Ferrari
Annual Report 2021

Plain-text annual report

FERRARI N.V. ANNUAL REPORT 2021 TABLE OF CONTENTS BOARD REPORT 5 Board of Directors and Auditors Letter from the Chairman and Chief Executive Officer Certain Defined Terms and Note on Presentation Forward-Looking Statements Selected Financial and Other Data Creating Value for Our Shareholders Risk Factors Overview Industry Overview Overview of Our Business COVID-19 Pandemic Update Financial Overview Results of Operations Subsequent Events and 2022 Outlook Major Shareholders Corporate Governance Non Financial Statement 6 8 11 12 14 16 18 48 50 54 94 96 104 126 128 130 154 Risk Management and Internal Control Systems 199 Remuneration of Directors 214 FINANCIAL STATEMENTS 237 Consolidated Financial Statements and Notes at December 31, 2021 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Company Financial Statements and Notes at December 31, 2021 Income Statement / Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Notes to the Company Financial Statements OTHER INFORMATION 331 Other information Independent Auditor’s Report 239 240 241 242 243 244 245 303 304 305 306 307 308 332 334 Disclaimer: this document is a PDF copy of the Annual Report of Ferrari N.V. at December 31, 2021 and is not presented in the ESEF-format as specified in the Regulatory Technical Standards on ESEF (Delegated Regulation (EU) 2019/815). The official Annual Report of Ferrari N.V. in ESEF single reporting package, as filed with the AFM, is available at: https://corporate.ferrari.com/en/investors/results 3 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSBOARD REPORT BOARD OF DIRECTORS AND AUDITORS BOARD OF DIRECTORS Executive Chairman John Elkann Acting Chief Executive Officer Benedetto Vigna Vice Chairman Piero Ferrari Directors Delphine Arnault Francesca Bellettini Eddy Cue Sergio Duca John Galantic Maria Patrizia Grieco Adam Keswick INDEPENDENT AUDITORS Ernst & Young Accountants LLP 6 FERRARI N.V.AR 20217 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSLETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER John Elkann Benedetto Vigna Dear Stakeholders, Group delivered 11,115 cars, recorded net revenues of Euro 4,271 million and an exceptional EBITDA 2021 was a pivotal year for Ferrari. It was a year margin at a record level of 35.9%. Beyond these of continuity and renewal, with innovation and figures there was an outstanding order intake, which growth as its themes, in line with our strategic we managed in line with our strategy to pursue a objectives of brand exclusivity, product excellence, controlled growth and to preserve brand exclusivity. staying true to our racing DNA and achieving carbon neutrality by 2030. Everything we revealed to the world in 2021 Our annual financial results, with a double-digit and driving experience. We have the broadest, most growth across all main financial indicators and innovative, and most beautiful range of cars ever exceeding our guidance, proved once again the offered to our customers, from the revolutionary soundness of our business model. Last year the aerodynamics of the 812 Competizione, the demonstrates our leadership in technology, design 8 FERRARI N.V.AR 2021exhilarating 296 GTB featuring our latest hybrid Our founder said, “Ferrari is made above all by people.” powertrain combining a V6 turbo and electric motor, Last year, as ever, it was essential that we continued and the evocative Ferrari Daytona SP3, our latest to invest in training for our workers, care for their limited edition Icona. wellbeing and value the wonderful diversity of talent in our company. Our efforts were rewarded in 2021 by When you buy a Ferrari you also join a vibrant, Equal Salary certification for the second consecutive passionate community, and we focused on creating year in Italy, and the first time in the United States. memorable, unique and authentic experiences for our clients on road, on track and in person. We marked We have also refined our company’s organisational Cavalcade’s 10th anniversary with a very special event structure to foster innovation, optimise processes in Sicily for Classiche and Moderne drivers, and we and increase collaboration, both internally and restarted our Tributi and Corse Clienti activities, with our partners. By promoting internal talent and culminating in the Finali Mondiali at Mugello – all in full through the appointment of some key strategic compliance with COVID-19 regulations. external hires, we have enhanced our agility and are ready to seize the opportunities ahead. We also brought our brand into exciting new territories: we launched our first fashion collection The process of growing and learning together – a range that truly reflects our excellence in quality has always underpinned our success. In 2022 we and design – and we have begun to give our stores celebrate our 75th Anniversary since the opening of a fresh new look to complement our merchandise. the Maranello factory as a single, formidable team, We reopened and revitalised our Cavallino restaurant ready to embrace all the exciting challenges and while retaining its heritage. rewards that the future will hold. On the track, this was our best ever season in February 25, 2022 GT racing, with Ferrari winning the Drivers’ and Manufacturers’ World titles in the FIA World John Elkann Benedetto Vigna Endurance Championship and victory at 24 Hours Chairman CEO of Le Mans. We also announced our eagerly-awaited return to the top class of such Championship in 2023 with our Le Mans Hypercar (LMH) programme. We have attracted a passionate new audience with the Ferrari Esports Series, gaining 35,000 participants across Europe. With five podium places and a third in the constructor standings, the Formula One season produced some encouraging signs – we’re focusing our energy on the 2022 challenge, confident that the Scuderia has the best pair of drivers on the grid in Charles Leclerc and Carlos Sainz. Amidst our achievements, we continue in our unwavering pursuit of reaching carbon neutrality by 2030, addressing – in addition to our electrification journey – both direct and indirect emissions with a focus on energy and materials. As a further step forward in this process, in 2021 we calculated our carbon footprint considering the emissions related to all the Group activities over our entire value chain. Our calculation, based on GHG protocol methodology, has been certified according ISO 14064 requirements by a third-party player and allowed us to determine priority areas for action. 9 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. AR 2021 14 CERTAIN DEFINED TERMS AND NOTE ON PRESENTATION CERTAIN DEFINED TERMS BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS In this report, unless otherwise specified, the terms The Group’s financial information is presented in “we”, “our”, “us”, the “Group”, the “Company” and Euro. In some instances, information is presented in “Ferrari” refer to Ferrari N.V., individually or together U.S. Dollars. All references in this document to “Euro” with its subsidiaries as the context may require. and “€” refer to the currency introduced at the start of References to “Ferrari N.V.” refer to the registrant. the third stage of European Economic and Monetary NOTE ON PRESENTATION Union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references to “U.S. Dollars” and “$” refer to the currency of the This Annual Report includes the consolidated financial United States of America (the “United States”). statements of Ferrari N.V. as of December 31, 2021 and 2020, and for the years ended December 31, The language of this Annual Report is English. Certain 2021, 2020 and 2019 prepared in accordance with legislative references and technical terms have International Financial Reporting Standards (“IFRS”) been cited in their original language in order that the as issued by the International Accounting Standards correct technical meaning may be ascribed to them Board, as well as IFRS as adopted by the European under applicable law. Union. There is no effect on these consolidated financial statements resulting from differences The financial data in the section “Results of Operations” between IFRS as issued by the IASB and IFRS as is presented in millions of Euro, while the percentages adopted by the European Union. The designation IFRS presented are calculated using the underlying figures also includes International Accounting Standards in thousands of Euro. (“IAS”) as well as all the interpretations of the International Financial Reporting Interpretations Certain totals in the tables included in this document Committee (“IFRIC” and “SIC”). The consolidated may not add due to rounding. financial statements and the notes to the consolidated financial statements are referred to collectively as the “Consolidated Financial Statements”. 11 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. FORWARD-LOOKING STATEMENTS Statements contained in this • the success of our Formula 1 operate, and changes in demand Annual Report, particularly racing team and the expenses for luxury goods, including high those regarding our possible or we incur for our Formula 1 performance luxury cars, which assumed future performance, activities, the uncertainty of the is highly volatile; competitive strengths, costs, sponsorship and commercial dividends, reserves and growth revenues we generate from our • competition in the luxury as well as industry growth and participation in the Formula 1 performance automobile other trends and projections, are World Championship, including industry; “forward-looking statements” that as a result of the impact of the contain risks and uncertainties. In COVID-19 pandemic, as well • our ability to successfully carry some cases, words such as “may”, as the popularity of Formula 1 out our controlled growth “will”, “expect”, “could”, “should”, more broadly; “intend”, “estimate”, “anticipate”, strategy and, particularly, our ability to increase our presence “believe”, “remain”, “continue”, • our ability to keep up with in growth market countries; “on track”, “successful”, “grow”, advances in high performance “design”, “target”, “objective”, “goal”, car technology, to meet • our low volume strategy; “forecast”, “projection”, “outlook”, the challenges and costs “prospects”, “plan”, “guidance” of integrating advanced • global economic conditions, and similar expressions are technologies, including hybrid macro events and pandemics, used to identify forward-looking and electric, more broadly into including the effects of the statements. These forward- our car portfolio over time and evolution of and response to the looking statements reflect the to make appealing designs for COVID-19 pandemic; respective current views of our new models; Ferrari with respect to future • the impact of increasingly events and involve significant • our ability to preserve our stringent fuel economy, risks and uncertainties that could relationship with the automobile emission and safety standards, cause actual results to differ collector and enthusiast including the cost of compliance, materially from those indicated in community; and any required changes to our the forward-looking statements. products; • changes in client preferences Such risks and uncertainties and automotive trends; • reliance upon a number of include, without limitation: key members of executive • our ability to preserve and economic environment, and the ability of our current enhance the value of the Ferrari including changes in some management team to operate brand; of the markets in which we and manage effectively; • changes in the general management and employees, AR 2021 12 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION • the performance of our dealer • our ability to provide or arrange We expressly disclaim and do not network on which we depend for adequate access to financing assume any liability in connection for sales and services; for our dealers and clients, and with any inaccuracies in any of associated risks; the forward-looking statements • increases in costs, disruptions in this document or in connection of supply or shortages of • labor relations and collective with any use by any third party of components and raw materials; bargaining agreements; such forward-looking statements. Actual results could differ • disruptions at our • exchange rate fluctuations, materially from those anticipated manufacturing facilities in interest rate changes, credit risk in such forward-looking Maranello and Modena; and other market risks; statements. We do not undertake an obligation to update or revise • the effects of Brexit on the UK • changes in tax, tariff or fiscal publicly any forward-looking market; policies and regulatory, statements. political and labor conditions • the performance of our in the jurisdictions in which Additional factors which licensees for Ferrari-branded we operate, including possible could cause actual results and products; future bans of combustion developments to differ from engine cars in cities and the those expressed or implied by • our ability to protect our potential advent of self-driving the forward-looking statements intellectual property rights technology; and to avoid infringing on the are included in the section “Risk Factors” of this Annual Report. intellectual property rights of • potential conflicts of interest due These factors may not be others; to director and officer overlaps exhaustive and should be read with our largest shareholders; in conjunction with the other • the ability of Maserati, our and engine customer, to sell its cautionary statements included in this Annual Report. You should planned volume of cars; • other factors discussed evaluate all forward-looking elsewhere in this document. statements made in this report in the context of these risks and uncertainties. • our continued compliance with customs regulations of various jurisdictions; • product recalls, liability claims and product warranties; • the adequacy of our insurance coverage to protect us against potential losses; • our ability to ensure that our employees, agents and representatives comply with applicable law and regulations; • our ability to maintain the functional and efficient operation of our information technology systems and to defend from the risk of cyberattacks, including on our in-vehicle technology; • our ability to service and refinance our debt; AR 2021 13 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. SELECTED FINANCIAL AND OTHER DATA The following tables set forth selected historical This financial information has been prepared in consolidated financial and other data of Ferrari and accordance with IFRS. have been derived from: (i) the audited Consolidated Financial Statements, included elsewhere in this Annual Report; The following information should be read in conjunction with “Certain Defined Terms and Note on Presentation—Note on Presentation”, “Risk Factors”, (ii) the audited consolidated income statement of the “Financial Overview” and the Consolidated Financial Company for the years ended December 31, 2018 Statements included elsewhere in this Annual Report. and 2017 and the audited consolidated statement Historical results for any period are not necessarily of financial position at December 31, 2019, 2018 indicative of results for any future period. and 2017. CONSOLIDATED INCOME STATEMENT DATA (€ million, except per share data) Net revenues EBIT Profit before taxes Net profit Net profit attributable to: Owners of the parent Non-controlling interests Basic earnings per common share (€) (1) Diluted earnings per common share (€) (1) (2) Dividend declared per common share (€) (3) Dividend declared per common share ($) (3) (5) Distribution declared per common share (€) (4) Distribution declared per common share ($) (4) (5) For the years ended December 31, 2021 4,271 1,075 1,042 833 831 2 4.50 4.50 0.867 1.0378 — — 2020 3,460 716 667 609 608 1 3.29 3.28 1.13 1.23 — — 2019 3,766 917 875 699 696 3 3.73 3.71 1.03 1.16 — — 2018 3,420 826 803 787 785 2 4.16 4.14 0.71 0.88 — — 2017 3,417 775 746 537 535 2 2.83 2.82 — — 0.635 0.682 (1) (2) (3) (4) (5) Basic and diluted earnings per common share in 2020 benefited from the one-off partial step-up of certain trademarks for tax purposes, which resulted in a net tax benefit of €75 million. The increase in the basic and diluted earnings per common share in 2018 compared to 2017 includes the effects of applying the Patent Box tax regime starting in the third quarter of 2018. See Adjusted Basic and Diluted Earnings per Common Share in the section “Non-GAAP Financial Measures” as well as Note 10 to the Consolidated Financial Statements, both included elsewhere in this document, for additional information. In order to calculate the diluted earnings per common share the weighted average number of shares outstanding has been increased to take into consideration the theoretical effect of (i) the potential common shares that would have been issued under the equity incentive plan for the years ended December 31, 2021, 2020, 2019, 2018 and 2017 (assuming 100 percent of the related awards vested), and (ii) the potential common shares that would have been issued for the Non-Executive Directors’ compensation agreement for the year ended December 31, 2017. See Note 12 to the Consolidated Financial Statements for additional information. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 15, 2021, a dividend distribution of €0.867 per outstanding common share was approved, corresponding to a total distribution of €160 million. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 16, 2020, a dividend distribution of €1.13 per outstanding common share was approved, corresponding to a total distribution of €209 million. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 12, 2019, a dividend distribution of €1.03 per outstanding common share was approved, corresponding to a total distribution of €193 million. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 13, 2018, a dividend distribution of €0.71 per outstanding common share was approved, corresponding to a total distribution of €134 million. Such dividend distributions were made from the retained earnings reserve. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 14, 2017, a cash distribution of €0.635 per outstanding common share was approved, corresponding to a total distribution of €120 million. Such distribution was made from the share premium reserve which is a distributable reserve under Dutch law. Translated into U.S. Dollars at the exchange rates in effect on the dates on which the distribution was declared in U.S. Dollars for common shares that are traded on the New York Stock Exchange. These translations are examples only, and should not be construed as a representation that the Euro amount represents, or has been or could be converted into, U.S. Dollars at that or any other rate. AR 2021 14 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (€ million, except per share data) Cash and cash equivalents Receivables from financing activities Total assets Debt Total equity Equity attributable to owners of the parent Non-controlling interests Share capital Common shares issued and outstanding (in thousands of shares) OTHER STATISTICAL INFORMATION Shipments (number of cars) Average number of employees for the period 2021 1,344 1,144 6,864 2,630 2,211 2,206 5 3 2020 1,362 940 6,262 2,725 1,789 1,785 4 3 At December 31, 2019 2018 898 966 5,446 2,090 1,487 1,481 6 3 794 878 4,852 1,927 1,354 1,349 5 3 2017 648 733 4,141 1,806 784 779 5 3 183,843 184,748 185,283 187,921 188,954 For the years ended December 31, 2021 11,155 4,571 2020 9,119 4,428 2019 10,131 4,164 2018 9,251 3,651 2017 8,398 3,336 AR 2021 15 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCREATING VALUE FOR OUR SHAREHOLDERS FERRARI IS AMONG THE WORLD’S LEADING LUXURY BRANDS WITH UNIQUE, WORLD-CLASS CAPABILITIES, AND A VISION BUILT ON OUR HISTORIC FOUNDATIONS AND STRENGTHS. We are fiercely protective of the demand for our cars and the To provide for tangible long- our brand, which is among the image of luxury and exclusivity term value creation, we place most iconic and recognizable inherent in our brand. particular emphasis on: in the world and critical to our value proposition to all of our Our commitment to excellence stakeholders. and our pursuit of innovation, We strive to maintain and state-of-the-art performance enhance the power of our brand and distinction in design and and the passion we inspire engineering in our luxury in clients and the broader cars is inseparable from our community of automotive commitment to integrity, enthusiasts by continuing transparency and responsibility • a governance model based on transparency and integrity; • a safe and eco-friendly working environment including excellent working conditions and respect for human rights; • professional development of our employees; our rigorous production and in the conduct of our business. • mutually beneficial relationships distribution model, which By fully integrating environmental with business partners and promotes excellence in and social considerations with the communities in which we innovation, design and exclusivity. economic objectives we are operate; able to identify potential risks • mitigation of environmental We also support our brand and capitalize on additional value by promoting a strong opportunities, resulting in connection to our company and a process of continuous our brand among the community improvement. of Ferrari enthusiasts. We focus relentlessly on Sustainability is a core element strengthening this connection by of our governance model and rewarding our most loyal clients executive management plays a impacts from our production processes and the luxury cars we produce, addressing direct and indirect GHG emissions, focusing on energy and materials, in addition to our electrification journey. through a range of initiatives, direct and active role in developing The Non Financial Statement such as driving events and client and achieving our sustainability section of our 2021 Annual Report activities in Maranello and, most objectives under the oversight of addresses those aspects of our importantly, by providing our our Board of Directors. sustainability efforts that we have most loyal and active clients with The foundation of a responsible identified as being of greatest preferential access to our newest, company rests on being fully importance to our internal and most exclusive and highest value attentive to the nature and extent external stakeholders. cars. As a result, in 2021 we sold of this interconnection and approximately 59% of our new our understanding of both the cars to already Ferrari customers potential effects of our activities and 32% to customers being and how those effects can be current owners of more than mitigated through responsible one Ferrari, which reinforces management. 16 FERRARI N.V.AR 202117 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. RISK FACTORS WE FACE A VARIETY OF RISKS AND UNCERTAINTIES IN OUR BUSINESS. THOSE DESCRIBED BELOW ARE NOT THE ONLY RISKS AND UNCERTAINTIES THAT WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE UNAWARE OF, OR THAT WE CURRENTLY BELIEVE TO BE IMMATERIAL, MAY ALSO BECOME IMPORTANT FACTORS THAT AFFECT US. RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS WE MAY NOT SUCCEED IN PRESERVING AND ENHANCING THE VALUE OF THE FERRARI BRAND, WHICH WE DEPEND UPON TO DRIVE DEMAND AND REVENUES. highest quality. The market for We selectively license the Ferrari luxury goods generally and for brand to third parties that luxury automobiles in particular produce and sell Ferrari-branded is intensely competitive, and luxury goods and therefore we we may not be successful in rely on our licensing partners to maintaining and strengthening preserve and enhance the value the appeal of our brand. Client of our brand. If our licensees preferences, particularly among or the manufacturers of these luxury goods, can vary over products do not maintain time, sometimes rapidly. We are the standards of quality and therefore exposed to changing exclusivity that we believe are perceptions of our brand image, consistent with the Ferrari Our financial performance is particularly as we seek to attract brand, or if such licensees or influenced by the perception new generations of clients and, manufacturers otherwise misuse and recognition of the Ferrari to that end, we continuously the Ferrari brand, our reputation brand, which, in turn, depends renovate and expand the range and the integrity and value of on many factors such as the of our models. For example, the our brand may be damaged and design, performance, quality gradual expansion of hybrid our business, operating results and image of our cars, the engine technology (already and financial condition may be appeal of our dealerships and integrated in past models materially and adversely affected. stores, the success of our such as the LaFerrari and the In addition, in 2019 we announced promotional activities including LaFerrari Aperta, as well as in a brand diversification strategy public relations and marketing, the more recent 296 GTB, SF90 that will significantly increase the as well as our general profile, Stradale and SF90 Spider) and deployment of our brand in non- including our brand’s image electric engine technology will car products and experiences. of exclusivity. The value of our introduce a notable change in If this strategy is not successful, brand and our ability to achieve the overall driver experience our brand image may be diluted premium pricing for Ferrari- compared to the combustion or tainted. branded products may decline engine cars of our historical if we are unable to maintain the models. Any failure to preserve value and image of the Ferrari and enhance the value of our brand, including, in particular, its brand may materially and aura of exclusivity. Maintaining adversely affect our ability to sell OUR BRAND IMAGE DEPENDS IN PART ON THE SUCCESS OF OUR FORMULA 1 RACING TEAM. the value of our brand will our cars, to maintain premium The prestige, identity, and appeal depend significantly on our pricing, and to extend the value of the Ferrari brand depend in ability to continue to produce of our brand into other activities part on the continued success luxury performance cars of the profitably or at all. of the Scuderia Ferrari racing AR 2021 18 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION team in the Formula 1 World of our racing team may suffer. production at our plants in Championship. The racing As the success of our racing Maranello and Modena, while team is a key component of our team forms a large part of our implementing remote working marketing strategy and may brand identity, a sustained period arrangements for all non- be perceived by our clients without racing success could manufacturing related activities. as a demonstration of the detract from the Ferrari brand We were able to return to full technological capabilities of our and, as a result, from potential production in May 2020. We sports, GT, special series and clients’ enthusiasm for the Ferrari generally realize minimal revenue Icona cars, which also supports brand and their perception of while our facilities are shut the appeal of other Ferrari- our cars, which could have an down, but we continue to incur branded luxury goods. adverse effect on our business, expenses. Moreover, the negative results of operations and financial cash impact is exacerbated by We are focused on improving condition. our racing results and restoring our historical position as the premier racing team particularly in Formula 1 as our most recent Drivers’ Championship and Constructors’ Championship were in 2007 and 2008, respectively. If we are unable to WE ARE SUBJECT TO RISKS RELATED TO THE COVID-19 PANDEMIC OR SIMILAR PUBLIC HEALTH CRISES THAT MAY MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS. the fact that, despite not selling cars, we have to continue to pay suppliers for components previously ordered. We continue to take measures to combat the spread of COVID-19 at our facilities, while continuing to guarantee the possibility of remote work for those employees attract and retain the necessary Public health crises such as whose job activity is compatible talent to succeed in international pandemics or similar outbreaks with such work arrangements. competitions or devote the capital could adversely impact our necessary to fund successful business. Starting in early 2020 In connection with the racing activities, the value of the the global spread of COVID-19 COVID-19 pandemic and related Ferrari brand and the appeal of led to governments around the government measures, we our cars and other luxury goods world mandating increasingly experienced delays in shipments may suffer. Even if we are able to restrictive measures to contain of cars from March 2020 to attract such talent and adequately the pandemic, including social May 2020 due to restrictions on fund our racing activities, there distancing, quarantine, “shelter dealers’ activities or the inability is no assurance that this will lead in place” or similar orders, travel of customers to take deliveries to competitive success for our restrictions and suspension of of cars. racing team. non-essential business activities. The COVID-19 pandemic has Although certain restrictions The success of our racing team caused significant disruption to have remained in place or been depends in particular on our the global economy, including reimplemented in some of the ability to attract and retain top changes in consumer spending countries where Ferrari operates, drivers, racing team management and behavior, disruption to since May 2020 substantially all and engineering talent. supply chains and financial Ferrari dealerships remained Our primary Formula 1 drivers, markets, as well as restrictions operational and order collections team managers and other key on business and individual continued. employees of Scuderia Ferrari activities. In 2020, the pandemic For further information on the are critical to the success of led to a global economic impact of the COVID-19 pandemic our racing team and if we were slowdown and a severe on our results of operations to lose their services, this could recession in several of the and liquidity, see “COVID-19 have a material adverse effect markets in which we operate Pandemic Update” and “Financial on the success of our racing and while economies recovered Overview”. While the overall team and correspondingly the partially in 2021, the pandemic COVID-19 situation improved in Ferrari brand. If we are unable to continues to be unpredictable 2021 in countries that have rolled find adequate replacements or and additional containment out vaccination campaigns, our to attract, retain and incentivize measures may lead to further business and operating results drivers and team managers, economic downturns. may be negatively impacted if other key employees or new From mid-March to early May the virus worsens or mutates, qualified personnel, the success 2020, we temporarily suspended if vaccination efforts are AR 2021 19 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS unsuccessful or if regions or capital needs, reduced liquidity actions taken by governments countries implement further and certain limitations in the around the world, as well as the restrictions to contain the supply of credit, which may overall condition and outlook virus. The resurgence of the ultimately lead to higher costs of the global economy. While pandemic in several European of capital for Ferrari. Any of the we are continuing to monitor countries and elsewhere in the foregoing could limit customer and assess the evolution of the last months of 2021, including demand or our capacity to meet pandemic and its effects on both due to the highly transmissible customer demand and have a the macroeconomic scenario Delta and Omicron variants, have material adverse effect on our and our financial position and led governments to reintroduce business, results of operations results of operations, significant containment measures and financial condition. uncertainty remains around and increasingly stringent the length and extent of the restrictions may be imposed Our brand activities across restrictions in the markets in in the coming periods. We may different jurisdictions have which we operate. However, the yet experience a new shutdown also been, and may continue effects on our business, results of or slowdown of all or part of to be, adversely impacted, due operations, financial performance our manufacturing facilities, to the temporary closure of and cash flows may be material including in the event that our the Ferrari stores, museums and adverse. employees are diagnosed with and theme parks in the first COVID-19 or our supply chains quarter of 2020 to comply with The COVID-19 pandemic may also are disrupted, or if additional government orders, with an exacerbate other risks disclosed “waves” of the pandemic adverse impact on our revenues in this section, including, but not lead to further government originating from such activities. limited to, our competitiveness, actions. Management time and Although Ferrari stores gradually demand for our products, resources may need to be spent reopened starting in May 2020, shifting consumer preferences, on COVID-19 related matters, to date in-store traffic has not yet exchange rate fluctuations, distracting them from the recovered to pre-pandemic levels customers’ and dealers’ access to implementation of our strategy. and Ferrari stores, museums and affordable financing, and credit In addition, the prophylactic theme parks may continue to be market conditions affecting the measures we have adopted or subject to certain restrictions availability of capital and financial that we will be required to adopt as a result of local regulations, resources. at our facilities may be costly although overall brand activities and may affect production have increased in 2021 compared Please refer to “COVID-19 levels. Our suppliers, customers, to 2020. dealers, franchisees and other Pandemic Update” and “Financial Overview” for additional contractual counterparties may The Formula 1 2021 World information relating to how the be restricted or prevented from Championship was also disrupted COVID-19 pandemic impacted our conducting business activities due to the COVID-19 pandemic, results of operations and financial for indefinite or intermittent albeit to a lesser extent than the condition. periods of time, including as prior’s year edition. Government a result of safety concerns, measures or decisions of Formula shutdowns, slowdowns, illness 1 may disrupt the Formula 1 of such parties’ workforce and 2022 World Championship, with other actions and restrictions potential material adverse effects requested or mandated by on our revenues and profits. governmental authorities. Furthermore, the COVID-19 The impact of the COVID-19 pandemic may lead to financial pandemic on Ferrari’s results of distress for our suppliers or operations and financial condition dealers, as a result of which will depend largely on future they may have to permanently events outside of our control, discontinue or substantially including ongoing developments reduce their operations. In in the pandemic, the success addition, the COVID-19 pandemic of containment measures, may lead to higher working vaccination campaigns and other 20 FERRARI N.V.AR 2021IF WE ARE UNABLE TO KEEP UP WITH ADVANCES IN HIGH PERFORMANCE CAR TECHNOLOGY, OUR BRAND AND COMPETITIVE POSITION MAY SUFFER. available technology advances and competition in the industry increases. If our research and development efforts do not lead to improvements in THE VALUE OF OUR BRAND DEPENDS IN PART ON THE AUTOMOBILE COLLECTOR AND ENTHUSIAST COMMUNITY. car performance relative to An important factor in the Performance cars are the competition, or if we are connection of clients to the characterized by leading-edge required to spend more to Ferrari brand is our strong technology that is constantly achieve comparable results, relationship with the global evolving. In particular, advances the sales of our cars or our community of automotive in racing technology often lead profitability may suffer. collectors and enthusiasts, to improved technology in road cars. Although we invest heavily in research and development, we may be unable to maintain our leading position in high performance car technology IF OUR CAR DESIGNS DO NOT APPEAL TO CLIENTS, OUR BRAND AND COMPETITIVE POSITION MAY SUFFER. particularly collectors and enthusiasts of Ferrari automobiles. This is influenced by our close ties to the automotive collectors’ community and our support of related events (such and, as a result, our competitive Design and styling are an integral as car shows and driving events) position may suffer. component of our models at our headquarters in Maranello and our brand. Our cars have and through our dealers, the As technologies change, we plan historically been characterized Ferrari museums and affiliations to upgrade or adapt our cars by distinctive designs combining with regional Ferrari clubs. The and introduce new models in the aerodynamics of a sports support of this community also order to continue to provide cars car with powerful, elegant lines. depends upon the perception of with the latest technology. We believe our clients purchase our cars as collectibles, which However, our cars may not our cars for their appearance we also support through our compete effectively with our as well as their performance. Ferrari Classiche services, and competitors’ cars if we are However, we will need to renew the active resale market for our not able to develop, source over time the style of our cars to automobiles which encourages and integrate the latest differentiate the new models we interest over the long-term. technology into our cars. For produce from older models, and The increase in the number of example, in the next few years to reflect the broader evolution cars we produce relative to the luxury performance cars will of aesthetics in our markets. number of automotive collectors increasingly transition to hybrid We devote great efforts to the and purchasers in the secondary and electric technology, albeit design of our cars and most of market may adversely affect our at a slower pace compared our current models are designed cars’ value as collectible items to mass market vehicles. See by the Ferrari Design Centre, our and in the secondary market “The introduction of hybrid in-house design team. The design more broadly. and electric technology in our of our electric cars and, more cars is costly and its long-term generally, of our future models If there is a change in collector success is uncertain”. We are with increased connectivity appetite or damage to the Ferrari also increasingly investing in features will depart from past brand, our ties to, and the support connectivity, which requires designs in appearance and we receive from, this community significant investments in functionality, thereby requiring may be diminished. Such a loss of research and development; we new skills and presenting new enthusiasm for our cars from the expect that the future generation challenges. If the design of our automotive collectors’ community of cars will feature a high degree future models fails to meet the could harm the perception of of connectivity for purposes evolving tastes and preferences the Ferrari brand and adversely of infotainment, safety and of our clients and prospective impact our sales and profitability. regulatory compliance. clients, or the appreciation of the wider public, our brand may Developing and applying new suffer and our sales may be automotive technologies is adversely affected. costly, and may become even more costly in the future as 21 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS OUR BUSINESS IS SUBJECT TO CHANGES IN CLIENT PREFERENCES AND TRENDS IN THE AUTOMOTIVE AND LUXURY INDUSTRIES. we expand in accordance with our may result in downward price strategy into adjacent segments of pressure and adversely affect our the luxury industry, where we do business, operating results and not have a level of experience and financial condition. The impact of market presence comparable to a luxury market downturn may be the one we have in the automotive particularly pronounced for the Our continued success depends industry. Any of these risks could most expensive among our car in part on our ability to originate have a material adverse effect on models, which generate a more and define products and trends our business, results of operations than proportionate amount of our in the automotive and luxury and financial condition. profits, therefore exacerbating industries, as well as to anticipate and respond promptly to changing consumer demands and automotive trends in the design, styling, technology, production, merchandising and pricing of our products. Our products must DEMAND FOR LUXURY GOODS, INCLUDING LUXURY PERFORMANCE CARS, IS VOLATILE, WHICH MAY ADVERSELY AFFECT OUR OPERATING RESULTS. the impact on our results. In addition, these effects may have a more pronounced impact on us given our low volume strategy and relatively smaller scale as compared to large global mass-market automobile appeal to a client base whose Volatility of demand for luxury manufacturers. preferences cannot be predicted goods, in particular luxury with certainty and are subject performance cars, may adversely to rapid change. Evaluating and affect our business, operating responding to client preferences results and financial condition. has become even more complex The market in which we sell WE FACE COMPETITION IN THE LUXURY PERFORMANCE CAR INDUSTRY. in recent years, due to our our cars is subject to volatility We face competition in all expansion in new geographical in demand. Demand for luxury product categories and markets markets. The introduction of automobiles depends to a large in which we operate. We compete hybrid and electric technology extent on general, economic, with other international luxury and the associated changes in political and social conditions performance car manufacturers customer preferences that may in a given market as well as the which own and operate well- follow are also a challenge we will introduction of new vehicles known brands of high-quality face in future periods. See also and technologies. As a luxury cars, some of which form part “If we are unable to keep up with performance car manufacturer of larger automotive groups advances in high performance and low volume producer, we and may have greater financial car technology, our brand and compete with larger automobile resources and bargaining power competitive position may suffer” manufacturers many of which with suppliers than we do, and “The introduction of hybrid have greater financial resources particularly in light of our policy and electric technology in our in order to withstand changes to maintain low volumes in order cars is costly and its long-term in the market and disruptions to preserve and enhance the success is uncertain”. In addition, in demand. Demand for our exclusivity of our cars. In addition, there can be no assurance cars may also be affected by several other manufacturers that we will be able to produce, factors directly impacting have recently entered or are distribute and market new the cost of purchasing and attempting to enter the upper end products efficiently or that any operating automobiles, such of the luxury performance car product category that we may as the availability and cost of market, including with advanced expand or introduce will achieve financing, prices of raw materials electric technology, thereby sales levels sufficient to generate and parts and components, increasing competition. profits. We will encounter this fuel costs and governmental risk, for example, as we introduce regulations, including tariffs, We believe that we compete the Purosangue, a luxury high import regulation and other taxes, primarily on the basis of our performance vehicle within the including taxes on luxury goods, brand image, the performance GT range that we are developing resulting in limitations to the use and design of our cars, our and is expected to commence of high performance sports cars reputation for quality and the production in 2022 with deliveries or luxury goods more generally. driving experience for our starting in 2023. Furthermore this Volatility in demand may lead customers. risk is particularly pronounced as to lower car unit sales, which 22 FERRARI N.V.AR 2021If we are unable to compete Day in September 2018, we We continuously improve our successfully, our business, announced our plan to introduce international network footprint results of operations and financial 15 new models in the 2019-2022 and skill set. We also plan to condition could be adversely period (which is unprecedented open additional retail stores affected. for Ferrari over a similar time in international markets. We OUR CONTROLLED GROWTH STRATEGY EXPOSES US TO RISKS. period), including the Icona limited do not yet have significant editions, a concept that takes experience directly operating inspiration from our iconic cars in many of these markets, of the past and interprets them and in many of them we face Our growth strategy includes in a modern way with innovative established competitors. Many a controlled expansion of our technology and materials. In the of these countries have different sales and operations, including GT range, we are developing a operational characteristics, the launching of new car models luxury high performance vehicle, including but not limited and expanding sales, as well as the Purosangue, and we are to employment and labor, dealer operations and workshops, developing a new line of cars transportation, logistics, real in targeted growth regions powered by V6 engines, starting estate, environmental regulations internationally. In particular, our with the 296 GTB, which was and local reporting or legal growth strategy requires us to unveiled in June 2021. In addition, requirements. expand operations in regions we will gradually but rapidly that we have identified as having expand the use of hybrid and Consumer demand and relatively high growth potential. electric technology in our road behavior, as well as tastes and We may encounter difficulties cars, consistent with customer purchasing trends may differ in in entering and establishing preferences and broader these markets, and as a result, ourselves in these markets, industry trends. While we will sales of our products may not including in establishing new seek to ensure that these changes be successful, or the margins successful dealership networks remain fully consistent with the on those sales may not be in and facing more significant Ferrari car identity, we cannot line with those we currently competition from competitors be certain that they will prove anticipate. Furthermore, such that are already present in profitable and commercially markets will have upfront short- those regions. successful. term investment costs that may not be accompanied by Our growth depends on the Our growth strategy may expose sufficient revenues to achieve continued success of our us to new business risks that typical or expected operational existing cars, as well as the we may not have the expertise, and financial performance and successful introduction of new capability or the systems to therefore may be dilutive to us in cars. Our ability to create new manage. This strategy will also the short-term. In many of these cars and to sustain existing car place significant demands on us countries, there is significant models is affected by whether by requiring us to continuously competition to attract and we can successfully anticipate evolve and improve our retain experienced and talented and respond to consumer operational, financial and internal employees. preferences and car trends. The controls. Continued expansion failure to develop successful new also increases the challenges Consequently, if our cars or delays in their launch that involved in maintaining high levels international expansion plans could result in others bringing of quality, management and client are unsuccessful, our business, new products and leading-edge satisfaction, recruiting, training results of operations and financial technologies to the market and retaining sufficiently skilled condition could be materially first, could compromise our management, technical and adversely affected. competitive position and hinder marketing personnel. If we are the growth of our business. As unable to manage these risks or part of our growth strategy, we meet these demands, our growth plan to broaden the range of our prospects and our business, models to capture additional results of operations and financial customer demand for different condition could be adversely types of vehicles and modes of affected. utilization. At our Capital Markets 23 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS OUR LOW VOLUME STRATEGY MAY LIMIT POTENTIAL PROFITS, AND IF VOLUMES INCREASE OUR BRAND EXCLUSIVITY MAY BE ERODED. A key to the appeal of the Ferrari brand and our marketing strategy is the aura of exclusivity and the sense of luxury which our brand conveys. without eroding the image of can be no assurance that we exclusivity in our brand we may will be successful in developing, be unable to significantly increase producing and marketing our revenues. THE SMALL NUMBER OF CAR MODELS WE PRODUCE AND SELL MAY RESULT IN GREATER VOLATILITY IN OUR FINANCIAL RESULTS. We depend on the sales of a small number of car models additional new cars (including our special series and limited edition models) to sustain sales growth in the future. GLOBAL ECONOMIC CONDITIONS, PANDEMICS AND MACRO EVENTS MAY ADVERSELY AFFECT US. A central facet to this exclusivity to generate our revenues. Our Our sales volumes and revenues is the limited number of models current product range consists may be affected by overall and cars we produce and our of eight range models (six sports general economic conditions strategy of maintaining our car cars and two GT cars), two special within the various countries in waiting lists to reach the optimal series models and three strictly which we operate. Deteriorating combination of exclusivity and limited edition Icona models. general economic conditions client service. While we anticipate expanding may affect disposable incomes Our low volume strategy is also our car offerings as part of our and reduce consumer wealth an important factor in the prices growth strategy, through our impacting client demand, that our clients are willing to previously announced plan to particularly for luxury goods, pay for our cars. This focus on introduce 15 new products in which may negatively impact our maintaining exclusivity limits our the 2019-2022 period, a limited profitability and put downward potential sales growth and profits number of models will continue pressure on our prices and compared to manufacturers less to account for a large portion of volumes. Furthermore, during reliant on the exclusivity of their our revenues at any given time in recessionary periods, social products. the foreseeable future, compared acceptability of luxury purchases to other automakers. Therefore, may decrease and higher taxes On the other hand, our current a single unsuccessful new model may be more likely to be imposed growth strategy contemplates a would harm us more than it on certain luxury goods including measured but significant increase would other automakers. There our cars, which may affect in car sales above current levels can be no assurance that our cars our sales. Adverse economic as we target a larger customer will continue to be successful conditions may also affect the base and modes of use, we in the market, or that we will be financial health and performance increase our focus on GT cars, able to launch new models on of our dealers in a manner that and our product portfolio evolves a timely basis compared to our will affect sales of our cars with a broader product range. competitors. It generally takes or their ability to meet their several years from the beginning commitments to us. We sold 11,155 cars in 2021 of the development phase to the compared to 7,255 cars in start of production for a new The luxury performance car 2014, and sales are expected to model and the car development market is generally affected by continue to increase gradually. process is capital intensive. As a global macroeconomic conditions In pursuit of our strategy, we result, we would likely be unable and many factors affect the may be unable to maintain the to replace quickly the revenue lost level of consumer spending in exclusivity of the Ferrari brand. from one of our main car models the luxury performance car If we are unable to balance if it does not achieve market industry, including the state of brand exclusivity with increased acceptance. Furthermore, our the economy as a whole, stock production, we may erode the revenues and profits may also be market performance, interest and desirability and ultimately the affected by our special series and exchange rates, inflation, political consumer demand or relative limited edition models (including uncertainty, the availability of pricing for our cars. As a result, the Icona limited editions) that consumer credit, tax rates, if we are unable to increase we launch from time to time and unemployment levels and other car production meaningfully which are typically priced higher matters that influence consumer or introduce new car models than our range models. There confidence. In general, although 24 FERRARI N.V.AR 2021our sales have historically been our products. In particular, the services industry. See also “We comparatively resilient in periods majority of our current sales depend on our suppliers, many of of economic turmoil, sales of are in the EU and in the United which are single source suppliers; luxury goods tend to decline States; if we are unable to expand and if these suppliers fail to during recessionary periods in other growth markets, a deliver necessary raw materials, when the level of disposable downturn in mature economies systems, components and parts income tends to be lower or when such as the EU and the United of appropriate quality in a timely consumer confidence is low. States may negatively affect manner, our operations may Significant inflationary pressures our financial performance. In be disrupted”. appeared in 2021 in many of the addition, uncertainties regarding markets in which we operate and future trade arrangements and this trend has continued in early industrial policies in various 2022. If this trend continues going countries or regions, such as in forward, we could experience the United Kingdom following the DEVELOPMENTS IN CHINA AND OTHER GROWTH MARKETS MAY ADVERSELY AFFECT OUR BUSINESS. an increase in the costs we incur exit from the European Union (see We operate in a number of for raw materials, utilities or further “We may be adversely growth markets, both directly and services, which could adversely affected by the UK’s exit from through our dealers. affect our business and results the European Union (Brexit) ”) We believe we have potential of operations if we are not able create additional macroeconomic for further success in new to pass on the increased costs to risk. In the United States, any geographies, in particular in our customers or successfully policy to discourage import into China, but also more generally in implement other mitigating the United States of vehicles Asia, recognizing the increasing actions. Furthermore, following produced elsewhere could personal wealth in these markets. the recent rise in inflation, many adversely affect our operations. While demand in these markets central banks are signaling that Any new policies may have an has increased in recent years interest rate increases may be adverse effect on our business, due to sustained economic expected in the coming months, financial condition and results of growth and growth in personal which is in turn expected to operations. Although Mainland income and wealth, we are increase our cost of borrowing China, Hong Kong and Taiwan unable to foresee the extent and the market rates for new car only represented approximately to which economic growth financing as well. Such increases 8 percent of our net revenues in will be sustained. For example, could impact our ability to obtain 2021 and is expected to represent rising geopolitical tensions and affordable financing or could a limited proportion of our potential slowdowns in the rate make our cars less affordable growth in the short term, slowing of growth there and in other to clients, which could cause economic conditions in Mainland emerging markets could limit the consumers to delay the purchase China, Hong Kong and Taiwan may opportunity for us to increase of our cars or to purchase less adversely affect our revenues in unit sales and revenues in those expensive cars. that region. A significant decline regions in the near term. in the EU, the global economy We are also susceptible to or in the specific economies of Our exposure to growth risks relating to epidemics and our markets, or in consumers’ countries is likely to increase, as pandemics of diseases. See “We confidence, could have a material we pursue expanded sales in are subject to risks related to the adverse effect on our business. such countries. Economic and COVID-19 pandemic that may See also “Developments in China political developments in growth materially and adversely affect and other growth markets may markets, including economic our business”. adversely affect our business”. crises or political instability, have had and could have in the We distribute our products Additionally, sanctions and future material adverse effects internationally and we may export controls which could on our results of operations and be affected by downturns in be introduced as a result of financial condition. Further, in general economic conditions or geopolitical tensions and conflicts certain markets in which we or uncertainties regarding future could adversely affect, directly or our dealers operate, required economic prospects that may indirectly, our supply chain and government approvals may limit impact the countries in which customers, as well as the global our ability to act quickly in making we sell a significant portion of financial markets and financial decisions on our operations in 25 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS those markets. Other government actions may also impact the market for luxury goods in these markets, such as tax changes WE MAY BE ADVERSELY AFFECTED BY THE UK’S EXIT FROM THE EUROPEAN UNION (BREXIT). provides clarity with respect to the intended relationship between the European Union and the United Kingdom going forward, or the active discouragement In a June 23, 2016 referendum, uncertainty remains around of luxury purchases. Consumer the United Kingdom voted to the details of such relationship, spending habits in these markets terminate the UK’s membership which remain in progress and may also change due to other in the European Union (“Brexit”). could evolve over time, and the factors that are outside of our The UK ceased to be a member full extent of the consequences of control. For instance, since August of the European Union on Brexit. Brexit could also negatively 2021 the President of the People’s January 31, 2020. On December impact economic conditions in Republic of China has repeatedly 24, 2020, the European Union Europe more generally, which signaled the government’s and the UK announced that in turn could adversely impact intention to regulate the spending they had reached a new global economic conditions. In patterns of individuals and bilateral trade and cooperation addition, Brexit may contribute to families with ultra-high incomes agreement governing their future significant volatility in exchange and encourage high-income relationship (the “EU-UK Trade and rates. In 2021, approximately groups and enterprises to Cooperation Agreement”) which 11 percent of our net revenues return more to society. While no was formally approved by the were generated in the UK; regulatory action has been taken European Council on December therefore, any material adverse to date, similar statements by 29, 2020 and by the UK parliament effect of Brexit on global or governmental authorities may on December 30, 2020. The regional economic or market affect the social acceptability of EU-UK Trade and Cooperation conditions could adversely spending on luxury goods. Agreement was subsequently affect our business, results of ratified by the European operations and financial condition Maintaining and strengthening Parliament and entered into force as customers may reduce or our position in these growth on May 1, 2021. delay spending decisions on our markets is a relevant component products. of our global growth strategy. Under the terms of the EU- However, initiatives from UK Trade and Cooperation several global luxury automotive Agreement, exports of cars manufacturers have increased between the European Union and competitive pressures for luxury the United Kingdom are exempt cars in several growth markets. from tariffs, to the extent the As these markets continue to goods contain a certain quantity OUR SUCCESS DEPENDS LARGELY ON THE ABILITY OF OUR CURRENT MANAGEMENT TEAM TO OPERATE AND MANAGE EFFECTIVELY. grow, we anticipate that additional of EU or UK inputs, as applicable. Our success depends on the competitors, both international The application of such rules ability of our senior executives and domestic, will seek to enter may result in increased costs and other members of these markets and that existing for us or for our suppliers management to effectively market participants will try to (which, in turn, they could seek manage our business as a aggressively protect or increase to transfer to us), and difficulties whole and individual areas of their market share. Increased in the procurement of parts. the business. Most of our senior competition may result in pricing In addition, the new customs executives and employees, pressures, reduced margins procedures set forth in the including many highly skilled and our inability to gain or hold EU-UK Trade and Cooperation engineers, technicians and market share, which could have Agreement may result in artisans, are required to work a material adverse effect on our increased operational complexity, from our offices and production results of operations and financial with full import controls for facilities in and around Maranello, condition. See also “Global goods being imported from Italy. If we were to lose the economic conditions, pandemics the European Union to the services of any of these senior and macro events may adversely United Kingdom expected to executives or key employees, affect us”. be gradually introduced by the this could have a material United Kingdom throughout adverse effect on our business, 2022. While the EU-UK Trade operating results and financial and Cooperation Agreement condition. We have developed 26 FERRARI N.V.AR 2021incentive plans aimed at retaining quality new dealers, based on, electrical and electronic parts, and incentivizing our senior among other things, dealer plastic components as well as executives and employees, as well margin, incentives and the castings and tires, which makes as management succession plans performance of other dealers us dependent upon the suppliers that we believe are appropriate in the region. If we are unable to of such components. In coming in the circumstances, although attract a sufficient number of new years, we will also require a it is difficult to predict with any Ferrari dealers in targeted growth greater number of components certainty that we will replace areas, our prospects could be for hybrid and electric engines these individuals with persons materially adversely affected. as we introduce hybrid and of equivalent experience and capabilities. If we are unable to find adequate replacements or to attract, retain and incentivize senior executives, other key employees or new qualified personnel, our business, results of operations and financial condition may suffer. WE RELY ON OUR DEALER NETWORK TO PROVIDE SALES AND SERVICES. WE DEPEND ON OUR SUPPLIERS, MANY OF WHICH ARE SINGLE SOURCE SUPPLIERS; AND IF THESE SUPPLIERS FAIL TO DELIVER NECESSARY RAW MATERIALS, SYSTEMS, COMPONENTS AND PARTS OF APPROPRIATE QUALITY IN A TIMELY MANNER, OUR OPERATIONS MAY BE DISRUPTED. electric technology in our cars, and we expect producers of these components will be called upon to increase the levels of supply as the shift to hybrid or electric technology gathers pace in the industry. While we obtain components from multiple sources whenever possible, similar to other small volume car manufacturers, most of the key components we use in our cars are purchased by us from single We do not own our Ferrari Our business depends on a source suppliers. We generally dealers and virtually all of our significant number of suppliers, do not qualify alternative sources sales are made through our which provide the raw materials, for most of the single-sourced network of dealerships located components, parts and systems components we use in our cars throughout the world. If our we require to manufacture cars and we do not maintain long-term dealers are unable to provide and parts and to operate our agreements with a number of sales or service quality that our business. We use a variety of our suppliers. Furthermore, we clients expect or do not otherwise raw materials in our business, have limited ability to monitor the adequately project the Ferrari including aluminum, and precious financial stability of our suppliers. image and its aura of luxury and metals such as palladium and exclusivity, the Ferrari brand may rhodium. We source materials While we believe that we may be negatively affected. We depend from a limited number of be able to establish alternate on the quality of our dealership suppliers. We cannot guarantee supply relationships and can network and our business, that we will be able to maintain obtain or engineer replacement operating results and financial access to these raw materials, components for our single- condition could be adversely and in some cases this access sourced components, we may be affected if our dealers suffer may be affected by factors unable to do so in the short term, financial difficulties or otherwise outside of our control and the or at all, at prices or costs that we are unable to perform to our control of our suppliers. In believe are reasonable. Qualifying expectations. Furthermore, we addition, prices for these raw alternate suppliers or developing may experience disagreements materials fluctuate and while we our own replacements for certain or disputes in the course of our seek to manage this exposure, highly customized components of relationship with our dealers or we may not be successful in our cars may be time consuming, upon termination which may lead mitigating these risks. costly and may force us to make to financial costs, disruptions and As with raw materials, we are costly modifications to the reputational harm. also at risk of supply disruption designs of our cars. For example, Our growth strategy also depends and shortages in parts and defective airbags manufactured on our ability to attract a sufficient components we purchase for use by Takata Corporation (“Takata”), number of quality new dealers to in our cars. We source a variety our former principal supplier of sell our products in new areas. of key components from third airbags, have led to widespread We may face competition from parties, including transmissions, recalls by several automotive other luxury performance car brakes, driving-safety systems, manufacturers starting in 2015, manufacturers in attracting navigation systems, mechanical, including us (see further “Car 27 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS recalls may be costly and may Donbas region of Ukraine, the efforts may disrupt our normal harm our reputation”; see also governments of the United States, production processes, thereby “Overview of Our Business— the European Union, Japan and harming the quality or volume of Regulatory Matters—Vehicle other jurisdictions have recently our production. safety”). Following the acquisition announced the imposition of of Takata by Key Safety Systems sanctions on certain industry Furthermore, if our suppliers fail (“KSS”) in April 2018, Joyson sectors and parties in Russia to provide components in a timely Safety Systems, which is the and the regions of Donetsk and manner or at the level of quality combined company of Takata Luhansk, as well as enhanced necessary to manufacture our and KSS following the acquisition, export controls on certain cars, our clients may face longer is our principal supplier of the products and industries. These waiting periods which could airbags installed in our cars. and any additional sanctions result in negative publicity, harm Failure by Joyson Safety Systems and export controls, as well as our reputation and relationship to continue the supply of airbags any counterresponses by the with clients and have a material may cause significant disruption governments of Russia or other adverse effect on our business, to our operations. jurisdictions, could adversely operating results and financial affect, directly or indirectly, condition. In the past, we have replaced our supply chain, with negative certain suppliers because they implications on the availability and failed to provide components that prices of raw materials, and our met our quality control standards. customers, as well as the global The loss of any single or limited financial markets and financial WE DEPEND ON OUR MANUFACTURING FACILITIES IN MARANELLO AND MODENA. source supplier or the disruption services industry. See also “We We assemble all of the cars that in the supply of components are subject to risks related to the we sell and manufacture, and from these suppliers could lead COVID-19 pandemic that may all of the engines we use in our to delays in car deliveries to our materially and adversely affect cars and sell to Maserati, at our clients, which could adversely our business” for a discussion of production facility in Maranello, affect our relationships with our the COVID-19 pandemic, which Italy, where we also have our clients and also materially and may affect our supply chain corporate headquarters. We adversely affect our operating directly or indirectly. manufacture all of our car chassis results and financial condition. in a nearby facility in Modena, Italy. The supply of raw materials, Changes in our supply chain have Our Maranello or Modena plants parts and components may in the past resulted and may in the could become unavailable either also be disrupted or interrupted future result in increased costs permanently or temporarily for by natural disasters, or by and delays in car production. a number of reasons, including unexpected fluctuations in market We have also experienced contamination, power shortage demand and supply, such as cost increases from certain or labor unrest. Alternatively, the ongoing global shortage of suppliers in order to meet our changes in law and regulation, semiconductors that started quality targets and development including export, tax and in 2021, which is impacting the timelines and because of design employment laws and regulations, automotive industry in particular. changes that we have made, and or economic conditions, including If any major disasters occur, we may experience similar cost wage inflation, could make it such as earthquakes, fires, increases in the future. We are uneconomic for us to continue floods, hurricanes, wars, terrorist negotiating with existing suppliers manufacturing our cars in Italy. attacks, pandemics or other for cost reductions, seeking new In the event that we were unable events, our supply chain may be and less expensive suppliers for to continue production at either disrupted, which may stop or certain parts, and attempting to of these facilities or it became delay production and shipment of redesign certain parts to make uneconomic for us to continue our cars. As a result of the current them less expensive to produce. to do so, we would need to geopolitical tensions and conflict If we are unsuccessful in our seek alternative manufacturing between Russia and Ukraine, efforts to control and reduce arrangements which would take and the recent recognition by supplier costs while maintaining time and reduce our ability to Russia of the independence of a stable source of high quality produce sufficient cars to meet the self-proclaimed republics supplies, our operating results will demand. Moving manufacturing of Donetsk and Luhansk, in the suffer. Additionally, cost reduction to other locations may also affect 28 FERRARI N.V.AR 2021the perception of our brand and In the future, we may enter In connection with our new car quality among our clients. into additional licensing or brand diversification strategy Such a transfer would materially franchising arrangements. Many announced in November 2019, reduce our revenues and could of the risks associated with we continue to streamline our require significant investment, our own products, including existing arrangements with which as a result could have a risks relating to the image of licensing partners and decrease material adverse effect on our the Ferrari brand and its aura the volume of our licensing business, results of operations of exclusivity, as well as to the business. This may adversely and financial condition. demand for luxury goods, also affect our results from brand apply to our licensed products activities, particularly in the Maranello and Modena are located and franchised stores. In addition, short to medium term while our in the Emilia-Romagna region of there are problems that our broader brand diversification Italy which has the potential for licensing or franchising partners strategy is carried out. seismic activity. For instance, in may experience, including risks 2012 a major earthquake struck associated with each licensing the region, causing production partner’s ability to obtain capital, at our facilities to be temporarily manage its labor relations, suspended for one day. If major maintain relationships with its disasters such as earthquakes, suppliers, manage its credit and WE DEPEND ON THE STRENGTH OF OUR TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS. fires, floods, hurricanes, wars, bankruptcy risks, and maintain Given the importance of our terrorist attacks, pandemics client relationships. While we brand’s recognition on our or other events occur, our maintain significant control over financial performance and headquarters and production the products produced for us strategy, we believe that our facilities may be seriously by our licensing partners and trademarks and other intellectual damaged, or we may stop or delay the franchisees running our property rights are fundamental production and shipment of our Ferrari stores and theme parks, to our success and market cars. See also “We are subject any of the foregoing risks, or the position. Therefore, our business to risks related to the COVID-19 inability of any of our licensing or depends on our ability to protect pandemic that may materially and franchising partners to execute and promote our trademarks adversely affect our business” on the expected design and and other intellectual property for a discussion of the COVID-19 quality of the licensed products, rights. Accordingly, we devote pandemic. Such damage from Ferrari stores and theme park, or substantial efforts to the disasters or unpredictable events otherwise exercise operational establishment and protection could have a material adverse and financial control over its of our trademarks and other impact on our business, results business, may result in loss intellectual property rights from operations and financial of revenue and competitive such as registered designs and condition. harm to our operations in the patents on a worldwide basis. WE RELY ON OUR LICENSING AND FRANCHISING PARTNERS TO PRESERVE THE VALUE OF OUR LICENSES AND THE FAILURE TO MAINTAIN SUCH PARTNERS COULD HARM OUR BUSINESS. product categories where we We believe that our trademarks have entered into such licensing and other intellectual property or franchising arrangements. rights are adequately supported While we select our licensing by applications for registrations, and franchising partners with existing registrations and other care, any negative publicity legal protections in our principal surrounding such partners markets. However, we cannot could have a negative effect on exclude the possibility that our licensed products, the Ferrari intellectual property rights may We currently have multi-year stores and theme parks or the be challenged by others, or that agreements with licensing Ferrari brand. Further, while we we may be unable to register partners for various Ferrari- believe that we could replace our our trademarks or otherwise branded products in the existing licensing or franchising adequately protect them in sports, lifestyle and luxury partners if required, our inability some jurisdictions, especially retail segments. We also have to do so for any period of time in those foreign countries that multi-year agreements with could materially adversely affect do not respect and protect franchising partners for our our revenues and harm our intellectual property rights to Ferrari stores and theme park. business. the same extent as do the United 29 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS States, Japan and European be subject to product piracy, countries. If a third party were where our components are to register our trademarks, or counterfeited, which may result similar trademarks, in a country in reputational risk for Ferrari. OUR REVENUES FROM FORMULA 1 ACTIVITIES MAY DECLINE AND OUR RELATED EXPENSES MAY GROW. where we have not successfully The risks described above arise Revenues from our Formula 1 registered such trademarks, particularly in our Brand activities activities depend principally on it could create a barrier to our (see “Overview of Our Business— the income from our sponsorship commencing trade under those Brand Diversification Strategy” ). agreements and on our share marks in that country. of Formula 1 revenues from WE MAY FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL AND INDUSTRIAL PROPERTY RIGHTS AGAINST INFRINGEMENT OR MISAPPROPRIATION BY THIRD PARTIES. If we fail to adequately protect broadcasting and other sources. our intellectual property rights, See “Overview of Our Business— this may adversely affect our Formula 1 Activities.” If we are results of operations and unable to renew our existing financial condition, as other sponsorship agreements or if manufacturers may be able to we enter into new or renewed manufacture similar products at sponsorship agreements lower cost, with adverse effects with less favorable terms, our on our competitive position. In revenues would decline. In Our success and competitive addition, counterfeited products, addition, our share of profits positioning depend on, among or products illegally branded as related to Formula 1 activities other factors, our registered “Ferrari”, may damage our brand. may decline if either our team’s intellectual property rights, as well In addition, we may incur high performance worsens compared as other industrial or intellectual costs in reacting to infringements to other competing teams, or if property rights, including or misappropriations of our the overall Formula 1 business confidential know-how, trade intellectual property rights. suffers, including potentially as a secrets, database rights and copyrights. To protect our intellectual property, we rely on intellectual THIRD PARTIES MAY CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS. result of increasing popularity of the FIA Formula E championship or other racing events. Furthermore, in order to compete effectively on track we have been property laws, agreements We believe that we hold all the investing significant resources in for the protection of trade rights required for our business research and development and secrets, confidentiality and non- operations (including intellectual to competitively compensate the disclosure agreements, and other property rights and third-party best available drivers and other contractual means. licenses). However, we are racing team members. These Such measures, however, may be exposed to potential claims from expenses also vary based on inadequate and our intellectual third parties alleging that we changes in Formula 1 regulations property rights may be infringed infringe their intellectual property that require modification to or challenged by third parties, rights, since many competitors our racing engines and cars. and our confidential know- and suppliers also submit patent These expenses are expected to how or trade secrets could be applications for their inventions continue, and may grow further, misappropriated or disclosed to and secure patent protection or including as a result of any the public without our consent. other intellectual property rights. If changes in Formula 1 regulations, Consultants, vendors and we are unsuccessful in defending which would negatively affect our current and former employees, against any such claim, we may results of operations. for example, could violate their be required to pay damages or On October 31, 2019, the World confidentiality obligations and comply with injunctions which Council (Formula 1’s legislative restrictions on the use of Ferrari’s may disrupt our operations. We body) approved new technical, intellectual property. Ferrari may also as a result be forced sporting and financial rules, may not be able to prevent such to enter into royalty or licensing following the extensive talks held infringements, misappropriations agreements on unfavorable terms in the past two years among or disclosures, with potential or to redesign products to comply the owners of the Formula 1 adverse effects on our brand, with third parties’ intellectual business and all teams with reputation and business. In property rights. particular, our components may regards to the arrangements relating to the participation of 30 FERRARI N.V.AR 2021Ferrari and the other teams resources that we are allowed to local employees and establishing competing in the championship allocate to Formula 1 activities, facilities in advance of generating in the period following the with potential adverse effects any revenue. We are subject to 2020 expiration of the previous on our team’s performance if a number of risks associated arrangements between racing we are not able to optimize such with international business teams and the operator of resources. Formula 1. The new rules provide for, among other things, a new car design, a cap of $142 million in 2022 and $137 million in 2023 (assuming 23 grand ENGINE PRODUCTION REVENUES ARE DEPENDENT ON MASERATI’S ABILITY TO SELL ITS CARS. prix races in both years), to be We produce V8 and V6 engines further reduced in subsequent for Maserati. We have a multi- years, for all costs and expenses year arrangement with Maserati covering on-track performance to provide V6 engines through (excluding, among others, the 2023. While Maserati is required activities to enable the supply of to compensate us for certain power units, marketing costs, production costs, in the event that drivers’ salaries and the top the sales of Maserati cars decline three personnel at each team), compared to the contractual limits on car upgrades over requirements of our engine race weekends, restrictions production agreements with on the number of times that Maserati, our revenues from the certain components can be sale of engines may be adversely replaced during a race and affected. the standardization of certain parts. While it was originally planned that the new sporting and technical regulations would come into effect in 2021, in March 2020, Formula 1, FIA and the racing teams agreed to postpone effectiveness of such regulations to 2022 due to the disruption to the 2020 Formula 1 season caused by COVID-19. The financial regulations (including the budget cap) came into force WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS, INCLUDING UNFAVORABLE REGULATORY, POLITICAL, TAX AND LABOR CONDITIONS AND ESTABLISHING OURSELVES IN NEW MARKETS, ALL OF WHICH COULD HARM OUR BUSINESS. activities that may increase our costs, impact our ability to sell our cars and require significant management attention. These risks include: • conforming our cars to various international regulatory and safety requirements where our cars are sold, or homologated; • difficulty in establishing, staffing and managing foreign operations; • difficulties attracting clients in new jurisdictions; • foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in Italy; • fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake; • our ability to enforce our contractual and intellectual property rights, especially in on January 1, 2021. Compliance We currently have international those foreign countries that with the final set of rules operations and subsidiaries do not respect and protect approved by the World Council in various countries and intellectual property rights to requires significant changes to jurisdictions in Europe, North the same extent as do the United our racing cars, processes and America and Asia that are subject States, Japan and European operations, and the rules may to the legal, political, regulatory, countries, which increases be subject to further changes tax and social requirements in the future. If we are unable and economic conditions in the risk of unauthorized, and uncompensated, use of our to effectively adapt our cars to these jurisdictions. Additionally, technology; comply with changes in Formula as part of our growth strategy, 1 regulations, our performance we will continue to expand our • European Union and foreign at the races may suffer. These sales, maintenance, and repair government trade restrictions, changes may result in adverse services internationally. However, customs regulations, tariffs and effects on our revenues such expansion requires us to price or exchange controls; and results of operations. In make significant expenditures, particular, the new cap on including the establishment of expenses affects the amount of local operating entities, hiring of • foreign labor laws, regulations and restrictions; 31 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS • preferences of foreign nations for domestically produced cars; • changes in diplomatic and trade relationships; • political instability, natural disasters, war or events of terrorism; and • the strength of international economies. affect our revenue. Governmental large volume manufacturers. regulations may increase the This change in legislation is costs we incur to design, develop expected to result in additional and produce our cars and may costs for Ferrari, either through affect our product portfolio. penalties or the purchase of Regulation may also result in emissions credits from other a change in the character or manufacturers. performance characteristics of our cars which may render them In the United States, the U.S. less appealing to our clients. We Environmental Protection Agency anticipate that the number and (“EPA”) and the National Highway extent of these regulations, and Traffic Safety Administration If we fail to successfully address their effect on our cost structure (“NHTSA”) have set the federal these risks, many of which we and product line-up, will increase standards for passenger cars cannot control, our business, significantly in the future. and light trucks to meet certain operating results and financial combined average greenhouse condition could be materially Current European legislation gas (“GHG”) and fuel economy harmed. limits fleet average greenhouse (“CAFE”) levels and more stringent NEW LAWS, REGULATIONS, OR POLICIES OF GOVERNMENTAL ORGANIZATIONS REGARDING INCREASED FUEL ECONOMY REQUIREMENTS, REDUCED GREENHOUSE GAS OR POLLUTANT EMISSIONS, OR VEHICLE SAFETY, OR CHANGES IN EXISTING LAWS, MAY HAVE A SIGNIFICANT EFFECT ON OUR COSTS OF OPERATION AND/OR HOW WE DO BUSINESS. gas emissions for new passenger standards have been prescribed cars. Due to our small volume for model years 2017 through manufacturer (“SVM”) status 2025. Since Ferrari is considered we benefit from a derogation to be an SVM under EPA GHG from the existing emissions regulations (as it produces requirement and we are instead less than 5,000 vehicles per required to meet, by 2021, model year for the US market), alternative targets for our fleet of we expect to benefit from a EU-registered vehicles. Despite derogation from currently global shipments exceeding applicable standards. We also 10,000 vehicles in 2019, Ferrari petitioned the EPA for alternative still qualifies as an SVM under EU standards for the model years regulations, since its total number 2017-2021 and 2022-2025, which of registered vehicles in the are aligned to our technical and EU per year is less than 10,000 economic capabilities. On June vehicles. On July, 14, 2021, the 25, 2020, the EPA Administrator European Commission published signed the final determination We are subject throughout a proposal to amend the EU for alternative GHG standards the world to comprehensive 2019/631, which, among other for SVMs for model years 2017 and constantly evolving laws, things, would repeal from 2030 through 2021 and issued final regulations and policies. We the derogation granted to SMVs. alternative GHG standards for us expect the extent of the legal If the proposed amendment is and other SVMs. In September and regulatory requirements confirmed in the final rule, this 2016 we petitioned the NHTSA for affecting our business and our may have a significant effect on recognition as an independent costs of compliance to continue our costs. to increase significantly in the manufacturer of less than 10,000 vehicles produced globally and future. In Europe and the United Switzerland has historically we proposed alternative CAFE States, for example, significant adopted the targets approved by standards for model years governmental regulation is driven the European Commission. On 2017, 2018 and 2019. Then, in by environmental, fuel economy, November 24, 2021, the Swiss December, 2017, we amended vehicle safety and noise emission concerns. Evolving regulatory Federal Council amended the CO2 emission regulations for cars and the petition by proposing alternative CAFE standards for requirements could significantly vans and starting from January model years 2016, 2017 and 2018 affect our product development 1, 2022 the vehicles of niche and instead, covering also the 2016 plans and may limit the number small volume manufacturers model year. In 2019, our global and types of cars we sell and where we sell them, which may will have to meet the same CO2 emission targets as those of production exceeded 10,000 vehicles, and therefore we are 32 FERRARI N.V.AR 2021no longer considered an SVM by and potential regulatory initiatives model years 2012-2025 which the NHTSA for the model year are subject to review by federal are in compliance with the EPA 2019. We previously purchased or state agencies or the courts. greenhouse gas emissions the CAFE credits needed to fulfill On March, 31, 2020, the NHTSA regulations are also deemed to this deficit. On July 15, 2020, and the EPA issued the final Safer be in compliance with California’s we submitted to the NHTSA a Affordable Fuel-Efficient (SAFE) greenhouse gas emission petition for an exemption from Vehicles Rule (the “SAFE Vehicles regulations (the so-called the CAFE standards for the Rule”) setting CAFE and carbon “deemed to comply” option). On model year 2020. We proceeded dioxide emissions standards December 12, 2018 the CARB with this submission because, for model years 2021-2026 amended its existing regulations although Ferrari originally passenger cars and light trucks. to clarify that the “deemed-to- intended to produce more than Under the SAFE Vehicles Rule, the comply” provision would not 10,000 vehicles in 2020, actual overall stringency of the federal be available for model years production was lower than standards is significantly reduced 2021-2025 if the EPA standards 10,000 vehicles as a result of from the levels previously set: the for those years were altered the COVID-19 pandemic and final rule will increase stringency via an amendment of federal the related shutdown of our production facilities. Therefore, of CAFE and CO2 emissions standards by 1.5 percent each regulations. On September 19, 2019, the NHTSA and the EPA since we met the NHTSA definition year through model year 2026, established the “One National of SVM, we have requested an as compared with the previous Program” for fuel economy alternative fleet average GHG standards issued in 2012, which regulation, announcing the EPA’s standard for model year 2020. would have required annual decision to withdraw California’s The NHTSA has confirmed that increases of approximately 5 waiver of preemption under the it will not send a shortfall letter percent. In May 2021, the NHTSA Clean Air Act, and by affirming to Ferrari requiring payment issued a notice of proposed the NHTSA’s authority to set of CAFE civil penalties or the rulemaking proposing to fully nationally applicable regulatory application of CAFE credits with repeal the regulatory text and standards under the preemption regard to model year 2020 until appendices promulgated in the provisions of the Energy Policy the NHTSA has ruled on Ferrari’s SAFE Vehicles Rule. In August and Conservation Act (EPCA). petitions for an alternative 2021, the EPA published a California and other states, along standard. If our petitions are notice of proposed rulemaking with the cities of Los Angeles rejected, we will not be able to proposing to strengthen federal and New York, initiated litigation benefit from the more favorable GHG emissions standards for to challenge this final rule. CAFE standard levels which we passenger cars and light trucks Several environmental groups have petitioned for and this may by setting stringent requirements have also challenged such final require us to purchase additional for reductions from model years rule. Ferrari currently avails CAFE credits in order to comply 2023-2026. Consistent with the itself of the “deemed-to-comply” with applicable CAFE standards. EPA approach, in September provision to comply with CARB In 2021, our global production 2021, NHTSA published a notice of greenhouse gas emissions exceeded 10,000 vehicles again, proposed rulemaking proposing regulations. Therefore, depending and therefore we are no longer revised fuel economy standards on future developments, it may considered SVM by the NHTSA for for passenger cars and light be necessary to also petition the model year 2021. We already trucks for model years 2024- the CARB for SVM alternative purchased the CAFE credits 2026. The EPA and the NHTSA did standards and to increase the needed to fulfill our 2021 deficit. not propose any changes to the number of tests to be performed We expect to adopt the same regulations regarding SVM status in order to follow the CARB approach in the coming years. or alternative standards. specific procedures. In the United States, considerable In the state of California (which In addition, we are subject to uncertainty is associated with has been granted special legislation relating to the emission emissions regulations in light authority under the Clean Air Act of other air pollutants such as, of changing policies under to set its own vehicle emission among others, the EU “Euro the past and newly appointed standards), the California Air 6” standards and Real Driving administration. New regulations Resources Board (“CARB”) has Emissions (RDE) standards, the are in the process of being enacted regulations under which “Tier 3” Motor Vehicle Emission developed, and many existing manufacturers of vehicles for and Fuel Standards issued by 33 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS the EPA, and the Zero Emission fuel consumption regulation our global production exceeded Vehicle regulation in California, targeted a national average fuel 10,000 vehicles, but we have which are subject to similar consumption of 5.0L/100km by not lost our SVM status for EU derogations for SVMs. In March 2020, and the Stage V regulation, 2020, the European Commission issued on December 31, 2019, CO2 regulations or for EPA GHG regulations in the United States. launched a public consultation on targets a national average fuel We could lose our status as an its roadmap outlining the policy consumption of 4.0 l/100km SVM in the EU, the United States options that it could pursue in by 2025. In addition to the fuel and other countries if we do revising the emission standards consumption target on the entire not continue to meet all of the for light and heavy duty vehicles fleet, the Chinese regulation GB necessary eligibility criteria (Euro 7). This initiative is part of the 19578-2021 sets specific fuel under applicable regulations as European Green Deal, advocating consumption limits on model they evolve, not only in relation the European automotive types. Currently, this standard is to volumes but also in relation industry’s role as a leader in the only applicable to domestic cars, to the conditions of operational global transition to zero-emission as it is not adopted by the China independence. In order to meet vehicles. More stringent air Certification and Accreditation these criteria we may need to pollutant emissions standards for Administration (CNCA). If this modify our growth plans or other combustion engine vehicles are regulation were also applied operations. Furthermore, even expected to be set by early 2022. to importers, considering the if we continue to benefit from current Ferrari portfolio, only derogations as an SVM, we will be Depending on the future the plug-in hybrid models would subject to alternative standards regulatory developments, the be compliant. that the regulators deem technological solutions required appropriate for our technical and to ensure Euro 7 compliance may In response to severe air economic capabilities and such affect customers’ expectations quality issues in Beijing and alternative standards may be on performance, sound and other major Chinese cities, in significantly more stringent than driving experience. The European 2016 the Chinese government those currently applicable to us. Commission is also expected to published a more stringent assess and evaluate the current emissions program (National Under these existing regulations, noise emissions limits, with the 6), providing two different as well as new or stricter rules risk of more stringent thresholds. levels of stringency effective or policies, we could be subject starting from 2020. Moreover, to sizable civil penalties or have In relation to the safety legislation several autonomous Chinese to restrict or modify product framework, in 2016, the NHTSA regions and municipalities have offerings drastically to remain published guidelines for driver implemented the requirements in compliance. We may have distraction, for which rulemaking of the National 6 program even to incur substantial capital activities have not progressed ahead of the mandated deadlines. expenditures and research since early 2017. The costs of During 2020, the Chinese Vehicle and development expenditures compliance associated with these Emission Control Center (VECC) to upgrade products and and similar rulemaking may launched the “Pre-study on Next manufacturing facilities, which be substantial. Stage Emission Standards for would have an impact on our Light Duty Vehicles”, an ongoing cost of production and results Other governments around the research project expected to of operation. For a description world, such as those in Canada, be finalized in a more stringent of the regulation referred to in South Korea, China and certain emission program in the coming the paragraphs above please Middle Eastern countries are also years. Depending on the future see “Overview of Our Business— creating new policies to address regulatory developments, the Regulatory Matters”. these issues which could be even technological solutions required In the future, the advent of self- more stringent than the U.S. or to ensure the compliance may driving technology may result European requirements. As in the affect customers’ expectations on in regulatory changes that we United States and Europe, these performance, sound and driving cannot predict but may include government policies if applied experience. to us could significantly affect limitations or bans on human driving in specific areas. In our product development plans. We have lost our status as an 2020 the European Commission In China, for example, Stage IV SVM for NHSTA in 2019, because issued its new digital strategy 34 FERRARI N.V.AR 2021policies, which represent providing additional flexibilities for In accordance with our a priority in the European SVMs (defined as manufacturers strategy, we believe hybrid Commission’s regulatory with less than 2,000 units and electric technology will agenda. Although no regulations imported in China per year) be key to providing continuing have been issued in this regard, that achieve a certain minimum performance upgrades to our the European Commission CAFC yearly improvement sports car customers, and has showed a determination rate. Following the adoption of will also help us capture the to strengthen Europe’s digital the Stage V fuel consumption preferences of the urban, affluent sovereignty and role as a regulation, an update to the GT cars purchasers whom we standard setter, with a clear Administrative Measures on CAFC are increasingly targeting, while focus on data, technology, and and NEV credits was published helping us meet increasingly infrastructure. in June 2020. The Administrative stricter emissions requirements. Measures have been extended Similarly, driving bans on to 2023. Because our CAFC is In 2021 we launched the 296 GTB, combustion engine vehicles expected to exceed the regulatory our third production model with could be imposed, particularly in ceiling, we will be required to Plug-in Hybrid Electric Vehicle metropolitan areas, as a result of purchase NEV credits. There is (PHEV) technology, while in 2020 progress in electric and hybrid no assurance that an adequate we made the first shipments technology. On September 23, market for NEV credits will of the SF90 Stradale, the first 2020, the Governor of California develop in China and if we are series production Ferrari to issued an executive order not able to secure sufficient NEV feature PHEV architecture, which requiring that all in-state sales credits this may adversely affect integrates the internal combustion of new passenger vehicles be our business in China. engine with three electric motors, zero-emission by 2035. The and the launch of the SF90 Spider, CARB is developing regulations Several others regulations are the spider version of the SF90 to implement such executive also emerging to take into account Stradale and Ferrari’s first plug-in order. During 2021, the state of the non-exhaust emissions such hybrid spider. Additionally, some Washington also moved ahead as brake particulate emissions of our past models, such as with legislation that could phase and the environmental impact of LaFerrari and LaFerrari Aperta, out sales of non-zero-emission the electric and hybrid vehicles also included hybrid technology. vehicles by 2030. In November components, with a particular The integration of hybrid and 2020, the UK Prime Minister, the focus on batteries and waste electric technology more broadly Transport Secretary and the batteries. Business Secretary announced, into our car portfolio over time may present challenges and in the context of the 10-Point To comply with current and costs. We expect to increase Plan for a Green Industrial future environmental rules in all R&D spending in the medium Revolution, the end of the sale markets in which we sell our cars, term particularly on hybrid and of new petrol and diesel cars we may have to incur substantial electric technology-related in the United Kingdom by 2030. capital expenditure and research projects. Although we expect This will put the United Kingdom and development expenditure to price our hybrid and electric on course to be the first G7 to upgrade products and cars appropriately to recoup the country to decarbonize cars manufacturing facilities, which investments and expenditures and vans. Any further similar would have an impact on our we are making, we cannot be developments in the future may cost of production and results of certain that these expenditures adversely affect the demand for operations. will be fully recovered. In addition, our cars and our business. In September 2017, the Chinese government issued the Administrative Measures on CAFC (Corporate Average Fuel Consumption) and NEV (New THE INTRODUCTION OF HYBRID AND ELECTRIC TECHNOLOGY IN OUR CARS IS COSTLY AND ITS LONG-TERM SUCCESS IS UNCERTAIN. this transformation of our car technology creates risks and uncertainties such as the impact on driver experience, and the impact on the cars’ residual value over time, both of which may be met with an unfavorable market Energy Vehicle) Credits. This We are gradually but rapidly reaction. Other manufacturers regulation establishes mandatory introducing hybrid and electric of luxury sports cars may be CAFC requirements, while technology in our cars. more successful in implementing 35 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS hybrid and electric technology. harm our reputation and result reputation and result in adverse In the long-term, although we in adverse publicity, lost revenue, publicity, lost revenue, delivery believe that combustion engines delivery delays, product recalls, delays, product liability claims and will continue to be fundamental product liability claims, harm to other expenses, and could have to the Ferrari driver experience, our brand and reputation, and a material adverse impact on our hybrid and pure electric cars may significant warranty and other business, operating results and become the prevalent technology expenses, and could have a financial condition. for performance sports cars material adverse impact on our thereby displacing combustion business, operating results and engine models. See also “If financial condition. we are unable to keep up with advances in high performance car technology, our brand and competitive position may suffer.” CAR RECALLS MAY BE COSTLY AND MAY HARM OUR REPUTATION. We have in the past and we Because hybrid and electric may from time to time in the technology is a core component future be required to recall WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, WHICH COULD HARM OUR FINANCIAL CONDITION AND LIQUIDITY IF WE ARE NOT ABLE TO SUCCESSFULLY DEFEND OR INSURE AGAINST SUCH CLAIMS. of our strategy, and we expect our products to address We may become subject to that a significant portion of our performance, compliance or product liability claims, which shipments in the medium term safety-related issues. We may could harm our business, will consist of vehicles that feature incur costs for these recalls, operating results and financial hybrid and electric technology, including replacement parts and condition. The automobile if the introduction of hybrid and labor to remove and replace the industry experiences significant electric cars proves too costly defective parts. For example, in product liability claims and we or is unsuccessful in the market, the course of 2015 and 2016, have inherent risk of exposure our business and results of we issued a series of recalls to claims in the event our cars operations could be materially relating to defective air bags do not perform as expected or adversely affected. manufactured by Takata and malfunction resulting in personal IF OUR CARS DO NOT PERFORM AS EXPECTED OUR ABILITY TO DEVELOP, MARKET AND SELL OUR CARS COULD BE HARMED. installed on certain of our models. injury or death. A successful Also in light of uncertainties in product liability claim against our ability to recover the recall us could require us to pay a costs from Takata (which filed substantial monetary award. for bankruptcy in June 2017 Moreover, a product liability and was later acquired by Key claim could generate substantial Our cars may contain defects Safety Systems in April 2018), we negative publicity about our cars in design and manufacture that recorded a provision regarding and business, adversely affecting may cause them not to perform this matter in the second quarter our reputation and inhibiting or as expected or that may require of 2016 for an amount of €37 preventing commercialization repair. There can be no assurance million. This provision has been of future cars, which could have that we will be able to detect and used over time and amounted a material adverse effect on fix any defects in the cars prior to to approximately €3 million our brand, business, operating their sale to consumers. Our cars as of December 31, 2021. For results and financial condition. may not perform in line with our additional information related to While we seek to insure against clients’ evolving expectations or in the Takata airbag inflator recalls product liability risks, insurance a manner that equals or exceeds see “Overview of Our Business— may be insufficient to protect the performance characteristics Regulatory Matters—Vehicle against any monetary claims we of other cars currently available. safety”. In addition, regulatory may face and will not mitigate For example, our newer cars oversight of recalls, particularly in any reputational harm. Any may not have the durability or the vehicle safety, has increased lawsuit seeking significant longevity of current cars, and may recently. Any product recalls can monetary damages may have a not be as easy to repair as other harm our reputation with clients, material adverse effect on our cars currently on the market. particularly if consumers call into reputation, business and financial Any product defects or any other question the safety, reliability or condition. We may not be able failure of our performance cars performance of our cars. Any to secure additional product to perform as expected could such recalls could harm our liability insurance coverage on 36 FERRARI N.V.AR 2021commercially acceptable terms suffer loss or damage that is not or at reasonable costs when covered by insurance or which needed, particularly if we face exceeds our insurance coverage, liability for our products and are or have to pay higher insurance forced to make a claim under premiums, our financial condition such a policy. may be affected. WE ARE EXPOSED TO RISKS IN CONNECTION WITH PRODUCT WARRANTIES AS WELL AS THE PROVISION OF SERVICES. A number of our contractual and legal requirements oblige us to provide extensive warranties to IMPROPER CONDUCT OF EMPLOYEES, AGENTS, OR OTHER REPRESENTATIVES COULD ADVERSELY AFFECT OUR REPUTATION AND OUR BUSINESS, OPERATING RESULTS, AND FINANCIAL CONDITION. A DISRUPTION IN OUR INFORMATION TECHNOLOGY, INCLUDING AS A RESULT OF CYBERCRIMES, COULD COMPROMISE CONFIDENTIAL AND SENSITIVE INFORMATION. We depend on our information technology and data processing systems to operate our business, and a significant malfunction or disruption in the operation of our systems, human error, interruption to power supply, our clients, dealers and national Our compliance controls, or a security breach that distributors. There is a risk policies, and procedures may compromises the confidential that, relative to the guarantees not in every instance protect and sensitive information stored and warranties granted, the us from acts committed by our in those systems, could disrupt calculated product prices and the employees, agents, contractors, our business and adversely provisions for our guarantee and or collaborators that would impact our ability to compete. warranty risks have been set or violate the laws or regulations Our ability to keep our business will in the future be set too low. of the jurisdictions in which we operating effectively depends There is also a risk that we will be operate, including employment, on the functional and efficient required to extend the guarantee foreign corrupt practices, operation by us and our third or warranty originally granted in environmental, competition, party service providers of our certain markets for legal reasons, and other laws and regulations. information, data processing or provide services as a courtesy Such improper actions could and telecommunications or for reasons of reputation subject us to civil or criminal systems, including our car where we are not legally obliged investigations, and monetary and design, manufacturing, inventory to do so, and for which we will injunctive penalties. In particular, tracking and billing and payment generally not be able to recover our business activities may be systems. We rely on these from suppliers or insurers. subject to anticorruption laws, systems to enable a number of OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO PROTECT US AGAINST ALL POTENTIAL LOSSES TO WHICH WE MAY BE SUBJECT, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. regulations or rules of other business processes and help countries in which we operate. If us make a variety of day-to-day we fail to comply with any of these business decisions as well as regulations, it could adversely to track transactions, billings, impact our operating results and payments and inventory. Such our financial condition. In addition, systems are susceptible to actual or alleged violations could malfunctions and interruptions damage our reputation and due to equipment damage, power our ability to conduct business. outages, and a range of other We maintain insurance coverage Furthermore, detecting, hardware, software and network that we believe is adequate to investigating, and resolving problems. Those systems are cover normal risks associated any actual or alleged violation also susceptible to cybercrime, or with the operation of our is expensive and can consume threats of intentional disruption, business. However, there can significant time and attention of which are increasing in terms of be no assurance that any claim our executive management. sophistication and frequency, with under our insurance policies will be honored fully or timely, our insurance coverage will be sufficient in any respect or our insurance premiums will not increase substantially. Accordingly, to the extent that we the consequence that such cyber incidents may remain undetected for long periods of time. For any of these reasons, we may experience system malfunctions or interruptions. Although our systems are diversified, including 37 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS multiple server locations and a Regulation, which came into force competitors that have less debt. range of software applications for on May 25, 2018. To an increasing To the extent we become more different regions and functions, extent, the functionality and leveraged, the risks described and we periodically assess and controls of our cars depend on above would increase. We may implement actions to ameliorate in-vehicle information technology. also have difficulty refinancing risks to our systems, a significant The increased demand for our existing debt or incurring or large scale malfunction or a “connected car” has led to new debt on terms that we would interruption of our systems could increased digitization of car consider to be commercially adversely affect our ability to systems, the wide application reasonable, if at all. manage and keep our operations of software, and the creation of running efficiently, and damage new, fully digital mobility services. our reputation if we are unable Such technology is capable of to track transactions and deliver transmitting and storing an products to our dealers and increasing amount of personal CAR SALES DEPEND IN PART ON THE AVAILABILITY OF AFFORDABLE FINANCING. clients. A malfunction that results information belonging to our In certain regions, financing for in a wider or sustained disruption customers. Any unauthorized new car sales has been available to our business could have a access to in-vehicle IT systems at relatively low interest rates for material adverse effect on our may compromise the car security several years due to, among other business, results of operations or the privacy of our customers’ things, expansive government and financial condition. In addition information and expose us to monetary policies. To the extent to supporting our operations, we claims as well as reputational that interest rates may rise use our systems to collect and damage. Ultimately, any significant generally based on governmental store confidential and sensitive compromise in the integrity of monetary policies or actions of data, including information about our data security could have a central banks, market rates for our business, our clients and our material adverse effect on our new car financing are expected employees. business. As our technology continues to evolve, we anticipate that we will collect and store even more data in the future, and that our systems will increasingly use remote communication features that OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR OPERATIONS AND WE MAY FACE DIFFICULTIES IN SERVICING OR REFINANCING OUR DEBT. to rise as well, which may make our cars less affordable to clients or cause consumers to purchase less expensive cars, adversely affecting our results of operations and financial condition. Following widespread indications of returning inflation in are sensitive to both willful and As of December 31, 2021, our several major economies, central unintentional security breaches. gross consolidated debt was banks are signaling that interest Much of our value is derived approximately €2,630 million rate increases may be expected from our confidential business (which includes our financial in coming periods. Additionally, if information, including car services). See “Financial consumer interest rates increase design, proprietary technology Overview—Liquidity and Capital substantially or if financial and trade secrets, and to the Resources—Non-GAAP Financial service providers tighten lending extent the confidentiality of such Measures—Net Debt and Net standards or restrict their lending information is compromised, Industrial Debt” for additional to certain classes of credit, our we may lose our competitive information. Our current and clients may choose not to, or may advantage and our car sales may long-term debt requires us to not be able to, obtain financing to suffer. We also collect, retain and dedicate a portion of our cash purchase our cars. use certain personal information, flow to service interest and including data we gather from principal payments and, if interest clients for product development rates rise, this amount may and marketing purposes, and increase. In addition, our existing data we obtain from employees. debt may limit our ability to raise Therefore we are subject to a further capital or incur additional variety of ever-changing data indebtedness to execute our protection and privacy laws growth strategy or otherwise on a global basis, including the may place us at a competitive EU General Data Protection disadvantage relative to 38 FERRARI N.V.AR 2021WE MAY NOT BE ABLE TO PROVIDE ADEQUATE ACCESS TO FINANCING FOR OUR DEALERS AND CLIENTS, AND OUR FINANCIAL SERVICES OPERATIONS MAY BE DISRUPTED. Ferrari Financial Services Inc. partners, we may not be able to See “Financial Overview—Liquidity find a suitable alternative partner and Capital Resources—Non- with similar resources and GAAP Financial Measures—Net experience and continue to offer Debt and Net Industrial Debt” for financing services to support additional information. Should the sales of Ferrari cars in key we lose the ability to access European markets, which could the securitization market at adversely affect our results of Our dealers enter into wholesale advantageous terms or at all, operations and financial condition. financing arrangements to the funding of our controlled or In December 2021, Stellantis N.V. purchase cars from us to hold in associated finance companies (hereinafter also “Stellantis” and inventory or to use in showrooms would become more difficult together with its subsidiaries, the and facilitate retail sales, and retail and expensive and our financial “Stellantis Group”) communicated clients use a variety of finance and condition may therefore be its intention to create a leading lease programs to acquire cars. adversely affected. operational leasing group and enhanced captive finance arm. As In most markets, we rely either on Any financial services provider, part of the proposed transaction, controlled or associated finance including our controlled finance CACF is expected to acquire the companies or on commercial companies, will face other 50 percent stake in FCA Bank relationships with third parties, demands on its capital, as well as currently owned by Stellantis. We including third party financial liquidity issues relating to other will continue to monitor future institutions, to provide financing investments or to developments developments in this area and to our dealers and retail clients. in the credit markets. evaluate any potential impacts on Finance companies are subject to Furthermore, they may be subject our partnership with FCA Bank. various risks that could negatively to regulatory changes that may affect their ability to provide increase their costs, which may financing services at competitive impair their ability to provide rates, including: • the performance of loans and leases in their portfolio, which could be materially affected by delinquencies or defaults; competitive financing products to our dealers and retail clients. To the extent that a financial services provider is unable or LABOR LAWS AND COLLECTIVE BARGAINING AGREEMENTS WITH OUR LABOR UNIONS COULD IMPACT OUR ABILITY TO OPERATE EFFICIENTLY. unwilling to provide sufficient All of our production employees financing at competitive rates are represented by trade • higher than expected car return to our dealers and retail clients, unions, are covered by collective rates and the residual value such dealers and retail clients bargaining agreements and/ performance of cars they lease; may not have sufficient access or are protected by applicable and to financing to purchase or lease labor relations regulations that • fluctuations in interest rates and currency exchange rates. our cars. As a result, our car sales may restrict our ability to modify and market share may suffer, operations and reduce costs which would adversely affect our quickly in response to changes results of operations and financial in market conditions. These Furthermore, to help fund our condition. retail and wholesale financing regulations and the provisions in our collective bargaining business, our financial services Our dealer and retail customer agreements may impede our companies in the United States financing in Europe are mainly ability to restructure our business also access forms of funding provided through our partnership successfully to compete more available from the banking system with FCA Bank S.p.A. (“FCA efficiently and effectively, in each market, including sales Bank”), a joint venture between especially with those automakers or securitization of receivables FCA Italy S.p.A. and Crédit whose employees are not either in negotiated sales or Agricole Consumer Finance S.A. represented by trade unions through asset-backed financing (“CACF”). If we fail to maintain or are subject to less stringent programs. At December 31, 2021, our partnership with FCA Bank regulations, which could have a an amount of $1,020 million was or in the event of a termination material adverse effect on our outstanding under revolving of the joint venture or change of results of operations and financial securitizations carried out by control of one of our joint venture condition. 39 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR BUSINESS, STRATEGY AND OPERATIONS WE ARE SUBJECT TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS, INTEREST RATE CHANGES, CREDIT RISK AND OTHER MARKET RISKS. significant adverse movements in foreign exchange rates have occurred in early 2022. If the U.S. Dollar or some other currencies were to depreciate against the CHANGES IN TAX, TARIFF OR FISCAL POLICIES COULD ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS. Euro, we expect that it would Imposition of any additional adversely impact our revenues taxes and levies designed to limit We operate in numerous markets and results of operations. The the use of automobiles could worldwide and are exposed to extent of adverse impacts from adversely affect the demand for market risks stemming from exchange rate fluctuations could our vehicles and our results of fluctuations in currency and increase if the portion of our operations. Changes in corporate interest rates. In particular, business in countries outside and other taxation policies as changes in exchange rates of Eurozone increases. See well as changes in export and between the Euro and the main “Financial Overview—Trends, other incentives given by various foreign currencies in which we Uncertainties and Opportunities”. governments, or import or tariff operate affect our revenues policies, could also adversely and results of operations. For We seek to manage risks affect our results of operations. other risks related to a rise in associated with fluctuations The impact of any such tariffs interest rates, see also “Our in currency through financial on our operations and results indebtedness could adversely hedging instruments. Although is uncertain and could be affect our operations and we we seek to manage our foreign significant, and we can provide may face difficulties in servicing currency risk in order to minimize no assurance that any strategies or refinancing our debt” and any negative effects caused we implement to mitigate the “Car sales depend in part on by rate fluctuations, including impact of such tariffs or other the availability of affordable through hedging activities, there trade actions will be successful. financing”. The exposure to can be no assurance that we will While we are managing our currency risk is mainly linked to be able to do so successfully, product development and the differences in geographic and our business, results of production operations on a distribution of our sourcing operations and financial condition global basis to reduce costs and and manufacturing activities could nevertheless be adversely lead times, unique national or from those in our commercial affected by fluctuations in regional standards can result activities, as a result of which market rates, particularly if these in additional costs for product our cash flows from sales are conditions persist. development, testing and denominated in currencies manufacturing. Governments different from those connected Our financial services activities often require the implementation to purchases or production are also subject to the risk of of new requirements during activities. For example, we incur insolvency of dealers and retail the middle of a product cycle, a large portion of our capital clients, as well as unfavorable which can be substantially more and operating expenses in Euro economic conditions in markets expensive than accommodating while we receive the majority where these activities are carried these requirements during the of our revenues in currencies out. Despite our efforts to mitigate design phase of a new product. other than Euro. In addition, such risks through the credit The imposition of any additional foreign exchange movements approval policies applied to taxes and levies or change in might also negatively affect the dealers and retail clients, there government policy designed to relative purchasing power of our can be no assurances that we will limit the use of high performance clients which could also have an be able to successfully mitigate sports cars or automobiles more adverse effect on our results such risks, particularly with generally, or any decisions by of operations. For example, the respect to a general change in policymakers to implement taxes U.S. Dollar remained relatively economic conditions. on luxury automobiles, could also stable during the first half of 2021 and appreciated against the Euro during the second half of 2021, while the pound sterling appreciated against the Euro throughout the year 2021. No adversely affect the demand for our cars. The occurrence of the above may have a material adverse effect on our business, results of operations and financial condition. 40 FERRARI N.V.AR 2021IF WE WERE TO LOSE OUR AUTHORIZED ECONOMIC OPERATOR CERTIFICATE, WE MAY BE REQUIRED TO MODIFY OUR CURRENT BUSINESS PRACTICES AND TO INCUR INCREASED COSTS, AS WELL AS EXPERIENCE SHIPMENT DELAYS. Because we ship and sell our RISKS RELATED TO OUR COMMON SHARES THE MARKET PRICE AND TRADING VOLUME OF OUR COMMON SHARES MAY BE VOLATILE, WHICH COULD RESULT IN RAPID AND SUBSTANTIAL LOSSES FOR OUR SHAREHOLDERS. cars in numerous countries, the The market price of our common customs regulations of various shares may be highly volatile jurisdictions are important to and could be subject to wide our business and operations. To fluctuations. In addition, the expedite customs procedure, trading volume of our common we obtained the European shares may fluctuate and cause Union’s Authorized Economic significant price variations to Operator (AEO) certificate. The occur. If the market price of AEO certificate is granted to our common shares declines operators that meet certain significantly, a shareholder may requirements regarding supply be unable to sell their common in laws or regulations, or differing interpretations thereof, affecting our business, or enforcement of these laws and regulations, or announcements relating to these matters; • adverse publicity about the automotive industry or the luxury industry generally, or particularly scandals relating to those industries, specifically; • litigation and governmental investigations; and • general market and economic conditions. THE LOYALTY VOTING PROGRAM MAY AFFECT THE LIQUIDITY OF OUR COMMON SHARES AND REDUCE OUR COMMON SHARE PRICE. chain security and the safety shares at or above their purchase The implementation of our loyalty and compliance with law of the price, if at all. The market price voting program could reduce the operator’s customs controls of our common shares may trading liquidity and adversely and procedures. Operators fluctuate or decline significantly affect the trading prices of our are audited periodically for in the future. Some of the factors common shares. The loyalty continued compliance with the that could negatively affect the voting program is intended to requirements. The AEO certificate price of our common shares, or reward our shareholders for allows us to benefit from special result in fluctuations in the price maintaining long-term share expedited customs treatment, or trading volume of our common ownership by granting initial which significantly facilitates shares, include: the shipment of our cars in the various markets where we operate. If we were to lose the AEO status, including for failure to meet one of the certification’s requirements, we would be required to change our business practices and to adopt standard customs procedures for the shipment of our cars. This could result in increased costs and shipment delays, which, in turn, could negatively affect our results of operations. • variations in our operating results, or failure to meet the market’s earnings expectations; • publication of research reports about us, the automotive industry or the luxury industry, or the failure of securities analysts to cover our common shares; • departures of any members of our management team or additions or departures of other key personnel; shareholders and persons holding our common shares continuously for at least three years the option to elect to receive special voting shares. Special voting shares cannot be traded and, if common shares participating in the loyalty voting program are sold they must be deregistered from the loyalty register and any corresponding special voting shares transferred to us for no consideration (om niet). This loyalty voting program is designed to encourage a • adverse market reaction to any stable shareholder base and, indebtedness we may incur or conversely, it may deter trading securities we may issue in the by shareholders that may be future; • actions by shareholders; • changes in market valuations of similar companies; • changes or proposed changes interested in participating in our loyalty voting program. Therefore, the loyalty voting program may reduce liquidity in our common shares and adversely affect their trading price. 41 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR COMMON SHARES THE INTERESTS OF OUR LARGEST SHAREHOLDERS MAY DIFFER FROM THE INTERESTS OF OTHER SHAREHOLDERS. in the public market by Piero Stellantis (based on SEC filings). Ferrari or the perception that The percentages of ownership such a sale could occur could and voting power above are adversely affect the prevailing calculated based on the number market price of the common of outstanding shares net of Exor N.V. (“Exor”) is our shares. largest shareholder, holding approximately 24.21 percent of our outstanding common shares and approximately 36.00 percent of our voting power (as of February 14, 2022). Therefore, WE MAY HAVE POTENTIAL CONFLICTS OF INTEREST WITH STELLANTIS AND EXOR AND ITS RELATED COMPANIES. treasury shares. Exor also owns a controlling interest in CNH Industrial N.V., which was part of the former Fiat Group before its spin-off several years ago. These ownership interests could create actual, perceived or potential Exor has a significant influence Questions relating to conflicts of conflicts of interest when over these matters submitted interest may arise between us these parties or our common to a vote of our shareholders, and Fiat Chrysler Automobiles directors and officers are faced including matters such as N.V., our former largest with decisions that could have adoption of the annual financial shareholder, renamed Stellantis different implications for us and statements, declarations of N.V., in a number of areas relating Stellantis or Exor, as applicable. annual dividends, the election to common shareholdings and and removal of the members management, as well as our past of our board of directors (the and ongoing relationships. There “Board of Directors”), capital are certain overlaps among increases and amendments the directors and officers of to our articles of association. us and Stellantis. For example, In addition, as of February 14, Mr. John Elkann, our Executive 2022, Piero Ferrari, the Vice Chairman, is the Chairman Chairman of Ferrari, holds and an executive director of approximately 10.30 percent Stellantis and Chairman and of our outstanding common Chief Executive Officer of Exor. shares and approximately 15.31 Certain of our other directors and percent of voting interest in officers may also be directors us (as of February 14, 2022). or officers of Stellantis or Exor, OUR LOYALTY VOTING PROGRAM MAY MAKE IT MORE DIFFICULT FOR SHAREHOLDERS TO ACQUIRE A CONTROLLING INTEREST IN FERRARI, CHANGE OUR MANAGEMENT OR STRATEGY OR OTHERWISE EXERCISE INFLUENCE OVER US, WHICH MAY AFFECT THE MARKET PRICE OF OUR COMMON SHARES. The percentages of ownership our and Stellantis’s largest The provisions of our articles and voting power above are shareholder. These individuals of association which establish calculated based on the number owe duties both to us and to the the loyalty voting program may of outstanding shares net of other companies that they serve make it more difficult for a third treasury shares. As a result, as officers and/or directors, party to acquire, or attempt to Piero Ferrari also has influence which may create conflicts as, acquire, control of our company, in matters submitted to a vote of for example, these individuals even if a change of control our shareholders. Exor and Piero review opportunities that may be were considered favorably by Ferrari informed us that they appropriate or suitable for both shareholders holding a majority have entered into a shareholder us and such other companies, of our common shares. As agreement pursuant to which or we pursue business a result of the loyalty voting they have undertaken to consult transactions in which both we program, a relatively large for the purpose of forming, and such other companies proportion of the voting power where possible, a common have an interest, such as our of Ferrari could be concentrated view on the items on the agenda arrangement to supply engines in a relatively small number of of shareholders meetings. for Maserati cars. Exor holds shareholders who would have See “Major Shareholders— approximately 24.21 percent of significant influence over us. As Shareholders’ Agreement”. The our outstanding common shares of February 14, 2022, Exor had interests of Exor and Piero Ferrari and approximately 36.00 percent approximately 24.21 percent may in certain cases differ from of the voting power in us (as of of our outstanding common those of other shareholders. In February 14, 2022), while it holds shares and a voting interest in addition, the sale of substantial approximately 14.4 percent of the Ferrari of approximately 36.00 amounts of our common shares outstanding common shares in percent. As of February 14, 2022, 42 FERRARI N.V.AR 2021Piero Ferrari held approximately incorporated in the Netherlands. are not required to file periodic 10.30 percent of our outstanding The rights of our shareholders reports and financial statements common shares and, as a result and the responsibilities of with the SEC as frequently or of the loyalty voting mechanism, members of our Board of as promptly as U.S. companies had approximately 15.31 percent Directors may be different from whose securities are registered of the voting power in our shares. the rights of shareholders and the under the Exchange Act, nor The percentages of ownership responsibilities of members of are we required to comply with and voting power above are board of directors in companies Regulation FD, which restricts the calculated based on the number governed by the laws of other selective disclosure of material of outstanding shares net of jurisdictions including the United information. Accordingly, there treasury shares. In addition, States. In the performance of its may be less publicly available Exor and Piero Ferrari informed duties, our Board of Directors is information concerning us than us that they have entered into required by Dutch law to consider there is for U.S. public companies. a shareholder agreement, our interests and the interests of summarized under “Major our shareholders, our employees Shareholders—Shareholders’ and other stakeholders, in all Agreement”. As a result, Exor cases with due observation of and Piero Ferrari may exercise the principles of reasonableness significant influence on matters and fairness. It is possible that involving our shareholders. Exor some of these parties will have OUR ABILITY TO PAY DIVIDENDS ON OUR COMMON SHARES MAY BE LIMITED AND THE LEVEL OF FUTURE DIVIDENDS IS SUBJECT TO CHANGE. and Piero Ferrari and other interests that are different from, Our payment of dividends on our shareholders participating in or in addition to, your interests as common shares in the future will the loyalty voting program may a shareholder. be subject to business conditions, have the power effectively to prevent or delay change of control or other transactions that may otherwise benefit our shareholders. The loyalty voting program may also prevent or discourage shareholder initiatives aimed at changing Ferrari’s management or strategy or otherwise exerting influence over Ferrari. See “Corporate Governance—Loyalty Voting Structure”. WE ARE A DUTCH PUBLIC COMPANY WITH LIMITED LIABILITY, AND OUR SHAREHOLDERS MAY HAVE RIGHTS DIFFERENT TO THOSE OF SHAREHOLDERS OF COMPANIES ORGANIZED IN THE UNITED STATES. WE EXPECT TO MAINTAIN OUR STATUS AS A “FOREIGN PRIVATE ISSUER” UNDER THE RULES AND REGULATIONS OF THE SEC AND, THUS, ARE EXEMPT FROM A NUMBER OF RULES UNDER THE EXCHANGE ACT OF 1934 AND ARE PERMITTED TO FILE LESS INFORMATION WITH THE SEC THAN A COMPANY INCORPORATED IN THE UNITED STATES. financial conditions, earnings, cash balances, commitments, strategic plans and other factors that our Board of Directors may deem relevant at the time it recommends approval of the dividend. Our dividend policy is subject to change in the future based on changes in statutory requirements, market trends, strategic developments, capital requirements and a number of other factors. In addition, under our articles of association and Dutch law, dividends may be As a “foreign private issuer,” we declared on our common shares are exempt from rules under the only if the amount of equity Securities Exchange Act of 1934, exceeds the paid up and called as amended (the “Exchange Act”) up capital plus the reserves that that impose certain disclosure have to be maintained pursuant and procedural requirements to Dutch law or the articles of for proxy solicitations under association. Further, even if we The rights of our shareholders Section 14 of the Exchange Act. In are permitted under our articles may be different from the rights addition, our officers, directors of association and Dutch law of shareholders governed by and principal shareholders are to pay cash dividends on our the laws of U.S. jurisdictions. exempt from the reporting and common shares, we may not have We are a Dutch public company “short-swing” profit recovery sufficient cash to pay dividends with limited liability (naamloze provisions of Section 16 of the in cash on our common shares. vennootschap). Our corporate Exchange Act and the rules under We are a holding company and affairs are governed by our the Exchange Act with respect to our operations are conducted articles of association and by their purchases and sales of our through our subsidiaries. As a the laws governing companies common shares. Moreover, we result, our ability to pay dividends 43 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO OUR COMMON SHARES primarily depends on the ability upon these persons. It may also demerger, it is possible that those of our subsidiaries, particularly be difficult for U.S. investors to creditors may seek to recover Ferrari S.p.A., to generate enforce within the United States from us, claiming that we remain earnings and to provide us judgments against us predicated liable to satisfy such obligations. with the necessary financial upon the civil liability provisions of While we believe we would prevail resources. the securities laws of the United against any such claim, litigation States or any state thereof. In is inherently costly and uncertain addition, there is uncertainty as and could have an adverse effect. to whether the courts outside the See “Overview—History of the United States would recognize Company”. OUR MAINTENANCE OF TWO EXCHANGE LISTINGS MAY ADVERSELY AFFECT LIQUIDITY IN THE MARKET FOR OUR COMMON SHARES AND COULD RESULT IN PRICING DIFFERENTIALS OF OUR COMMON SHARES BETWEEN THE TWO EXCHANGES. or enforce judgments of U.S. courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Therefore, it may be difficult to Our shares are listed on both enforce U.S. judgments against the New York Stock Exchange us, our directors and officers and (“NYSE”) and the Euronext Milan. our independent auditors. The dual listing of our common shares may split trading between the NYSE and the Euronext Milan, adversely affect the liquidity of the shares and the development STELLANTIS CREDITORS MAY SEEK TO HOLD US LIABLE FOR CERTAIN STELLANTIS OBLIGATIONS. RISKS RELATED TO TAXATION CHANGES TO TAXATION OR THE INTERPRETATION OR APPLICATION OF TAX LAWS COULD HAVE AN ADVERSE IMPACT ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Our business is subject to various taxes in different jurisdictions (mainly Italy), which include, among others, the Italian of an active trading market for One step of our Separation corporate income tax (“IRES”), our common shares in one or (see “Overview—History of the regional trade tax (“IRAP”), value both markets and may result Company”) from FCA (references added tax (“VAT”), excise duty, in price differentials between to “FCA” or “FCA Group” refer to registration tax and other indirect the exchanges. Differences in Fiat Chrysler Automobiles N.V., taxes. We are exposed to the risk the trading schedules, as well together with its subsidiaries, that our overall tax burden may as volatility in the exchange rate prior to the merger between FCA increase in the future. of the two trading currencies, and Peugeot S.A. completed on among other factors, may result January 16, 2021, which resulted Changes in tax laws or in different trading prices for in the creation of Stellantis N.V.) regulations or in the position our common shares on the two included a demerger from FCA of of the relevant Italian and non- exchanges. our common shares previously Italian authorities regarding IT MAY BE DIFFICULT TO ENFORCE U.S. JUDGMENTS AGAINST US. held by it. In connection with the application, administration a demerger under Dutch law, or interpretation of these laws the demerged company may or regulations, particularly if continue to be liable for certain applied retrospectively, could We are organized under the obligations of the demerging have negative effects on our laws of the Netherlands, and company that exist at the time current business model and have a substantial portion of our of the demerger, but only to a material adverse effect on our assets are outside of the United the extent that the demerging business, operating results and States. Most of our directors and company fails to satisfy such financial condition. senior management and our liabilities. Based on other actions independent auditors are resident taken as part of the Separation, In order to reduce future potential outside the United States, and all we do not believe we retain any disputes with tax authorities, we or a substantial portion of their liability for obligations of FCA, now seek advance agreements with respective assets may be located Stellantis, existing at the time of tax authorities on significant outside the United States. As a the Separation. Nevertheless, in matters. In particular we filed a result, it may be difficult for U.S. the event that Stellantis fails to ruling application for advance investors to effect service of satisfy obligations to its creditors pricing agreement (APA) on process within the United States existing at the time of the transfer pricing. 44 FERRARI N.V.AR 2021In addition, tax laws are complex and subject to subjective valuations and interpretive decisions, and we will periodically be subject to tax audits aimed at assessing our compliance with direct and indirect taxes. The tax authorities may not agree with our interpretations of, or the positions AS A RESULT OF THE DEMERGERS AND THE MERGER IN CONNECTION WITH THE SEPARATION, WE MIGHT BE JOINTLY AND SEVERALLY LIABLE WITH FCA FOR CERTAIN TAX LIABILITIES ARISEN IN THE HANDS OF FCA. than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business, as defined in applicable Treasury Regulations), or (ii) at least 50 percent of our assets for the taxable year (averaged over the year and determined based we have taken or intend to take on, Although the Italian tax authorities upon value) produce or are held tax laws applicable to our ordinary confirmed in a positive advance for the production of “passive activities and extraordinary tax ruling issued on October 9, income”. U.S. persons who own transactions. In case of challenges 2015 that the demergers and shares of a PFIC are subject to by the tax authorities to our the Merger that was carried a disadvantageous U.S. federal interpretations, we could face long out in connection with the income tax regime with respect tax proceedings that could result Separation would be respected to the income derived by the PFIC, in the payment of penalties and as tax-free, neutral transactions the dividends they receive from have a material adverse effect on from an Italian income tax the PFIC, and the gain, if any, they our operating results, business perspective, under Italian tax law derive from the sale or other and financial condition. we may still be held jointly and disposition of their shares in On October 8, 2021, an agreement combined application of the rules severally liable, as a result of the the PFIC. was reached between 136 governing the allocation of tax While we believe that shares countries for a two-pillar approach liabilities in case of demergers of our stock are not stock of a to international tax reform (the and mergers, with FCA for PFIC for U.S. federal income tax “OECD Agreement”). Amongst taxes, penalties, interest and purposes, this conclusion is based other things, Pillar One proposes any other tax liability arising in on a factual determination made a reallocation of a proportion of the actions of FCA because of annually and thus is subject to tax to market jurisdictions, while violations of its tax obligations change. Moreover, our common Pillar Two seeks to apply a global related to tax years prior to the shares may become stock of a minimum effective tax rate of two Demergers described in the PFIC in future taxable years if 15 percent starting from 2023. section “Overview—History of the there were to be changes in our The OECD Agreement is likely to Company”. assets, income or operations. determine changes in corporate tax rates in a number of countries in the coming years. The impact of changes in corporate tax rates on the measurement of tax assets and liabilities depends THERE MAY BE POTENTIAL “PASSIVE FOREIGN INVESTMENT COMPANY” TAX CONSIDERATIONS FOR U.S. HOLDERS. THE CONSEQUENCES OF THE LOYALTY VOTING PROGRAM ARE UNCERTAIN. No statutory, judicial or administrative authority directly on the nature and timing of Shares of our stock would discusses how the receipt, the legislative changes in each be stock of a “passive foreign ownership, or disposition of country, which are subject to investment company,” or a PFIC, special voting shares should uncertainty. Additionally, there for U.S. federal income tax be treated for Italian or U.S. are expected changes on the purposes with respect to a U.S. tax purposes and as a result, horizon with respect to US holder if for any taxable year the tax consequences in those tax reforms. At this time, it is in which such U.S. holder held jurisdictions are uncertain. expected that these changes shares of our stock, after the will be substantively enacted in application of applicable “look- The fair market value of the 2022. There was no impact on through rules” (i) 75 percent or special voting shares, which current or deferred taxes in 2021 more of our gross income for the may be relevant to the tax in relation to these potential tax taxable year consists of “passive consequences, is a factual changes and management will income” (including dividends, determination and is not continue to monitor developments interest, gains from the sale or governed by any guidance in the related tax legislation going exchange of investment property that directly addresses such a forward. and rents and royalties other situation. Because, among other 45 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ RISKS RELATED TO TAXATION things, our special voting shares of intangibles) with a 110% “super are not transferable (other than, tax deduction” for R&D expenses in very limited circumstances, related to eligible intangible together with the associated assets. The decree provides for common shares) and a a specific transitional procedure shareholder will receive amounts between the two regimes. The in respect of the special voting amount of the related tax benefits shares only if we are liquidated, (if any) that the Group may receive we believe and intend to take the from the Patent Box or other position that the fair market value tax regimes remains subject to of each special voting share is uncertainty. minimal. However, the relevant tax authorities could assert that the Furthermore, we currently value of the special voting shares calculate taxes due in Italy based, as determined by us is incorrect. among other things, on certain tax breaks recognized by Italian The tax treatment of the loyalty tax regulations for R&D expenses voting program is unclear and and for the investments on shareholders are urged to consult manufacturing equipment, which their tax advisors in respect of result in a tax saving. the consequences of acquiring, owning and disposing of special In addition, we benefit from the voting shares. WE CURRENTLY BENEFIT OR SEEK TO BENEFIT FROM CERTAIN SPECIAL TAX REGIMES, WHICH MAY NOT BE AVAILABLE IN THE FUTURE. measures introduced in Italy by art. 110 of Law Decree no. 104/2020, converted into Law no.126/2020, which re-opened the voluntary step up of tangible and intangible assets, with the application of a three-percent substitutive tax rate. The 2022 Italian Law no. 190/2014, as budget law introduced some subsequently amended and retroactive changes to the supplemented, introduced an step-up regime. In particular, optional Patent Box regime in the the 2022 budget law provides Italian tax system. The Patent Box for an extension from 18 years regime is a tax exemption related to 50 years of the amortization to, inter alia, the use of intellectual period for tax purposes for property assets. Business any trademarks and goodwill income derived from the use of that benefited from the step-up each qualified intangible asset is regime. The modification even partially exempted from taxation if reduces our annual financial for both IRES and IRAP purposes. benefit does not affect the overall We are currently applying the positive impact of the incentive. Patent Box tax regime for the period from 2020 to 2024, in line These measures continue to with applicable tax regulations mitigate the tax burden in Italy. in Italy. Law Decree No. 146 as Significant changes in regulations amended by the 2022 Italian or interpretation might adversely budget law, replaced the former affect the availability of such Patent Box regime (which allowed exemptions and result in higher taxpayers to exempt from tax charges. See also “Changes to corporate income tax (IRES) and taxation or the interpretation or regional income tax (IRAP) up to application of tax laws could have 50% of their income derived from an adverse impact on our results of the direct or indirect exploitation operations and financial condition.” 46 FERRARI N.V.AR 202147 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. OVERVIEW FERRARI IS AMONG THE WORLD’S LEADING LUXURY BRANDS, FOCUSED ON THE DESIGN, ENGINEERING, PRODUCTION AND SALE OF THE WORLD’S MOST RECOGNIZABLE LUXURY PERFORMANCE SPORTS CARS. OUR BRAND SYMBOLIZES EXCLUSIVITY, INNOVATION, STATE-OF-THE-ART SPORTING PERFORMANCE AND ITALIAN DESIGN AND ENGINEERING HERITAGE. Our name and history and the range (including cars presented announced at our 2018 Capital image enjoyed by our cars are in 2021, for which shipments will Markets Day. closely associated with our commence in future years) is Formula 1 racing team, Scuderia comprised of six sports cars (the In 2021, we shipped 11,155 cars Ferrari, the most successful 812 GTS, the Ferrari F8 Tributo, and recorded net revenues of racing team in the history of the Ferrari F8 Spider, the 296 GTB, €4,271 million, EBIT of €1,075 Formula 1. From the inaugural the SF90 Stradale and the SF90 million, net profit of €833 year of Formula 1 in 1950 Spider), two GT cars (the Ferrari million and earnings before through the present, Scuderia Roma and the Ferrari Portofino interest, taxes, depreciation, and Ferrari has won 238 Grand Prix M), two special series cars (the amortization (EBITDA) of €1,531 races, 16 Constructors’ World 812 Competizione and the 812 million. For additional information titles and 15 Drivers’ World titles. Competizione A), two versions regarding EBITDA, including a We are the only team which of our first Icona model, the reconciliation of EBITDA to net has taken part in all the editions Ferrari Monza SP1 and the Ferrari profit, as well as other non-GAAP of the Championship, racing Monza SP2, as well as the recently financial measures we present, in more than 1,000 Formula 1 presented new model in the Icona see “Financial Overview—Liquidity Grand Prix races. range, the Ferrari Daytona SP3. and Capital Resources—Non-GAAP Financial Measures”. We believe our history of In 2021 we completed the excellence, technological shipments of the 812 Superfast, Whilst broadening our product innovation and defining style while the shipments of the portfolio to target a larger transcends the automotive Ferrari Monza SP1 and SP2 customer base, we continue to industry, and is the foundation of will be completed in the first pursue a low volume production the Ferrari brand and image. quarter of 2022. We also produce strategy in order to maintain a We design, engineer and limited edition hypercars and reputation for exclusivity and produce our cars in Maranello, one-off cars. Our most recent scarcity among purchasers of Italy, and sell them in over 60 hypercar, the LaFerrari Aperta, our cars and we carefully manage markets worldwide through was launched in 2016 to our production volumes and a network of 172 authorized celebrate our 70th Anniversary delivery waiting lists to promote dealers operating 191 points of and finished its limited series run this reputation. We divide our sale as of the end of 2021. in 2018. In 2021, we launched regional markets into (i) EMEA, 4 new models, including the (ii) Americas, (iii) Mainland China, We believe our cars are the 296 GTB, a new PHEV featuring Hong Kong and Taiwan, and (iv) epitome of performance, luxury a new V6 engine, the limited Rest of APAC, which represented and styling. series V12 812 Competizione respectively 49.2 percent, 25.4 Our product offering comprises and 812 Competizione A, and percent, 8.1 percent and 17.3 four main pillars: the sports range, the new Icona series model, percent of units shipped in 2021. the GT range, special series and the Ferrari Daytona SP3, and The geographical distribution Icona, a line of modern cars we have launched 13 models of shipments reflects deliberate inspired by our iconic cars of in accordance with our plan to allocations driven by the phase-in the past. Our current product launch 15 new models by 2022 as pace of individual models. AR 2021 48 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION HISTORY OF THE COMPANY In 1947, we produced our merger of Peugeot S.A. with first racing car, the 125 S. The and into FCA), which was 125 S’s powerful 12 cylinder completed on January 3, 2016 Ferrari was incorporated as a engine would go on to become (the “Separation”) and occurred public limited liability company synonymous with the Ferrari through a series of transactions (naamloze vennootschap) under brand. In 1948, the first road including (i) an intragroup the laws of the Netherlands car, the Ferrari 166 Inter, was restructuring which resulted in on September 4, 2015 with an produced. Styling quickly the Company’s acquisition of the indefinite duration. Our official became an integral part of the assets and business of Ferrari seat (statutaire zetel) is in Ferrari brand. Amsterdam, the Netherlands, North Europe Limited and the transfer by FCA of its 90 percent and our corporate address and In 1950, we began our shareholding in Ferrari S.p.A. principal place of business are participation in the Formula 1 to the Company, (ii) the transfer located at Via Abetone Inferiore World Championship, racing in of Piero Ferrari’s 10 percent n. 4, I-41053 Maranello (MO), the world’s second Grand Prix in shareholding in Ferrari S.p.A. to Italy. Ferrari is registered with Monaco, which makes Scuderia the Company, (iii) the initial public the Dutch Trade Register of Ferrari the longest running offering of common shares of the Chamber of Commerce Formula 1 team. the Company on the New York under number 64060977. Its We won our first Constructor Stock Exchange in October 2015 telephone number is +39-0536- World Title in 1952. Our success under the ticker symbol RACE, 949111. The name and address on the world’s tracks and roads and (iv) the distribution, following of the Company’s agent in the extends beyond Formula 1, the initial public offering, of United States is: Ferrari North including victories in some of FCA’s remaining interest in the America, Inc., 250 Sylvan Avenue, the most important car races Company to FCA’s shareholders. Englewood Cliffs, NJ 07632. such as the 24 Hours of Le Mans, On January 4, 2016 the Company Its telephone number is the world’s oldest endurance also completed the listing of its +1 (201) 816 2600. automobile race, and the 24 common shares on the Mercato Our company is named after our Hours of Daytona. Telematico Azionario (“MTA”, subsequently renamed founder Enzo Ferrari. The Fiat group acquired a 50 Euronext Milan), under the An Alfa Romeo driver since 1924, percent stake in Ferrari S.p.A. in ticker symbol RACE. Enzo Ferrari founded his own 1969 and increased its stake to racing team, Scuderia Ferrari, in 90 percent in 1988 following the Modena in 1929 initially to race death of Enzo Ferrari, with the Alfa Romeo cars. In 1939 he set remaining 10 percent held by up his own company, initially Enzo Ferrari’s son, Piero Ferrari. called Auto Avio Costruzioni. In Ferrari became an independent, late 1943, Enzo Ferrari moved publicly traded company his headquarters from Modena following its separation from to Maranello, which remains our FCA (renamed Stellantis in headquarters to this day. January 2021, following the AR 2021 49 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. INDUSTRY OVERVIEW Within the luxury goods market, we define our target pre-pandemic levels while shipments of the overall market for luxury performance cars as two-door luxury performance car market partially recovered cars powered by engines producing more than but remained below the 2019 pre-pandemic levels, 500 hp and selling at a retail price in excess of Euro after the economic shock experienced in 2020 as a 150,000 (including VAT). The luxury performance result of the COVID-19 pandemic. The actions taken car market historically has followed relatively closely worldwide for the containment of the pandemic, growth patterns in the broader luxury market. The including widespread vaccination campaigns, enabled luxury performance car market is generally affected Ferrari and some of its main competitors to fully by global macroeconomic conditions and, although recover and maintain their production capacity. we and certain other manufacturers have proven Furthermore, the renewed product offering by relatively resilient, general downturns can have a several competitors was another key element driving disproportionate impact on sales of luxury goods in the positive performance of the market. light of the discretionary nature of consumer spending in this market. Furthermore, because of the emotional Unlike in other segments of the broader luxury nature of the purchasing decision, economic market, in the luxury performance car market, a confidence and factors such as expectations significant portion of demand is driven by new regarding future income streams as well as the social product launches. The market share of individual acceptability of luxury goods may impact sales. producers fluctuates over time reflecting the timing Following the sharp recession of 2008-2009, the sales volumes even in difficult market environments luxury performance car market has been resilient because the novelty, exclusivity and excitement of a to further economic downturns and stagnation in new product is capable of creating and capturing its of product launches. New launches tend to drive the broader economy, also a result of the increase of own demand from clients. new product launches. A sustained period of wealth creation in several Asian countries and, to a lesser Growing environmental concerns are leading to the extent, in the Americas, has led to an expanding implementation of increasingly stringent emissions population of potential consumers of luxury goods. regulations and an increase in demand for both Developing consumer preferences in the Asian hybrid and electric vehicles. Cost and limited charging markets, where the newly affluent are increasingly infrastructure are currently limiting factors in the embracing western brands of luxury products, have demand for electric vehicles, but advancements in also led to higher demand for cars in our segment, battery technology in coming years are expected to which are all produced by established European boost sales of hybrid and electric high performance manufacturers. In turn, the changing demographic luxury vehicles, although at a slower pace compared of customers and potential customers is driving an to mass market vehicles. The ability to combine evolution towards luxury performance cars more driving experience with hybrid and electric suited to an urban, daily use. technology will be key for the commercial success of high performance luxury vehicles. Additionally, the growing appetite of younger affluent purchasers for luxury performance cars has led to As shown in the chart on the following page, our new entrants, which in turn has resulted in higher volumes in recent years have proven less volatile sales overall in the market. than our competitors’. We believe this is due to our strategy of maintaining low volumes compared to In 2021, the luxury performance car market demand, as well as to the higher number of models in experienced a V-shaped recovery, with Ferrari our range and our more frequent product launches shipments returning to and surpassing the 2019 compared to our competitors. AR 2021 50 20072008200920042005200620102011201220132014201520162019202020212018201710,0009,0008,0007,0006,0005,0004,0003,0002,0001,000055,00050,00045,00040,00035,00030,00025,00020,00015,000DECEMBER 31FERRARI VS. LUXURY PERFORMANCE CAR INDUSTRYLuxury performance car industryFerrariUnitsUnitsLuxury performance car industryFerraripre-pandemic levels while shipments of the overall luxury performance car market partially recovered but remained below the 2019 pre-pandemic levels, after the economic shock experienced in 2020 as a result of the COVID-19 pandemic. The actions taken worldwide for the containment of the pandemic, including widespread vaccination campaigns, enabled Ferrari and some of its main competitors to fully recover and maintain their production capacity. Furthermore, the renewed product offering by several competitors was another key element driving the positive performance of the market. Unlike in other segments of the broader luxury market, in the luxury performance car market, a significant portion of demand is driven by new product launches. The market share of individual producers fluctuates over time reflecting the timing of product launches. New launches tend to drive sales volumes even in difficult market environments because the novelty, exclusivity and excitement of a new product is capable of creating and capturing its own demand from clients. Growing environmental concerns are leading to the implementation of increasingly stringent emissions regulations and an increase in demand for both hybrid and electric vehicles. Cost and limited charging infrastructure are currently limiting factors in the demand for electric vehicles, but advancements in battery technology in coming years are expected to boost sales of hybrid and electric high performance luxury vehicles, although at a slower pace compared to mass market vehicles. The ability to combine driving experience with hybrid and electric of high performance luxury vehicles. As shown in the chart on the following page, our volumes in recent years have proven less volatile than our competitors’. We believe this is due to our strategy of maintaining low volumes compared to demand, as well as to the higher number of models in our range and our more frequent product launches compared to our competitors. • Ferrari and Luxury Performance Car Industry data are updated to December 31, 2021. • The commercial criteria we used for evaluation of the Luxury Performance Car Industry include all two door GT and sports cars with power above 500 hp, and retail price above Euro 150,000 (including VAT) sold by Aston Martin, Audi, Bentley, BMW, Ferrari, Ford, Honda/Acura, Lamborghini, Maserati, McLaren, Mercedes Benz, Polestar, Porsche and Rolls-Royce. • Ferrari data based on internal information for the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales (which accounted for approximately 86% of the total Ferrari shipments in 2021). • Data for the Luxury Performance Car Industry based on units registered (in Brazil, Japan, Taiwan, United Kingdom, Germany, France, Switzerland, Italy, Poland, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, Mainland China, Russia, Australia, New Zealand, Singapore and Indonesia). Source: USA: US Maker Data Club, Brazil-JATO; Austria-OSZ; Belgium-FEBIAC; France-SIV; Germany-KBA; UK-SMMT; Italy-UNRAE; Netherlands-VWE; Poland-CEPiK; Spain-TRAFICO; Sweden-BranschData; Switzerland-ASTRA; Mainland China-China Automobile Industry Association- DataClub; Russia-AEBRUS; Taiwan-Ministry of Transportation and Communications; Australia-VFACTS-S; Japan-JAIA; Indonesia-GAIKINDO; New Zealand- VFACTS; Singapore-LTA, MTA (Land Transport Authority, Motor Trader Associations); South Korea-KAIDA. In 2021, Ferrari volumes in the largest 22 markets increased compared to 2020, primarily driven by contribution from our renewed and enlarged product range. In 2021, we had a market share of 26% in the luxury performance technology will be key for the commercial success car market; with 30% of market share in the sports car segment and 20% of market share in the GT segment. 51 BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONAR 2021INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS20072008200920042005200620102011201220132014201520162019202020212018201710,0009,0008,0007,0006,0005,0004,0003,0002,0001,000055,00050,00045,00040,00035,00030,00025,00020,00015,000DECEMBER 31FERRARI VS. LUXURY PERFORMANCE CAR INDUSTRYLuxury performance car industryFerrariUnitsUnitsLuxury performance car industryFerrari The chart below sets forth our market shares in 2021 based on volumes in our largest 22 markets by geographical area. Top 22 Markets Europe Americas Mainland China and Taiwan Rest of APAC 26% 29% 19% 25% 38% 62% 74% 71% 81% 75% Ferrari Market Share Luxury Perfomance Car Industry • Ferrari and Luxury Performance Car Industry data updated to December 31, 2021. • The commercial criteria we used for evaluation of the Luxury Performance Car Industry include all two door GT and sports cars with power above 500 hp, and retail price above Euro 150,000 (including VAT) sold by Aston Martin, Audi, Bentley, BMW, Ferrari, Ford, Honda/Acura, Lamborghini, Maserati, McLaren, Mercedes Benz, Polestar, Porsche, and Rolls-Royce. • Ferrari data based on internal information for the 22 top countries (excluding Middle East countries) for Ferrari annual registrations and sales (which accounted for approximately 86% of the total Ferrari shipments in 2021). • Data for the Luxury Performance Car Industry based on units registered (Brazil, Japan, Taiwan, United Kingdom, Germany, France, Switzerland, Italy, Poland, Spain, Sweden, Netherlands, Belgium and Austria) or sold (in USA, South Korea, Mainland China, Russia, Australia, New Zealand, Singapore and Indonesia). Source: USA: US Maker Data Club, Brazil-JATO; Austria-OSZ; Belgium-FEBIAC; France-SIV; Germany-KBA; UK-SMMT; Italy-UNRAE; Netherlands-VWE; Poland-CEPiK; Spain-TRAFICO; Sweden-BranschData; Switzerland-ASTRA; Mainland China-China Automobile Industry Association- DataClub; Russia-AEBRUS; Taiwan-Ministry of Transportation and Communications; Australia-VFACTS-S; Japan-JAIA; Indonesia-GAIKINDO; New Zealand- VFACTS; Singapore-LTA, MTA (Land Transport Authority, Motor Trader Associations); South Korea-KAIDA. • Ferrari is market leader in several countries, including France, Italy, Switzerland, UK, USA, Australia, Japan and South Korea, among others. While we monitor our market share as an indicator of our brand appeal, we do not regard market share in the luxury performance market as particularly relevant as compared to other segments of the automotive industry. We are not focused on market share as a performance metric. Instead, we deliberately manage our supply relative to demand, to defend and promote our brand exclusivity and premium pricing. COMPETITION Competition in the luxury performance car market is Competition in the luxury performance car market concentrated in a fairly small number of producers, is driven by the strength of the brand and the including both large automotive companies that appeal of the products in terms of performance, own luxury brands as well as small producers styling, novelty and innovation as well as on the exclusively focused on luxury cars, like us. The luxury manufacturers’ ability to renew its product offerings performance car market includes sports cars and regularly in order to continue to stimulate customer GT cars. demand. Our current sports car models are the 812 GTS, the Competition among similarly positioned luxury Ferrari F8 Tributo, the Ferrari F8 Spider, the 296 performance cars is also driven by price and total GTB and the SF90 Stradale and the SF90 Spider, cost of ownership. Resilience of the car value after our first series production Plug-in Hybrid Electric a period of ownership is an important competitive Vehicle (PHEV) models. Our principal competitors dimension among similarly positioned luxury cars, are Lamborghini, McLaren, Porsche, Mercedes, as a higher resilience decreases the total cost of Aston Martin and Audi. Our current GT range models ownership and promotes repeat purchases: we include the Ferrari Roma and the Ferrari Portofino M, believe this is a strong competitive advantage of while our main competitors are Rolls-Royce, Bentley, Ferrari cars. Aston Martin and Mercedes. 52 FERRARI N.V.AR 202153 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. OVERVIEW OF OUR BUSINESS FERRARI IS AMONG THE WORLD’S LEADING LUXURY BRANDS, FOCUSED ON THE DESIGN, ENGINEERING, PRODUCTION AND SALE OF THE WORLD’S MOST RECOGNIZABLE LUXURY PERFORMANCE SPORTS CARS. Our brand symbolizes exclusivity, series and Icona, a line of modern the Ferrari Daytona SP3, and innovation, state-of-the-art cars inspired by our iconic cars we have launched 13 models sporting performance and Italian of the past. Our current product in accordance with our plan to design and engineering heritage. range (including cars presented launch 15 new models by 2022 as Our name and history and the in 2021, for which shipments will announced at our 2018 Capital image enjoyed by our cars are commence in future years) is Markets Day. closely associated with our comprised of six sports cars (the Formula 1 racing team, Scuderia 812 GTS, the Ferrari F8 Tributo, In 2021, we shipped 11,155 cars Ferrari, the most successful the Ferrari F8 Spider, the 296 GTB, and recorded net revenues of racing team in the history of the SF90 Stradale and the SF90 €4,271 million, EBIT of €1,075 Formula 1. From the inaugural Spider), two GT cars (the Ferrari million, net profit of €833 year of Formula 1 in 1950 Roma and the Ferrari Portofino million and earnings before through the present, Scuderia M), two special series cars (the interest, taxes, depreciation, and Ferrari has won 238 Grand Prix 812 Competizione and the 812 amortization (EBITDA) of €1,531 races, 16 Constructors’ World Competizione A), two versions million. For additional information titles and 15 Drivers’ World titles. of our first Icona model, the regarding EBITDA, including a We are the only team which has Ferrari Monza SP1 and the Ferrari reconciliation of EBITDA to net taken part in all the editions of the Monza SP2, as well as the recently profit, as well as other non-GAAP Championship, racing in more presented new model in the Icona financial measures we present, than 1,000 Formula 1 Grand Prix range, the Ferrari Daytona SP3. see “Financial Overview—Liquidity races. We believe our history and Capital Resources—Non- of excellence, technological In 2021 we completed the GAAP Financial Measures”. innovation and defining style shipments of the 812 Superfast, transcends the automotive while the shipments of the Whilst broadening our product industry, and is the foundation Ferrari Monza SP1 and SP2 portfolio to target a larger of the Ferrari brand and image. will be completed in the first customer base, we continue to We design, engineer and quarter of 2022. We also produce pursue a low volume production produce our cars in Maranello, limited edition hypercars and strategy in order to maintain a Italy, and sell them in over 60 one-off cars. Our most recent reputation for exclusivity and markets worldwide through hypercar, the LaFerrari Aperta, scarcity among purchasers of a network of 172 authorized was launched in 2016 to our cars and we carefully manage dealers operating 191 points of celebrate our 70th Anniversary our production volumes and sale as of the end of 2021. and finished its limited series run delivery waiting lists to promote in 2018. In 2021, we launched this reputation. We believe our cars are the 4 new models, including the We divide our regional markets epitome of performance, luxury 296 GTB, a new PHEV featuring into (i) EMEA, (ii) Americas, (iii) and styling. a new V6 engine, the limited Mainland China, Hong Kong and Our product offering comprises series V12 812 Competizione Taiwan, and (iv) Rest of APAC, four main pillars: the sports and 812 Competizione A, and which represented respectively range, the GT range, special the new Icona series model, 49.2 percent, 25.4 percent, AR 2021 54 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION 8.1 percent and 17.3 percent our image. We launched our We continue in our unwavering of units shipped in 2021. The first fashion collection on pursuit of reaching carbon geographical distribution of June 13, 2021 in Maranello, neutrality by 2030, addressing – shipments reflects deliberate drawing inspiration from our in addition to our electrification allocations driven by the phase-in marque’s style, innovation and journey – both direct and pace of individual models. performance. We also license the indirect emissions with a focus Ferrari brand to a limited number on energy and materials. As We focus our marketing of producers and retailers of a further step forward in this and promotion efforts in the luxury and lifestyle sectors, process, in 2021 we calculated investments we make in our including theme parks that, our carbon footprint considering racing activities and in particular, we believe, enhance the brand the emissions related to all of our Scuderia Ferrari’s participation experience of our loyal clients and activities over our entire value in the FIA Formula 1 World Ferrari enthusiasts. The world of chain. Our calculation, based Championship which is the Ferrari can also be experienced in on greenhouse gas protocol pinnacle of motorsport and is our Ferrari Museum in Maranello methodology, has been certified one of the most watched annual and in the Enzo Ferrari Museum according to ISO 14064-1:2018 sports series in the world, with in Modena. approximately 445 million unique requirements by a third-party and allowed us to determine priority viewers in 2021 and an average Our international network of areas for action. total audience for a Grand Prix Ferrari Stores consists of 16 weekend of 70.3 million. (Source: Ferrari owned store and 14 We will continue focusing Formula 1 Press Office). Although franchised stores (including our efforts on protecting and our most recent Formula 1 world 12 Ferrari Store Junior) where enhancing the value of our brand title was in 2008, we continuously visitors can find our fashion to preserve our strong financial enhance our focus on Formula collection as well as on our profile and participate in the 1 activities with the goal of website. In 2021 we began giving growth of the premium luxury improving racing results and a fresh new look to the stores, market. We intend to pursue restoring our historical position starting with our stores in controlled and profitable growth as the premier racing team in Maranello, Milan, Rome and in existing and emerging markets Formula 1. We believe that these Los Angeles. activities support the strength while expanding the Ferrari brand to carefully selected and awareness of our brand On June 15, 2021 we reopened and lifestyle categories. among motor enthusiasts, clients revitalized our Ristorante Cavallino, and the general public. which is situated opposite to the As one of the world’s most entrance of our Maranello factory, recognized premium luxury while retaining the heritage of this brands, we operate in carefully historic location. selected luxury and lifestyle categories consistent with AR 2021 55 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS SPORTS AND GT RANGE, SPECIAL SERIES AND ICONA: FERRARI LINE-UP STRATEGIC PILLARS GRAN TURISMO RANGE SPORT RANGE SPECIAL SERIES ICONA Our product offering comprises four main pillars: existing clients to use a Ferrari in various moments of the sports range, the GT range, special series and their lives. Our diversified product offering includes Icona. Our current product range as of the date of different architectures (such as front-engine and this report includes six sports cars (the 812 GTS, the mid-rear engine), engine sizes (V6, V8 and V12), Ferrari F8 Tributo, the Ferrari F8 Spider, the 296 GTB, technologies (atmospheric, turbo-charged, hybrid, the SF90 Stradale and the SF90 Spider), two GT cars electric), body styles (such as coupes, spiders and (the Ferrari Roma and the Ferrari Portofino M), two targa), and seats (2 seaters and 2+ seaters). special series cars (the 812 Competizione and the 812 Competizione A), and three strictly limited edition We are also actively engaged in after sales activities Icona models (the new Ferrari Daytona SP3, which driven, among other things, by the objective of was presented in November 2021, as well as the preserving and extending the market value of the cars Ferrari Monza SP1 and SP2). In 2021 we completed we sell. We believe our cars’ performance in terms shipments of the 812 Superfast. We target end clients of value preservation after a period of ownership seeking high performance cars with distinctive significantly exceeds that of any other brand in the design and state-of-the-art technology. Our broad luxury car segment. High residual value is important model range is designed to fulfill the strategy of to the primary market because clients, when “Different Ferrari for different Ferraristi, different purchasing our cars, take into account the expected Ferrari for different moments”, which means being resale value of the car in assessing the overall cost able to offer a highly differentiated product line-up of ownership. Furthermore, a higher residual value that can meet the varying needs of new customer potentially lowers the cost for the owner to switch segments (in terms of sportiness, comfort, on-board to a new model thereby supporting client loyalty and space, design, amongst others) and that can allow our promoting repeat purchase. 56 FERRARI N.V.AR 2021ROAD CARS SPORTS V8 Hybrid SF90 Stradale V8 Hybrid SF90 Spider V6 Hybrid 296 GTB V8 F8 Tributo V8 F8 Spider V12 812 Superfast V12 812 GTS GRAN TURISMO SPECIAL SERIES ICONA V8 Portofino M V8 Roma V12 812 Competizione V12 812 Competizione A V12 Monza SP1/SP2 V12 Daytona SP3 ONE-OFF TRACK CARS ONE-OFF V12 BR20 Produced in 2021 FERRARI CHALLENGE THE XX PROGRAMME RACING CARS V8 488 Challenge EVO V12 FXX-K EVO V8 488 GT Modificata The charts below set forth the percentage of our unit shipments (excluding the XX Programme, racing cars, one-off and pre-owned cars) for the years ended December 31, 2021, 2020 and 2019 by pillar: 2% 2% < 1% 29% 24% 36% 2021 2020 2019 64% 69% 74% Sports and Special Series GT Icona* (*) Shipments of Icona models commenced in 2019 and contributed to less than 1 percent of our shipments for that year. 57 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / SPORTS AND GT RANGE, SPECIAL SERIES AND ICONA: FERRARI LINE-UP STRATEGIC PILLARS The table and charts below set forth our unit shipments(1) for the years ended December 31, 2021, 2020 and 2019, by geographic market: (Number of cars and % of total cars) EMEA Germany UK Italy Switzerland France Middle East (2) Other EMEA( 3) Total EMEA Americas (4) Mainland China, Hong Kong and Taiwan Rest of APAC (5) Total For the years ended December 31, 2021 % 2020 % 2019 % 1,252 11.2 996 668 481 473 334 1,288 5,492 2,831 899 1,933 8.9 6.0 4.3 4.2 3.0 11.6 49.2 25.4 8.1 17.3 11,155 100.0 995 971 574 456 463 304 1,055 4,818 2,325 456 1,520 9,119 10.9 10.6 6.3 5.0 5.1 3.3 11.6 52.8 25.5 5.0 16.7 967 1,120 559 454 452 309 1,034 4,895 2,900 836 1,500 9.5 11.1 5.5 4.5 4.5 3.1 10.1 48.3 28.6 8.3 14.8 100.0 10,131 100.0 (1) Excluding the XX Programme, racing cars, one-off and pre-owned cars. (2) Middle East mainly includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait. (3) Other EMEA includes Africa and the other European markets not separately identified. (4) Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America. (5) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia, South Korea, Thailand, India and Malaysia. 17.3% 16.7% 14.8% 8.1% 2021 49.2% 25.4% 5.0% 25.5% 2020 52.8% 8.3% 28.6% 2019 48.3% EMEA Americas Mainland China, Hong Kong and Taiwan Rest of APAC 58 FERRARI N.V.AR 2021SPORTS RANGE Our sports cars are and SF90 Spider, our first series coupled with an electric motor production cars which feature capable of delivering a further characterized by compact bodies, PHEV technology that combines 122 kW (167 hp) – unprecedented a design guided by performance a V8 engine (780 hp) with three performance for a V6 car. and aerodynamics, and often electric motors allowing the car benefit from technologies initially to reach 1,000 hp; the Ferrari F8 GT RANGE developed for our Formula 1 Tributo and the Ferrari F8 Spider, Our GT cars, while maintaining single-seaters or Ferrari GT equipped with a mid-rear V8 the performance expected of racing activities. They favor engine (720 hp), 4 time winner of a Ferrari, are characterized by performance over comfort, the engine of the year award; the more refined interiors with a seeking to provide a driver with 812 GTS, equipped with a front higher focus on comfort and on- an immediate response and V12 engine (800 hp) and the 296 board life quality. In our GT range, superior handling, leveraging GTB, which is the first 6-cylinder we offer two models equipped state-of-the-art vehicle dynamics engine installed on a Ferrari with our V8 engine, the Ferrari components and controls. In road car and produces 830 hp Roma (620 hp) and the Ferrari our sports car class, we offer total power output delivered by Portofino M (620 hp). six models: the SF90 Stradale a new 120° V6 engine (663 hp) The following chart depicts the four dimensions of our customer value proposition for our sports and GT range models: SPORTINESS SF90 Stradale SF90 Spider 296 GTB F8 Tributo F8 Spider COMFORT & VERSATILITY PERFORMANCE Portofino M 812 GTS 812 Superfast Roma ELEGANCE 59 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ SPORTS AND GT RANGE, SPECIAL SERIES AND ICONA: FERRARI LINE-UP STRATEGIC PILLARS SPECIAL SERIES unveiled. This limited-edition targa F12berlinetta in 2014), the Ferrari From time to time, we also design, takes inspiration from legendary SP38 (a superlative mid-rear V8 engineer and produce special Ferrari sports prototypes of the turbo taking inspiration from series cars which can be limited 1960s and sports a naturally the legendary Ferrari F40), the in time or volume and are usually aspirated V12 engine, mid-rear- 458MM Speciale (the last mid based on our range sports mounted in typical racing car rear model with a V8 naturally models but introduce novel style. Undisputedly the most aspirated engine in 2016), the product concepts. These cars iconic of all of Ferrari’s engines, Ferrari P80/C, a real track car are characterized by significant this power unit delivers 840 hp taking inspiration from past modifications designed to – along with 697 Nm of torque Ferrari Sport Prototipo models, enhance performance and and maximum revs of 9500 rpm and the Ferrari Omologata, driving emotions. Our special – making it the most powerful based on the 812 Superfast V12 series cars are particularly naturally aspirated road engine platform. The most recent model, targeted to collectors and, from ever built by Ferrari. produced in 2021, is the BR20, a very elegant V12 based on the GTC4 Lusso. a commercial and product development standpoint, they facilitate the transition from existing to new range models. LIMITED EDITION HYPERCARS AND ONE-OFFS Following the completion of In line with our tradition of shipments for the Ferrari 488 hypercars starting with the GTO Pista and Ferrari 488 Pista Spider (288 GTO) in 1984 up to the Enzo in 2020, in 2021 Ferrari launched in 2002 and the LaFerrari Aperta, the 812 Competizione and the our latest hypercar launched in 812 Competizione A (830 hp). 2016, we also produce limited Respectively a coupe and a targa, edition hypercars. These are the the 812 Competizione and the highest expression of Ferrari 812 Competizione A represent road car performance at the time the pinnacle of our technical and are often the forerunners expertise and performance with of technological innovations an extraordinary weight to power for future range models, ratio of 1.79 kg/hp, which puts with innovative features and them at the top of our V12 car futuristic design. category, reaching 0-100 km/h in 2.85 seconds and 0-200 km/h In order to meet the varying in 7.7 seconds. ICONA needs of our most loyal and discerning clients, we also produce a very limited number In September 2018, we of one-off models. While based introduced a new pillar of our on the chassis and equipped with product portfolio: the Icona, engines of one of the current a unique concept that takes range models for homologation inspiration from the iconic cars and registration purposes, these of our history and reinterprets cars reflect the exact exterior them in a modern fashion, pairing and interior design specifications timeless design with state-of- requested by the clients, and the-art materials and technology. are produced as a single, unique The first examples of this strictly car. Some of the most iconic limited-edition product line-up models emerged from our are the Ferrari Monza SP1 and One-Off program include the SP2, which are inspired by the SP12 EC (inspired by the 512 BB classic collectible barchetta cars, and created in 2011), the F12 the 750 Monza and 860 Monza. In TRS (a radical two-seat roadster 2021 the Ferrari Daytona SP3 was created on the platform of the 60 FERRARI N.V.AR 2021PERSONALIZATION OFFER WHERE (Sales Channel) HOW (Initiatives) One-off Tailor Made Special Equipment Personalization Program “Carrozzeria Scaglietti” Maranello TM Center @Maranello @Shanghai @New York Atelier @Maranello @New York Dealership with Special Equipment Dealership New Sales Toolbox New Special Equipment Process Continuous Enrichment of OPT List All of our models feature highly customizable The “Tailor Made” program provides an additional interior and exterior options, which are included in level of personalization in accordance with the our personalization catalog. Some of these options expectations of our clients. A dedicated Ferrari include performance contents like carbon fibre designer assists clients in selecting and applying parts, carbon fibre wheels, titanium exhaust systems, virtually any specific design element chosen by the alternative brake caliper colors, parking cameras, client. Our clients benefit from a large selection of MagnaRide dual mode suspension, various door panel finishes and accessories in an array of different configurations, steering wheel inserts and state-of- materials (ranging from cashmere to denim), the-art custom high fidelity sound systems. Starting treatments and hues. To assist our clients’ choice we with the SF90 Stradale and the SF90 Spider, we have also offer three collections inspired by Ferrari’s own also introduced the “Assetto Fiorano” configuration, tradition: Scuderia (taking its lead from our sporting which provides numerous exclusive features for history), Classica (bringing a modern twist to the those who seek radical performance and design. styling cues of our signature GT models) and Inedita This more extreme configuration is also available (showcasing more experimental and innovation-led for the 296 GTB. personalization). With our “Special Equipment” program, we offer The “One-off” program is the maximum level of clients additional customization choices for their cars. personalization and exclusivity. Our specialists are able to guide clients in creating See “—Limited Edition Hypercars and One-Offs” above a very customized car through a wide catalog of for more details. special items such as different types of rare leathers, custom stitching, special paints, special carbon fiber, and personalized luggage sets designed to match the car’s interior. 61 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSDESIGN created the Advanced Design team, a laboratory that aims at defining the brand’s design vision, developing Design is a fundamental and distinctive aspect of our new concepts and formal languages through so far products and our brand. Our designers, modelers unexplored methods and tools, and trying to achieve and engineers work together to create car bodies simplification and formal purity while staying true to that incorporate the most innovative aerodynamic the Ferrari DNA which has characterized its history. solutions in the sleek and powerful lines typical of our cars. The interiors of our cars seek to balance Ferrari Design is organized as an integrated automotive functionality, aesthetics and comfort. Cockpits design studio, employing a total workforce of are designed to maximize the driving experience, approximately 120 people (full-time workers as well as tending towards more sporty or more comfortable external contractors) including designers, 3D surfacing depending on the model. The interiors of our vehicles operators, physical modelers and graphic artists. It boast elegant and sophisticated trims and details that operates a modeling studio fully equipped with 5-axis enhance the ergonomic layout of all main controls, milling machines with the capacity to develop various many of which are clustered on the steering wheel. full-scale models (interior and exterior) in parallel. A guiding principle of our design is that each new model represents a clear departure from prior In September 2018 we opened a new building for the models and introduces new and distinctive aesthetic Ferrari Design Centre, which is our first facility fully elements, delivering constant innovation within the dedicated to the Ferrari Design. The new building hosts furrow of tradition. two Ateliers and the Tailor Made department to engage clients with Ferrari’s rich personalization services. The For the design of our cars we have relied historically Ferrari Design Centre has designed our most recent on Italian coachbuilders such as Carrozzeria Touring, cars, including our entire current line up. Vignale, Scaglietti and Pininfarina. These partnerships helped Ferrari in defining its design language at During its 12 year history, the Ferrari Design Centre the forefront of design advance. Throughout the has received many prestigious design awards for the years this area of excellence has been recognized cars it has designed, including the following in the last repeatedly by a long series of awards being bestowed 2 years: upon Ferrari cars. In 2010 we established the Ferrari Design Centre, our in-house design department, with the objective of improving control over the entire design process and • Ferrari SF90 Spider: iF Design Award; Red Dot Design Award (2021); • Ferrari Omologata: Red Dot Design Award (2021); • Ferrari Roma: iF Design Award (2021); ensuring long-term continuity of the Ferrari style. The • Ferrari Portofino M: AUTONIS - Best New Design 2021 mission of the Ferrari Design Centre is to define and - Auto Motor und Sport - (2021); evolve the stylistic direction of the marque, imprinting all new products with a modern stamp, according to a futuristic, uncompromised vision. The name and logo • Ferrari Roma: The Most Beautiful Supercar of the Year - Festival Automobile International, Paris (2020); Red Dot Design Award (2020); Car Design Award “Ferrari Design” denotes all concepts and works of the (2020); Ferrari Design Centre (see “—Intellectual Property”). Ferrari Design handles all aspects of automotive styling for the Ferrari road cars product range, encompassing the styling of all bodywork, external components and interior trim, applied to series • Ferrari SF90 Stradale: iF Gold Design Award (2020); Red Dot Best of The Best (2020); • Ferrari F8 Tributo: iF Design Award (2020); Red Dot Design Award (2020); production models for the GT and sports car range • Ferrari One Off P80/C: iF Design Award (2020); special editions, limited edition hypercars, Iconas, • Ferrari Monza SP1: XXVI PREMIO COMPASSO D’ORO one-off models, concept cars and some track-only (2020). models. Ferrari Design also includes a Color & Trim unit which manages the choice of materials and finishes On September 27, 2021 we announced a long-term, for both exterior and interior trim and, in addition, is multi-year collaboration with the creative collective responsible for the Tailor Made program in conjunction LoveFrom. The first expression of this new partnership with the Product Marketing department. Ferrari will bring together Ferrari’s legendary performance Design is also involved in the styling and conceptual and excellence with LoveFrom’s unrivalled experience definition of Ferrari branded products produced by and creativity that has defined extraordinary world our licensees (see “—Brand Activities”). In 2019, we changing products. 62 FERRARI N.V.AR 2021PRODUCT DEVELOPMENT PRODUCT DEVELOPMENT AND TECHNOLOGICAL INNOVATION Our development efforts take into account the three defining dimensions of Ferrari cars; performance; versatility and comfort; and driving emotions. PERFORMANCE VERSATILITY & COMFORT DRIVING EMOTIONS Performance reflects features such as weight, horsepower, torque, grip, aerodynamic efficiency, acceleration, and maximum speed, which all contribute to determine the lap time on track. We strive to ensure that every Ferrari is the best performing car in its segment. Versatility derives from spaciousness, accessibility and mode of traction, including rear-wheel-drive or all-wheel-drive and, in future, electric-powered driving. Comfort results from the ease of the riding experience and onboard interface. Regulation will affect development in this area; for example, a prescribed electric range may be required in future to access city centers. Driving emotions is a key differentiator of Ferrari cars. There are three elements to driving emotions: sound, perceived acceleration and responsiveness of the car. Sound is an important part of the experience and very involving for the driver. Perceived acceleration is the driver’s subjective impression of the instantaneous car acceleration beyond the actual 0-100 or 0-200 km/h performance measured in the car technical specifications. Responsiveness requires that every driver command (steering, gear shifting and braking) leads to an immediate, linear and controllable reaction of the car. These three dimensions variably interact in our sports and GT cars. As we work on the future product range, we strive to improve on each of those dimensions, focusing for sports cars on performance and driving emotions, and for GT cars on versatility and comfort on board and driving emotions. SPORTS Driving Emotions GRAN TURISMO Performance Versatility & Comfort 63 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / PRODUCT DEVELOPMENT INNOVATION PRINCIPLES aspirated engine. For example, ARCHITECTURE We believe there are five key compared to Ferrari’s previous In addition to engines, the other guidelines to innovation at line of V8 turbo engines, the principal technical area we are Ferrari: focus on the three key specific power output of the focusing on is the architecture. Our defining dimensions described Ferrari F8 Tributo and the Ferrari architecture covers all principal on the previous page; leveraging 488 Pista was increased to 184 technical specifications of future on Formula 1 know-how; first horsepower per litre without Ferrari models. We expect that mover positioning in core meaningful turbo lag. innovation requirements will arise areas such as powertrain and principally from: the evolution aerodynamics; customization We have undertaken an important of engine families; the level of of technologies available on program to develop hybrid hybridization and electrification; the market (such as the turbo and electric technology. One modes of traction; the number technology); and pursuit of of the more relevant topics of seats up to a real four-seater; synergies (arising from common of this generation, we expect and the body style, which will vary architectures within our range). the concept of the car in an much more significantly than in the In addition to these internally era of climate change to be an past in light of the introduction of driven factors, regulation is key opportunity for us. We intend the Purosangue. in determining the direction of to use hybrid and electric innovation. technology, as well as Formula 1 We expect that our core COMBUSTION AND HYBRID ENGINES technology, to increase specific architectures will be the power output without turbo lag. rear-mid-engine architecture and the front-mid-engine architecture, We believe internal combustion Innovation runs within Ferrari, each comprising several variants. engines will remain important so the challenge of building in Ferrari’s powertrain mix a Ferrari for a low-emissions REAR-MID-ENGINE ARCHITECTURE and therefore we continue future is one that we are already The rear-mid-engine architecture to invest in new combustion embracing. With the SF90 is optimal for sports cars thanks engine technologies and the Stradale we developed the first to its compact dimensions, low development or use of bio-fuels. series production model in our gravity center and favorable range with PHEV technology, mass repartitions. It is designed to Going forward, Ferrari will have which is also featured in the SF90 integrate multiple power units with three engine families: Spider. In 2021 we launched our a higher specific power output • V12 - We will maintain and develop the V12 naturally aspirated engine family, long the pinnacle of Ferrari engines; • V8 - We have implemented further technological enhancements for the V8 family; and • V6 - We developed and launched this year a completely new V6 family based on a specific and innovative architecture. third production model with than the Ferrari 488 Pista. In this PHEV technology, the 296 GTB, architecture, combustion engines a pure rear wheel drive sports can be combined with an electric car that reaches the pinnacle motor to realize hybridization, of driving emotions thanks to including a battery to enable its V6 engine and significantly electric range. This architecture reduced weight, giving it a also allows to install an E-Axle on class-leading overall weight- the front to increase overall power to-power ratio. The increased and to have an all-wheel drive offering of hybrid powertrains powertrain. The first application will allow us to meet both specific of this architecture is the SF90 regulatory requirements and also Stradale. In combination, we satisfy customers’ desires for have developed a new and highly significantly improved emissions, innovative 8-shift double-clutch The industry effort to combine while enhancing the performance transmission gearbox. greater power outputs with lower and driving experience that Hybridization will impact the emissions and consumption render Ferrari cars unique. weight of engines and therefore often leads to a higher turbo lag. Through a technological breakthrough, Ferrari has engineered a turbo engine with turbo engine performance but with the response of a naturally we will deploy new lightweight technologies to compensate this impact. Package efficiency will also be key to achieve a compact car that reduces weight and inertia. In order to apply 64 FERRARI N.V.AR 2021Front-mid-engine Rear-mid-engine ARCHITECTURE Power unit Gearbox NEW FERRARI PRODUCT RANGE Engine Hybridization Traction Seating Body style Clearance V12 vs. V8 vs. V6 Yes vs. No 2WD vs. 4WD Coupè vs. Spider vs. “Purosangue” Low vs. High 2 vs. 2+ vs. 2+2 vs. 4 PRODUCT SPECIFICATION the architecture to different powertrains, the wheelbase may NEW-GENERATION HUMAN- MACHINE INTERFACE driving technology in response to regulatory developments vary. The second example of this Particularly driven by growth and customer preferences, new architecture is the 296 GTB, in the GT segment, Ferrari has especially in the GT segment. For where the V6 engine allowed for developed the next generation example, in 2018 we launched a reduction in the wheel base of of human-machine interface initial functionalities for Advanced 500 mm with a positive impact on (HMI) technologies. Using Driving Assistant Systems (ADAS) driving emotions and without any state-of-the-art technologies we such as predictive braking and trade off of comfort on board. will be guided by the Formula 1 automatic cruise control on derived concept of “eyes on the current models, and further FRONT-MID-ENGINE ARCHITECTURE street, hands on the steering innovations will be introduced in The front-mid-engine wheel”, for a focused, safe and future models. architecture, also a transaxle enjoyable drive. The new HMI Ferrari is carefully monitoring powertrain concept, is optimal includes several new technologies, the evolution of autonomous for our GT cars in terms of including a new head-up display, driving technologies, including dimensions. This architecture a new innovative cluster, a new sensors, new chips, artificial is able to accommodate an steering wheel that features intelligence and connectivity, all-wheel-drive powertrain, will new commands and a new and we will select and customize allow for hybridization, and will infotainment system, as well as those innovations compatible with have a flexible wheelbase suited tools aimed at positively enhancing the Ferrari experience and the to a variety of engines as well the passengers’ experience. highest security standards. These as seat configurations including The first cars using all or part of technologies combined with the two-seaters and four-seaters. these technologies are the SF90 hybridization and the incoming It will be accessible, spacious Stradale and the Ferrari Roma. cybersecurity requirements will and comfortable. Key to this architecture will be the new active suspension systems AUTONOMOUS DRIVING AND CONNECTIVITY also have an important impact on the electronic architecture of our cars and we are presently we are developing, with a high While we do not intend to develop developing our future electrical range between comfort and self-driving cars, we will adopt and electronic architecture to take sportiness. certain features of autonomous into account these requirements. 65 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSPRODUCTION AND PROCUREMENT PRODUCTION PROCESS volume of cars we produce per year and to our Our production facilities are located in Maranello and highly skilled and flexible employee base that can in Modena, Italy (see “—Properties”). Our production be deployed across various production areas. In processes include supply chain management, addition, we can adjust our make-or-buy strategies production and distribution logistics of cars in our to address fluctuations in the level of demand on range models and special series, as well as assembly our internal production resources. Our facilities can of prototypes and avanseries. accommodate a meaningful increase in production compared to current output with the increase of Notwithstanding the low volumes of cars produced, weekend shifts to address special peaks in demand. our production process requires a great variety In 2021 we increased production with the introduction of inputs - over 40,000 product identifier codes of a second shift on car assembly lines in addition to sourced from approximately 800 total suppliers the single shift operated on the V8 assembly line. We - entailing complex supply chain management constantly work to increase the utilization rate and to ensure continuity of production. Our stock of reduce the internal scrap rate and we closely monitor supplies is warehoused in Ubersetto, near Maranello, an index of our production efficiency. We are also and its management is outsourced to a third party committed to continually improving the reliability of logistics company. our cars, reducing defects, and optimize finishing. Most of the manufacturing process takes place in Unlike most low volume car producers, we operate Maranello, including aluminum alloy casting in our our own foundry and machining department foundry, engine construction, mechanical machining, producing several of the main components of our painting, car assembly, and bench testing; at our engines, such as engine blocks, cylinder heads and second plant in Modena (Carrozzeria Scaglietti) we crankshafts. We believe this accelerates product manufacture the aluminum bodyworks of our cars. development and results in components that meet All parts and components not produced in house at our specifications more closely. Ferrari are sourced from our panel of suppliers (see “—Procurement”). ENGINE PRODUCTION Our engines are produced according to a vertical Between 2002 and 2012 the plants housing our structure, from the casting of aluminum in our production processes were entirely renovated or foundry up to the final assembly and testing of rebuilt and in recent years we have continued to the engine. Several of the main components of make significant investments in our manufacturing our engines, such as blocks and cylinder heads facilities. Equipment may require substantial are produced at our foundry in Maranello. For investment with the introduction of new models or this purpose, we use a special aluminum alloy that to maintain state-of-the-art technology, particularly includes seven percent silicon and a trace of iron, in the case of shell tools for the foundry, tools for which improves mechanical integrity, as well as machining, feature tools for body welding and special our own shell and sand casting molds. Once all mounting equipment for the assembly. Starting from components are ready, engines are assembled on 2021, we have been acquiring additional resources different lines for our V12 engines, our V8 and V6 and production equipment, mainly in relation to engines, and the V6 engines we manufacture for Battery Electric Vehicles (“BEVs”), to successfully Maserati. The assembly process is a combination of manage the new technological advancements and automatic and manual operations. At the start of the related challenges resulting from the transition to assembly process, each engine is identified with a electrification. barcode and operations are recorded electronically. Every engine goes to the test benches to ensure it As at December 31, 2021, our production processes delivers the expected performance; 10-20 percent employed 1,723 engineers, technicians and other of engines are also hot tested and measured for personnel (191 white collar employees and 1,532 power and torque. In 2021 we produced an average workers, of which 449 were temporary production of approximately 114 engines per day, including employees). We have a flexible production approximately 8 V12 engines and 49 V8 engines organization, which allows us to adjust production (including 5 V8 turbo for Maserati), as well as 57 V6 capacity to accommodate our expected production engines for Maserati (see “—Manufacturing of Engines requirements. This is primarily due to the low for Maserati”). 66 FERRARI N.V.AR 2021BODY ASSEMBLY shift to two shifts. On the first floor there is also the In parallel with the assembly of our engines, we assembly line for the Ferrari Monza SP1 and SP2; prepare our body-shells at our body shop Carrozzeria starting from April 2021, the line on the ground floor Scaglietti in Modena. The main components of also moved from one to two shifts. body-shells are not manufactured internally but are sourced from manufacturers for chassis, bodies PERSONALIZATION AND ROAD TESTS and carbon fiber parts. At Carrozzeria Scaglietti we During the assembly process of our cars we manage have two different production lines dedicated to the the fitting of all bespoke interiors, components and assembly of our V8 and V12 aluminum bodies. We special equipment options that our clients choose as carefully check the alignment of the various parts part of our personalization program (see “—Sports – most importantly the engine cover and the wings and GT, Special Series and Icona: Ferrari Line up – with electronic templates and gauges. Our highly Strategic Pillars—Personalization Offer ”). After the trained specialists also perform surface controls on assembly phase, every car completes a 40-kilometer the aluminum panels and eliminate any imperfections road test-drive. by either filing or panel beating. In our Scaglietti plant we also have a dedicated line for the assembly of a FINISHING AND CLEANING special carbon fiber body for the Ferrari Monza SP1 After the road test all cars go to the finishing and SP2, and for the latest Icona model launched in department. There, we thoroughly clean interior and November 2021, the Ferrari Daytona SP3. exterior, perform a comprehensive review of the whole car, and polish and finish the bodies to give PAINTING them their final appearance. When transferred to our paint shop, the bodies are mounted on a loading bay, immersed in the MANUFACTURING OF ENGINES FOR MASERATI cataphoresis tanks and subsequently transferred We have been producing engines for Maserati since to a fixing gas fired oven at 140°C. Primers are then 2003. The V8 engines that we historically produced applied and fixed at 190°C until the completely grey and continue to produce for Maserati are variants body-shell is ready for painting. All body-shells are of Ferrari families of engines and are mounted on cleaned with automatic pressure blowers (to avoid Maserati’s highest performing models, such as the the electrostatic effect) and carefully brushed with Quattroporte and Levante (turbo engines), and the emu feathers (because of their natural electrostatic GranTurismo and the GranCabrio (aspirated engines). properties) to clean off any dirt particles or impurities All of the V8 engines that we sell to Maserati are before painting. The painting process is automated manufactured and assembled according to the same for larger surfaces, while it is done by hand for some production processes we adopt for the V8s equipped other localized areas. In 2019, we replaced the robot on our cars (see “—Production Process” ). which performs the application of the base coat. The whole car is painted at the same time to ensure color In 2011 we began producing a family of engines harmony. The bodies are finally polished with lacquer exclusively for Maserati, in much larger production to fix the paint and give the bodies their final finish. volumes to be installed on the Quattroporte and In 2018 we substituted our clear coat with a new Ghibli (mainly the F160 3.0-liter V6 Turbo engines), and generation 2K (bi-component) transparent coat that in 2016 we started the production of F161 engines allows us to decrease the temperature of the oven to be installed on the Levante, Maserati’s SUV. The from 140°C to 90°C; this is a very innovative process term of our supply agreement with Maserati for the that allows us to simultaneously paint aluminum and production of V6 and V8 engines is until 2023. Under carbon fiber parts. the framework agreement, Maserati is required to compensate us for certain costs we may incur ASSEMBLY LINE AND FINAL CHECKS from our suppliers if there is a shortfall in the annual The final assembly of our cars takes place in volume of engines actually purchased by Maserati Maranello. We have three different lines placed at in that year. In 2021, we sold approximately 1,250 V8 ground level and the first floor of the building. For turbo engines to Maserati and approximately 13,650 each model, the initial assembly operations take place V6 engines in six different versions, ranging from 330 simultaneously on different lines and sections to hp to 450 hp. maximize efficiency so while the body is assembled on the main line, the powertrain, as well as the cockpit In order to meet the V6 volume and specifications and the doors, are prepared on a separate sub-line. requirements, in 2012 we built a dedicated assembly In 2018, the line on the first floor moved from one facility in Maranello with a much higher level of 67 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PRODUCTION AND PROCUREMENT industrialization compared to how or when we believe that owning dealerships, we retain production of our V12 engines. outsourcing would impair the flexibility to adapt to evolving Due to the larger volumes and efficiency and flexibility of our market requirements over time. product specifications, our production process. Therefore, make-or-buy strategy for the we continue to invest in the We believe that our careful and production of F160 V6 and F161 skills and processes required strict selection of the dealers V6 engines also differs from for low-volume production of that sell our cars is a key factor the strategy applicable to the components that we believe for promoting the integrity and production of Ferrari engines. improve product quality. success of our brand. The vast majority of the engine Our selection criteria are based components are sourced For the year ended December on the candidates’ reputation, externally from our panel of 31, 2021, the purchases from financial stability and proven suppliers (see “—Procurement”) our ten largest suppliers by value track records. We are also intent and in 2020 we started sourcing accounted for approximately 20 on selecting dealers who are all casting and machining of the percent of total procurement able to provide a purchase and cylinder heads externally, while costs, and no supplier accounted after-sales experience aimed the V6 assembly line and testing for more than 10 percent of our at exceeding our clients’ high continued to be managed by us total procurement costs. expectations. Furthermore, in Maranello. our dealers are committed to SALES AND AFTER-SALES promoting and marketing our PROCUREMENT Our commercial team, which cars in a manner intended to We source a variety of includes approximately 360 preserve the Ferrari brand components, raw materials, employees at December 31, 2021, integrity and to ensure the highest supplies, utilities, logistics and is organized in four geographic level of client satisfaction. other services from numerous areas covering our principal suppliers. We recognize the regional end markets: (i) EMEA, While dealers may hold multiple contribution of our suppliers (ii) Americas, (iii) Mainland China, franchises, we enjoy a high to our success in pursuing Hong Kong and Taiwan, and (iv) degree of prominence and level excellence in terms of luxury Rest of APAC. and performance, therefore we of representation at each point of sale, where most of the client carefully select suppliers that are DEALER NETWORK interface and retail experience is able to meet our high standards. We sell our cars exclusively exclusive to Ferrari. Our network through a network of authorized and business development team For the sourcing of certain dealers (with the exception of works with all dealers to ensure key components with highly one-offs and track cars which our operating standards are met. technological specifications, we sell directly to end clients). Our rigorous design, layout and we have developed strongly In our larger markets we act as corporate identity guidelines synergic relationships with importer either through wholly guarantee uniformity of the some of our suppliers, which we owned subsidiaries or, in China, Ferrari image and client interface. consider “key strategic innovation through a subsidiary partly partners”. We currently rely on owned by a local partner, and In 2021 and through the date of selected key strategic innovation we sell the cars to dealers for this report, our dealer network partners, including for the supply resale to end clients. In smaller has successfully adapted to the of transmissions and brakes. markets we generally sell the cars new and unforeseen challenges We have also developed strong to a single importer/dealer. We resulting from the COVID-19 relationships with other industrial regularly assess the composition pandemic. We have supported partners for bodyworks and of our dealer network in order our dealers network since the chassis manufacturing and for to maintain the highest level of start of the pandemic, including powertrain and transmissions, quality. At December 31, 2021, our through our “Back on Track” among other things. Pursuant network comprised 172 dealers program, which has allowed our to our make-or-buy strategy, operating 191 points of sale. dealers to welcome our clients we generally retain production in their showrooms safely. In in-house whenever we have We do not presently own addition, the majority of our dealer an interest in preserving or dealerships and, while our network’s worldwide facilities developing technological know- strategy does not contemplate have been upgraded with the 68 FERRARI N.V.AR 2021latest Ferrari Corporate Identity, We collect and observe data We provide a suggested retail to provide clients with a superior relating to dealer profitability price or a maximum retail experience while delivering a and financial health in order price for all of our cars, but unique luxury environment and to prevent or mitigate any each dealer is free to negotiate digital touchpoints to complement adverse experience for clients different prices with clients and the physical environment. arising from a dealer ceasing to provide financing. Although to do business or experiencing many of our clients in certain Through our in-house Ferrari financial difficulties. Our regional markets purchase our cars from Academy we provide training to representatives visit dealerships dealers without financing, we dealers for sales, after-sales and regularly to monitor and measure offer direct or indirect finance technical activities. This ensures performance and compliance and leasing services to retail that our dealer network delivers a with our operating standards. clients and to dealers (See “— consistent level of market leading We have the right to terminate Financial Services ”). standards across diverse cultural dealer relationships in a variety environments. During 2020 and of circumstances, including The total number of our dealers 2021 our training strategy was failure to meet performance or as well as their geographical quickly adapted by introducing financial standards, or failure distribution tends to closely and boosting virtual-training to comply with our guidelines. reflect the development or solutions to cope with travel Dealer turnover is relatively expected development of sales restrictions, while continuing to low, reflecting the strength of volumes to end clients in our foster expertise in the network at the franchise and our selection various markets over time. the highest level. processes, but is sufficient to guarantee an orderly renewal The chart below sets forth the over time and to stimulate geographic distribution of our the network’s health and 191 points of sale at December performance. 31, 2021: 60 MARKETS . 172 DEALERS . 191 POINTS OF SALE . 237 SERVICE POINTS FERRARI - MARANELLO AMERICAS 55 POS - 55 WS EMEA 80 POS - 120 WS FGC - FERRARI Greater China 20 POS - 21 WS Rest of APAC 36 POS - 41 WS HQ HUBS U.S.A. 43 POS - 41 WS NORTH EUROPE 13 POS - 15 WS MAINLAND CHINA 16 POS - 17 WS NORTH EAST ASIA 10 POS - 13 WS REGIONS CANADA 5 POS - 4 WS CENTRAL EUROPE 13 POS - 20 WS TAIWAN 3 POS - 3 WS SOUTH EAST ASIA 7 POS - 9 WS LATIN AMERICA 7 POS - 10 WS WEST EUROPE 22 POS - 31 WS EAST EUROPE 14 POS - 20 WS SOUTH EUROPE 18 POS - 34 WS HONG KONG 1 POS - 1 WS AUSTRALASIA 8 POS - 8 WS MIDDLE EAST 11 POS - 11 WS 69 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / PRODUCTION AND PROCUREMENT Our sales are diversified across AFTER-SALES After the 7th year of life, a car (if in our dealer network, with the Dealers provide after-sales perfect maintenance condition) largest dealer representing services to clients, either at can be included in the Main Power approximately 2.6 percent facilities adjacent to showrooms, warranty coverage program of our shipments, and our 15 or in stand-alone service points (Maintenance and Power) largest dealers representing across 237 facilities worldwide at through to the car’s 15th year of approximately 24 percent of our December 31, 2021. After-sales life. Between the 10th year of life shipments in 2021. activities are very important and the Classiche eligibility (20 for our business to ensure the year old car) Ferrari provides As part of our supply and demand client’s continued enjoyment its customers, in addition to management, we determine of the car and the experience. standard maintenance items, also allocations based on various Therefore, we enforce a strict certain specific maintenance kits metrics including expected quality control on our dealers’ (Ferrari Premium) to preserve developments in the relevant services activities and we provide car performance and safety market, the number of cars sold continued training and support systems. When a car follows the historically by the various dealers, to the dealers’ service personnel. full maintenance program up to current order book of dealers and This includes our team of “flying the 20th year of life, it automatically the average waiting time of the doctors,” Ferrari engineers who obtains the Ferrari Classiche end client in the relevant market. regularly travel to service centers certification. Our order reporting system to address difficult technical allows us to collect and monitor issues for our clients. While we do not have any direct information regarding end client involvement in pre-owned car orders and is able to assist us in We sell cars together with sales, we seek to support a production planning, allocation a scheduled program of healthy secondary market in and dealer management. recommended maintenance order to promote the value of services in order to ensure that our brand, benefit our clients and PARTS these cars are maintained to facilitate sales of new cars. Our We supply parts for current and the highest standards to meet dealers provide an inspection older models of Ferrari to our our strict requirements for service for clients seeking to authorized dealer network. performance and safety. sell their car which involves In addition to substitution of detailed checks on the car and a spare parts during the life of the Our 7 Year Maintenance Program certification on which the client car, sales are driven by clients’ (free of charge for customers can rely, covering, among other demand for parts to customize since 2011 on any new cars) is things, the authenticity of the their cars and maximize offered to further strengthen car, the conformity to original performance, particularly after customer retention in the official technical specifications, and the a change in ownership, as well network and has been coupled state of repair. Furthermore, we as parts required to compete in with the possibility to extend offer owners of classic Ferrari the Ferrari Challenge and other the statutory warranty term of cars maintenance and restoration client races. We also supply parts our standard warranty terms services through the 73 “Officina to Ferrari models currently out through the Power warranty Ferrari Classiche” workshops, of production, with stocks dating coverage program up to the 15th part of our service network. back to 1995. The stock of parts year of life of the car. For certain for even older models is currently strictly limited series cars (for In addition, owners of our classic owned and managed by a third example, the LaFerrari and the cars can seek assistance in car party which in some cases also LaFerrari Aperta) we introduced and engine restorations at our manufactures out-of-stock parts a Full Warranty Coverage Ferrari Classiche department based on our designs. The sale of Extension that can be applied in Maranello. parts is a profitable component of after the 36-month commercial our product mix and is expected contractual warranty. to benefit from the increase in the number of Ferrari cars in circulation. 70 FERRARI N.V.AR 2021FINANCIAL SERVICES We offer retail client financing for the purchase of our cars as well as dealer financing through the operations of Ferrari Financial Services (“FFS”). We offer retail client financing: • directly in the United States through our fully owned subsidiary Ferrari Financial Services Inc. (“FFS Inc”); • through our associate Ferrari Financial Services GmbH in certain markets in EMEA (primarily the UK, Germany and Switzerland); and • through various partnerships in other European countries and other major international markets, such as Japan and Mainland China. FFS Inc also has remaining dealer financing services in the United States. Through FFS, we offer a range of flexible, bespoke financial and ancillary services to clients (both current and new) interested in purchasing a wide range of cars, from our current product range to older pre-owned and classic models. FFS also provides special financing arrangements to a selected group of our most valuable and loyal customers. Starting in 2016, FFS Inc has pursued a strategy of autonomous financing for our financial services activities in the United States, further reducing dependency on intercompany funding and increasing the portion of self- liquidating debt with various securitization transactions. At December 31, 2021, the consolidated financial services portfolio was €1,144 million and originated in the United States. 71 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCLIENT RELATIONS OUR CLIENTS ARE THE BACKBONE OF OUR BUSINESS TOGETHER WITH OUR BRAND AND OUR TECHNOLOGY. WE DO NOT PROMOTE OUR BRAND OR OUR CARS THROUGH GENERAL ADVERTISING. OUR MAIN BRAND MARKETING AND PROMOTIONAL ACTIVITIES HAVE TWO PRINCIPAL TARGETS. Firstly, we target the general public. Our most significant effort in this respect is centered on our racing activities and the resonance of Scuderia Ferrari (see “—Formula 1 Activities”). We also engage in other brand-promotional activities, including our participation in various public events. In light of the COVID-19 pandemic, in 2021 our brand- promotional activities were carried out mainly through digital platforms such as eSports, and our official social media channels. Secondly, we target existing and prospective clients seeking to promote clients’ knowledge of our products, and their enjoyment of our cars both on road and on track, and to foster long-term relationships with our clients, which is key to our success. In 2021, approximately 59 percent of our new cars were sold to Ferrari owners. By purchasing our cars, clients become part of a select community sharing a primary association with the Ferrari image and we foster this sense of fellowship with a number of initiatives. We strive to maximize the experience of our clients throughout their period of interaction with Ferrari – from first contact, through purchasing decision process, to waiting-time management and ownership. The MyFerrari App is available exclusively for Ferrari clients to enhance their connection to the Ferrari world through the direct distribution of tailored content, including the digital editions of our 2021 model launches. This new channel enables clients to directly access features and services, strengthening their relationship with the brand and their preferred official Ferrari dealer. 72 FERRARI N.V.AR 2021CLIENT EVENTS Clients can continue to benefit (Ferrari Cavalcade, including the from a set of direct services Cavalcade Classiche) and with With client gatherings still which enables them to participate our own branded presence within impacted by restrictions in in remote Atelier and Tailor Made established driving events. For 2021, we continued to hold the sessions directly with our team example, in the Ferrari Tribute presentation of our latest product of designers in Maranello. In to Mille Miglia and the Ferrari offerings using digital formats addition, clients can send their Tribute to Targa Florio modern where appropriate. creations in the configurator tool Ferrari cars take part in their own In May 2021, we livestreamed of the MyFerrari app directly to dedicated competition before the on our social channels the their official dealers. start of the main racing. presentation of the new limited series 812 Competizione and 812 Competizione A from our DRIVING EVENTS To mark the tenth anniversary of our most exclusive driving event newly finished Attività Sportive Driving events serve the dual for clients, in 2021 the Ferrari GT facility which overlooks our objective of allowing clients to Cavalcade was held in Taormina, Fiorano race track. Viewers enjoy the best emotions of driving Sicily, gathering for the first time were able to hear the wonderful a Ferrari, and to foster client both our best modern and classic sounds of the naturally aspirated loyalty and repeat purchases by Ferrari models owned by clients V12 engine while the 812 creating enhanced opportunities from around the world. Competizione completed hot laps to experience new Ferrari cars. A final gala was held in the around the circuit. The Ferrari community is a spectacular Teatro Antico di passionate group supported by a Taormina, a perfect climax to the In June 2021, the 296 GTB, an wide array of experiences tailored driving experience through the evolution of Ferrari’s mid-rear- to the dreams of modern car charms and warm hospitality of engined two-seater sports owners, classic car connoisseurs, Southern Italy. berlinetta concept, was unveiled and racetrack enthusiasts. digitally across our social All driving events managed channels in an extended reality We see nurturing our clients’ directly by Ferrari, such as the format around the “Fun to Drive” passion for driving as a key Ferrari Cavalcade, and those concept of the model. asset for our future commercial managed by third-party event success, particularly in markets organizers, such as the Ferrari Additionally, in November 2021 where racing traditions are Tribute to Mille Miglia and the the Ferrari Daytona SP3, the less pronounced. We offer our Ferrari Tribute to Targa Florio, third car to join the strictly prospective and existing clients proceeded in accordance with limited-edition Icona series, was interested in new Ferrari models local government health and presented to selected clients at an our Esperienza Ferrari program, safety regulations. exclusive and private gathering which consists of driving sessions at Casa Ferrari in Florence. The with a team of highly qualified Another exclusive driving Ferrari Daytona SP3 made its and skilled Ferrari instructors experience added in 2021 is the public and livestream debut at the and technicians. In addition we Corso Pilota Classiche course Finali Mondiali held at the Mugello also offer to our clients on-track led by experts of the Ferrari circuit, where it led a parade driving courses (Corso Pilota), Classiche team, and aimed at flanked by the legendary sports catering to different levels classic car enthusiasts and prototypes of the 1960s that it of skill and experience and clients interested in learning was inspired from. teaching essential driving skills more about the Ferrari Classiche for high performance cars. In certification program and Following the digital launches of selected markets, such as China, the storied archives at our our new product offerings, clients we also offer complimentary Officine Classiche restoration were engaged locally by their driving courses on-track to any department. The initiative preferred Ferrari dealers for new car buyer. conducting car configurations, also offers the opportunity to experience on-track driving of static previews of the model, and In addition to on-track racing, those celebrated models on our eventually dynamic test drives we organize various on-the- Fiorano race circuit. when the dealer demonstrations road driving events, both became available. under proprietary formats 73 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSATTIVITÀ SPORTIVE GT racing teams, the Competizioni sustainable event management, GT engineers kept planning for making the Prancing Horse’s one- Attività Sportive GT is our the future. On February 24, 2021 make series the first European department overseeing Ferrari announced the launch single-make series for thermal the activities of Competizioni GT of the Le Mans Hypercar (LMH) cars to receive this certification. and Corse Clienti which organizes programme under which Ferrari F1 Clienti and the XX Programme, and supports client activities will enter the new top category of the non-competitive activities on track. the FIA WEC World Championship of Corse Clienti F1 Clienti and Ferrari is once again World starting from 2023, in partnership the XX Programme, and the Endurance Champion, both in with AF Corse. Ferrari has non-competitive activities of the Constructors’ and Drivers’ also announced a technical Corse Clienti, experienced an categories, four years after its partnership agreement with increase in the number of event prior win, completing one of ORECA for the assembly and attendees in 2021 compared the most successful seasons in after-sales services of the new to 2020 and featured two new Ferrari’s history. GT3, which will begin track testing initiatives: F1 Clienti Masterclass in early 2022. The technical and XX Programme’s Exclusive In 2021, the Competizioni GT partnership confirms Ferrari’s Experience. Department enjoyed a year of long-term commitment to the extraordinary achievements on main GT car championships. track. Ferrari AF Corse’s 488 GTEs won the Constructors’ Among the non-competitive title in the FIA World Endurance activities, the Club Competizioni Championship. GT continued successfully Ferrari drivers Alessandro Pier and the event’s participation Guidi and James Calado won increased by 24 percent the world championship for a compared to 2020, benefiting second time after winning in from the debut of the 488 GT 2017, becoming the first World Modificata, a limited series car Endurance Championship dedicated to sports clients, drivers to achieve this result. 24 of which took part in the Ferrari and AF Corse achieved Finali Mondiali. two titles in the LMGTE AM category as well, and won the Participants in the Corse Clienti 24 Hours of Le Mans in PRO racing season in Europe, North and Am classes. In the GT3 car America and United Kingdom championships, the 488 GT3 also increased in comparison Evo 2020 continued its winning with 2020, although the Asia streak. Pier Guidi-Ledogar- Pacific series had to contend Nielsen’s victory in the GT World with continued travel restrictions Challenge Europe Endurance and quarantines in the relevant Cup was undoubtedly the most geographies. For the first time important result of the season, in the history of the one-make and the crew drove a Ferrari to series, a woman – Michelle glory in the 24 Hours of Spa- Gatting – was crowned champion Francorchamps for the first of the European series. During time since 2004. The 2021 488 the Finali Mondiali, 17-year-old GTE and 488 GT3 statistics were Finn Luka Nurmi won the Ferrari updated with 44 victories in 93 Challenge World Championship, races (48%) and 423 wins in 761 setting another record after races (55%), respectively. Since becoming the youngest winner its racing debut, the various in the history of the series at just configurations of the 488 GT3 16 earlier in the year. The Ferrari have achieved 106 titles. Challenge Europe received While providing direct and the ISO 20121 certification, indirect support to the various the international standard for 74 FERRARI N.V.AR 2021FERRARI CLASSICHE The Ferrari Classiche department supports Ferrari service network with 73 “Officina Ferrari Classiche” customers in managing their historic Ferrari vehicles workshops to date, primarily for vehicle repairs and with the objective of keeping as many of these classic the certifications’ inspections or revalidation, and the cars on the road as possible. Services include the network is expected to expand in future periods. certification of the authenticity of classic Ferrari cars and vehicles of particular historical relevance, The originality of the car with respect to the initial the management of Ferrari restoration and repair specifications is checked via a technical inspection, activities, as well as the management of Ferrari spare performed either at the Ferrari Classiche facility parts, including when these are no longer available in Maranello or at an authorized Officina Ferrari on the market. The department also provides advice Classiche, and benefits from a comprehensive on repair operations carried out on Ferrari Classiche archive containing drawings of each of the cars within its network. individual chassis and details of historical components. Based on the evidence gathered Ferrari Classiche aims to create a platform of during this inspection, the car is then presented to information and technical expertise to preserve an expert committee, chaired by the founder’s son, and enhance over time the awareness and value of Piero Ferrari, for the certification. Ferrari’s heritage and brand. We view the surviving Ferrari vehicles of historical value as the tangible At the Maranello workshop, Ferrari Classiche carries legacy and incarnation of our brand. The Ferrari out full restorations using either original components Classiche department also supports and encourages and spare parts or replicas manufactured in the direct participation of clients in strategic accordance with the original specifications. Our historical events. The Ferrari Classiche department in Maranello service offers our clients the opportunity to restore any classic Ferrari to its original pristine conditions. consists of an office of specialists and a workshop The Ferrari Classiche department also provides basic in which historic cars are restored and repaired. In technical and instructional support to the Ferrari addition, in order to provide an enhanced service to Classiche Academy, a new driving school project that owners away from the main workshop in Maranello, launched in 2019 for vintage Ferrari cars, including starting in 2017 Ferrari Classiche authorized a new the Ferrari 308 and 550 Maranello. 75 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFORMULA 1 ACTIVITIES Championship since the series Constructors’ Championship, was launched in 1950, and won its with 323.5 points, five podiums, Participation in the FIA Formula 1 first Grand Prix in 1951. two pole positions, and with fifth World Championship with We are the only team that has and seventh place finishes in Scuderia Ferrari is a core competed in each season the Drivers’ Championship, for element of our marketing effort since launch and the oldest and Carlos Sainz and Charles Leclerc and promotional activities, as most successful in the history respectively. well as an important source of of Formula 1, with 238 Grand technological innovation for Prix wins. Throughout our Scuderia Ferrari’s continuing the engineering, development racing history, we have won 15 participation in the FIA Formula 1 and production of our sports, Drivers’ Championships and 16 World Championship over the five GT, special series and Icona Constructors’ Championships, year period from 2021 to 2025 is cars. The FIA Formula 1 World more than any other team. Many governed by two agreements – Championship is the pinnacle of the best known drivers in widely known as New Concorde of motorsports with 445 million the sport’s history have raced Agreement - signed on August 18, unique viewers and a total in Scuderia Ferrari’s distinctive 2020. cumulative global television red cars including Alberto The first of such agreements audience of 1.55 billion in 2021. Ascari, Juan-Manuel Fangio, Mike governs the regulatory and (Source: Formula 1 Press Office) Hawthorn, Phil Hill, John Surtees, governance aspects of the sport, Niki Lauda, Jody Scheckter, Gilles and the second governs the Once again in 2021, Formula 1’s Villeneuve, Michael Schumacher commercial aspects. The New social media platforms grew and Kimi Raikkonen. Our drivers’ Concorde Agreement recognizes significantly, with the total number line-up in 2021 comprised Charles the historical role of Ferrari, the of followers up 40 percent to 49.1 Leclerc, the first graduate of the only team that has participated million, and video views increased Ferrari Driver Academy training in all Formula 1 World by 50 percent to 7 billion. scheme to race for our Formula Championship editions since its In 2021, Formula 1’s social media 1 race team, and Carlos Sainz, a inception. In exchange for their channels were once again the young but already experienced participation in Formula 1 races, fastest growing major sports talented Spanish driver. the participating teams receive league in the world across the a share of a prize fund based on four major social platforms and In 2021 the new FIA financial the profits earned from Formula registered the fastest growth in regulations entered into force, 1-related commercial activities engagement compared to other imposing a cap (which will managed by Formula 1, including major sports. (Source: Formula 1 gradually decrease over the in particular, promoters’ fees, Press Office) next two years) on certain television broadcasting royalties, expenses and investments partnership agreements and Formula 1 cars rely on advanced related to operations and the other sources. Shares in the prize technology, powerful hybrid chassis of the cars which may be fund are paid to the teams, largely engines and cutting edge incurred by any single Formula based on the relative ranking of aerodynamics. While Europe 1 team. Moreover, development each team in the championship. is the sport’s traditional base, activities were also limited by We use our share of these longstanding non-European the new regulation and only one payments to offset a portion venues such as Australia, Brazil, development per component was of the costs associated with Canada, Japan, Mexico and the allowed in the power unit area. Scuderia Ferrari, including the United States have been joined costs of designing and producing in the last two decades by racing Though the 2021 season the race cars each year and the venues in China, Bahrain, United remained affected by the costs associated with managing Arab Emirates, Singapore, COVID-19 pandemic, thanks to the a racing team, including the Qatar, Saudi Arabia, Russia efforts of FIA, Formula 1 and the salaries of the drivers, who are and Azerbaijan. This provides teams, it was possible to organize typically among the most highly participants in the Formula 1 22 Grands Prix, a record number paid athletes in the world. Please World Championship exceptional in the history of the sport. see “Risk Factors—Our revenues visibility on the world stage. In terms of results, the season from Formula 1 activities may Scuderia Ferrari has been ended with third place for decline and our related expenses racing in the Formula 1 World the Scuderia Ferrari in the may grow”. 76 FERRARI N.V.AR 2021Improvements in technology development of our road cars the car to recover, store and and, from time to time, changes and their engines. deploy energy generated both by in regulations typically require We often transfer technologies the vehicle during braking and the design and production initially developed for racing to by the exhaust gases through a of a new racing car every our road cars. Examples include turbocharger. year. Therefore, in addition to steering wheel paddles for gear- our long-term research and shifting, the use and development The great visibility, both on development efforts, we begin of composite materials, which traditional media and on digital designing our cars each year make cars lighter and faster, platforms, that Scuderia Ferrari in the spring, in anticipation of and technology related to hybrid obtains thanks to its participation the start of the racing season propulsion. the following March. While the in the FIA Formula 1 World Championship continues to chassis and the power unit we Our road cars (especially our attract significant sponsorships. build each year are designed to sports car models) have benefited be used throughout the racing from the know-how acquired The visibility and placement of season, the majority of other in the wind tunnel by our racing partner logos on the car and team components fitted on our cars car development teams, enjoying uniforms reflect their respective are adjusted from race to race greater stability as they reach level of sponsorship. depending on the characteristics high speeds on and off the track. We use the platform provided of the circuits. Our research and development by Formula 1 for a number of team focus on combining associated marketing initiatives, To maximize the performance, minimal lap times with maximum such as the hosting of clients efficiency and safety of our efficiency, leading to advances and other key partners in Ferrari Formula 1 cars, while complying in kinetic energy recovery Formula 1 Club Hospitality to with the strict technical rules and systems, or ERS, technology. watch and experience the restrictions set out by the FIA, Current advanced ERS features Grand Prix races with Scuderia our research and development two electric motor/generator Ferrari, and our Formula 1 team plays a key role in the units in every car, which allow drivers’ participation in various 77 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ FORMULA 1 ACTIVITIES promotional activities for our MUGELLO CIRCUIT The circuit was awarded the prize road cars. We often sell older Located in Scarperia just outside for the Best Grand Prix circuit Formula 1 cars to customers Firenze, for more than 100 years for a MotoGP event five times for use in amateur racing or the Mugello Circuit has carved (1995, 1996, 1997, 2000, 2011), collection. its mark as one of the leading and is also a leader in terms of its motorsport venues globally. sustainability practices. It was the More generally, Formula 1 racing Internationally renowned as first circuit in the world to obtain allows us to promote and market the host venue for the Italian FIA’s prestigious “Achievement our brand and technology to a MotoGP Grand Prix since 1976 of Excellence” in 2015 and to global audience without resorting (and consecutively since 1994), be certified according to the to traditional advertising the Formula 1 Grand Prix of sustainable event management activities, therefore preserving Tuscany Ferrari 1000 in 2020, system ISO 20121. In July 2021, an the aura of exclusivity around our and numerous international analysis carried out by Enovation brand and limiting the marketing motorsports competitions, the Consulting and Right Hub on 96 costs that we, as a company 5,245 metres circuit mimicking circuits worldwide, 23 of which operating in the luxury industry, the natural slopes of the Tuscan host or have hosted a Formula 1 would otherwise incur. hills is also famed for its ultimate GP, featured the Mugello Circuit driving experience and modern on top of the Sustainable Circuits In December 2021, the World facilities. Index. Motor Sport Council validated the framework for the 2026 Originally a 66 km road circuit, In 2021 all certifications Power Unit Regulations, which the first motorsport event held were renewed, including for includes technical, operational at Mugello starting from 1914 the international standards and financial guidelines. The were regularity. Enzo Ferrari for sustainable and event framework identifies key won in 1921 on an Alfa Romeo management as well as the objectives related to, among class 4.500. The current facilities system of safety and health other things, the environmental were designed in the early 70’s management on work places. impact, cost reduction measures and later re-modelled in 1988 and competitiveness of the FIA when Ferrari bought the circuit. Formula 1 World Championship. Year after year the track has A detailed document of the seen consistent improvements 2026 Power Unit Regulations is in terms of safety with FIA Grade expected to be developed and 1 and FIM Grade A certifications, submitted to the World Motor the highest levels of homologation Sport Council during the course for a racetrack. of 2022. In 2021 the circuit hosted 250 days of track activities and 14 race weekends. 78 FERRARI N.V.AR 202179 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSBRAND DIVERSIFICATION STRATEGY As one of the world’s leading line of apparel and accessories sold exclusive in relation to the luxury luxury brands, Ferrari operates in our monobrand stores, on our pricing and aspirational character in carefully selected luxury and website www.store.ferrari.com of our cars, but also inclusive in lifestyle categories. We also and in selected multi-brand stores, relation to our F1 fan community. engage in brand development both physical and online. and protection activities through To ensure long-term profitable licensing contracts with selected In November 2019, management growth, Ferrari intends to focus partners, retail activities through presented the principles of its its offering on product categories a chain of franchised or directly brand diversification strategy, that enhance the vibrancy and managed stores, licensed theme recognizing Ferrari as a unique vitality of the brand through the parks and the development of a brand with a dual identity: following pillars: BRAND EXTENSION ENTERTAINMENT CAR ADJACENCIES A REFINED COLLECTION OF TO REACH OUT TO A WIDER AND A COLLECTION OF EXCLUSIVE PRODUCTS THAT WILL EMBODY YOUNGER CUSTOMER BASE LUXURY PRODUCTS AND FERRARI’S DNA WHILE LEVERAGING FERRARI’S SERVICES TO COMPLEMENT THE UNIQUE RACING ROOTS FERRARI EXPERIENCE In 2021, due to government restrictions on travel and certain business activities imposed as a result of the COVID-19 pandemic, the number of visitors in our museums, our franchised and directly managed stores, and our licensed theme parks (further described below) was significantly lower than pre-pandemic levels despite an increase compared to 2020. 80 FERRARI N.V.AR 2021 RETAIL Through our network of stores (franchised or directly We use multiple criteria to select our franchisees, managed), we offer a wide range of Ferrari branded including know-how, financial condition, sales products, including our fashion collection. network and market access. Generally, we require that applicants meet certain minimum working At December 31, 2021, there were a total of 30 retail capital requirements and have the requisite business Ferrari stores, including those in Maranello, Milan, facilities and resources. Rome, Miami, Los Angeles and Abu Dhabi, of which We typically enter into a standard franchising 16 stores directly owned and operated by us and 14 agreement with our franchisees. Pursuant to this franchised stores (including 12 Ferrari Store Junior). agreement, the franchisee is authorized to sell our We require all franchisees to operate our monobrand products at a suggested retail price. In exchange, stores according to our standards. Stores are we provide them with our products, the benefit of designed, decorated, furnished and stocked our marketing platform and association with our according to our directions and specifications. corporate identity. MUSEUMS, LICENSING, ENTERTAINMENT AND THEME PARKS products include consumer classic double curve side profile electronics, sportswear, toys, of the Ferrari GT body, spanning video games, watches and other 200,000 square meters and Ferrari owns and manages two accessories, as well as theme carrying the largest Ferrari logo museums, one in Maranello and parks. one in Modena. ever created. Ferrari World Abu Dhabi offers an all-around In 2021, we consolidated our Ferrari experience to children We enter into license agreements participation in eSports with the and adults alike. with a number of licensees for second edition of the Ferrari the design, development and eSports series with more than Our second theme park, Ferrari production of Ferrari branded 34,000 participants. Land Portaventura, opened in products. We carefully select A significant portion of our April 2017 near Barcelona, and our licensees through a rigorous revenues from licensing activities includes Red Force, the tallest process and we contractually consists of royalties we receive and fastest roller-coaster in seek to ensure that our brand in connection with Ferrari World, Europe. In the long-term we aim and intellectual property are our theme park in Abu Dhabi. to open one theme park in each protected and that the products Ferrari World opened on Yas of the main geographic areas which will eventually bear our Island, on the North East side of where we operate, including brand are of adequate quality, Abu Dhabi’s mainland, in 2010. North America and Asia. appearance and market Ferrari World’s iconic sleek red positioning. Ferrari branded roof is directly inspired by the 81 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS INTELLECTUAL PROPERTY We own a number of registered • “Ferrari” (word) designs and utility patents. We expect the number to grow as we • “Ferrari” logotype: continue to pursue technological innovations and to develop our design and brand activities. We file patent applications in • the “Prancing Horse” (figurative): Europe, and around the world (including in the United States) to protect technology and improvements considered important to our business. No single patent is material to our The names of our sports, GT, special series and Icona car models and Formula 1 single- seater models are also registered as trademarks (and logotypes) and we also register their domain names and the cars’ design. The protection of intellectual property is also increasingly important in connection with our design and brand activities. Therefore, we adopt and follow internal processes and business as a whole. • the trademark (figurative): procedures to ensure both that We also own a number of registered trademarks, designs and patents, including approximately 510 trademarks (word or figurative), registered all necessary protection is given to our intellectual property rights and that no third party rights are infringed by us. In addition, we are particularly active in seeking to limit any counterfeiting activities in several countries and across • the racing shield (figurative): regarding our Ferrari branded a number classes. In particular, we ensure that the maximum level of protection is given to the following iconic trademarks, for which we own approximately 4,020 applications/registrations products around the world. To reach this goal we closely monitor trademark applications and domain names worldwide, actively interact with national and local authorities and customs and in approximately 140 countries, • Scuderia Ferrari (word and avail ourselves of a network of in most of the main classes for figurative): experienced outside counsels. goods and services: 82 FERRARI N.V.AR 2021 ~510 ~4,020 TRADEMARKS APPLICATIONS/ REGISTRATIONS OWNED 83 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSPROPERTIES Our principal manufacturing facility is located in In 2020, we purchased approximately 64 thousand Maranello (Modena), Italy. It has an aggregate covered square meters of land in Maranello to be used area of approximately 823 thousand square meters. for future developments. In 2021, we completed Our Maranello plant hosts our corporate offices the construction of the new building related to and most of the facilities we operate for the design, new GT sport activities (which covers an area of development and production of our road and track approximately 6 thousand square meters near the cars, as well as of our Formula 1 single-seaters. (See Fiorano track), the new building for our Formula 1 “Production and Procurement—Production Process” ). simulator and the renovation of the offices used Except for some leased technical equipment, we own by our Marketing and Commercial department. In all of our facilities and equipment in Maranello. 2020 we also purchased approximately 52 thousand square meters of land in Maranello to be used for Since 2002 we have either rebuilt or renovated most future developments. of the buildings in Maranello, including the paint shop building and the production building. In 2015 we Adjacent to the plant is our Fiorano track, of completed construction of the new building entirely approximately 3 thousand meters, built in 1972 and dedicated to our Formula 1 team and racing activities, remodeled in 1996. The track also houses the Formula as well as the new wind tunnel 4WD. 1 logistics offices. Additional facilities in Maranello include a product development center, a hospitality In 2018 we completed the new Ferrari Design Centre, area and the Ferrari museum. a building that covers more than 7 thousand square meters. We also own the Mugello racing circuit in Scarperia, near Florence, which we rent to racing events In 2019 we completed the office area and workshop organizers (see “Formula 1 Activities—The Mugello area of the New Technical Center for the development Circuit” ). of engines and hybrid systems. The entire building and the engine and hybrid test benches cover an area We own a second plant in Modena, named of approximately 20 thousand square meters and was Carrozzeria Scaglietti. At this approximately 26 completed in 2021. thousand square meter plant we manufacture Also in 2019, we purchased land of approximately aluminum bodyworks for our regular range, special 16 thousand square meters in line with our series and prototype cars. expansion plans. The total carrying value of our property, plant and equipment at December 31, 2021 was €1,353 million. 84 FERRARI N.V.AR 2021 EMPLOYEES Human capital is a crucial factor in our success, work arrangements, commuting programs and a building on our position as a global leader in the dedicated welfare program, Formula Benessere, luxury performance car sector and creating long- which includes, among other programs, Formula term, sustainable value. To recognize excellence, Benessere Donna and Formula Benessere Junior encourage professional development and create (offering medical assistance to employees and their equal opportunities, we adopt a number of initiatives, families) and Formula Estate Junior (offering Summer including our appraisal system to assess our middle- Campus to the children of employees). managers and white collar employees through performance management metrics; our talent At December 31, 2021, we had a total of 4,609 management and succession planning, in addition employees, including 143 managers and senior to assessment plans for blue collars; training and managers. Of these, 4,337 were based at our skill-building initiatives; employee satisfaction and Maranello facility, and 272 in offices around the world engagement surveys, including our so-called “Pit Stop” (including 25 managers and senior managers), mostly and “Pole Position” programs; and flexible in North America and China. White-collar employees and middle-managers Italy Rest of the world Workers Italy Rest of the world Managers and senior managers Total At December 31, 2021 2,276 2,039 237 2,190 2,180 10 143 2020 2,186 1,961 225 2,233 2,224 9 137 2019 1,983 1,772 211 2,179 2,170 9 123 4,609 4,556 4,285 Approximately 12 percent of the employees were trade union members in 2021. Our employees’ principal trade unions are Federazione Italiana Metalmeccanici (FIM-CISL), Unione Italiana Lavoratori Metalmeccanici (UILM-UIL), Federazione Italiana Sindacati Metalmeccanici e Industrie Collegate (FISMIC) and Federazione Impiegati Operai Metallurgici (FIOM-CGIL). All of our employees are covered by collective bargaining agreements. Our managers are represented by the Italian trade union, Federmanager, and are subject to a collective bargaining agreement, which will expire on December 31, 2022. Our other employees are covered by two agreements: the first one entered into by FCA, CNH Industrial and Ferrari with FIM-CISL, UILM-IUL, FISMIC, UGL and AQCF signed on March 11, 2019 which will expire on December 31, 2022, and the second one named “Accordo Premio di Competitività Ferrari” signed on September 25, 2019 which will expire on December 31, 2023. This collective bargaining contract provides, among other things, for the payment of bonuses linked to performance up to a maximum of approximately €13,000 gross per year and payable in four installments: three advances and a final balance. In addition to the collective agreements, we have individually negotiated agreements with several of our managers and other key employees providing for long-term incentives, exclusivity and non-compete provisions. 85 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS REGULATORY MATTERS We manufacture and sell our cars around the world and our operations are therefore subject to a variety GREENHOUSE GAS/CO2/FUEL ECONOMY LEGISLATION of laws and regulations relating to environmental, European legislation limited fleet average greenhouse health and safety and other matters. These laws gas emissions for new passenger cars to 130 grams regulate our cars, including their emissions, fuel consumption and safety, as well as our manufacturing of CO2 per kilometer for the period 2015-2019. Due to our SVM status under EU regulations we benefited facilities and operations, setting strict requirements from a derogation from the 130 grams per kilometer on emissions, treatment and disposal of waste, emissions requirement available to small volume and water and hazardous materials and prohibitions on niche manufacturers during that period. Pursuant to environmental contamination. Our vehicles, together that derogation, we were instead required to meet with the engines that power them, must comply with extensive regional, national and local laws and yearly CO2 emissions targets, beginning in 2012, reaching a target level of 290 grams per kilometer in regulations, and industry self-regulations (including 2016 for our fleet of EU-registered vehicles that year. those that regulate vehicle safety). However, we Despite global shipments exceeding 10,000 vehicles currently benefit from certain regulatory exemptions, in 2019, Ferrari continued to qualify as an SVM under because we qualify as an SVM or similar designation EU regulations, because its total number of registered in certain jurisdictions where we sell cars. As outlined vehicles in the EU per year is less than 10,000 vehicles. below, these exemptions provide a range of benefits, from less stringent emissions caps and compliance In 2014, the European Union set new 2020 emissions date extensions, to exemptions from zero emission targets, calling for 95 percent of a manufacturer’s full vehicle production requirements. fleet of new passenger cars registered in the EU in We are in substantial compliance with the relevant 2020 to average 95 grams of CO2 per kilometer, rising to 100 percent of the fleet in 2021. The 2014 regulation regulatory requirements affecting our facilities and extends the small volume and niche manufacturers products around the world. We constantly monitor derogation. Pursuant to the derogation approved by such requirements and adjust our operations as the European Commission following our petition, we necessary to remain in compliance. were required to meet certain CO2 emissions target levels in the 2017-2021 period, reaching a target of APPROVAL AND MARKET SURVEILLANCE 277 grams per kilometer in 2021 for our fleet of EU- In May 2018 the European Parliament and European registered cars that year. Council issued Regulation 2018/858, establishing the new framework for the approval and market In 2019, the European Union set new 2025 and surveillance of motor vehicles (repealing Directive 2030 emissions targets, calling for respectively a 2007/46/EC). While the previous regulatory 15 percent and 37.5 percent reduction of the target framework of Directive 2007/46/EC was focused on applicable in 2021. An incentive mechanism for zero technical standards, the new regulation has a broader and low emission vehicles was also introduced. This scope by including market surveillance requirements new regulation (EU 2019/631) continues to state in order to ensure the enforcement of applicable that it is not appropriate to use the same method standards. The key objectives of Regulation 2018/858 to determine the emissions reduction targets for are: enhancing the independence of technical large volume manufacturers as for small volume services (i.e. the approved testing laboratories) as well manufacturers that are considered as independent. as improving the quality of the testing of vehicles and Therefore, Ferrari and other SVMs have the possibility setting stricter requirements for technical services; to continue to apply for alternative emissions introducing market surveillance in order to verify the reduction and are required to submit the application conformity of vehicles on the market to the applicable at the latest by October 31 of the year in which the standards, and requiring corrective measures in related derogation shall apply. case of non-compliance or where a vehicle poses a safety risk or a risk to the environment; strengthening The regulation EU 2019/631 sets out new EU rules the type approval system with more stringent on monitoring and reporting of average emissions: oversight by the EU. The Commission has the power the Commission will have to ensure the real-world to suspend, restrict or withdraw the designation of technical services, to order recalls, and to impose financial penalties. representativeness of the CO2 emission values based on data from the fuel consumption meters installed in new cars and will be obliged to publish 86 FERRARI N.V.AR 2021the performance of each manufacturer. For this calendar year. Moreover, the proposal would increase purpose, the Commission issued in March 2021 the Implementing Regulation EU 2021/392 requiring manufacturers to collect and report the real-world on-board fuel consumption monitoring (OBFCM) data and the vehicle identification numbers of new cars registered starting from January 1, 2021, unless the vehicle owner expressly refuses to make that data the 2030 CO2 emissions target from a 37.5% to a 55% reduction compared to 2021 and introduce a 2035 target whereby CO2 emissions from new cars and vans would have to be 100% lower compared to 2021. Similarly to the EU, Switzerland introduced CO2 emission regulations for new cars in July 2012. available. The European Commission will then publish Despite the existence of some specificities within real-world data on an annual basis, aggregated at the Swiss regulation, derogations aligned with EU the level of manufacturer for comparison of the regulation have been granted to SVMs up to and same set of vehicles between data recorded in the including 2021. Switzerland has historically adopted certificates of conformity and the real-world data. the targets approved by the European Commission. In addition, regulation EU 2019/631 requires the On November 24, 2021, the Swiss Federal Council European Commission to evaluate the possibility of a common methodology for the assessment and the amended the CO2 emission regulations for cars and vans. This regulation was repealed starting consistent data reporting of full life-cycle emissions from January 1, 2022 and the vehicles of niche and from cars. The regulation also includes provisions small volume manufacturers will have to meet the on in-service conformity testing and on detecting strategies which may artificially improve the CO2 performance. Because of these requirements, the same CO2 emission targets as the large volume manufacturers. This change in legislation is expected to result in additional costs for Ferrari, either through European Commission is currently working on a penalties or the purchase of emissions credits from Delegated Regulation defining the procedures for other manufacturers. Ferrari does not expect such verifying the CO2 emissions of vehicles in-service. Detailed technical provisions (e.g. test procedures, additional costs to be material. statistical evaluations, tolerances, pass/fail criteria, In the United States, both Corporate Average Fuel etc.) for the in-service verification procedures will be Economy (“CAFE”) standards and greenhouse further defined by an Implementing Regulation. gas emissions (“GHG”) standards are imposed on manufacturers of passenger cars. Because the The European Green Deal, adopted by the control of fuel economy is closely correlated with European Commission in December 2019, has at the control of GHG emissions, the United States its core combating climate change and reaching Environmental Protection Agency (“EPA”) and the the objectives of the Paris Agreement and other National Highway Traffic Safety Administration environmental goals (including addressing air (“NHTSA”) have sought to harmonize fuel economy pollution). One of its central elements is the regulations with the regulation of GHG vehicle 2050 climate neutrality objective. The European Commission enshrined the 2050 climate neutrality emissions (primarily CO2). These agencies have set the federal standards for passenger cars and light objective into EU law entered into force in July 2021. trucks to meet an estimated combined average fuel In order to set the EU on a sustainable path to achieve economy (CAFE) level that is equivalent to 35.5 miles climate neutrality by 2050, the European Commission per U.S. gallon for 2016 model year vehicles (250 has also presented a net EU-wide, economy-wide plan to reduce greenhouse gas emissions by at least 55 grams CO2 per mile). In August 2012, these agencies extended this program to cars and light trucks percent by 2030, compared to 1990 levels. for model years 2017 through 2025, targeting an estimated combined average emissions level of 163 Building on the existing legislation and the EU’s grams per mile in 2025, which is equivalent to 54.5 2030 climate ambitions, the European Commission miles per gallon. also published the “Fit for 55” Package on July, 14, 2021, which includes a proposed amendment to the On September 27, 2019 the EPA and the NHTSA issued regulation EU 2019/631. In particular, the European the “Safer Affordable Fuel-Efficient (SAFE) Vehicles Commission’s proposal would remove by 2030 the Rule Part One: One National Program” (SAFE I Rule). provision granting a derogation from the specific These rules would exert federal preemption authority emissions targets to manufacturers responsible for under the CAFE statute over California’s ability to between 1,000 and 10,000 new passenger cars in a regulate greenhouse gases and would revoke the 87 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REGULATORY MATTERS current EPA waiver under the Clean Air Act which had proposed alternative CAFE standards, for model authorized California to regulate GHG from motor years 2017, 2018 and 2019. Then, in December, 2017, vehicles. The state of California along with other states we amended the petition by proposing alternative and certain NGOs filed challenges to these rules in CAFE standards for model years 2016, 2017 and 2018 both US District Court for the District of Columbia instead, covering also the 2016 model year. In 2019, and the United States Court of Appeals D.C. Circuit. our global production exceeded 10,000 vehicles, and In May 2021, the NHTSA issued a notice of proposed therefore we are not considered a SVM by the NHTSA rulemaking proposing to fully repeal the SAFE I Rule. for model year 2019. We previously purchased the CAFE credits needed to fulfill this deficit. On July 15, On March, 31, 2020 the EPA and the NHTSA issued 2020, we submitted to the NHTSA a petition for an the final SAFE Vehicles Rule (Part Two) setting CAFE exemption from the CAFE standards for the model and carbon dioxide emissions standards for model year 2020. We proceeded with this submission years 2021-2026 passenger cars and light trucks. because, although Ferrari originally intended to Under the SAFE Vehicles Rule (Part Two), the overall produce more than 10,000 vehicles in 2020, actual stringency of the federal standards is significantly production was lower than 10,000 vehicles as a result reduced from the levels previously set as the final rule of the COVID-19 pandemic and the related shutdown will increase stringency of CAFE and CO2 emissions standards by 1.5 percent each year through model of our production facilities. Therefore since we met the NHTSA definition of a SVM, we have requested an year 2026, as compared with the standards issued in alternative fleet average GHG standards for model 2012, which would have required annual increases year 2020 standard. The NHTSA has confirmed that of approximately 5 percent. In August 2021, the EPA it will not send a shortfall letter to Ferrari requiring published a notice of proposed rulemaking proposing payment of CAFE civil penalties or the application of to strengthen federal GHG emissions standards for CAFE credits with regards to model year 2020 until passenger cars and light trucks by setting stringent the NHTSA has ruled on Ferrari’s petitions for an requirements for reductions from for model years alternative standard. We purchased the CAFE credits 2021-2026. Consistently with the EPA’s approach, needed to fulfill our model year 2021 deficit and in September 2021 the NHTSA published a notice we are planning to continue with this approach for of proposed rulemaking proposing revised fuel subsequent model years. economy standards for passenger cars and light trucks for model years 2024-2026. The state of California has been granted special authority under the Clean Air Act to set its own vehicle Under current regulation, for model years 2017-2026, emission standards. In February 2010, the California the EPA allows a SVM, defined as an operationally Air Resources Board (“CARB”) enacted regulations independent manufacturer with less than 5,000 under which manufacturers of vehicles for model yearly unit sales in the United States, to petition for years 2012-2016 which are in compliance with the a less stringent standard. The EPA has granted us EPA greenhouse gas emissions regulations are SVM status. We therefore petitioned the EPA for also deemed to be in compliance with California’s alternative standards for the model years 2017-2021 greenhouse gas emission regulations (the so-called and 2022-2025, which are aligned to our technical “deemed to comply” provision). In November 2012, and economic capabilities. On July 31, 2019 the EPA the CARB extended these rules to include model published a Notice in the U.S. Federal Register (Federal years 2017-2025. In 2017 CARB performed a technical Register /Vol. 84, No. 147) that in part proposed assessment regarding greenhouse gas standards that Ferrari be permitted an alternative standard for model years 2022 through 2025, in parallel with substantially in line with the alternative standard that the EPA and the NHTSA, and confirmed in March Ferrari proposed to the EPA for model years 2017- 2017 that the standards defined in 2012 may be 2021. The EPA approved Ferrari proposed standards still considered appropriate. On December 12, for model years 2017-2020, whereas it required a 2018 the CARB amended its existing regulations to small reduction for the model year 2021 standard. clarify that the “deemed to comply” provision would On June 25, 2020, the EPA Administrator signed the not be available for model years 2021-2025 if the final determination for alternative GHG standards for EPA standards for those years were altered via an SVMs for model years 2017 through 2021. amendment of federal regulations. On September 19, 2019, the NHTSA and the EPA established the “One In September 2016, we petitioned the NHTSA for National Program” for fuel economy regulation, taking recognition as an independent manufacturer of the first step towards finalizing the agencies’ August less than 10,000 vehicles produced globally, and we 2018 proposal by announcing the EPA’s decision to 88 FERRARI N.V.AR 2021withdraw California’s waiver of preemption under the In the future, driving bans on combustion Clean Air Act, and by affirming the NHTSA’s authority engine vehicles could be imposed, particularly in to set nationally applicable regulatory standards metropolitan areas, promoting progress in electric under the preemption provisions of the Energy Policy and hybrid technology. On September 23, 2020, the and Conservation Act (EPCA). The two agencies Governor of California issued an executive order indicated that they anticipate issuing a final rule on requiring that all in-state sales of new passenger standards in the near future. Ferrari currently avails vehicles be zero-emission by 2035. CARB is itself of the “deemed-to-comply” provision to comply developing regulations among the Advanced Clean with CARB greenhouse gas emissions regulations. Cars II (ACC II) regulatory package to implement such Therefore, depending on future developments, it executive order. The ACC II regulations will seek to may be necessary to also petition the CARB for SVM increase the number of zero-emission vehicles (ZEVs) alternative standards and to increase the number for sale and reduce criteria and greenhouse gas of tests to be performed in order to follow the CARB emissions from new light- and medium-duty vehicles specific procedures. beyond the 2025 model year. During 2021, the state of Washington introduced legislation that could While Europe and the United States lead the phase out sales of non-ZEVs. The Washington State implementation of these fuel consumption/CO2 emissions programs, other jurisdictions typically House bill 1204 titled “Clean Cars 2030” provides that all privately and publicly owned passenger and light follow on with adoption of similar regulations within duty vehicles of model year 2030 or later registered a few years thereafter. In China, for example, Stage in Washington state must be electric vehicles and the IV targeted a national average fuel consumption of state’s transportation commission will now work on 5.0L/100km by 2020. In September 2017, the Chinese a scoping plan for achieving the 2030 requirement, government issued the Administrative Measures on anticipating the California target by five years. In CAFC (Corporate Average Fuel Consumption) and November 2020, the UK Prime Minister, the Transport NEV (New Energy Vehicle) Credits. This regulation Secretary and the Business Secretary announced, in establishes mandatory CAFC requirements, while the context of the 10-Point Plan for a Green Industrial providing additional flexibility for SVMs (defined as a Revolution, the end of the sale of new petrol and manufacturer with less than 2,000 units imported in diesel cars in the United Kingdom by 2030. On July 14, China per year that achieve a certain minimum CAFC 2021 the UK Government published the Green Paper yearly improvement rate). Manufactures that exceed the CAFC regulatory ceiling are required to purchase on a New Road Vehicle CO2 Emissions Regulatory Framework for the United Kingdom. The commitment NEV credits. is to reach net zero carbon emissions by 2050. Following Brexit, the UK Government is autonomous The Stage V regulation, issued on December 31, 2019, in defining the legal framework to deliver the sets the fuel consumption fleet average targets for internal combustion engine vehicles phase out dates the period 2021-2025, targeting a national average fuel announced and is expected to publish a proposal in consumption of 4.0 l/100km by 2025. Following the 2022. This will put the United Kingdom on course to be adoption of the Stage V fuel consumption regulation, the first G7 country to decarbonize cars and vans. an update to the Administrative Measures on CAFC and NEV credits was published in June 2020, keeping the additional flexibility for SVMs and relaxing the EXHAUST AND EVAPORATIVE EMISSIONS REQUIREMENTS minimum CAFC yearly improvement rate required. In 2007, the European Union adopted a series In addition to the fuel consumption target on the of updated standards for emissions of other air entire fleet, the Chinese regulation GB 19578-2021 pollutants from passenger and light commercial sets specific fuel consumption limits on model types. vehicles, such as nitrogen oxides, carbon monoxide, Currently, this standard is only applicable to domestic hydrocarbons and particulates. These standards cars, as it is not adopted by the China Certification and were phased in from September 2009 (Euro 5) and Accreditation Administration (CNCA). In the current September 2014 (Euro 6) for passenger cars. In 2016, Ferrari portfolio, only the plug-in hybrid models would the European Union established that Euro 6 limits be compliant with this regulation. Following the same shall be evaluated through Real Driving Emissions approach also with respect to pure electric vehicles, (RDE) measurement procedure and a new test-cycle during 2021 the relevant Chinese authorities have more representative of normal conditions of use published a notice to call for participation in a working (Worldwide Light Vehicles Test Procedure). SVMs group that should define the energy consumption (vehicle manufacturers with a worldwide annual limit standards for electric vehicles. production lower than 10,000 units in the year prior 89 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REGULATORY MATTERS to the grant of the type-approval) are required to be 2020, the European Commission launched a public compliant with RDE standards starting from 2020 consultation on its roadmap outlining the policy while non-SVMs have been required to comply with options that it could pursue in revising the emission RDE standards starting from 2017. We believe all standards for light and heavy duty vehicles (Euro new Ferrari models are fully compliant with RDE 7). This initiative is part of the European Green Deal, requirements. In 2018, the European Commission advocating the European automotive industry’s role issued Regulation 2018/1832 for the purpose of as a leader in the global transition to zero-emission improving the emission type approval tests and vehicles. More stringent air pollutant emissions procedures for light passenger and commercial standards for combustion engine vehicles are vehicles, including those for in-service conformity expected to be set by early 2022. Depending on the and RDE and introducing devices for monitoring the future regulatory developments, the technological consumption of fuel and electric energy. Under the EU solutions required to ensure compliance with Euro Regulation, which became applicable in January 2019, 7 standards may affect customers’ expectations on among other things, the extended documentation performance, sound and driving experience. The package provided by manufacturers to type approval European Commission is also expected to assess authorities to describe Auxiliary Emission Strategies and evaluate the current noise emissions limits, with (AES) is no longer required to be kept confidential, the risk of more stringent thresholds. and the decision whether to allow access to such documentation package is left to national authorities. In the United States, the “Tier 3” Motor Vehicle In addition, the Regulation introduced a new Emission and Fuel Standards issued by the EPA methodology for checking In-Service Conformity were finalized in April 2014. With Tier 3, the EPA (ISC) which includes RDE tests. Compliance is has established more stringent vehicle emission tested based on ISC checks performed by the standards, requiring significant reductions in both manufacturer, the granting type approval authority tailpipe and evaporative emissions, including nitrogen (GTAA), and accredited laboratories or technical oxides, volatile organic compounds, carbon monoxide services. Test results will be publicly available; in and particulate matter. The new standards are addition, the GTAA will publish annual reports on intended to harmonize with California’s standards for the ISC checks performed, in order to improve 2015-2025 model years (so called “LEV3”) and will be transparency. The European Commission is currently implemented over the same timeframe as the U.S. working on another amendment to the WLTP and federal CAFE and GHG standards for cars and light RDE test procedures primarily to align them with the trucks described above. Because of our status as an corresponding UNECE Regulations. However, other operationally independent SVM, Ferrari obtained EU-specific requirements are also anticipated. a longer, more flexible schedule for compliance with these standards under both the EPA and On December 13, 2018, the General Court of the California Program. European Union issued a ruling on the action started in mid-2016 by the cities of Madrid, Brussels and Paris In addition, California is moving forward with other on the legality of the Commission introducing in the stringent emission regulations for vehicles, including second RDE Regulation (2016/646) RDE conformity the Zero Emission Vehicle regulation (ZEV). The ZEV factors (CF) which had the effect of increasing the regulation requires manufacturers to increase their emission limits. This led to the appeal proceedings sales of zero emissions vehicles year on year, up to during 2019 against the General Court’s judgment an industry average of approximately 15 percent that annulled the conformity factors in the RDE of vehicles sold in the state by 2025. Because we legislation. The appeal is currently pending. currently sell fewer than 4,500 units in California, we are exempt from these requirements. During 2019, the European Commission announced that it will propose more stringent air pollutant Additional stringency of evaporative emissions also emissions standards for combustion-engine requires more advanced materials and technical vehicles and indicated 2021 as a target timeline. solutions to eliminate fuel evaporative losses, all for The European Commission created an Advisory much longer warranty periods (up to 150,000 miles in Group on Vehicle Emission Standards (AGVES), by the United States). joining all the relevant expert groups working on emission legislation, in order to provide technical As already mentioned, the California Air Resources advice for the development of the post-EURO 6/ Board is working on the development of the ACC VI emission standards for motor vehicles. In March II regulations and in December 2021 presented 90 FERRARI N.V.AR 2021proposals to amend the Low Emission Vehicle and waste batteries. This proposal will apply to all (or LEV) Regulation to reduce both tailpipe and kind of batteries, including automotive and electric evaporative emissions. vehicle batteries, and establishes requirements on sustainability, labelling, information and end-of-life. In response to severe air quality issues in Beijing This regulation is currently under discussion. and other major Chinese cities, in 2016 the Chinese To comply with current and future environmental government published a more stringent emissions rules, we may have to incur substantial capital program (National 6), providing two different levels expenditure and research and development of stringency (6a and 6b) effective starting from expenditure to upgrade products and manufacturing 2020. In July 2018 China’s central government facilities, which would have an impact on our cost of launched a three-year plan to reduce air pollution, production and results of operation. extending targets for reducing lung-damaging airborne particulate pollution to the country’s VEHICLE SAFETY 338 largest cities. This plan includes reductions Vehicles sold in Europe are subject to vehicle safety in steel and other industrial capacity, reducing regulations established by the EU or by individual reliance on coal, promoting electric vehicles and member states. In 2009, the EU established a cleaner transport, enhancing air-pollution warning simplified framework for vehicle safety, repealing systems, and increasing inspections of businesses more than 50 directives and replacing them with a for air pollution infractions. Several autonomous single regulation (the “General Safety Regulation”) regions and municipalities have implemented the aimed at incorporating relevant United Nations requirements of the National 6 program even ahead standards. This incorporation process began in of the mandated deadlines. 2012. With respect to regulations on advanced safety systems, the EU now requires new model cars from During 2020, the Chinese Vehicle Emission Control 2011 onwards to have electronic stability control Center (VECC) launched the “Pre-study on Next systems and tire pressure monitoring systems. Stage Emission Standards for Light duty Vehicles”, an Regulations on low-rolling resistance tires have ongoing research project expected to be finalized in a also been introduced. The framework is reviewed more stringent emission program in the next years. periodically, and a revised version of the General Safety Regulation is currently under discussion. Several others regulations are also emerging to In May 2018, the European Commission adopted a take into account the non-exhaust emissions and proposal for a regulation to make certain vehicle the environmental impact of electric and hybrid safety measures mandatory. On March 25, 2019, vehicles components. Brake particulate emissions the European Parliament, Council and Commission from passenger cars are currently not regulated reached a provisional political agreement on the by any UNECE or regional Regulations. However, the revised General Safety Regulation. As of 2022, new representatives of some contracting parties (e.g. the safety technologies will become mandatory in European Union, UK and Japan) are asking for the European vehicles, such as Advanced Emergency authorization to develop a new UN Global Technical Braking, Emergency Lane Keeping systems, crash- Regulation (UN GTR) on the topic of brake particulate test improved safety belts, intelligent speed assistance emissions of light duty vehicle’s brake systems. The and warning of driver drowsiness or distraction. Informal Working Group on Electric Vehicles and In 2017, the EU published technical requirements Environment of the United Nations proposed during for the Emergency Call (eCall) system, mandatory 2021 a Global Technical Regulation on in-vehicle for new model cars starting from 2018. Starting battery durability. This regulation is applicable to from July 1, 2019, new types of pure electric vehicle both pure electric and plug-in hybrid vehicles and and new types of hybrid electric vehicle capable of establishes provisions regarding state-of-health operating without propulsion from a combustion monitors, minimum performance requirements engine operating are required to be equipped with and in-service conformity checks. A UN GTR is not an Acoustic Vehicle Alerting System (AVAS), and from binding for certification purposes. However, it could July 1, 2021 for all new vehicles of such types, in order be transposed into a UN Regulation or a regional to alert pedestrians that a vehicle is moving at low regulation required for the certification. The European speeds. Starting from 2022, European authorities Commission has expressed the will to include these and United Nation’s contracting parties will enforce GTR requirements in Euro 7 regulation. Moreover, regulations on cyber security and over the air the European Commission published, in December updates. Starting from 2024, European authorities 2020, a proposal for a new regulation on batteries and United Nation’s contracting parties will enforce 91 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REGULATORY MATTERS amendments for the existing regulation on pedestrian initiated a global recall campaign to include all protection, modifying the current test procedures Ferrari cars produced in all model years mounting and enhancing the measurement methods on such airbag inflators. The global recall campaign extended vehicle areas such as the windscreen. was implemented based on priority groups and In 2020 the European Commission issued its new the timeline set by the NHTSA. Ferrari recognized digital strategy policies, which represent a priority provisions of €37 million in 2016 for the estimated in its regulatory agenda. During 2021, several draft costs of the worldwide global Takata recall due to proposals were issued in this respect, including uncertainty of recoverability of the costs from Takata. in relation to Real Time Traffic Information (RTTI), At December 31, 2021 the provision amounted to Connected and Intelligent Transport Systems (C-ITS), approximately €3 million, reflecting the current best Artificial Intelligence (AI). During 2022 more legislative estimate for future costs related to the entire recall acts are forecasted, including regarding access to campaign to be carried out by the Group. vehicle data and automated driving). In 2017, the Chinese authorities published an updated Under U.S. federal law, all vehicles sold in the United version of the current local general safety standard States must comply with Federal Motor Vehicle Safety which allows China to become the driver market Standards (“FMVSS”) promulgated by the NHTSA. for the Event Data Recorder mandatory installation Manufacturers need to provide certification that all starting from 2021. Technical requirements were vehicles are in compliance with those standards. In defined in mid-2019, through the formal adoption addition, if a vehicle contains a defect that is related of the local standard. Among the United Nations to motor vehicle safety or does not comply with an contracting parties, China has been the first country applicable FMVSS, the manufacturer must notify to propose an early adoption of updated test vehicle owners and provide a remedy at no cost procedures on high-voltage batteries for hybrid and to the owner. Moreover, the Transportation Recall electric vehicles, which has been enforced starting in Enhancement, Accountability, and Documentation 2020. During 2021, the Chinese authorities worked on Act (“TREAD”) requires manufacturers to report several rulemaking initiatives related to active safety certain information related to claims and lawsuits (e.g. ADAS, eCall), vehicle digitalization, cyber security involving fatalities and injuries in the United States and software updates which are not yet mandatory if alleged to be caused by their vehicles, and other for certification purposes and contribute to the information related to client complaints, warranty regulatory uncertainty in this market. claims, and field reports in the United States, as well as information about fatalities and recalls outside the United States. Several new or amended FMVSSs have taken or will take effect during the next few years in certain instances under phase-in schedules that require only a portion of a manufacturer’s fleet to comply in the early years of the phase-in. These include an amendment to the side impact protection requirements that added several new tests and performance requirements (FMVSS No. 214), an amendment to roof crush resistance requirements (FMVSS No. 216), and a rule for ejection mitigation requirements (FMVSS No. 226). U.S. federal law also sets forth minimum sound requirements for hybrid and electric vehicles (FMVSS No. 141). On May 4, 2016, the NHTSA published a Consent Order Amendment to the November 3, 2015 Takata Consent Order regarding a defect which may arise in the non-desiccated Takata passenger airbag inflators manufactured using phase stabilized ammonium nitrate and mounted on certain vehicles, including Ferrari cars. As a result of this order and subsequent orders by the NHTSA relating to the non-desiccated Takata passenger airbag inflators, in 2016 Ferrari 92 FERRARI N.V.AR 2021 93 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. COVID-19 PANDEMIC UPDATE The global spread of the COVID-19 virus (“COVID-19”), return to full production by May 8, 2020 through which was declared a global pandemic by the the implementation of various safety measures to World Health Organization in March 2020, has led to combat and contain the spread of the COVID-19 governments around the world mandating various virus in the workplace. restrictive measures to contain the pandemic, including social distancing, quarantine, “shelter • Following various initiatives implemented by Ferrari in place” or similar orders, travel restrictions and since the start of the pandemic to support local suspension of non-essential business activities. To communities, the Group continues to provide date, several of these measures are still in place or logistical support as well as facilities at its Fiorano were reintroduced at various points in time as a result race track for the vaccination campaign, where of further “waves” of the pandemic, although the more than 230 thousand vaccine doses have scope and timing of restrictive measures have varied been administered to date by the local medical greatly across jurisdictions. authority. This is in addition to the more than 115 thousand serological tests, rapid swabs tests As the virus spread and the severity of the COVID-19 and flu vaccinations provided at the Fiorano pandemic became apparent, Ferrari’s leadership took race track since the start of the pandemic. With actions to protect and support its employees and the commencement of the national COVID-19 communities, mitigate the impacts on the Group’s vaccination campaign in Italy, in mid-June 2021 financial performance and strengthen the Group’s Ferrari launched its own vaccination plan, dedicated liquidity and financial position. to its employees, their families and all the resident The impacts of the COVID-19 pandemic on the Health Authorities. The campaign resulted in a high Group’s operations and the main actions taken number of vaccinations and is now completed. by Ferrari in response to the pandemic since its Ferrari also organized an additional extraordinary inception are summarized below: COVID-19 vaccination campaign for employees, consultants and suppliers; planned alongside local • With the safety and well-being of Ferrari employees center, with first doses administered on October 1, in mind and considering government restrictions 2021 and second doses on October 29, 2021. Ferrari implemented to combat the spread of the virus, also implemented a flu vaccination campaign in production and deliveries to the distribution network November 2021 and more recently a campaign for were temporarily suspended from the end of March the booster dose of the COVID-19 vaccine. resident consultants and suppliers at our screening until the beginning of May 2020. Although certain restrictions have remained in place in some of • Although production and certain other activities, the countries where Ferrari operates, since May including Formula 1, our stores and our museums, 2020 substantially all Ferrari dealerships remained were temporarily suspended near the end of March operational and order collections continued as 2020, the Group continued many other key business usual. The Group remains focused on maintaining a activities and functions through remote working robust order book going forward and on the careful arrangements, and up to the date of this document management of our waiting lists in line with our it continues to take measures to combat the spread strategy of controlled growth and preservation of of COVID-19 at its facilities while guaranteeing the brand exclusivity. possibility of remote work for those employees whose job activity is compatible with such work • To protect the health and well-being of its workforce arrangements. and customers as Ferrari returned to regular business operations, we successfully implemented • In order to prudently manage potential liquidity our “Back on Track” program, which facilitated our or refinancing risks in the foreseeable future, the AR 2021 94 Group focused on increasing and preserving its Ferrari’s leadership is continuously monitoring available liquidity and took actions to contain costs the evolution of the COVID-19 pandemic as new and capital expenditures in 2020, while ensuring information becomes available as well as the related that all projects that are considered important for effects on the results of operations and financial the continuing success of Ferrari and its future position of the Group. Ferrari has been gradually development are maintained. recovering from the effects of the COVID-19-related suspension of production and other business • The Group decided to temporarily suspend its share activities that occurred primarily in 2020. The effects repurchase program from the end of March 2020 of the pandemic on Ferrari in 2021 were limited and, to the beginning of March 2021, when the program building on the otherwise strong performance in a was restarted. year in which the Group exceeded its guidance on all metrics, management looks to seize the opportunities • The start of the 2020 Formula 1 World ahead and share its future plans on June 16, 2022 in Championship season was postponed from Maranello at the Capital Markets Day. March to July 2020 and it ultimately consisted of 17 Grand Prix events, five fewer than those originally The future impacts of COVID-19 on Ferrari’s results scheduled. Additionally, most of the races were of operations and financial condition will depend on held without public attendance, including Paddock ongoing developments in relation to the pandemic, Club and paddock guests. These circumstances including the success of the gradual release of adversely impacted our financial results in 2020 containment measures and vaccination programs due to a reduction of sponsorships and consequent worldwide, as well as the overall condition and outlook reduced commercial revenues from partners of the global economy. See also “Risk Factors—We are and the holder of Formula 1’s commercial rights subject to risks related to the COVID-19 pandemic or (Formula One Management). Although the 2021 similar public health crises that may materially and season remained affected by the COVID-19 adversely affect our business”. pandemic, including changes in venues and several races being held with a reduced number of spectators, the season ultimately consisted of a record number of 22 Grand Prix races. • Brand activities were also adversely impacted as a result of the temporary closure of Ferrari stores and museums in the first quarter of 2020, which gradually reopened starting from May 2020 with appropriate safety measures in place to protect our staff and customers. To date, in-store traffic has not yet recovered to pre-pandemic levels and museums continue to be subject to certain restrictions as a result of local regulations, although overall brand activities have increased in 2021 compared to 2020. • There have been no significant effects on the valuation of assets or liabilities and no increases in allowances for credit losses as a result of COVID-19. Moreover, no material impairment indicators have been identified and there have been no changes in accounting judgments or other significant accounting impacts relating to COVID-19. • No significant changes occurred in controls that materially affect internal control over financial reporting. 95 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. FINANCIAL OVERVIEW MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE GROUP The following discussion of our financial condition and results of operations should be read together with the information included under “Overview—History of the Company” and the Consolidated Financial Statements included elsewhere in this document. This discussion includes forward-looking statements, and involves numerous risks and uncertainties, including, but not limited to, those described under “Forward-Looking Statements” and “Risk Factors”. Actual results may differ materially from those contained in any forward-looking statements. TRENDS, UNCERTAINTIES AND OPPORTUNITIES Shipments — Our net revenues and results of In order to maintain our brand’s reputation of operations depend on, among other things, the exclusivity among purchasers of our cars, we have achievement of shipment targets established in our continued our low volume strategy while responding budgets and business plans, which we define in line to growing demand and to demographic changes as with our low volume strategy to pursue controlled the size and spending capacity of our target clients growth and preserve brand exclusivity. As part of has grown, gradually increasing annual shipments this strategy, we seek to manage waiting lists in from 10,131 in 2019 to 11,155 in 2021, despite a the various markets in which we operate in order decrease to 9,119 in 2020 driven by the effects of to respond optimally to relative levels of demand, the COVID-19 pandemic, resulting in average annual based on our order books, while being sensitive to shipments of 10,135 over the three year period from local client expectations in those markets. In certain 2019 to 2021. Our plans reflects a continuation of this markets, we believe that waiting lists have promoted strategy and a measured but significant increase the sense of exclusivity of our products and, in shipments above current levels as we broaden accordingly, we monitor and manage waiting lists to our product portfolio to target a potentially larger maintain this exclusivity while ensuring that we do not customer base, while preserving and enhancing the jeopardize client satisfaction. exclusivity and value of our brand. AR 2021 96 The following table sets forth our shipments (1) by geographic location: EMEA Germany UK Italy Switzerland France Middle East (2) Other EMEA (3) Total EMEA Americas (4) Mainland China, Hong Kong and Taiwan Rest of APAC (5) Total For the years ended December 31, 2021 % 2020 % 2019 % 1,252 11.2% 996 668 481 473 334 1,288 5,492 2,831 899 1,933 8.9% 6.0% 4.3% 4.2% 3.0% 11.6% 49.2% 25.4% 8.1% 17.3% 11,155 100.0% 995 971 574 456 463 304 1,055 4,818 2,325 456 1,520 9,119 10.9% 10.6% 6.3% 5.0% 5.1% 3.3% 11.6% 52.8% 25.5% 5.0% 16.7% 967 1,120 559 454 452 309 1,034 4,895 2,900 836 1,500 9.5% 11.1% 5.5% 4.5% 4.5% 3.1% 10.1% 48.3% 28.6% 8.3% 14.8% 100.0% 10,131 100.0% (1) Excluding the XX Programme, racing cars, one-off and pre-owned cars. (2) Middle East mainly includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait. (3) Other EMEA includes Africa and the other European markets not separately identified. (4) Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America. (5) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia, South Korea, Thailand, India and Malaysia. We target our products to the upper end of the luxury viable. Costs we incur for the development of our car segment and buyers of our cars tend to belong to cars and engines, as well as their related components the wealthiest segment of the population. As the size and systems, are recognized as an asset if, and only and spending capacity of our target client base has if, both of the following conditions under IAS 38 - grown significantly in recent years, our addressable Intangible Assets are met: (i) development costs can market and the sense of exclusivity fostered by our be measured reliably and (ii) the technical feasibility of low volume strategy have been further enhanced. the product, estimated volumes and expected pricing Given that our shipment strategy is flexible, we are all support the view that the development expenditure able to adjust the geographical allocation of our will generate future economic benefits. All other shipments to respond to changes in our key markets. research and development costs are expensed as The geographic allocation of our shipments and their incurred. Capitalized development costs include mix by product is generally impacted by the phase- all direct and indirect costs that may be directly in/phase-out pace of individual models, as well as attributed to the development process. the length of waiting lists and other market-specific factors and conditions, including the potential for The level of our capitalized development costs is future growth. We expect that further growth in primarily affected by the timing of updates and shipments will result primarily from our deliberate renewals to our product range and, more recently, targeting of new customer groups and modes of use by our decision to integrate newly-introduced through the expansion of our product range. powertrain technologies (including hybrid and electric) more broadly into our product portfolio. Research, Development and Product Lifecycle — We continually launch new cars with enhanced We engage in research and development activities technological innovations and design improvements. aimed at improving the design, performance, From 2019 to 2021 we launched 13 new models in advanced technology, safety, efficiency and reliability accordance with our plan to launch 15 new models of our cars. The first stage of product development by 2022 as announced at our 2018 Capital Markets is the research phase. In this phase, we research Day, with the objective of maintaining our product the specifications of new models that we believe portfolio’s leading position and to respond quickly to will appeal to our clients and will be commercially market demand and technological breakthroughs. 97 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / TRENDS, UNCERTAINTIES AND OPPORTUNITIES A clear example of this is the integration of hybrid the design, development and construction of a new engine technology in several recent models, including racing car are generally expensed as incurred and the 296 GTB, which we launched in 2021 and features classified as research and development costs in the Plug-in Hybrid Electric Vehicle (PHEV) technology and income statement, unless the technology is expected a new V6 engine, as well as the SF90 Stradale and to be used for more than one year and the costs the SF90 Spider, our first series production models meet the capitalization criteria in IAS 38. Research to feature PHEV technology, which were launched and development costs for Formula 1 activities in 2019 and 2020, respectively. Additionally, some of can vary from year to year and may be difficult to our past models, such as LaFerrari and the LaFerrari predict because they are subject to, among other Aperta, also included hybrid technology. Our range things, changes in racing regulations and the need to models typically have a lifecycle of four to five years, respond to our car’s performance relative to other while our special series, Icona and limited edition racing teams. Research and development costs are hypercars typically have shorter lifecycles. A portion recognized net of technology-related government of our research and development efforts are related incentives. to the development of the various components used in our models, and in particular, hybrid, electric, Under the recently effective Formula 1 financial electronic and mechanical components. The new regulations, a budget cap has been introduced to and advanced technological content integrated into limit the amount of certain types of costs (primarily our new models is in part driven by the output from relating to the development and manufacturing of the the research and development efforts for vehicle racing car chassis) that may be incurred by the teams components. Our continued focus on component participating in the Formula 1 World Championship to development has the objective of improving a maximum of $147 million for the recently completed performance and reducing the costs to develop new 2021 season and to a maximum of $142 million for the models. Capitalized development costs are amortized upcoming 2022 season, to be further reduced to $137 on a straight-line basis from the start of production million for the 2023 season (assuming 23 Grand Prix over the estimated lifecycle of the model or the useful races in both the 2022 and 2023 seasons). life of the related assets or components, which is generally between four and eight years. As a result of our strategy to update and broaden our product range and significantly increase our We also incur research and development costs in efforts relating to hybrid, electric and other advanced connection with Formula 1 racing activities, including technologies, our overall research and development initiatives to maximize the performance, efficiency expenditure increased during the period from 2019 and safety of our racing cars. While we develop to 2021. In particular, we made significant investments these technologies for initial use in our Formula 1 in product development in relation to both our current racing cars, we seek to transfer these technologies product portfolio and models to be launched in and components, where appropriate, to models in future years, as well components. Notwithstanding our current and future product range. Technological actions taken in 2020 to contain costs as a result developments and changes in the regulations of the of the COVID-19 pandemic, we continued to invest Formula 1 World Championship generally lead us to significantly in research and development projects design, develop and construct a new racing car to that are considered important for the continuing be used for one year only and the costs incurred for success of Ferrari and its future development. 98 FERRARI N.V.AR 2021The following table summarizes our research and development for the years ended December 31, 2021, 2020 and 2019: Capitalized development costs (1) Research and development costs expensed (A) Total research and development Amortization of capitalized development costs (B) R&D costs as recognized in the consolidated income statement (A+B) (1) Capitalized to development costs within intangible assets during the year. For the years ended December 31, 2021 2020 363 574 937 194 768 320 527 847 180 707 2019 330 559 889 140 699 Car Profitability — The relative profitability of the expect that our average price point will continue to cars we sell tends to vary depending on a number increase reflecting the superior technological content of factors, including exclusivity of the offering, of our new models. technological advancement and content of the car, engine size and performance, level of personalization Additionally, the interior and exterior technology and the geographic market in which it is sold. For and content of the cars we sell can be customized example, our Icona models, which include the Ferrari through our personalization offerings, which can Daytona SP3 presented in November 2021 and the be further enhanced through additional bespoke Ferrari Monza SP1 and SP2 (our first Icona models, specifications. Incremental revenues from whose shipments commenced in 2019), as well as our personalization are a particularly favorable factor limited edition hypercars (the latest of which was the of our pricing and product mix, due to the fact that LaFerrari Aperta which concluded shipments in 2018) we generate incremental margin on each additional have sales prices that are much higher than other option selected by our clients. models in the Ferrari product range in light of their exclusivity, as well as the advanced technology and Cost of Sales — Cost of sales comprises expenses design integrated in these models. In general, more incurred in the manufacturing and distribution of exclusive offerings generate higher net revenues cars and parts, including engines sold to Maserati and provide better margins than those generated on and engines rented to other Formula 1 racing teams. shipments of range models and special series cars, The cost of materials, components and labor are the and therefore they benefit our results in the periods most significant elements of our cost of sales, while in which they are sold. We plan to launch our Icona the remaining costs primarily include depreciation, models more frequently compared to our limited insurance and transportation costs. Cost of sales edition hypercars, and we expect this to reduce the also includes warranty and product liability-related volatility in financial performance that we have at costs, which are estimated and recorded at the time times experienced historically due to the cadence of our cars are shipped. Interest expenses and other our limited edition hypercars. financial charges that are directly attributable to our We seek to increase the average price point of risks and write-downs of financial assets, are also financial services activities, including provisions for our range and special series models over time by reported in cost of sales. continually improving performance, technology and other features, as well as by leveraging the exclusivity We purchase a variety of components (including of certain model offerings and the scarcity value mechanical, electrical, electronic, aluminum, steel and resulting from our low volume strategy. In particular, plastic components, as well as castings and tires), raw in recent years we have been increasing the price of materials (the most significant of which is aluminum) selected models in certain markets and introduced and supplies, and we incur costs for utilities, logistics new models with higher average selling prices and other services from numerous suppliers in the compared to the corresponding predecessor models. manufacture of our cars. Fluctuations in the cost Furthermore, as we continue to integrate advanced of sales are primarily related to the number of cars technologies more broadly into our car portfolio, we we produce and sell along with changes in car mix. 99 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / TRENDS, UNCERTAINTIES AND OPPORTUNITIES Newer models generally have more technologically Economic Conditions and Macro Events — advanced components and enhancements, including Significant inflationary pressures appeared in 2021 hybrid and electric technology, and therefore have in many of the markets in which we operate and higher costs per unit; however we aim to price our this trend has continued in early 2022. Although cars appropriately to recover these costs. Our Icona there were no material effects on our results of models, as well as our limited edition hypercars and operations in 2021 from the recent rise in inflation in one-off cars, also tend to have higher costs per unit, certain goods and services, management is carefully but these higher costs tend to be more than offset by monitoring the inflation outlook, as well as any higher sales prices. Cost of sales are also affected by changes to interest rates, to appropriately address fluctuations of certain raw material prices, although the potential impacts on our operating costs and we typically seek to manage these costs and minimize financial expenses, as well as our new order intake. their volatility through the use of long-term fixed price purchase contracts. Additionally, as a result of the current geopolitical tensions and conflict between Russia and Ukraine, In recent years we have made efforts to achieve and the recent recognition by Russia of the technical and commercial efficiencies. In particular, independence of the self-proclaimed republics technical efficiencies focus on efforts to produce of Donetsk and Luhansk, in the Donbas region of components using innovative and cost-effective Ukraine, the governments of the United States, the materials, without compromising the quality or European Union, Japan and other jurisdictions have performance of the components. In order to achieve recently announced the imposition of sanctions on these technical efficiencies, we perform in-house certain industry sectors and parties in Russia and the research and development activities and we invite regions of Donetsk and Luhansk, as well as enhanced our suppliers to present us with innovative technical export controls on certain products and industries. solutions that they have developed. Commercial Despite the fact that Ferrari has very limited efficiencies have been achieved through negotiating commercial interests in Russia, Ukraine and the areas discounts and entering into long-term contracts with of conflict, these and any additional sanctions and suppliers, who commit upfront to pass on to us a export controls, as well as any counterresponses portion of the efficiencies they achieve in performing by the governments of Russia or other jurisdictions, our supply contracts. Furthermore, efforts are could adversely affect, directly or indirectly, our made to award new business to existing suppliers, supply chain, with negative implications on availability where appropriate, in order to negotiate favorable and prices of raw materials, and our customers, pricing. As cost of sales also includes depreciation as well as the global financial markets and financial of plant and equipment, cost of sales is affected by services industry. the number and timing of product launches, which trigger the commencement of depreciation of Effects of Foreign Currency Exchange Rates — plant and equipment acquired specifically for the We are affected by fluctuations in foreign currency production of certain car models. exchange rates through (i) the translation into Euro upon consolidation of foreign currency financial As further described in the “Results of Operations” statements of our subsidiaries with functional section below, due to the effects of the temporary currencies other than Euro, which we refer to as the suspension of production and shipments, as well translation impact, and (ii) transactions by entities as the changes to the calendar and format of the of the Group in currencies other than their own 2020 Formula 1 World Championship, which were functional currencies, which we refer to as the caused by the COVID-19 pandemic, costs as a transaction impact. percentage of net revenues were higher in 2020 compared to other years. Furthermore, a portion of Translation impacts arise in the preparation of the our costs are fixed in nature and we decided to pay all consolidated financial statements; in particular, we employees throughout the whole suspension period present our consolidated financial statements in and not accede to any government aid programs, Euro, while the functional currency of each of our therefore management actions to reduce costs only subsidiaries depends on the primary economic partially compensated the decrease in net revenues environment of that entity. In preparing the experienced in 2020 as a result of the pandemic. consolidated financial statements, we translate into Euro the assets and liabilities of foreign subsidiaries expressed in local functional currency other than Euro using the foreign currency exchange rates 100 FERRARI N.V.AR 2021 prevailing at the balance sheet date, while we Patent Box Benefit — Income taxes for the years translate income and expenses using the average ended December 31, 2021, 2020 and 2019 benefited foreign currency exchange rates for the period from the application of the Patent Box tax regime, presented. Accordingly, fluctuations in the foreign which provides tax benefits for companies that currency exchange rates of the functional currencies generate income through the use of intangible assets. of our subsidiaries against the Euro impacts our Starting in 2020 the Group has applied the Patent results of operations. Box tax regime for the period from 2020 to 2024 and determined the income eligible for the Patent Box Transaction impacts arise when our Group entities regime with recognition of the Patent Box tax benefit conduct transactions in currencies other than their in three equal annual installments. own functional currency. Therefore, we are also exposed to foreign currency risks in connection Italian legislation recently enacted in 2021 will replace with scheduled receipts and payments in multiple the current Patent Box tax regime with a 110% currencies. Our costs are primarily denominated “super tax deduction” for certain costs related to in Euro, while the majority of our revenues are eligible intangible assets and provides for a specific generated in currencies other than the Euro, transitional procedure between the two regimes. The including in U.S. Dollars, Pound Sterling, Japanese new legislation should not have any impact on income Yen, Chinese Yuan, Swiss Franc and, to a lesser taxes of the Group for the year ended December 31, extent, certain other currencies. 2021 and management will continue to follow updates In general, an appreciation of the U.S. Dollar, and the other currencies in which we operate, against the For additional information see Note 10 “Income taxes” Euro would positively impact our net revenues and to the Consolidated Financial Statements included results of operations. elsewhere in this document. in the legislation as they become known. Our risk management policies contemplate the use Trademark Step-up — In the fourth quarter of 2020, of derivative financial instruments to hedge foreign the Group benefited from the measures introduced currency exchange rate risk. In particular, we have in Italy by the art. 110 of the Law Decree n. 104/2020, used derivative financial instruments as cash flow converted in the Law n.126/2020, enacting “Urgent hedges for the purpose of hedging the foreign measures to support and relaunch the economy” currency exchange rate at which a predetermined which reopened the voluntary step up of tangible and proportion of forecasted transactions denominated intangible assets, with the application of a substitutive in foreign currencies will occur. Accordingly, our tax rate (3%). In particular, Ferrari S.p.A. benefited results of operations have not been fully exposed from the one-off partial step-up of its trademark to fluctuations in foreign currency exchange rates. for tax purposes, which resulted in the recognition See Note 30 “Qualitative and Quantitative Information in 2020 of deferred tax assets for €84 million and on Financial Risks” to the Consolidated Financial a substitute tax liability for €9 million, resulting in Statements included elsewhere in this document for a net tax benefit of €75 million. There was no cash additional information related to our foreign currency effect in 2020 from the step-up of the trademark. exchange rate risk policies. The deferred tax asset will be utilized over a 50-year Regulation — We ship our cars throughout the world following the approval of Law 234/2021; see also and are therefore subject to a variety of laws and Note 10 “Income taxes” to the Consolidated Financial regulations, including tariffs. These laws regulate our Statements included elsewhere in this document) and cars, including their emissions, fuel consumption and the substitute tax will be paid in three equal annual period (recently extended from the previous 18 years safety, as well as our manufacturing facilities. As we installments starting in 2021. are currently a small volume manufacturer in certain jurisdictions, we benefit from certain regulatory Management considers this item significant in nature exemptions, including less stringent emissions caps. but non-recurring and not reflective of ongoing Developing, engineering and producing cars which operational activities, therefore the positive impact meet continuously evolving regulatory requirements, of €75 million has been excluded in the calculation of and can therefore be sold in the relevant markets, Adjusted Net Profit and Adjusted Basic and Diluted requires a significant effort and expenditure of Earnings per Common Share for 2020. resources. See “Overview of Our Business—Regulatory Matters” for additional information. 101 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / TRENDS, UNCERTAINTIES AND OPPORTUNITIES Asset-backed Financing (Securitizations) — Maserati Engine Volumes — We have been producing We pursue a strategy of autonomous financing for engines for Maserati since 2003. The V8 engines that our financial services activities in the United States, we historically produced and continue to produce for which involves limiting or reducing dependency on Maserati are variants of Ferrari families of engines intercompany funding and increasing the portion and are mounted on Maserati’s highest performing of self-liquidating debt with various securitization models. We also produce a V6 family of engines transactions. At December 31, 2021 and 2020 our exclusively for Maserati. We currently have a multi- funding under securitization programs amounted to year arrangement with Maserati to provide V6 €900 million and €761 million, respectively. engines up to 2023. Net revenues generated from For additional information see Note 24 “Debt” to received from Maserati, which in turn depend on the Consolidated Financial Statements included Maserati production volumes and product launches. elsewhere in this document. Our net revenues from engines increased in 2021 sales of engines to Maserati depend on the orders compared to 2020 as a result of higher orders received from Maserati, although they remain below 2019 levels. 102 FERRARI N.V.AR 2021 103 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS 2021 COMPARED TO 2020 AND 2020 COMPARED TO 2019 The following is a discussion of the results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, and for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The presentation includes line items as a percentage of net revenues for the respective periods presented to facilitate year-over-year comparisons. For the year ended December 31, 2020 our costs as a percentage of net revenues and our EBIT and EBIT margin were negatively impacted by the COVID-19 pandemic, which caused a seven-week production and delivery suspension in the first half of 2020 (during which we decided to pay all employees throughout the whole suspension period and not accede to any government aid programs) as well as changes to the format of the 2020 Formula 1 World Championship. (€ million, except percentages) Net revenues Cost of sales Selling, general and administrative costs Research and development costs Other expenses, net Result from investments EBIT Net financial expenses Profit before taxes Income tax expense Net profit For the years ended December 31, 2021 Percentage 2020 Percentage 2019 Percentage of net revenues 100.0% 48.7% 8.1% 18.0% 0.2% 0.2% 25.2% 0.8% 24.4% 4.9% 19.5% 4,271 2,081 348 768 6 7 1,075 33 1,042 209 833 of net revenues 100.0% 48.7% 9.7% 20.4% 0.6% 0.1% 20.7% 1.4% 19.3% 1.7% 17.6% 3,460 1,686 336 707 19 4 716 49 667 58 609 of net revenues 100.0% 47.9% 9.1% 18.6% 0.1% 0.1% 24.4% 1.2% 23.2% 4.6% 18.6% 3,766 1,805 343 699 5 3 917 42 875 176 699 AR 2021 104 NET REVENUES The following table sets forth an analysis of our net revenues for each of the years ended December 31, 2021, 2020 and 2019: (€ million, except percentages) For the years ended December 31, Increase/(Decrease) 2021 Percentage 2020 Percentage 2019 Percentage 2021 vs. 2020 2020 vs. 2019 of net revenues of net revenues of net revenues Cars and spare parts (1) 3,573 83.7% 2,835 81.9% 2,926 77.7% 738 26.0% (91) (3.1)% Engines (2) Sponsorship, commercial and brand (3) Other (4) 189 431 78 4.4% 151 4.4% 198 5.3% 38 25.7% (47) (24.0)% 10.1% 390 11.3% 538 14.3% 41 10.4% (148) (27.5)% 1.8% 84 2.4% 104 2.7% (6) (7.4)% (20) (19.5)% Total net revenues 4,271 100.0% 3,460 100.0% 3,766 100.0% 811 23.4% (306) (8.1)% (1) Includes net revenues generated from shipments of our cars, any personalization generated on these cars, as well as sales of spare parts. (2) (3) Includes net revenues generated from the sale of engines to Maserati for use in their cars and from the rental of engines to other Formula 1 racing teams. Includes net revenues earned by our Formula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues, as well as net revenues generated through the Ferrari brand, including merchandising, licensing and royalty income. (4) Primarily relates to financial services activities, management of the Mugello racetrack and other sports-related activities. 2021 COMPARED TO 2020 In particular, the increase in shipments was driven by Net revenues for 2021 were €4,271 million, an the F8 family, together with the Ferrari Roma and the increase of €811 million, or 23.4 percent (an increase SF90 Stradale, which both reached global distribution of 26.0 percent on a constant currency basis), from in the second quarter of 2021, as well as the ramp €3,460 million for 2020. up of the Ferrari Portofino M and the SF90 Spider, partially offset by the Ferrari Portofino, the 488 Pista The increase in net revenues was attributable to the family and the 812 Superfast. Additionally, deliveries combination of (i) a €738 million increase in cars and of the Ferrari Monza SP1 and SP2 increased in 2021 spare parts, (ii) a €38 million increase in engines, and compared 2020, in line with planning, and the models (iii) a €41 million increase in sponsorship, commercial are reaching the end of production. The positive mix and brand, partially offset by a €6 million decrease in impact was driven by the SF90 family and the Ferrari other revenues. Monza SP1 and SP2, as well as higher revenues from personalizations. CARS AND SPARE PARTS Net revenues generated from cars and spare parts All geographic regions positively contributed in the were €3,573 million for 2021, an increase of €738 year, with increases in revenues of: (i) €251 million in million, or 26.0 percent, from €2,835 million for 2020. EMEA, (ii) €217 million in Americas, (iii) €137 million in Mainland China, Hong Kong and Taiwan, and (iv) €133 The increase in net revenues from cars and spare million in Rest of APAC. The performance in Mainland parts was primarily attributable to higher car China, Hong Kong and Taiwan was boosted by the volumes, positive mix and personalizations, partially launch of new models and the comparison versus offset by negative foreign currency exchange impact the prior year, which was negatively impacted by the (mainly relating to the U.S. Dollar and the Japanese decision to deliberately accelerate client deliveries Yen). Shipments in 2020 were impacted by the seven- in 2019 in advance of new emissions regulations. week production and delivery suspension in the first All changes include the effects of foreign currency half of the year caused by the COVID-19 pandemic. hedge transactions. Overall, shipments increased by 2,036 cars, or 22.3 percent, driven by a 34.6 percent increase in shipments of our V8 models while shipments of our V12 models decreased by 16.1 percent, mainly due to the 812 Superfast, which was phased out during 2021. 105 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / CONSOLIDATED RESULTS OF OPERATIONS – 2021 COMPARED TO 2020 AND 2020 COMPARED TO 2019 ENGINES percent while our V12 models decreased by 9.0. The Net revenues generated from engines were €189 decrease in shipments also reflects the phase-out of million for 2021, an increase of €38 million, or 25.7 the Ferrari Portofino as well as the Ferrari 488 Pista percent, from €151 million for 2020. The increase was and Ferrari 488 Pista Spider gradually approaching mainly attributable to an increase in engines sold to the end of their lifecycles, partially offset by the ramp Maserati and, to a lesser extent, higher revenues from up of the Ferrari F8 Tributo, the Ferrari F8 Spider, and the rental of engines to other Formula 1 racing teams. the 812 GTS which reached global distribution, as SPONSORSHIP, COMMERCIAL AND BRAND delivered as originally scheduled in 2020. Net revenues generated from sponsorship, Formula The deliveries of the SF90 Stradale started in the 1 commercial agreements and brand management fourth quarter of 2020 following the industrialization activities were €431 million for 2021, an increase delays experienced and subsequently resolved. of €41 million, or 10.4 percent, from €390 million Deliveries of the Ferrari Roma also commenced well as the Ferrari Monza SP1 and SP2, which were for 2020. The increase was primarily attributable in the fourth quarter. to Formula 1 racing activities, driven by the more favorable Formula 1 calendar compared to 2020, and The €91 million decrease in net revenues was brand-related activities, partially offset by a lower composed of (i) a €170 million increase in EMEA, (ii) a prior year Formula 1 ranking. €143 million decrease in Americas (including positive OTHER foreign currency translation impact driven by the strengthening of the U.S. Dollar compared to the Other net revenues were €78 million for 2021, a Euro), (iii) a €146 million decrease in Mainland China, decrease of €6 million, or 7.4 percent, from €84 Hong Kong and Taiwan, and (iv) a €28 million increase million for 2020. in the Rest of APAC. Net revenues by geography were impacted by the deliberate geographic allocations 2020 COMPARED TO 2019 driven by the phase-in/phase-out pace of individual Net revenues for 2020 were €3,460 million, a models, which primarily favored EMEA in 2020. The decrease of €306 million, or 8.1 percent (a decrease decrease in Mainland China, Hong Kong and Taiwan of 8.9 percent on a constant currency basis), from was primarily impacted by the decision to accelerate €3,766 million for 2019. client deliveries in the first half of 2019, in addition to the effects of COVID-19 in 2020. The change in net revenues was attributable to the combination of (i) a €91 million decrease in cars and ENGINES spare parts, (ii) a €47 million decrease in engines, (iii) Net revenues generated from engines were €151 a €148 million decrease in sponsorship, commercial million for 2020, a decrease of €47 million, or 24.0 and brand, and (iv) a €20 million decrease in other percent, from €198 million for 2019. The decrease revenues. was attributable to lower shipments of engines to Maserati and lower revenues from the rental of CARS AND SPARE PARTS engines to other Formula 1 racing teams driven by the Net revenues generated from cars and spare parts reduced number of races in 2020 as a result of the were €2,835 million for 2020, a decrease of €91 COVID-19 pandemic. million, or 3.1 percent, from €2,926 million for 2019. The decrease in net revenues was primarily SPONSORSHIP, COMMERCIAL AND BRAND attributable to lower volumes as well as their Net revenues generated from sponsorship, Formula personalizations, mainly due to the seven-week 1 commercial agreements and brand management production suspension in the first half of 2020 and activities were €390 million for 2020, a decrease of the temporary closure of certain dealerships caused €148 million, or 27.5 percent, from €538 million for by the COVID-19 pandemic, partially offset by positive 2019. The decrease was primarily attributable to mix driven by deliveries of the Ferrari Monza SP1 impacts of the COVID-19 pandemic, which resulted in and SP2. a reduced number of Formula 1 races in 2020 and a decrease in-store traffic and museum visitors. Overall, shipments decreased by 1,012 cars, or 10.0 percent, compared to the prior year, driven by the COVID-19 pandemic, with a gradual recovery of production and shipments in the second half of 2020. Shipments of our V8 models decreased by 10.3 106 FERRARI N.V.AR 2021 OTHER Other net revenues were €84 million for 2020 a decrease of €20 million, or 19.5 percent, from €104 million for 2019. The decrease was primarily attributable to reduced sports-related activities and the cancellation of the Moto GP event at the Mugello racetrack, the effects of which were only partially offset by the first ever Formula 1 Grand Prix held at the Mugello racetrack. COST OF SALES (€ million, except percentages) For the years ended December 31, Increase/(Decrease) Percentage Percentage Percentage 2021 of net 2020 of net 2019 of net 2021 vs. 2020 2020 vs. 2019 revenues revenues revenues Cost of sales 2,081 48.7% 1,686 48.7% 1,805 47.9% 395 23.4% (119) (6.6)% 2021 COMPARED TO 2020 2020 COMPARED TO 2019 Cost of sales for 2021 was €2,081 million, an increase Cost of sales for 2020 was €1,686 million, a decrease of €395 million, or 23.4 percent, from €1,686 million of €119 million, or 6.6 percent, from €1,805 million for for 2020. As a percentage of net revenues, cost of 2019. As a percentage of net revenues, cost of sales sales was 48.7 percent for both 2021 and 2020. increased from 47.9 percent in 2019 to 48.7 percent The increase in cost of sales was primarily in 2020. attributable to higher car volumes and a change The decrease in cost of sales was primarily in product mix, as well as higher Maserati engine attributable to a decrease in car volumes due to volumes and costs for other supporting activities. COVID-19 pandemic and lower engine volumes produced for Maserati, partially offset by higher depreciation. Cost of sales in 2020 includes the full cost of employees’ paid days of absence during the COVID-19-related production suspension. SELLING, GENERAL AND ADMINISTRATIVE COSTS (€ million, except percentages) For the years ended December 31, Increase/(Decrease) Percentage Percentage Percentage 2021 of net 2020 of net 2019 of net 2021 vs. 2020 2020 vs. 2019 revenues revenues revenues Selling, general and administrative costs 348 8.1% 336 9.7% 343 9.1% 12 3.5% (7) (2.1)% 2021 COMPARED TO 2020 2020 COMPARED TO 2019 Selling, general and administrative costs were €348 Selling, general and administrative costs for 2020 million for 2021, an increase of €12 million, or 3.5 were €336 million, a decrease of €7 million, or 2.1 percent, from €336 million for 2020. As a percentage percent, from €343 million for 2019. As a percentage of net revenues, selling, general and administrative of net revenues, selling, general and administrative costs were 8.1 percent in 2021 compared to 9.7 costs were 9.7 in 2020 compared to 9.1 percent percent in 2020. in 2019. The increase was mainly attributable to The decrease in selling, general and administrative communication and marketing activities related to costs was primarily attributable to the deployment of models unveiled in 2021, as well as lifestyle events and significant cost containment actions, partially offset costs to support the organic growth of the business. by Formula 1 racing activities. 107 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / CONSOLIDATED RESULTS OF OPERATIONS – 2021 COMPARED TO 2020 AND 2020 COMPARED TO 2019 RESEARCH AND DEVELOPMENT COSTS (€ million, except percentages) For the years ended December 31, Increase/(Decrease) Percentage Percentage Percentage 2021 of net 2020 of net 2019 of net 2021 vs. 2020 2020 vs. 2019 revenues revenues revenues 574 13.4% 527 15.2% 559 14.9% 47 8.9% (32) (5.9)% Research and development costs expensed during the year Amortization of capitalized development 194 4.6% 180 5.2% 140 3.7% 14 7.7% 40 29.3% costs Research and development costs 768 18.0% 707 20.4% 699 18.6% 61 8.6% 8 1.2% 2021 COMPARED TO 2020 from €699 million for 2019. As a percentage of net Research and development costs for 2021 were €768 revenues, research and development costs were 20.4 million, an increase of €61 million, or 8.6 percent, percent in 2020 compared to 18.6 percent in 2019. from €707 million for 2020. As a percentage of net revenues, research and development costs were 18.0 The increase of €8 million in research and percent in 2021 compared to 20.4 percent in 2020. development costs during the period was primarily attributable to an increase in amortization of The increase in research and development costs was capitalized development costs of €40 million driven by primarily attributable to an increase in research and a general increase in capitalized development costs development costs expensed of €47 million driven in recent years in line with our strategy to update and by product innovation and Formula 1 activities, and broaden our product range and significantly increase comparison was impacted by higher technology our efforts relating to hybrid and other advanced incentives in the prior year, as well as an increase technologies, partially offset by lower research and in amortization of capitalized development costs of development costs expensed during the period of €14 million driven by a general increase in capitalized €32 million, including as a result of technology-related development costs in recent years in line with our government incentives recognized in 2020. strategy to update and broaden our product range and significantly increase our efforts in relation to We continued to invest in research and development hybrid and other advanced technologies. projects important for the continuing success of 2020 COMPARED TO 2019 actions taken in 2020 to contain costs as a result of Ferrari and its future development, despite certain Research and development costs for 2020 were the COVID-19 pandemic. €707 million, an increase of €8 million, or 1.2 percent, OTHER EXPENSES/(INCOME), NET (€ million, except percentages) Other expenses/(income), net For the years ended December 31, Increase/(Decrease) 2021 6 2020 19 2019 2021 vs. 2020 2020 vs. 2019 5 (13) (69.9)% 14 270.2% Generally, other expenses/(income), net consist of other expenses that primarily include indirect taxes, provisions and other miscellaneous expenses, as well as other income that primarily includes rental income, gains on the disposal of property, plant and equipment and other miscellaneous income, including the release of previously recognized provisions. Other expenses/(income), net in 2021 is composed of other expenses of €14 million, partially offset by €8 million of 108 FERRARI N.V.AR 2021other income. Other expenses/(income), net in 2020 is Other expenses/(income), net in 2019 is composed of composed of other expenses of €25 million, partially other expenses of €14 million, partially offset by €9 offset by €6 million of other income. million of other income. Other expenses, net in 2021 and 2019 include releases of provisions relating to legal disputes following developments favorable to Ferrari. EBIT (€ million, except percentages) For the years ended December 31, Increase/(Decrease) Percentage Percentage Percentage 2021 of net 2020 of net 2019 of net 2021 vs. 2020 2020 vs. 2019 revenues revenues revenues EBIT 1,075 25.2% 716 20.7% 917 24.4% 359 50.2% (201) (21.9)% 2021 COMPARED TO 2020 2020 COMPARED TO 2019 EBIT for 2021 was €1,075 million, an increase of €359 EBIT for 2020 was €716 million, a decrease of €201 million, or 50.2 percent, from €716 million for 2020. As a million, or 21.9 percent, from €917 million for 2019. As a percentage of net revenues, EBIT increased from 20.7 percentage of net revenues, EBIT decreased from 24.4 percent in 2020 to 25.2 percent in 2021. percent in 2019 to 20.7 percent in 2020. The increase in EBIT was primarily attributable to The decrease in EBIT was attributable to the combined the combined effects of (i) positive volume impact of effects of (i) negative volume impact of €126 million, €220 million, (ii) positive product mix impact of €212 (ii) positive product mix and price impact of €130 million, (iii) an increase in research and development million, (iii) an increase in industrial costs of €58 costs of €61 million, (iv) an increase in selling, general million, including higher depreciation, (iv) an increase and administrative costs of €12 million, (v) positive in research and development costs of €8 million (net contribution of €77 million driven by Formula 1 racing of the benefit from technology-related government activities reflecting the more favorable Formula incentives), (v) a decrease in selling, general and 1 calendar compared to 2020 as well as higher administrative costs of €7 million, (vi) negative contribution from brand-related activities, Maserati contribution of €184 million due to the impacts of engines and other supporting activities, partially COVID-19 on the Formula 1 racing calendar, lower offset by a lower prior year Formula 1 ranking, and traffic for brand related activities and lower engine (vi) negative foreign currency exchange impact of sales to Maserati, and (vii) positive foreign currency €77 million (including foreign currency hedging exchange impact of €38 million (including foreign instruments) primarily driven by the strengthening currency hedging instruments) primarily driven by of the Euro compared to the U.S. Dollar and the the strengthening of the U.S. Dollar and Japanese Yen Japanese Yen. compared to the Euro. The positive mix impact was driven by the SF90 family, The negative volume impact was primarily attributable the Ferrari Monza SP1 and SP2, and personalizations, to the temporary suspension of shipments for seven partially offset by the ramp up of the Ferrari Roma and weeks during the first half of 2020 as a result of the Portofino M and reduced contribution of the 812 the COVID-19 pandemic, the effects of which were Superfast, which was phased out during 2021. partially recovered in the second half of the year. The positive product mix and price impact was primarily attributable to deliveries of the Ferrari Monza SP1 and SP2 as well as an otherwise richer product mix, partially offset by fewer shipments of the FXX-K EVO and lower contributions from our personalization programs, which are correlated to the decrease in volumes. 109 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ CONSOLIDATED RESULTS OF OPERATIONS – 2021 COMPARED TO 2020 AND 2020 COMPARED TO 2019 NET FINANCIAL EXPENSES (€ million, except percentages) Net financial expenses For the years ended December 31, Increase/(Decrease) 2021 33 2020 49 2019 2021 vs. 2020 2020 vs. 2019 42 (16) (32.3)% 7 16.7% 2021 COMPARED TO 2020 2020 COMPARED TO 2019 Net financial expenses for 2021 decreased to €33 Net financial expenses for 2020 increased to €49 million compared to €49 million for 2020. million compared to €42 million for 2019. The decrease in net financial expenses was primarily The increase in net financial expenses was primarily attributable to a decrease in net foreign exchange attributable to (i) a decrease in the fair value of losses, including hedging costs. investments held by the Group (compared to an increase in the fair value of investments held by the Group 2019), and (ii) an increase in net foreign exchange losses, including the net costs of hedging. INCOME TAX EXPENSE (€ million, except percentages) Income tax expense For the years ended December 31, Increase/(Decrease) 2021 209 2020 58 2019 2021 vs. 2020 2020 vs. 2019 176 151 n.m. (118) (67.1)% 2021 COMPARED TO 2020 In the fourth quarter of 2020, the Group benefited Income tax expense for 2021 was €209 million, an from the measures introduced in Italy by the art. 110 increase of €151 million, compared to €58 million of the Law Decree n. 104/2020, converted in the Law for 2020. Income taxes for both years benefited n.126/2020, enacting “Urgent measures to support from the application of the Patent Box regime. See and relaunch the economy” which reopened the Note 10 “Income Taxes” to the Consolidated Financial voluntary step up of tangible and intangible assets, Statements included elsewhere in this document for with the application of a substitutive tax rate (3%). In additional information related to the Patent Box tax particular, Ferrari S.p.A. benefited from the one-off regime in Italy. partial step-up of its trademark for tax purposes, which resulted in the recognition in 2020 of deferred The increase in income tax expense was primarily tax assets for €84 million and a substitute tax liability attributable to the combined effects of (i) an for €9 million, resulting in a net tax benefit of €75 increase in profit before taxes and (ii) a net tax million. There was no cash effect in 2020 from the benefit recognized in 2020 from the partial step up step-up of the trademark. The deferred tax asset of trademarks for tax purposes amounting to €75 will be utilized over a 50-year period (following the million, as further described below. introduction of the 2022 Italian budget law (Law 234/2021) which provides for an extension from The effective tax rate was 20.1 percent in 2021 18 years to 50 years of the amortization period for compared to 8.7 percent in 2020. The increase in the tax purposes for any trademarks and goodwill that effective tax rate was primarily attributable to the benefited from the step-up regime) and the substitute effects of a net tax benefit recognized in 2020 from tax will be paid in three equal annual installments the voluntary, partial step-up of trademarks for tax starting in 2021. The net benefit has been treated as purposes, as further described below. an adjusting item in the calculation of Adjusted Net Profit and Adjusted Basic and Diluted Earnings per Common Share for 2020. 110 FERRARI N.V.AR 2021 2020 COMPARED TO 2019 Income tax expense for 2020 was €58 million, a decrease of €118 million, or 67.1 percent compared to €176 million for 2019. The decrease in income tax expense was primarily attributable to the combined effects of (i) a tax benefit from the partial step up of trademarks for tax purposes amounting to €75 million, as further described above, (ii) a decrease in profit before taxes, and (iii) the effects of deductions for eligible research and development costs. Income taxes for both years benefited from the application of the Patent Box regime. The effective tax rate was 8.7 percent in 2020 compared to 20.2 percent in 2019. The decrease in the effective tax rate was primarily attributable to the effects of the net tax benefit recognized in 2020 from the trademark step-up as described above, and to a lesser extent, the effects of deductions for eligible research and development costs. RECENT DEVELOPMENTS See “Subsequent Events and 2022 Outlook”. 111 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS FERRARI N.V. LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY OVERVIEW edition models. We maintain sufficient inventory of raw materials and components to ensure continuity of our production lines, however delivery of most raw materials and components takes place monthly We require liquidity in order to fund our operations or more frequently in order to minimize inventories. and meet our obligations. Short-term liquidity is The manufacture of one of our cars typically takes required, among others, to purchase raw materials, between 30 and 45 days, depending on the level parts, components and utilities for car production, of automation of the relevant production line, and as well as to fund personnel expenses and other the car is generally shipped to our dealers three operating costs. In addition to our general working to six days following the completion of production, capital and operational needs, we require cash although we may warehouse cars in local markets for for capital investments to support continuous longer periods of time to ensure prompt deliveries in product range renewal and expansion and, more certain regions. As a result of the above, including the recently, for research and development activities to advances received from customers for certain car transition our product portfolio to hybrid and electric models, we tend to receive payment for cars shipped technology. We also make investments to, among before or around the time we are required to make others, enhance manufacturing efficiency, improve payments for the raw materials, components or other capacity, implement sustainability initiatives, ensure materials used in manufacturing the cars. environmental compliance and carry out maintenance activities. We fund our capital expenditure primarily Our investments for capital expenditure and with cash generated from our operating activities. research and development are, among other factors, influenced by the timing and number of new models We centrally manage our operating cash management, launches. Our development costs, as well as our other liquidity and cash flow requirements with the objective investments in capital expenditure, generally peak of ensuring efficient and effective management of our in periods when we develop a significant number of funds. We believe that our cash generation together new models to renew or expand our product range. with our available liquidity, including committed credit Our investments in research and development are lines granted from primary financial institutions, will be also influenced by the timing of research costs for sufficient to meet our obligations and fund our business our Formula 1 activities, for which expenditure in and capital expenditures. a normal season is generally higher in the first and last quarters of the year, and otherwise depends on See the “Net Debt and Net Industrial Debt” section the evolution of the applicable Formula 1 technical below for additional details relating to our liquidity. regulations, as well as the number and cadence of races during the course of the racing season. We are CYCLICAL NATURE OF OUR CASH FLOWS currently undergoing a period of structurally higher Our working capital is subject to month to month capital spending as we broaden our car architectures fluctuations due to, among other things, production and work on the transition to hybrid and electric and sales volumes, our financial services activities, technologies. We also continue to make significant the timing of capital expenditures and, to a lesser capital investments by prioritizing capital projects that extent, tax payments. In particular, our inventory are considered important for the continuing success levels generally increase in the periods leading up to of Ferrari and its future development, including the the launch of new models, during the phase out of acquisition in 2020 and, to a lesser extent, in 2021, of existing models when we build up spare parts, and tracts of land adjacent to our facilities in Maranello as at the end of the second quarter when our inventory part of our expansion plans. levels are generally higher to support the summer plant shutdown. The payment of income taxes also affects our cash flows. We typically pay the first tax advance payment We generally receive payment for cars between 30 in the second quarter of the year and the remaining and 40 days after the car is shipped (or earlier when portion in the third and/or fourth quarters. Our tax sales financing schemes are utilized by us or by expense and tax payments in 2021, 2020 and 2019 our dealers) while we generally pay most suppliers benefited from applying the Patent Box tax regime. between 60 and 90 days after we receive the raw See Note 10 “Income Taxes” to the Consolidated materials, components or other goods and services. Financial Statements included elsewhere in this Additionally, we also receive advance payments document for additional information related to the from our customers, mainly for our Icona and limited Patent Box tax regime in Italy. AR 2021 112 CASH FLOWS The following table summarizes the cash flows from/(used in) operating, investing and financing activities for each of the years ended December 31, 2021, 2020 and 2019. For additional details of our cash flows, see our Consolidated Financial Statements included elsewhere in this document. (€ million) Cash and cash equivalents at beginning of the year Cash flows from operating activities Cash flows used in investing activities Cash flows (used in)/from financing activities Translation exchange differences Total change in cash and cash equivalents For the years ended December 31, 2021 1,362 1,283 (733) (580) 12 (18) 2020 898 838 (708) 340 (6) 464 Cash and cash equivalents at end of the year 1,344 1,362 2019 794 1,306 (701) (502) 1 104 898 2021 COMPARED TO 2020 (iv) lower dividends paid to owners of the parent of For the year ended December 31, 2021 cash and 48 million (€160 million paid in 2021 compared to cash equivalents held by the Group decreased by 208 million paid in 2020, primarily driven by the €18 million compared to an increase of €464 million effects of the COVID-19 pandemic). for year ended December 31, 2020. The difference in the net change in cash and cash equivalents in 2020 COMPARED TO 2019 2021 compared to 2020 of €482 million was primarily For the year ended December 31, 2020 the total attributable to the combined effects of: change in cash and cash equivalents was €464 million (i) the full repayment of a bond for €501 million in compared to €104 million for year ended December January 2021 (including a principal amount of 31, 2019. The increase in cash generation of €360 €500 million and interest of €1 million); million in 2020 compared to 2019 was primarily (ii) lower cash proceeds from the issuance of bonds attributable to: and notes of €491 million (net proceeds of €149 (i) net cash proceeds of €640 million received in million in 2021 from the issuance of the 2032 2020 from the issuance of the 2025 Bond; and Notes (as defined below) compared to €640 (ii) lower share repurchases of €257 million (€130 million in 2020 from the issuance of the 2025 million in 2020 compared to €387 million in 2019) Bond (as defined below); driven by our decision to temporarily suspend (iii) higher share repurchases of €101 million (€231 the share repurchase program in March 2020 million in 2021 compared to €130 million in 2020 to preserve liquidity as a result of the COVID-19 as the share repurchase program was restarted pandemic; on March 11, 2021 following the decision to temporarily suspend the program on March partially offset by: 30, 2020 to preserve liquidity as a result of the (i) a decrease in advances received for the Ferrari COVID-19 pandemic); and Monza SP1 and SP2 (which were primarily (iv) higher investments in intangible assets of €33 received in 2019 ahead of shipments, including million to support the development of our current for cars actually delivered in 2020); and future product offering; (ii) the adverse impacts on our cash flows from partially offset by: operating activities as a result of the COVID-19 pandemic, including the temporary suspension of (i) an increase in EBITDA of €388 million; production and deliveries for seven weeks during (ii) an increase of €123 million in net proceeds from the first half of 2020, as well as higher inventories bank borrowings and other financial institutions; reflecting efforts to mitigate potential supply (iii) a positive impact of €62 million from working chain issues; capital and other operating assets and liabilities, (iii) an increase in income taxes paid, and and (iv) lower net proceeds from our securitization programs. 113 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ LIQUIDITY AND CAPITAL RESOURCES Please refer to the following discussion and to the expense recognized in relation to the Group’s Consolidated Statement of Cash Flows included equity incentive plans); elsewhere in this document for additional information related to our cash flows. partially offset by: A summary of the cash flows from or used in change in inventories, trade receivables and operating, investing and financing activities for each trade payables. In particular, the movement was (i) €15 million of cash absorbed from the net year is provided below. attributable to: (a) cash absorbed by inventories of €68 million driven by higher finished goods OPERATING ACTIVITIES — YEAR ENDED and raw materials, including the effects of efforts DECEMBER 31, 2021 to protect the supply chain from potential COVID- For the year ended December 31, 2021, our cash 19-related disruptions, partially offset by (b) cash flows from operating activities were €1,283 million, generated from trade receivables of €44 million primarily the result of: and (c) cash generated from trade payables of €9 (i) profit before tax of €1,042 million, adjusted for million; €456 million for depreciation and amortization (ii) €137 million of cash absorbed related to the net expense, €33 million of net finance costs and net change in other operating assets and liabilities, other non-cash expenses and income of €48 primarily attributable to reversals of advances million (including provision accruals, result from received for the Ferrari Monza SP1 and SP2; investments and share-based compensation (iii) €69 million related to cash absorbed from expense recognized in relation to the Group’s receivables from financing activities, driven by an equity incentive plans); increase in the financial receivables portfolio; partially offset by: (i) €123 million related to cash absorbed by (iv) 52 million of net finance costs paid; and (v) €91 million of income tax paid. receivables from financing activities driven by an OPERATING ACTIVITIES — YEAR ENDED increase in the financial services portfolio; DECEMBER 31, 2019 (ii) €30 million of cash absorbed from the change For the year ended December 31, 2019, our cash in other operating assets and liabilities, primarily flows from operating activities were €1,306 million, attributable to reversals of advances received for primarily the result of: the Ferrari Monza SP1 and SP2, partially offset by (i) profit before tax of €875 million, adjusted to advances received for the 812 Competizione and add back €352 million of depreciation and 812 Competizione A; amortization expense, €42 million of net finance (iii) €6 million of cash absorbed from the net costs and net other non-cash expenses and change in inventories, trade receivables and income of €49 million (including provision trade payables. In particular, the movement was accruals, result from investments and share- attributable to: (a) cash absorbed by inventories based compensation expense recognized in of €81 million driven by higher volumes, relation to the Group’s equity incentive plans); and partially offset by (b) cash generated from trade (ii) €146 million of cash generated by the change in receivables of €2 million and (c) cash generated other operating assets and liabilities, primarily from trade payables of €73 million; attributable to advances received for the Ferrari (iv) €28 million of net finance costs paid; and Monza SP1 and SP2; (v) €109 million of income tax paid. partially offset by: OPERATING ACTIVITIES — YEAR ENDED (i) €77 million of cash absorbed from receivables DECEMBER 31, 2020 from financing activities driven by an increase in For the year ended December 31, 2020, our cash the financial services portfolio; flows from operating activities were €838 million, (ii) €9 million of cash related to the net change in primarily the result of: inventories, trade payables and trade receivables. (i) profit before tax of €667 million, adjusted for In particular, the movement was attributable to €427 million for depreciation and amortization (a) cash absorbed by inventory of €41 million expense, €49 million of net finance costs, and and (b) cash absorbed by trade receivables of net other non-cash expenses and income of €59 €22 million, which were both primarily driven million (including provision accruals, result from by higher volumes, partially offset by (c) cash investments and share-based compensation generated from trade payables of €54 million 114 FERRARI N.V.AR 2021driven by higher capital expenditures and an in financing activities was €580 million, primarily the increase in volumes; result of: (iii) €39 million of net finance costs paid; and (i) €500 million for the full repayment of a bond (iv) €33 million of income tax paid. upon maturity in January 2021; (ii) €231 million to repurchase common shares INVESTING ACTIVITIES — YEAR ENDED under the Company’s share repurchase program DECEMBER 31, 2021 (including the “Sell-to-Cover” practice under the For the year ended December 31, 2021, our net cash equity incentive plans); used in investing activities was €733 million, primarily (iii) €161 million of dividends paid, of which €1 million the result of: €385 million for additions to intangible was to non-controlling interests; assets, mainly related to externally acquired and (iv) €22 million in repayments of lease liabilities; and internally generated development costs to support (v) €7 million related to the net change in other debt; the development of our current and future product offering and, (ii) €352 million of capital expenditures partially offset by: additions to property, plant and equipment, partially (i) €149 million of net proceeds from the issuance of offset by proceeds from disposals. For a detailed the 2032 Notes in July 2021; analysis of additions to property, plant and equipment (ii) €121 million related to the net change in bank and intangible assets see “—Capital Expenditures” borrowings and other financial institutions; and below. (iii) €71 million of proceeds net of repayments related to our revolving securitization programs in the INVESTING ACTIVITIES — YEAR ENDED United States. DECEMBER 31, 2020 For the year ended December 31, 2020, our net cash FINANCING ACTIVITIES — YEAR ENDED DECEMBER used in investing activities was €708 million, primarily 31, 2020 the result of: (i) €352 million for additions to intangible For the year ended December 31, 2020, our net cash assets, mainly related to externally acquired and from financing activities was €340 million, primarily internally generated development costs and, (ii) €357 the result of: million of capital expenditures additions to property, (i) €640 million of net proceeds from the issuance plant and equipment, mainly related to plant and of the 2025 Bond; machinery for new models as well as our acquisition (ii) €44 million of proceeds net of repayments of tracts of land adjacent to our facilities in Maranello related to our revolving securitization programs as part of our expansion plans, partially offset by in the United States; and proceeds from the disposals. For a detailed analysis (iii) €18 million related to the net change in other of additions to property, plant and equipment and debt; intangible assets see “—Capital Expenditures” below. partially offset by: INVESTING ACTIVITIES — YEAR ENDED (i) €211 million of dividends paid, of which €3 million DECEMBER 31, 2019 was to non-controlling interests; For the year ended December 31, 2019, our net cash (ii) €130 million paid to repurchase common shares used in investing activities was €701 million, primarily under the Company’s share repurchase program the result of: (i) €354 million for additions to intangible in the first quarter of 2020; assets, mainly related to externally acquired and (iii) €20 million in repayments of lease liabilities; and internally generated development costs and, (ii) €352 (iv) €1 million related to the net change in bank million of capital expenditures additions to property, borrowings. plant and equipment, mainly related to plant and machinery for new models as well as our acquisition FINANCING ACTIVITIES — YEAR ENDED of tracts of land adjacent to our facilities in Maranello DECEMBER 31, 2019 as part of our expansion plans, partially offset by For the year ended December 31, 2019, our net cash proceeds from disposals. For a detailed analysis used in financing activities was €502 million, primarily of additions to property, plant and equipment and the result of: intangible assets see “—Capital Expenditures” below. (i) €387 million paid to repurchase common shares under the Company’s share repurchase FINANCING ACTIVITIES — YEAR ENDED program; DECEMBER 31, 2021 (ii) €315 million related to the cash tender offer to For the year ended December 31, 2021, net cash used repurchase an aggregate nominal amount of 115 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ LIQUIDITY AND CAPITAL RESOURCES €200 million of 0.25 percent notes due January (i) €298 million of net proceeds from the Company’s 2021 and an aggregate nominal amount of €115 issuance of 1.12 percent senior notes due August million of the 1.5 percent notes due March 2023; 2029 and 1.27 percent senior notes due August (iii) €195 million of dividends paid, of which €2 million 2031, each having a principal amount of €150 was to non-controlling interests; and million; (iv) €7 million related to the net change in bank (ii) €92 million of proceeds net of repayments borrowings and lease liabilities. related to our revolving securitization programs partially offset by: (iii) €12 million related to the net change in other debt. in the United States; and CAPITAL EXPENDITURES Capital expenditures are defined as additions to property, plant and equipment (including right-of-use assets recognized in accordance with IFRS 16 — Leases) and intangible assets. Capital expenditures for the years ended December 31, 2021, 2020 and 2019 were €750 million, €734 million and €706 million, respectively. The following table sets a forth a breakdown of capital expenditures by category for each of the years ended December 31, 2021, 2020 and 2019: (€ million) Intangible assets Externally acquired and internally generated development costs Patents, concessions and licenses Other intangible assets Total intangible assets Property, plant and equipment Industrial buildings Plant, machinery and equipment Other assets Advances and assets under construction Total property, plant and equipment Total capital expenditures For the years ended December 31, 2021 2020 2019 363 17 5 385 35 123 20 187 365 750 320 27 5 352 28 115 24 215 382 734 330 18 6 354 16 176 18 142 352 706 116 FERRARI N.V.AR 2021INTANGIBLE ASSETS For the year ended December 31, 2019, we invested Our total capital expenditures in intangible assets for €330 million in externally acquired and internally the year ended December 31, 2021 were €385 million generated development costs, of which €145 million (€352 million and €354 million for the years ended related to development of models to be launched in December 31, 2020 and 2019, respectively). future years and €185 million primarily related to the development of our current product portfolio as well The most significant investments relate to externally as components. acquired and internally generated development costs. In particular, we make such investments to PROPERTY, PLANT AND EQUIPMENT support the development of our current and future Our total capital expenditures in property, plant and product offering. The capitalized development costs equipment for the year ended December 31, 2021 primarily include materials and personnel costs were €365 million (€382 million and €352 million relating to engineering, design and development for the years ended December 31, 2020 and 2019, activities focused on content enhancement of respectively). existing cars and new models, including to broaden our product range and our ongoing investments in Our most significant investments generally relate to hybrid and electric technology and the development plant, machinery and equipment, which amounted of components, which are necessary to provide to €123 million for the year ended December 31, continuing performance upgrades to our sports car 2021 (€115 million and €176 million for the years customers and to help us capture the preferences ended December 31, 2020 and 2019, respectively) of the urban, affluent purchasers of GT cars whom as well as advances and assets under construction, we are increasingly targeting as we transition our which amounted to €187 million for the year ended product portfolio to hybrid and electric technology. December 31, 2021 (€215 million and €142 million We continually invest in product development to for the years ended December 31, 2020 and 2019, ensure we can quickly and efficiently respond to respectively). Our main investments primarily related market demand and technological breakthroughs, as to industrial tools needed for the production of cars well as to maintain our position at the top of the luxury and investments in car production lines (including performance sports cars market. those for models to be launched in future years), as well as investments related to our personalization For the year ended December 31, 2021, we invested programs and engine assembly lines. Investments €363 million in externally acquired and internally in advances and assets under construction and generated development costs, of which €229 million industrial buildings for the periods presented reflect related to the development of models to be launched our focus on the hybridization and broadening of in future years and €134 million primarily related to our product range and supporting future model the development of our current product portfolio and launches, including our acquisition of tracts of land components. adjacent to our facilities in Maranello as part of our expansion plans, which amounted to €42 million in For the year ended December 31, 2020, we invested 2021 (cumulative acquisitions of land since the start of €320 million in externally acquired and internally 2019 amounted to €117 million). generated development costs, of which €244 million primarily related to the development of models to be At December 31, 2021, the Group had contractual launched in future years and, to a much lesser extent, commitments for the purchase of property, plant and to investments required for new technical regulations equipment amounting to €74 million (€101 million at applicable for the 2022 to 2025 Formula 1 seasons, December 31, 2020). and €76 million related to the development of models in our current product portfolio and car components. 117 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ LIQUIDITY AND CAPITAL RESOURCES CONTRACTUAL OBLIGATIONS The following table summarizes payments due under our significant contractual commitments at December 31, 2021: (€ million) Payments due by period Less than 1 to 3 years 3 to 5 years Long-term debt (1) Interest on long-term debt (2) Lease obligations (3) Unconditional minimum purchase obligations (4) Purchase obligations (5) Total contractual obligations 1 year 343 28 15 80 74 540 After 5 years Total 781 38 19 61 — 899 753 508 2,385 17 13 15 — 21 11 1 — 104 58 157 74 798 541 2,778 (1) Amounts presented relate to the principal amounts of long-term debt, excluding lease liabilities and the related interest expense that will be paid when due. For additional information see Note 24 “Debt” to our Consolidated Financial Statements included elsewhere in this document. The table above does not include short-term debt obligations. See the table below for a reconciliation of the contractual commitments of our long-term debt to our debt recorded in the consolidated statement of financial position included within our Consolidated Financial Statements. (2) Amounts include interest payments based on contractual terms and current interest rates on our long-term debt. Interest rates based on variable rates included above were determined using the rates in effect at December 31, 2021. (3) Lease obligations mainly relate to leases for Ferrari stores, industrial buildings and certain other assets used in our business. (4) Unconditional minimum purchase obligations relate to our unconditional purchase obligations to purchase a fixed or minimum quantity of goods and/or services from suppliers with fixed and determinable price provisions. From time to time, in the ordinary course of our business, we enter into various arrangements with key suppliers in order to establish strategic and technological advantages. In particular, such agreements primarily relate to research and development activities and, to a lesser extent, tooling obligations. This amount also includes unconditional purchase obligations to purchase a minimum quantity of goods and/or services in connection with certain of our sponsorship contracts. (5) Purchase obligations represent obligations to purchase property, plant and equipment. The long-term debt obligations reflected in the table above can be reconciled to the amount in the consolidated statement of financial position at December 31, 2021 (in our Consolidated Financial Statements included elsewhere in this document) as follows: (€ million) Debt Short-term debt obligations Lease liabilities Amortized cost effects Long-term debt Amount 2,630 (186) (56) (3) 2,385 PENSION, POST-EMPLOYMENT BENEFITS AND OTHER PROVISIONS FOR EMPLOYEES We provide post-employment benefits for certain active employees and retirees of the Group. We classify these benefits on the basis of the type of benefit provided and in particular as defined contribution plans, defined benefit obligations and other provisions for employees. At December 31, 2021 the liability for such obligations amounted to €101 million (€60 million at December 31, 2020). See Note 22 “Employee benefits” to the Consolidated Financial Statements included elsewhere in this document. OFF BALANCE SHEET ARRANGEMENTS We have entered into various off-balance sheet arrangements with unconsolidated third parties in the ordinary course of business. For additional information see Note 29 “Commitments” to our Consolidated Financial Statements included elsewhere in this document. 118 FERRARI N.V.AR 2021NON-GAAP FINANCIAL MEASURES similarly titled measures used by other companies nor are they intended to be substitutes for measures We monitor and evaluate our operating and financial of financial performance or financial position as performance using several non-GAAP financial prepared in accordance with IFRS. measures including: Net Debt, Net Industrial Debt, Free Cash Flow and Free Cash Flow from Industrial NET DEBT AND NET INDUSTRIAL DEBT Activities, EBITDA, Adjusted EBITDA, Adjusted EBIT, Due to different sources of cash flows used for the Adjusted Net Profit, Adjusted Basic and Diluted repayment of debt between industrial activities and Earnings per Common Share, as well as a number of financial services activities, and the different business financial metrics measured on a constant currency structure and leverage implications, Net Industrial basis. We believe that these non-GAAP financial Debt, together with Net Debt, are the primary measures provide useful and relevant information measures used by us to analyze our capital structure to management and investors regarding our and financial leverage. We believe the presentation of performance and improve our ability to assess our Net Industrial Debt aids management and investors financial performance and financial position. They in their analysis of the Group’s financial position and also provide us with comparable measures that financial performance and to compare the Group’s facilitate management’s ability to identify operational financial position and financial performance with that trends, as well as make decisions regarding future of other companies. Net Industrial Debt is defined as spending, resource allocations and other operational total debt less cash and cash equivalents (Net Debt), decisions. While similar measures are widely used further adjusted to exclude the debt and cash and in the industry in which we operate, the financial cash equivalents related to our financial services measures we use may not be comparable to other activities (Net Debt of Financial Services Activities). The following table sets forth a reconciliation of Net Debt and Net Industrial Debt at December 31, 2021 and 2020. (€ million) Cash and cash equivalents Total liquidity Bonds and notes Asset-backed financing (Securitizations) Lease liabilities Borrowings from banks and other financial institutions Other debt Total Debt Net Debt (A) Net Debt of Financial Services Activities (B) Net Industrial Debt (A-B) At December 31, 2021 1,344 1,344 (1,487) (900) (56) (154) (33) (2,630) (1,286) (989) (297) 2020 1,362 1,362 (1,835) (761) (62) (29) (38) (2,725) (1,363) (820) (543) On July 29, 2021, the Company issued 0.91 percent senior notes due January 2032 (“2032 Notes”) through a private placement to certain US institutional investors, having a principal of €150 million. The net proceeds from the issuance amounted to €149,495 thousand, and the yield to maturity, on an annual basis, equals the nominal coupon rates of the Notes. The Notes are primarily used for general corporate purposes, including the funding of capital expenditures. On May 27, 2020, the Company issued 1.5 percent coupon notes due May 2025 (“2025 Bond”), having a principal of €650 million. The notes were issued at a discount for an issue price of 98.898 percent, resulting in net proceeds of €640 million after related expenses and a yield to maturity of 1.732 percent. The bond was admitted to trading on the regulated market of Euronext Dublin. 119 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ NON-GAAP FINANCIAL MEASURES For additional information relating to our total debt, see Note 24 “Debt” to the Consolidated Financial Statements included elsewhere in this document. The increase in the Net Debt of Financial Services Activities (as defined above) of €169 million, from €820 million at December 31, 2020, to €989 million at December 31, 2021, relates primarily to the increase in asset-backed financing (securitizations) of the receivables generated by our financial services activities in the United States, which grew by €204 million, from €940 million at December 31, 2020 to €1,144 million at December 31, 2021. The following table presents our receivables from financing activities and our Net Debt of Financial Services Activities at December 31, 2021 and 2020: (€ million) Receivables from financing activities Net Debt of Financial Services Activities At December 31, 2021 1,144 (989) 2020 940 (820) For further details of our receivables from financing activities and our asset-backed financing (securitizations), see Note 18 “Current Receivables and Other Current Assets” and Note 24 “Debt” to the Consolidated Financial Statements included elsewhere in this document. CASH AND CASH EQUIVALENTS Cash and cash equivalents amounted to €1,344 million at December 31, 2021 compared to €1,362 million at December 31, 2020. See “Cash Flows” above for further details. Approximately 85 percent of our cash and cash equivalents were denominated in Euro at December 31, 2021 (approximately 88 percent at December 31, 2020). Our cash and cash equivalents denominated in currencies other than the Euro are available mostly to Ferrari S.p.A. and certain subsidiaries which operate in areas other than Europe. Cash held in such countries may be subject to transfer restrictions depending on the jurisdictions in which these subsidiaries operate. In particular, cash held in China (including in foreign currencies), which amounted to €90 million at December 31, 2021 (€56 million at December 31, 2020), is subject to certain repatriation restrictions and may only be repatriated as a repayment of payables, or debt, or as dividends or capital distributions. We do not currently believe that such transfer restrictions have an adverse impact on our ability to meet our liquidity requirements. The following table sets forth an analysis of the currencies in which our cash and cash equivalents were denominated at the dates presented. (€ million) Euro Chinese Yuan U.S. Dollar Japanese Yen Other currencies Total At December 31, 2021 1,144 88 68 20 24 2020 1,203 51 76 13 19 1,344 1,362 Cash collected from the settlement of receivables under securitization programs is subject to certain restrictions regarding its use and is primarily applied to repay principal and interest of the related funding. Such cash amounted to €48 million at December 31, 2021 (€37 million at December 31, 2020). 120 FERRARI N.V.AR 2021TOTAL AVAILABLE LIQUIDITY Total available liquidity (defined as cash and cash equivalents plus undrawn committed credit lines) at December 31, 2021 was €2,020 million (€2,062 million at December 31, 2020). The following table summarizes our total available liquidity: (€ million) Cash and cash equivalents Undrawn committed credit lines Total available liquidity At December 31, 2021 1,344 676 2,020 2020 1,362 700 2,062 The undrawn committed credit lines at December in April 2021, the Group replaced an uncommitted 31, 2021 and at December 31, 2020 relate to revolving credit line of $50 million, which was terminated, with credit facilities. For further details, see Note 24 “Debt” a new committed credit line for $100 million with a in the Consolidated Financial Statements included term of 24 months. At December 31, 2021 the line elsewhere in this document. had been drawn down for $70 million (€62 million) representing the only committed credit line that has To prudently manage potential liquidity or refinancing been drawn down by the Group. The new credit line risks as a result of the COVID-19 pandemic, in April replaces the funding previously provided by one of 2020 the Group increased its undrawn committed securitization programs in the US for funding of up credit lines by securing an additional amount of €350 to $110 million that expired in April 2021. In October million, doubling the total committed credit lines 2021, a committed credit line previously negotiated available and undrawn to €700 million. In March 2021 in April 2020 for €100 million expired. At December the Group cancelled a credit line of €100 million and 31, 2021 the Group had total committed credit lines simultaneously replaced it with a new credit line for available and undrawn of €676 million (€700 million at €150 million with a term of 23 months. Subsequently, December 31, 2020). 121 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ NON-GAAP FINANCIAL MEASURES REE CASH FLOW AND FREE CASH FLOW FROM INDUSTRIAL ACTIVITIES adjusted to exclude the operating cash flow from our financial services activities (Free Cash Flow from Free Cash Flow and Free Cash Flow from Industrial Financial Services Activities). Prior to 2020, we defined Activities are two of our primary key performance Free Cash Flow and Free Cash Flow from Industrial indicators to measure the Group’s performance. Activities without excluding from investments in These measures are presented by management to property, plant and equipment the right-of-use assets aid investors in their analysis of the Group’s financial recognized during the period in accordance with performance and to compare the Group’s financial IFRS 16 — Leases. Applying the current definition of performance with that of other companies. Free Free Cash Flow and Free Cash Flow from Industrial Cash Flow is defined as cash flows from operating Activities to 2019 would result in an immaterial activities less investments in property, plant and difference compared to the figures presented below. equipment (excluding right-of-use assets recognized during the period in accordance with IFRS 16 — The following table sets forth our Free Cash Flow and Leases) and intangible assets. Free Cash Flow from Free Cash Flow from Industrial Activities for the years Industrial Activities is defined as Free Cash Flow ended December 31, 2021, 2020 and 2019. (€ million) Cash flows from operating activities Investments in property, plant and equipment and intangible assets Free Cash Flow Free Cash Flow from Financial Services Activities Free Cash Flow from Industrial Activities For the years ended December 31, 2021 1,283 (737) 546 (96) 642 2020 838 (709) 129 (42) 171 2019 1,306 (706) 600 (75) 675 Free Cash Flow for the year ended December 31, 2021 was €546 million compared to €129 million for the year ended December 31, 2020 and €600 million for the year ended December 31, 2019. For an explanation of the drivers in Free Cash Flow see “Cash Flows” above. Free Cash Flow from Industrial Activities for the year ended December 31, 2021 was €642 million, an increase of €471 million compared to €171 million for the year ended December 31, 2020. The increase in Free Cash Flow from Industrial Activities in 2021 compared to 2020 was primarily attributable to an increase in EBITDA and a positive change in cash flows from other operating assets and liabilities driven by the collection of advances from the 812 Competizione and 812 Competizione A, partially offset by the reversal of advances for the Ferrari Monza SP1 and SP2 and higher investments to support the development of our current and future product offering and higher taxes paid. Free Cash Flow from Industrial Activities for the year ended December 31, 2020 was positive €171 million a decrease of €504 million compared to €675 million for the year ended December 31, 2019. The decrease in Free Cash Flow from Industrial Activities was primarily driven by a decrease in advances received for the Ferrari Monza SP1 and SP2 (which were primarily received in 2019 ahead of shipments, including for cars actually delivered in 2020), the adverse impacts on our EBITDA as a result of the COVID-19 pandemic and higher inventories at year end reflecting efforts to mitigate potential supply chain issues, as well as an increase in income taxes paid. Free Cash Flow from Industrial Activities in 2019 benefited from advances collected ahead of shipments of the Ferrari Monza SP1 and SP2, including for cars actually delivered in 2020. 122 FERRARI N.V.AR 2021EBITDA AND ADJUSTED EBITDA by management to aid investors in their analysis of EBITDA is defined as net profit before income tax the performance of the Group and to assist investors expense, net financial expenses and amortization and in the comparison of the Group’s performance with depreciation. Adjusted EBITDA is defined as EBITDA that of other companies. Adjusted EBITDA is provided as adjusted for certain income and costs, which are in order to present how the underlying business has significant in nature, expected to occur infrequently, performed prior to the impact of the adjusting items, and that management considers not reflective of which may obscure the underlying performance and ongoing operational activities. EBITDA is presented impair comparability of results between periods. The following table sets forth the calculation of EBITDA and Adjusted EBITDA for the years ended December 31, 2021, 2020 and 2019, and provides a reconciliation of these non-GAAP measures to net profit. There were no adjustments impacting Adjusted EBITDA for the periods presented. (€ million) Net profit Income tax expense Net financial expenses EBIT Amortization and depreciation EBITDA and Adjusted EBITDA For the years ended December 31, 2021 833 209 33 1,075 456 1,531 2020 609 58 49 716 427 2019 699 176 42 917 352 1,143 1,269 ADJUSTED EBIT impact of any adjusting items, which may obscure the Adjusted EBIT represents EBIT as adjusted for certain underlying performance and impair comparability of income and costs which are significant in nature, results between the periods. expected to occur infrequently, and that management considers not reflective of ongoing operational The following table sets forth the calculation of activities. Adjusted EBIT for the years ended December 31, 2021, We provide Adjusted EBIT in order to present how 2020 and 2019. There were no adjustments impacting the underlying business has performed prior to the Adjusted EBIT for the periods presented. (€ million) EBIT and Adjusted EBIT For the years ended December 31, 2021 1,075 2020 716 2019 917 123 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ NON-GAAP FINANCIAL MEASURES ADJUSTED NET PROFIT impact of any adjusting items, which may obscure the Adjusted Net Profit represents net profit as adjusted underlying performance and impair comparability of for certain income and costs (net of tax effects) results between the periods. which are significant in nature, expected to occur infrequently, and that management considers not The following table sets forth the calculation of reflective of ongoing operational activities. We Adjusted Net Profit for the years ended December 31, provide Adjusted Net Profit in order to present how 2021, 2020 and 2019. the underlying business has performed prior to the (€ million) Net profit Trademark step-up (1) Adjusted Net Profit For the years ended December 31, 2021 833 — 833 2020 609 (75) 534 2019 699 — 699 (1) Reflects the application of the measures introduced in Italy by the art. 110 of the Law Decree n. 104/2020, converted in the Law n.126/2020, enacting “Urgent measures to support and relaunch the economy” which reopened the voluntary step up of tangible and intangible assets, with the application of a substitutive tax rate (3%). In particular, Ferrari S.p.A. benefited from the one-off partial step-up of its trademark for tax purposes, which resulted in the recognition in 2020 of deferred tax assets for €84 million and a substitute tax liability for €9 million, resulting in a net tax benefit of €75 million. There was no cash effect in 2020. ADJUSTED BASIC AND DILUTED EARNINGS PER COMMON SHARE order to present how the underlying business has performed prior to the impact of any adjusting items, Adjusted Basic and Diluted Earnings per Common which may obscure the underlying performance and Share represents earnings per share, as adjusted for impair comparability of results between the periods. certain income and costs (net of tax effects) which are significant in nature, expected to occur infrequently, The following table sets forth the calculation of and that management considers not reflective of Adjusted Basic and Diluted Earnings per Common ongoing operational activities. We provide Adjusted Share for the years ended December 31, 2021, 2020 Basic and Diluted Earnings per Common Share in and 2019. Net profit attributable to owners of the Company Trademark step-up (1) € million € million Adjusted net profit attributable to owners of the Company € million For the years ended December 31, 2021 831 — 831 2020 608 (75) 533 2019 696 — 696 Weighted average number of common shares for basic earnings per share thousand 184,446 184,806 186,767 Adjusted basic earnings per common share € 4.50 2.88 3.73 Weighted average number of common shares for diluted earnings per share (2) thousand 184,722 185,379 187,535 Adjusted diluted earnings per common share € 4.50 2.88 3.71 (1) Reflects the application of the measures introduced in Italy by the art. 110 of the Law Decree n. 104/2020, converted in the Law n.126/2020, enacting “Urgent measures to support and relaunch the economy” which reopened the voluntary step up of tangible and intangible assets, with the application of a substitutive tax rate (3%). In particular, Ferrari S.p.A. benefited from the one-off partial step-up of its trademark for tax purposes, which resulted in the recognition in 2020 of deferred tax assets for €83.7 million and a substitute tax liability for €9.0 million, resulting in a net tax benefit of €74.7 million. There was no cash effect in 2020. (2) The weighted average number of common shares for diluted earnings per share was increased to take into consideration the theoretical effect of the potential common shares that would be issued under the Group’s equity incentive plans (assuming 100 percent of the related awards vested). 124 FERRARI N.V.AR 2021See Note 12 “Earnings per Share” to the Consolidated period revenues of foreign subsidiaries expressed in Financial Statements, included elsewhere in this local functional currency other than Euro, (ii) applying document, for the calculation of the basic and diluted the prior-period average foreign currency exchange earnings per common share. rates to current period revenues originated in a currency other than the functional currency of the CONSTANT CURRENCY INFORMATION applicable entity, and (iii) eliminating the variances of The “Results of Operations” discussion above includes any foreign currency hedging (see Note 2 “Significant information about our net revenues on a constant Accounting Policies” to the Consolidated Financial currency basis, which excludes the effects of foreign Statements, included elsewhere in this document, currency translation from our subsidiaries with for information on the foreign currency exchange functional currencies other than Euro, as well as the rates applied). Although we do not believe that these effects of foreign currency transaction impact and measures are a substitute for GAAP measures, we foreign currency hedging. We use this information do believe that revenues excluding the impact of to assess how the underlying revenues changed currency fluctuations and the impacts of hedging independent of fluctuations in foreign currency provide additional useful information to investors exchange rates and hedging. We calculate constant regarding the operating performance on a local currency by (i) applying the prior-period average currency basis. foreign currency exchange rates to translate current 125 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSSUBSEQUENT EVENTS AND 2022 OUTLOOK SUBSEQUENT EVENTS 2022 OUTLOOK On January 26, 2022 Ferrari announced that CEVA The following 2022 outlook is subject to trading Logistics will be a new Scuderia Ferrari team partner conditions unaffected by COVID-19 pandemic starting from the 2022 Formula 1 season. The restrictions and based on the following assumptions: multi-year agreement will also see CEVA involved in Ferrari’s other racing activities in GT racing and the • Carefully leveraging strong demand Ferrari Challenge, with the Marseille-based company taking on the role of Official Logistics Partner for • Richer model mix being more than offset by the those series. negative impact from the Ferrari Monza SP1 and SP2 phase out On February 8, 2022 Ferrari announced a new partnership with Qualcomm Technologies, Inc. • Ferrari Daytona SP3 and Ferrari Purosangue will The San Diego, California-based company will commence production in 2022 with deliveries be a Scuderia Ferrari Premium Partner through starting in 2023 Snapdragon, Qualcomm’s premium product and experience brand leveraged across multiple • Formula 1 revenues reflecting more diversified but platforms and categories, including automotive. The lower sponsorship, partially offset by better prior agreement with Qualcomm Technologies will have a year ranking strong technological impact aimed at accelerating the digital transformation process for Ferrari • Increasing depreciation and amortization in line with and its road cars. Starting from the first common the start of production of new models projects already identified, such as the digital cockpit, the two companies will bring together ideas and • Industrial free cash flow generation sustained by expertise to explore new opportunities and a range of Daytona SP3 advances collection technological solutions. • Disciplined capital expenditures to fuel long-term Under the common share repurchase program, from development January 1, 2022 to February 18, 2022 the Company purchased an additional 390,819 common shares for Net revenues: ~ Euro 4.8 billion total consideration of €80.1 million. At February 18, 2022 the Company held in treasury an aggregate of Adj. EBITDA: Euro 1.65-1.70 billion (34.5%-35.5%) 10,470,922 common shares. Adj. EBIT: Euro 1.10-1.15 billion (23%-24%) On February 25, 2022, the Board of Directors of Ferrari N.V. recommended to the Company’s Adj. Diluted EPS: Euro 4.55-4.75 per share (*) shareholders that the Company declare a dividend of €1.362 per common share, totaling approximately Industrial Free Cash Flow: ≥ Euro 0.60 billion €250 million. The proposal is subject to the approval of the Company’s shareholders at the Annual General (*) Calculated using the weighted average diluted number of common Meeting to be held on April 13, 2022. shares as of December 31, 2021 (184,722 thousand). 126 FERRARI N.V.AR 2021127 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSMAJOR SHAREHOLDERS Exor is our largest shareholder through its which holds 84.37 percent of its share capital, approximately 24.21 percent shareholding interest based on regulatory filings with the Netherlands in our outstanding common shares (as of February Authority for the Financial Markets (stichting Autoriteit 14, 2022). See “Overview—History of the Company”. Financiële Markten, the “AFM”). G.A. is a Dutch private As a result of the loyalty voting mechanism, Exor’s company with limited liability (besloten vennootschap voting power is approximately 36.00 percent (as of met beperkte aansprakelijkheid) with interests February 14, 2022). In addition, as of February 14, 2022, represented by shares, founded by Giovanni Agnelli Mr. Piero Ferrari holds approximately 10.30 percent and currently held by members of the Agnelli and Nasi of our outstanding common shares and, as a result families, descendants of Giovanni Agnelli, founder of the loyalty voting mechanism, his voting power of Fiat. Its present principal business activity is to is approximately 15.31 percent. The percentages of purchase, administer and dispose of equity interests ownership and voting power above are calculated in public and private entities and, in particular, based on the number of outstanding shares net of to ensure the cohesion and continuity of the treasury shares. administration of its controlling equity interests. The managing directors of G.A., as of February 16, 2022, Exor and Mr. Piero Ferrari informed us that they have were John Elkann, Jeroen Preller, Florence Hinnen, entered into a shareholder agreement, summarized Tiberto Brandolini d’Adda, Alessandro Nasi, Andrea below under “—Shareholders’ Agreement”. Agnelli, Luca Ferrero de’ Gubernatis Ventimiglia and Benedetto Della Chiesa. Exor resulted from a cross-border merger of its predecessor entity, Exor S.p.A. with and into Exor Based on the information in Ferrari’s shareholder N.V. As a result of that merger, which was completed register, regulatory filings with the AFM and the on December 11, 2016, all activities of Exor S.p.A. SEC and other sources available to us, the following are continued by Exor under universal succession, shareholders owned, directly or indirectly, in excess including with respect to the holding of our shares. of three percent of the common shares holding Exor is controlled by Giovanni Agnelli B.V. (“G.A.”), voting rights of Ferrari, as of February 14, 2022: Shareholder Exor N.V. (2) Piero Ferrari (2) BlackRock, Inc. (3) T. Rowe Price Associates, Inc (4) Other public shareholders Number of common shares Percentage owned (1) 44,435,280 18,894,295 10,708,393 7,423,138 102,037,188 24.21% 10.30% 5.84% 4.04% 55.61% (1) The percentages of share capital set out in this table are calculated as the ratio of (i) the aggregate number of outstanding common shares beneficially owned by the shareholder to (ii) the total number of outstanding common shares (net of treasury shares) of Ferrari. These percentages may slightly differ from the percentages of share capital included in the public register held by the AFM of all notifications made pursuant to the disclosure obligations under chapter 5.3 of the Dutch Act on financial supervision (Wet op het financieel toezicht; the “AFS”), inter alia, because any shares held in treasury by Ferrari are included in the relevant denominators for purposes of the AFS disclosure obligations. (2) Each of Exor and Piero Ferrari participate in the loyalty voting program of Ferrari. As of February 14, 2022, Exor owned 44,435,280 special voting shares and Mr. Ferrari owned 18,892,160 special voting shares. Therefore, as discussed above in this section, their voting power in Ferrari is higher than the percentage of common shares beneficially held as presented in this table. (3) Based on filings with the SEC (Amendment No. 1 to Schedule 13G filed on February 3, 2022, File No. 005-89223), BlackRock, Inc. is a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) and, out of the common shares beneficially owned as set forth in the table, it has sole voting power over 9,871,147 common shares. (4) Based on filings with the SEC (Amendment No. 1 to Schedule 13G filed on February 14, 2018, File No. 005-89223), T. Rowe Price Associates, Inc. is an investment adviser registered under Section 203 of the U.S. Investment Advisers Act of 1940. Based on subsequent filings with the SEC, out of the common shares beneficially owned as set forth in the table, T. Rowe Price associates, Inc. has sole voting power over 4,112,710 common shares. 128 FERRARI N.V.AR 2021Based on the information in Ferrari’s shareholder to make a binding, unconditional and irrevocable all register and other sources available to us, as of cash offer for the purchase of such common shares. February 14, 2022, approximately 63.8 million Ferrari common shares, or 32.9 percent of the outstanding The foregoing will not apply in the case of transfers Ferrari common shares, were held in the United of Ferrari common shares: (i) by any party to the States. As of the same date, approximately 1,924 Shareholders’ Agreement, to a party that qualifies as a record holders had registered addresses in the “Loyalty Transferee” (as defined in the Ferrari Articles United States. SHAREHOLDERS’ AGREEMENT of Association) of such party, (ii) by Exor, to any affiliate of G.A., to a successor in business of G.A. and to any affiliate of a successor in business of G.A., and (iii) by any party to the Shareholders’ Agreement that is an On December 23, 2015, Exor and Piero Ferrari individual, to an entity wholly owned and controlled by entered into a Shareholders’ Agreement, which that same party. In addition, the provisions regarding became effective at the completion of the Separation the pre-emption right in favor of Exor and right of first on January 3, 2016 (the “Shareholders’ Agreement”) offer of Piero Ferrari shall not apply in relation to, and and prior to the admission to listing and trading Piero Ferrari shall be free and allowed to carry out, of the common shares of Ferrari on the MTA, now market sales to third parties of his Ferrari common renamed Euronext Milan. Ferrari is not a party to the shares which in the aggregate do not exceed, during Shareholders’ Agreement and does not have any the whole period of validity of the Shareholders’ rights or obligations thereunder. Below is a summary Agreement, 0.5 percent of the number of common of the principal provisions of the Shareholders’ shares owned by Piero Ferrari upon completion of Agreement based on regulatory filings made by Exor the Separation. and Piero Ferrari. CONSULTATION TERM The Shareholders’ Agreement entered into force For the purposes of forming and exercising, to the upon completion of the Separation on January 3, extent possible, a common view on the items on the 2016 and provides that it shall remain in force until agenda of any General Meeting of shareholders of the fifth anniversary of the effective date of the Ferrari, Exor and Piero Ferrari will consult with each Separation, provided that if neither of the parties other prior to each General Meeting. For the purposes to the Shareholders’ Agreement terminates the of this consultation right and duties, representatives Shareholders’ Agreement within six months before of each of Exor and Piero Ferrari shall meet in order the end of the initial term, then the Shareholders’ to discuss in good faith whether they have or can Agreement shall be renewed automatically for find a common view as to the matters on the agenda another five year term. Since neither of the parties of the immediately following General Meeting. This to the Shareholders’ Agreement terminated it within consultation right does not include an obligation to six months before January 3, 2021, the Shareholders’ vote in any certain way nor does it constitute a veto Agreement was automatically renewed for another right in favor of Piero Ferrari. five year term and, therefore, until January 3, 2026. PRE-EMPTION RIGHT IN FAVOR OF EXOR AND RIGHT OF FIRST OFFER OF PIERO FERRARI The Shareholders’ Agreement shall terminate and cease to have any effect as a result of the transfer of In the event that Piero Ferrari intends to transfer all the common shares owned by either Exor or Piero (in whole or in part) his Ferrari common shares or Ferrari to a third party. receives a third party offer for the acquisition of all or part of his Ferrari common shares, Exor will have GOVERNING LAW AND JURISDICTION the right to purchase all (but not less than all) of the The Shareholders’ Agreement is governed by common shares Piero Ferrari intends to transfer on and must be interpreted according to the laws of the terms of the original proposed transfer by Piero the Netherlands. Any disputes arising out of or in Ferrari or, in case the original proposed transfer was connection with the Shareholders’ Agreement are for no consideration, at market prices determined subject to the exclusive jurisdiction of the competent pursuant to the Shareholders’ Agreement. court in Amsterdam, the Netherlands, without prejudice to the right of appeal and appeal to the In the event Exor intends to transfer (in whole or Supreme Court. in part) its common shares to a third party, either solicited or unsolicited, Piero Ferrari will have the right 129 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. CORPORATE GOVERNANCE INTRODUCTION BOARD OF DIRECTORS Ferrari is a public limited liability company, Pursuant to the Company’s articles of association incorporated under the laws of the Netherlands. (the “Articles of Association”), its board of directors The Company is the holding company of the Ferrari (the “Board of Directors”) may have three or more group following the separation of the Ferrari business directors (the “Directors”). At the annual general from FCA, now renamed Stellantis. In this section, the meeting of shareholders held on April 15, 2021, “Company” also refers to Ferrari N.V. predecessor, the number of the Directors was set at nine and formerly known as New Business Netherlands N.V., as the current slate of Directors was appointed. the context may require. Such predecessor of Ferrari Mr. Benedetto Vigna was designated as Acting N.V. was the holding company of the Ferrari group Chief Executive Officer by the Board of Directors following completion of the restructuring intended to effective as of September 16, 2021. The term of facilitate Ferrari’s IPO. When in this section reference office of the current Directors will expire on the is made to Ferrari N.V., it solely relates to the current day the Company’s 2022 annual general meeting Ferrari N.V. (previously known as FE New N.V.), which of shareholders is held. Each Director may be acquired Ferrari N.V. predecessor under universal reappointed at any subsequent annual general title through a merger under Dutch law. The Company meeting of shareholders; the next annual general qualifies as a foreign private issuer under the New meeting of shareholders is currently expected to York Stock Exchange (“NYSE”) listing standards and be held on April 13, 2022. On December 10, 2020, its common shares are listed on the NYSE and on the Mr. Louis Camilleri communicated to the Company Euronext Milan (previously named Mercato Telematico his decision, for personal reasons, to retire with Azionario). immediate effect from his role as the Company’s Chief Executive Officer and as member of the In accordance with the NYSE rules, the Company Board of Directors. As a result, Mr. John Elkann, the is permitted to follow its so called “home country Company’s Executive Chairman, acted as interim practice” with regard to certain corporate Chief Executive Officer pursuant to his appointment governance standards. Therefore, the Company by the Board of Directors at the meeting of the Board has adopted, except as discussed below under of Directors held on December 15, 2020, until Mr. “Compliance with Dutch Corporate Governance Benedetto Vigna was designated as Acting Chief Code”, the best practice provisions of the revised Executive Officer by the Board of Directors effective Dutch corporate governance code issued by the as of September 16, 2021. The Board of Directors Corporate Governance Code Monitoring Committee, recommended during its meeting of February 25, which entered into force on January 1, 2018 (the 2022 the shareholders to appoint Mr. Benedetto “Dutch Corporate Governance Code”) and is Vigna as executive director at the Company’s 2022 applicable as from financial year 2017. The Dutch annual general meeting of shareholders and the Corporate Governance Code contains principles and Board of Directors during its meeting shortly after best practice provisions that regulate relations inter the AGM 2022 envisages to confirm his title of CEO. alia between the board of directors of a company and On February 16, 2021, the Company announced its committees and the relationship with the general that Mr. Roberto Cingolani tendered his resignation meeting of shareholders. from his role as Company’s non-executive Director and member of the ESG Committee of the Board of In this report the Company addresses its overall Directors effective as of February 13, 2021 when he corporate governance structure. The Company was appointed Minister of the new Italian Government. discloses, and intends to disclose any material Mrs. Delphine Arnault was appointed as a member departure from the best practice provisions of the of the ESG Committee on February 26, 2021, filling Dutch Corporate Governance Code in this and in its the vacancy left by the resignation of Mr. Roberto future annual reports. Cingolani. AR 2021 130 The Board of Directors as a whole is responsible for Team (hereinafter also the “FLT”, formerly Senior the strategy of the Company. The Board of Directors Management Team, and so renamed as a result of the is composed of two executive Directors (i.e., Mr. organizational changes executed in January 2022), John Elkann, Executive Chairman, and Mr. Benedetto which is responsible for reviewing the operating Vigna, Acting Chief Executive Officer) and eight performance of the businesses, collaborating non-executive Directors, who do not have day-to- on certain operational matters, supporting the day responsibility within the Company or the Group. executive Directors with their tasks and executing Pursuant to Article 17 of the Articles of Association, decisions of the Board of Directors and the day-to-day the general authority to represent the Company shall management of the Company, primarily to the extent be vested in the Board of Directors and the Chief it relates to the operational management. Executive Officer. The Board of Directors appointed the following position of each of the persons currently serving as internal committees: (i) an Audit Committee, (ii) a ESG Directors of Ferrari N.V. Unless otherwise indicated, Committee, and (iii) a Compensation Committee. the business address of each person listed below On certain key operational matters, the executive will be c/o Ferrari, Via Abetone Inferiore n. 4, I-41053 Directors are supported by the Ferrari Leadership Maranello (MO), Italy. Set forth below is the name, year of birth and Name Year of Birth Position John Elkann Benedetto Vigna Piero Ferrari Sergio Duca Delphine Arnault Francesca Bellettini Eddy Cue John Galantic Maria Patrizia Grieco Adam Keswick 1976 1969 1945 1947 1975 1970 1964 1961 1952 1973 Executive Chairman and Executive Director Acting Chief Executive Officer Vice Chairman and Non-Executive Director Senior Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Eight Directors currently qualify as independent The Board of Directors has also resolved to appoint (representing a majority) for purposes of NYSE rules Sergio Duca as chairman of the Board, as referred to and Rule 10A-3 of the Securities Exchange Act of 1934, in the Dutch Civil Code, who will in such capacity have as amended (the “Exchange Act”) and seven Directors the title Chair (Voorzitter). qualify as independent (representing a majority) for purposes of the Dutch Corporate Governance Code. The following members are independent within the meaning of the Dutch Corporate Governance Code The non-executive Directors of the Company and NYSE rules: met to discuss the functioning of the Board and its committees, the functioning of the executive Directors as a corporate body of the company, or the corporate strategy and the main risks of the business, • Delphine Arnault; • Francesca Bellettini; • Eddy Cue; pursuant to best practice provisions 2.2.6, 2.2.7 and • Sergio Duca; 1.1.2 of the Dutch Corporate Governance Code. • John Galantic; The Board of Directors has resolved to grant the following titles: • John Elkann: Chairman of the Company; • Benedetto Vigna: Acting Chief Executive Officer; • Piero Ferrari: Vice-Chairman; and • Maria Patrizia Grieco; and • Adam Keswick. In addition, Piero Ferrari is considered independent within the meaning of the NYSE rules. Directors are expected to prepare themselves for and • Sergio Duca: Senior Non-Executive Director to attend all Board of Directors meetings, the annual 131 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ BOARD OF DIRECTORS general meeting of shareholders and the meetings Piero Ferrari (Vice Chairman and non-executive of the committees on which they serve, with the Director) – Mr. Piero Ferrari has been Vice Chairman understanding that, on occasion, a Director may be of Ferrari S.p.A. since 1988. He also serves as unable to attend a meeting. Chairman of HPE-COXA, is board member and Vice From January 1, 2021 to the year-end there were four and Vice President of CRN Ancona (Ferretti Group). meetings of the Board of Directors. The attendance He was President of Piaggio Aero Industries S.p.A. rate at these meetings was 100 percent. from 1998 to 2014 and served as Chairman of the President of Ferretti Group and a board member The current composition of the Board of Directors is 2001 and BA SERVICE from 2000 to 2015. He was Italian Motor Sport Commission (CSAI) from 1998 to the following: also a board member and Vice President of Banca Popolare dell’Emilia Romagna in Modena from 2002 John Elkann (Chairman of the Company and to 2011 and from 2011 to 2014 respectively. The son Executive Director) – Mr. John Elkann is Chairman of Ferrari’s founder Enzo Ferrari, Mr. Piero Ferrari and Chief Executive Officer of Exor and Chairman covered a variety of management positions in the of Stellantis N.V. Mr. Elkann obtained a scientific motor sport division of Ferrari from 1970 to 1988 baccalaureate from the Lycée Victor Duruy in Paris with increasing responsibilities. His first position with and graduated in Engineering from Politecnico, the Ferrari dates back to 1965 working on the production Engineering University of Turin. While at university, of the Dino 206 Competizione racing car. Mr. Piero he gained work experience in various companies of Ferrari received an honorary degree in Aerospace the Fiat Group in the UK and Poland (manufacturing) Engineering from the University of Naples Federico as well as in France (sales and marketing). He started II in 2004 and an Honorary Degree in Mechanical his professional career in 2001 at General Electric Engineering from the University of Modena and as a member of the Corporate Audit Staff, with Reggio Emilia in 2005. In 2004, Mr. Piero Ferrari was assignments in Asia, the USA and Europe. John Elkann awarded the title of Cavaliere del Lavoro. is Chairman of Giovanni Agnelli B.V. He is Chairman of GEDI Gruppo Editoriale S.p.A. and board member of Born in 1945, Italian citizenship. PartnerRe Ltd. Mr. Elkann is a trustee of MoMA. He also serves as Chairman of the Giovanni Agnelli Foundation. Sergio Duca (Chairman of the Board of Directors and Born in 1976, Italian citizenship. a member of the Statutory Auditors of BasicNet S.p.A. Senior Non-Executive Director) – Mr. Sergio Duca is since 2017, independent director of OSAI Automation Benedetto Vigna – Mr. Benedetto Vigna is Acting Chief System S.p.A. since November 2020 and a director Executive Officer since September 2021. Before joining of Tofaş Türk Otomobil Fabrikasi Anonim Şirketi, as Ferrari, he was President of STMicroelectronics’, well as Chairperson of the corporate governance Analog, MEMS and Sensors Group, since January 2016 committee, member of the risk management and also a member of ST’s Executive Committee from committee and member of the audit committee of the May 31, 2018. Mr. Vigna joined ST in 1995 and founded board of directors of Tofaş Türk Otomobil Fabrikasi ST’s MEMS activities (Micro-Electro-Mechanical Anonim Şirketi. He also serves as member of the board Systems). Under his guidance, ST’s MEMS sensors of Nedcommunity association since May 2019 and established ST’s leadership with large OEMs in motion- Chairman of the board of auditors of the Fondazione activated user interfaces. His responsibilities were per la Scuola of Compagnia di San Paolo and ISPI expanded to include connectivity, imaging and power (Institute for the Study of International Politics), as well solutions and he piloted a series of successful moves as a member of the board of auditors of the Intesa into new business areas, with a particular focus on the San Paolo Foundation Onlus. Mr. Duca has previously industrial and automotive market segments. During his served as Chairman of the Board of Statutory Auditors career Mr. Vigna has filed more than 200 patents on of Enel S.p.A. from April 2010 until May 2019, Chairman micromachining, authored numerous publications and of the Board of Directors of Orizzonte SGR S.p.A. from has sat on the boards of several EU-funded programs 2008 until 2016, Chairman of the Board of Statutory including start ups as well as worldwide recognized Auditors of Exor S.p.A. until May 2015, Chairman of boards of Asian and American research centers. the Board of Statutory Auditors and effective auditor Mr. Vigna graduated in Subnuclear Physics from the of GTech until April 2015, member of the Board of University of Pisa. ASTM S.p.A. and Chairman of the Audit Committee of ASTM S.p.A. from 2010 until 2013, Chairman of the Born in 1969, Italian citizenship. Board of Statutory Auditors of Tosetti Value SIM and 132 FERRARI N.V.AR 2021an independent director of Sella Gestione SGR until From 2003 until 2008 she worked at Gucci, Italy, first April 2010. From 1997 until July 2007, Mr. Duca was as Assistant to the President and Managing Director the Chairman of PricewaterhouseCoopers S.p.A. In and, from 2005, as Strategic Planning Director and addition, he has previously served as Chairman of Associate Worldwide Merchandising Director. In the board of auditors of the Silvio Tronchetti Provera 2008, she joined Bottega Veneta, Italy, as Worldwide Foundation, Chairman of the board of auditors of Merchandising Director and from 2010 she became Compagnia di San Paolo until May 2016, member of the Worldwide Merchandising-Communication Director Edison Foundation’s advisory board and the University based in Switzerland. From 1999 until 2002, Mrs. Bocconi in Milan’s development committee, as well as Bellettini worked in the Prada Group, Italy, first in the Chairman of the Bocconi’s Alumni Association’s board Planning and New Business Development Division of of auditors and a member of the board of auditors Prada and, in 2002, as Operations Manager of Helmut of the ANDAF (Italian Association of Chief Financial Lang. Previously, she worked in Compass Partners Officers). As a certified chartered accountant and International, UK from 1998 to 1999, in Deutsche auditor, he acquired broad experience through the Morgan Grenfell, UK from 1996 to 1998 and in PricewaterhouseCoopers network as the external Goldman Sachs International, UK from 1994 to 1996. auditor of a number of significant Italian listed While graduating, she interned at Citibank, Italy in 1994. companies. Mr. Duca graduated with honors Mrs. Bellettini graduated in Business Administration in Economics and Business from University Bocconi with a major in Finance from Bocconi University, Italy. in Milan. Born in 1947, Italian citizenship. Born in 1970, Italian citizenship. Eddy Cue (non-executive Director) – Mr. Eddy Cue is Delphine Arnault (non-executive Director) – Mrs. Apple’s senior vice president of Services, reporting Delphine Arnault graduated from the EDHEC Business to CEO Tim Cook. Mr. Cue oversees the full range of School and the London School of Economics. She Apple’s services, including Apple Music, Apple News, began her career at McKinsey & Company, the Apple Podcasts, the Apple TV app, and Apple TV+, global management consultancy firm, where she as well as Apple Pay, Apple Card, Maps, Search Ads, was a Consultant for two years. In 2001, she joined Apple’s iCloud services, and Apple’s productivity and the Executive Committee of Christian Dior Couture creativity apps. Mr. Cue’s team has an excellent track where she directed several product lines. She was record of building and strengthening world-class appointed Deputy General Manager of Christian services that meet and exceed the high expectations Dior Couture in 2008 and in September 2013 Deputy of Apple’s customers, and offer creators and General Manager of Louis Vuitton Malletier. She has storytellers the opportunity to bring their creative been a board director of LVMH Moët Hennessy Louis visions to people around the world. Mr. Cue joined Vuitton SE since 2003. Delphine was appointed to Apple in 1989. Mr. Cue was instrumental in creating the board of Château Cheval Blanc, the Saint-Emilion the Apple online store in 1998, the iTunes Store in premier grand cru classé in 2008. In 2002 she joined 2003, and the App Store in 2008. He also played a key the board of Loewe, the celebrated Spanish leather role in developing Apple’s award-winning iLife suite goods company, and was appointed to Pucci’s board of applications. In his early years at Apple, he was a of directors in 2007. She was appointed to the boards successful manager of software engineering and of Céline in December 2011 and Christian Dior SE in customer support teams. Mr. Cue earned a bachelor’s April 2012. Delphine Arnault previously served as a degree in Computer Science and Economics from director of both Havas and 21st Century Fox from 2013 Duke University. He serves on the Board of Trustees of to 2019. In 2021, she has been appointed to the Board both the Paley Center for Media and Duke University. of Gagosian and Phoebe Philo Limited. Born in 1975, French citizenship. Born in 1964, American citizenship. John Galantic (non-executive Director) – John Francesca Bellettini (non-executive Director) – Mrs. Galantic is President and Chief Operating Officer of Francesca Bellettini is President and Chief Executive Chanel Inc. Galantic obtained a Bachelor’s degree Officer of Yves Saint Laurent (part of the Kering from Tufts University and Master’s degree in Business Group), based in France, since September 2013. Mrs. Administration from Harvard Business School. He Bellettini is a member of the Kering Group Executive began his career at Procter and Gamble and worked Committee since 2013. Mrs. Bellettini joined the Kering in various Marketing and Sales roles in Italy, the UK and Group in 2003, serving in several executive roles. US. After stints at GlaxoSmithKline in global Marketing 133 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ BOARD OF DIRECTORS and at Coty Beauty, as President of Coty Americas, BOARD REGULATIONS he joined Chanel in 2006. He joined the board of Chanel in 2018. Galantic has also been on the board of The current regulations of the Board of Directors deal Bacardi Limited since 2011. Since 2017, he has been with matters that concern the Board of Directors and on the board of the Chanel Fondation, a philanthropic its committees internally. organization focused on women and girls. Born in 1961, American citizenship. manner in which meetings of the Board of Directors The regulations contain provisions concerning the are called and held, including the decision-making Maria Patrizia Grieco (non-executive Director) – Mrs. process. The regulations provide that meetings may Maria Patrizia Grieco has been the Chairperson of be held by telephone conference or video-conference, the board of directors of Banca Monte dei Paschi di provided that all participating Directors can follow the Siena since May 2020, after having gained experience proceedings and participate in real time discussion of in the financial sector during the six years spent the items on the agenda. on the board of directors of Anima Holding. From May 2014 to May 2020 she was the Chairperson of The Board of Directors can only adopt valid the board of directors of Enel, the Italian company resolutions when the majority of the Directors world leader in the utilities sector. After graduating in office shall be present at the meeting or be in law from the University of Milan, she started her represented thereat. career in 1977 at Italtel, where in 1994 she became chief of the Legal and General Affairs directorate. A Director may only be represented by another In 1999, she was appointed General Manager with Director authorized in writing. A Director may not act the task of reorganizing and repositioning the as a proxy for more than one other Director. company, and in 2002 she became Chief Executive Officer. Subsequently, she held the positions of Chief All resolutions shall be adopted by the favorable Executive Officer of Siemens Informatica, Partner vote of the majority of the Directors present or of Value Partners and Chief Executive Officer of represented at the meeting, provided that the the Group Value Team (today NTT Data). From 2008 regulations may contain specific provisions in this to 2013 she was Chief Executive Officer of Olivetti, respect. Each Director shall have one vote. where she also held the role of Chairperson from 2011. She has been a member of the boards of The Board of Directors shall be authorized to directors of Fiat Industrial and CIR and currently adopt resolutions without convening a meeting if serves on the boards of Ferrari, Amplifon and Endesa all Directors shall have expressed their opinions in S.A. Mrs. Grieco is also Chair of Assonime and is writing, unless one or more Directors shall object in a member of the board of directors of Bocconi writing against the resolution being adopted in this University. Maria Patrizia Grieco was appointed way prior to the adoption of the resolution. Chairperson of the Italian Corporate Governance Committee in 2017. The Committee’s purpose is to THE AUDIT COMMITTEE promote good corporate governance practices of Italian listed companies. The Audit Committee is responsible, inter alia, for assisting and advising the Board of Directors, and Born in 1952, Italian citizenship. acting under authority delegated by the Board of Directors, with respect to: (i) the integrity of the Adam Keswick (non-executive Director) – Mr. Adam Company’s financial statements, (ii) the Company’s Keswick first joined the Jardine Matheson Group policy on tax planning, (iii) the Company’s financing, in 2001 and was appointed to the Board of Jardine (iv) the Company’s application of information and Matheson in 2007. He was Deputy Managing Director communication technology, (v) the systems of internal of Jardine Matheson from 2012 to 2016, and became controls that management and the Board of Directors chairman of Matheson & Co. in 2016. Mr. Keswick is have established, (vi) the Company’s compliance with a director of Dairy Farm, Hongkong Land, Jardine legal and regulatory requirements, (vii) the Company’s Strategic and Mandarin Oriental. He is also Vice- compliance with recommendations and observations Chairman of the Supervisory Board of Rothschild & Co. of internal and independent auditors, (viii) the and is a Director of Yabuli China Entrepreneurs Forum. Company’s policies and procedures for addressing certain actual or perceived conflicts of interest, (ix) Born in 1973, British citizenship. the review and approval of related party transactions, 134 FERRARI N.V.AR 2021(x) the independent auditors’ qualifications, THE COMPENSATION COMMITTEE independence, remuneration and any non-audit services for the Company, (xi) the functioning of the The Compensation Committee is responsible for, Company’s internal auditors and of the independent among other things, assisting and advising the auditors, (xii) risk management guidelines and policies, Board of Directors, and acting under authority and (xiii) the implementation and effectiveness of the delegated by the Board of Directors ,with respect to: Company’s ethics and compliance program. (i) determining executive compensation consistent with the Company’s remuneration policy, (ii) reviewing The Audit Committee currently consists of Mr. Duca and approving the remuneration structure for the (Chairperson), Mrs. Bellettini and Mrs. Grieco, each executive Directors, (iii) administering equity incentive of whom is independent within the meaning of plans and deferred compensation benefit plans, (iv) the Dutch Corporate Governance Code. The Audit discussing with management the Company’s policies Committee is elected by the Board of Directors and is and practices related to compensation and issuing comprised of at least three non-executive Directors. recommendations thereon, and (v) to prepare the Audit Committee members are also required (i) not compensation report. to have any material relationship with the Company or to serve as auditors or accountants for the The Compensation Committee currently consists of Company, (ii) to be “independent”, for purposes of Mr. Galantic (Chairperson), Mr. Cue and Mr. Ferrari. NYSE rules, Rule 10A-3 of the Exchange Act and the The Compensation Committee is elected by the Board Dutch Corporate Governance Code, and (iii) to be of Directors and is comprised of at least three non- “financially literate” and have “accounting or selected executive Directors, at most one of whom may not financial management expertise” (as determined be independent under Dutch Corporate Governance by the Board of Directors). At least one member of Code. Unless decided otherwise by the Compensation the Audit Committee shall be a “financial expert” as Committee, the Head of Human Resources of the defined by the Sarbanes-Oxley Act and the rules of the Company attends its meetings. U.S. Securities and Exchange Commission and section 2(3) of the Dutch Decree on the Establishment of an In 2021 the Compensation Committee met twice audit committee. No Audit Committee member may with 100 percent attendance of its members at such serve on more than four audit committees for other meeting. The Compensation Committee reviewed public companies, absent a waiver from the Board of the compensation report. Further information on Directors, which must be disclosed in the Company’s the activities of the Compensation Committee are annual report. Unless decided otherwise by the Audit included in the compensation report. Committee, the independent auditors of the Company, the Chief Financial Officer and the Head of Internal THE ESG COMMITTEE Audit are required to attend its meetings, while the Chief Executive Officer is free, but not required, to The ESG Committee (formerly the Governance and attend the meetings of the Audit Committee, unless Sustainability Committee) is responsible for, among the Audit Committee determines otherwise, and shall other things, assisting and advising the Board of attend the meetings of the Audit Committee if the Directors, and acting under authority delegated by Audit Committee so requires. The Audit Committee the Board of Directors, with respect to: (i) drawing up shall meet with the independent auditor at least the selection criteria and appointment procedures once per year outside the presence of the executive for members of the Board of Directors; (ii) periodic Directors and management. assessment of the size and composition of the Board of Directors and as appropriate making proposals for In 2021 the Audit Committee met six times and the a composition profile of the Board of Directors; (iii) average attendance rate was 88.89 percent. At these periodic assessment of the performance of individual meetings several matters were discussed, including directors and reporting this to the Board of Directors; the audit committee role and responsibilities, the (iv) proposals to the non-executive members of Company’s financial control and risk framework, risk the Board of Directors for the nomination and assessment, internal control over financial reporting re-nomination of directors to be elected by the pursuant to the applicable rules, and a financial shareholders; (v) supervision of the policy on the overview of operating results. selection and appointment criteria for senior management and on succession planning; and (vi) monitoring, evaluation and reporting on the strategy, targets, achievements, disclosures and reports 135 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ THE ESG COMMITTEE relating to ESG matters globally of the Company be entitled otherwise. Notwithstanding the above, and its subsidiaries. On December 14, 2021 the no indemnification shall be made in respect of any Board of Directors changed the name of the former claim, issue or matter as to which any of the above- Governance and Sustainability Committee into ESG mentioned indemnified persons shall be adjudged to Committee and approved a new committee charter be liable for gross negligence or willful misconduct effective as of the same date. in the performance of such person’s duty to Ferrari. The ESG Committee consists of Mr. Elkann insurance for the members of the Board of Directors (Chairperson), Mrs. Arnault and Mr. Cue. The ESG and certain other officers, substantially in line with Committee is elected by the Board of Directors and that purchased by similarly situated companies. Ferrari has purchased directors’ and officers’ liability is comprised of at least three Directors. At least more than half of the members shall be independent under CONFLICT OF INTEREST the Dutch Corporate Governance Code, and at most one of the members may be an executive Director. A Director shall not participate in discussions and decision making of the Board of Directors with In 2021 the ESG Committee met once with 100 respect to a matter in relation to which he or she has percent attendance of its members at such a direct or indirect personal interest that is in conflict meeting. The Committee reviewed the Board of with the interests of the Company and the business Directors’ and Committee’s assessments, the associated with the Company (“Conflict of Interest”), Sustainability achievement and objectives, and the which shall be determined outside the presence recommendations for Directors’ election. of the director concerned. All transactions, where there is a Conflict of Interest, must be concluded on In addition, as described above, the charters of the terms that are customary in the branch concerned Audit Committee, Compensation Committee and ESG and approved by the Board of Directors. In addition, Committee set forth independence requirements for the Board of Directors as a whole may, on an ad hoc their members for purposes of the Dutch Corporate basis, resolve that there is such a strong appearance Governance Code. Audit Committee members are of a Conflict of Interest of an individual Director in also required to qualify as independent for purposes relation to a specific matter, that it is deemed in the of NYSE rules and Rule 10A-3 of the Exchange Act. best interest of a proper decision making process that such individual Director be excused from INDEMNIFICATION OF DIRECTORS participation in the decision making process with respect to such matter even though such Director Under Dutch law, indemnification provisions may be may not have an actual Conflict of Interest. included in a company’s articles of association. Under the Articles of Association, the Company is required At least annually, each Director shall assess in good to indemnify any and all of its Directors, officers, faith whether (i) he or she is independent under (A) former Directors, former officers and any person best practice provision 2.1.8 of the Dutch Corporate who may have served at its request as a director or Governance Code, (B) the requirements of Rule 10A-3 officer of another company in which it owns shares under the Exchange Act, and (C) Section 303A of the or of which it is a creditor, who were or are made a NYSE Listed Company Manual; and (ii) he or she would party or are threatened to be made a party to or are have a Conflict of Interest in connection with any involved in, any threatened, pending or completed transactions between the Company and a significant action, suit or proceeding, whether civil, criminal, shareholder or related party of the Company, administrative, arbitrative or investigative (each a including affiliates of a significant shareholder “Proceeding”), or any appeal in such a Proceeding (such conflict, a “Related-Party Conflict”), it being or any inquiry or investigation that could lead to understood that currently Exor N.V. (“Exor”) would be such a Proceeding, against any and all liabilities, considered a significant shareholder. damages, reasonable and documented expenses (including reasonably incurred and substantiated The Directors shall inform the Board of Directors attorneys’ fees), financial effects of judgments, fines, through the Senior Non-executive Director or the penalties (including excise and similar taxes and Secretary of the Board of Directors as to all material punitive damages) and amounts paid in settlement information regarding any circumstances or in connection with such Proceeding by any of them. relationships that may impact their characterization Such indemnification shall not be deemed exclusive as “independent,” or impact the assessment of their of any other rights to which those indemnified may interests, including by responding promptly to the 136 FERRARI N.V.AR 2021annual D&O questionnaires circulated by or on Common Share. Pursuant to the Terms and Conditions behalf of the Secretary that are designed to elicit of the Special Voting Shares (“Terms and Conditions”), relevant information regarding business and other and for so long as the Ferrari common shares remain relationships. in the Loyalty Register, such Ferrari common shares shall not be sold, disposed of, transferred, except in Based on each Director’s assessment described very limited circumstances - i.e., transfers to affiliates above, the Board of Directors shall make a or to relatives through succession, donation or other determination at least annually regarding such transfers (defined in the Terms and Conditions as Director’s independence and such Director’s Related- “Loyalty Transferee”) - but a shareholder may create or Party Conflict. These annual determinations shall permit to exist any pledge, lien, fixed or floating charge be conclusive, absent a change in circumstances or other encumbrance over such Ferrari common from those disclosed to the Board of Directors, that shares, provided that the voting rights in respect of necessitates a change in such determination. such Ferrari common shares and any corresponding special voting shares remain with such shareholder at Mr. Elkann is Chief Executive Officer of Exor, our and all times. Ferrari’s shareholders who want to directly Stellantis’s largest shareholder, and an executive or indirectly sell, dispose of, trade or transfer such director of Stellantis. Stellantis, Exor and a number Ferrari common shares or otherwise grant any of companies in the Stellantis and Exor groups are right or interest therein, or create or permit to exist related parties to Ferrari. See “Risk Factors–We may any pledge, lien, fixed or floating charge or other have potential conflicts of interest with Stellantis and encumbrance over such Ferrari common shares with Exor and its related companies” and Note 28 “Related a potential transfer of voting rights relating to such Party Transactions” to our Consolidated Financial encumbrances will need to submit a de-registration Statements. Finally, Mr. Ferrari controls COXA S.p.A, request as referred to in the Terms and Conditions, from which Ferrari purchases components for in order to transfer the relevant Ferrari common Formula 1 racing cars, and HPE S.r.l., which provides shares to the regular trading system (the “Regular consultancy engineering services to Ferrari, see Note Trading System”) except that a Ferrari shareholder 28 to our Consolidated Financial Statements. may transfer Ferrari common shares included in the LOYALTY VOTING STRUCTURE Loyalty Register to a Loyalty Transferee (as defined in the Terms and Conditions) of such Ferrari shareholder without transferring such shares from the Loyalty In connection with the separation from Fiat Chrysler Register to the Regular Trading System. Automobiles N.V., Ferrari issued special voting shares with a nominal value of one Euro cent (€0.01) per share Ferrari’s shareholders who seek to qualify to receive to FCA, Piero Ferrari and FCA shareholders holding special voting shares can also request to have their FCA special voting shares prior to the separation Ferrari common shares registered in the Loyalty including Exor, in addition to Ferrari common shares. Register. Upon registration in the Loyalty Register such shares will be eligible to be treated as Qualifying As of February 14, 2022, Exor held approximately Common Shares, provided they meet the conditions. 24.21 percent of our outstanding common shares and approximately 36.00 percent of the voting power in Notwithstanding the fact that Article 13 of the Ferrari us, Piero Ferrari held approximately 10.30 percent of Articles of Association permits the Board of Directors our outstanding common shares and approximately of Ferrari to approve transfers of special voting 15.31 percent of the voting power in us and public shares, the special voting shares cannot be traded and shareholders hold approximately 48.69 percent of are transferable only in very limited circumstances (i.e., the voting power in us. The percentages of voting to a Loyalty Transferee described above, or to Ferrari power above are calculated based on the number of for no consideration (om niet)). outstanding shares net of treasury shares. Subject to meeting certain conditions, our common Association, Ferrari shall maintain a special capital shares can be registered in our loyalty register (the reserve to be credited against the share premium “Loyalty Register”) and all such common shares may exclusively for the purpose of facilitating any issuance qualify as qualifying common shares (“Qualifying or cancellation of special voting shares. The special Common Shares”). The holder of Qualifying Common voting shares shall be issued and paid up against this Pursuant to Article 23 of the Ferrari Articles of Shares is entitled to receive without consideration one special capital reserve. special voting share in respect of each such Qualifying 137 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ LOYALTY VOTING STRUCTURE The special voting shares have immaterial economic Shares or the relevant Ferrari common shares in entitlements. Such economic entitlements are the Loyalty Register. The voting rights attached to designed to comply with Dutch law but are immaterial the special voting shares issued and allocated in for investors. The special voting shares carry the respect of the relevant Qualified Common Shares same voting rights as Ferrari common shares. will be suspended upon a direct or indirect change of control in respect of the relevant holder of such Section 10 of the Terms and Conditions include Qualifying Common Shares that are registered in the liquidated damages provisions intended to deter Loyalty Register. any attempt by holders to circumvent the terms of the special voting shares. Such liquidated For the purposes of this section a “change of control” damages provisions may be enforced by Ferrari by shall mean, in respect of any Ferrari shareholder that means of a legal action brought by Ferrari before is not an individual (natuurlijk persoon), any direct competent courts of Amsterdam, the Netherlands. In or indirect transfer in one or a series of related particular, a violation of the provisions of the Terms transactions as a result of which (i) a majority of the and Conditions concerning the transfer of special voting rights of such shareholder, (ii) the de facto voting shares, Electing Common Shares (common ability to direct the casting of a majority of the votes shares registered in the Loyalty Register for the exercisable at general meetings of shareholders of purpose of becoming Qualifying Common Shares in such shareholder and/or (iii) the ability to appoint accordance with the Ferrari Articles of Association) or remove a majority of the directors, executive and Qualifying Common Shares may lead to the directors or board members or executive officers imposition of liquidated damages. Because we expect of such shareholder or to direct the casting of a the restrictions on transfers of the special voting majority or more of the voting rights at meetings of shares to be effective in practice we do not expect the the board of directors, governing body or executive liquidated damages provisions to be used. committee of such shareholder has been transferred to a new owner, provided that no change of control Pursuant to Section 12 of the Terms and Conditions, shall be deemed to have occurred if (a) the transfer any amendment to the Terms and Conditions (other of ownership and/or control is an intra-group than merely technical, non-material amendments transfer under the same parent company, (b) the and unless such amendment is required to ensure transfer of ownership and /or control is the result of compliance with applicable law or regulations or the succession or the liquidation of assets between the listing rules of any securities exchange on which spouses or the inheritance, inter vivos donation or the Ferrari common shares are listed) may only be other transfer to a spouse or a relative up to and made with the approval of the general meeting of including the fourth degree or (c) the fair market shareholders of Ferrari. value of the Qualifying Common Shares held by such shareholder represents less than twenty percent At any time, a holder of Qualifying Common Shares (20 percent) of the total assets of the Transferred or Electing Common Shares may request the de- Group at the time of the transfer and the Qualifying registration of such shares from the Loyalty Register Common Shares held by such shareholder, in the to enable free trading thereof in the Regular Trading sole judgment of the Company, are not otherwise System. Upon the de-registration from the Loyalty material to the Transferred Group or the change of Register, such shares will cease to be Electing control transaction. “Transferred Group” shall mean Common Shares or Qualifying Common Shares as the relevant shareholder together with its affiliates, the case may be and will be freely tradable and voting if any, over which control was transferred as part of rights attached to the corresponding special voting the same change of control transaction within the shares will be suspended with immediate effect and meaning of the definition of change of control. such special voting shares shall be transferred to Ferrari for no consideration (om niet). If Ferrari is dissolved and liquidated, whatever remains of Ferrari’s equity after all its debts have A shareholder who is a holder of Qualifying Common been discharged shall first be applied to distribute Shares or Electing Common Shares must promptly the aggregate balance of share premium reserves notify the Agent and Ferrari upon the occurrence of and other reserves (other than the special dividend a “change of control” as defined in the Ferrari Articles reserve), to holders of Ferrari common shares of Association, as described below. The change of in proportion to the aggregate nominal value of control will trigger the de-registration of the relevant the Ferrari common shares held by each holder; Electing Common Shares or Qualifying Common secondly, from any balance remaining, an amount 138 FERRARI N.V.AR 2021equal to the aggregate amount of the nominal value shares, representing approximately 24.62 percent of the Ferrari common shares will be distributed to of the aggregate issued share capital. the holders of Ferrari common shares in proportion b. The Company has imposed no limitations on to the aggregate nominal value of Ferrari common the transfer of common shares. The Articles of shares held by each of them; thirdly, from any balance Association provide in Article 13 for transfer remaining, an amount equal to the aggregate amount restrictions for special voting shares. of the special voting shares dividend reserve will be c. For information on participations in the Company’s distributed to the holders of special voting shares capital in respect of which pursuant to Sections in proportion to the aggregate nominal value of the 5:34, 5:35 and 5:43 of the Dutch Financial special voting shares held by each of them; fourthly, Supervision Act (Wet op het financieel toezicht) from any balance remaining, the aggregate amount notification requirements apply, please refer to of the nominal value of the special voting shares will the chapter “Major Shareholders” of this Annual be distributed to the holders of special voting shares Report. There you will find a list of Shareholders in proportion to the aggregate nominal value of the who are known to the Company to have holdings of special voting shares held by each of them; and, 3 percent or more at the stated date. lastly, any balance remaining will be distributed to d. No special control rights or other rights accrue to the holders of Ferrari common shares in proportion shares in the capital of the Company. to the aggregate nominal value of Ferrari common e. A mechanism for verifying compliance with a shares held by each of them. DISCLOSURES PURSUANT TO DECREE ARTICLE 10 EU-DIRECTIVE ON TAKEOVERS scheme allowing employees to subscribe for or to acquire shares in the capital of the company or a subsidiary if the employees do not arrange for such verification directly is not applicable to the Company. f. No restrictions apply to voting rights attached In accordance with the Dutch Besluit artikel 10 to shares in the capital of the Company, nor are overnamerichtlijn (the “Decree”), the Company makes there any deadlines for exercising voting rights. the following disclosures: The Articles of Association allow the Company to cooperate in the issuance of registered depositary a. For information on the capital structure of the receipts for common shares, but only pursuant to Company, the composition of the issued share a resolution to that effect of the Board of Directors. capital and the existence of the two classes of The Company is not aware of any depository shares, please refer to Note 14 to the Company receipts having been issued for shares in its Financial Statements in this Annual Report. For capital. information on the rights attached to the common g. The Company is not aware of the existence of any shares, please refer to the Articles of Association agreements with Shareholders which may result in which can be found on the Company’s website. To restrictions on the transfer of shares or limitation summarize, the rights attached to common shares of voting rights except for the shareholders’ comprise pre-emptive rights upon issuance of agreement, dated December 23, 2015 between common shares, the entitlement to attend to the Exor (formerly Exor S.p.A.) and Piero Ferrari, which general meeting of Shareholders and to speak became effective upon the completion of the and vote at that meeting and the entitlement to Separation on January 3, 2016 (the “Shareholders’ distributions of such amount of the Company’s Agreement”). The Shareholders’ Agreement profit as remains after allocation to reserves. includes certain preemption rights of Exor in the For information on the rights attached to the event of a proposed transfer of common shares special voting shares, please refer to the Articles by Piero Ferrari, and certain rights of first offer of of Association and the Terms and Conditions Piero Ferrari in the event of a proposed transfer for the Special Voting Shares which can both of common shares by Exor, in each case subject be found on the Company’s website and more to the exceptions set forth in the Shareholders’ in particular to the paragraph “Loyalty Voting Agreement. The Shareholders’ Agreement will Structure” of this Annual Report in the chapter remain in force until the fifth anniversary of the “Corporate Governance”. As at December 31, 2021, Separation provided that if neither of the parties the issued share capital of the Company consisted to the Shareholders’ Agreement terminates the of 193,923,499 common shares, representing Shareholders’ Agreement within six months before approximately 75.38 percent of the aggregate the end of the initial term, then the Shareholders’ issued share capital, and 63,349,112 special voting Agreement shall be renewed automatically for 139 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ DISCLOSURES PURSUANT TO DECREE ARTICLE 10 EU-DIRECTIVE ON TAKEOVERS another five year term. Since neither of the parties necessary in the opinion of the Board of Directors. to the Shareholders’ Agreement terminated it This authorization is limited in respect of special within six months before January 3, 2021, the voting shares to a maximum aggregate amount Shareholders’ Agreement was automatically of special voting shares as provided for in the renewed for another five year term and, therefore, Company’s authorized share capital as set out until January 3, 2026. in the Company’s Articles of Association. The h. The rules governing the appointment and dismissal authorization was granted for a period starting of members of the Board of Directors are stated from the date on which the prior authorization in the Articles of Association of the Company. All expires and therefore from January 2, 2021 up members of the Board of Directors are appointed to and including October 15, 2021. The Board of by the general meeting of Shareholders. The term Directors was also designated for the same period of office of all members of the Board of Directors as the authorized body to limit or exclude the rights is for a period of approximately one year after of pre-emption of shareholders in connection with appointment, such period expiring on the day the the authority of the Board of Directors to issue first Annual General Meeting of Shareholders is common shares and grant rights to subscribe for held in the following calendar year. The general common shares as referred to above. Pursuant to meeting of Shareholders has the power to the resolution of the Annual General Meeting held suspend or dismiss any member of the Board on April 15, 2021, the Board of Directors has been of Directors at any time. The rules governing an further authorized to issue shares in the capital amendment of the Articles of Association are of the Company and to grant rights to subscribe stated in the Articles of Association and require a for shares in the capital of the Company. This resolution of the general meeting of Shareholders authorization is limited in respect of common which can only be passed pursuant to a prior shares to 10 percent of the issued common shares proposal of the Board of Directors. for general corporate purposes as of the date i. The general powers of the Board of Directors of the 2021 Annual General Meeting (i.e. April 15, are stated in the Articles of Association of the 2021), which can be used for any and all purposes Company. For a period of five (5) years from necessary in the opinion of the Board of Directors. January 2, 2016, the Board of Directors has been This authorization is limited in respect of special irrevocably authorized to issue shares up to voting shares to up to 10% of the maximum the maximum aggregate amount of shares as aggregate amount of special voting shares as provided for in the Company’s authorized share provided for in the Company’s authorized share capital as set out in Article 4.1 of the Articles of capital as set out in the Company’s Articles of Association, as amended from time to time. The Association. The authorization has been granted Board of Directors has also been designated for a period of 18 months starting from the date of for the same period as the authorized body to the 2021 Annual General Meeting of Shareholders limit or exclude the rights of pre-emption of on April 15, 2021 up to and including October shareholders in connection with the authority of 14, 2022. The Board of Directors has also been the Board of Directors to issue common shares designated for the same period as the authorized and grant rights to subscribe for common shares body to limit or exclude the rights of pre-emption as referred to above. Pursuant to the resolution of shareholders in connection with the authority of the Annual General Meeting held on April 16, of the Board of Directors to issue common shares 2020, the Board of Directors was authorized to and grant rights to subscribe for common shares issue shares in the capital of the Company and to as referred to above. In the event of an issuance of grant rights to subscribe for shares in the capital special voting shares, shareholders have no right of the Company. This authorization is limited in of pre-emption. The Company has the authority respect of common shares to (i) 10 percent of to acquire fully paid-up shares in its own share the issued common shares for general corporate capital, provided that such acquisition is made purposes as of the date of the 2020 Annual General for no consideration. Further rules governing the Meeting (i.e. April 16, 2020), which can be used acquisition of shares by the Company in its own for any and all purposes, plus (ii) an additional 10 share capital are set out in article 8 of the Articles percent of the issued common shares as of such of Association. date if the issuance occurs on the occasion of j. The Company is not a party to any significant the acquisition of an enterprise or a corporation, agreements which will take effect, will be altered or, if such issuance and/or the granting of rights or will be terminated upon a change of control of to subscribe for common shares is otherwise the Company as a result of a public offer within 140 FERRARI N.V.AR 2021the meaning of Section 5:70 of the Dutch Financial All convocations of general meetings of shareholders Supervision Act (Wet op het financieel toezicht ), and all announcements, notifications and provided that certain of the loan agreements communications to shareholders shall be made entered into by the Company contain clauses by means of an announcement on the Company’s that, as is customary for financing agreements corporate website and such announcement shall of similar type, may require early repayment or remain accessible until the relevant general meeting termination in the event of a change of control of of shareholders. Any communication to be addressed the Company. to the general meeting of shareholders by virtue of k. The Company did not enter into any agreement Dutch law or the Articles of Association, may be either with a director or employee of the Company included in the notice, referred to in the preceding providing for a payment / distribution upon sentence or, to the extent provided for in such notice, termination of employment as a result of a public on the Company’s corporate website and/or in a offer within the meaning of article 5:70 of the Dutch document made available for inspection at the office Financial Supervision Act. of the Company and such other place(s) as the Board GENERAL MEETING OF SHAREHOLDERS At least one general meeting of shareholders shall be may be sent to Shareholders through the use of an held every year, which meeting shall be held within six electronic means of communication to the address months after the close of the financial year. provided by such Shareholders to the Company for Convocations of general meetings of shareholders of Directors shall determine. Furthermore, general meetings of shareholders shall this purpose. be held in the case referred to in Section 2:108a of the The notice shall state the place, date and hour of the Dutch Civil Code as often as the Board of Directors, meeting and the agenda of the meeting as well as the the Chairman or the Chief Executive Officer deems other data required by law. it necessary to hold them or as otherwise required by Dutch law, without prejudice to what has been An item proposed in writing by such number of provided in the next paragraph hereof. Shareholders who, by Dutch law, are entitled to make such proposal, shall be included in the notice Shareholders solely or jointly representing at least or shall be announced in a manner similar to the ten percent (10 percent) of the issued share capital announcement of the notice, provided that the may request the Board of Directors, in writing, to call a Company has received the relevant request, including general meeting of shareholders, stating the matters the reasons for putting the relevant item on the to be dealt with. agenda, no later than the sixtieth day before the day of If the Board of Directors fails to call a meeting, then the meeting. such shareholders may, on their application, be Pursuant to Dutch law, the board of a listed company authorized by the interim provisions judge of the has the power to invoke a cooling-off period of up to court (voorzieningenrechter van de rechtbank) to 250 days in the event of (i) a request by one or more convene a general meeting of shareholders. The shareholders for consideration of a proposal to interim provisions judge (voorzieningenrechter appoint, suspend or dismiss one or more members van de rechtbank ) shall reject the application if he of the board, or (ii) when an unsolicited public bid is not satisfied that the applicants have previously has been announced or made for the shares of the requested the Board of Directors in writing, stating listed company. The decision by the board to invoke the exact subjects to be discussed, to convene a the cooling-off period is subject to supervisory board general meeting of shareholders. approval. To invoke the cooling-off period, the request General meetings of shareholders shall be held in the board be substantially contrary to the interest of Amsterdam or Haarlemmermeer (Schiphol Airport), the listed company and its affiliated enterprises. under i) or the public bid under ii) must in the view of the Netherlands, and shall be called by the Board of Directors, the Chairman or the Chief Executive The agenda of the annual general meeting of Officer, in such manner as is required to comply shareholders shall contain, inter alia, the following with the law and the applicable stock exchange items: regulations, not later than on the forty-second day a. adoption of the annual report; prior to the day of the meeting. b. the remuneration report; 141 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ GENERAL MEETING OF SHAREHOLDERS c. at least every four years after adoption of the of the meeting, after which the shareholders shall have remuneration policy, the remuneration policy; the opportunity to react to the minutes in the following d. the policy of the Company on additions to reserves three months. The minutes shall then be adopted in the and on dividends, if any; manner as described in the preceding paragraph. e. granting of discharge to the Directors in respect of the performance of their duties in the relevant If an official notarial record is made of the business financial year; transacted at the meeting then minutes need not be f. the appointment of Directors; drawn up and it shall suffice that the official notarial g. if applicable, the proposal to pay a dividend; record be signed by the notary. h. if applicable, discussion of any substantial change in the corporate governance structure of the As a prerequisite to attending the meeting and, to Company; and the extent applicable, exercising voting rights, the i. any matters decided upon by the person(s) shareholders entitled to attend the meeting shall be convening the meeting and any matters placed obliged to inform the Board of Directors in writing on the agenda with due observance of applicable within the time frame mentioned in the convening Dutch law. notice. At the latest this notice must be received by the Board of Directors on the day mentioned in the The Board of Directors shall provide the general convening notice. meeting of shareholders with all requested information, unless this would be contrary to an Shareholders and those permitted by Dutch law to overriding interest of the Company. If the Board of attend the general meetings of shareholders may Directors invokes an overriding interest, it must cause themselves to be represented at any meeting give reasons. by a proxy duly authorized in writing, provided they shall notify the Company in writing of their wish to be When convening a general meeting of shareholders, represented at such time and place as shall be stated the Board of Directors shall determine that, for the in the notice of the meetings. For the avoidance of purpose of Article 19 and Article 20 of the Articles of doubt, such attorney is also authorized in writing if Association, persons with the right to vote or attend the proxy is documented electronically. The Board of meetings shall be considered those persons who Directors may determine further rules concerning have these rights at the twenty-eighth day prior to the deposit of the powers of attorney; these shall be the day of the meeting (the “Record Date”) and are mentioned in the notice of the meeting. registered as such in a register to be designated by the Board of Directors for such purpose, irrespective The Company is exempt from the proxy rules under whether they will have these rights at the date of the the Exchange Act. meeting. In addition to the Record Date, the notice of the meeting shall further state the manner in which The chairman of the meeting shall decide on the shareholders and other parties with meeting rights admittance to the meeting of persons other than may have themselves registered and the manner in those who are entitled to attend. which those rights can be exercised. For each general meeting of shareholders, the The general meeting of shareholders shall be Board of Directors may decide that shareholders presided over by the Chairman or, in his absence, by shall be entitled to attend, address and exercise the person chosen by the Board of Directors to act as voting rights at such meeting through the use of chairman for such meeting. electronic means of communication, provided that shareholders who participate in the meeting are One of the persons present designated for that capable of being identified through the electronic purpose by the chairman of the meeting shall act means of communication and have direct cognizance as secretary and take minutes of the business of the discussions at the meeting and the exercising transacted. The minutes shall be confirmed by the of voting rights (if applicable). The Board of Directors chairman of the meeting and the secretary and may set requirements for the use of electronic means signed by them in witness thereof. of communication and state these in the convening The minutes of the general meeting of shareholders for each general meeting of shareholders decide shall be made available, on request, to the that votes cast by the use of electronic means of shareholders no later than three months after the end communication prior to the meeting and received notice. Furthermore, the Board of Directors may 142 FERRARI N.V.AR 2021by the Board of Directors shall be considered to be No voting rights shall be exercised in the general votes cast at the meeting. Such votes may not be cast meeting of shareholders for shares owned by the prior to the Record Date. Whether the provision of the Company or by a subsidiary of the Company. Pledgees foregoing sentence applies and the procedure for and usufructuaries of shares owned by the Company exercising the rights referred to in that sentence shall and its subsidiaries shall however not be excluded be stated in the notice. from exercising their voting rights, if the right of pledge or usufruct was created before the shares Prior to being allowed admittance to a meeting, a were owned by the Company or a subsidiary. Neither shareholder and each person entitled to attend the the Company nor any of its subsidiaries may exercise meeting, or its attorney, shall sign an attendance list, voting rights for shares in respect of which it holds a while stating his name and, to the extent applicable, right of pledge or usufruct. the number of votes to which he is entitled. Each shareholder and other person attending a meeting Without prejudice to the Articles of Association, the by the use of electronic means of communication Company shall determine for each resolution passed: and identified in accordance with the above shall a. the number of shares on which valid votes have be registered on the attendance list by the Board of been cast; Directors. In the event that it concerns an attorney of b. the percentage that the number of shares as a shareholder or another person entitled to attend referred to under a. represents in the issued share the meeting, the name(s) of the person(s) on whose capital; behalf the attorney is acting, shall also be stated. c. the aggregate number of votes validly cast; and The chairman of the meeting may decide that the d. the aggregate number of votes cast in favor of attendance list must also be signed by other persons and against a resolution, as well as the number of present at the meeting. abstentions. The chairman of the meeting may determine the time ISSUANCE OF SHARES for which shareholders and others entitled to attend the general meeting of shareholders may speak if The general meeting of shareholders or alternatively he considers this desirable with a view to the orderly the Board of Directors, if it has been designated to conduct of the meeting as well as other procedures do so by the general meeting of shareholders, shall that the chairman considers desirable for the efficient have authority to resolve on any issuance of shares and orderly conduct of the business of the meeting. and rights to subscribe for shares. The general Every share (whether common or special voting) shall designation of the Board of Directors for this purpose confer the right to cast one vote. is in force, no longer have authority to decide on the issuance of shares and rights to subscribe for shares. meeting of shareholders shall, for as long as any such Shares in respect of which Dutch law determines that no votes may be cast shall be disregarded For a period of five years from January 2, 2016 the for the purposes of determining the proportion Board of Directors has been irrevocably authorized of shareholders voting, present or represented to issue shares and rights to subscribe for shares or the proportion of the share capital present or up to the maximum aggregate amount of shares represented. as provided for in the company’s authorized share capital as set out in Article 4.1 of the Articles of All resolutions shall be passed with an absolute Association, as amended from time to time. majority of the votes validly cast unless otherwise specified in the Articles of Association. Blank votes The general meeting of shareholders or the Board shall not be counted as votes cast. of Directors if so designated in accordance with the Articles of Association, shall decide on the price and All votes shall be cast in writing or electronically. The the further terms and conditions of issuance, with chairman of the meeting may, however, determine due observance of what has been provided in relation that voting by raising hands or in another manner thereto in Dutch law and the Articles of Association. shall be permitted. Voting by acclamation shall be permitted if none of to decide on the issuance of shares or rights to the shareholders present or represented objects. subscribe for shares, such designation shall specify the class of shares and the maximum number of shares or If the Board of Directors is designated to have authority 143 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ ISSUANCE OF SHARES rights to subscribe for shares that can be issued under Payment in a currency other than euro may only be such designation. When making such designation the made with the consent of the Company. duration thereof, which shall not be for more than five years, shall be resolved upon at the same time. The The Board of Directors has also been designated as designation may be extended from time to time for the authorized body to limit or exclude the rights of periods not exceeding five years. The designation may pre-emption of shareholders in connection with the not be withdrawn unless otherwise provided in the authority of the Board of Directors to issue common resolution in which the designation is made. shares and grant rights to subscribe for common shares as referred to above. Pursuant to the resolution of the Annual General Meeting held on April 16, 2020, the Board of Directors In the event of an issuance of common shares was authorized to issue shares in the capital of the every holder of common shares shall have a right of Company and to grant rights to subscribe for shares pre-emption with regard to the common shares or in the capital of the Company. This authorization is rights to subscribe for common shares to be issued limited in respect of common shares to (i) 10 percent in proportion to the aggregate nominal value of his of the issued common shares for general corporate common shares, provided however that no such purposes as of the date of the 2020 Annual General right of pre-emption shall exist in respect of shares or Meeting (i.e. April 16, 2020), which can be used for rights to subscribe for common shares to be issued any and all purposes, plus (ii) an additional 10 percent to employees of the Company or of a group company of the issued common shares as of such date if the pursuant to any option plan of the Company. issuance occurs on the occasion of the acquisition of an enterprise or a corporation, or, if such A shareholder shall have no right of pre-emption issuance and/or the granting of rights to subscribe for shares that are issued against a non-cash for common shares is otherwise necessary in the contribution. opinion of the Board of Directors. This authorization is limited in respect of special voting shares to a In the event of an issuance of special voting shares to maximum aggregate amount of special voting qualifying shareholders, shareholders shall not have shares as provided for in the Company’s authorized any right of pre-emption. share capital as set out in the Company’s Articles of Association. The authorization was granted for The general meeting of shareholders or the Board a period starting from the date on which the prior of Directors, as the case may be, shall decide when authorization expired and therefore from January 2, passing the resolution to issue shares or rights to 2021 up to and including October 15, 2021. Pursuant subscribe for shares in which manner the shares to the resolution of the Annual General Meeting held shall be issued and, to the extent that rights of pre- on April 15, 2021, the Board of Directors has been emption apply, within what period those rights may be further authorized to issue shares in the capital of the exercised. Company and to grant rights to subscribe for shares in the capital of the Company. This authorization is CORPORATE OFFICES limited in respect of common shares to 10 percent of the issued common shares for general corporate The Company is incorporated under the laws of the purposes as of the date of the 2021 Annual General Netherlands. It has its official seat in Amsterdam, the Meeting (i.e. April 15, 2021), which can be used for Netherlands, and the place of effective management any and all purposes necessary in the opinion of of the Company is Via Abetone Inferiore n. 4 I-41053 the Board of Directors. This authorization is limited Maranello (MO) Italy. in respect of special voting shares to up to 10% of the maximum aggregate amount of special voting The business address of the Board of Directors and shares as provided for in the Company’s authorized the senior managers is Via Abetone Inferiore n. 4 share capital as set out in the Company’s Articles of I-41053 Maranello (MO) Italy. Association. The authorization has been granted for a period of 18 months starting from the date of the The Company is registered at the Dutch trade register 2021 Annual General Meeting of Shareholders on April under number 64060977. 15, 2021 up to and including October 14, 2022. Payment for shares shall be made in cash unless state for the purposes of the EU Transparency another form of consideration has been agreed. Directive (Directive 2004/109/EC, as amended). The Netherlands is the Company’s home member 144 FERRARI N.V.AR 2021INTERNAL CONTROL SYSTEM The approach adopted by the Company for the evaluation, monitoring and continuous updating of the The Company has in place an internal control system system of internal control over financial reporting, is (the “System”), based on the model provided by based on a ‘top-down, risk-based’ process consistent the COSO Framework (Committee of Sponsoring with the COSO Framework. This enables focus on Organizations of the Treadway Commission Report areas of higher risk and/or materiality, where there is – Enterprise Risk Management model) and the risk of significant errors, including those attributable principles of the Dutch Corporate Governance to fraud, in the elements of the financial statements Code, which consists of a set of policies, procedures and related documents. The key components of the and organizational structures aimed at identifying, process are: measuring, managing and monitoring the principal • identification and evaluation of the source and risks to which the Company is exposed. The System probability of material errors in elements of financial is integrated within the organizational and corporate reporting; governance framework adopted by the Company and • assessment of the adequacy of key controls in contributes to the protection of corporate assets, as enabling ex-ante or ex-post identification of potential well as to ensuring the efficiency and effectiveness of misstatements in elements of financial reporting; business processes, reliability of financial information and and compliance with laws, regulations, the Articles of • verification of the operating effectiveness of Association and internal procedures. controls based on the assessment of the risk of The System, which has been developed on the basis focused on areas of higher risk. of international best practices, relies on the so called “Three Levels of Controls Model” as referred to and Identification and evaluation of the risk of outlined in the “Risk Management Process and Internal misstatements which could have material effects Control Systems” section of this Report. on financial reporting is carried out through a risk misstatement in financial reporting, with testing PRINCIPAL CHARACTERISTICS OF THE INTERNAL CONTROL SYSTEM AND INTERNAL CONTROL OVER FINANCIAL REPORTING assessment process that uses a top-down approach to identify the organizational entities, processes and the related accounts, in addition to specific activities, which could potentially generate significant errors. Under the methodology adopted by the Company, risks and related controls are associated with the The Company has in place a system of risk accounting and business processes upon which management and internal control over financial accounting information is based. reporting based on the model provided by the COSO Framework, according to which the internal control Significant risks identified through the assessment system is defined as a set of rules, procedures and process require definition and evaluation of key tools designed to provide reasonable assurance of controls that address those risks, thereby mitigating the achievement of corporate objectives. the possibility that financial reporting will contain any material misstatements. In relation to the financial reporting process, reliability, accuracy, completeness and timeliness In accordance with international best practices, the of the information contribute to the achievement Group has two principal types of control in place: of such corporate objectives. Risk management • controls that operate at Group or subsidiary level, is an integral part of the internal control system. A such as delegation of authorities and responsibilities, periodic evaluation of the system of internal control separation of duties, and assignment of access over financial reporting is designed to ensure the rights to IT systems; and overall effectiveness of the components of the COSO • controls that operate at process level, such as Framework (control environment, risk assessment, authorizations, reconciliations, verification of control activities, information and communication, consistencies, etc. This category includes controls and monitoring) in achieving those objectives. for operating processes, controls for financial The Company has a system of administrative and carried out by captive service providers. These accounting procedures in place that ensure a high controls can be preventive (i.e., designed to prevent degree of reliability in the system of internal control errors or fraud that could result in misstatements over financial reporting. in financial reporting) or detective (i.e., designed to closing processes and cross-sector controls 145 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PRINCIPAL CHARACTERISTICS OF THE INTERNAL CONTROL SYSTEM AND INTERNAL CONTROL OVER FINANCIAL REPORTING reveal errors or fraud that have already occurred). amended to include specific guidelines relating to: They may also be classified as manual or automatic, the Environment, Health and Safety, Business Ethics such as application-based controls relating to the and Anticorruption, Suppliers, Human Resource technical characteristics and configuration of IT Management, Respect of Human Rights, Conflicts of systems supporting business activities. Interest, Community Investment, Data Privacy, Use of IT and Communications Equipment, Antitrust and An assessment of the design and operating Export Controls. effectiveness of key controls is carried out through tests performed by the Internal Audit The Code of Conduct applies to the Directors and all department, both at group and subsidiary level, using employees of the Company and its subsidiaries and sampling techniques recognized as best practices other individuals or companies that act in the name internationally. and on behalf of the Company or its subsidiaries. The assessment of the controls may require the The Company promotes adoption of the Code of definition of compensating controls and plans Conduct as a best practice standard of business for remediation and improvement. The results of conduct by partners, suppliers, consultants, monitoring are subject to periodic review by the agents, dealers and others with whom it has a manager responsible for the Company’s financial long-term relationship. In fact, the Company’s reporting and communicated by him to senior contracts worldwide include specific clauses management and to the Audit Committee (which in relating to recognition and adherence to the turn reports to the Board of Directors). principles underlying the Code of Conduct and CODE OF CONDUCT related guidelines, as well as compliance with local regulations, particularly those related to corruption, money-laundering, terrorism and other crimes We have adopted a Code of Conduct which applies to constituting liability for legal persons. all of our employees, including our principal executive, principal financial and principal accounting officers. The Company closely monitors the effectiveness of Our Code of Conduct is posted on our website at and compliance with the Code of Conduct. Violations https://corporate.ferrari.com/sites/ferrari15ipo/ of the Code of Conduct are usually determined files/codice_condotta_ferrari_eng_def.pdf. If the through, among other things: periodic activities provisions of our Code of Conduct that apply to our carried out by the Internal Audit department of the principal executive officer, principal financial officer Group; reports received in accordance with the or principal accounting officer are amended, or if a whistleblowing management procedures; and checks waiver is granted, we will disclose such amendment forming part of the standard operating procedures. or waiver. The Internal Audit department investigates violations of the Code of Conduct during standard periodic The Code of Conduct represents a set of values or specific audits. Periodic reporting is provided recognized, adhered to and promoted by the to the Chairman and CEO as well as to the Audit Company which understands that conduct based on Committee. For all Code of Conduct violations, the the principles of diligence, integrity and fairness is an disciplinary measures taken are commensurate with important driver of social and economic development. the seriousness of the case and comply with local legislation. The relevant corporate departments are The Code of Conduct is a pillar of the governance notified of violations, irrespective of whether criminal system which regulates the decision-making action is taken by the authorities. processes and operating approach of the Company and its employees in the interests of stakeholders. INSIDER TRADING POLICY The Code of Conduct amplifies aspects of conduct related to the economic, social and environmental As of January 3, 2016 the Company’s Board of dimensions, underscoring the importance of dialog Directors adopted an insider trading policy setting with stakeholders. Explicit reference is made to forth guidelines and recommendations to all the UN’s Universal Declaration on Human Rights, Directors, officers and employees of the Group with the principal Conventions of the International respect to transactions in the Company’s securities. Labor Organization (ILO), the OECD Guidelines for This policy, which also applies to immediate family Multinational Enterprises and the U.S. Foreign Corrupt members and members of the households of Practices Act (FCPA). The Code of Conduct was persons covered by the policy, is designed to prevent 146 FERRARI N.V.AR 2021insider trading or allegations of insider trading, and to protect the Company for integrity and ethical conduct. DIVERSITY POLICY PROFILE OF THE NON-EXECUTIVE DIRECTORS In respect of the composition of the Board of Directors, a profile of the non-executive Directors (the “Profile”) has been adopted by the Company. The Board of Directors adopted a diversity policy The purpose of this profile is to provide guidance for the Board of Directors (the “Diversity Policy”) with respect to the composition and expertise of the effective as of December 31, 2017, since the non-executive Directors. The Profile provides that Company believes that diversity in the composition the Board of Directors shall be composed in such of the Board of Directors in terms of age, gender, manner that its composition reflects an adequate expertise, professional background and nationality mix of technical abilities, professional background is an important mean of promoting debate, balanced and experience, both general and specific, gained in decision making and independent actions of the an international environment and pertaining to the Board of Directors. dynamics of the macro-economy and globalization of markets, more generally, as well as the industrial The Diversity Policy gives weight to the following and financial sectors, more specifically. In selecting diversity factors in Board of Directors composition: and nominating new non-executive Directors, the age, gender, expertise, work and personal Company shall ensure that such non-executive background and nationality. The Company considers Directors complement the knowledge and experience each of these aspects key drivers to support the of the other non-executive Directors. In selecting above mentioned goals and to achieve sufficient and nominating new non-executive Directors, the diversity of views and the expertise needed for a Company shall also ensure that the Diversity Policy proper understanding of current affairs and longer- is taken into account. In recommending prospective term risks and opportunities related to the Company’s candidates for nomination to the Board of Directors, business. The Board of Directors and its ESG the ESG Committee shall take into account the Committee consider such factors when evaluating Profile. The Profile is posted on our website at https:// nominees for election to the Board of Directors and corporate.ferrari.com/sites/ferrari15ipo/files/e_fnv_ during the annual performance assessment process. profile_non-executive_directors_13_09_2018_clean_ final_new_0.pdf. The Company has achieved all the following concrete targets: (a) at least 30 percent of the seats of the Board of Directors are occupied by women and at COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE least 30 percent by men; (b) diversity in the age of the members of the Board of Directors by having one The Company endorses the principles and best or more members of the Board of Directors aged practice provisions of the Dutch Corporate under 50 at the day of their nomination; provided Governance Code, except for the following best that, in the candidate selection process, rules and practice provisions which are explained below: generally accepted principles of non-discrimination (on grounds such as ethnic origin, race, disability or • Best practice provision 2.2.4 of the Dutch Corporate sexual orientation) will be taken into account; and Governance Code: The supervisory board should (c) the nationality of the members of the Board of also draw up a retirement schedule in order to avoid, Directors shall be reasonably consistent with the as much as possible, supervisory board members geographic presence of the Company’s business, retiring simultaneously. The retirement schedule and that no nationality should count for more than 60 should be published on the company’s website. percent of the members of the Board of Directors. The Company does not have a retirement schedule To ensure its correct implementation, the Diversity as referred to in best practice provision 2.2.4 of Policy will be taken into account in the nomination of the Dutch Corporate Governance Code, because executive Directors, and in the adoption of a profile the Company’s Articles of Association provide for non-executive Directors as well as in nominating for a term of office of member of the Board of and recommending non-executive Directors. Since Directors for a period of approximately one year the financial year 2017, the targets relating to gender after appointment, such period expiring on the day and age have been realized. Since 2019 also the target the first annual general meeting of shareholders relating to nationality has been achieved. is held in the following calendar year. Short terms of office for board members are customary for 147 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE companies listed in the U.S. As the Company is listed Mr. Elkann, our Executive Chairman and Executive on the NYSE, the Company also follows certain Director, has a position on the ESG Committee, common U.S. governance practices, one of which is to which best practice provision 5.1.4 of the the reappointment of our Directors at each annual Dutch Corporate Governance Code applies. The general meeting of shareholders. In light of this term position of Mr. Elkann as executive Director in this of office, the Company does not have a retirement committee follows inter alia from the duties of the schedule in place. ESG Committee, which are more extensive than the duties of a selection and appointment committee • Best practice provision 4.1.8 of the Dutch and include duties that warrant participation of an Corporate Governance Code: Management board executive Director in the view of the Company. and supervisory board members nominated for appointment should attend the general meeting at which votes will be cast on their nomination. ITALIAN CORPORATE GOVERNANCE CODE Pursuant to best practice provision 4.1.8 of the Dutch As regards the Italian framework for corporate Corporate Governance Code, every executive and non- governance, the Company is aware that a new version executive Director nominated for appointment should of the corporate governance code (the “Italian CGC”) attend the general meeting at which votes will be cast has been issued by Borsa Italiana S.p.A., applicable on its nomination. Since, pursuant to Article 14.3 of the (starting from January 2021) to all companies with Articles of Association, the term of office of Directors shares listed on the Euronext Milan (formerly named is approximately one year, such period expiring on the Mercato Telematico Azionario, or MTA). day the first annual general meeting of shareholders of the Company is held in the following calendar year, all As of December 31, 2021, the Company’s corporate members of the Board of Directors are nominated for governance structure is substantially in line with (re)appointment each year. By publishing the relevant all the principles and recommendations set forth biographical details and curriculum vitae of each in the Italian CGC, especially due to the fact that nominee for (re)appointment, the Company ensures the Company has adopted, and complies with, the that the Company’s general meeting of shareholders Dutch Corporate Governance Code, which contains is well informed in respect of the nominees for (re) principles and best practice provisions largely similar appointment and in practice only the Chairman, the to those highlighted in the Italian CGC, exception being Chief Executive Officer and the Vice-Chairman will made for the following: therefore be present at the general meeting. a) The independent Chair of the Board of Directors • Best practice provision 5.1.4 of the Dutch Corporate cannot chair the control and risk committee (Article Governance Code: Neither the audit committee nor 2, Recommendation no. 7 of the Italian CGC). the remuneration committee can be chaired by the chairman of the management board or by a former Our Senior Non-Executive Director and Chair of the executive director of the company. Board of Directors, Mr. Duca, is also the Chairperson of the Audit Committee, which is not in line with best Our Senior Non-Executive Director and Chair of the practice provision under Article 2, Recommendation Board of Directors, Mr. Duca, is also the Chairperson no. 7 of the Italian CGC. The Company believes that Mr. of the Audit Committee, which is not in line with best Duca, in light of his extensive experience with audits practice provision 5.1.4 of the Dutch Corporate and his knowledge in this respect, brings a valuable Governance Code. The Company believes that Mr. contribution to the Audit Committee and therefore Duca, in light of his extensive experience with audits believes it is in Ferrari’s best interest and appropriate and his knowledge in this respect, brings a valuable for Mr. Duca to chair the Audit Committee. contribution to the Audit Committee and therefore believes it is in Ferrari’s best interest and appropriate b) In large companies, the Board of Directors expresses for Mr. Duca to chair the Audit Committee. its guidelines on the maximum number of offices that can be considered compatible with an effective • Best practice provision 5.1.4 of the Dutch Corporate performance and the time commitment required Governance Code: The committees referred to in by the role of the directors. The relevant offices best practice 2.3.2 should be comprised exclusively of are those held in corporate bodies of other listed non-executive directors. companies or of companies having a significant size (Article 3, Recommendation no. 15 of the Italian CGC). 148 FERRARI N.V.AR 2021Applicable Dutch corporate law already expressly Executive Officer, which provides for, inter alia, the regulates the maximum number of offices that may involvement of, inter alia, a specific committee (i.e., be held by directors. Pursuant to Dutch law, persons the CEO Search Committee), who will assist the ESG may not be appointed as non-executive directors if Committee with selecting a new candidate for this such persons are non-executive director, member of office. the supervisory board or other similar bodies for five or more (Dutch) companies of a certain size and such persons cannot be appointed as executive directors if such persons are non-executive director at more REPORT OF THE NON-EXECUTIVE DIRECTORS than two other (Dutch) companies of a certain size INTRODUCTION or if such person is the chairperson of the board of This is the report of the non-executive Directors of the supervisors or the one tier board of another (Dutch) Company over the financial year 2021, as referred to company of a certain size. Ferrari is compliant with in best practice provision 5.1.5 of the Dutch Corporate the above-mentioned Dutch limits. Governance Code. c) In large companies, the Board of Directors It is the responsibility of the non-executive Directors elaborates, with the support of the nomination to supervise the policies carried out by the executive committee, a plan for the succession of the Chief Directors and the general affairs of the Company and Executive Officer and executive directors by its affiliated enterprise, including the implementation identifying, at least, the procedures to be followed in of the strategy of the Company regarding long- the event of an early termination of office (Article 4, term value creation. In so doing, the non-executive Recommendation no. 24 of the Italian CGC). Directors act solely in the interest of the Company. With a view of maintaining supervision on the The Company’s Board of Directors believes that the Company, the non-executive Directors regularly members of the Board of Directors itself – chosen discuss Ferrari’s long-term business plans, the and appointed on the basis of their respective implementation of such plans and the risks associated expertise, level of professionalism and knowledge with such plans with the executive Directors. of the Company’s business – would be capable to carry out (in the absence, due to early termination of According to the Articles of Association, the Board the office, of the Chief Executive Officer and/or any of Directors is a single board and consists of three other executive officer) the ordinary business of the or more members, comprising both members Company until the appointment, by the competent having responsibility for the day-to-day management corporate body, of the new Chief Executive Officer of Ferrari (executive Directors) and members not and/or other executive officer(s). having such day-to-day responsibility (non-executive Further, the Company’s Board of Directors believes executive Directors in a one-tier board such as the that the decision whether to adopt a succession Company’s Board of Directors may be allocated plan shall be further analysed bearing in mind the under or pursuant to the Articles of Association, Directors). The tasks of the executive and non- sensitivity of the topic. provided that the general meeting of shareholders has stipulated whether such Director is appointed Furthermore, the Company believes that the overall as executive or as non-executive Director and system of delegated powers adopted by the Company furthermore provided that the task to supervise the is sufficient to mitigate the risk of a vacancy for an performance by the Directors of their duties can executive director or a senior manager and ensure only be performed by the non-executive Directors. the continuity of the Company’s business. The overall Regardless of an allocation of tasks, all Directors system of delegated powers adopted by the Company remain collectively responsible for the proper already includes a succession plan for the top management and strategy of the Company (including management which in the Company is represented by supervision thereof in case of non-executive the Ferrari Leadership Team. The Company believes Directors). that the above measures help the Company achieving the objective underlying the Code’s principles and in Details of the current composition of the Board of any case contributes to good corporate governance. Directors, including the non-executive Directors, and Finally, it should be noted that the Company’s Board its committees are set forth in the section “Board of of Directors has already defined a procedure to be Directors”. applied for the appointment of, at least, the Chief 149 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REPORT OF THE NON-EXECUTIVE DIRECTORS SUPERVISION BY THE NON-EXECUTIVE DIRECTORS The non-executive Directors supervise the policies carried out by the executive Directors and the general affairs of the Company and its affiliated enterprise. In so doing, the non-executive Directors have also focused on the effectiveness of the Company’s internal risk management and control systems, the integrity and quality of the financial reporting and Ferrari’s long-term business plans, the implementation of such plans and the risks associated. The non-executive Directors also determine the remuneration of the executive Directors and nominate candidates for the Director appointments. Furthermore, the Board of Directors may allocate certain specific responsibilities to one or more individual Directors or to a committee comprised of eligible Directors of the Company and subsidiaries of the Company. In this respect, the Board of Directors has allocated certain specific responsibilities to the Audit Committee, the Compensation Committee and the ESG Committee. Further details on the manner in which these committees have carried out their duties, are set forth in the sections “The Audit Committee”, “The Compensation Committee” and “The ESG Committee”. The non-executive Directors supervised the adoption and implementation of the strategies and policies by the Group, reviewed this annual report, including the Compensation Report and the Group’s financial results, received updates on legal and compliance matters and they have been regularly involved in the review and approval of transactions entered into with related parties. The non-executive Directors have also reviewed the reports of the Board of Directors and its committees and the recommendations for the appointment of Directors. During 2021, there were four meetings of the Board of Directors. Portions of these meetings took place without the executive Directors being present. The average attendance at those meetings was 100 percent. An overview of the attendance of the individual Directors per meeting of the Board of Directors and its committees set out against the total number of such meetings is set out below: Name John Elkann Benedetto Vigna (1) Piero Ferrari Sergio Duca Delphine Arnault Francesca Bellettini Roberto Cingolani (2) Eddy Cue John Galantic Maria Patrizia Grieco Adam Keswick Meeting Board of Directors Audit Committee 4/4 2/2 4/4 4/4 4/4 4/4 4/4 4/4 4/4 4/4 6/6 5/6 5/6 ESG Committee 1/1 Compensation Committee 2/2 2/2 2/2 1/1 (1) Mr. Benedetto Vigna was designated as Acting Chief Executive Officer by the Board of Directors effective as of September 16, 2021. (2) On February 16, 2021, the Company announced that Mr. Roberto Cingolani tendered his resignation from his role as Company’s non-executive. Director and member of the ESG Committee of the Board of Directors effective as of February 13, 2021. During these meetings, key topics discussed were, amongst others: the Group’s strategy, the Group’s financial results and reporting, sustainability, acquisitions and divestments, executive compensation, technological developments, risk management, updates on legal and compliance, risk management, human resources with the Head of Human Resources, implementation of the Remuneration Policy and the Compensation Report. 150 FERRARI N.V.AR 2021INDEPENDENCE OF THE NON-EXECUTIVE DIRECTORS Director. During such meeting the ESG Committee dealt also with the directors’ nomination process, The non-executive Directors are required by Dutch the assessment of Directors’ qualifications, the size law to act solely in the interest of the Company. and composition of the Board of Directors and the The Dutch Corporate Governance Code stipulates committees, and the recommendations for Directors’ the corporate governance rules relating to the election. independence of non-executive Directors and requires under most circumstances that a majority of The non-executive Directors have been regularly the non-executive Directors be “independent.” informed by each committee as referred to in best Currently, eight out of eight non-executive Directors Governance Code and the conclusions of those are considered to be independent under the NYSE committee were taken into account when drafting definition while seven non-executive Directors are this report of the non-executive Directors. practice provision 2.3.5 of the Dutch Corporate considered to be independent under the Dutch Corporate Governance Code. Mr. Piero Ferrari The non-executive Directors were able to review and is considered not to be independent under the evaluate the performance of the Audit Committee, Dutch Corporate Governance Code, since he the ESG Committee and the Compensation holds approximately 10 percent of our outstanding Committee based on the assessments made by common shares. Mr. Sergio Duca, the Senior Non- the ESG Committee. The self-assessment of the Executive Director of the Board of Directors, is Committees were also discussed by the Board of independent under the Dutch Corporate Governance Directors. The outcome of the evaluations is that Code in accordance with best practice provision 2.1.9 there is no need to amend the size or composition of the Dutch Corporate Governance Code. of the Audit Committee, the ESG Committee and the Ferrari is of the opinion that the independency Compensation Committee, nor is there any reason to requirements as referred to in best practice provision amend their charters on this basis. Further details on 2.1.10 of the Dutch Corporate Governance Code are the manner in which these committees have carried met by the Company. out their duties, are set forth in sections “The Audit Committee”, “The Compensation Committee” and “The EVALUATION BY THE NON-EXECUTIVE DIRECTORS ESG Committee”. The non-executive Directors are responsible On the basis of the preparations by the ESG for supervising the Board of Directors and its Committee, the non-executive Directors were able committees, as well as the individual executive and to review the Board of Director’s assessments, non-executive Directors, and are assisted by the ESG the individual Directors’ assessments and the Committee in this respect. recommendation for Directors’ election. The Board of Directors concluded that each of the Directors In accordance with the ESG Committee Charter, continues to demonstrate commitment to its the ESG Committee assists and advises the Board respective role in the Company. of Directors with respect to periodic assessment of the performance of individual Directors. In this Also, pursuant to the Compensation Committee respect, the ESG Committee has, amongst others, Charter, the Compensation Committee implements the duties and responsibilities to review annually and oversees the remuneration policy as it applies the Board of Directors’ performance and the to non-executive Directors, executive Directors and performance of its committees and to review each senior officers reporting directly to the executive Director’s continuation on the Board of Directors at Directors. The Compensation Committee administers appropriate regular intervals as determined by the all the equity incentive plans and the deferred ESG Committee. compensation benefits plans. On the basis of the assessments performed, the non-executive Directors In 2021, the ESG Committee’s periodic assessments determine the remuneration of the executive took place during the meeting held on February 25. Directors and nominate candidates for the Director During that meeting, the ESG Committee focused appointments. on the results of the periodic assessments and the performance of the Board of Directors, its The non-executive Directors have supervised committees and the individual Directors, keeping also the performance of the Audit Committee, the into account the self-assessment prepared by each Compensation Committee and the ESG Committee. 151 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSSTATEMENT BY THE BOARD OF DIRECTORS Based on the assessment performed, the Board of Directors believes that, as of December 31, 2021, the Group’s and the Company’s Internal Control over Financial Reporting is considered effective and that (i) the Board Report provides sufficient insights into any material weaknesses in the effectiveness of the internal risk management and control systems (please refer to section “Principal Characteristics of the Internal Control System and Internal Control over Financial Reporting” of this Annual Report), (ii) the internal risk management and control systems are designed to provide reasonable assurance that the financial reporting does not contain any material inaccuracies (please refer to section “Principal Characteristics of the Internal Control System and Internal Control over Financial Reporting” of this Annual Report), (iii) based on the current state of affairs, it is justified that the Group’s and the Company’s financial reporting is prepared on a going concern basis (please refer to Note 1 to the Consolidated Financial Statements of this Annual Report and Note 2 to the Company Financial Statements of this Annual Report for additional information on the basis of preparation), and (iv) the Board Report states those material risks and uncertainties that are, in the Board of Director’s judgment, relevant to the expectation of the Company’s continuity for the period of twelve months after the preparation of the Board Report (please refer to the chapter “Risk Factors” of this Annual Report). February 25, 2022 John Elkann Executive Chairman Benedetto Vigna Acting Chief Executive Officer RESPONSIBILITIES IN RESPECT TO THE ANNUAL REPORT The Board of Directors is responsible for preparing the Annual Report, inclusive of the Consolidated and Company Financial Statements and Board Report, in accordance with Dutch law and International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the European Union (IFRS). In accordance with Section 5:25c, paragraph 2 of the Dutch Financial Supervision Act, the Board of Directors states that, to the best of its knowledge, the Consolidated and Company Financial Statements prepared in accordance with IFRS as adopted by the European Union provide a true and fair view of the assets, liabilities, financial position and profit or loss for the year of the Company and its subsidiaries and that the Board Report provides a true and a fair view of the performance of the business during the financial year and the position at balance sheet date of the Company and its subsidiaries, together with a description of the principal risks and uncertainties that the Company and the Group face. February 25, 2022 Board of Directors John Elkann Benedetto Vigna (Acting Chief Executive Officer) Piero Ferrari Sergio Duca Delphine Arnault Francesca Bellettini Eddy Cue John Galantic Maria Patrizia Grieco Adam Keswick 152 FERRARI N.V.AR 2021153 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. NON FINANCIAL STATEMENT FERRARI GROUP ABOUT FERRARI Ferrari is among the world’s leading luxury brands, focused on the design, engineering, production and sale of the world’s most recognizable luxury performance sports cars. Our brand symbolizes exclusivity, innovation, state- of-the-art sporting performance and Italian design and engineering heritage. Our name and history and the image enjoyed by our cars are closely associated with our Formula 1 racing team, Scuderia Ferrari, the most successful racing team in the history of Formula 1. From the inaugural year of Formula 1 in 1950 through the present, Scuderia Ferrari has won 238 Grand Prix races, 16 Constructors’ World titles and 15 Drivers’ World titles. We are the only team which has taken part in all the editions of the Championship, racing in more than 1,000 Formula 1 Grand Prix races. We believe our history of excellence, technological innovation and defining style transcends the automotive industry, and is the foundation of the Ferrari brand and image. We design, engineer and produce our cars in Maranello, Italy, and sell them in over 60 markets worldwide through a network of 172 authorized dealers operating 191 points of sale as of the end of 2021. OUR STRATEGY Our strategy focuses on maintaining our leading position in the luxury performance sports car market, while enhancing and protecting the value and exclusivity of the Ferrari brand. We focus on cost-efficiencies and aim to achieve profitable growth by pursuing the following strategies. Controlled growth Regular new model introductions and enhancements Pursue excellence in racing Controlled growth in adjacent luxury and lifestyle categories AR 2021 154 MATERIALITY MATRIX AND STAKEHOLDER ENGAGEMENT THE MATERIALITY MATRIX HIGHLIGHTS THE ASSESSED TOPICS THAT ARE MOST RELEVANT FOR THE GROUP AND OUR STAKEHOLDERS AND THEREFORE REPRESENT OUR STRATEGIC SUSTAINABILITY PRIORITIES. In 2021, we updated the analysis the SASB Materiality Matrix, which paragraph) and has been of the most relevant sustainability highlighted those sustainability complemented through a topics(1) (materiality analysis) for topics that may have financial qualitative analysis performed the Group and our stakeholders impacts, in line with a double by our Ferrari Leadership to better reflect sustainability materiality perspective which Team (hereinafter also the “FLT”, context developments, changes will be further developed in previously referred to as the in our drivers and goals, as the future. In particular, this Senior Management Team, and well as our 2019-2022 plan and was prepared by taking into so renamed as a result of the our sustainability strategy. The account various stakeholder organizational changes executed materiality analysis has been engagement initiatives carried in January 2022), which resulted in implemented in line with the GRI out during the year (as described the materiality matrix below. Standards and consistently with in the “Stakeholder Engagement” MATERIALITY MATRIX OF FERRARI GROUP T N A T R O P M I Y R E V S R E D L O H E K A T S R O F E C N A V E L E R Quality and safety of products and customers Customer satisfaction Innovation: technology and design Human capital Health and safety Image and brand reputation Ethical business conduct Emissions Economic and financial performance Environmental commitment Supply chain responsible management Risk management & Compliance Education Diversity, inclusion and non-discrimination Work-life balance and employees wellness Responsible communication and marketing Industrial relations Local communities Relationship with Institutions and Authorities Relationship with sponsors LEGEND: Proactively fostering best practice governance Exceeding expectations Being the employer of choice Reducing environmental footprint Creating and sharing value with the community IMPORTANT RELEVANCE FOR FERRARI GROUP VERY IMPORTANT significance of economic, environmental & social impacts (1) The potentially relevant topics are identified by taking into consideration sector benchmarking analyses, UN Sustainable Development Goals (SDGs), and relevant international studies and publications. 155 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / MATERIALITY MATRIX AND STAKEHOLDER ENGAGEMENT The materiality matrix highlights considered a priority and are development of Human capital the assessed topics that are increasingly relevant to Ferrari; and Health and safety. Compared most relevant for the Group Quality and safety of products and to last year’s materiality and our stakeholders and customers, Customer satisfaction, matrix, for our stakeholders, therefore represent our strategic Supply chain responsible Environmental commitment, sustainability priorities. management and Emissions are Diversity inclusion and non- also considered of the upmost discrimination as well as Work-life Specifically, the most relevant importance. Special attention is balance and employees’ wellness topics are related to product paid to Ethical business conduct increased their relevance, while responsibility: Image and brand and Risk management and Responsible communication and reputation and Innovation: compliance as well. The analysis marketing slightly decreased. technology and design are confirmed the importance of the This materiality matrix is directly linked with our sustainability strategy, characterized by: EXCEEDING EXPECTATIONS BEING THE EMPLOYER OF CHOICE Drive technological innovation while pursuing excellence Provide an inclusive, educational and inspiring work in design and craftsmanship to fuel the passion of our environment to unleash everyone’s passion, creativity customers and enthusiasts. MATERIAL TOPIC • Image and brand reputation • Innovation: technology and design and talent. MATERIAL TOPIC • Human capital • Health and safety • Quality and safety of products and customers • Work-life balance and employees wellness • Customer satisfaction • Diversity inclusion and non-discrimination • Responsible communication and marketing RELEVANT UNITED NATIONS SDGs RELEVANT UNITED NATIONS SDGs PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE Maintain Ferrari’s corporate governance and risk management systems aligned with best practices to ensure an ethical business conduct while providing superior and sustainable returns to our shareholders. MATERIAL TOPIC • Ethical business conduct • Risk management and compliance • Supply chain responsible management • Relationship with Institutions and Authorities • Relationship with sponsors RELEVANT UNITED NATIONS SDGs REDUCING ENVIRONMENTAL FOOTPRINT Increase our environmental awareness to continuously set and implement related programs and actions. MATERIAL TOPIC • Emissions • Environmental commitment RELEVANT UNITED NATIONS SDGs CREATING AND SHARING VALUE WITH THE COMMUNITY Encourage strategic partnerships and the creation of positive externalities for all stakeholders. MATERIAL TOPIC • Economic and financial performance • Education • Local communities • Industrial relations RELEVANT UNITED NATIONS SDGs 156 FERRARI N.V.AR 2021The abovementioned material topics have been linked to the Sustainable Development Goals (SDGs) that are impacted by our business. Each material topic is analyzed in the subsequent chapters within this Sustainability Report and includes a qualitative description of management’s approach and, where available, selected performance indicators. For the most material topics, the table below shows the pursued policies, the related key risks and risk trends and the relevant chapters within this Annual Report. MOST SIGNIFICANT MATERIAL TOPICS PURSUED POLICIES KEY RISKS AND RISK TRENDS RELEVANT CHAPTERS OF THIS ANNUAL REPORT Image and brand reputation value and exclusivity of the • Enhancing and protecting the Ethical business conduct Innovation: technology and design Ferrari brand • Maintaining a culture dedicated to integrity, responsibility and ethical behavior • Being focused on developing new technologies and distinctive designs • Creating an inspiring working • Brand image; • Climate Change Ferrari Group • Non-compliance with laws, regulations, local standards (including tax) and codes Proactively fostering best practice governance • Brand image; • Competition; • Technological and regulatory uncertainty Exceeding expectations Human capital environment, enabling the • Attraction, development and development of everyone’s retention of talents Being the employer of choice Emissions talent • Focusing on researching technologies that further reduce emissions and preparing for a low-emission future • Designing and manufacturing Quality and safety of while keeping the safety of products and customers our customers and other road users always in mind • Taking an integrated approach to risk management; Risk management & Compliance • Non-compliance with laws, regulations, local standards (including tax) and codes; Reducing environmental • Technological and regulatory footprint uncertainty; • Climate Change • Non-compliance with laws, regulations, local standards Exceeding expectations (including tax) and codes • Non-compliance with laws, regulations, local standards Proactively fostering best • Acting with the highest level (including tax) and codes; practice governance of integrity, complying with • Climate Change applicable laws. Customer satisfaction level of customer satisfaction • Being devoted to the highest Health and safety • Enforcing a safety-first culture • Brand image; • Competition; • Technological and regulatory uncertainty • Non-compliance with laws, Exceeding expectations regulations, local standards Being the employer of choice (including tax) and codes Supply chain responsible management • Implementing a responsible • Non-compliance with laws, and efficient supply chain regulations, local standards management; (including tax) and codes; • Encouraging the adoption • Cybersecurity including third of sustainable practices and parties vulnerabilities; sharing among our business • Climate Change; partners and suppliers. • Relationship with suppliers Proactively fostering best practice governance Further disclosure on key risks is presented within paragraph “Sustainability Risks”. 157 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. / MATERIALITY MATRIX AND STAKEHOLDER ENGAGEMENT STAKEHOLDER ENGAGEMENT As an international firm with ambitious corporate objectives and a complex value chain, we need to develop forms of communication and collaboration with both our internal and external stakeholders that allow us to understand their needs, interests and expectations. Ferrari’s approach to engaging stakeholders aims for honest, clear and effective communication and consultation, based on constant dialog. To fully understand the needs and perspectives of our stakeholders is a fundamental part of the value generation process we continuously strive to promote both inside and outside our organization. This Statement is addressed to all stakeholders involved in our activities, as shown in the following image: Enthusiasts Clients Dealers Financial Community and Shareholders Suppliers Media and Influencers Community and University Sponsors Business and Licensing Partners Government, Regulators and Sport Institutions Employees and Trade Unions Ferrari believes that building and honing effective communication and collaboration with its internal and external stakeholders is a key element of sustainable and lasting growth, with a view to conciliate interests and expectations. With this in mind, over the years we set an ongoing process of stakeholder engagement carrying out initiatives with different levels of interaction and methods of involvement. Our Stakeholder Engagement Practice, inspired by the values and principles of the Code of Conduct, seeks to give all directors, managers and employees of the Ferrari Group, and anyone else working for it or on its behalf, guidelines on the right methods and forms of interaction with different stakeholders. In line with the Stakeholder Engagement Practice, in 2021 we carried out various specific activities to enhance the voice of our stakeholders on sustainability themes. We engaged with our employees through two face-to- face workshops that had a dual purpose: to further communicate the importance of the sustainability theme and explain what it stands for within Ferrari, as well as to collect their priorities and suggestions. In addition, we AR 2021 158 BOARD REPORT FINANCIAL STATEMENTS OTHER INFORMATION organized two meetings with our employees participating in the two Ferrari MBA courses to gather their views on the main sustainability-related risks and opportunities that Ferrari will face in the near future, in connection with the main trends we are witnessing. Moreover, we realized an ad hoc virtual workshop to engage the students of the Motorvehicle University of Emilia-Romagna (MUNER). Furthermore, we collected our dealers’ expectations on ESG topics through a questionnaire. Finally, we engaged with our top investors to better understand what they consider to be the main ESG drivers for Ferrari, as well as participating every year in a variety of ESG questionnaires such as the SAM Corporate Sustainability Assessment (CSA), ranking in the top quartile of our industry in the last assessment, the CDP Climate Change and CDP Water questionnaires, obtaining a “B” and “C” rating respectively in 2021. All these activities allowed us to further strengthen our materiality analysis. Considering the rising environmental and social changes, these engagement activities are an important part of the sustainability approach that helps us identify potential updates in our sustainability material topics, risks and opportunities, as well as supporting management in achieving the Company’s objectives. The main outcomes of the engagement activities implemented in 2021 showed an increased attention of our stakeholders toward environmental responsibility, confirming the importance of reducing emissions, and the attention to employee-related topics. Education was confirmed as a key element by the stakeholders involved. Ferrari firmly believes that keeping a profitable dialog and collaboration with its stakeholders is essential and intends to continue the path of engagement undertaken, with a view to continuous improvement. PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE OUR ESG COMMITTEE environment, its carbon footprint and its response to the relevant challenges, including pollution, efficient use of natural resources (i.e. water and energy), waste management and reduction, emissions and The ESG Committee (formerly the Governance and environmental impact of the Company’s supply chain; Sustainability Committee) of our Board of Directors (2) Social: the Company’s role within the society and is responsible for, among other things, assisting and its interaction with stakeholders and communities, advising the Board of Directors, and acting under including workplace policies, employee engagement authority delegated by the Board of Directors, with and well-being, diversity, nondiscrimination and equal respect to: (i) drawing up the selection criteria and treatment, responsible sourcing, social aspects of the appointment procedures for members of the Board supply chain and engagement with the communities of Directors; (ii) periodic assessment of the size in which the Company operates (charitable donations and composition of the Board of Directors and as and social projects); (3) Governance: the Company’s appropriate making proposals for a composition corporate governance framework and any applicable profile of the Board of Directors; (iii) periodic standards, codes and best practices. assessment of the performance of individual directors and reporting this to the Board of Directors; (iv) In 2021, the ESG Committee consisted of Mr. Elkann proposals to the non-executive members of the Board (Chairperson), Mrs. Arnault and Mr. Cue. of Directors for the nomination and re-nomination of directors to be elected by the shareholders; The ESG Committee is elected by the Board of (v) supervision of the policy on the selection and Directors and is comprised of at least three Directors. appointment criteria for senior management and on At least more than half of the members shall be succession planning; and (vi) monitoring, evaluation independent under the Dutch Corporate Governance and reporting on the strategy, targets, achievements, Code, and at most one of the members may be an disclosures and reports relating to ESG matters executive Director. globally of the Company and its subsidiaries. On December 14, 2021 the Board of Directors changed In 2021 the ESG Committee met once with the name of the former Governance and Sustainability 100 percent attendance of its members. The Committee into ESG Committee and approved a new Committee reviewed, inter alia, the Board of committee charter effective as of the same date. Directors’ and Committee’s assessments, the Sustainability achievement and objectives, and the The term “ESG” refers to the following: (1) recommendations for Directors’ election. Environmental: the Company’s impact on the natural AR 2021 159 INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE OUR DECISION-MAKING PROCESS Ferrari’s integrity system sets the foundation for the The FLT is responsible for reviewing the operating corporate governance of Ferrari Group and includes performance of the businesses, collaborating on a framework comprised of the following primary certain operational matters, supporting the Chief elements: Executive Officer with his tasks and executing the decisions of the Board of Directors and the day-to-day • Principles that capture Ferrari’s commitment to management of the Company, primarily as it relates to important values in business and personal conduct; operational management. The FLT is led by the Chief Executive Officer and is composed of the heads of the • Practices that are the basic rules that must operating and central functions. guide our daily behaviors in order to achieve our overarching Principles; Starting from 2022, at management level we have defined new cross-functional committees, among • Procedures that further articulate Ferrari’s specific which one is responsible for the strategic positioning operational approaches for achieving compliance of the Ferrari Brand and cross-functional projects and that may have specific applications limited to to sustain excellence in every area, starting from our certain geographical regions and/or businesses, as priority to reach carbon neutrality by 2030, addressing appropriate. direct and indirect GHG emissions, focusing on energy and materials, in addition to our electrification journey. Our Code of Conduct is approved by the board of directors of Ferrari N.V. and is applicable to the Our Chief Financial Officer, a member of the FLT, is whole Ferrari Group. It applies to all Ferrari Group responsible for the sustainability function, which board members and officers, full-time and part-time oversees the coordination of the sustainability employees, as well as to all temporary, contract and activities within the Group, promoting dialog between all other individuals and companies that act on behalf different teams and functions, and identifying risks of Ferrari Group, regardless of their location. The and opportunities. Group Compliance and Internal Audit departments investigate possible violations of the Code of Conduct INTEGRITY OF BUSINESS CONDUCT also through the management of the Ethics Helpline, At Ferrari, we seek to develop a cooperative as well as during standard periodic audits and environment in which the dignity of each individual through specific Business Ethics and Compliance is respected and that embodies the highest ethical (“BEC”) audits. In 2021, BEC surveys were conducted standards in business conduct. We are committed to in order to measure employees’ awareness on topics maintaining a fair, secure, productive and inclusive such as: Code of Conduct, Whistleblowing Procedure, workplace for all members of our workforce, in which Gifts and Entertainment Expenses’ Management. In everyone is valued for their unique contribution. light of the results, dedicated actions, such as training and awareness activities, have been implemented. The foundation of Ferrari’s governance model is the Code of Conduct that embodies a set of values HUMAN RIGHTS recognized, adhered to and promoted by the Ferrari’s commitment to respect, protect and Company. Ferrari believes that a conduct based on promote human rights is laid down in the Human the principles of diligence, integrity and fairness is a Rights Practice, which is inspired by the guiding key driver for the social and economic development. principles set forth in the Code of Conduct and Ferrari endorses the United Nations (“UN”) defines Ferrari’s main commitments to a corporate Declaration on Human Rights, the International Labor culture dedicated to ethics and integrity. In particular, Organization (“ILO”) Conventions and the Organization the Human Rights Practice sets out key principles for Economic Co-Operation and Development such as the prohibition of child labor, compulsory (“OECD”) Guidelines for Multinational Companies. labor and forced labor, the attention to a healthy Accordingly, our Code of Conduct aims to ensure that and safe working environment for our employees, all members of Ferrari Group workforce act with the the rejection of any form of abuse, harassment highest level of integrity and comply with applicable and discrimination, the zero tolerance in respect of laws, thus contributing to build a better future for corruption and the protection of the rights of local our Company and the communities in which we do communities. business. Ferrari’s Code of Conduct can be found on our corporate website at http://corporate.ferrari.com/en/governance/code-conduct. 160 FERRARI N.V.AR 2021The table below provides an overview of the relevant information on human rights policies regarding four of our stakeholder groups, particularly related to human rights issues. REFERENCE TABLE ON HUMAN RIGHTS STAKEHOLDERS PARTICULARLY RELATED TO HUMAN RIGHTS ISSUES MATERIAL TOPICS KEY APPLICABLE POLICIES Section Reference of MAIN KPIs Section Reference of RISKS, OPPORTUNITIES AND MANAGEMENT ACTIONS Employees and • Human capital • Human Rights • Being the employer of • Proactively fostering trade unions • Health and safety Practice choice/Our employees in best practice • Work-life balance and employees wellness • Ethics Helpline numbers governance / • Being the employer of Sustainability Risks • Diversity inclusion and • Code of Conduct choice/ Occupational • Being the employer non-discrimination • Industrial relations • Ethical business conduct • Risk management and compliance • Stakeholders’ engagement practice • Being the employer of choice/Our employees in Health and Safety of choice numbers • Being the employer of choice/ Training and talent development • Being the employer of choice/ Talent Recruitment and Employee Retention • Proactively fostering best practice governance/ Whistleblowing • SASB index/Labor practices Suppliers • Supply chain • Human Rights • Proactively fostering best • Proactively fostering responsible management • Ethical business conduct Practice practice governance/ best practice • Stakeholders’ engagement practice Responsible Supply Chain governance/ • Proactively fostering best Sustainability Risks practice governance/ • Proactively fostering • Risk management and • Ethics Helpline Responsible Supply Chain/ best practice compliance Conflict minerals governance/Responsible • Third Parties’ Compliance Practice • Anticorruption Compliance Practice • Proactively fostering best Supply Chain practice governance/ • Proactively fostering Whistleblowing best practice governance/Responsible Supply Chain/ Conflict minerals Community and • Local Communities • Human Rights • Creating and sharing • Creating and sharing university • Education Practice value with the community/ value with the • Stakeholders’ engagement practice Ferrari & Education community/Ferrari & Education • Economic and financial performance • Ethical business conduct • Risk management and compliance Clients • Quality and safety • Human Rights • Proactively fostering best • Proactively fostering of products and Practice customers • Ethical business conduct • Stakeholders’ engagement practice practice governance/ Cybersecurity, data best practice governance/ protection and privacy Sustainability Risks • Exceeding expectations/ • Exceeding expectations/ • Risk management and • Ethics Helpline Vehicle Safety Vehicle Safety compliance 161 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE ANTI-BRIBERY AND CORRUPTION requirement for the protection of its assets, integrity Ferrari Group is committed to the highest and reputation in an overall and long-term vision. standards of integrity, honesty and fairness in all internal and external affairs and does not Ferrari is committed to only collaborating with Third tolerate any kind of bribery. The laws of virtually all Parties that meet certain requirements both in terms countries in which Ferrari operates prohibit bribery of compliance with applicable laws and regulations and any violation of anti-bribery and anticorruption and in relation to ethics, integrity and transparency. laws would entail serious consequences for both In this respect, Ferrari has adopted the Third Parties companies and individuals, which can result in Compliance Practice, that establishes the general significant fines, imprisonment of individuals and rules of conduct that must be followed at Group reputational damages. level when dealing with any Third Parties, including active and passive counterparties as well as any Ferrari’s policy is that no one - director, officer or further Third Parties with which Ferrari may establish other employee, consultant, agent, representative, contractual relationships. supplier or business partner - shall, directly or indirectly, give, offer, request, promise, authorize, In particular, the Third Parties Compliance Practice solicit or accept bribes or any other perquisite underlines the importance of carrying out a (including gifts or gratuities, with the exception “compliance evaluation” before establishing any of commercial items universally accepted in an business relationship with a Third Party in order international context of modest economic value, to examine its ethical reliability and reputation, its permitted by applicable laws and in compliance with involvement in a legitimate and lawful business, and the Code of Conduct and all applicable practices and its commitment to share Ferrari’s values of integrity procedures) in connection with their work for Ferrari and fairness. at any time or for any reason. By adhering to the principles outlined in the Third In this respect, Ferrari has adopted the Anticorruption Parties Compliance Practice, Third Parties are Compliance Practice, which is considered the therefore expected not only to comply with applicable document of reference for anticorruption matters laws and Ferrari’s ethical principles and standards, by all worldwide Ferrari branches and subsidiaries but also to become active parties towards their own and is applied in each country in accordance with employees and their respective third parties in order local legislation. The Anticorruption Compliance to disseminate a culture of compliance, integrity and Practice establishes the general rules of conduct transparency. that must be followed in order to prevent corruption- related crimes and ensure compliance with the In this respect, during 2021 numerous internal anticorruption laws to which Ferrari is subject. Such Procedures governing dealings with Third Parties rules are further enhanced in internal Procedures have been revised in order to strengthen the regulating those specific areas deemed at risk from preventive control activities that must be carried out an anticorruption perspective. prior to the establishment of the respective business Furthermore, during 2021 dedicated trainings on Anticorruption and Conflict of Interests have been ANTITRUST relationships. provided to our employees, with the aim to promote Ferrari Group recognizes the paramount importance the consistency of their behaviors with the applicable of a competitive market and is committed to fully anticorruption laws and regulations. comply with antitrust and other pro-competition DEALINGS WITH THIRD PARTIES (“Antitrust Laws”), believing that compliance with Dealing with third parties entails inherent risks, in Antitrust Laws is crucial to Ferrari Group’s reputation. legislation in force in the countries where it operates particular in terms of potential corporate liabilities, as well as financial and reputational damages that Ferrari defines and pursues its commercial Ferrari may suffer as a consequence of unlawful activities and targets in autonomy and conducts carried out by third parties with which independence with respect to any competitors, it does business (“Third Parties”). Hence, Ferrari operating on the basis of its own strategic and strongly believes that the capability to adequately commercial decisions, and strictly rejects any form evaluate Third Parties, as well as promptly address of anticompetitive conduct. The Ferrari Group and any threats and risk factors, represents an essential its directors, officers, and other employees shall 162 FERRARI N.V.AR 2021comply with these principles and refrain from any Organizational Models, laws and regulations, as form of action, omission or business practices that well as business practices and corporate rules. The might represent an antitrust violation. allegations are assessed by the relevant departments of Ferrari and managed in accordance with the To strengthen its commitment to a free and fair Whistleblowing Procedure, that has been prepared on competition, Ferrari adopted the Antitrust Compliance the basis of the international best practices as well as Practice, which outlines - at Group level - the rules and to the applicable laws and regulations. principles that all members of Ferrari’s workforce must follow, as well as the actions and controls that The Ethics Helpline can be accessed either by phone they shall perform in order to prevent antitrust or by web (with multiple languages available) and is offences and ensure compliance with Antitrust Laws. an essential element of the management process, in accordance with the Code of Conduct. It is managed Furthermore, during 2021 Ferrari has started the by an independent provider, available 24 hours a day, adoption of an Antitrust Compliance Program in seven days a week. All reports are processed with the line with the Guidelines on Antitrust Compliance utmost confidentiality on reported subjects and facts, developed by the Italian Competition Authority, which so that the individuals who report an alleged violation includes procedures, internal controls, as well as in good faith are not subject to any form of retaliation. training and awareness activities. In particular, stakeholders can also report alleged violations anonymously if permitted by local law. COMPLIANCE WITH ECONOMIC SANCTIONS’ REGULATIONS Furthermore, Ferrari employees may also seek advice Economic Sanctions are those provisions adopted concerning the application and/or interpretation of by governments and institutions for managing crisis the Code of Conduct by contacting the reference scenarios, such as resolution of conflicts and fight people included in the Worldwide Ethics and against terrorism, and guaranteeing respect for Compliance Contact List. human rights and fundamental freedoms, in the common foreign and security policy. Internal Audit and Group Compliance departments, Such provisions may include export license Resources departments, as well as other business obligations, commercial restrictions, such as the functions possibly involved, assess all the so-called trade embargoes, financial restrictions and allegations. The results and potential disciplinary restrictions on movement, which can be targeted to actions are then reported based on the necessary states, organizations, natural and legal persons. escalation process (the relevant internal functions with the support of the Legal Affairs and Human are notified of the violations). It follows that Ferrari Group, in carrying out its activities, is required to evaluate and respect such In addition, in order to provide maximum blocks, prohibitions and restrictive measures, in transparency to the entire process, a Whistleblowing particular in relation to dealings with third parties and Committee has been appointed, composed of the transactions that potentially determine the involvement heads of Internal Audit, Group Compliance, Legal of countries for which Sanctions risks apply. Affairs and Human Resources departments. The In this respect, during 2021 Ferrari adopted the monitor the progress of the investigations and Sanctions Compliance Practice, designed to formalize ensures that the concerns raised are handled the internal roles and responsibilities as well as the appropriately. Periodic reporting on whistleblowing principles and general rules aimed at preventing management is provided to the CEO as well as to the conducts that may violate Economic Sanctions laws Audit Committee. Whistleblowing Committee meets periodically to and regulations. WHISTLEBLOWING Ferrari Group adopts the Ethics Helpline, a channel which allows all stakeholders (employees, customers, suppliers and partners) to request advice and/or report concerns about alleged situations, events or actions which may be inconsistent with values and principles set out in the Code of Conduct, 163 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE The violations are categorized according to the Principles of the Code of Conduct listed in the table below. WHISTLEBLOWING REPORTING AS OF DECEMBER 31, 2021 Category Conducting business Interacting with external parties Managing our assets and information Protecting our workforce Total Reports received in 2021 Reports closed in 2021 Reports in which a violation was confirmed 1 5 3 5 14 1 5 2 4 12 - - 1 2 3 In this context, the reports received are a key instrument for Internal Audit and Group Compliance departments to identify violations of the Code of Conduct. For all Code of Conduct violations, the disciplinary measures taken are commensurate with the seriousness of the case and comply with the applicable legislation. Furthermore, in 2021 a dedicated training on whistleblowing has been provided in favor of our employees, in order to raise awareness on the importance of a company culture based on ethics and integrity, as well as detail the process by which employees can report suspected or actual misconducts. CYBERSECURITY, DATA PROTECTION AND PRIVACY CYBERSECURITY information. As experienced during the COVID-19 pandemic, allowing people to work from home with the same level of security as if they were in the office. As our technology continues to evolve, we anticipate All employees are provided with specific training on to collect and store even more data in the future, information security and cybersecurity. Training is also and that our IT systems will improve security offered to external workers. This training is delivered countermeasures against the risks of willful and both online and in classroom, and it is part of regularly unintentional security breaches. Much of our value is launched training campaigns. A specific session on derived from our confidential business information, information security and cybersecurity is also part of including car design, proprietary technology and the two-day induction program for new employees. trade secrets. We also collect, retain and use certain personal information, including data we gather from On a weekly basis, the Company performs clients for product development and marketing vulnerability analysis to detect areas of weakness in purposes, and data we obtain from employees. the information/cyber security system, both internally Any unauthorized access to our IT systems may and externally. Penetration tests are executed compromise the confidentiality of Ferrari’s intellectual periodically by an external provider. property or the privacy of our customers’ information and expose us to claims as well as reputational Until the end of 2021, the Head of IT Security & damage. For these reasons, Ferrari has always paid Compliance was the function responsible for the outmost attention to cybersecurity. We have overseeing cybersecurity. It directly reported to the created a system of procedures, policies, services, Group’s CIO who, in turn, reported to the Group’s CFO, infrastructures and training as well as awareness to who is a member of the Ferrari Leadership Team. address all facets of cybersecurity currently known. The area that has been nurtured the most is Digital & Data department directly reporting into the CEO. information protection with a focus on preventing The head of IT Security & Compliance changed in Head data breaches, which has been addressed through of Cybersecurity and continues to report directly into the several tools & countermeasures, for example by Chief of Digital & Data Officer, formerly the CIO, who is a providing Ferrari tested and managed PCs to all member of the Ferrari Leadership Team. Starting from January 2022, the ICT department became users who connect to our network, extending it to our employees as well as to third parties. The user Cybersecurity topics are discussed in various internal and device authentication has strongly increased Committees several times per year, as well as at the the control over the access and management of Audit Committee level at least once a year. 164 FERRARI N.V.AR 2021DATA PROTECTION AND PRIVACY SUSTAINABILITY RISKS We care about processing data in a safe and We are committed to creating a culture of transparent manner and act in accordance with sustainability. Creating such a culture requires the current legislative framework that governs the effective risk management, responsible and proactive processing of our personal data at global scale, decision-making, and innovation. Our efforts are aimed including but not limited to the General Data Protection at minimizing the negative impacts of our business. Regulation “GDPR” (EU Regulation no. 2016/679) and Our risk management approach is an important the California Consumer Privacy Act of 2018 “CCPA”. business driver and it is integral to the achievement The data protection legal framework has steadily of the Group’s long-term business plan. We take an developed in the recent years and has brought a integrated approach to risk management, where new consciousness about privacy. More than ever risk and opportunity assessment are at the core of before, data protection and privacy have become the leadership team agenda. The Board of Directors fundamental, as they have been heavily impacted by the is responsible for considering the ability to control COVID-19 pandemic. In these specific circumstances, and manage risks crucial to achieving its identified processing of personal data is necessary in order to business targets, and for the continuity of the Group. take appropriate measures to contain the spread of the virus and subsequently mitigate its effects. Ferrari has adopted the last publication (“Enterprise Data protection and privacy law requires, among Performance”) of the COSO Framework (Committee others, the application of increased transparency of Sponsoring Organizations of the Treadway obligations, the introduction of common records Commission) as the foundation of its enterprise risk Risk Management - Integrating Strategy and of processing activities, the appointment of a Data management (ERM). Protection Officer “DPO”, an effective response mechanism to data subjects’ privacy-related requests In order to ensure the adequateness of its internal and - where advisable - privacy impact assessments risk management and control systems, Ferrari has before processing personal data. structured its risk management process and internal control systems based on the “Three Level of Controls Within this context, we have adopted a progressive Model”. Each level of controls has different roles and approach to ensure compliance with data responsibilities with clearly defined boundaries: protection and privacy law requirements, such as the implementation of new processes (e.g. system • The first level of control is composed of the collecting consents and privacy notices adoption functional management who is responsible for of a new Governance tool in order to periodically embedding risk management and internal control update the records of processing activities as well systems into each business process. First line as to perform privacy impact assessments), the of control has the ownership, responsibility and creation of new internal procedures (e.g. Privacy accountability for assessing and mitigating risks. It Procedure, Privacy by Design , appointment and is constituted by core business Risk Owners, staff management of system administrators, management functions Risk Owners and by the FLT. of requests from data subjects etc.), the guarantee of an effective and prompt response to requests • The second level of control is composed of the from data subjects (e.g. implementation of an online functions that oversee risk management across portal which will allow consumers to make privacy the company processes, monitoring and facilitating requests), the update of privacy notices, the drafting the implementation of effective risk management of operating instructions for authorized persons and control activities by the first line of control. It is within the Company, the designation of internal constituted by Compliance, Strategic, Operational privacy referents within Company departments and and Reporting functions such as Enterprise Risk the creation of an internal Privacy Committee. Regular Management, Group Compliance, Sustainability, e-learning courses, aimed at raising the awareness SOX, Health & Safety, Ecology & Energy, Supplier Risk on the data privacy regulations and requirements, Management, Financial Risk Management, Quality, are organized for and addressed to the newly hired Group Financial Control and IT Security. employees who are involved in the processing of personal data. • The third level of control is composed of Internal Audit that provides independent assurance on efficiency Dedicated face-to-face trainings have been delivered and effectiveness of Ferrari’s risk management, to the Privacy Referents and to the Customer Care. governance and internal control processes. 165 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE The FLT is responsible for identifying, prioritizing and mitigating risks, and for the establishment and maintenance of a risk management system across our business functions. Our risk management framework is discussed with the Group’s Audit Committee at least on an annual basis. We have integrated the analysis and assessment of socio-environmental risks in our risk management framework and are currently integrating our risk management activities with the outcomes of the materiality analysis described in the paragraph “Materiality Matrix of Ferrari Group”. In particular, the following key risks and risk trends are the ones related to our most material topics. Further information on sustainability risks and the related management approaches put in place by Ferrari are reported throughout this Statement. Key Risk Material topics Further references Brand Image (Strategic Risk(2) and Reputational risk(3)) Image and brand reputation, Innovation: Ferrari Group, Overview of Our Business technology and design, Customer satisfaction. The preservation and enhancement of the value of the Ferrari brand is crucial in driving revenue and demand for our cars. The perception and recognition of the Ferrari brand are of strategic importance and depend on many factors such as the design, technology, performance, quality and image of our cars, as well as the appeal of our dealerships and stores, the success of our client activities, and our general profile, including our brand’s image of exclusivity. The prestige, identity and appeal of the Ferrari brand also depend on the continued success of the Scuderia Ferrari racing team in the Formula 1 World Championship. Key Risk Material topics Further references Competition (Strategic risk) Innovation: technology and design, Exceeding expectations, Overview Customer satisfaction. of Our Business We face competition in all product categories and markets in which we operate. We believe that we compete primarily thanks to our brand image, the performance and design of our cars, our reputation for quality and the driving experience we offer our customers. Key Risk Material topics Further references Technological and regulatory uncertainty Innovation: technology and design, Exceeding expectations (Strategic risk) Customer satisfaction, Emissions. Performance cars are characterized by leading-edge technology that is constantly evolving. In particular, advances in racing technology often lead to improved technology in road cars. As technologies change, we plan to upgrade or adapt our cars and introduce new models in order to continue to provide cars with the latest technology. However, our cars may not compete effectively with our competitors’ cars if we are not able to develop, source and integrate the latest technology into our cars, also taking into consideration external factors such as the shortening of raw materials and components, faster obsolescence of components and the evolution of regulations on (for example) safety, noise, environmental and sustainability. (2) Strategic risks: risks which affect or are created by Ferrari’s business strategy and could affect Ferrari’s long-term positioning and performance. (3) Reputational risks: risks which affect Ferrari’s Brand image, credibility and/or integrity. 166 FERRARI N.V.AR 2021Key Risk Material topics Further references Relationship with suppliers (Operational risk (4)) Supply chain responsible management. Responsible Supply Chain, Integrity of Business Conduct. Our business depends on a significant number of suppliers that provide raw materials, parts and systems we require to manufacture cars and parts to run our business. We source materials from a limited number of suppliers. In addition, similar to other small volume car manufacturers, most of the key components we use in our cars are purchased from single source suppliers. We work with strategic partners in various areas of our business such as manufacturing and since their approach might differ from our own standards, Ferrari is exposed to performance, operational, financial and reputational risks regarding its suppliers. The COVID-19 pandemic could contribute to the financial distress for our suppliers leading to reduction or termination of their operations. In addition, potential unethical or improper business practices by suppliers could have a negative effect on the company’s reputation considering the high exposure of the Ferrari brand and image. Furthermore, the increase of components and products’ complexity and the increase of car volumes produced could result in further pressure on suppliers’ activities. Key Risk Material topics Further references Attraction, development and retention Human Capital. Talent Recruitment and Employee Retention, of talents (Operational risk) Training and talent development. Our success depends on the ability of our senior executives and other members of management to effectively manage individual areas of the business and our business as a whole. If we are unable to attract, retain and incentivize senior executives, drivers, team managers and key employees to succeed in international competitions or devote the capital necessary to fund successful racing activities, new models and innovative technology, this may adversely affect the level of enthusiasm of Ferrari clients for the brand and their perception of our cars, which could have an adverse effect on our business, results of operations and financial condition. The fast technology evolution that automotive industry is experiencing requires us to always reinforce and update our competences in new and emerging skill areas in order to guarantee a continuous alignment with market and technology trends. Key Risk Material topics Further references Cybersecurity including third parties Supply chain responsible management. Cybersecurity, data protection and privacy. vulnerabilities (Operational risk) Our IT systems architecture and industrial machinery are exposed to external cyber-attacks. In addition, we have to consider also that our third parties could be subjected to external cyber-attacks. In case the third party is connected to our system, the cyber attacker could also penetrate our IT systems. Also in the next years, we expect to increase the connectivity features of our cars. These new features may increase the cyber security risk of our cars with the chance that an external attack may occur. Moreover, in consideration of the UN-ECE regulations we will be required to adopt a Cyber Security Management System in order to obtain a certification to continue to register and sell our cars and to demonstrate that we are able and aware to deal with potential cyber risk, both at car level and enterprise level. (4) Operational risks: risks impacting the internal processes, people, systems and/or external resources of the organization and affect Ferrari’s ability to execute its business plan. 167 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ PROACTIVELY FOSTERING BEST PRACTICE GOVERNANCE Key Risk Climate Change (Strategic risk and Health, Safety and Environmental risk (5)) Material topics Emissions, Further references Further Climate-related Disclosures (TCFD) Image and brand reputation, Innovation: technology and design, Risk management and Compliance, Supply chain responsible management. As relevant factors for long-term value creation, Ferrari considers pivotal to manage risks related to climate change. The fight against climate change and the preservation of the environment are becoming crucial around the world and these concerns have resulted in rapidly evolving climate and environmental regulations emitted across international markets. Ferrari aims to increase the environmental awareness to continuously set and implement new programs and actions. We are conscious that these goals require an effort both from us and from our third parties and the Company is working on adapting internal processes, developing components, studying materials and sharing this perspective with our partners. Key Risk Material topics Further references Non-compliance with laws, regulations, Ethical business conduct, Integrity of Business Conduct, Reducing local standards (including tax) and codes (Compliance risk (6)) Emissions, environmental footprint Risk management and Compliance, Quality and safety of products and customers, Supply chain responsible management, Health and safety. We are subject to comprehensive and constantly evolving laws, regulations and policies throughout the world. In Europe, United States and China, for example, significant governmental regulation is driven by environmental, fuel economy, vehicle safety and noise emission concerns, and regulatory enforcement has become more active in recent years. A detailed description of how we respond to these risks can be found in the section “Risk Management Process and Internal Control Systems”. RESPONSIBLE SUPPLY CHAIN values recognized, adhered to and promoted by our Our focus on excellence, in terms of luxury, Company. The Code of Conduct was updated to include quality, aesthetics and performance, requires us specific guidelines relating to the respect of human to implement a responsible and efficient supply rights and conflicts of interest. The Group made its best chain management in order to select suppliers effort to ensure that the Code of Conduct is regarded and partners that are able to meet our high as a best practice of business conduct and followed by standards. Notwithstanding the low volume of cars third parties, including long lasting relationships and manufactured, our production process requires business partners such as suppliers, dealers, advisors a great variety of inputs entailing a complex and agents. The selection of suppliers is based not only supply chain management to ensure continuity of on the quality and competitiveness of their products production. We source a variety of components and services, but also their adherence to social, ethical (among which transmissions, brakes, driving- and environmental principles. safety systems and others), raw materials (such as aluminum or special steel), supplies, utilities, logistics Strategic suppliers are assessed through a risk and other services from numerous suppliers. analysis that aims at identifying critical suppliers, thanks to a mix of financial-compliance and industrial Ferrari encourages the adoption and sharing of assessments. Their growth capability is analyzed to sustainable practices among our business partners, identify where we need to support the development suppliers and dealers. All suppliers must respect the of our business partners to help them meet the Ferrari Code of Conduct, which includes the set of requests of the Group. Starting from 2020, we (5) Health, Safety and Environmental risks: risks which affect health and safety and the environment. (6) Compliance risks: risks of non-compliance with laws, regulations, local standards, code of conduct, internal policies and procedures. 168 FERRARI N.V.AR 2021are strengthening our suppliers’ qualification and Covered Countries are not harmed by our efforts. selection processes in order to verify not only their In particular, Ferrari has developed actions and technical capability and financial solidity, but also - strategies aimed at complying with the applicable through a screening methodology - their reliability in Conflict Minerals provisions, with specific reference terms of ethics, integrity and reputation (the so-called to those established by Section 1502 of the Dodd- “Compliance Evaluation”). Moreover, a pilot project Frank Act and the subsequent rules promulgated was launched in 2021 to assess suppliers according by the U.S. Securities and Exchange Commission, to sustainability criteria. A considerable part of our requiring companies to determine whether 3TG in relevant suppliers have been engaged and assessed their supply chain originated from the Democratic through a questionnaire that covered the following Republic of the Congo and its adjoining countries, topics: ethics, human rights, health and safety and and whether the procurement of those minerals environmental impact. Based on the results of the supported the armed conflict. assessment, different action plans will be undertaken. In the next few years, we aim to progressively extend Due to the complexity of our supply chain, we are the scope of this activity. In addition, we identified dependent upon suppliers to provide the information and engaged 91 suppliers who were among the most necessary to correctly identify the smelters and impactful in terms of GHG emissions in relation to our refiners that produce the 3TG contained in our activities through CDP Supply Chain questionnaire. All products and take appropriate action to determine of this aims at reducing supply chain emissions and that these smelters and refiners source responsibly. driving the low-carbon transition. In accordance with the Organization for Economic Co-operation and Development (“OECD”) Due Diligence Before engaging a new supplier(7), the competent Guidance for Responsible Supply Chains of Minerals departments of Ferrari Group conduct an adequate from Conflict-Affected and High-Risk Areas, we have Compliance Evaluation on the potential supplier in established an internal management system in relation order to examine its ethical reliability and reputation, to the supply of Conflict Minerals with the objective, its involvement in a legitimate and lawful business, inter alia, of: (1) minimizing the trade in Conflict and its commitment to share Ferrari’s values of Minerals that directly or indirectly finance or benefit integrity, fairness and compliance. The Compliance armed groups anywhere in the world; and (2) enabling Evaluation is capable of identifying potential risks legitimate minerals from conflict and high-risk for Ferrari under different perspectives, such as: regions to enter Ferrari’s global supply chain, thereby anticorruption, trade sanctions, money-laundering, supporting the economies and the local communities conflict of interests, ethics and reputation. that depend on the export of such minerals. CONFLICT MINERALS Specifically, we: Ferrari supports the goal of preventing the exploitation of minerals violating human rights, with • expect our suppliers to assure that the 3TG in their specific reference to tantalum, tin, tungsten and gold products do not directly or indirectly finance or (collectively, “3TG” or “Conflict Minerals”) originated benefit armed groups in the Covered Countries; and from high-risk or conflict affected countries (“Covered Countries”), that may be included in our • require all of our 3TG suppliers to conduct the cars. As part of Ferrari’s commitment to respect and necessary due diligence and provide us with promote human rights and the sustainability of its adequate information on the country of origin and operations, Ferrari selects suppliers based not only source of the materials used in the products they on the quality and competitiveness of their products supply to us. and services, but also on their adherence to social, ethical and environmental principles, as outlined in In 2020, 94% of Ferrari’s direct suppliers by Ferrari’s Code of Conduct. purchased value submitted responses to our Therefore, we place a high priority on responsible the coverage of our analysis and the response rate survey. We are strongly committed to increasing sourcing and the integrity of our suppliers and we through targeted actions. strive to ensure that the livelihoods of individuals in (7) In 2021, 100% of Ferrari S.p.A. new suppliers were evaluated with this screening methodology. 169 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSEXCEEDING EXPECTATIONS products, methods and the working environment. Pole Position Evo, for instance, rewards ideas put Innovation is in our DNA and we will continue pushing forward by individual staff members. In 2021, we boundaries to respond to customers’ desires, always received around 8,200 suggestions from employees. setting new standards in the “Ferrari way”. RESEARCH, INNOVATION AND TECHNOLOGY collaboration with our suppliers, and a handful Innovation drives products and processes, which of them are considered “key strategic innovation represents one of our key differentiating factors. partners”. Collaborations with leading universities are This is why we are focused on developing new also in place to foster the development of new ideas. Our focus on excellence requires a strong technologies and distinctive designs. Technological breakthroughs are further enhanced Participation in the Formula 1 World Championship through design. In 2010, the Ferrari Design Center with Scuderia Ferrari is an important source of was established as a best-in-class in-house design technological innovation, which is then transferred department to improve control over the design or adapted into our road cars, such as the hybrid process and to ensure long-term continuity of the configuration of the SF90 Stradale. Moreover, our Ferrari style. A guiding principle of the Ferrari style is development efforts take into account the three that each new model represents a clear departure defining dimensions of Ferrari cars: performance, from prior models and introduces new and distinctive versatility and comfort, as well as driving emotions. In aesthetic elements, delivering constant innovation addition to these internally driven factors, regulation within the furrow of tradition. Our designers, is key in determining the direction of technical modelers and engineers work together to create innovation. car bodies that incorporate the most innovative aerodynamic solutions within the elegant and One of our other main focuses is on innovating our powerful lines typical of Ferrari cars. working methods, which involves stimulating the creativity of our employees. With this in mind, we have The R&D investments and expenses to fuel the growth implemented programs designed to encourage the of the Group, as described above, are represented in development of ideas and solutions that will improve the charts below(8). R&D and CAPEX (€m) EXPENSED R&D AND CAPEX GROSS CAPEX 1,265 1,261 1,324 706 734 750 1,167 948 639 392 639 392 356 342 330 271 745 630 803 852 356 342 330 271 359 415 447 510 556 528 559 527 574 16 93 16 145 17 154 25 141 18 185 162 169 185 176 189 706 734 750 32 320 22 363 24 330 352 382 365 20 318 301 2013 2014 2015 2016 2017 2018 2019 2020 2021 2013 2014 2015 2016 2017 2018 2019 2020 2021 R&D expensed to the P&L Capex PP&E Other intagible Assets Captalised R&D (8) Capital expenditures (Capex) include right-of-use assets recognized in accordance with IFRS 16 – Leases within PP&E, for approx. Euro 13 million in 2021, for approx. Euro 25 million in 2020 and for approx. Euro 13 million in 2019. 170 FERRARI N.V.AR 2021CUSTOMER SATISFACTION We are devoted to the highest level of customer satisfaction. We have a structured process to assess the overall customer satisfaction on product, service provided, events organized by us and the overall customer experience with the car. Specific KPIs are constantly monitored and analyzed by the Marketing Intelligence department. The KPIs are measured through bespoke surveys for each car launch and collected for every new model, from range vehicles to special and limited editions. A similar approach is adopted for evaluating the quality of service and satisfaction of our events. The results of the product and service satisfaction analyses are used to outline any necessary action plans for current models and, additionally, to identify potential features to be added to the next generation of vehicles. Recent surveys show that customer satisfaction for Ferrari products and services has constantly stayed at a very high level. The chart below shows the flow between clients, dealers and Ferrari. We have developed an integrated system between our customer care, dealers, marketing department and area managers to track all contacts with clients, manage inquiries and share the results of customer and dealer satisfaction analysis. 171 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSDEALERAREAMANAGER DEVELOPMENT(for future models)PRODUCTION(for current models)FERRARI CLIENTS CUSTOMER CAREQuestionnairesQuestionnaires feedbacks MARKETINGINTELLIGENCE Scorecard & ReportReport & AnalysisQuestionnairesQuestionnaires feedbacks and inquiriesClients Inquiries Replies to Inquiries Market Research Activities (questionnaires & reports) VEHICLE SAFETY development of the human-machine interface in every Ferrari F1 car and its subsequent gradual transfer Vehicle safety is among our top priorities and Ferrari to our road-going sports cars. The SF90 Stradale’s cars are always designed and manufactured with steering wheel completes the transfer process from the safety of our customers and other road users racing and also ushers in a new era by introducing in mind. Given the nature of our cars, the electronic a series of touch commands that allow the driver equipment is developed with an integrated approach, to control the most important performance-related ensuring the best balance between safety, control and aspect of the car without ever taking their hands off best-in-class performance, to further enhance the the wheel. The Head Up Display is another part of the Ferrari driving emotions. innovative HMI and allows various data to be projected All of our range models are subject to a series of so that their attention is not distracted from driving. tests to obtain approval from the relevant authorities. We extended this innovative HMI to the Ferrari Roma onto the windshield within the driver’s field of vision Moreover, we start assessing all our new models at an and 296 GTB. early stage of planning and design to identify areas of improvement. Regarding further aspects of vehicle safety, please refer to See “Overview of Our Business - Regulatory To guarantee the highest level of passenger safety, Matters – Vehicle safety”. we develop both passive and active safety systems. Passive safety requirements are the initial guidelines BEING THE EMPLOYER OF CHOICE assigned to the engineers in order to define the design of every component, from car framework The high attention and care for our products is the to all the retain components (airbags, seat belts, foundation upon which Ferrari’s success is built and etc.). Moreover, specific devices are installed in this is feasible thanks to the efforts of the people racing cars to obtain FIA (Federation International de working in Ferrari. One of the many strengths is the l’Automobile) approval. ability to attract, retain and develop talents. Since 1997, we have developed the “Formula Uomo” initiative, with With the aim of solving issues beforehand and the intention of developing a high quality working reducing the environmental impact of these activities, life for our employees. In 2021, we carried out all all tests are reproduced in a state-of-the-art virtual the initiatives for our people, always in accordance environment before conducting them with real cars. with the most stringent COVID-19 pandemic related laws and protocols. Over the years, the project has Regarding active safety, we believe that the future become a pillar of our culture, based on redesigning developments of vehicle safety will be linked to the working environment, enforcing a safety-first Advanced Driver Assistance Systems (ADAS) culture, enabling individual development, enhancing and Human-Machine Interface (HMI), capable of teamwork and building a community now comprising preventing or mitigating crash occurrences. We 57 different nationalities. are currently assessing the implementation of the most recent trends and developments in terms of In 2021, we started the program “Formula Insieme”, simplifying and easing the interaction between the whose aim is to pursue the continuous development car and the driver to avoid any distraction. ADAS are of Ferrari through a “plan, do, check, act” approach, included into our entire fleet and we are working to starting from our employees’ opinions, gaining implement new solutions for our upcoming models, awareness of their points of view and identifying such as lane keeping assist, intelligent speed assist opportunities for continuous improvement. The and driving drowsiness. starting point was an online survey, which took place between April and May, through which we collected The SF90 Stradale, the first hybrid series-production the opinions of our employees on different topics car in Ferrari’s history, encapsulates the most concerning the working environment like safety, advanced technologies developed in Maranello, change readiness, open culture and many others. This including the HMI which, with its track-derived survey reached an exceptional participation rate of “eyes on the road, hands on the steering wheel” about 90%. Following this, Ferrari shared the survey philosophy, takes on a truly central role. The result is results with all employees and structured an action an HMI (Human-Machine Interface) that is a complete plan based on the employees’ proposals. departure from previous models. The “hands-on-the- steering-wheel” philosophy has consistently driven the 172 FERRARI N.V.AR 2021WORKING ENVIRONMENT performance and medical programs. Moreover, We know that the best individual and team people can access medical and physiotherapeutic performance is only achieved if employees feel they support during trips related to the Formula 1 World are in the right environment. We also believe that the Championship. quality of our products cannot be separated from the lives of the people working in Ferrari. Our attention to the promotion of health and safety among our employees goes beyond what is required This is why the working environment and wellbeing by law and, to this effect, special workshops are of the Company’s employees are among our most organized for employees to raise awareness on the important priorities, representing the key focus of our importance of these topics. “Formula Uomo” initiatives. To foster a sense of belonging among employees Our complex in Maranello, a state-of-the-art work and their families and to offer concrete support environment, was designed to reinforce the to working parents with the demanding duties of synergistic relationship between work and results. childcare during school holidays, we have launched With the needs of our employees firmly in mind, the program “Formula Estate Junior”. This initiative our manufacturing facilities are specifically created consists of a free day camp for employees’ children to combine carefully designed lighting systems, aged 3 to 13, with various programs including sports, projected to maximize the amount of natural light, and outdoor activities, excursions and workshops. The several external and internal green areas. Thermal program, which has reached its 13th edition, allows comfort throughout the factory is also a crucial children to enjoy an exciting experience with a requirement and, since 2013, the in-plant foundry is didactic purpose: each edition of the “Formula Estate equipped with a cooling system that makes it air- Junior” camp has an educational theme developed by conditioned and climate controlled. Special measures professional educators (136 in 2021) and is organized aimed at reducing the environmental impact and in collaboration with the local community. The 2021 noise through the use of advanced technologies edition was still affected by COVID-19 restrictions are also in place. As an example, the design of our but showed a participation of over 600 children, an Machining department is aimed at providing the increase compared to the previous one, even if the workplace with maximum acoustic comfort thanks to number of educators was the same as in 2020, as the noise reduction solutions (source and reverberation). legislation changed. To promote an active lifestyle among our employees, Education is also the focus of a series of different we rely on our “Formula Benessere” program, aimed initiatives that provide scholarships to talented junior at providing preventative healthcare to employees high, high school and university students. In 2021, and their children. A gym is available for all the our scholarship program, named after our founder employees at Maranello, while employees at the “Enzo Ferrari”, was awarded to 85 talented students Modena plant have free membership in one of the with the awards handed out by our Chairman during city gyms. Initially provided to the F1 racing team an outdoor event. Moreover, in 2021 we reimbursed as part of their training program for the Grand Prix about 800 employees for the cost of their children’s activities, the initiative was subsequently rolled out textbooks (reimbursement is offered to all employees’ to all employees. While waiting for the reopening children until high school and, in certain cases, we of the gym, virtual training classes are available reimburse the cost of school textbooks for employees on demand for all employees with the dedicated in continued education). App. As part of the “Formula Benessere” benefits, preventative healthcare is provided to all employees In compliance with the anti-COVID regulations, more and their children. Medical specialists are available for than 1,850 Ferrari children aged 0 to 10 were able to consultation in areas such as ophthalmic, cardiology, enjoy the collection of a Christmas gift dedicated to osteopathy and dermatology, among others. A free every age group. annual check-up focusing on general health and fitness is also provided to managers and children of We offer additional benefits to our employees in five all employees aged 5 to 15. For our people involved different areas - food, free time, wellness, travel and in F1 World Championship we developed the “Health personal services - including personalized loans at Pit Stop”. This program aims to foster people’s health competitive rates within the internal branch of a local by enhancing their psycho/physical performance bank, special rates for housing needs and discounts through annual medical check-ups and nutritional, at the Ferrari Museums, Ferrari Stores and at the 173 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ BEING THE EMPLOYER OF CHOICE Ferrari Company Outlet, as well as a service that gives junior workers, which in our manufacturing process the opportunity to Ferrari employees to delegate their takes place directly on the job because we believe in own bureaucratic practices. constantly maintaining excellence through “learning Regarding sustainable mobility, we offered our by doing”. employees the possibility of long-term rental of Human capital development ensures that our electric cars and bicycles. In addition, Ferrari has Company has the appropriate skill set to execute launched a new project in collaboration with local the business strategy and improve employee authorities to encourage the use of bicycles to reach attraction, retention, as well as motivation, and, the workplace. as a result, enhance productivity and the quest for innovation. Training requests for employees To foster the sense of belonging, the Company who receive a regular performance and career usually organizes multiple events, most of which development review, are identified during this were paused in 2021 as in 2020 due to the COVID-19 review process in order to address the needs of pandemic. For the first time since the beginning of the both parties. pandemic, in 2021 we hosted, at the Mugello Circuit, the Ferrari Challenge championship World Finals, an A Training Plan with three specific objectives is event attended by a large number of our employees in place: together with their guests, adopting the highest COVID-19 precautionary measures. • To protect and pass on the strategic and specific know-how of Ferrari Over the last years, several culture and sport associations have been created: employees and – Among all the training initiatives in Ferrari, we are former employees that share a common interest very proud of our “Scuola dei mestieri”, started have the opportunity to cultivate their passions and in 2009. It is a unique, in-house, technical training organize sport and recreational activities together. project for both white collars and workers, which increases the professionalism of junior talents All these benefits are provided to all of our employees. and motivates senior employees, recognizing TRAINING AND TALENT DEVELOPMENT Maestri and to pass on Ferrari’s unique heritage Along with the need to hire, develop and retain talents, to the next generation. The initiative combines we are aware that we must manage human capital as different didactic methodologies, including on a critical resource to achieve the best possible results. the job sessions and in-classroom training, both their competencies by asking them to become The success, prestige and appeal of our brand skills, with a particular focus on innovation. Being depends on the ability to attract talents and retain a Maestro is an aspirational position and key to the focused on the consolidation of competencies and them. In particular, top drivers, racing management, Company’s success. engineering talent and all the employees that make Ferrari unique have to be rewarded based on In 2021, we further consolidated the activities their ability, determination, and expectations. This of the previous years, with the three main areas is why we offer career progression opportunities of focus being: product innovation (mainly with tailored to each individual’s strengths, ambitions regard to hybridization, HMI and new components, and our Company’s requirements, underpinned in a cross-functional training), process innovation by substantial investments in training. A total of (as in the case of low bake painting and additive over 70,100 hours (up 11% vs. 2020) of training manufacturing) as well as support and induction have been provided to the Company’s employees of new colleagues. Moreover a new course on the in 2021. This result was achieved mostly thanks to new V6 engine was added. the high-quality volunteering training we provide to our employees, through internally developed As in the previous year, also in 2021, to ensure activities, among which the two MBA programs and effective training opportunities to employees the technical training projects such as “La Scuola during the COVID-19 pandemic, all the courses dei Mestieri” and the training course dedicated to have been implemented through e-learning all members of the purchasing department. What platforms and webinars. A dedicated virtual makes Ferrari’s craftsmanship unique is the direct library containing all the courses was created transfer of knowledge and expertise from senior to while a number of tablets were distributed 174 FERRARI N.V.AR 2021among participants to guarantee accessibility. worked on integration objectives, with many Such an effort guaranteed all the 2021 scheduled proposals emerging at the end of the course on course. how to improve working activities. Moreover, we implemented training courses for Scuderia Furthermore, within “Scuola dei mestieri” we Ferrari managers to address their specific needs, have implemented an activity called “Scuola delle covering Ferrari’s leadership model and other professioni”, dedicated to young engineers and all topics. employees of the Purchasing department, in order to provide them with an overview of all the phases • To foster and support the inclusion, growth and of product development and to pass on the Ferrari development of our people. DNA. In 2021, a new class provided participants with “technical” visits to all production departments to – In line with business and Company requirements, show the unique manufacturing process in Ferrari. and consistent with the needs expressed in the Performance & Leadership Management system, training activities were provided with respect to • To shape and prepare the future managerial class managerial, technical and language skills. for the business, innovation, management and human capital development challenges. Launched in 2019, we continue to offer our employees the possibility to access the Harvard – In 2021, despite the permanence of the COVID-19 Manage Mentor e-learning platform. The pandemic, the activities concerning the Ferrari training provided through this platform has Corporate Executive MBA were confirmed. The been customized according to our needs and objective of the master’s program is to improve the following three lines of development: to the management skills of the attendees, to let them integrate this platform with the Performance gain experience on the most recent innovation and Leadership Management system; to give trends and to convey the Ferrari leadership model. employees, especially newcomers, the basic This master’s degree offers a unique tailor- managerial skills that we consider essential made program to form a critical mass within requirements; and to adapt professional the management class that will be able to grasp development paths based on employees’ career the challenges of the future, while at the same levels. Soft skills and language courses are time preserving the tradition of Ferrari. During included in this platform, as well as several training the course of study, innovation talks, leadership activities on diversity topics sustaining our Equal scrums and site visits to production plants are Salary Certification. carried out. This master’s degree will help to develop a group of managers with a shared In addition, an online training campaign is approach to leadership, while respecting and launched twice a year and includes all the valuing individual differences. A group on which corporate mandatory trainings dedicated to Ferrari can rely on to tackle future challenges. new employees. These kind of campaigns are In 2021, in addition to the third edition of this repeated periodically to provide a training update master’s degree, a new program was launched for to all employees. Among the mandatory courses, employees aged between 27 and 35. The Ferrari a session is dedicated to our Code of Conduct Global Corporate MBA, in addition to providing that covers also anticorruption and human rights participants with managerial skills, pays special topics. In 2021, a mandatory online campaign was attention to the three main disruptive trends launched on Anticorruption, Conflicts of interest, of our time: technological innovation, digital Whistleblowing and Italian Legislative Decree transformation and sustainable transition. 231/2001, regarding the principle of corporate administrative responsibility for certain types of In 2021, we completed the second edition of crimes committed by qualified representatives of the managerial growth program called “Fly the the Company in the interest or to the advantage Flag”, that involved all managers of Direzione of the Company itself. In 2021, the training course Tecnica with individual and group activities. The dedicated to all members of the purchasing objective of this program is to strengthen the department, realized in partnership with the peculiar characteristics of a manager: assuming European Institute of Purchasing Management, responsibility, increasing accountability and was concluded and the participants were provided enhancing teamwork. Cross-functional groups with a certification of completion. 175 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ BEING THE EMPLOYER OF CHOICE In 2021, we made additional progress regarding the activities started the previous years to ensure know- how continuity and we promoted the strengthening of employee skills to meet our ambitions for the future. Collaboration, innovation, focus and learning, together with agility at all levels, represent some of the key values we pursue to thrive in a rapidly changing world. All these training activities, delivered both in presence and online, resulted in an increase in the overall number of training hours provided compared to the previous year. AVERAGE HOURS OF TRAINING Total 2021 15.2 2020 13.9 2019 13.5 TALENT RECRUITMENT AND EMPLOYEE RETENTION and consolidating partnerships with leading engineering universities and companies. Within this The excellence that our products and our brand project, for the third edition we also included our embody is what attracts and retains the best talents Brand Diversification team with the goal to attract the worldwide. best fashion and luxury management and master’s graduates. “Ferrari F1 Engineering Academy”, At Ferrari, recruitment and selection is about sourcing active since 2015, is dedicated to the recruitment of the right qualities and skills that will represent the talented engineers to be introduced to our F1 team. backbone of our future success. Our recruitment We regularly perform dedicated communication process provides a platform to engage with future activities at universities, integrating on-line testing as employees, to assess competencies through a well as dedicated assessment centers managed in structured selection process and to prepare for post- Maranello to ensure that the most suitable applicants recruitment integration and development. have the opportunity to join the Ferrari team. We have now reached the 7th edition of this program; The mission of the recruitment team is to identify, retention rates continue to be high. Moreover in 2021, evaluate and bring onboard the individuals which we took part to an onboarding program together are aligned with our requirements and values. We with three companies, also members of MUNER, to received in excess of 46,000 applications during 2021, share knowledge with students around: vehicle setup, including specific as well as spontaneous applications electronics and homologations. from around the world for engineering, technical, marketing and financial positions. To ease employees into their new jobs, Ferrari provides a two-day induction program. The first day We also undertake partnership programs with is dedicated to introducing the Company culture and top universities around the world to engage with mission, as well as guiding new employees through students, professors, career offices and a network the corporate offices and production plants. The of professionals in order to identify talents for the following day is focused on health and safety training. future. In 2021, we organized 53 events, attended by almost 4,500 students. We offer Company insight To promote a responsible behavior during the presentations, testimonials by Ferrari staff, selected assembling phase of cars and engines, we launched case studies at university campus and, for partner many years ago the “Pit Stop” and “Fiorano Race” universities such as the Motorvehicle University of initiatives, where colleagues on the same shift are Emilia-Romagna (MUNER), we also offer the selected assigned to “teams”, with key performance indicators opportunity to visit the Ferrari facilities. These activities in place for the improvement of quality, efficiency allow us to transmit the key values of the Company, and environmental sustainability. The teams are then and therefore to engage directly, or indirectly through ranked based on the data, with the best performers communications and social media, nourishing our being rewarded. Furthermore, we organize the recruitment pipeline. Our program includes different “Pole Position Evo” program to evaluate individual graduate projects: “Ferrari GT Academy” is dedicated performances. to the recruitment of engineering, production and commercial personnel, with the aim of attracting, We reward our employees, excluding senior evaluating and hiring future talents and establishing management, through a productivity bonus called 176 FERRARI N.V.AR 2021“Premio di Competitività”, based on yearly shipments aspirations and the final evaluation. Starting from and adj. EBITDA results, as well as a product quality 2021, the training on our Performance Management index adjusted for individual absenteeism rates. In process was transformed in online training video 2021, each employee received around Euro 5,500 on courses that are always available to all of our top of the additional Euro 2,100, as provided for in a employees, besides delivering in-person training. specific agreement signed with the trade unions. On the side, Ferrari organizes assessment classes with external psychologists and HR experts with the All employees, excluding workers, receive a regular aim of evaluating employee potential. Due to COVID performance review based on performance and 19 restrictions, these assessments of potential leadership behaviors, which ends with a final were carried out in an online format for white-collar evaluation from their assessors at the end of the year. employees, while individual development interviews Workers undergo a different review, which is based were organized for workers. In addition, for the on regular assessments, aimed at developing their first time in 2021, we started for our Managers career path. and Senior Managers the leadership development project, an individual assessment of leadership In 2021, more than 2,200 employees received a behaviors aimed at continuous improvement and performance evaluation through our specific professional development, which also includes a 360 online tool, covering almost 100% of white collars degree feedback. The results of these assessments and managers. This online tool allows us to track are a fundamental asset for succession plans in and share with employees and management the key positions, identifying career development results of the assessment, including strengths and opportunities and defining consistent retention improvement areas as well as their professional actions. EMPLOYEES WHO RECEIVED A REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEW BY EMPLOYEE CATEGORY Employee category Managers and Senior Managers Middle Managers White Collars Workers 2021 2020 2019 98% 96% 90% 0% 97% 99% 92% 0% 86% 73% 66% 0% Thanks to our career development program, Ferrari encourages the professional growth of its employees and tries to fill key positions with talented internal candidates before tapping into the external market. The results of the analysis carried out on our key positions covered by our employees are used to develop specific succession plans, with a timeframe of 2-4 years, to ensure the competitiveness of Ferrari over time and to take advantage of our employees’ talents. In 2021, Ferrari S.p.A. and Ferrari North America Inc. confirmed the Equal Salary Certificate for providing equal pay to men and women with the same qualifications and positions in the Company. This accreditation attested the Company’s commitment to creating an inclusive and diverse working environment while fostering career development for everybody. In 2020, Ferrari was the first Italian Company to receive this specific certification. The certification process included a detailed statistical analysis of compensation levels, which revealed that the Prancing Horse is one of Europe’s companies having successfully eliminated the gender pay gap. Ferrari sees this certification not as an end point but as a further stage of growth and an opportunity to implement tangible actions to ensure that everyone can pursue their professional growth. In 2021, Ferrari took advantage of all the training courses offered by Valore D, the association with over 240 member companies in Italy, whose commitment is to promote gender balance and an inclusive culture in organizations and across the country: 32 Ferrari women employees were selected to get access to discussions on diversity, inclusive leadership, language and soft skills. Moreover, on Ferrari intranet all employees can access several “open talks” on these topics. For the third year in a row, our effort to guarantee employee attraction and retention was also recognized by the Top Employers Institute in 2022. 177 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSOCCUPATIONAL HEALTH AND SAFETY management to review safety issues. Periodic internal health and safety audits are performed to ensure We are particularly focused on the safety of our compliance with our health and safety management people and we are dedicated to the prevention of system, current laws and best practices. Ferrari accidents at work(9). Our hazard identification, risk S.p.A. and Mugello Circuit S.p.A. health and safety assessment and incident investigation processes management systems are certified ISO 45001:2018(10), are developed in accordance with the highest a voluntary international standard, which specifies the international and national voluntary standards and requirements of an occupational health and safety normative requirements on health and safety. In management system with reference to the activities addition to formal meetings being held with employee performed within the premises of the organization by representatives, periodic meetings are also held with its employees or external workers. HOURS OF HEALTH AND SAFETY TRAINING PER YEAR AND NUMBER OF PARTICIPANTS(11) Training hours Number of participants 2021 22,044 3,957 2020 18,169 3,089 2019 22,313 2,927 We continue to make significant investments in safety at work: improvements in the existing structures and specific training have allowed us to achieve significant results. Mandatory health and safety training is provided to all new hires during the second day of the induction program, while periodic sessions are developed for all employees. We provide employees who test our cars with specific on-track driving training to make sure they have all the skills required to perform emergency maneuvers, if necessary. As shown in the table above, in 2021, the number of training hours increased and returned in line with pre COVID-19 pandemic level. In addition, a constantly updated dynamic health protocol is in place and a specific health and safety section is part of the training program of the “Department Team Leaders”. Particularly effective has been the program to highlight the so-called “near misses”: events that could have caused injuries but did not. Moreover, most of the buildings are provided with a defibrillator along with the standard health and safety equipment. The table below shows a substantially stable trend in the lost time injuries rate over the last three years. In 2021, the injury rate was 1.2, with 9 occurrences (6 in 2020) and no fatalities occurring. The types of work-related injuries include bruises and one case of a collision with a vehicle, occurred during an exhibition of the single-seaters at the Motor Valley Fest in Modena, that resulted in high-consequence injury. Each work-related injury is analyzed to determine the cause and appropriate measures to avoid recurrence are then implemented. (9) In this section, we refer to Ferrari S.p.A., which operates primarily in the Maranello and Modena plants and to Mugello Circuit S.p.A., which operates the Mugello racing circuit. (10) Ferrari S.p.A. and Mugello Circuit S.p.A. include 94% of all Ferrari Group employees. (11) The figures provided refer to all employees and external staff of Ferrari S.p.A. and Mugello Circuit S.p.A. 178 FERRARI N.V.AR 2021NUMBER OF INJURIES AND INJURY RATE(12) Total number of lost time injuries of which causing more than 3 days of absence (excl. high-consequence injury and fatalities)(13) of which high-consequence injury of which fatalities Total lost time injury rate(14) of which causing more than 3 days of absence (excl. high-consequence injury and fatalities)(15) of which high-consequence injury of which fatalities Hours worked 2021 2020 9 5 1 0 1.2 0.7 0.1 0 6 4 0 0 1.0 0.6 0 0 2019 10 7 0 0 1.5 1.1 0 0 7,263,995 6,280,881(16) 6,471,529 During the course of 2021, three injuries have been recorded for agency workers, two resulting in more than 3 days of absence and one resulting in less than 3 days of absence. During the last year, no cases of diseases arising from a work situation or activity, or from a work-related injury have been recorded. Due to the nature of the activity conducted in Ferrari plants, workers are not considered exposed to high risks relating to specific diseases. Every employee undergoes a regular work-related medical examination, as prescribed by law. Health and safety contents are covered by the CCSL (Contratto Collettivo Specifico di Lavoro), signed on March 11, 2019, and also by the Accordo Premio di Competitività Ferrari, signed on September 25, 2019, providing a specific health and safety Commission involving, on a monthly basis, both the Company and the workers’ representatives for health and safety. CCSL and Accordo Premio di Competitività Ferrari cover 100% of Ferrari employees in Italy. OUR EMPLOYEES IN NUMBERS As of December 31, 2021, Group(17) employees were 4,609, an increase of 1.2% compared to December 31, 2020 (4,556). We expect to continue growing over the next few years in order to meet our key priorities. Number of employees December 31, 2021 December 31, 2020 December 31, 2019 Total of which women 4,609 15.2% 4,556 14.8% 4,285 14.0% We also rely on external collaborators such as contractors, self-employed persons, workers hired through external agencies and interns. (12) The figures provided are referred to all the employees of Ferrari S.p.A. and Mugello Circuit S.p.A., with the exception of Managers and Senior Managers; this category of employees did not incur any injuries in 2021. All data does not include first aid medical treatments. (13) Injuries that must be reported to INAIL (Italian National Institute for Insurance against Accidents at Work), according to Italian legislation. (14) The injury rate is the ratio of the number of injuries reported to the number of hours worked (including overtime), multiplied by 1,000,000, excluding commuting accidents. (15) Injuries that must be reported to INAIL (Italian National Institute for Insurance against Accidents at Work), according to Italian legislation. (16) In 2020, total hours worked decreased mainly due to the seven-week production suspension caused by the COVID-19 pandemic. (17) In this chapter, “The Group” refers to all the legal entities indicated as consolidated line by line by Ferrari N.V. in 2021 Annual Report. 179 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ OCCUPATIONAL HEALTH AND SAFETY PERCENTAGE OF EMPLOYEES PER EMPLOYEE CATEGORY BY GENDER Employee category December 31, 2021 December 31, 2020 Managers and Senior Managers Middle Managers White Collars Workers Total Male Female Total Male Female Total 86.0% 84.0% 75.3% 92.1% 84.8% 14.0% 16.0% 24.7% 7.9% 15.2% 143 639 1,637 2,190 85.4% 84.1% 75.8% 92.2% 14.6% 15.9% 24.2% 7.8% 4,609 85.2% 14.8% 137 603 1,583 2,233 4,556 As indicated in the table above, compared to the previous year in 2020, the percentage of female employees slightly grew from 14.8% to 15.2%. This was mainly due to an increase in the “Middle Managers” and “White Collars” categories. PERCENTAGE OF EMPLOYEES BY AGE GROUP Total 13.0% 68.5% 18.6% 4,609 15.2% 66.8% 18.0% 4,556 December 31, 2021 December 31, 2020 <30 30-50 >50 Total <30 30-50 >50 Total The majority of the workforce is between the age of 30 and 50 (68.5%). NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER New Hires Departures New Hires (%) Departures (%) 2021 2020 Total Group Total Group 240 187 5.2% 4.1% 405 134 8.9% 2.9% All the employees of the Group in Italy (representing 94.1% of the total workforce) are subject to collective agreements (CCSL, Contratto Collettivo Specifico di Lavoro and Accordo Premio di Competitività Ferrari). Ferrari pays salaries that are in line with industry standards. In addition to the statutory minimum wages, salaries are often determined by collective bargaining agreements. ABSENTEEISM RATE IN ITALY(18) Employees 2021 1.64% 2020 1.53% (18) The absenteeism rate is calculated as a ratio of hours lost for sickness divided the number of hours to be worked. The perimeter considered relates only to Ferrari N.V., Ferrari S.p.A. and Mugello Circuit S.p.A. employees. 180 FERRARI N.V.AR 2021REDUCING ENVIRONMENTAL FOOTPRINT developments while monitoring the emissions of Ferrari cars reporting to our Chief Research & OUR ENVIRONMENTAL RESPONSIBILITY Development Officer. We assemble all of our cars and manufacture all the engines used in our cars or sold to Maserati In 2021, we calculated our 2019 and 2020 carbon at our production facility in Maranello19 (Italy). The footprint considering the GHG emissions related to Carrozzeria Scaglietti plant, located in Modena (Italy), all the Group activities over our entire value chain, is where we manufacture aluminum bodyworks including both direct and indirect GHG emissions. and chassis. The two plants cover a cumulative Our carbon footprint calculation, based on GHG area of approximately 850,000 m2. We also own the protocol methodology, has been verified by a Mugello racing circuit in Scarperia, near Florence certification entity according to ISO 14064-1:2018 (Italy), which covers an area of 1,700,000 m2 (of requirements. This analysis enhanced our awareness which approximately 1,200,000 m2 of green or tree- on our overall environmental impact, allowing us covered areas). We directly operate 16 retail stores and maintain offices for our foreign subsidiaries and other to determine priority areas for action. Our 2019 base year carbon footprint is approximately 600 ktons CO2eq. Direct GHG emissions account for 14% of the total, while indirect upstream GHG smaller facilities in Italy, such as the Museo Enzo emissions accounts for 54%, the majority referring Ferrari (MEF) in Modena and the Ferrari Museum to “Purchased goods and services” category and in Maranello. The environmental impact of these indirect downstream for 32% of the total, mainly due additional facilities is deemed negligible and is to “Use of sold products” category. excluded in this chapter’s data. Group Carbon Footprint The monitoring and management of the environmental performance of our productive 14% plants is assigned to a team that reports to our Chief Technologies & Infrastructures Officer. Their effort is aimed at minimizing the impact of our activities on the environment, particularly in relation to the energy consumption of the production facilities. A different team is in charge of overseeing regulatory 32% 2019 54% Upstream Downstream Direct We are committing to achieve carbon neutrality by 2030 on our entire value chain, addressing direct and indirect GHG emissions, focusing on energy and materials, in addition to our electrification journey. PLANTS AND CIRCUITS ENVIRONMENTAL MANAGEMENT SYSTEMS We have invested heavily to minimize our environmental impact since 2001, when the Company reached the ISO 14001:2015 certification for our plants in Maranello and Modena. In 2019, we obtained the renewal of the certification of our environmental management system according to the new standard ISO 14001:2015. In addition, in 2007, we obtained and renewed the Integrated Environmental Authorization. As mentioned in our Environmental Policy, our effort is to minimize the negative impact of our activities on natural resources and the global environment. (19) Maranello production facility is composed of the main offices and production buildings, the “Nuova Gestione Sportiva” building and the adjacent Fiorano track (of approximately 3,000 meters). 181 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REDUCING ENVIRONMENTAL FOOTPRINT In addition, Ferrari S.p.A. has obtained the three stars system with ISO 14001:2015 and EMAS (Eco- of the FIA Environmental Accreditation Program. Management and Audit Scheme). Moreover, in The program development by the Fédération 2020, Mugello Circuit S.p.A. obtained the ISO 20121 Internationale de l’Automobile aims at helping certification, confirmed also in 2021. Mugello Circuit key players in the motorsport and automotive has been the first circuit in the world to obtain this sector measure and enhance their environmental certification. This standard applies to the activities performance by means of an independent related to the events hosted and is evidence of the certification process. commitment of Mugello Circuit to implement a responsible and sustainable management system. To further reflect our sustainability commitment, in 2021 we obtained the ISO 20121 certification, EFFICIENT ENERGY USE the international standard for sustainable event Our culture embraces a rational use of energy, management, for the Ferrari Challenge Europe, which is mainly utilized for the manufacturing of cars becoming the first European one-make championship and engines. Over the years, the Group has strived for combustion-powered cars to receive this to lower its energy consumption and to minimize certification. The standard applies to the planning and its environmental impact, adopting innovative realization of the 2021 Championship. In the same solutions and using renewable energy sources for year, the ISO 20121 certification was obtained also its manufacturing facilities. In 2008, we installed by Passione Ferrari, for SPA-Francorchamps event. our first solar panels and subsequently increased Passione Ferrari is the official program of track capacity in 2011 and 2015. Since 2014, Ferrari has events for Ferrari owners and sports car lovers, been purchasing electricity with Guarantee of Origin hosted by the Ferrari European Challenge series. certificates. During 2021, we also obtained the ISO 20121 In addition, from 2009, we started using electricity certification for Ferrari Factory Tour, a unique along with hot and cold water generated by the experience for customers, prospects and guests of trigeneration plant(20), allowing us to optimize our sponsors, where ad-hoc guided tours are organized energy needs. In 2021, the trigeneration plant to the “Cittadella Ferrari” and the iconic places of the produced 78% of the electricity needed for the “Cavallino Rampante”. Maranello plant, while the renewable sources(21) cover the remaining 22%. The Mugello Circuit S.p.A. obtained and renewed the certification for the environmental management ENERGY CONSUMPTION WITHIN THE ORGANIZATION Unit of measurement: TJ Non-renewable fuel consumption Natural Gas (used for trigenerator) Natural Gas (for other uses) Gasoline Diesel(22) Total electricity bought for consumption From renewable sources From non-renewable sources Electricity self-produced for consumption(23) Electricity sold Total 2021 1,638 1,117 452 56 13 142 142 — 3 (9) 2020 1,515 1,079 376 47 13 108 107 1 4 (8) 1,774 1,619 (20) Even if the trigenerator plant was bought by Ferrari in September 2016, data referring to energy consumption and GHG emissions consolidate trigenerator plant data for the whole 2016 for comparative reasons. (21) Thanks to our photovoltaic system and the purchase of Guarantee of Origin certificates. (22) Data also include Ferrari’s trucks and power generator related to F1 activities. (23) From photovoltaic. 182 FERRARI N.V.AR 2021The total energy consumption within the Group for building related to new GT sport activities, the new 2021 was 1,774 TJ, with an increase of 9.6% from 2020 building for Formula 1 simulator and the renovation (1,619 TJ). In 2021 we returned to pre COVID-19 level. of the offices of Marketing and Commercial Direction, all of them built with high standard of We are constantly implementing actions such as the energy efficiency. replacement of traditional illumination systems to LED technology and the use of high efficiency engine AIR EMISSIONS with inverter technology in pumps for the industrial water distribution system. As of today, all our new The emissions of CO2eq deriving from the Maranello and Modena plants and from the Mugello racing buildings in Maranello are Class A-ranked and the circuit (Scope 1 and Scope 2 market-based) are equal Formula 1 team headquarters comply with the net zero energy building protocol (NetZeb), meaning that the total amount of energy used by the building is approximately equal to the amount of renewable energy it generates. In 2021, we completed the new to 95,514 tCO2eq in 2021, compared to 88,380 tCO2eq in 2020, 94,615 tCO2eq in 2019, 91,773 tCO2eq in 2018, 92,609 tCO2eq in 2017 and 93,086 tCO2eq in 2016. DIRECT AND ENERGY INDIRECT GHG EMISSIONS Unit of measurement: tCO2eq Scope 1(24) 2021 2020 2019 2018 2017 2016 95,514 88,242 93,789 91,001 91,789 92,319 Scope 2 (market-based method)(25) — 138 826 Scope 2 (location-based method)(26) 12,423 10,095 11,603 772 9,219 820 9,822 767 9,105 In 2021, our Scope 1 GHG emissions increased by 8% compared to 2020. In 2021 we managed to reduce to zero our Scope 2 market based GHG emissions, thanks to the purchase of renewable energy by Ferrari S.p.A. and Mugello Circuit S.p.A. If we had not purchased Guarantee of Origin certificates these emissions would have been higher by 18,102 tons CO2eq. Other significant air emissions are mainly related to volatile organic compounds (VOCs) released during vehicle manufacturing. In addition, NOX, SOX and dust emissions are constantly monitored. OTHER SIGNIFICANT AIR EMISSIONS Unit of measurement: tons NOX SOX Volatile Organic Compounds (VOCs) Dusts 2021 2020 63 1 62 5 59 1 46 3 (24) Direct greenhouse gas emissions, measured in tons of CO2 equivalent, were calculated using emission factors indicated in “Emission Factors from Cross-Sector Tools; March 2017” and “Global Warming Potential Values Guidance; May 2015”, published by The Greenhouse Gas Protocol. Gases included in the calculation of the Scope 1 GHG emissions: CO2, CH4, N2O, HFCs and other refrigerant gases. (25) Market-based indirect greenhouse gas emissions, measured in tons of CO2, were calculated using the Residual Mix emission factors indicated in “2020 European Residual Mixes, V.1.0”, published by AIB. The Group purchases Guarantee of Origin (GO) certificates in order to reduce the impact of CO2 emissions in the atmosphere. (26) Location-based indirect greenhouse gas emissions, measured in tons of CO2, were calculated using the emission factor indicated in “Confronti internazionali; 2019”, published by Terna. 183 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REDUCING ENVIRONMENTAL FOOTPRINT WASTE MANAGEMENT is the first raw material (by weight) used in our We acknowledge that rational use of raw materials, manufacturing process. Other projects aimed at together with careful waste management, reducing waste are undergoing a feasibility analysis. helps reduce the environmental impact of the In particular, according to the concept of the circular manufacturing process. In addition, innovative economy, in some cases our production scraps solutions and advanced technical processes minimize can be used for our manufacturing processes (e.g. waste and negative environmental impact. The reuse processed sand used in the foundry, aluminum that of production scraps in our manufacturing process cannot be smelted). also has the objective of reducing waste. To achieve this target, a series of initiatives in the increase of 2% compared to 2020 (9,785 tons), entirely different phases of the manufacturing process treated offsite, increasing at a lesser pace than our have been implemented. As an example, aluminum production growth, also thanks to new washing water scraps are melted in the foundry to avoid waste, this treatment that allowed us to avoid the generation of is particularly important considering that aluminum more than 600 tons of waste. Total waste for(27) 2021 was equal to 9,992 tons, with an WASTE DIVERTED FROM DISPOSAL Unit of measurement: tons 2021 2020 Total Hazardous Waste Total Non-Hazardous Waste Weight Percentage Weight Percentage 630.7 4,165.5 13.2% 86.8% 587.6 3,902.8 13.1% 86.9% Total Waste Diverted From Disposal 4,796.2 100.0% 4,490.4 100.0% WASTE DIRECTED TO DISPOSAL Unit of measurement: tons 2021 2020 Total Hazardous Waste Total Non-Hazardous Waste Weight Percentage Weight Percentage 1,240.3 3,955.6 23.9% 76.1% 1,533.4 3,761.3 29.0% 71.0% Total Waste Directed To Disposal 5,195.9 100.0% 5,294.7 100.0% LOGISTICS We produce all of our vehicles and spare parts in our Maranello and Modena plants, however, our network of third-party dealers comprises 191 point of sales around the world. A meticulous work is constantly carried out to optimize logistical operations with the aim of reducing the environmental impact and associated air emissions. WATER MANAGEMENT We are well aware of the importance of a responsible management of water and, even if our plants are not located in areas exposed to high or extremely high overall water risks, nor our production process can be considered water intensive, we have developed a series of initiatives to reduce water consumption in our manufacturing processes. This commitment was reinforced by introducing the adiabatic cooling system in our New Technical Center, a new technology which allows us to save more water compared to traditional methods. Moreover, we collect and reuse rainwater and condensation for sanitary facilities. All the water sourced comes from municipal water supplies and wells: as of today, no water bodies are directly affected by the withdrawal of water. (27) 2021 and 2020 data includes waste generated by Ferrari S.p.A. in the plants of Maranello and Modena and warehouses and Mugello Circuit S.p.A. 184 FERRARI N.V.AR 2021WATER WITHDRAWAL BY SOURCE(28) Unit of measurement: ML 2021 2020 Groundwater Third-party water Total(31) All areas of which All areas areas with water stress(29) 25.1 0.0 25.1 537.0 198.7 735.7 496.0 205.4 701.4 of which areas with water stress(30) 18.4 0.0 18.4 We treat our wastewater in accordance with all applicable laws and regulations. All the wastewater of our plants is always monitored and channeled in the public sewage system and not directly into water bodies. The water used in some of the industrial processes (such as washing solutions or paint washing), before its discharge in the public sewer system, is treated by an industrial water treatment plant where it undergoes the necessary chemical, physical, and biological treatments. WATER DISCHARGE BY DESTINATION Unit of measurement: ML Effluents / Water bodies Public sewer system Total BIODIVERSITY AND NOISE POLLUTION 2021 0 404.6 404.6 2020 0 371.0 371.0 Our plants and racing circuits, as of December 2021, are not located in any protected or highly biodiverse areas and, to our best knowledge, they do not have a significant environmental impact on such areas. Moreover, our plants and racing circuits are not adjacent to any protected or highly biodiverse areas. This analysis is conducted annually and is based on the World Database on Protected Areas. However, the Mugello racing circuit is located in an extremely important natural landscaping area. Therefore, the main tribune has been constructed using eco-active materials with zero impact on the surrounding zone to help reduce both pollutants and bacteria. With regard to the noise produced in proximity of the Fiorano and Mugello circuits, the acoustic monitoring of the plant perimeter is regularly carried out and the Mugello Circuit complies with the authorization received by the appropriate authorities. VEHICLE ENVIRONMENTAL IMPACT Part of the environmental impact of our activities is related to our product lifecycle, including both downstream and upstream GHG emissions. Ferrari cars are perceived as collectibles and therefore the number of cars demolished each year is very scarce. In addition, our cars are generally not considered means of transportation. (28) Water stress analysis performed with 2019 Aqueduct Water Risk Atlas(World Resources Institute). (29) 2021 data refers to Mugello racing circuit. (30) 2020 data refers to Mugello racing circuit. (31) Total water withdrawal refers to freshwater (≤1,000 mg/L Total Dissolved Solids). 185 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSVEHICLE EMISSIONS improving core components such as the powertrain, car dynamics and the use of materials such as special We are subject to a variety of laws and regulations aluminum alloys and carbon fiber. The expertise that, among others, are related to car emissions acquired in these fields has recently enhanced our and fuel consumption. Ferrari vehicles must comply efforts to combine improved performance with with extensive regional, national and local laws and reductions in CO2 emissions. regulations, as well as industry self-regulations (including those that regulate vehicle safety). However, We have undertaken an important program to we currently benefit from certain regulatory develop hybrid and electric technology. One of the exemptions because we qualify as a Small Volume more relevant topics of this generation, the concept Manufacturer or similar designation in most of the of the car in an era of climate change, will likely be an jurisdictions where we sell our cars (for more details opportunity for us. Innovation runs within Ferrari, so refer to the “Regulatory Matters” paragraph of 2021 the challenge of building a Ferrari for a low-emissions Annual Report). future is one that we are already embracing. To this effect, we have already started our journey towards We continue focusing on researching technologies carbon neutrality by 2030, addressing direct and that further reduce emissions in the use phase, such indirect GHG emissions, focusing on energy and as hybrid and electric engines. We started working materials, in addition to our electrification journey. The with hybrid technology back in 2011, when we SF90 Stradale, our first hybrid series-production car introduced the HY-KERS (Kinetic Energy Recovery in Ferrari history, launched in 2019, the SF90 Spider, System) technology in our F1 cars, which was launched in 2020, and the 296 GTB launched in 2021, transferred in 2013 to LaFerrari, our first road car to perfectly reflect our commitment to this approach. use hybrid technology. Further enhancing the hybrid The increased offering of hybrid powertrains technology, in 2014, we introduced hybrid power units will allow us to meet both specific regulatory in our F1 cars and, in 2019, we launched the SF90 requirements but also to satisfy customers’ desires Stradale, our first hybrid series-production car. for significantly improved emissions, while enhancing the driving emotions that render Ferrari cars simply Through innovations in areas such as turbochargers, unique. engine downsizing, transmission, electric steering and hybrid technology we constantly reduced our emissions on our entire fleet. Consistent with our In 2020, we achieved a 35% reduction in CO2 emissions (compared to 2007) for our European fleet through mission to develop cutting edge sports and GT cars, improvements in the car’s energy efficiency. product development efforts continually focus on 186 FERRARI N.V.AR 2021450 430 410 390 370 350 330 310 290 270 250 AVERAGE SPECIFIC NEDC BASED CO2 EMISSIONS 2007-2020 (FERRARI EU FLEET(32)) 435 404 357 -35% 322 321 323 317 316 299 281 283 281 280 281 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E Registration Year ) m k / g i ( s n o s s m E 2 i 0 C In 2021 we saw an important decrease of 9% versus prior year in our EU fleet average CO2 emissions also thanks to the SF90 family. For the purpose of the graph below, 100% of the Ferrari fleet in EU has been taken into account to determine the average specific WLTP based emissions of CO2, despite the phase-in criteria granted in 2020, while the previous graph considered average specific NEDC based emissions of CO2. As part of the implementation of Regulation (EC) No. 715/2007 of the European Parliament and of the Council, a new test procedure for measuring CO2 emissions from, and fuel consumption of, passenger cars and light commercial vehicles, the Worldwide Harmonised Light Vehicles Test procedure (‘WLTP’), set out in Commission Regulation (EU) 2017/1151, started to apply in 2017. However, as defined by Regulation (EU) 2019/631, WLTP based CO2 emissions are considered for CO2 target compliance purposes from 2021. AVERAGE SPECIFIC WLTP BASED CO2 EMISSIONS 2020-2021 (FERRARI EU FLEET(33)) ) m k / g i ( s n o s s m E 2 i 0 C 310 300 290 280 270 260 250 303 -9% 277 Registration Year 2020E 2021E (32) For the purpose of this graph, 100% of the Ferrari fleet in EU has been taken into account to determine the average specific NEDC based emissions of CO2, despite the phase-in criteria granted in the years 2010-2014 and 2020. 2020: provisional fleet average emissions of CO2. (33) 2020: provisional fleet average emissions of CO2, 2021: provisional fleet average emissions of CO2. 187 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS RAW MATERIALS GOVERNANCE: Car makers consume large amounts of raw for the overall strategy of the Company, including in materials and a conscientious planning of relation to sustainability and climate change topics. The Board of Directors as a whole is responsible the manufacturing process is essential to the management of scarce resources. On these matters, within the Board of Directors, the ESG Committee, is responsible for, among other Among the most used materials in our cars are light things, assisting and advising the Board of Directors, alloys, such as aluminum: to reduce the sourcing and acting under authority delegated by the Board of aluminum specific initiatives to reuse scraps of Directors, with respect to: monitoring, evaluation have been developed (see “Our Environmental and reporting on the strategy, targets, achievements, Responsibility - Waste management”). disclosures and reports relating to ESG matters globally of the Company and its subsidiaries. The FLT is We measure and monitor the presence of hazardous responsible for reviewing the operating performance substances in our homologated vehicles, as required of the businesses, collaborating on certain operational by local regulations. Every Ferrari homologated vehicle, matters, supporting the Chief Executive Officer with therefore, every component installed, follows the his tasks and executing the decisions of the Board REACH prescriptions. Every Ferrari vehicle is compliant of Directors and the day-to-day management of to 2000/53/EC (End-of-life Directive), as applicable. the Company, primarily as it relates to operational management. The FLT is led by the Chief Executive Our suppliers are requested to comply with 2011/65/ Officer and composed of the heads of the operating UE (RoHS Directive) and 2000/53/EC (End-of-life segments and certain central functions. Starting Directive), and to provide, through the International from 2022, at management level we have defined Material Data System, all the information related new cross- functional committees, among which to the composition of substances used in the one is responsible for the strategic positioning of the manufacturing process. Our internal systems Ferrari Brand and cross-functional projects to sustain automatically reject non-compliant components. excellence in every area, starting from our priority VEHICLE’S END OF LIFE to reach sustainability journey towards carbon neutrality by 2030, addressing direct and indirect GHG emissions, focusing on energy and materials, in We are not directly involved in product take back addition to our electrification journey. programs due to the nature of our business: the number of Ferrari cars demolished each year is very Our Chief Financial Officer, a member of the FLT, scarce as Ferrari cars are perceived as collectibles, is responsible for the Sustainability function that is which the Group also supports through its “Ferrari involved in coordinating the activities within the Group Classiche” services and the active preowned market. with regard to sustainability, promoting the discussion FURTHER CLIMATE-RELATED DISCLOSURES (TCFD) between different teams and functions, and aiming at identifying risks and opportunities regarding sustainability and climate change. The monitoring and management of the environmental performance Ferrari is conscious of the risks and opportunities of our productive plants is assigned to a team that related to climate change, as one of the more relevant reports to our Chief Technologies & Infrastructures defining factors for long-term value creation. The Officer. Their effort is aimed at minimizing the impact following section aims at providing a transparent of our activities on the environment, particularly in disclosure on climate change-related matters, in relation to the energy consumption of the production accordance with the recommendations of the Task facilities. A different team is in charge of overseeing Force on Climate-related Financial Disclosures (“TCFD”). regulatory developments while monitoring the The following paragraphs summarize how Ferrari is emissions of Ferrari cars reporting to our Chief tackling climate-change risks and opportunities in the Research & Development Officer. areas of Governance, Strategy, Risk, Management as well as Metrics and Targets. For further details, please STRATEGY: see the TCFD correspondence table at the end of this Ferrari is aware of the challenges and opportunities section. We are committed to progressively develop our posed by climate change for sustainable business environmental governance, strategy, metrics and goals, development. Recently, Ferrari made significant and in line with best practices and TCFD guidelines. substantial strides on its journey to sustainability. 188 FERRARI N.V.AR 2021This progress was driven by a sustainability strategy Our CFO, who directly reports to the CEO, is designed around five pillars. One of the pillars of our responsible for the risk management function that is sustainability strategy is “Reducing environmental involved, among the other risks, in the assessment, footprint: increase our environmental awareness to monitoring and management of climate related risks. continuously set and implement related programs and Operating areas represent the first line of defense, actions”. In particular, we are committing to achieve they identify and assess climate-related risks and carbon neutrality by 2030 on our entire value chain. in collaboration with the central function of risk Our business strategy is also influenced by climate management those risks are assessed, monitored change-related commitments and developments at and managed at corporate level. In particular, this year the international, regional and national level, such as we have further implemented the reporting of our the Paris Agreement and Sustainable Development climate-related risk & opportunities, included in the Goals (SDGs). In particular, we take into consideration paragraph “Sustainability Risks” of this document. GHG-related normative requirements, as in many parts of the world, significant governmental regulation As relevant factors for long-term value creation, is driven by environmental, fuel economy and GHG Ferrari considers pivotal to manage risks related to emissions concerns. In this context, our most significant climate change. The fight against climate change and environmental efforts are deployed through a program the preservation of the environment are becoming for the reduction of polluting and GHG emissions, crucial around the world and these concerns have both direct and indirect. In particular, we are currently resulted in rapidly evolving climate and environmental working on developing hybrid powertrains and regulations emitted across international markets. other innovations also to meet specific regulatory requirements and preparing for a low-emission future, METRICS AND TARGETS: thanks to our DNA based on innovation. Climate change We are committing to achieve carbon neutrality by is a key megatrend for Ferrari. In the coming years, we 2030 on our entire value chain looking at both direct are planning to carry out the scenario analysis as well and indirect GHG emissions. All our functions are as setting targets accordingly. involved in reaching this strategic objective and we RISK MANAGEMENT: have started identifying actions to reduce our carbon footprint, with a focus on energy consumption and Our risk management approach is an important materials, in addition to our electrification journey. business driver and it is integral to the achievement of the Group’s long-term business plan. We take an In 2021, we calculated our carbon footprint integrated approach to risk management, where risk considering the GHG emissions related to all the and opportunity assessment are at the core of the Group activities over our entire value chain, including leadership team agenda. Ferrari has adopted the last both direct and indirect GHG emissions. Our carbon publication of the COSO Framework as the foundation footprint calculation, based on GHG protocol of its enterprise risk management (ERM) which also methodology, has been certified according ISO integrates the analysis and assessment of socio- 14064-1:2018 requirements. This analysis enhanced environmental risks, including climate related risks, in our awareness on our overall environmental impact, our risk management framework. allowing us to determine priority areas for action. In order to ensure the adequateness of its internal risk management and control systems, Ferrari has Our base year carbon footprint is approximately 600 ktons CO2eq. Direct GHG emissions account for 14% of the total, while indirect upstream GHG structured its risk management process and internal emissions accounts for 54%, the majority referring control systems based on the “Three Level of Controls to “Purchased goods and services” category and Model”. The Board of Directors is responsible for indirect downstream for 32% of the total, mainly due considering the ability to control and manage risks to “Use of sold products” category. crucial to achieving its identified business targets, and for the continuity of the Group. In this Statement we disclose our impacts and performance according to the requirements of the The FLT is responsible for identifying, prioritizing GRI Standards, GHG protocol and SASB. Moreover, and mitigating risks and for the establishment and we report two indicators to monitor our economic maintenance of a risk management system across growth and its climate impact: the Carbon on net our business functions. Our risk management revenues ratio and the Carbon on Adj. EBITDA ratio. framework is discussed with the Group’s Audit These two indicators show that Ferrari managed to Committee at least on an annual basis. decouple its economic growth from its environmental 189 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ FURTHER CLIMATE-RELATED DISCLOSURES (TCFD) impact. In other words, we keep on growing our business activities while at the same time maintaining almost stable our CO2 emissions. TCFD REFERENCE TABLE For further details, please refer to the documents mentioned in the table below. TCFD AREA RECOMMENDED TCFD DISCLOSURE FURTHER REFERENCES Governance: Disclose the organization’s governance around climate-related risks and opportunities. a) Describe the board’s oversight of climate-related risks and opportunities. b) Describe management’s role in assessing and managing climate- related risks and opportunities. • Annual Report: Board Report/ Corporate Governance. • Annual Report_Board Report_Non Financial Statement: Proactively fostering best practice governance/ Our ESG Committee – Our Decision making process. • CDP Climate Change Questionnaire: C1 – Governance. • Annual Report: Board Report/ Corporate Governance. • Annual Report_Board Report_Non Financial Statement: Proactively fostering best practice governance/ Our ESG Committee – Our Decision making process. • CDP Climate Change Questionnaire: C1 – Governance. • Annual Report: Board Report/Risk Factors; Risk Management Process and Internal Control Systems. a) Describe the climate-related risks and • Annual Report_Board Report_Non Financial opportunities the organization has Statement: Materiality matrix and stakeholder identified over the short, medium, and engagement/ Materiality matrix of Ferrari long-term. Strategy: Disclose the actual and potential impacts of climate related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. b) Describe the impact of climate- related risks and opportunities on the organization’s businesses, strategy, and financial planning. Group; Proactively fostering best practice governance/ Our Governance. • CDP Climate Change Questionnaire: C2 - Risks and Opportunities; C3 -Business strategy. • Annual Report: Board Report/Risk Factors; Risk Management Process and Internal Control Systems. • Annual Report_ Board Report _Non Financial Statement: Materiality matrix and stakeholder engagement/ Materiality matrix of Ferrari Group; Proactively fostering best practice governance/ Our ESG Committee – Our Decision making process; Reducing environmental footprint/ Vehicle environmental impact. • CDP Climate Change Questionnaire: C2 - Risks and Opportunities; C3 -Business strategy. c) Describe the resilience of the organization’s strategy, taking into • CDP Climate Change Questionnaire: C3 consideration different climate- -Business strategy. related scenarios, including a 2°C or lower scenario. 190 FERRARI N.V.AR 2021TCFD AREA RECOMMENDED TCFD DISCLOSURE FURTHER REFERENCES Risk Management: Disclose how the organization identifies, assesses, and manages climate-related risks. Metrics & Targets: Disclose the metrics and targets used to assess and manage relevant climate related risks and opportunities where such information is material. a) Describe the organization’s processes for identifying and assessing climate- related risks. • Annual Report: Board Report/ Risk Management Process and Internal Control Systems. • Annual Report_Board Report_Non Financial Statement: Proactively fostering best practice governance. • CDP Climate Change Questionnaire: C2 - Risks and Opportunities. • Annual Report: Board Report/Risk Factors; Risk Management Process and Internal Control Systems. • Annual Report_ Board Report _Non Financial Statement: Proactively fostering best practice b) Describe the organization’s processes governance/ Our ESG Committee – Our for managing climate-related risks. Decision making process/ Sustainability Risks; Reducing environmental footprint/ Our environmental responsibility, Plants and circuits, Vehicle environmental impact. • CDP Climate Change Questionnaire: C2 - Risks and Opportunities. • Annual Report: Board Report/ Risk Management Process and Internal Control c) Describe how processes for Systems. identifying, assessing, and managing • Annual Report_ Board Report _Non Financial climate-related risks are integrated Statement: Proactively fostering best practice into the organization’s overall risk governance/ Our ESG Committee – Our management. Decision making process. • CDP Climate Change Questionnaire: C2 - Risks and Opportunities. • Annual Report: Board Report/ Non financial statement. a) Disclose the metrics used by the • Annual Report_ Board Report _Non Financial organization to assess climate-related Statement: Reducing environmental footprint/ risks and opportunities in line with Plants and circuits, Vehicle environmental its strategy and risk management impact. process. • CDP Climate Change Questionnaire: C4 - Targets and performance; C6 -Emissions data; C7 – Emissions breakdowns; C8 – Energy. • Annual Report: Board Report/ Non financial statement. b) Disclose Scope 1, Scope 2, and, if • Annual Report_Board Report_Non Financial appropriate, Scope 3 greenhouse gas Statement: Reducing environmental footprint/ (GHG) emissions, and the related risks. Plants and circuits. • CDP Climate Change Questionnaire: C6 -Emissions data; C7 – Emissions breakdowns. • Annual Report: Board Report/ Non financial statement. c) Describe the targets used by the • Annual Report_Board Report_Non Financial organization to manage climate- Statement: Reducing environmental footprint/ related risks and opportunities and Plants and circuits, Vehicle environmental performance against targets. impact. • CDP Climate Change Questionnaire: C4 - Targets and performance. 191 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSEU TAXONOMY The Regulation (EU) 2020/852 (hereinafter the “Regulation”) introduced the EU Taxonomy, a classification system that translates the EU’s climate and environmental objectives into criteria related to specific economic activities for investment purposes. Starting from the 2021 financial year, we disclose to what extent our activities and operations are considered in line with the criteria defined by the Regulation and related documentation, with particular reference to the available technical annexes regarding two out of six environmental objectives (Climate Change Mitigation and Adaptation) set out in article 9 of the same Regulation. Accordingly, Ferrari has been developing specific analysis to respond to such new disclosure requirements. A study was performed in accordance with the following methodological steps, briefly described below: 1) General understanding of the requirements established by the Regulation and analysis of the list of economic activities of Ferrari eligible(34) for the EU Taxonomy. • We thoroughly analyzed the requirements established by the Regulation and related documentation. • We identified the economic activity 3.3 “Manufacture of low carbon technologies for transport” as the one that correlates the most with Ferrari’s core activities and operations. Further linkages can be found with the economic activity 6.5 “Transport by motorbikes, passenger cars and light commercial vehicles”, with particular reference to our financial services activities. Such a process was conducted by analyzing both formal Ferrari-related NACE codes as well as its substantial business activities and operations in comparison to the list provided by the EU Taxonomy. Further residual Ferrari activities and operations are currently considered not pertinent to other Taxonomy-related economic activities and/or not significant for the purpose of this disclosure. 2) Analysis of 2021 Ferrari Turnover, CapEx and OpEx, in line with the previously mentioned points and calculation of EU Taxonomy-related KPIs. • We analyzed our turnover, capital and operating expenditure for the calculation of the KPIs requested pursuant to the Regulation and related documentation, according to our current interpretation of the applicable requirements(35): Turnover(36) KPI: a) Regarding the denominator, we based it on our consolidated net turnover in accordance with IAS 1.82(a). For further details on our accounting policies regarding our consolidated net turnover please refer to the Consolidated Financial Statements of our Annual Report. b) Regarding the numerator, we analyzed our potential turnover derived from products or services in line with the previous mentioned assumptions: › we considered as “eligible”: the revenues related to the shipments of our cars and to financial services activities; › we considered as “not eligible”: the revenues generated from the sales of spare parts as well as of engines to Maserati for the use in their cars and from the rental of engines to other Formula 1 racing teams; the revenues earned by our Formula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues; the net revenues generated through the Ferrari (34) Taxonomy-eligible economic activity means an economic activity that is described in the delegated acts supplementing the Taxonomy Regulation irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts. (35) The analysis was made also taking into consideration the “Draft Commission notice on the interpretation of certain legal provisions of the Disclosures Delegated Act under Article 8 of the EU Taxonomy Regulation on the reporting of eligible economic activities and assets” published on February 2, 2022. (36) The financial data included in these KPIs are a portion of group net revenues included in our 2021 Annual Report: Consolidated Financial Statements, note 4 and Financial Overview _Results of Operations. 192 FERRARI N.V.AR 2021brand, including merchandising, licensing and royalty income; any other revenue, primarily related to the management of the Mugello racetrack and other sports-related activities. CapEx(37) KPI: c) Regarding the denominator, it consists of additions to tangible and intangible fixed assets during the financial year, before depreciation, amortization and any re-measurements, including those resulting from revaluations and impairments, as well as excluding changes in fair value. It includes acquisitions of tangible fixed assets (IAS 16), intangible fixed assets (IAS 38) and right-of-use assets (IFRS 16). Additions resulting from business combinations are also included. Goodwill and Borrowing costs are not included in denominator, as it is not defined as a tangible or intangible asset in accordance with IAS 16 and IAS 38 . For further details on our accounting policies regarding our Capex, please refer to the Consolidated Financial Statements of our Annual Report. d) Regarding the numerator, we analyzed our capital expenditures in line with the previous mentioned assumptions: › we considered as “eligible”: – the additions of tangible assets related to our production facilities in Maranello and Modena, plus our subsidiaries (excluding racetrack management and retail business) as well as financial services activities; – the additions of intangible assets related to externally acquired and internally generated development costs for our cars as well as patents, concessions and licenses and other intangible assets mainly related to the registration of trademarks. › we considered as “not eligible”: the remaining additions of tangible and intangible assets. OpEx(38) KPI: e) Regarding the denominator, it consists of direct non-capitalized costs that relate to research and development, building renovation measures, short-term lease, maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment. f) Regarding the numerator, we analyzed our direct non-capitalized costs in line with the previous mentioned assumptions: › we considered as “eligible”: – the direct non-capitalized costs that relate to research and development, mainly including Formula 1 activities and research and development activities to support the innovation of our product range and components, in particular, in relation to hybrid and electric technology; – the maintenance expenditures related to the manufacturing of our vehicles, and our subsidiaries (excluding racetrack management and retail business) as well as those related to financial services activities; › we considered as “not eligible”: the remaining direct non-capitalized costs. (37) The financial data included in these KPIs are a portion of group Capital Expenditures included in our 2021 Annual Report, Consolidated Financial Statements, notes 14 and 15. (38) The financial data included in these KPIs are a portion of group Operating Expenditures included in our 2021 Annual Report, Consolidated Financial Statements. 193 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ EU TAXONOMY • According to the analysis performed, we calculated the share of Ferrari turnover, capital expenditures and operating expenditures that we currently consider to be taxonomy “eligible” and “not eligible”. Turnover Capital expenditures Operating expenditures 2021 EU Taxonomy - Eligible EU Taxonomy – Not Eligible 81% 98% 100% 19% 2% -% • Potential double counting in the allocation in the numerator of Turnover, CapEx and OpEx has been avoided through the use of the financial information which are at the base of the Consolidated Financial Statements as of 31 December 2021. Further analysis will be made over time according to the progressive evolution of the Regulation (EU) 2020/852, with particular reference to the second delegated act for the remaining objectives, and its concrete interpretation/application for reporting purposes in accordance with Ferrari’s strategic approach. In order to truly understand the importance and actions that Ferrari is putting in place to achieve the climate mitigation objective, it should be noted our unwavering pursuit of reaching carbon neutrality by 2030, addressing both direct and indirect emissions with a focus on energy and materials. As a further step forward in this process, in 2021 we calculated our carbon footprint considering the emissions related to all the Group activities over our entire value chain. Our calculation, based on GHG protocol methodology, has been certified according ISO 14064- 1:2018 requirements by a third-party player and allowed us to determine priority areas for action. CREATING AND SHARING VALUE WITH THE COMMUNITY technologies within the automotive industry, and in particular innovative solutions for state-of-the-art performance in luxury cars, is also a prerequisite for Our goal is to create and share long-term value with the Group to seize future opportunities. our stakeholders. On the one side, the economic value generated and distributed provides an indication Ferrari aims to promote education in the local on how we created wealth, on the other, there are community at high school level by establishing long- plenty of intangible resources and initiatives that term relationships with technical schools in Maranello, contribute to the value creation processes. In this such as the istituti tecnici superiori, and other context, community engagement and involvement towns nearby. In 2021, Ferrari promoted orientation with the local territory are of fundamental importance activities towards STEM disciplines for students in a to us, with particular reference to Maranello and secondary school, by setting up a technological lab. Modena, where all our cars are manufactured. To maintain alive the spirit of Ferrari and the story of its Ferrari is partner of the Motorvehicle University founder Enzo Ferrari, two different museums have of Emilia-Romagna (MUNER), an association which been established, attracting every year thousands was strongly advocated by the Emilia-Romagna of visitors from all over the world to the heart of the region. It was created thanks to a synergistic Italian “Motor Valley”. FERRARI & EDUCATION connection between the universities of Modena and Reggio Emilia, Bologna, Ferrara and Parma along with car companies (Lamborghini, Dallara, Ducati, We are aware of our responsibility towards the HaasF1Team, HPE COXA, Marelli, Maserati, Pagani, community and our efforts are directed to support Scuderia AlphaTauri) in the region that represent the its development, mainly through collaborations with excellence of Italian brands, which of course local universities and schools and thanks to the includes Ferrari. industry network in the Emilia-Romagna region. We believe that promoting the education of young talents Furthermore, in 2021, Ferrari Group around the is an essential step to reinforce the connection with world promoted educational and charity activities local communities. Shaping brilliant engineers with a for their local communities, in collaboration with specific academic background that focuses on new different partners. 194 FERRARI N.V.AR 2021FERRARI MUSEUM MARANELLO & MUSEO ENZO FERRARI (MEF) our rigorous production and distribution model, promoting hard-to-satisfy demand and scarcity The Ferrari Museum Maranello invites visitors to value in our cars. We also support our brand value by experience the Prancing Horse dream first-hand, enabling a strong connection between Ferrari and offering them a journey through the Group’s history, our community of enthusiasts. values and automotive world. Scuderia Ferrari Club is a non-profit consortium The Museo Enzo Ferrari is built around the house in company founded in 2006 by Ferrari S.p.A. to which Enzo Ferrari was born in 1898. The MEF tells coordinate the activities of the Scuderia’s many fans the story of Enzo Ferrari as a young boy discovering who have founded clubs around the world. Today the irresistible allure of the world of motor racing, the Company has nearly 200 officially-recognised his career as a driver in 1920s, as the driving force Clubs in over 20 countries. An incredible mix of behind the Scuderia Ferrari in the 1930s, and then as different nationalities, cultures and lifestyles is Ferrari, the Constructor, from 1947 onwards. united by one enduring passion for Ferrari. Scuderia SCUDERIA FERRARI CLUB Ferrari Club also works with the Clubs to support the organization of their events. Before joining Scuderia We strive to maintain and enhance the power and Ferrari Club, an organisation must demonstrate a passion we inspire in customers and the broader significant track record and engage in a conduct in community of automotive enthusiasts by continuing line with Ferrari’s values. 195 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSMETHODOLOGY AND SCOPE Through this Non-Financial Statement, we aim to provide our stakeholders with non-financial information, illustrate our sustainability strategy and our corporate social responsibility initiatives in 2021 (from January 1st, 2021 to December 31st, 2021) to ensure transparent and structured communication with our stakeholders. This Statement was prepared in accordance with the Dutch Civil Code, and with the Dutch Decree on Non- Financial Information (Besluit bekendmaking niet-financiële informatie), which is a transposition of Directive 2014/95/EU ‘Disclosure of non-financial and diversity information’ into Dutch law. The table below shows the internal references to the chapter(s) or paragraph(s) of this Annual Report where the relevant aspects of the Dutch Decree are discussed in particular. DUTCH DECREE ASPECTS INTERNAL REFERENCE – CHAPTER / PARAGRAPH Business model • Our Business Policies and due diligence • Corporate Governance • Proactively fostering best practice governance / Integrity of Business Conduct • Being the employer of choice / Working environment • Being the employer of choice / Training and talent development • Being the employer of choice / Occupational health and safety • Reducing environmental footprint / Environmental management systems • Risk Factors Principal risks and their management • Proactively fostering best practice governance / Sustainability Risks • Risk, Risk Management and Control Systems Thematic aspects Environmental matters • Reducing environmental footprint / Vehicles environmental impact • Reducing environmental footprint / Plants and circuits; • Reducing environmental footprint /Further Climate-related Disclosures (TCFD) • Our Business • Proactively fostering best practice governance / Integrity of Business Conduct • Proactively fostering best practice governance / Responsible supply chain Social matters • Exceeding expectations / Research innovation technology • Exceeding expectations / Customer Satisfaction • Exceeding expectations / Vehicle safety • Creating and sharing value with the community / Ferrari & education • Being the employer of choice / Working environment • Being the employer of choice / Training and talent development Employee matters • Being the employer of choice / Talent recruitment and Employee Retention • Being the employer of choice / Occupational Health and Safety • Being the employer of choice / Our employees in numbers • Proactively fostering best practice governance / Integrity of Business Conduct • Proactively fostering best practice governance / Responsible supply chain Respect for human rights • Being the employer of choice / Talent recruitment and Employee Retention • Being the employer of choice / Occupational Health and Safety • Being the employer of choice / Our employees in numbers Fight against corruption and bribery • Proactively fostering best practice governance / Integrity of Business Conduct Supply Chain Conflict minerals • Proactively fostering best practice governance / Integrity of Business Conduct • Proactively fostering best practice governance /Responsible Supply Chain • Proactively fostering best practice governance / Integrity of Business Conduct • Proactively fostering best practice governance / Responsible Supply Chain This Statement is an extract of our Sustainability Report, that is prepared in accordance with the GRI Standards: Core option. This Statement also includes further disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the Automobiles Sustainability Accounting Standards, prepared by the Sustainability Accounting Standards Board (SASB), and the EU Taxonomy Regulation 2020/852. This has been shared with the Executive Officers of the Group and with the ESG Committee of the Board of Directors. 196 FERRARI N.V.AR 2021With regard to the financial data, the scope of reporting corresponds to that of Ferrari N.V.’s Consolidated Financial Statements. Regarding the qualitative and quantitative data on social and environmental aspects, the scope of reporting corresponds to Ferrari N.V. and our subsidiaries consolidated on a line-by-line basis (as indicated in the note 3 “Scope of consolidation”). Environmental data and information is reported for our principal manufacturing facility in Maranello, for our second plant in Modena and for our Mugello racing circuit. Any exceptions, with regard to the scope of this data, are clearly indicated throughout this Statement. Directly measurable quantities have been included, while limiting, as far as possible, the use of estimates. Any estimated data is indicated accordingly, additionally certain totals in the tables included in this document may not add due to rounding. During the reporting period, we did not face any significant change concerning the organization’s size, structure, ownership or supply chain. SASB INDEX FERRARI – AUTOMOBILES ACCOUNTING STANDARD SUSTAINABILITY ACCOUNTING STANDARDS BOARD RESPONSE (SASB) INDEX 2021 TOPIC METRIC CODE UNIT OF M. Response/Comment Activity Metrics Number of vehicles manufactured TR-AU-000.A Number of vehicles sold TR-AU-000.B Percentage of vehicle models rated by NCAP programs with an overall TR-AU-250a.1. 5-star safety rating, by region Product Safety Number of safety-related defect complaints, percentage investigated TR-AU-250a.2. Number of vehicles recalled TR-AU-250a.3. N° N° % N° N° 11,831 11,155 N/A(39) 1 100% Mandatory recalls: 37,962 Voluntary recalls: 6,207 Labor Practices agreements Percentage of active workforce covered under collective bargaining TR-AU-310a.1 % 94.1% (1) Number of work stoppages and (2) total days idle TR-AU-310a.2. N° 0 Sales-weighted average passenger fleet fuel economy, by region TR-AU-410a.1. Avg EU: 277 gCO2/km (provisional data) USA: 416 g/mi (GHG emissions) China: 10.91 l/100 km Number of (1) zero emission vehicles (ZEV), (2) hybrid vehicles, TR-AU-410a.2. N° 1,722 (plug-in hybrid) and (3) plug-in hybrid vehicles sold Fuel Economy and Use-phase Emissions Discussion of strategy for managing fleet fuel economy and emissions TR-AU-410a.3 risks and opportunities • Annual Report: Board Report/ Overview of Our Business/ Regulatory Matters; • Annual Report: Board Report/Non Financial Statement/ Reducing environmental footprint/ Vehicle environmental impact; • Annual : Board Report/Non Financial Statement/ Reducing environmental footprint/Further Climate-related Disclosures (“TCFD”); (39) N/A non applicable. We do not take part to NCAP (New Car Assessment Program) programs. 197 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ SASB INDEX TOPIC METRIC CODE UNIT OF M. Response/Comment Materials Sourcing of risks associated with the use of TR-AU-440a.1 Description of the management critical materials • Annual:Board Report/Non Financial Statement/ Reducing environmental footprint/Vehicle environmental impact/ Raw materials; • Annual Report: Board Report/ Non Financial Statement/ Proactively fostering best practice governance/Responsible Supply Chain; • Annual Report:Board Report/ Non Financial Statement/ Proactively fostering best practice governance/Responsible Supply Chain/ Conflict minerals; • Annual Report: Board Report/Risk Management Process and Internal Control System 9,992.0 tons 48% recycled Total amount of waste from manufacturing, percentage recycled TR-AU-440b.1 Tons • Annual Report: Board Report/Non Financial Statement/Reducing environmental footprint/ Plants and circuits/Waste management; • Annual Report: Board Report/Non Financial Statement/Reducing environmental footprint/Vehicle environmental impact/ Vehicle’s end of life; 85% (recycled) - 95% (recovered)_ These values refer to the minimum percentage by mass guaranteed on our European fleet and determined in accordance with EU Directive 2005/64/EC 85% This value refers to the minimum percentage by mass guaranteed on our European fleet and determined in accordance with EU Directive 2005/64/EC Materials Efficiency & Recycling Weight of end-of-life material recovered, percentage recycled TR-AU-440b.2 Tons; % Average recyclability of vehicles sold TR-AU-440b.3 % 198 FERRARI N.V.AR 2021RISK MANAGEMENT PROCESS AND INTERNAL CONTROL SYSTEMS Our risk management approach is an important Management, Quality, Financial Risk Management, business driver and it is integral to the achievement Group Financial Control and IT Security. of the Group’s long-term business plan. We take an • The third level of control is composed of Internal integrated approach to risk management, where Audit that provides independent assurance on risk and opportunity assessment are at the core of efficiency and effectiveness of Ferrari’s risk the leadership team agenda. The Board of Directors management, governance and internal control is responsible for considering the ability to control processes. and manage risks crucial to achieving its identified business targets, and for the continuity of the Group. The FLT is responsible for identifying, prioritizing For this reason, Ferrari has developed varying and mitigating risks and for the establishment and appetites to achieve different strategic objectives, maintenance of a risk management system across focusing attention at all relevant risk levels, from risk our business functions. As the decision making body management to internal control. led by the CEO and composed of the heads of the operating segments and certain central functions, Ferrari has adopted the last publication (“Enterprise the FLT reviews the risk management framework and Risk Management - Integrating Strategy and the Company’s key global risks on a regular basis. For Performance”) of the COSO Framework (Committee those risks deemed to be significant, comprehensive of Sponsoring Organizations of the Treadway risk response plans are developed and reviewed on Commission) as the foundation of its enterprise risk a regular basis to ensure the actions are relevant management (ERM). and sufficient. Our risk management framework is discussed with the Group’s Audit Committee at least on In order to ensure the adequateness of its internal an annual basis. risk management and control systems, Ferrari has structured its risk management process and internal control systems based on the “Three Level of Controls FERRARI’S ENTERPRISE RISK MANAGEMENT PROCESS Model”. Each level of controls has different roles and responsibilities with clearly defined boundaries: The Ferrari Enterprise Risk Management system is • The first level of control is composed of the oriented by and structured in six different components: functional management who is responsible for 1. Risk Governance: A structure through which our embedding risk management and internal control organization directs, manages and reports its systems into each business process. First line risk management activities. The Risk Governance of control has the ownership, responsibility and structure encompasses clearly defined roles and accountability for assessing and mitigating risks. It responsibilities, decision-making powers, a risk is constituted by core business Risk Owners, staff operating model and reporting lines. functions Risk Owners and by the FLT. 2. Risk Culture: The values and the attitude • The second level of control is composed of the consistent with our risk management culture are functions that oversee risk management across communicated to and understood at all levels of the the Company processes, monitoring and facilitating organization. the implementation of effective risk management 3. Risk Strategy & Appetite: Our risk management and control activities by the first line of control. It is principles are intended to enable the achievement constituted by Compliance, Strategic, Operational of our business plan, goals and strategic objectives. and Reporting functions such as Enterprise Risk Our risk appetite is balanced by risk tolerance, limits Management, Group Compliance, Sustainability, and associated protocols in case of a breach to SOX, Health & Safety, Ecology & Energy, Supplier Risk control risk levels within our organization. 199 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ FERRARI’S ENTERPRISE RISK MANAGEMENT PROCESS 4. Risk Assessment & Measurement: Established monitoring the identified risks and management activities that allow Ferrari to identify, assess activities against established metrics permits and quantify potential risks on regular basis. This timely proactive response where warranted. activity allows Ferrari to consider the potential 6. Risk Reporting: Reporting of risk and related impact that events may have on the achievement of information (e.g. mitigation activities) provide the Company’s objectives. genuine insight into the strengths and weaknesses 5. Risk Management & Monitoring: Management’s of the risk management activity. Disclosure of response to manage, mitigate or accept risk. Risk risk management information to key internal management efforts create value through the use and external stakeholders, also supporting the of information on risks and controls, in order to decision-making processes. improve business performance. Systematically RISK APPETITE The risk appetite of Ferrari, (i.e. the level of risk that Ferrari is willing to accept to achieve its objectives), has been defined based on the parameters identified below and will be applied to our strategy, Code of Conduct, Company values and policies. Ferrari does not rank by importance the individual types of risk reported in this section because it believes such ranking would be an arbitrary exercise as all risks mentioned have relevance for the Group and the business. The types of risk identified are as follows: Risk category Risk description Risk appetite statement Strategic risks (S) Risks which affect or are created by Ferrari’s business strategy and could affect Ferrari’s long-term positioning and performance. Operational risks (O) Risks impacting the internal processes, people, systems and/or external resources of the organization and affect Ferrari’s ability to execute its business plan. Moderate Ferrari is willing to accept moderate risks in order to achieve its strategic objectives. Ferrari recognizes the need of continuing to invest in research and development to design and build technically innovative, aesthetically iconic and highly performing cars able to deliver the most “fun to drive” Moderate experience and feature design excellence. Strategic risks are taken in a responsible way considering all stakeholders’ interests in order to preserve its brand exclusivity, an extraordinary level of demand and the unique customer experience and the current technological and regulatory trends. Ferrari seeks to minimize execution risks on its plans by implementing a manufacturing system capable of flexibly meeting expected targets, maintaining a quality of products and services in line with Ferrari’s customers’ expectations, developing and retaining talents within the organization, securing business continuity as well as production line performances and ensuring the adequacy of our business partners. Financial risks (F) valuation, currency, liquidity, commodity and impairment Low risks. Ferrari continuously seeks to improve and strengthen its financial position to generate the required cash to finance Risks including areas such as Ferrari has a cautious approach with respect to financial risks. its operations and reward its stakeholders. Compliance risks (C) local standards, code of Risks of non-compliance with laws, regulations, conduct, internal policies and procedures. Zero tolerance Ferrari does not tolerate infringements and abides to all applicable laws and regulations through the implementation of preventive measures, the rigorous enforcement of its internal Code of Conduct to ensure that ethics and integrity are respected and the promotion of its values. Reputational risks (R) Brand image, credibility and/ Risks which affect Ferrari’s or integrity Ferrari strives to protect and enhance its reputation by Zero mitigating all the potential threats that could impact the tolerance organization's reputation, credibility and the operational integrity, while constantly increasing its brand awareness. Health, Safety and Risks which affect health and Zero Environmental risk (H) safety and the environment tolerance Ferrari does not tolerate risks that could have effect on its employees or clients as well as on the environment of the surrounding world. 200 FERRARI N.V.AR 2021RISK TRENDS AND KEY RISKS Ferrari assesses risks according to their potential impact, likelihood and the entity’s preparedness, which, properly combined, determine an overall risk exposure to prioritize risks and focus the efforts on the most important ones. Ferrari expects that the risk responses which have been implemented or that will be deployed when activated by ad-hoc triggers, will mitigate the risks up to the level defined within the risk appetite. Below we identify and discuss our key Company-specific risks. The risks listed and the response plans are not exhaustive and may be adjusted from time to time. The image below shows the listed risks divided by risk category. al Risks (R ) n tio ta u p e R S t r ategic Risks (S) Unfavorable global economic conditions Technological and regulatory uncertainty Competition Climate Change Delays in brand diversification strategy execution Brand image E n v i r H o e n a m l t h e , n S t a a l f e R t i s y k a ( H n d ) Delay in products launch Dependence on local manufacturing facilities Talents’ attraction, development and retention Relationship with suppliers Formula 1 Revenues O p e r a t i o Non-compliance laws, regulations, local standards Internal control over financial reporting n a l R i s k s Cybersecurity including third parties vulnerabilities ( O ) Financial Risks (F ) Exchange rate and commodity prices o C Internal Risks External Risks k s (C) e Ris m plianc 201 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS BRAND IMAGE (S/R) as the appeal of our dealerships and stores, the success of our client activities, and our general profile, The preservation and enhancement of the value of the including our brand’s image of exclusivity. Ferrari brand is crucial in driving revenue and demand for our cars. The perception and recognition of the The prestige, identity and appeal of the Ferrari Ferrari brand are of strategic importance and depend brand also depend on the continued success of the on many factors such as the design, technology, Scuderia Ferrari racing team in the Formula 1 World performance, quality and image of our cars, as well Championship. Key aspects Response plans: Selective licensing of the Ferrari brand Internal function dedicated to monitoring and maximizing residual value of Ferrari cars, monitoring of pre-owned market and estimating evolution of residual values Preserving brand value Selective choice of franchising partners Success of the Formula 1 team Dealer score cards Social Media management Ferrari Academy (in-house training center for dealers) Close monitoring of social media and Ferrari perception Adoption of a Ferrari Social Media Practice UNFAVORABLE GLOBAL ECONOMIC CONDITIONS (S) purchases may decrease and higher taxes may be more likely to be imposed on certain luxury goods including our cars. Deteriorating general economic conditions may affect disposable income and reduce consumer In general, although our sales have historically been wealth, which in turn may impact client demand, comparatively resilient in periods of economic particularly for luxury goods, which may negatively turmoil, sales of luxury goods tend to decline during impact our profitability and put downward pressure recessionary periods when the level of disposable on our prices and volumes. Furthermore, during income tends to be lower or when consumer recessionary periods, social acceptability of luxury confidence is low. Key aspects Response plans: Dependency on mature economies, particularly in EMEA and the United States Expanding in emerging markets, diversifying and monitoring economic trends; developing growth plans in line with growth in number of High Net Worth Individuals and Ultra High Net Worth Individuals Closely monitoring all market developments and continuously reviewing the countries in which we do business and their geo-political events Monitoring budget and timing of capital expenditures Global economic development Monitoring customers’ orders and waiting lists Planning car volumes to optimise dealer network stock levels Incorporation of economic trends in financial forecasts 202 FERRARI N.V.AR 2021COMPETITION (S) for quality and the driving experience we offer our We face competition in all product categories customers. and markets in which we operate. We compete Several global luxury automotive manufacturers with other international luxury performance car have increased competitive pressure for luxury manufacturers which own and operate well-known cars particularly in EMEA and the United States. brands of high-quality cars. Some of them are part Considering that these are mature markets, we of larger automotive groups and may have greater anticipate that existing market participants will try financial resources and bargaining power with to aggressively protect or increase their market suppliers than us, particularly in light of our policy share. Increased competition may result in pricing to maintain low volumes in order to preserve and pressure, reduction of marginality and our inability enhance the exclusivity of our cars. We believe that to meet our shipment targets, which could have a we compete primarily thanks to our brand image, the material adverse effect on our results of operations performance and design of our cars, our reputation and financial condition. Key aspects Response plans: Order book and residual value management Focus on client relationships, including Maranello Experience, selected participation for new model launches and Ferrari clubs Close contact with dealers and client programs Indirectly support residual values through financial services products for pre-owned cars Margin pressure Definition and monitoring of waiting list targets Shipments Internal department dedicated to monitor customer base renewal Customer base renewal Definition and monitoring of a customer satisfaction index Personalization services (Atelier and Tailor Made) Protection of our intellectual property through patents TECHNOLOGICAL AND REGULATORY UNCERTAINTY (S) External factors such as the shortages of raw materials and components, faster obsolescence of components and the evolution or introduction Performance cars are characterized by leading-edge of new regulations on (for example) safety, noise, technology that is constantly evolving. In particular, environmental and sustainability require us to further advances in racing technology often lead to improved focus on defining new strategies on products and technology in road cars. Although we invest heavily components. A failure in defining and establishing in research and development, we may be unable to this strategy could prejudice the preservation of maintain our leading position in high performance individual initiatives’ profitability, our capacity to car technology and, as a result, our competitive develop new attractive products and to guarantee position may suffer. As technologies change, we plan alignment between products’ features and customers’ to upgrade or adapt our cars and introduce new preferences. models in order to continue to provide cars with the latest technology. However, our cars may not We are gradually but rapidly introducing hybrid compete effectively with our competitors’ cars if we and electric-electronic technology in our cars. In are not able to develop, source and integrate the latest accordance with our strategy, we believe hybrid and technology into our cars. electric technology will be key to providing continuing performance upgrades to our sports car customers, Developing and applying new automotive technologies and will also help us capture the preferences of is costly, and may become even more costly in the urban, affluent GT cars purchasers whom we the future as available technology advances and are increasingly targeting, while helping us meet competition in the industry increases. If our research increasingly stricter emissions requirements. and development efforts do not lead to improvements in car performance relative to the competition, or if we We expect to increase R&D spending in the medium are required to spend more to achieve comparable term particularly on hybrid and electric technology- results, sales of our cars or our profitability may suffer. related projects. This transformation of our car 203 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ TECHNOLOGICAL AND REGULATORY UNCERTAINTY (S) technology creates risks and uncertainties such as the impact on driver experience, and the impact on the cars’ residual value over time, both of which may be met with an unfavorable market reaction. Finally, other luxury sports cars manufacturers may be more successful in implementing hybrid and electric technology. Key aspects Response plans: Increase of complexity of products and components Misalignment between product features & customer preferences Shortening of components' and technologies life-cycle New dominant design/ technologies Increase of complexity in after sales activity Close monitoring of luxury car markets, technological evolution, social trends and customer experiences change Continuous alignment between R&D department and Product Marketing department Preparation of product briefs to provide effective guidance to all relevant functions during the new products development phase Monitoring of new market entrants and possible new actions adopted by existing competitors Structured dealership network in order to offer a close after sales services to the clients Global RRR (Retain-Recruit-Reward) project dedicated to dealerships in order to increase the efficiency and effectiveness of dealership network DELAYS IN BRAND DIVERSIFICATION STRATEGY EXECUTION (S) Furthermore, our capacity to recruit new business partners, in the current pandemic and consequent economic conditions, may be impacted resulting in The COVID-19 pandemic conditions could influence a potential delay of our new Brand Diversification our capacity to correctly and timely execute our strategy expansion. Brand Diversification strategy announced in 2019, which is centered on the strengthening the If we are unable to manage the current conditions, deployment of our brand in non-car products and to monitor on a regular basis the achievement of the experiences. milestones, to introduce new branded products that meet customers’ expectation, to monitor the potential Our Brand Diversification activities across different misalignment between results and milestones and jurisdictions have been, and may continue to be, to put in place promptly the necessary corrective adversely impacted, due to the temporary closure actions, this may adversely affect our ability to achieve of the Ferrari stores, museums and theme parks to our strategy and prevent our investments from comply with government orders, with an adverse generating the volumes and revenues estimated. In impact on the our revenues originating from such addition, if our strategy is not successful, our brand activities. image may be weakened or tainted. Key aspects Response plans: Close monitoring of business strategy, its results and adoption of timely corrective actions Definition of product development’s milestones and the related approval flow Brand diversification strategies Dedicated resources focused on business development activities and definition of procedures to Selection of new potential identify, select and evaluate business partners business partners Assessment, qualification and monitoring of business partners Relationship with business partners (e.g. licensees, franchisees, theme parks, etc.) IT/digital tools and activities to engage customers and potential new partners Development of sections dedicated to Health & Safety in new contracts and regular collection from Business Partners of all Health & Safety certifications Social Audit procedures and supporting tools for conducting risk assessments and social audits to check compliance to the Minimum Required Ethical Standards 204 FERRARI N.V.AR 2021DELAY IN PRODUCTS LAUNCH (O) place significant demands on us by requiring us to continuously evolve and improve our operational, Our growth depends on the continued success of financial and internal controls. Continued expansion our existing cars, as well as the successful and timely and continuous increasing of complexity of our car introduction of new cars. Our ability to create new models also could increases the challenges involved cars and to sustain existing car models is affected in maintaining high levels of quality, management by whether we can successfully anticipate and and client satisfaction, recruiting, training and respond to consumer preferences and car trends. retaining sufficient skilled management, technical and The failure to develop successful new cars or delays marketing personnel, supplying new components in their launch that could result in others bringing from our suppliers. new products and leading-edge technologies to the market first, could compromise our competitive If we are unable to manage these risks or meet these position and hinder the growth of our business. demands, our growth prospects and our business, results of operations and financial condition could be Our growth strategy may expose us to new business adversely affected. In detail, we may have potential risks that we may not have the expertise, capability delay in new products launch resulting in lower or the systems to manage. This strategy will also revenues volumes than planned. Key aspects Response plans: Close monitoring of business strategy, its results and adoption of timely corrective actions Structured internal process with assigned roles and responsibilities and defined activities for every product development project Delay in product launch Project Management team in charge to define timing and monitoring every product development project Monitoring of issues on quality and timing both at manufacturing level and at suppliers level to promptly take corrective actions 205 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSDEPENDENCE ON MANUFACTURING FACILITIES IN MARANELLO AND MODENA AND PRODUCTION COSTS (O) Modena are located in the Emilia-Romagna region of Italy, which has the potential for seismic activity. If major disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, pandemics or All cars sold and assembled by us and all engines other events occur, our headquarters, Formula 1 we use for our cars or we sell to Maserati are activities and production facilities may be seriously manufactured at our production facility in Maranello, damaged, or we may have to stop or delay the Italy, where we also have our corporate headquarters production and shipment of our cars. and Formula 1 activities. We manufacture all our car chassis in a nearby facility in Modena, Italy. Furthermore, we face risks related to supply chain disruption and to shortages of raw materials, parts, In the event that we are unable to continue production components and systems used in our cars. Our ability at either of these two facilities, we would need to to manage costs related to production activities seek alternative manufacturing arrangements which could be impacted by general market conditions would take time and reduce our ability to produce and by the fluctuation of prices for raw materials, sufficient cars to meet demand. parts and components. If we are unable to manage Our Maranello or Modena plants could become new mitigations activities, such as hedging activities, unavailable either permanently or temporarily for a increase in productivity or higher cars prices, this number of reasons, including contamination, power could result in a reduction of or profitability. shortage or labor unrest. In addition, Maranello and a relevant increase in our operating costs through Key aspects Response plans: Dependence on two manufacturing facilities Investments in the last 15 years to reduce the extent of possible damage from earthquakes located in close proximity to IT disaster recovery plans each other Insurance coverage Production and operations suspension Safety Stock for critical components Shortage of critical production inputs (e.g., raw-materials) Identification of an internal task force that monitors, identifies and address possible raw materials, parts and components shortages 206 FERRARI N.V.AR 2021RELATIONSHIP WITH SUPPLIERS (O) additional costs, liabilities and leading to not having access to components/products supplied by the Our business depends on a significant number of business partner. Furthermore, potential unethical suppliers that provide raw materials, parts and or improper business practices by suppliers could systems we require to manufacture cars and parts to have a negative effect on the Company’s reputation run our business. We source materials from a limited considering the high exposure of the Ferrari brand number of suppliers. In addition, similar to other and image. small volume car manufacturers, most of the key components we use in our cars are purchased from Furthermore, the increase of components and single source suppliers. products’ complexity and the increase of car volumes produced could result in further pressure We work with strategic partners in various areas on suppliers’ activities. If suppliers are unable to of our business, such as manufacturing, and since strengthen their operation or are unable to work on our strategic partners’ approach might differ multiple projects, this could lead to critical issues from our own standards, Ferrari is exposed to and lack of respect of requirements. In addition, if we performance, operational, financial and reputational are unable to monitor suppliers’ activities, ensuring risks regarding its suppliers. The COVID-19 pandemic the respect of the highest standards in terms of could contribute to the financial distress for our technology, quality and timing, we could face a suppliers leading to reduction or termination of their potential increase of reworks, delay in car deliveries operations. Suppliers’ default could have a negative and recall/services campaigns. effect on Ferrari’s business activities resulting in Key aspects Response plans: Single source suppliers for components Dependence on limited number of suppliers for raw materials, parts and components Critical issues from suppliers and lack of respect of requirements Difficulties in accessing and building long-term relationships with critical suppliers High quality reputable suppliers assessed by the Supplier Risk Management function Identifying alternative suppliers for critical components KPIs’ definition for a continuous monitoring of supplier issues A dedicated Supplier Development function with the mandate to monitor the suppliers’ conditions and encourage a continuous improvement of their activities 207 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSATTRACTION, DEVELOPMENT AND RETENTION OF TALENTS (O) has become pivotal and whenever a gap is identified, the transition to new capabilities is pursued either through internal capabilities development or through Our success and our innovation capacity depend talent acquisition on the external market. Being unable on the ability of our senior executives and other to be ahead of technology trends or to develop new members of management to effectively manage capabilities could increase the risks of both not individual areas of our business and our business as meeting expectations of existing and new customers a whole. and not maintaining our current competitive The prestige, identity, and appeal of the Ferrari advantage. brand depend on the continued success of the If we are unable to attract, retain and incentivize Scuderia Ferrari racing team in the Formula 1 World senior executives, drivers, team managers and key Championship, which depends on our ability to attract employees to succeed in international competitions and retain top drivers, racing management and or devote the capital necessary to fund successful engineering talent. racing activities, new models and innovative technology, this may adversely affect the level of The fast technology evolution that automotive industry enthusiasm of Ferrari clients for the brand and their is experiencing requires us to always reinforce and perception of our cars, which could have an adverse update our competences in new and emerging skill effect on our business, results of operations and areas in order to guarantee a continuous alignment financial condition. with market and technology trends. Mapping current and comprehend future necessary competences Key aspects Response plans: Requirement for skilled engineers Preparing current successful employees for future key positions Improving talent development program for key resources Talent reviews and succession plans Requirement to attract and Retention plans retain the best drivers Management potential Labor unions Implementation of “Scuola dei mestieri” initiative where skills are transferred to the new generations to retain highly specific skills and knowledge over time, as well as the Ferrari Corporate Executive MBA and the new Ferrari Global Corporate MBA People survey to periodically evaluate employees’ engagement, retention and potential issues Training and development FORMULA 1 REVENUES (O) with spectators’ participation and corresponding Revenues from our Formula 1 activities depend lower revenues. principally on the income from our sponsorship In addition, our share of profits related to Formula 1 agreements and on our share of Formula 1 revenues activities may decline if either our team’s from broadcasting and other sources. performance worsens compared to other competing teams, or if the overall Formula 1 business suffers, If we are unable to renew our existing sponsorship including potentially as a result of increasing agreements or if we enter into new or renewed popularity of the FIA Formula E championship. sponsorship agreements with less favorable terms, our revenues would decline. Our capacity to renew Moreover, in order to compete effectively on track we our existing sponsorship agreements and to have have been investing significant resources in research other more competitive sponsorship agreements also and development and competitively to compensate depends on our performance in Formula 1 activities the best available drivers and other racing team and our ability to win Formula 1 championships, both members. These expenses also vary based on drivers and constructors. Furthermore, the COVID-19 changes in Formula 1 regulations that require pandemic has impacted the 2021 Formula 1 season, modification to our racing engines and cars. These resulting in a reduced number of Formula 1 races expenses are expected to continue, and may grow 208 FERRARI N.V.AR 2021further, including as a result of any changes in Formula 1 regulations, which would negatively affect our results of operations and consequently our capacity to attract new business sponsorships. Key aspects Response plans: Internal organizational unit dedicated to F1 business partners Definition of Branding Guidelines F1 sponsorship revenues F1 financial regulation Negotiation of new sponsorship contracts or renewal of current sponsorship contracts Defining new services and custom experience and different activities to provide to our sponsors Participation in Formula 1 Strategic Group Continuous monitoring and implementation of required changes in the F1 regulations and identification of early remediation plans CYBERSECURITY INCLUDING THIRD PARTIES VULNERABILITIES (O) In case the third party is connected to our system, the cyber attacker could penetrate also our IT systems. Our IT systems architecture and industrial machinery If we are unable to protect our system IT systems are exposed to external cyber-attacks. The number architecture and industrial machinery, to design and sophistication of attacks have dramatically a well-functioning security architecture for our increased in recent years. Furthermore, external cars and to promote good practices with our third cyber organizations are currently better structured parties, we are exposed to the risk that both our and organized than in the past and can more internal sensitive data and customers’ data stored in effectively perform cyber-attacks. the cars can be stolen and disseminated externally. Alternatively, the data can be encrypted and a ransom Also in the next years, we expect to increase the could be requested (ransomware practices). connectivity features of our cars. These new features may increase the cyber security risk of our cars Moreover, we have to consider that UN-ECE regulations with the chance that an external attack may occur. In has been introduced and we will be required to adopt this case, potential impact may occur on road users a Cyber Security Management System (“CSMS”) in in term of safety, operational conditions of cars, order to obtain a certification to continue to register financial impact and privacy damage. Furthermore, and sell our cars and to demonstrate that we are able the reputation and the integrity and value of our and aware to deal with potential cyber risk, both at brand may be damaged and our business, operating car level and enterprise level. Failing in obtaining the results and financial condition may be materially and Cyber Security Management System Certification adversely affected. could result, for the countries where the regulation is applicable, in impossibility to homologate and sell new In addition, we have to consider also that our third types vehicle from July 2022 and to register and sell parties could be subjected to external cyber-attacks. existing types from July 2024. Key aspects Response plans: Increasing our employees’ awareness on phishing activities and other ways to perform an external cyber attacks Increased sophistication of Continuous monitoring of potential external cyber-attacks and remediation plans Cyber Attacks Assessment of internal vulnerability level (vulnerability assessment) and implementation of further Third Parties cybersecurity technical actions where necessary Remote working impact on IT Security Cars connectivity Assessment and monitoring the cyber security maturity level of third parties (suppliers and dealers) and promotion of good practices Ferrari started gathering insights in Cyber Security and Connected Experience with different streams and internal projects CSMS Program Roll-out of a specific project to allow the Company to obtain and maintain over the time cyber security management system certification Appointment of a CSMS Committee to coordinate activities related to CSMS 209 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCLIMATE CHANGE (H/S) Ferrari, by 2030, aims to address direct and indirect GHG emissions, focusing on energy and materials, in As relevant factors for long-term value creation, addition to its electrification journey. Ferrari considers pivotal to manage risks related to climate change. The fight against climate change and Ferrari aims to increase the environmental awareness the preservation of the environment are becoming to continuously set and implement new programs and crucial around the world and these concerns have actions. We are conscious that these goals require an resulted in rapidly evolving climate and environmental effort both from us and from our third parties and the regulations emitted across international markets. Company is working on adapting internal processes, Any difficulty or delay in implementing actions to sharing this perspective with our partners. become Carbon neutral by 2030, could negatively affect our revenues, profits, image and our capacity Climate Change topic is also strongly connected to to work with new and existing third parties that ask environmental laws’ changes and tightening. Please more attention on climate change matters. refer to paragraph dedicated to “Technological and developing components, studying materials and regulatory uncertainty” risk for further details on Ferrari’s view on this aspect. Key aspects Response plans: Complete mapping of direct and indirect emissions, including an estimation of indirect emissions by suppliers and materials Mapping specific suppliers carbon footprint and raising awareness to improve bottom up information sharing Climate Change Monitoring fleet emissions over time Activities on going to identify new co-designer and new innovation / product development activities, also considering CO2 potential impacts Starting activities for analysing and defining plan to use renewable energy sources in Company activities (photovoltaic, hydrogen and geothermal) 210 FERRARI N.V.AR 2021NON-COMPLIANCE WITH LAWS, REGULATIONS, LOCAL STANDARDS (INCLUDING TAX) AND CODES (C) and where we sell them, which may adversely affect our revenue and operating results. Our compliance controls, policies, and procedures We are subject to comprehensive and constantly may not protect us in every instance from acts evolving laws, regulations and policies throughout committed by our employees, agents, contractors the world. We expect the legal and regulatory or collaborators that would violate the laws or requirements affecting our business and our costs of regulations of the jurisdictions in which we operate, compliance to keep increasing significantly in scope including employment, foreign corrupt practices, and complexity in the future. In Europe, United States environmental, competition, and other laws and and China, for example, significant governmental regulations. In particular, our business activities may regulation is driven by environmental, fuel economy, be subject to anticorruption laws, regulations or vehicle safety and noise emission concerns, and rules of other countries in which we operate. If we regulatory enforcement has become more active in fail to comply with any of these regulations, it could recent years. Evolving regulatory requirements could adversely impact our operating results, financial significantly affect our product development plans condition and reputation. and may limit the number and types of cars we sell Key aspects Response plans: Technical regulatory requirements regarding our cars Increasing knowledge and awareness of laws, regulations, standards and codes Monitoring, reviewing, reporting and adapting to relevant changes in rules and regulations Specific project teams activated in case of new requirements to put in place the required HSE (Health, Safety and organizational and process changes Environment) Tax Human Resources Implement and update global HSE system Risk-based reviews of operations by HSE professionals Strengthening IT infrastructure for standard operational procedures Legal Increasing internal compliance awareness and effective communication between central compliance team and managers working at the subsidiary level Anti-Bribery & Corruption Code of Conduct Communicating and implementing business conduct standards internally Maintaining a global whistle blower procedure EXCHANGE RATE FLUCTUATIONS, INTEREST RATE CHANGES, COMMODITY PRICES, CREDIT RISK AND OTHER MARKET RISKS (F) U.S. Dollars in the United States and other markets where the U.S. Dollar is the reference currency. In 2021, the value of commercial activity exposed to changes in the Euro/U.S. Dollar exchange rate accounted for about 51 percent of the total currency Ferrari operates in numerous markets worldwide risk from commercial activity. Ferrari uses derivative and is exposed to market risks stemming from financial instruments (primarily forward currency fluctuations in currency and to a lesser extent contracts and currency options) to hedge up to interest rates and commodity prices. The exposure 90 percent of the principal exposures to foreign to currency risk is mainly linked to our cash flows currency exchange risk, typically for a period of up to from sales which are denominated in currencies twelve months. Derivatives financial instruments are different from those connected to purchases or executed for hedging purposes only. production activities. We incur a large portion of our capital and operating expenses in Euro while we Several subsidiaries are located in countries that are receive the majority of our revenues in currencies outside the Eurozone exposing Ferrari to translational other than Euro. exchange risk, in particular the United States, China, Japan, Australia and Singapore. The Group monitors The main foreign currency exchange rate to which its principal exposure to translational exchange risk, Ferrari is exposed is the Euro/U.S. Dollar for sales in although there was no specific hedging in this respect 211 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ EXCHANGE RATE FLUCTUATIONS, INTEREST RATE CHANGES, COMMODITY PRICES, CREDIT RISK AND OTHER MARKET RISKS (F) at the reporting date because the relative exposure is Ferrari’s most important financial asset is cash. It not material. is held on bank and deposit accounts with primary financial institutions and money market funds. Our In addition, foreign exchange movements might also group policy requires us to continuously monitor negatively affect the relative purchasing power of our counterparty risk and limit concentration of financial clients, which could also have an adverse effect on assets to a maximum of 25% of the total with a our revenues and results of operations. single financial counterpart. Ferrari owns a financial services portfolio secured on the titles of cars or Ferrari generally has a positive cash flow that other guarantees, spread over more than 4,400 almost offsets the exposure to liquidity risk. The clients that are mainly in the US. Impairment risk Group uses various forms of financing to cover the mainly relates to the financial services portfolio which funding requirements of its industrial activity and is evaluated on an individual basis for material or for financing offered to customers and dealers. overdue credit positions. The amount of any write- The terms of these financings, which include bank down is based on an estimate of the recoverable cash facilities (committed and uncommitted), access to flows, their timing, recovery costs and the fair value of capital markets and private placements, are intended any guarantees received. to limit the Group exposure to interest rate fluctuation. Approximately 37 percent of the Group’s total debt In addition, an increase of certain commodity bears floating interest rates and Ferrari enters into prices can have a negative impact on Ferrari’s interest rate caps as requested by certain of its results. Ferrari uses derivative financial instruments asset-backed financing agreements for its financial (primarily commodity swaps) to hedge a portion of services activities. Considering the current capital certain exposure to commodity price risk. structure of the Group, Ferrari has not entered into any interest rate derivatives other than the interest Further information is included in Note 30 to the rate caps mentioned, however, the exposure is Consolidated Financial Statements. regularly monitored. Key aspects Response plans: Exposure to foreign exchange Foreign exchange hedging instruments authorized within the Company’s foreign exchange risk movements from non-Euro management policy related sales Exposure to interest rate movements on financial assets and liabilities Monitoring interest rate movements for hedging purposes and execution of the foreseen interest rate caps Commodity hedging instruments defined and authorized for specific commodities’ price exposure risk Exposure to commodity price Credit approval policies applied to dealers and retail clients Credit risk of default or insolvency Bank guarantees, pre-payments (also title of the vehicle for the financial services business) 212 FERRARI N.V.AR 2021INTERNAL CONTROL OVER FINANCIAL REPORTING Starting from October 2015 Ferrari N.V. is listed on the Significant risks identified through the assessment process require definition and evaluation of key controls that address those risks, thereby mitigating New York Stock Exchange (NYSE), while from January the possibility that financial reporting will contain any 2016 Ferrari N.V. is also listed on the Euronext Milan material misstatements. (previously named Mercato Telematico Azionario). Our shares’ listing on regulated markets involves Group has two principal types of control in place: In accordance with international best practices, the being compliant with the related securities regulations and listing rules. In particular, publicly • controls that operate at Group or subsidiary level, traded companies filing financial statements with such as delegation of authorities and responsibilities, the US Securities and Exchange Commission are separation of duties, and assignment of access required to comply with the Sarbanes Oxley Act rights to IT systems; and requirements, in particular sections 302, 404 and 906 that involve a periodical management assessment of • controls that operate at process level, such as internal controls and CEO and CFO Certifications of authorizations, reconciliations, verification of Periodic Financial Reports and SEC Filings. In addition, consistencies, etc. This category includes controls our independent registered public accounting firm for operating processes, controls for financial is also required to report on the effectiveness of the closing processes and controls carried out by internal control over financial reporting. specific service providers. These controls can be preventive (i.e., designed to prevent errors or Under the COSO Internal Control-Integrated fraud that could result in misstatements in financial Framework, according to which the internal control reporting) or detective (i.e., designed to reveal errors system is defined as a set of rules, procedures and or fraud that have already occurred). These controls tools designed to provide reasonable assurance of may also be classified as manual or automatic, the achievement of corporate objectives, Ferrari such as application-based controls relating to the has developed an Internal Control System over the technical characteristics and configuration of IT Financial Reporting in order to assure completeness, systems supporting business activities. accuracy and reliability of the group financial reporting. An assessment of the design and operating effectiveness of key controls is carried out through Within the above mentioned context, identification tests performed periodically during the year, both at and evaluation of the risk of misstatements which Group and subsidiary level, using sampling techniques could have material effects on financial reporting recognized as best practices internationally. is carried out through a risk assessment process that uses a top-down approach to identify the The assessment of the controls may require the organizational entities, processes and the related definition of compensating controls and plans accounts, in addition to specific activities that could for remediation and improvement. The results of potentially generate significant errors. Under the monitoring are subject to periodic review by the methodology adopted by the Company, risks and manager responsible for the Company’s financial related controls are associated with the accounting reporting and communicated by him to senior and business processes upon which accounting management and to the Audit Committee. information is based. 213 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFERRARI N.V. REMUNERATION OF DIRECTORS INTRODUCTION 2. Implementation of remuneration strategy: details how remuneration features have been The description below summarizes the guidelines and implemented during the 2021 financial year and the principles followed by Ferrari in order to define actual remuneration received by each executive and implement the remuneration policy applicable to and non-executive director. In 2021, there was no the executive directors and non-executive directors deviation from the remuneration policy. of the Company, as well as members of the Ferrari Leadership Team (FLT). In addition, this section provides the remuneration paid to these individuals for the year ended December 31, 2021. The form and 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR amount of compensation received by the directors REMUNERATION PRINCIPLES of Ferrari for the year ended December 31, 2021 was The main goal of Ferrari’s remuneration strategy determined in accordance with the remuneration is to develop a system which consistently supports policy. The Compensation Committee oversees the business strategy and value creation for all the remuneration policy, remuneration plans and shareholders, establishing a compensation structure practices of Ferrari and recommends changes when that allows us to attract and retain the most highly appropriate. The Committee is solely comprised qualified executive talent and motivate such of non-executive directors from the Board of executives to achieve business and financial goals that Directors who are independent pursuant to the Dutch create long-term value for shareholders in a manner Corporate Governance Code. Through this document, consistent with our core business and leadership Ferrari aims to provide its stakeholders with a high values and taking into account the social context level of transparency and disclosure in order to around the Company. strengthen the trust they and the market place in Ferrari, as well as provide them with the information In defining the remuneration strategy, the they need to assess the Company’s remuneration Compensation Committee has taken into account principles and exercise shareholders’ rights in an certain principles which characterize Ferrari’s informed manner. The Company may from time to remuneration policy, such as: time amend the remuneration policy, subject to our shareholders’ approval when necessary. 1. The identity, mission and values of the Company, to attract, retain and reward skilled women and This Compensation Report consists of two sections: men who constitute the soul of the Company. Their passion, courage, creativity, ambition and pride 1. Remuneration strategy: our current remuneration constitute the essence of Ferrari and fuel its legend policy (which is available on our corporate to ever greater heights. Being Ferrari means being website) governs compensation for both part of a unique future-focused team in which executive and non-executive directors. In people are the most valuable resource. Together 2020, Ferrari confirmed these remuneration with all our employees we have crafted the vision, features through the positive vote expressed by mission and values that are the very essence shareholders in the Annual General Meeting held of being part of Ferrari and which guide our on April 16, 2020 (the “2020 AGM”). employees as we tackle our day-to-day challenges; Our current remuneration strategy further strengthens the alignment with shareholders’ 2. The provision of statutory requirements, with interests and long-term sustainability of our specific focus on the Shareholder Rights Directive business, adopting certain updates to reflect (Directive (EU) 2017/828) and the implementation developing best practices in the Dutch Corporate thereof into Dutch law; Governance Code. AR 2021 214 3. International competitive remuneration market assets or the environment, in order to guarantee trends, based on the idea that it is becoming an optimal working environment for all employees increasingly challenging to attract and retain and attract the best talents. Our results in this field employees in today’s competitive labor market. reflect, once again, our strategic commitment For our executive directors and members to protecting the environment and ensuring of the FLT, fixed remuneration, short-term personal safety; incentive opportunities and long-term incentive opportunities are calculated based on the position 6. The views of the Board of Directors, members of and responsibilities assigned to each, taking the FLT, other senior leaders and all employees, into account average remuneration levels on in order to make the health and safety of the the market for positions with similar levels of Company’s employees essential to the successful responsibility and managerial complexity in large conduct and future growth of the Company. In international companies, in order to maintain high this respect and in line with the Dutch Corporate levels of competitiveness and engagement; Governance Code, the internal pay ratio is an important input for determining the remuneration 4. Corporate governance and executive for the Board of Directors; and remuneration best practices as expressed by institutional investor guidelines, developing a 7. The centrality for Ferrari of value creation and remuneration policy compliant with the Dutch the interest of our shareholders, the importance Corporate Governance Code and the interest of of which is recognized through the use of Total Ferrari’s shareholders. We analyze any gaps in Shareholder Return (TSR) as a performance each of our remuneration components in order metric in the Company’s long-term incentive plans. to provide a high level of alignment with the main The Compensation Committee considers that guidelines of our stakeholders; the use of relative TSR remains one of the most appropriate measures of long-term performance 5. The societal context around and social support for Ferrari. The structure of our PSU awards in respect of the Company, developing a specific demonstrates the centrality of this factor and helps focus on trends in sustainability among our to promote a strong correlation between pay and employees. We are committed to provide a performance for our Executives. healthy and safe workplace for all employees and stakeholders by implementing a high level of The main principles of Ferrari’s remuneration policy safety standards to avoid potential risks to people, are outlined in the chart below: FERRARI’S STRATEGY 1 ALIGNMENT WITH 2 PAY FOR PERFORMANCE 3 COMPETITIVENESS 4 LONG-TERM SHAREHOLDER 5 COMPLIANCE VALUE CREATION > > > > > Compensation is strongly linked to the achievement of targets aligned with the Company’s publicly disclosed strategic objectives Compensation must reinforce our performance driven culture and meritocracy Compensation is set with the objective of attracting, retaining and motivating highly qualified executives and effective leaders Targets triggering any variable compensation are aligned to the long-term interests of shareholders Ferrari compensation policies and plans are designed to comply with applicable laws and corporate governance requirements 215 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR OVERVIEW OF REMUNERATION ELEMENTS in order to motivate its beneficiaries to achieve challenging targets. In particular, Ferrari’s 2021 As anticipated above, Ferrari’s current remuneration achievements, success and developments were policy was approved by shareholders at the 2020 driven by organization-wide alignment with the AGM and will be resubmitted to a vote by the Company’s strategy and values, through incentives Company’s General Meeting at least every four years. that reward the achievement of those goals; The structure of the remuneration applicable to our executive directors, non-executive directors and (iii) long-term incentives linked to the first and other key management under Ferrari’s remuneration fourth pillars of Ferrari’s remuneration policy policy has not changed in 2021 and consists of the (Alignment with Ferrari’s Strategy and Long-Term following elements: Shareholder Value Creation) with the aim to align the behavior of executives critical to the business (i) fixed remuneration linked to the third pillar of with shareholders’ interests, motivate executives Ferrari’s remuneration policy (Competitiveness) to achieve long-term strategic objectives, and with the objective of attracting, retaining enhance retention of key resources; and motivating our qualified executives and effective leaders. For this reason, we (iv) non-monetary benefits which are related periodically benchmark comparable salaries to the overall remuneration and linked to the paid to executives with similar experience by third pillar of Ferrari’s remuneration policy comparable companies; (Competitiveness). (ii) short-term incentives linked to the first and Ferrari’s remuneration policy provides that a substantial second pillars of Ferrari’s remuneration policy portion of the compensation of our executive directors (Alignment with Ferrari’s Strategy and Pay for and members of the FLT should be “at-risk”, meaning Performance) and tied to specific financial targets that each will receive a certain percentage of his or which are set at challenging levels; short-term her total compensation only to the extent Ferrari and incentives are also linked to the contribution of the the executive accomplish short and long-term goals individual member (Individual Performance Factor) established by the Compensation Committee. STAKEHOLDER ENGAGEMENT The Compensation Committee regularly reviews the directors’ remuneration policy against the best corporate governance practices adopted by institutional shareholders and the recommendations of the main proxy advisors, considering also the view of the stakeholders on the remuneration policy and main features of the compensation report. In this respect, the Annual General Meeting of shareholders held on April 15, 2021 approved the remuneration report for the year 2020 (the “Ferrari Remuneration Report 2020”) and the voting results are reflected in the following table: Resolution Votes For % Votes Against % Votes Total Abstain 2.c - Remuneration Report 2020 (discussion and advisory vote) 180,789,386 86.96943 27,087,542 13.03057 207,876,928 158,295 Considering the previous vote of the Annual General Meeting of shareholders and to further understand shareholders’ feedback to the Ferrari Remuneration Report 2020, we engaged with our stakeholders prior to drafting the Compensation Report for the year 2021. We believe that those conversations have been very constructive and have led to improvements in our Compensation Report. In particular, our reporting on both short term and long-term incentive plans was identified as an area for improvement for the below reasons: • some stakeholders issued negative voting advice on the Ferrari Remuneration Report 2020 due to (i) the accelerated vesting of PSU awards pursuant to the Equity Incentive Plan 2019-2021 of the former CEO, Louis Camilleri, upon his resignation; (ii) the vesting below median of the Equity Incentive Plan with reference to the TSR metric; and (iii) the argued lack of link between one-third of the awards granted under the Equity Incentive Plan (33% of RSUs) to any performance targets; 216 FERRARI N.V.AR 2021 • some stakeholders also issued negative voting structure by further improving some elements advice on the Ferrari Remuneration Report 2020 and with a specific view on sustainability-linked due to the lack of short-term incentive plans performance indicators. for executive directors, based on an annual performance assessment of collective and Through this Compensation Report we continue to individual indicators. pursue our objective to provide our stakeholders each year with clear and comprehensive disclosure Since we constantly work on the improvement of of the decisions relating to the remuneration of our our remuneration strategies, we have taken into executive and non-executive directors and members account the previous vote of the general meeting in of the FLT. the process of reviewing of our variable incentive schemes which will become effective in 2022, as We trust that stakeholders will consider these further described below in this Compensation Report. changes positively and appreciate the spirit of More specifically, (i) we included short-term incentives transparency and continuous improvement which in the Chairman’s and the CEO’s compensation drives them. packages for 2022, in order to better align executive directors’ actions to Ferrari’s strategy and The Compensation Report for the financial year 2021 performance and in line with best market practices, is subject to a consultative vote at the Annual General and (ii) we are re-designing our long-term incentive Meeting of Shareholders scheduled for April 2022. REMUNERATION STRUCTURE FOR 2021 AND MAIN 2022 CHANGES AT A GLANCE Ferrari faced a change in Executive Director leadership during the year 2021. Our Executive Chairman, John Elkann, had the role of Acting CEO until September 2021, when Benedetto Vigna joined Ferrari as its new CEO(40). The purpose and features of the different elements of our remuneration structure for 2021 and main changes for 2022 are outlined in the table below: Component Purpose Terms and Conditions Amounts Outlook 2022 Remuneration Structure • Attract, retain and motivate highly qualified executives to achieve challenging results • Competitively position our compensation package compared to the compensation of comparable companies, • Offer a highly competitive compensation package Ferrari’s remuneration structure is organized as compared to the reference market follows: • Reference Market: • Fixed remuneration Roles with the same mainly represented by • Short-term incentives the reference panel (“Reference Panel”) and companies that compete • Long-term incentives • Non-monetary benefits for similar talent • Reinforce our performance driven culture and meritocracy managerial complexity and responsibilities within comparable companies, comprised of those represented by the Reference Panel. The remuneration structure remains unchanged for 2022 (40) Benedetto Vigna was appointed by the Board of Directors on September 16, 2021 as acting CEO. 217 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR Component Purpose Terms and Conditions Amounts Outlook 2022 • Executive Chairman and Acting CEO: Fixed remuneration is set in relation to the delegated powers assigned over the term and positions held • Executive Chairman and in line with the reference Acting CEO: €250,000 Based on the results of benchmarking conducted on the market. annually; starting from practices of the • CEO: Fixed remuneration is set in relation to the delegated powers assigned over the term and positions held in line Chairman has been increased to €500,000 per year. October 1, 2021, the base companies belonging salary of the Executive to the Executive Fixed Remuneration • Reward skills, contribution and experience required for the position held with the Reference Market. • CEO: €1,500,000 annually • Non-Executive Directors: Remuneration of Non- Executive Directors is fixed and not dependent (the amount is annualized since the current CEO joined Ferrari in September 2021). on the Company’s financial • Non-Executive Directors: results. It is approved $75,000 annually. by the Company’s shareholders and periodically reviewed by the Compensation Committee. • FLT Members: the fixed remuneration is related to the position held and the responsibilities attributed, as well as the experience • FLT Members: the fixed and strategic nature Chairman’s Reference Panel (for further details, see the section “2021 remuneration of executive directors and FLT members” in the paragraph about benchmarking and in line with best market practices, starting from October 1, 2021, the base salary of the Executive Chairman has been increased to €500,000 per year. The same applies to the fixed remuneration of the remuneration is related to of the resource, in line current CEO increased the position held and the with reference market to €1,500,000, as responsibilities attributed, offering for roles of as well as the experience similar responsibility and and strategic nature of complexity. the resources, in line with reference market offering for roles of similar responsibility and complexity. compared to the remuneration of the former CEO (€700,000). Short-Term Incentive Plan • Achieve the annual 2021 Short-term incentives financial, operational and other targets and additional business priorities targets: • Based on achievement of annually predetermined performance objectives • Motivate and guide • Annual financial, executives’ activities over the short-term period operational and other identified objectives • Executive Chairman: The compensation package for 2021 did not include any short-term incentives. • CEO: The compensation package for 2021 did not include any short-term incentives since he joined In order to further align Executive Chairman and CEO’s compensation to the best market practices (for further details, see the section “2021 remuneration of executive directors and FLT members” Ferrari in September 2021. in the paragraph • FLT Members: Variable incentive percentage of fixed remuneration based on the position held with an average target pay-opportunity equal to 100% of base salary and an average maximum pay- opportunity equal to 225% of base salary. about benchmarking), the compensation package for 2022, for both Executive Chairman and CEO will include a short-term incentive plan with a target pay-opportunity equal to 100% of base salary and maximum pay-opportunity equal to 225% of base salary. 218 FERRARI N.V.AR 2021Component Purpose Terms and Conditions Amounts Outlook 2022 • Equity awards to promote creation of value for the shareholders • PSUs and RSUs: vesting in instalments • PSUs: 50% linked to • Executive Chairman: With reference to Long- Term Incentive Plans currently in place (LTI Plan 2020-2022 and LTI Plan 2021-2023), the target pay- opportunity is 300% and maximum pay-opportunity is 400% of base salary, in accordance with the • Align the behavior of TSR compared to Peer long-term shareholder executives critical to the business with Group, 30% linked to value creation and pay for The new LTI Plan 2022- EBITDA; 20% linked to a performance principles 2024 for the Executive shareholders’ interests qualitative factor related of Ferrari’s remuneration Long-Term Incentive Plan • Motivate executives to achieve long-term to the sustainability and policy. innovation of business. • CEO: Our CEO will be strategic objectives • The new LTI Plan 2022- eligible as beneficiary of • Enhance retention of key resources 2024 will introduce Long-Term Incentive Plan relevant changes as to starting from LTI Plan the amount of PSUs and 2022-2024. Chairman and the CEO will provide for a pay- opportunity equal to 200% and a maximum pay-opportunity equal to 274% of base salary. RSUs to be awarded to the executive directors (which will be awarded only with PSUs) and as to the metrics to which PSUs are linked. • FLT Members: variable incentive percentage of fixed remuneration based on the position held with an average target opportunity equal to 125% and average maximum pay opportunity equal to 156% of base salary. • Customary welfare, retirement-related and Non-monetary Benefits • Retain executives through a total reward approach • Represent an integral fringe benefits such as part of the remuneration company cars and drivers, • Enhance executive and employee security and productivity package with welfare personal/home security, No changes and retirement-related medical insurance, benefits accident insurance, tax preparation and financial counselling Share Ownership Guidelines • Ensures alignment with shareholders’ interests • Executive Directors, other FLT members, other senior leaders • Executive Chairman and CEO: 6 times net base and key employees are salary No changes expected to build up share • FLT Members: 3 times net ownership over a period base salary of 5 years 219 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR EXECUTIVE DIRECTORS’ PAY-MIX In light of the foregoing considerations, our Executive Chairman’s and CEO’s compensation packages are structured as follows: 2021 CHAIRMAN AND INTERIM CE0 TARGET AMOUNTS CHAIRMAN AND INTERIM CE0 MAXIMUM AMOUNTS 25% 20% 75% 80% Fixed Remuneration Long-Term Incentives As shown in the charts above, our compensation structure places an appropriate amount of compensation opportunities for our Executive Chairman and CEO at risk, based on financial and non-financial performance measures and relative TSR. A significant portion of the compensation opportunities is delivered in equity, the vesting and value of which are intended to align the executive’s interests with shareholder returns. The Chairman and Acting CEO compensation package for 2021 did not include any short-term incentives, which have been included in the Chairman’s and CEO’s compensation packages for 2022 (as shown in the charts below), in order to better align executive directors’ action to Ferrari’s performance and strategy and in line with best market practices (see the section “2021 remuneration of executive directors and FLT members” in the paragraph about benchmarking): CHAIRMAN TARGET AMOUNTS CHAIRMAN MAXIMUM AMOUNTS 2022 50% 50% 25% 25% 46% 17% 37% CEO TARGET AMOUNTS CEO MAXIMUM AMOUNTS 25% 25% 46% 17% 37% Fixed Remuneration Short-Term Incentives Long-Term Incentives Our remuneration policy is aligned with Dutch law and the Dutch Corporate Governance Code. In particular, the Dutch Corporate Governance Code (the “Code”) requires listed companies to disclose certain information about 220 FERRARI N.V.AR 2021the compensation of their Board and executive non-executive directors will take into account, among directors. Through this remuneration strategy, Ferrari other things, Ferrari’s financial and operational results fulfills the requirements of the Code ensuring full and other business objectives, while considering the transparency with our shareholders. executive directors’ view concerning the level and 2021 REMUNERATION OF EXECUTIVE DIRECTORS AND FLT MEMBERS structure of their own remuneration. Performance targets are set by the Compensation Committee to be both achievable and stretching, considering Ferrari’s The Board of Directors determines the compensation strategic priorities and the automotive landscape. The for our executive directors following the performance measures that are used for variable recommendation of the Compensation Committee components have been chosen to support Ferrari’s and with reference to the remuneration policy. The strategy, long-term interests and sustainability. We compensation structure for executive directors establish target compensation levels using a market- and FLT members includes a fixed component and a based approach and we monitor compensation variable component based on short and long-term levels and trends in the market. We also periodically performance. As anticipated above, the Chairman’s benchmark our executive compensation program and Acting CEO’s compensation package for 2021 against peer companies. did not include any short-term incentives, which have been included in the Chairman’s and CEO’s In particular, Ferrari identified for the role of CEO an compensation packages for 2022 in order to make ad hoc Reference Panel composed of 15 companies. their compensation packages more competitive Ferrari benchmarked its CEO’s total remuneration with the relevant market (considering the companies with those of listed companies deemed comparable belonging to the Reference Panel described below). with Ferrari in light of some or all of the following criteria: a) representing excellence and luxury in We believe that this compensation structure their respective sectors; b) operating in the same promotes the interests of Ferrari in the short and the business as Ferrari; c) acting in similar sectors ; d) long-term and is designed to encourage the executive presenting overall a similar Market Cap, Revenues and directors and FLT members to act in the best interests number of Employees with Ferrari. The companies of Ferrari. In determining the level and structure of in the Reference Panel used by Ferrari for the CEO’s the compensation of the executive directors, the compensation benchmarking are listed below: Chief Executive Officer Reference Panel Aston Martin Lagonda Bayerische Motoren Worke Compagnie Financiere Richemont Harley-Davidson Kering Moncler Renault Volkswagen Brembo Burberry Mercedes-Benz Group Hermes International LVMH Pirelli The Estée Lauder Companies The Executive Chairman’s Reference Panel comprises the companies of the CEO’s Reference Panel which have a Chairman with powers and delegations comparable to Ferrari (5 Companies out of 15 of those inserted in CEO’s Reference Panel), along with two additional companies (added in order to benchmark a statistically significant number of peers and determined based on companies that have a chairman with powers and authority comparable to the powers and authority of the Executive Chairman). The companies forming part of the Reference Panel for the Executive Chairman target compensation benchmarking are listed below: Executive Chairman Reference Panel Aston Martin Lagonda Compagnie Financiere Richemont Hermes International The Estèe Lauder Companies Brembo Ford Motors Salvatore Ferragamo 221 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR The Executive Chairman’s and the Acting CEO’s directors and FLT members is to attract and retain Reference Panels remained unchanged in 2021. highly qualified senior executives. The level and structure of the Executive Chairman’s Our policy is to periodically benchmark comparable and CEO’s compensation packages for 2022 have salaries paid to executives with similar experience by been determined taking into account the results comparable companies. of benchmarking conducted on the practices of the companies belonging to the abovementioned VARIABLE COMPONENTS Reference Panels. Executive directors and FLT members are also eligible to receive variable compensation subject In particular, the current Executive Chairman’s and to the achievement of pre-established financial and CEO’s compensation packages (i) have been adjusted other identified performance targets. The short and in order to result in line with the best market practice, long-term components of executive directors’ and in terms of level of compensation and structure, and FLT members’ variable remuneration are linked to with the Ferrari’s remuneration policy as approved by predetermined, assessable targets in order to create shareholders at the 2020 AGM; and (ii) are competitive long-term value for the shareholders. with the companies belonging to the identified Reference Panel. More in detail, the CEO’s base salary Our variable compensation programs are designed is aligned to the median of the abovementioned to recruit, motivate and reward executive directors Reference Panel (in 2020, it was below the 25th and members of the FLT delivering operational and percentile) while the Executive Chairman’s base salary strategic performance over time. The provisions and is slightly below the 25th percentile of the relevant financial objectives of our variable compensation Reference Panel (in the 2020 was far below the 25th programs are evaluated on an annual basis and percentile); the total target compensation for both of modified in accordance with industry and business them is aligned to the median of the Reference Panel conditions. (in the 2020 were both below the 25th percentile). The same applies for the pay mix (considered as ratio SHORT-TERM INCENTIVES (STI) between base salary, LTI and STI components) which The primary objective of our performance-based is aligned to the best market practice. short-term variable cash-based incentives is to On the basis of the remuneration policy objectives, business priorities for the current or next year. The compensation of executive directors and FLT short-term incentive plan is designed to motivate members consists, inter alia, of the elements its beneficiaries to achieve challenging targets, by incentivize the members of the FLT to focus on the discussed below. FIXED COMPONENT recognizing individual contributions to the Group’s results on an annual basis. The Compensation Committee believes that it is appropriate to use a The primary objective of the base salary (the fixed balance of corporate financial targets, strategic part of the annual cash compensation) for executive objectives and individual performance objectives. The methodology for Short Term Incentive Calculation is the following: Base Salary x STI% Adjusts opportunity based on business results Links directly to individual current contribution (X) $ Target Bonus x Company Performance Factor x Individual Performance Factor = STI Payout 222 FERRARI N.V.AR 2021The target level for both the Company Performance Pursuant to the Welcome Bonus, the CEO has been Factor and the Individual Performance Factor is 100%, granted (i) an extraordinary cash lump sum of reaching a possible maximum level which is equal to €1,000,000 and (ii) 16,256 Ferrari common shares, the 150% of target set level, resulting in a maximum in each case subject to approval by shareholders at pay-opportunity equal to 225% of base salary. the 2022 Annual General Meeting. Subject to approval by shareholders at the 2022 Annual General Meeting, To determine the executive directors’ annual the shares have been granted by Ferrari without the performance bonus, the non-executive directors, obligation to hold the shares for a least five years, upon proposal of the Compensation Committee: because the attraction and the appointment of the • approve the executive directors’ targets and new CEO – considering his deep understanding maximum allowable bonuses; of the technologies driving the change in the • select the appropriate metrics and their weighting; Company’s industry, and his proven innovation, • set the stretch objectives; business-building and leadership skills – was • consider any unusual items in a performance year considered a transaction of strategic importance to determine the appropriate measurement of and effect for Ferrari’s results. achievement; and • approve the final bonus determination. With the exception of the Welcome Bonus, no special bonuses were awarded to the executive directors or In 2021, the Compensation Committee defined the members of the FLT for 2021. Company Performance Factor by reference to four metrics: • Net Revenues (20%) As described above, our executive directors (Executive Chairman and CEO) were not included in • Consolidated Adjusted EBIT (20%) the Short-Term Incentive Plan in 2021, but they will be • Consolidated Adjusted EBITDA Margin (20%) included in the Short-Term Incentive Plan for 2022, • Industrial Free Cash Flow (40%) in order to better align executive directors’ action to Ferrari’s strategy and performance and in line with The Compensation Committee established best market practice. challenging goals for each metric, each of which pays out independently. There is no minimum bonus LONG-TERM INCENTIVES (LTI) payout; as a result, if none of the threshold objectives We believe that the equity incentive plan discussed are satisfied, there is no bonus payment. below increases the alignment between the Company’s performance and shareholder interests, In addition, upon proposal of the Compensation by linking the compensation opportunity of the Committee, the non-executive directors have executive directors and members of the FLT to authority to grant special bonuses for specific increasing shareholder value. transactions that are deemed exceptional in terms of strategic importance and effect on Ferrari’s results, During 2021, Ferrari had three long-term equity taking into account standards of reasonableness and incentive plans in place, consistent with the fairness. The form of any such bonus (cash, common Company’s business plan presented at the Capital shares of Ferrari or options to purchase common Markets Day in September 2018 and awarding to their shares) is determined by the non-executive directors beneficiaries a combination of performance share from time to time. units (“PSUs”) and restricted share units (“RSUs”), each representing the right to receive one Ferrari common In particular, during 2021, a special bonus was share: awarded to Benedetto Vigna (subject to approval by (i) Equity Incentive Plan 2019-2021, approved on shareholders at the 2022 Annual General Meeting) February 26, 2019 by the Board of Directors, for having joined Ferrari (the “Welcome Bonus”). covering a performance period from 2019 to The attraction and the appointment of the new 2021, having the Executive Chairman and the CEO - considering his deep understanding of the former CEO of the Company, as well as members technologies driving the change in the Company’s of the FLT and other key employees of the Group, industry, and his proven innovation, business- as beneficiaries; this plan ended on December 31, building and leadership skills – was considered a 2021; transaction of strategic importance and effect for (ii) Equity Incentive Plan 2020-2022, approved on Ferrari’s results. February 17, 2020 by the Board of Directors, covering a performance period from 2020 to 223 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR 2022, having the Executive Chairman, as well as The PSU awards are earned based on the level of members of the FLT and other key employees achievement of defined key performance indicators of the Group as beneficiaries. The former CEO relating to: i) a relative total shareholder return was not eligible for the Equity Incentive Plan (“TSR”) target (which is relative to the TSR of a defined 2020-2022; peer group (“Peer Group”)), ii) an EBITDA target, and (iii) Equity Incentive Plan 2021-2023, approved on iii) an innovation target. Each target is measured February 26, 2021 by the Board of Directors, independently of the other targets and relates to covering a performance period from 2021 to separate portions of the aggregate awards. The RSU 2023, having the Executive Chairman and Interim awards are service-based and vest conditional on the CEO of the Company, as well as members of executive directors’ continued employment with the the FLT and other key members of the Group as Company at the time of vesting. beneficiaries. Details of the equity long-term incentives granted to the Executive Chairman and Interim CEO are summarized below: Executive Chairman and Interim CEO Type of Equity Long-Term Incentive Vehicle Proportion of Equity Long-Term Grant Vesting Cycle Performance Metrics (Weighting) or Vesting Condition 1) TSR (50%) 67% Vest at the end of 3-years 2) EBITDA (30%) Rolling Plan 3) Innovation Performance Goal (20%) Equity Incentive Plan 2019-2021 Performance Share Units (PSUs) Equity Incentive Plan 2019-2021 Retention Restricted 33% Share Units (RSUs) Vest at the end of 3-years Conditional on continued Rolling Plan employment Type of Equity Long-Term Incentive Vehicle Proportion of Equity Long-Term Grant Vesting Cycle Performance Metrics (Weighting) or Vesting Condition 1) TSR (50%) 67% Vest at the end of 3-years 2) EBITDA (30%) Rolling Plan 3) Innovation Performance Goal (20%) Executive Chairman and Interim CEO Equity Incentive Plan 2020-2022 Performance Share Units (PSUs) Equity Incentive Plan 2020-2022 Retention Restricted 33% Share Units (RSUs) Vest at the end of 3-years Conditional on continued Rolling Plan employment Executive Chairman and Interim CEO Equity Incentive Plan 2021-2023 Performance Share Units (PSUs) Equity Incentive Plan 2021-2023 Type of Equity Long-Term Incentive Vehicle Proportion of Equity Long-Term Grant Vesting Cycle Performance Metrics (Weighting) or Vesting Condition 1) TSR (50%) 67% Vest at the end of 3-years 2) EBITDA (30%) Rolling Plan 3) Innovation Performance Goal (20%) Vest at the end of 3-years Conditional on continued Rolling Plan employment Retention Restricted 33% Share Units (RSUs) 224 FERRARI N.V.AR 2021The number of PSU awards earned is determined based on the level at which the three performance criteria described below are achieved. At the end of the vesting period, the total number of PSUs earned is equal to the sum of: • the number of PSUs earned under the TSR payout factor; plus • the number of PSUs earned under the EBITDA payout factor; plus • the number of PSUs earned under the Innovation Performance Goal. Metrics (weight) Metrics (type) Benchmark Rationale Link between pay and performance TSR (50%) Financial criteria Peer Group (8 companies: Ferrari, Aston Martin, Burberry, Hermes, Kering, LVMH, Moncler, Richemont) TSR is tracked for both Ferrari and the companies in the defined Peer Group calculating starting and ending prices as an average of the 30 calendar days prior to grant and award date. Ranking % of Target Awards 1° 2° 3° 4° 5° 6° - 7° - 8° 150% 120% 100% 75% 50% 0 EBITDA (30%) Financial criteria 5-year Business Plan Innovation Performance Factor (20%) Non-financial Critical project criteria milestones Earnings before interest, taxes, depreciation and amortization takes a company’s earnings, and subtracts its cost of debt, cost of goods sold and operating expenses and taxes, resulting in an indicator of Ferrari’s profitability. Performance % of Target Awards +10% +5% 5 Years Plan -5% < -5% 140% 120% 100% 80% 0 The Innovation Performance Factor focuses on the new product launches in line with Ferrari’s plan and on technological innovation. It is measured in terms of product launches (milestones, volumes and contribution margin), for a weight of 70%, and key technological projects, for the remaining 30%, to be achieved during the performance period. Our non-financial criterion, the Innovation Performance Factor, is included in the Equity Incentive Plans in order to have a performance indicator directly linked to the long-term sustainability and technological innovation of our business. The TSR Peer Group was updated during the course of 2019 in order to consider more strategically relevant comparable companies for Ferrari and remained the same in 2020 and 2021. In relation to the vesting of the PSUs awarded to the Executive Chairman, the vesting of all units under each plan occurs after the end of the relevant performance period (i.e., December 31, 2021, December 31, 2022 and December 31, 2023), to the extent that the conditions for vesting are satisfied. The performance period for the Equity Incentive Plan 2019-2021 PSUs commenced on January 1, 2019 and terminated on December 31, 2021. The fair value of the awards used for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The fair value of the PSUs that were granted to Mr. Elkann in 2019 is € 111.64 per share. 225 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR The key assumptions used to calculate the grant-date fair values for these awards are summarized below: Key Assumptions Grant date share price Expected volatility Dividend yield Risk-free rate PSU Awards Granted to the Chairman in 2019 €122.90 26.5% 0.9% 0% The performance period for the Equity Incentive Plan 2020-2022 PSUs commenced on January 1, 2020. The fair value of the awards used for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The fair value of the PSUs that were granted to Mr. Elkann in 2020 is €136.06 per share. The key assumptions used to calculate the grant-date fair values for these awards are summarized below: Key Assumptions Grant date share price Expected volatility Dividend yield Risk-free rate PSU Awards Granted to the Chairman in 2020 €142.95 26.6% 0.8% 0% The performance period for the Equity Incentive Plan 2021-2023 PSUs commenced on January 1, 2021. The fair value of the awards used for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The fair value of the PSUs that were granted to Mr. Elkann in 2021 is €130.42 per share. Key Assumptions Grant date share price Expected volatility Dividend yield Risk-free rate PSU Awards Granted to the Executive Director in 2021 €175.80 27.0% 0.75% 0% The expected volatility was based on the observed volatility of the defined Peer Group. The risk-free rate was based on the iBoxx sovereign Eurozone yield. The RSUs granted to Mr. Elkann under the Equity Incentive Plan 2019-2021 vested at the end of the three-years cliff vesting period in 2022, while the RSUs granted under the Equity Incentive Plan 2020-2022 and the Equity Incentive Plan 2021-2023 will vest in 2023 and 2024 at the end of the three-years cliff vesting period, subject to continued employment with the Company. The fair value of the RSUs that were granted to Mr. Elkann in 2019 is 119.54 per share, the fair value of the RSUs that were granted to Mr. Elkann in 2020 is €139.39 per share and the fair value of the RSUs that were granted to the Chairman and Interim CEO in 2021 is €171.86 per share. 226 FERRARI N.V.AR 2021EQUITY INCENTIVE PLAN 2022-2024 SEVERANCE DESIGN MAIN FEATURES The terms of service of the CEO provide that The design of the new Equity Incentive Plan 2022-2024, termination of the contract by either party is subject which Ferrari will implement in 2022, subject to the to six months’ notice period. However, if the Company approval of the next Annual General Meeting, provides terminates his services for reasons other than for significant changes compared to the former Long- for just cause (as defined) or if he terminates his Term Equity Incentive Plans. The main changes, which services due to the reduction or limitations of his will be better illustrated in the Agenda and Explanatory managing powers or following his dismissal in case Notes of the Annual General Meeting to be held in April of change of control, the Company shall pay the CEO 2022, include: an amount equal to 18 monthly installments of his • Combination of PSUs and RSUs: different weight base monthly salary, including any amount due for of their distribution in relation to the responsibilities the six months’ notice period (which means that the and the level of contribution to the results of each severance amount does not exceed 12 months’ salary, cluster of beneficiaries. Executive Directors will in line with the Code), plus the accrued pro rata of be entitled only to PSUs in order to strengthen the the Company’s contribution to the pension fund as alignment of their long-term interests with those of well as STI and LTI variable compensation accrued at shareholders; the date of termination of employment. If an actual • Financial criteria related to the vesting of PSUs: severance payment will be made at the termination TSR Peer Group will be updated in order to consider of employment and such severance payment would more comparable companies to Ferrari and the exceed 12 months’ base salary, then a disclosure will pay-out scale will be amended accordingly, requiring be made in line with the Code. performance at the benchmark median before rewarding beneficiaries; If within twenty-four months following a change of • Non-financial criteria: the Innovation Performance control (as defined), the Chairman’s services are Factor will be replaced by two ESG-related criteria. terminated by the Company (other than for cause), OTHER BENEFITS or are terminated by the Chairman for good reason, the Chairman is entitled to receive the accelerated Executive directors may also be entitled to vesting of awards under his long-term incentive plan. customary fringe benefits such as personal use of aircraft, company cars and drivers, personal/home security, medical insurance, accident insurance, tax preparation and financial counselling. The Compensation Committee may grant other benefits to the executive directors in particular circumstances. 227 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR INTERNAL PAY RATIOS data) is as follows: using the CEO’s total annual In line with the Dutch Corporate Governance Code, remuneration(41) provided for 2021 (€4,486,151), the the internal pay ratio is an important input for resulting CEO pay ratio versus the average employee determining the Remuneration Policy for the Board of annual remuneration(42) was 48.4 (in 2020: 87.4). Directors. In addition, also in line with new guidance The value of the CEO pay ratio as compared with on methodology, the Company has applied a different the pay ratios disclosed in the previous years is not methodology when compared to previous years. representative due to the change of the calculation For the financial year 2021 the internal pay ratio (the methodology, as explained above. For this reason and ratio between (i) the total annual remuneration of the in order to provide a comparison, the table below CEO and (ii) the average annual remuneration of the reports the pay ratios of the previous years calculated employees of the company and the group companies following the current calculation methodology. of which the company consolidates the financial CEO Total Remuneration Costs (A) Average Employee (FTE) Total Remuneration Costs (B) PAY RATIO (A/B) 2021 2020 2019 4,486,151 6,835,721 8,631,030 92,656 78,193 48.4 87.4 83,780 103.0 The decrease in the pay ratio in 2021 when compared to 2020 can be explained, inter alia, by the fact that for 2020 and 2019 the pay ratio is calculated considering the remuneration of the former CEO, Louis Camilleri, whose compensation package was different from that of the current CEO and included a large portion of LTI variable compensation. For 2021 the pay ratio is calculated considering the remuneration of the current CEO, Benedetto Vigna payable for the period from September 16, 2021 which includes a one-off Welcome Bonus. There is no significant difference between the pay ratio so calculated and the pay ratio calculated based on the target remuneration elements pro rated on a full year basis. In addition, the compensation payable to Mr. Elkann as interim CEO during 2021 is not included in the calculation of the pay ratio, because such compensation has been forfeited by Mr. Elkann (see “—Implementation of Remuneration Strategy in 2021—Directors’ Compensation” below). RECOUPMENT OF INCENTIVE COMPENSATION (CLAW BACK POLICY) The Equity Incentive Plans (the Equity Incentive Plan 2019-2021, the Equity Incentive Plan 2020-2022 and the Equity Incentive Plan 2021-2023) include a claw back clause, which allows the Company to claim the refund of part or all of the variable component of remuneration awarded or paid on the basis of information or data that subsequently prove manifestly incorrect, if the Board of Directors determines that circumstances that would have constituted “cause” (as defined) existed while the remuneration remained unvested or due to the beneficiaries’ fraud or negligence (each, a “Recovery Event”). In particular, if a Recovery Event occurs within two years after the payment of cash or delivery of any shares in respect of the PSUs or RSUs, a participant will be required to repay the net amount received, as determined by the Board of Directors in its discretion. (41) The total annual remuneration of the CEO includes all remuneration components (such as fixed remuneration, variable remuneration in cash (bonus), the share-based portion of the remuneration (value of the share-based payment is determined at the time of allocation in line with the applicable regulations under IFRS), social premiums, pension, expense allowance, et cetera), as included in the (consolidated) financial statements on an IFRS basis. (42) The average annual remuneration of the employees is determined by dividing the total wage costs in the financial year (as included in the (consolidated) financial statements on an IFRS basis) by the average number of FTEs during the financial year. Hiring of external employees is taken into account on a pro rata basis, insofar as these are hired for at least three months during the financial year. 228 FERRARI N.V.AR 2021STOCK OWNERSHIP In 2019 the Board of Directors determined stock ownership guidelines applicable to Ferrari’s directors and certain employees, recognizing the critical role that stock ownership has in aligning the interests, in particular, of Ferrari’s Executive Chairman, CEO, FLT members and senior leaders and key employees with those of the shareholders. As of the end of the 2021 financial year, covered employees should own Ferrari common shares in the following minimum amounts (as a multiple of net base salary): Incumbent Executive Chairman and Chief Executive Officer Other FLT members Other senior leaders Other key employees Share Ownership Guideline 6 times net base salary 3 times net base salary 1.5 times net base salary 1 times net base salary The above listed covered employees are required to EBITDA and Innovation Performance Factor), which achieve the applicable ownership threshold within represents a significant part of the Chairman’s and five years, through acquisitions of Ferrari common the CEO’s compensation package, supports both shares as a result of the vesting of PSUs or RSUs Ferrari’s business strategy and value creation for until the required ownership level has been met, our shareholders. As specified above, in 2022 the excluding any shares sold to pay taxes in connection non-financial criteria will be updated, replacing the with the granting of those shares. In addition to the Innovation Performance Factor with two ESG-related stock ownership guidelines, the Executive Chairman factors. and the CEO are each required to retain one hundred percent (100%) of the number of shares of common The Compensation Committee evaluates the mix of stock issued, on a net, after-tax basis, upon vesting variable compensation linked to financial and non- and settlement of any equity awards granted to financial performance, as well as shareholder returns, such individual until the fifth anniversary of the grant taking also into account the wages and employment date of such award other than in the event of death, conditions of our employees. Our incentive plans termination of service due to total disability, approved are based on peer and market benchmarked leave of absence or retirement. performance metrics. SCENARIO ANALYSIS In the event that specific long-term threshold On an annual basis, the non-executive directors, upon performance targets are not achieved, there will proposal of the Compensation Committee, examine be no variable pay vesting or payout for executive the relationship between the performance criteria directors for the relevant period. chosen and the possible outcomes for the variable remuneration of our executive directors (scenario The following table and chart describe compensation analysis). To date, the non-executive directors believe levels that the Executive Chairman and the CEO the remuneration policy has proven effective in could receive in 2022 (2021 has not been considered terms of establishing a correlation between Ferrari’s since less representative) under the compensation strategic goals and the chosen performance criteria, packages to be implemented and different scenarios as the main key performance criteria of our executive in a calendar year, assuming a constant share price directors’ long-term incentive plan (i.e. the TSR, (i.e. no appreciation): 229 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 1. REMUNERATION STRATEGY FOR THE 2021 FINANCIAL YEAR Element of remuneration Details of assumption Fixed remuneration This comprises base salary with effect from January 1, 2022. The Executive Chairman salary is €500,000 (starting from October 1, 2021) and the CEO annualized salary is €1,500,000. Short-term Incentive Plan the Chairman and the CEO will include a short-term incentive plan with a target pay-opportunity Subject to approval by the next Annual General Meeting, the compensation packages for 2022 for equal to 100% of base salary and maximum pay-opportunity equal to 225% of base salary. The new LTI Plan 2022-2024 will introduce significant changes as to the amount of PSUs and RSUs to be awarded to the executive directors (which will be awarded only with PSUs) and as to the metrics to which PSUs are linked. Executive Chairman and CEO: Long-term Incentive Plan • in case of failure to achieve any of the performance criteria the scenario assumes no award of PSUs; • in case of achievement of the targets for each of the performance criteria, the scenario assumes an award equal to target pay opportunity (200% of base salary); • in case of achievement of the maximum level of each performance criteria the scenario assumes the award equal to maximum pay opportunity (274% of base salary). Chairman Remuneration (€) CEO Remuneration (€) 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Chairman Minimum Chairman Target Chairman Maximum CEO Minimum CEO Target CEO Maximum Fixed Remuneration Short-Term Incentives Long-Term Incentives N.B. Details about the Chairman and the CEO’s actual 2021 remuneration are included in section 2. Implementation of remuneration policy in 2021. 230 FERRARI N.V.AR 2021 REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS Remuneration of non-executive directors is approved by the Company’s shareholders and periodically reviewed by the Compensation Committee. Remuneration of non-executive directors is fixed and not dependent on the Company’s financial results. Non- executive directors are not eligible for variable compensation and do not participate in any incentive plans. The current annual remuneration for the non-executive directors (which was approved at the AGM, held on April 15, 2020) is shown in the table below: Non-Executive Director Compensation Annual cash retainer Additional retainer for Audit Committee member Additional retainer for Audit Committee Chairman Additional retainer for Compensation Committee member Additional retainer for Compensation Committee Chairman Additional retainer for ESG Committee member Additional retainer for ESG Committee Chairman Additional retainer for the senior non-executive Director U.S. $ $75,000 $10,000 $20,000 $5,000 $15,000 $5,000 $15,000 $25,000 All remuneration of the non-executive directors is paid in cash. REMUNERATION OF OTHER EMPLOYEES Ferrari aims to provide a market-competitive and fair remuneration package for its workforce, in line with the remuneration policy and in order to better pursue the Company’s strategy and purpose and contribute to long- term value creation. Furthermore, Ferrari operates a merit-based remuneration policy, not discriminating on the basis of gender, age, nationality, social status or cultural background. In 2020, Ferrari S.p.A. started an in-depth analysis on equal remuneration, which led, in July 2020, to the award of the Equal Salary Certificate for providing equal pay to men and women with the same qualifications and positions in the Company which has been maintained also in 2021. This award is a testament to the Company’s commitment to creating an inclusive and diverse working environment while fostering career development for all. Ferrari was the first Italian Company to receive this award The certification process included a detailed statistical analysis of compensation levels, which revealed that Ferrari is one of Europe’s companies successfully eliminating the gender pay gap. Ferrari sees this certification not as an end point but as a further stage of growth and an opportunity to implement tangible actions to ensure that everyone can pursue his own professional growth. The same process was conducted in 2020 also for Ferrari North America Inc. which has been awarded with the Equal Salary Certification as well as Ferrari S.p.A. and maintains it in 2021. 231 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS 2. IMPLEMENTATION OF REMUNERATION STRATEGY IN 2021 INTRODUCTION This section sets out the implementation of Ferrari’s remuneration strategy for the year ended December 31, 2021. The remuneration granted in the year ended December 31, 2021 is in accordance with the substance and the procedures of the remuneration strategy (as set out above) and therefore we believe it allows us to seek to attract and retain the most highly qualified executive talent and motivate such executives to achieve business and financial goals that create long-term value for shareholders in a manner consistent with our core business and leadership values and taking into account the social context around the Company. DIRECTORS’ COMPENSATION The following table summarizes the remuneration received by the members of the Board of Directors for the year ended December 31, 2021 from Ferrari and its subsidiaries. Name Office held Fixed remuneration Annual fee (€) Fringe benefits (€) Variable remuneration (€) Extraordinary items (€) Pension expense (€) Total remuneration (4)(5) (€) John Elkann (1) Chairman and Executive Director 325,405 11,533(3) — (*) — Benedetto Vigna (2) Chief Executive Officer and Executive Director 500,000 3,852(3) Total Executive Directors 825,405 15,385 Piero Ferrari Sergio Duca Vice Chairman and Non-Executive Director Senior Non-Executive Director Delphine Arnault Francesca Bellettini Roberto Cingolani (5) Eddy Cue John Galantic Maria Patrizia Grieco Adam Keswick Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 68,825 12,237(3) 103,238 68,171 73,127 8,225 73,127 77,429 73,127 64,524 — — — — — — — — Total Non-Executive Directors 609,793 12,237 — — — — — — — — — — — — 3,982,299(6) 3,982,299 — — — — — — — — — — — — — — — — — — — — — — — 336,938 4,486,151 4,823,089 81,062 103,238 68,171 73,127 8,225 73,127 77,429 73,127 64,524 622,030 (1) From 01/01/2021 to 09/15/2021: Chairman, CEO and Executive Director. From 09/16/2021 to 12/31/2021: Chairman, and Executive Director. (2) Mr. Vigna joined Ferrari as CEO and Executive Director on 09/16/2021. (3) Relate to car benefits provided to Mr. Vigna, Mr. Elkann and Mr. Ferrari in accordance with the remuneration policy. (4) Certain amounts have been translated from U.S. Dollars to Euro. (5) Mr. Roberto Cingolani was Non-Executive Director from 04/16/2020 to 02/13/2021. (6) As a Welcome Bonus for having joined Ferrari, the CEO has been granted (i) an extraordinary lump sum of €1,000,000 and (ii) 16,256 Ferrari common shares, in each case subject to approval by shareholders at the 2022 Annual General Meeting. (*) For information regarding equity-based variable compensation see Share- Based Compensation of Executive Directors below. The Chairman, Mr. John Elkann, asked not to receive any remuneration for the period during which he served as Interim CEO. The Board of Directors acknowledged this and decided to allocate an equivalent sum as a charitable donation to an education fund with the mandate to provide locally quality, fair and inclusive education as well as equal learning opportunities. 232 FERRARI N.V.AR 2021The following table summarizes the remuneration received by the members of the Board of Directors for the year ended December 31, 2020 from Ferrari and its subsidiaries. Variable remuneration (€) Extraordinary items (€) Pension expense (€) Total remuneration (4) (€) Name Office held John Elkann (1) Louis C. Camilleri (2) Chairman and Executive Director Chief Executive Officer and Executive Director Fixed remuneration Annual fee (€) Fringe benefits (€) 65,904 11,886(3) 363,960 11,886(3) Total Executive Directors 429,864 23,772 Piero Ferrari Sergio Duca Delphine Arnault Francesca Bellettini (6) Giuseppina Capaldo (7) Roberto Cingolani (8) Eddy Cue John Galantic (6) Maria Patrizia Grieco Adam Keswick Elena Zambon (7) Vice Chairman and Non-Executive Director Senior Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 18,155 11,886(3) 27,233 17,020 — 23,829 — 19,290 — 19,290 17,020 17,020 — — — — — — — — — — —(*) —(*) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 77,790 375,846 453,636(5) 30,041 27,233 17,020 — 23,829 — 19,290 — 19,290 17,020 17,020 170,743(5) Total Non-Executive Directors 158,857 11,886 — (1) From 01/01/2020 to 12/15/2020: Chairman and Executive Director. From 12/15/2020 to 12/31/2020: Chairman, CEO and Executive Director. (2) Mr. Camilleri was CEO until 12/10/2020. (3) Relate to car benefits provided to Mr. Camilleri, Mr. Elkann and Mr. Ferrari in accordance with the remuneration policy. (4) Certain amounts have been translated from U.S. Dollars to Euro. (5) In response to the healthcare crisis caused by the COVID-19 pandemic, the Board of Directors waived their full cash compensation from April to the end of the year to help fund Company initiatives to support the communities in which Ferrari operates. (6) Mrs. Francesca Bellettini and Mr. John Galantic were Non-Executive Directors from 04/16/2020. (7) Mrs. Elena Zambon and Mrs. Giuseppina Capaldo were Non-Executive Directors from 01/01/2020 to 04/16/2020. (8) Mr. Roberto Cingolani was Non-Executive Director from 04/16/2020 to 02/13/2021. (*) For information regarding equity-based variable compensation see Share- Based Compensation of Executive Directors below. 233 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS / 2. IMPLEMENTATION OF REMUNERATION STRATEGY IN 2021 The following table shows a comparison of the total remuneration of directors over the last five years, based on Ferrari directors who served as directors in 2021. Name Office held 2021 2020 2019 2018 2017 Directors’ Total Remuneration (€) Chairman and Executive Director Chief Executive Officer and Executive Director Former Chief Executive Officer and Executive Director Vice Chairman and Non-Executive Director Senior Non-Executive Director 336,938(1) 77,790 223,586 92,579(3) 115,317 4,486,151(6) — — — — — 375,846(4) 887,255 270,412(5) 133,021 81,062 30,041 83,472 80,546 111,919 103,238 27,233 109,810 94,890(7) 119,743 John Elkann (*) Benedetto Vigna (*) Louis C. Camilleri (*) Piero Ferrari Sergio Duca Delphine Arnault Francesca Bellettini (8) Roberto Cingolani (10) Eddy Cue John Galantic (8) Maria Patrizia Grieco Adam Keswick Adjusted EBITDA Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Average Ferrari Share Price Median fixed remuneration of employees (**) 68,171 17,020 67,080 63,889 97,614 73,127 8,225 — — — — — — — — 73,127 19,290 73,542 68,149 102,039 77,429 — — — — 73,127 19,290 76,024 72,408 106,465 64,524 17,020 67,080 63,889 97,614 1,531 185.25 34,071 1,143 155.98 32,876 1,269 1,114 131.44 105.49 1,036 79.93 31,782 30,600 30,385 (1) From 01/01/2021 to 09/15/2021: Chairman, CEO and Executive Director. From 09/16/2021 to 12/31/2021: Chairman and Executive Director. (2) From 01/01/2019 to 04/12/2019: Chairman and Non-Executive Director. From 04/12/2019 to 12/31/2019: Chairman and Executive Director. (3) From 01/01/2018 to 07/21/2018: Vice Chairman and Non-Executive Director. From 07/21/2018 to 12/31/2018: Chairman and Non-Executive Director. (4) Chief Executive Officer and Executive Director until 12/10/2020. (5) From 01/01/2018 to 07/21/2018: Senior Non-Executive Director. From 09/07/2018 to 12/31/2018: Chief Executive Officer and Executive Director. (6) Mr. Vigna joined Ferrari as CEO and Executive Director on 09/16/2021. As a Welcome Bonus for having joined Ferrari, the CEO has been granted (i) an extraordinary lump sum of €1,000,000 and (ii) 16,256 Ferrari common shares, in each case subject to approval by shareholders at the 2022 Annual General Meeting. (7) From 07/21/2018 to 12/31/2018: Senior Non-Executive Director (8) Mrs. Francesca Bellettini and Mr. John Galantic were Non-Executive Directors from 04/16/2020. (9) Mr. Roberto Cingolani was Non-Executive Director from 04/16/2020 to 02/13/2021. (*) For information regarding equity-based variable compensation see Share- Based Compensation of Executive Directors below. (**) This information does not include the “Premio di Competitività”, which is on top of the fixed remuneration. As a Welcome Bonus for having joined Ferrari, the CEO has been granted (i) an extraordinary lump sum of €1,000,000 and (ii) 16,256 Ferrari common shares, in each case subject to approval by shareholders at the 2022 Annual General Meeting. 234 FERRARI N.V.AR 2021SHARE-BASED COMPENSATION OF EXECUTIVE DIRECTORS The following table provides an overview of the outstanding Equity Incentive Plans provided to Ferrari Executive Directors in 2021: Main conditions of share award plans Movements in share awards during 2021 Name, position Plan Performance period Grant date Vesting date Number of unvested shares at January 1, 2021 Shares awarded Shares vested Number of unvested shares at December 31, 2021 of which are subject to performance conditions Equity Incentive Plan 2019-2021 Equity Incentive Plan 2020-2022 Equity Incentive Plan 2021-2023 Equity Incentive Plan 2019-2021 John Elkann, Executive Chairman Louis C. Camilleri, Former Chief Executive Officer 2019 - 2021 April 2019 March 2022 20,703 — — 20,703 13,802 2020 - 2022 April 2020 March 2023 4,829 — — 4,829 3,219 2021 - 2023 April 2021 March 2024 — 4,448 — 4,448 2,965 2019 - 2021 April 2019 March 2021 100,479 — 100,479 — — March 2020 March 2022 COMPENSATION OF THE MEMBERS OF THE FLT The compensation paid to or accrued during the year ended December 31, 2021 by Ferrari and its subsidiaries to the members of the FLT (excluding the CEO) amounted to €18.7 million in aggregate, €14.1 million for salary and other short-term benefits (which is linked to the FY 2021 performance and represents slightly more than the target set levels), €4.2 million for share-based compensation in relation to PSUs and RSUs awarded under the Group’s Equity Incentive Plans (2019-2021; 2020-2022; 2021-2023) and €0.4 million for the Group’s contributions to pension funds. The PSU and RSU awards will vest in March 2022, 2023 and 2024, subject to continued employment and, for the PSU awards, to the achievement of performance conditions related to TSR, EBITDA and Innovation, as described above. Given Ferrari’s third place positioning in the TSR ranking against the Peer Group (corresponding to the vesting of 100 per cent. of the target PSUs awarded) for the vesting of the Equity Incentive Plan 2016-2020, which covers the performance period from 2018 to 2020, ending at December 31, 2020, 37,082 PSUs and 19,812 RSUs had vested for FLT members. DIRECTOR AND OFFICER OVERLAPS There are overlaps among certain directors and officers of Stellantis (formerly FCA) and our directors and officers. These individuals owe duties both to us and to the other companies that they serve as officers and/or directors. This may raise certain conflicts of interest as, for example, these individuals review opportunities that may be appropriate or suitable for both Ferrari and such other companies, or business transactions are pursued in which both Ferrari and such other companies have an interest, such as Ferrari’s arrangement to supply engines for Maserati cars. For example, Mr. John Elkann our Chairman, is also the Chairman of Stellantis and the Chairman and Chief Executive Officer of Exor. At February 14, 2022, Exor held approximately 24.21 percent of our outstanding common shares and approximately 36.00 percent of the voting power in the Company, while it holds approximately 14.4 percent of the outstanding common shares in Stellantis, based on SEC filings. The percentages of ownership and voting power above are calculated based on the number of outstanding shares net of treasury shares. See “Risk Factors - Risks related to our Common Shares - We may have potential conflicts of interest with Stellantis and Exor and its related companies”. 235 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSFINANCIAL STATEMENTS 238 FERRARI N.V.AR 2021INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Income Statement Consolidated Statement of Comprehensive Income 240 241 Consolidated Statement of Financial Position 242 Consolidated Statement of Cash Flows 243 Consolidated Statement of Changes in Equity 244 Notes to the Consolidated Financial Statements 245 239 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (€ thousand) Net revenues Cost of sales Selling, general and administrative costs Research and development costs Other expenses/(income), net Result from investments EBIT Net financial expenses Profit before taxes Income tax expense Net profit Net profit attributable to: Owners of the parent Non-controlling interests Basic earnings per common share (in €) Diluted earnings per common share (in €) For the years ended December 31, Note 2021 2020 2019 4 5 6 7 8 9 4,270,894 3,459,790 3,766,615 2,080,613 1,686,324 1,805,310 348,024 768,104 5,561 6,896 336,126 707,385 18,475 4,647 343,179 699,211 4,991 3,522 1,075,488 716,127 917,446 33,257 49,092 42,082 1,042,231 667,035 875,364 10 209,095 58,155 176,656 833,136 608,880 698,708 3 12 12 830,767 607,817 695,818 2,369 4.50 4.50 1,063 3.29 3.28 2,890 3.73 3.71 The accompanying notes are an integral part of the Consolidated Financial Statements. 240 FERRARI N.V.AR 2021CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (€ thousand) For the years ended December 31, Note 2021 2020 2019 Net profit 833,136 608,880 698,708 Items that will not be reclassified to the consolidated income statement in subsequent periods: (Losses)/Gains on remeasurement of defined benefit plans Related tax impact Total items that will not be reclassified to the consolidated income statement in subsequent periods Items that may be reclassified to the consolidated income statement in subsequent periods: (Losses)/Gains on cash flow hedging instruments Exchange differences on translating foreign operations Related tax impact Total items that may be reclassified to the consolidated income statement in subsequent periods 20 20 20 20 20 (463) 110 (353) 34 1 35 (64,130) 14,229 17,960 40,109 (11,731) (11,291) (31,941) 17,087 Total other comprehensive (loss)/income, net of tax (32,294) 17,122 (2,078) 456 (1,622) (2,272) 2,652 610 990 (632) Total comprehensive income 800,842 626,002 698,076 Total comprehensive income attributable to: Owners of the parent Non-controlling interests 797,988 625,053 695,075 2,854 949 3,001 The accompanying notes are an integral part of the Consolidated Financial Statements. 241 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2021 AND 2020 (€ thousand) Assets Goodwill Intangible assets Property, plant and equipment Investments and other financial assets Deferred tax assets Total non-current assets Inventories Trade receivables Receivables from financing activities Current tax receivables Other current assets Current financial assets Cash and cash equivalents Total current assets Total assets Equity and liabilities Equity attributable to owners of the parent Non-controlling interests Total equity Employee benefits Provisions Deferred tax liabilities Debt Other liabilities Other financial liabilities Trade payables Current tax payables Total equity and liabilities At December 31, Note 2021 2020 13 14 15 16 10 17 18 18 18 18 19 3 20 22 23 10 24 25 19 26 785,182 1,138,173 785,182 979,290 1,353,165 1,226,630 54,509 168,757 42,841 152,221 3,499,786 3,186,164 540,575 185,000 1,143,968 14,306 122,224 13,500 460,617 184,260 939,607 12,438 76,471 40,084 1,344,146 1,362,406 3,363,719 3,075,883 6,863,505 6,262,047 2,205,898 1,785,186 5,518 4,018 2,211,416 1,789,204 101,200 150,868 95,973 59,985 155,335 113,474 2,630,011 2,724,745 726,775 36,520 797,832 112,910 687,462 2,140 713,807 15,895 6,863,505 6,262,047 The accompanying notes are an integral part of the Consolidated Financial Statements. 242 FERRARI N.V.AR 2021CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (€ thousand) Cash and cash equivalents at the beginning of the year 1,362,406 897,946 793,664 For the years ended December 31, 2021 2020 2019 Cash flows from operating activities: Profit before taxes Amortization and depreciation Provision accruals Result from investments Net finance costs Other non-cash expenses, net Change in inventories Change in trade receivables Change in trade payables Change in receivables from financing activities Change in other operating assets and liabilities Finance income received Finance costs paid Income tax paid 1,042,231 455,989 30,284 (6,896) 33,257 23,941 (81,309) 1,771 72,568 (122,746) (29,840) 1,679 (29,202) (109,001) 667,035 426,637 25,805 (4,647) 49,092 39,073 (67,797) 44,477 8,594 (69,376) (137,313) 2,109 (54,427) (91,051) 875,364 351,946 14,253 (3,522) 42,082 38,987 (40,627) (22,377) 53,940 (76,694) 145,547 3,274 (42,600) (33,480) Total cash flows from operating activities 1,282,726 838,211 1,306,093 Cash flows used in investing activities: Investments in property, plant and equipment (352,316) (357,018) (352,154) Investments in intangible assets (384,827) (351,978) (353,458) Proceeds from the sale of property, plant and equipment and intangible assets 4,405 969 4,539 Total cash flows used in investing activities (732,738) (708,027) (701,073) Cash flows (used in)/from financing activities: Repayment of bonds and notes Proceeds from bonds and notes Net change in borrowings to banks and other financial institutions Proceeds from securitizations, net of repayments Repayment of lease liabilities Net change in other debt Dividends paid to owners of the parent Dividends paid to non-controlling interests Share repurchases (500,000) — (315,395) 149,495 121,385 71,444 (21,605) (8,037) 640,073 298,316 (1,740) 44,126 (20,035) 18,081 (3,516) 92,173 (3,896) 12,322 (160,101) (208,100) (192,664) (1,354) (2,929) (2,120) (230,899) (129,793) (386,749) Total cash flows (used in)/from financing activities (579,672) 339,683 (501,529) Translation exchange differences Total change in cash and cash equivalents Cash and cash equivalents at the end of the year 11,424 (5,407) (18,260) 464,460 1,344,146 1,362,406 791 104,282 897,946 The accompanying notes are an integral part of the Consolidated Financial Statements. 243 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (€ thousand) Share capital Retained earnings and other reserves Cash flow hedge reserve Currency translation differences Remeasurement of defined benefit plans Equity attributable to owners of the parent Non- controlling interests Total At January 1, 2019 2,504 1,319,478 (2,992) 37,850 (8,118) 1,348,722 5,117 1,353,839 Net profit Other comprehensive income/ (loss) Dividends to owners of the parent Dividends to non-controlling interests Share repurchases Share-based compensation — — — — — — Special voting shares issuance (1) 69 695,818 — — — 695,818 2,890 698,708 — (1,662) 2,541 (1,622) (743) 111 (632) (193,238) — (386,749) 17,480 (69) — — — — — — — — — — — — — — — (193,238) — (193,238) — (2,120) (2,120) (386,749) 17,480 — — — — (386,749) 17,480 — At December 31, 2019 2,573 1,452,720 (4,654) 40,391 (9,740) 1,481,290 5,998 1,487,288 Net profit Other comprehensive income/ (loss) Dividends to owners of the parent Dividends to non-controlling interests Share repurchases Share-based compensation — — — — — — 607,817 — — — 28,818 (11,617) (208,765) — (129,793) 17,401 — — — — — — — — — 35 — — — — 607,817 1,063 608,880 17,236 (114) 17,122 (208,765) — (208,765) — (2,929) (2,929) (129,793) 17,401 — — (129,793) 17,401 At December 31, 2020 2,573 1,739,380 24,164 28,774 (9,705) 1,785,186 4,018 1,789,204 Net profit Other comprehensive income/ (loss) Dividends to owners of the parent Dividends to non-controlling interests Share repurchases Share-based compensation Other movements — — — — — — — 830,767 — — — 830,767 2,369 833,136 — (46,170) 13,744 (353) (32,779) 485 (32,294) (160,272) — (230,899) 13,895 (418) — — — — — — — — — — — — — — 418 (160,272) — (160,272) — (1,354) (1,354) (230,899) 13,895 — — — — (230,899) 13,895 — At December 31, 2021 2,573 2,192,453 (22,006) 42,518 (9,640) 2,205,898 5,518 2,211,416 (1) See Note 20 “Equity” for additional details. The accompanying notes are an integral part of the Consolidated Financial Statements. 244 FERRARI N.V.AR 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. BACKGROUND AND BASIS OF PREPARATION BACKGROUND The consolidated financial statements are prepared on a going concern basis and applying the historical cost method, modified as required for the measurement of certain financial instruments, which Ferrari is among the world’s leading luxury brands. are generally measured at fair value. The activities of Ferrari N.V. (herein referred to as “Ferrari” or the “Company” and together with its The Group’s presentation currency is the Euro, which subsidiaries the “Group”) and its subsidiaries are is also the functional currency of the Company, and focused on the design, engineering, production and unless otherwise stated information is presented in sale of luxury performance sports cars. The cars are thousands of Euro. designed, engineered and produced in Maranello and Modena, Italy and sold in more than 60 markets 2. SIGNIFICANT ACCOUNTING POLICIES worldwide through a network of 172 authorized dealers operating 191 points of sale. The Ferrari FORMAT OF THE FINANCIAL STATEMENTS brand is licensed to a selected number of producers The consolidated financial statements include and retailers of luxury and lifestyle goods, with Ferrari the consolidated income statement, consolidated branded merchandise also sold through a network statement of comprehensive income, consolidated of 16 Ferrari-owned stores and 14 franchised stores statement of financial position, consolidated (including 12 Ferrari Store Junior), as well as on statement of cash flows, consolidated statement Ferrari’s website. To facilitate the sale of new and of changes in equity and the accompanying notes pre-owned cars, the Group provides various forms (referred to collectively as the “Consolidated Financial of financing to clients and dealers, including through Statements”). cooperation and other agreements with certain financial institutions. Ferrari also participates in the For presentation of the consolidated income Formula 1 World Championship through Scuderia statement, the Group uses a classification based on Ferrari. The activities of Scuderia Ferrari are a core the function of expenses, as it is more representative element of Ferrari marketing and promotional of the format used for internal reporting and activities and an important source of innovation to management purposes and is consistent with support the technological advancement of Ferrari international practice. range models. BASIS OF PREPARATION In the consolidated income statement, the Group presents a subtotal for Earnings Before Interest and AUTHORIZATION OF CONSOLIDATED FINANCIAL Taxes (EBIT). EBIT distinguishes between the profit STATEMENTS AND COMPLIANCE WITH before taxes arising from operating items and those INTERNATIONAL FINANCIAL REPORTING STANDARDS arising from financing activities. EBIT is one of the These consolidated financial statements of Ferrari primary measures used by the Board of Directors N.V. were authorized for issuance by the Board of (the Group’s “Chief Operating Decision Maker” as Directors on February 25, 2022. defined in IFRS 8 — Operating Segments) to assess The consolidated financial statements have been performance. prepared in accordance with the International For presentation of the consolidated statement of Financial Reporting Standards (“IFRS”) as issued financial position, a mixed format has been selected by the International Accounting Standards Board to present current and non-current assets and (“IASB”), as well as IFRS as adopted by the European liabilities, as permitted by IAS 1 paragraph 60. More Union. There is no effect on these consolidated specifically, the Consolidated Financial Statements financial statements resulting from differences include both industrial and financial services activities. between IFRS as issued by the IASB and IFRS as Receivables from financing activities are included in adopted by the European Union. The designation current assets as the investments will be realized in IFRS also includes International Accounting their normal operating cycle. The funding for financial Standards (“IAS”) as well as the interpretations of services activities is primarily obtained through the International Financial Reporting Interpretations securitization programs and funding from certain Committee (“IFRIC” and “SIC”). of the Group’s operating companies. This financial service structure within the Group does not allow the separation of financial liabilities funding the financial services operations (whose assets are reported 245 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES within current assets) and those funding the industrial There was no effect from the adoption of these operations. Presentation of financial liabilities as amendments. current or non-current based on their date of maturity would not facilitate a meaningful comparison The Group adopted the amendments to IFRS 4 — with financial assets, which are categorized on the Insurance Contracts which deferred the expiry date basis of their normal operating cycle. Disclosure as of the temporary exemption from applying IFRS 9 to the due date of the various components of debt is to annual periods beginning on or after January 1, provided in Note 24. 2021. There was no effect from the adoption of these The consolidated statement of cash flows is amendments. presented using the indirect method. The Group adopted the amendments to IFRS 16 for NEW STANDARDS AND AMENDMENTS EFFECTIVE FROM JANUARY 1, 2021 COVID-19-related rent concessions beyond 30 June 2021. The amendment extended the applicability of a previous amendment to IFRS 16 in 2020 that permits The following new amendments that are applicable lessees, as a practical expedient, not to assess on or subsequent to January 1, 2021 were adopted by whether particular rent concessions occurring as the Group for the preparation of these Consolidated a direct consequence of the COVID-19 pandemic Financial Statements. are lease modifications and instead to account for those rent concessions as if they are not lease The Group adopted a package of amendments to modifications, thus giving the possibility to the lessees IFRS 9 — Financial Instruments, IAS 39 — Financial to recognize the entire economic benefit of such Instruments: Recognition and Measurement, IFRS 7 — discounts immediately through profit or loss. There Financial Instruments: Disclosures, IFRS 4 — Insurance was no significant effect from the adoption of this Contracts and IFRS 16 — Leases in response to the amendment. reform of inter-bank offered rates (IBOR) and other interest rate benchmarks. The amendments aim at helping companies to provide investors with useful NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS NOT YET EFFECTIVE information about the effects of the reform on those The standards, amendments and interpretations companies’ financial statements. These amendments issued by the International Accounting Standards focus on the effects on financial statements when a Board (“IASB”) that will have mandatory application in company replaces the old interest rate benchmark 2022 or subsequent years are listed below: with an alternative benchmark rate as a result of the reform. The new amendments relate to: In May 2017 the IASB issued IFRS 17 — Insurance • changes to contractual cash flows – a company Contracts, which establishes principles for the is not be required to derecognize or adjust the recognition, measurement, presentation and carrying amount of financial instruments for disclosure of insurance contracts issued as well changes required by the interest rate benchmark as guidance relating to reinsurance contracts reform, but will instead update the effective held and investment contracts with discretionary interest rate to reflect the change to the alternative participation features issued. In June 2020 the IASB benchmark rate; issued amendments to IFRS 17 aimed at helping • hedge accounting – a company does not have to companies implement IFRS 17 and make it easier for discontinue its hedge accounting solely because companies to explain their financial performance. it makes changes required by the interest rate The new standard and amendments are effective on benchmark reform if the hedge meets other hedge or after January 1, 2023. The Group does not expect accounting criteria; and any material impact from the adoption of these • disclosures – a company is required to disclose amendments. information about new risks that arise from the interest rate benchmark reform and how the In January 2020 the IASB issued amendments to IAS 1 company manages the transition to alternative — Presentation of Financial Statements: Classification benchmark rates. of Liabilities as Current or Non-Current to clarify how to classify debt and other liabilities as current or non- current, and in particular how to classify liabilities with an uncertain settlement date and liabilities that may be settled by converting to equity. These amendments are effective on or after January 1, 2023. The Group 246 FERRARI N.V.AR 2021does not expect any material impact from the material accounting policy information rather than adoption of these amendments. their significant accounting policies and provide In May 2020 the IASB issued amendments to IFRS 3 — to accounting policy disclosures. These amendments Business combinations to update a reference in IFRS 3 are effective on or after January 1, 2023. The Group to the Conceptual Framework for Financial Reporting does not expect any material impact from the without changing the accounting requirements for adoption of these amendments. guidance on how to apply the concept of materiality business combinations. These amendments are effective on or after January 1, 2022. The Group does In February 2021 the IASB issued amendments to not expect any material impact from the adoption of IAS 8 — Accounting Policies, Changes in Accounting these amendments. Estimates and Errors: Definition of Accounting Estimates which clarify how companies should In May 2020 the IASB issued amendments to IAS 16 distinguish changes in accounting policies from — Property, Plant and Equipment. The amendments changes in accounting estimates. These amendments prohibit a company from deducting from the cost are effective on or after January 1, 2023. The Group of property, plant and equipment amounts received does not expect any material impact from the from selling items produced while the company is adoption of these amendments. preparing the asset for its intended use. Instead, a company should recognize such sales proceeds In May 2021 the IASB issued amendments to IAS and the related cost in the income statement. These 12 — Income Taxes: Deferred Tax related to Assets amendments are effective on or after January 1, 2022. and Liabilities Arising From a Single Transaction that The Group does not expect any material impact from clarify how companies account for deferred tax on the adoption of these amendments. transactions such as leases and decommissioning obligations. These amendments are effective on or In May 2020 the IASB issued amendments to IAS 37 after January 1, 2023. The Group does not expect — Provisions, Contingent Liabilities and Contingent any material impact from the adoption of these Assets, which specify which costs a company amendments. includes when assessing whether a contract will be loss-making. These amendments are effective on In December 2021 the IASB issued an amendments or after January 1, 2022. The Group does not expect to IFRS 17 — Insurance Contracts: Initial Application of any material impact from the adoption of these IFRS 17 and IFRS 9 - Comparative Information, which amendments. provides a transition option relating to comparative information about financial assets presented on In May 2020 the IASB issued Annual Improvements initial application of IFRS 17. The amendment is aimed to IFRSs 2018 - 2020 Cycle. The improvements have at helping entities to avoid temporary accounting amended four standards with effective date January mismatches between financial assets and insurance 1, 2022: i) IFRS 1 — First-time Adoption of International contract liabilities, and therefore improve the Financial Reporting Standards in relation to allowing usefulness of comparative information for users of a subsidiary to measure cumulative translation financial statements. The amendment is effective differences using amounts reported by its parent, on or after January 1, 2023. The Group does not ii) IFRS 9 — Financial Instruments in relation to expect any material impact from the adoption of this which fees an entity includes when applying the ‘10 amendment. percent’ test for derecognition of financial liabilities, iii) IAS 41 — Agriculture in relation to the exclusion of BASIS OF CONSOLIDATION taxation cash flows when measuring the fair value of SUBSIDIARIES a biological asset, and iv) IFRS 16 — Leases in relation Subsidiaries are entities over which the Group has to an illustrative example of reimbursement for control. Control is achieved when the Group has leasehold improvements. The Group does not expect power over the investee, when it is exposed to, or has any material impact from the adoption of these rights to, variable returns from its involvement with amendments. the investee, and has the ability to use its power over the investee to affect the amount of the investor’s In February 2021 the IASB issued amendments to returns. Subsidiaries are consolidated on a line by IAS 1 — Presentation of Financial Statements and line basis from the date on which the Group achieves IFRS Practice Statement 2: Disclosure of Accounting control. The Group reassesses whether or not it policies which require companies to disclose their controls an investee if facts and circumstances 247 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES indicate that there are changes to one or more of the are recognized in other comprehensive income/(loss) three elements of control listed above. with a corresponding adjustment to the carrying amount of the investment. The Group recognizes any non-controlling interests (“NCI”) in the acquiree on an acquisition-by-acquisition Unrealized gains on transactions between the Group basis, either at fair value or at the non-controlling and its associates are eliminated to the extent of the interest’s share of the recognized amounts of the Group’s interest in the associate. Unrealized losses acquiree’s identifiable net assets. Net profit or loss are also eliminated unless the transaction provides and each component of other comprehensive evidence of an impairment of the asset transferred. income/(loss) are attributed to the owners of the parent and to the non-controlling interests. Total When the Group’s share of the losses of an associate comprehensive income/(loss) of subsidiaries is exceeds the Group’s interest in that associate, the attributed to owners of the parent and to the non- Group discontinues recognizing its share of further controlling interests even if this results in the non- losses. Additional losses are provided for, and a controlling interests having a deficit balance. liability is recognized, only to the extent that the Group All significant intra-group balances and transactions made payments on behalf of the associate. and any unrealized gains and losses arising from intra-group transactions are eliminated in preparing The Group discontinues the use of the equity method the Consolidated Financial Statements. from the date the investment ceases to be an associate or when it is classified as available-for-sale. has incurred legal or constructive obligations or Subsidiaries are deconsolidated from the date when control ceases. When the Group ceases to INTERESTS IN JOINT OPERATIONS have control over a subsidiary, it derecognizes the A joint operation is a joint arrangement whereby the assets (including any goodwill) and liabilities of the parties that have joint control of the arrangement subsidiary at their carrying amounts, derecognizes have rights to the assets and obligations for the the carrying amount of non-controlling interests in liabilities, relating to the arrangement. Joint control the former subsidiary and recognizes the fair value is the contractually agreed sharing of control of an of any consideration received from the transaction. arrangement, which exists only when decisions about Any retained interest in the former subsidiary is then the relevant activities require the unanimous consent remeasured to its fair value. of the parties sharing control. In 2016 the Group sold a majority stake in Ferrari When the Group undertakes its activities under joint Financial Services GmbH. From such date, the Group’s operations, it recognizes in relation to its interest in remaining interest has been remeasured at fair value the joint operation: (i) its assets, including its share and accounted for using the equity method. of any assets held jointly, (ii) its liabilities, including its share of any liabilities incurred jointly, (iii) its revenue INTERESTS IN ASSOCIATES from the sale of its share of the output arising from An associate is an entity over which the Group has the joint operation, (iv) its share of the revenue from significant influence. Significant influence is the power the sale of the output by the joint operation, and (v) to participate in the financial and operating policy its expenses, including its share of any expenses decisions of the investee but without having control incurred jointly. or joint control over those policies. Associates are accounted for using the equity method of accounting FOREIGN CURRENCY TRANSACTIONS from the date significant influence is obtained. The functional currency of the Group’s entities is the currency of their primary economic environment. Under the equity method, the investments are In individual companies, transactions in foreign initially recognized at cost and adjusted thereafter to currencies are recorded at the exchange rate recognize the Group’s share of the profit/(loss) and prevailing at the date of the transaction. Monetary other comprehensive income/(loss) of the investee. assets and liabilities denominated in foreign The Group’s share of the investee’s profit/(loss) is currencies at the balance sheet date are translated at recognized in the consolidated income statement. the foreign currency exchange rate prevailing at that Distributions received from an investee reduce the date. Exchange differences arising on the settlement carrying amount of the investment. Post-acquisition of monetary items or on reporting monetary items at movements in other comprehensive income/(loss) rates different from those at which they were initially 248 FERRARI N.V.AR 2021recorded during the period or in previous financial Average foreign currency exchange rates for the statements are recognized in the consolidated period are used to translate the cash flows of foreign income statement. subsidiaries in preparing the consolidated statement CONSOLIDATION OF FOREIGN ENTITIES of cash flows. All assets and liabilities of foreign consolidated Goodwill, assets acquired and liabilities assumed companies with a functional currency other than the arising from the acquisition of entities with a Euro are translated using the closing rates at the date functional currency other than the Euro are of the consolidated statement of financial position. recognized in the Consolidated Financial Statements Income and expenses are translated into Euro at in the functional currency and translated at the the average foreign currency exchange rate for the foreign currency exchange rate at the acquisition period. Translation differences resulting from the date. These balances are translated at subsequent application of this method are classified as currency balance sheet dates at the relevant foreign currency translation differences within other comprehensive exchange rate. income/(loss) until the disposal of the investment. The principal foreign currency exchange rates used to translate other currencies into Euro were as follows: 2021 2020 2019 Average At December 31, Average At December 31, Average At December 31, 1.1827 0.8596 1.0811 1.1326 0.8403 1.0331 1.1422 0.8897 1.0705 1.2271 0.8990 1.0802 1.1195 0.8778 1.1124 1.1234 0.8508 1.0854 129.8767 130.3800 121.8458 126.4900 122.0058 121.9400 7.6282 1.5749 1.4826 1.5891 9.1932 7.1947 1.5615 1.4393 1.5279 8.8333 7.8747 1.6549 1.5300 1.5742 8.8587 8.0225 1.5896 1.5633 1.6218 9.5142 7.7355 1.6109 1.4855 1.5273 8.7715 7.8205 1.5995 1.4598 1.5111 8.7473 U.S. Dollar Pound Sterling Swiss Franc Japanese Yen Chinese Yuan Australian Dollar Canadian Dollar Singapore Dollar Hong Kong Dollar INTANGIBLE ASSETS GOODWILL Goodwill is not amortized, but is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. DEVELOPMENT COSTS Development costs for car project production and related components, engines and systems are recognized as an asset if, and only if, both of the following conditions under IAS 38 — Intangible Assets are met: that development costs can be measured reliably and that the technical feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Capitalized development costs include all direct and indirect costs that may be directly attributed to the development process. All other research and development costs are expensed as incurred, net of any government grants received. Capitalized development costs are amortized on a straight-line basis from the start of production over the estimated lifecycle of the model or the useful life of the related components or other assets (generally between four and eight years). The Group incurs significant research and development costs through the Formula 1 racing activities. These costs are considered fundamental to the development of the range and track car models and prototypes. Technological developments and changes in the regulations of the Formula 1 World Championship generally require the Group to design, develop and construct a new racing car to be used for one year only. The costs incurred for the design, development and construction of a new racing car are generally expensed as incurred unless the technology will be used for more than one year and the costs meet the capitalization criteria in IAS 38. 249 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES PATENTS, CONCESSIONS AND LICENSES PROPERTY, PLANT AND EQUIPMENT Separately acquired patents, concessions and COST licenses are initially recognized at cost. Patents, Property, plant and equipment is initially recognized concessions and licenses acquired in a business at cost which comprises the purchase price, any combination are initially recognized at fair value. costs directly attributable to bringing the assets to Patents, concessions and licenses are amortized on the location and condition necessary to be capable of a straight-line basis over their useful economic lives, operating in the manner intended by management, which is generally between three and five years. capitalized borrowing costs and any initial estimate of the costs of dismantling and removing the OTHER INTANGIBLE ASSETS item and restoring the site on which it is located. Other intangible assets mainly relate to the Self-constructed assets are initially recognized at registration of trademarks and have been recognized production cost. Subsequent expenditures and the in accordance with IAS 38 — Intangible Assets, where cost of replacing parts of an asset are capitalized it is probable that the use of the asset will generate only if they increase the future economic benefits future economic benefits for the Group and where embodied in that asset. All other expenditures are the cost of the asset can be measured reliably. Other expensed as incurred. When such replacement costs intangible assets are measured at cost less any are capitalized, the carrying amount of the parts that impairment losses and amortized on a straight-line are replaced is recognized as a loss in the period of basis over their estimated life, which is generally replacement in the consolidated income statement. between three and five years. DEPRECIATION Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows: Industrial buildings Plant, machinery and equipment Other assets Land is not depreciated. Depreciation rates 3% - 20% 5% - 22% 12% - 25% If the asset being depreciated consists of separately identifiable components whose useful lives differ from that of the other parts making up the asset, depreciation is charged separately for each of its component parts through application of the ‘component approach’. LEASES Lease liabilities are measured at the net present value With the adoption of IFRS 16, the Group recognizes a of the following: (i) fixed lease payments, (ii) variable right-of-use asset and a corresponding lease liability lease payments that are based on an index or a rate at the date at which the leased asset is available for and, if applicable, (iii) amounts expected to be payable use. Each lease payment is allocated between the by the lessee under residual value guarantees, and (iv) principal liability and finance costs. Finance costs the exercise price of a purchase option if the lessee are charged to the income statement over the lease is reasonably certain to exercise that option. Lease period using the effective interest rate method. The liabilities do not include any non-lease components right-of-use asset is depreciated on a straight-line that may be included in the related contracts. basis over the lease term. Lease payments are discounted using the interest Right-of-use assets are measured at cost comprising rate implicit in the lease. If that rate cannot be the following: (i) the amount of the initial measurement determined, the Group’s incremental borrowing rate of lease liability; (ii) any lease payments made at is used, being the rate that the Group would have to or before the commencement date less any lease pay to borrow the funds necessary to obtain an asset incentives received; (iii) any initial direct costs and, if of similar value in a similar economic environment applicable, (iv) restoration costs. Payments associated with similar terms and conditions. with short-term leases and leases of low-value assets are recognized as an expense in the income Some lease contracts contain variable payment terms statement on a straight-line basis. that are linked to sales generated from Ferrari stores. 250 FERRARI N.V.AR 2021Variable lease payments that depend on sales are using a discount rate that reflects current market recognized in the income statement in the period in assessments of the time value of money and the risks which the condition that triggers those payments specific to the asset or CGU. An impairment loss is occurs. recognized if the recoverable amount is lower than the carrying amount. Extension and termination options are included in a number of leases related to Ferrari stores, Where an impairment loss for assets other than warehouses and machinery and equipment of the goodwill, subsequently no longer exists or has Group. In determining the lease term, management decreased, the carrying amount of the asset or CGU considers all facts and circumstances that create an is increased to the revised estimate of its recoverable economic incentive to exercise an extension option, amount, but not in excess of the carrying amount that or not exercise a termination option. Extension would have been recorded had no impairment loss options (or periods after termination options) are only been recognized. The reversal of an impairment loss included in the lease term if the lease is reasonably is recognized in the consolidated income statement certain to be extended (or not terminated). immediately. BORROWING COSTS FINANCIAL INSTRUMENTS General and specific borrowing costs directly PRESENTATION attributable to the acquisition, construction or Current financial assets include trade receivables, production of qualifying assets, which are assets receivables from financing activities, derivative that necessarily take a substantial period of time to financial instruments, other current financial assets get ready for their intended use, are added to the and cash and cash equivalents. cost of those assets, until such time as the assets are substantially ready for their intended use. Investments and other financial assets include All other borrowing costs are expensed in net as well as other securities and non-current financial investments accounted for using the equity method financial expenses if related to the Group’s industrial assets. activities or cost of sales if related to the Group’s financial services activities in the consolidated income Financial liabilities include debt (which primarily statement, as incurred. includes bonds, notes, asset-backed financing IMPAIRMENT OF ASSETS (securitizations) and borrowings from banks), trade payables and other financial liabilities, which mainly The Group continuously monitors its operations include derivative financial instruments. to assess whether there is any indication that its intangible assets (including development costs) and MEASUREMENT its property, plant and equipment may be impaired. Financial assets, other than investments accounted Goodwill is tested for impairment annually or more for using the equity method, and financial liabilities frequently, if there is an indication that an asset may are measured in accordance with IFRS 9 - Financial be impaired. Instruments. If indications of impairment are present, the carrying Except for investments accounted for using the amount of the asset is reduced to its recoverable equity method, the Group initially measures financial amount, which is the higher of fair value less costs of assets at fair value plus, in the case of financial assets disposal and its value in use. The recoverable amount not measured at fair value through profit or loss, is determined for the individual asset, unless the transaction costs. asset does not generate cash inflows that are largely independent of the cash inflows from other assets Equity instruments held by the Group are recognized or groups of assets, in which case the asset is tested at fair value through profit or loss. When market as part of the cash-generating unit (“CGU”) to which prices are not directly available, the fair value is the asset belongs. A CGU is the smallest identifiable measured using appropriate valuation techniques group of assets that generates cash inflows that (e.g. discounted cash flow analysis based on market are largely independent of the cash inflows from information available at the balance sheet date). As other assets or groups of assets. In assessing the permitted by IFRS 9, equity investments for which value in use of an asset or CGU, the estimated future there is no quoted market price in an active market cash flows are discounted to their present value and there is insufficient financial information in order 251 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES to determine fair value may be measured at cost as an DERIVATIVE FINANCIAL INSTRUMENTS estimate of fair value. Derivative financial instruments are used for economic hedging purposes only in order to reduce Trade receivables and receivables from financing financial risks and in particular, foreign currency activities are originated in the ordinary course of risks. Derivative financial instruments qualify for business and held within a business model with hedge accounting only when at the inception of the the objective to hold the receivables in order to hedge there is formal designation and documentation collect contractual cash flows that meet the ‘solely of the hedging relationship, the hedge is expected to payments of principal and interest’ criterion under be highly effective, its effectiveness can be reliably IFRS 9, therefore they are measured at amortized measured and it is highly effective throughout the cost using the effective interest rate method. financial reporting periods for which it is designated. Receivables with maturities greater than one year are discounted to present value. Assessments are All derivative financial instruments are measured at made regularly as to whether there is any objective fair value. evidence that a financial asset or group of financial assets may be impaired and, if any such evidence When derivative financial instruments qualify exists, an impairment loss is recognized within for hedge accounting, the following accounting financial expenses. Under IFRS 9, a forward-looking treatments apply: expected credit loss model must be applied when assessing impairment. In making impairment Cash flow hedges — Where a derivative financial assessments, the Group applies the standard instrument is designated as a hedge of the exposure simplified approach to estimate the lifetime expected to variability in future cash flows of a recognized asset credit losses and considers its historical credit loss or liability or a highly probable forecasted transaction experience, adjusted for forward-looking factors and could affect the consolidated income statement, specific to the nature of the Group’s receivables the effective portion of any gain or loss on the and economic environment, which may be different derivative financial instrument is recognized directly for the Group’s trade receivables compared to in other comprehensive income/(loss). The cumulative receivables from financing activities. If any such gain or loss is reclassified from other comprehensive evidence exists, an impairment loss is recognized income/(loss) to the consolidated income statement within financial expenses. at the same time as the economic effect arising from the hedged item affects the consolidated income The Group considers a default to occur and a statement. The gain or loss associated with a hedge significant increase in credit risk to occur when the or part of a hedge that has become ineffective is counterparty fails to make contractual payments recognized in the consolidated income statement within a certain number of days of when they fall immediately within net financial income/expenses. due. For example, for receivables from financing When a hedging instrument or hedge relationship activities this typically occurs when the counterparty is terminated but the hedged transaction is still fails to make contractual payments within 60 days of expected to occur, the cumulative gain or loss when the related receivables fall due, while for trade realized to the point of termination remains in other receivables this is assessed on a case by case basis. comprehensive income/(loss) and is recognized in the consolidated income statement at the same time Financial assets and trade receivable are written as the underlying transaction occurs. If the hedged off when the counterparty fails to make contractual transaction is no longer probable, the cumulative payments and there is no reasonable expectation unrealized gain or loss held in other comprehensive of recovery, and in any circumstance no later than income/(loss) is recognized in the consolidated 360 days. When trade receivables or receivables income statement immediately. from financing activities have been written off, the Company may continue to engage in enforcement The Group does not use fair value hedges or hedges actions to attempt to recover the receivables. of a net investment. Financial liabilities, with the exception of derivative If hedge accounting cannot be applied, the gains or financial instruments, are measured at amortized losses from the fair value measurement of derivative cost using the effective interest rate method. financial instruments are recognized immediately within financial expenses. 252 FERRARI N.V.AR 2021TRANSFERS OF FINANCIAL ASSETS ordinary course of business less the estimated costs The Group sells certain of its receivables from of completion and the estimated costs for sale and financing activities under securitization programs. distribution. Securitization transactions involve the sale of a financial receivables portfolio to a special purpose CASH AND CASH EQUIVALENTS vehicle, which in turn finances the purchase of Cash and cash equivalents includes cash in hand, such financial receivables by issuing asset-backed deposits held at call with banks and other short-term securities in the form of notes whose repayment highly liquid investments with original maturities of of principal and interest depends on the cash flows three months or less. generated by the related financial receivables. The receivables sold as part of securitization programs EMPLOYEE BENEFITS are consolidated until collection from the customer as DEFINED CONTRIBUTION PLANS they do not meet the requirements for derecognition Costs arising from defined contribution plans are in accordance with IFRS 9. expensed as incurred. The Group may also sell certain of its trade DEFINED BENEFIT PLANS receivables through factoring transactions without The Group’s net obligations are determined recourse. The Group derecognizes the financial separately for each plan by estimating the present assets when, and only when, the contractual rights value of future benefits that employees have earned and risks to the cash flows arising from the related in the current and prior periods, and deducting the financial assets are no longer held or the Group fair value of any plan assets. The present value of has transferred the financial assets. In the case of the defined benefit obligation is measured using a transfer of financial assets, if the Group transfers actuarial techniques and actuarial assumptions that substantially all the risks and rewards of ownership of are unbiased and mutually compatible and attributes the financial assets, it derecognizes such assets and benefits to periods in which the obligation to provide separately recognizes as assets or liabilities any rights post-employment benefits arise by using the and obligations created or retained in the transfer. Projected Unit Credit Method. On derecognition of financial assets, the difference between the carrying amount of the assets and the The components of the defined benefit cost are consideration received or receivable for the transfer recognized as follows: of the assets is recognized within cost of sales in the consolidated income statement. • the service costs are recognized in the consolidated TRADE RECEIVABLES income statement by function and presented in the relevant line items (cost of sales, selling, general and Trade receivables are amounts due from clients administrative costs, research and development for goods sold or services provided in the ordinary costs, etc.); course of business. Trade receivables are recognized initially at fair value and subsequently measured • the net interest on the defined benefit liability is at amortized cost using the effective interest rate recognized in the consolidated income statement as method, less any provision for allowances. net financial income /(expenses), and is determined INVENTORIES by multiplying the net liability/(asset) by the discount rate used to discount obligations taking into account Inventories of raw materials, semi-finished products the effect of contributions and benefit payments and finished goods are stated at the lower of cost made during the year; and and net realizable value, cost being determined on a first-in first-out (FIFO) basis. The measurement of • the remeasurement components of the net inventories includes the direct costs of materials, obligations, which comprise actuarial gains labor and indirect costs (variable and fixed). and losses and any change in the effect of Purchase costs include ancillary costs. Prototypes the asset ceiling are recognized immediately are recognized at their estimated realizable value, in other comprehensive income/(loss). These if lower than production cost. Provision is made for remeasurement components are not reclassified obsolete and slow-moving raw materials, finished in the consolidated income statement in a goods, spare parts and other supplies based on subsequent period. their expected future use and realizable value. Net realizable value is the estimated selling price in the 253 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES OTHER LONG-TERM EMPLOYEE BENEFITS resources embodying economic benefits will be The Group’s obligations represent the present value required to settle the obligation and a reliable estimate of future benefits that employees have earned in of the amount of the obligation can be made. return for their service during the current and prior periods. Remeasurement components on other WARRANTY AND RECALL CAMPAIGNS PROVISION long-term employee benefits are recognized in the All cars are sold with warranty coverage. The consolidated income statement in the period in which warranty coverage generally applies to defects that they arise. may become apparent within a certain period from the purchase of the car. SHARE-BASED COMPENSATION The Group has implemented equity incentive The warranty provision is recognized at the time plans that provide for the granting of share-based of the sale of the car, based on the present value compensation to the Chairman, the Chief Executive of management’s estimate of the expected cost to Officer, all other members of the Ferrari Leadership fulfill the obligations over the contractual warranty Team and other key employees of the Group. The period. Estimates are principally based on the Group’s Group also provides share-based compensation historical claims or costs experience and the cost as part of commercial agreements with certain of parts and services to be incurred in the activities. suppliers. The share-based compensation The costs related to these provisions are recognized arrangements are accounted for in accordance with within cost of sales at the time when they are IFRS 2 — Share-based Payment, which requires the probable and reasonably estimable. Company to recognize share-based compensation expense based on fair value of awards granted. See “Use of estimates” below for further details. Compensation expense for the equity-settled awards containing market performance conditions is DEFERRED INCOME measured at the grant date fair value of the award Deferred income relates to amounts received by the using a Monte Carlo simulation model, which requires Group under various agreements, which are reliant the input of subjective assumptions, including the on the future performance of a service or other act expected volatility of the Company’s common stock, of the Group. Deferred income is recognized as net the dividend yield, interest rates and a correlation revenues when the Group has fulfilled its obligations coefficient between the common stock and the under the terms of the various agreements. relevant market index. The fair value of the awards which are conditional only on a recipient’s continued Range models (models belonging to the Ferrari service to the Company is measured using the share product portfolio, excluding special series, Icona, price at the grant date adjusted for the present value limited edition hypercars and one-off models) are of future distributions which employees will not sold with a scheduled maintenance program to receive during the vesting period. ensure that the cars are maintained to the highest standards to meet the Group’s strict requirements for Share-based compensation expense relating to the performance and safety. Amounts attributable to the equity incentive plans is recognized over the service maintenance program are not recognized as income period within selling, general and administrative immediately, but are deferred over the maintenance costs or cost of sales in the consolidated income program term. The amount of the deferred income statement depending on the function of the related to this program, is based on the estimated fair employee, with an offsetting increase to equity. value of the service to be provided. Share-based compensation expense relating to commercial agreements with certain suppliers is ADVANCES recognized over the period in which the supplier’s Advances relate to amounts received from or billed to services are received and classified within the customers in advance of having delivered the related consolidated income statement depending on the cars or provided the related services. function of the supplier’s services, with an offsetting increase to equity. PROVISIONS REVENUE RECOGNITION Revenue is recognized when control over a product or service is transferred to a customer. Revenue is Provisions are recognized when the Group has a measured at the transaction price which is based present obligation, legal or constructive, as a result on the amount of consideration that the Group of a past event, it is probable that an outflow of expects to receive in exchange for transferring 254 FERRARI N.V.AR 2021the promised goods or services to the customer Revenues for the sale of cars, spare parts and and excludes any sales incentives as well as taxes engines are recognized at a point in time when control collected from customers that are remitted to of the cars, spare parts or engines is transferred government authorities. The transaction price will to the customer based on shipping terms, which include estimates of variable consideration to the generally corresponds to the date when the cars, extent it is probable that a significant reversal of spare parts and engines are released to the carrier revenue recognized will not occur. The Group enters responsible for transportation to dealers or Maserati. into contracts that may include both products and Revenues relating to the maintenance program are services, which are generally capable of being recognized over time based on the input method of distinct and accounted for as separate performance measuring progress towards complete satisfaction obligations. of the related performance obligation, calculated as a proportion of overall revenues expected during The Group generates revenue from the sale of cars, the maintenance period equal to the ratio of costs spare parts and engines as well as from sponsorship, incurred in the reporting period compared to the commercial and brand activities. The Group accounts overall costs to be incurred during the maintenance for a contract with a customer when there is a legally period. Revenues relating to the extended warranties enforceable contract between the Group and the are recognized on a straight-line basis over the customer, the rights of the parties are identified, the extended warranty period. Revenues from the supply contract has commercial substance, and collectability of engines and related services to other Formula 1 of the contract consideration is probable. Payments racing teams are recognized over time on a time and from customers are typically due within 30 and 40 materials basis when the services are provided. days of invoicing. The Group does not recognize any assets associated performance obligations, variable consideration, with the incremental costs of obtaining a contract allocation of transaction price and the timing of Management has exercised judgment in determining with a customer that are expected to be recovered. revenue recognition. The majority of revenue is recognized at a point-in- time or over a period of one year or less, and the SPONSORSHIP, COMMERCIAL AND BRAND Group applies the practical expedient to recognize ACTIVITIES the incremental costs of obtaining a contract as an Revenues from sponsorship agreements are expense when incurred if the amortization period of generally recognized ratably over the contract the asset that would otherwise be recognized is one term as the customer benefits from the service year or less. throughout the service period. For sponsorship agreements that contain variable consideration CARS, SPARE PARTS AND ENGINES based on performance of the racing team, the related The sales of cars, spare parts and engines have revenues are estimated and recognized over the multiple performance obligations that include relevant period to the extent that it is highly probable products, services, or a combination of products that a significant reversal in the amount of the and services as contracts may include maintenance cumulative revenue recognized will not occur, which programs and extended warranties that are is typically when it is considered highly probable that separately priced or not separately priced. Contracts the related conditions associated with the variable may also include variable consideration for discounts consideration will be achieved. such as sales incentives and performance based bonuses and product returns. The cost of incentives Revenues from commercial activities primarily is estimated at the inception of a contract at the relate to the revenues from participating in the expected amount that will ultimately be paid and is Formula 1 World Championship. The revenues recognized as a reduction to revenue at the time attributable to each racing team are governed by a of the sale. Revenues recognized are limited to specific agreement and depend upon, among other the amount of consideration the Group expects to factors, the prior year ranking of each of the racing receive. The Group allocates the transaction price to teams. Revenues of the commercial activities are the performance obligations based on the stand alone recognized ratably over the contract term. selling prices (SSP) for each obligation. When the SSP does not exist, the Group estimates the SSP based on Revenues from brand licensing agreements where the adjusted market approach. the customer has a right to access the Group’s brands or the contract includes minimum guaranteed 255 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES payments are recognized on a straight-line basis over except tax arising from (i) a transaction or event the contract term. Licensing revenues in excess of the which is recognized, in the same or a different period, minimum guaranteed payments are recognized when either in other comprehensive income/(loss) or the related conditions are satisfied. Revenues from directly in equity, or (ii) a business combination. sales-based licensing agreements are recognized when the sales occur. Deferred taxes are accounted using the full liability method. Deferred tax liabilities are recognized for all Management has exercised judgment in determining taxable temporary differences between the carrying variable consideration. OTHER REVENUES amounts of assets or liabilities and their tax base, except to the extent that the deferred tax liabilities arise from the initial recognition of goodwill or the Interest income generated by our financial service initial recognition of an asset or liability in a transaction activities from the provision of client and dealer which is not a business combination and at the time financing is reported within revenues using the of the transaction, affects neither accounting profit effective interest rate method and not within net nor taxable profit. Deferred tax assets are recognized financial income/expenses. for all deductible temporary differences to the extent COST OF SALES that it is probable that taxable profit will be available against which the deductible temporary differences Cost of sales comprises expenses incurred in the can be utilized, unless the deferred tax assets arise manufacturing and distribution of cars and parts, from the initial recognition of an asset or liability in a including the engines rented to other Formula 1 transaction that is not a business combination and at racing teams, of which, cost of materials, components the time of the transaction, affects neither accounting and labor costs are the most significant portion. The profit nor taxable profit. remaining costs principally include depreciation, amortization, insurance and transportation costs. Deferred tax assets and liabilities are measured at Cost of sales also includes warranty and product- the substantively enacted tax rates in the respective related costs, which are estimated and recorded at jurisdictions in which the Group operates that are the time of sale of the car. expected to apply to the period when the asset is realized or liability is settled. Any remeasurements Expenses which are directly attributable to the to deferred tax assets and liabilities as a result financial services companies, including the interest of changes in substantially enacted tax rates are expenses related to their financing as a whole and recognized in the income statement. provisions for risks and write-downs of assets, are also reported in cost of sales. The recoverability of deferred tax assets is dependent on the Group’s ability to generate sufficient future OTHER EXPENSES AND OTHER INCOME taxable income in the period in which it is assumed Other expenses consist of miscellaneous costs that the deductible temporary differences reverse which cannot be allocated to specific functional and tax losses carried forward can be utilized. In areas, such as indirect taxes, accruals for provisions making this assessment, the Group considers future not attributable to cost of sales or selling, general taxable income arising on the most recent budgets and administrative costs, and other miscellaneous and plans, prepared by using the same criteria expenses. described for testing the impairment of assets and goodwill, moreover, it estimates the impact of Other income consists of miscellaneous income that the reversal of taxable temporary differences on is not directly attributable to the sale of goods or earnings and it also considers the period over which services, such as gains on the disposal of property these assets could be recovered. The carrying plant and equipment, the release of certain provisions amount of deferred tax assets is reduced to the originally recognized as other expenses, rental extent that it is not probable that sufficient taxable income and other miscellaneous income. profit will be available to allow the benefit of part or all TAXES of the deferred tax assets to be utilized. The carrying amount of deferred tax assets is reviewed at each Income taxes include all taxes based upon the taxable reporting date. profits of the Group. Current and deferred taxes are recognized as income or expense and are included The Group recognizes deferred tax liabilities in the consolidated income statement for the period, associated with the existence of a subsidiary’s 256 FERRARI N.V.AR 2021undistributed profits, except when it is able to control in IFRS 8 — Operating Segments) in making decisions the timing of the reversal of the temporary difference regarding the allocation of resources and to assess and it is probable that this temporary difference will performance. not reverse in the foreseeable future. The Group recognizes deferred tax assets associated with the USE OF ESTIMATES deductible temporary differences on investments The Consolidated Financial Statements are prepared in subsidiaries only to the extent that it is probable in accordance with IFRS which require the use of that the temporary differences will reverse in the estimates, judgments and assumptions that affect foreseeable future and taxable profit will be available the carrying amount of assets and liabilities, the against which the temporary difference can be utilized. disclosure of contingent assets and liabilities and the Deferred tax assets relating to the carry-forward of estimates and associated assumptions are based unused tax losses and tax credits, as well as those on elements that are known when the financial arising from deductible temporary differences, are statements are prepared, on historical experience recognized to the extent that it is probable that future and on any other factors that are considered to be amounts of income and expenses recognized. The profits will be available against which they can be relevant. utilized. The estimates and underlying assumptions are Current income taxes and deferred taxes are offset reviewed periodically and continuously by the Group. when they relate to the same taxation authority and If the items subject to estimates do not perform as there is a legally enforceable right of offset. assumed, then the actual results could differ from the estimates, which would require adjustment Italian Regional Income Tax (“IRAP”) is recognized accordingly. The effects of any changes in estimate within income tax expense. IRAP is calculated on a are recognized in the consolidated income statement measure of income defined by the Italian Civil Code as in the period in which the adjustment is made, or the difference between operating revenues and costs, prospectively in future periods. before financial income and expense, and in particular before the cost of fixed-term employees, credit losses The items requiring estimates for which there is a risk and any interest included in lease payments. IRAP is that a material difference may arise in respect of the applied on the tax base at 3.9 percent for the years carrying amounts of assets and liabilities in the future ended December 31, 2021, 2020 and 2019. are discussed below. Tax uncertainties are accounted for in accordance RECOVERABILITY OF NON-CURRENT ASSETS WITH with IFRIC 23. DEFINITE USEFUL LIVES Other taxes not based on income, such as property property, plant and equipment and intangible assets. taxes and capital taxes, are included in other Intangible assets with definite useful lives mainly Non-current assets with definite useful lives include expenses, net. DIVIDENDS consist of capitalized development costs. The Group periodically reviews the carrying amount Dividends payable by the Group are reported as of non-current assets with definite useful lives when a change in equity in the period in which they are events and circumstances indicate that an asset may approved by shareholders or the Board of Directors be impaired. Impairment tests are performed by as applicable under local rules and regulations. comparing the carrying amount and the recoverable ROUNDING OF AMOUNTS amount of the cash-generating unit (“CGU”). The recoverable amount is the higher of the CGU’s fair All amounts disclosed in the financial statements and value less costs of disposal and its value in use. In notes have been rounded off to the nearest thousand assessing the value in use, the estimated future cash Euro unless otherwise stated. flows are discounted to their present value using a SEGMENT REPORTING pre-tax discount rate that reflects current market assessments of the time value of money and the risks The Group has determined that it has one operating specific to the CGU. and one reportable segment based on the information reviewed by the Board of Directors (the For the period covered by these Consolidated Group’s “Chief Operating Decision Maker” as defined Financial Statements, the Group has not recognized 257 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES any impairment charges for non-current assets with appropriateness and recoverability. The lives are definite useful lives. based on historical experience with similar assets as well as anticipation of future events which may RECOVERABILITY OF GOODWILL impact their life such as changes in technology. In accordance with IAS 36 — Impairment of Assets, Historically changes in useful lives and residual values goodwill is not amortized and is tested for impairment have not resulted in material changes to the Group’s annually or more frequently if facts or circumstances amortization charge or estimated recoverability of the indicate that the asset may be impaired. related assets. As the Group is composed of one operating segment, PRODUCT WARRANTY LIABILITIES goodwill is tested at the Group level, which represents The Group establishes reserves for product the lowest level within the Group at which goodwill warranties at the time the sale is recognized. The is monitored for internal management purposes Group issues various types of product warranties in accordance with IAS 36. The impairment test is under which the performance of products delivered performed by comparing the carrying amount (which is generally guaranteed for a certain period or term, mainly comprises property, plant and equipment, which is generally defined by the legislation in the goodwill and capitalized development costs) and the country where the car is sold. The reserve for product recoverable amount of the CGU. The recoverable warranties includes the expected costs of warranty amount of the CGU is the higher of its fair value less obligations imposed by law or contract, as well as the costs of disposal and its value in use. expected costs for policy coverage. The estimated For the period covered by these Consolidated on assumptions regarding the lifetime warranty Financial Statements, the Group has not recognized costs of each car line and each model year of that car any impairment charges for goodwill. line, as well as historical claims experience for the future costs of these actions are principally based DEVELOPMENT COSTS Group’s cars. In addition, the number and magnitude of additional service actions expected to be approved, Development costs are capitalized if the conditions and policies related to additional service actions, are under IAS 38 — Intangible Assets have been met. taken into consideration. Due to the uncertainty and The starting point for capitalization is based upon potential volatility of these estimated factors, changes the technological and commercial feasibility of the in the assumptions used could materially affect the project, which is usually when a product development results of operations. project has reached a defined milestone according to the Group’s established product development model. The Group periodically initiates voluntary service Feasibility is based on management’s judgment which actions to address various client satisfaction, safety is formed on the basis of estimated future cash flows. and emissions issues related to cars sold. Included Capitalization ceases and amortization of capitalized in the reserve is the estimated cost of these services development costs begins on start of production of and recall actions. The estimated future costs of the relevant project. these actions are based primarily on historical claims experience for the Group’s cars and the cost of The amortization of development costs requires parts and services to be incurred in the specified management to estimate the lifecycle of the related activities, and are recognized at the time when they model or assets. Any changes in such assumptions are probable and reasonably estimable. Estimates would impact the amortization charge recorded of the future costs of these actions are inevitably and the carrying amount of capitalized development imprecise due to several uncertainties, including costs. The periodic amortization charge is derived the number of cars affected by a service or recall after determining the expected lifecycle of the related action. It is reasonably possible that the ultimate cost model or assets and, if applicable any expected of these service and recall actions may require the residual value at the end of its life. Increasing an Group to make expenditures in excess of (or less asset’s expected lifecycle or its residual value would than) established reserves over an extended period of result in a reduced amortization charge in the time. The estimate of warranty and additional service consolidated income statement. obligations is periodically reviewed during the year. The useful lives and residual values of the Group’s In addition, the Group makes provisions for estimated models are determined by management at the product liability costs arising from property damage time of capitalization and reviewed annually for and personal injuries including wrongful death, and 258 FERRARI N.V.AR 2021potential exemplary or punitive damages alleged to circumstances, and the jurisdiction and the different be the result of product defects. By nature, these laws involved. The Group monitors the status of costs can be infrequent, difficult to predict, and have pending legal proceedings and consults with experts the potential to vary significantly in amount. Costs on legal and tax matters on a regular basis. It is associated with these provisions are recorded in the therefore possible that the provisions for the Group’s consolidated income statement and any subsequent legal proceedings and litigation may vary as the result adjustments are recorded in the period in which the of future developments in pending matters. adjustment is determined. LITIGATION SHARE-BASED COMPENSATION Various legal proceedings, claims and governmental The Group accounts for share-based compensation investigations are pending against the Group on a relating to its equity incentive plans and commercial wide range of topics, including car safety, emissions agreements with certain suppliers in accordance and fuel economy, early warning reporting, dealer, with IFRS 2 — Share-based Payment, which requires supplier and other contractual relationships, the recognition of share-based compensation intellectual property rights and product warranties expense based on the fair value of the awards matters. Some of these proceedings allege defects granted. Share-based compensation for equity- in specific component parts or systems (including settled awards containing market performance airbags, seatbelts, brakes, transmissions, engines conditions is measured at the grant date of the and fuel systems) in various car models or allege awards using a Monte Carlo simulation model, general design defects relating to car handling which requires the input of subjective assumptions, and stability, sudden unintended movement or including the expected volatility of our common stock, crashworthiness. These proceedings seek recovery the dividend yield, interest rates and the correlation for damage to property, personal injuries or coefficient between our common stock and the wrongful death and in some cases could include a relevant market index. The probability that the Group claim for exemplary or punitive damages. Adverse will achieve a certain level of Total Shareholder Return decisions in one or more of these proceedings could performance compared to the defined peer group require the Group to pay substantial damages, or (“Peer Group”) is also considered. As a result, at the undertake service actions, recall campaigns or other grant date management is required to make key costly actions. assumptions and estimates regarding conditions that will occur in the future, which inherently involves Litigation is subject to many uncertainties, and the uncertainty. Therefore, the amount of share-based outcome of individual matters is not predictable with compensation recognized has been affected by the assurance. An accrual is established in connection significant assumptions and estimates used. with pending or threatened litigation if a loss is probable and a reliable estimate can be made. Since OTHER CONTINGENT LIABILITIES these accruals represent estimates, it is reasonably The Group makes provisions in connection with possible that the resolution of some of these matters pending or threatened disputes or legal proceedings could require the Group to make payments in excess when it is considered probable that there will be of the amounts accrued. It is also reasonably possible an outflow of funds and when the amount can be that the resolution of some of the matters for which reasonably estimated. If an outflow of funds becomes accruals could not be made may require the Group possible but the amount cannot be estimated, the to make payments in an amount or range of amounts matter is disclosed in the notes to the Consolidated that could not be reasonably estimated. Financial Statements. The Group is the subject of legal and tax proceedings covering a wide range The term “reasonably possible” is used herein to of matters in various jurisdictions. Due to the mean that the chance of a future transaction or uncertainty inherent in such matters, it is difficult event occurring is more than remote but less than to predict the outflow of funds that could result probable. Although the final resolution of any such from such disputes with any certainty. Moreover, matters could have a material effect on the Group’s the cases and claims against the Group often derive operating results for the particular reporting period from complex legal issues which are subject to in which an adjustment of the estimated reserve is a differing degree of uncertainty, including the recorded, it is believed that any resulting adjustment facts and circumstances of each particular case would not materially affect the consolidated financial and the manner in which applicable law is likely position of the Group. to be interpreted and applied to such fact and 259 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. SIGNIFICANT ACCOUNTING POLICIES CURRENT AND DEFERRED TAXES judgments that are periodically reviewed for any The calculation of current and deferred income changes in facts and circumstances or changes in taxes, including various tax benefits, exemptions tax regulations and interpretations. Such judgments or credits (such as patent box tax benefits, asset are primarily related to the recoverability of deferred revaluations and research and development credits), long-term tax assets, which involves the assessment involves the interpretation of applicable tax laws of the ability to generate sufficient future taxable and regulations that could be subject to changes profit over the period in which the deductible or application directives from tax authorities. As a temporary differences or unused tax losses are result, the calculation of current and deferred taxes, expected to be utilized, as well as to the calculation of including those related to uncertain tax positions, certain tax benefits and liabilities. may require complex management estimates and 3. SCOPE OF CONSOLIDATION Ferrari N.V. is the parent company of the Group and it holds, directly and indirectly, interests in the Group’s main operating companies. The Group’s scope of consolidation at December 31, 2021 and 2020 was as follows: Country Nature of business At December 31, 2021 At December 31, 2020 Shares Shares Shares Shares held by the held by held by the held by Group NCI Group NCI Italy Manufacturing 100% —% 100% —% Name Directly held interests Ferrari S.p.A. Indirectly held through Ferrari S.p.A. Ferrari North America Inc. Ferrari Japan KK USA Japan Ferrari Australasia Pty Limited Australia Ferrari International Cars Trading (Shanghai) Co. L.t.d. Ferrari (HK) Limited Ferrari Far East Pte Limited Ferrari Management Consulting (Shanghai) Co. L.t.d. Ferrari South West Europe S.a.r.l. China Hong Kong Singapore China France Ferrari Central Europe GmbH Germany G.S.A. S.A. in liquidation Switzerland Importer and distributor Importer and distributor Importer and distributor Importer and distributor Importer and distributor Service company Service company Service company Service company Service company Mugello Circuit S.p.A. Ferrari Financial Services, Inc. Italy USA Racetrack management Financial services Indirectly held through other Group entities Ferrari Auto Securitization Transaction LLC (1) USA Ferrari Auto Securitization Transaction - Lease, LLC (1) USA Ferrari Auto Securitization Transaction - Select, LLC (1) USA Ferrari Financial Services Titling Trust (1) 410 Park Display, Inc. (2) USA USA (1) Shareholding held by Ferrari Financial Services Inc. (2) Shareholding held by Ferrari North America Inc. Financial services Financial services Financial services Financial services Retail 260 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 80% 20% 80% 20% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% —% 100% 100% —% —% 100% 100% —% —% FERRARI N.V.AR 2021NON-CONTROLLING INTERESTS The non-controlling interests at December 31, 2021 and 2020 and the net profit attributable to non-controlling interests for the years ended December 31, 2021, 2020 and 2019 relate to Ferrari International Cars Trading (Shanghai) Co. L.t.d. (“FICTS”), in which the Group holds an 80 percent interest. (€ thousand) Equity attributable to non-controlling interests (€ thousand) Net profit attributable to non-controlling interests At December 31, 2021 5,518 2020 4,018 For the years ended December 31, 2021 2,369 2020 1,063 2019 2,890 The non-controlling interests in FICTS are not considered to be significant to the Group for the periods presented in these Consolidated Financial Statements. RESTRICTIONS The Group may be subject to restrictions which limit its ability to use cash in relation to its interest in FICTS. In particular, cash held in China is subject to certain repatriation restrictions and may only be repatriated as a repayment of payables or debt, or through a payment of dividends or capital distributions. The Group does not believe that such transfer restrictions have any adverse impacts on its ability to meet liquidity requirements. Cash held in China at December 31, 2021 amounted to €89,611 thousand (€55,566 thousand at December 31, 2020). Cash collected from the settlement of receivables under securitization programs is subject to certain restrictions regarding its use and is principally applied to repay principal and interest of the related funding. Such cash amounted to €47,742 thousand at December 31, 2021 (€36,935 thousand at December 31, 2020). 4. NET REVENUES Net revenues are as follows: (€ thousand) Cars and spare parts Engines Sponsorship, commercial and brand Other Total net revenues For the years ended December 31, 2021 2020 2019 3,573,119 2,835,170 2,925,721 189,432 430,579 77,764 150,655 390,002 83,963 198,308 538,238 104,348 4,270,894 3,459,790 3,766,615 Other net revenues primarily relate to financial services activities, management of the Mugello racetrack and other sports-related activities. Interest and other financial income from financial services activities included within net revenues in 2021, 2020 and 2019 amounted to €55,043 thousand, €65,878 thousand and €66,386 thousand, respectively. 261 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS5. COST OF SALES Cost of sales in 2021, 2020 and 2019 amounted to 6. SELLING, GENERAL AND ADMINISTRATIVE COSTS €2,080,613 thousand, €1,686,324 thousand and Selling costs in 2021, 2020 and 2019 amounted to €1,805,310 thousand, respectively, consisting mainly €168,466 thousand, €171,900 thousand and €173,512 of the cost of materials, components and labor thousand, respectively, consisting mainly of costs related to the manufacturing and distribution of cars for sales personnel, marketing and events, and retail and spare parts and, to a lesser extent, engines sold stores. Costs for marketing and events primarily to Maserati and engines rented to other Formula 1 relate to trade shows and media and client events racing teams. The remaining costs mainly include for the launch of new models, including the use of depreciation, insurance and transportation costs, as digital solutions, as well as sponsorship and indirect well as warranty and product-related costs, which are marketing costs incurred through the Formula 1 estimated and recorded at the time of shipment. racing team, Scuderia Ferrari. General and administrative costs in 2021, 2020 and Interest and other financial expenses from financial 2019 amounted to €179,558 thousand, €164,226 services activities included within cost of sales thousand and €169,667 thousand, respectively, in 2021, 2020 and 2019 amounted to €16,639 consisting mainly of administrative and other general thousand, €36,628 thousand and €45,083 thousand, expenses, including for personnel, that are not directly respectively. attributable to manufacturing, sales or research and development activities. 7. RESEARCH AND DEVELOPMENT COSTS Research and development costs are as follows: (€ thousand) Research and development costs expensed during the year Amortization of capitalized development costs Total research and development costs For the years ended December 31, 2021 573,632 194,472 768,104 2020 526,831 180,554 707,385 2019 559,582 139,629 699,211 Research and development costs expensed during the period primarily relate to Formula 1 activities and research and development activities to support the innovation of our product range and components, in particular, in relation to hybrid and electric technology. Amortization of capitalized development costs have increased in recent years as a result of our strategy to update and broaden our product range and significantly increase our efforts relating to hybrid and other advanced technologies. Research and development costs for the year ended December 31, 2020 and, to a lesser extent, for the year December 31, 2021 are recognized net of technology-related government incentives. 8. OTHER EXPENSES/(INCOME), NET Other expenses, net are as follows: (€ thousand) Other expenses Other income Other expenses, net For the years ended December 31, 2021 13,666 (8,105) 5,561 2020 25,067 (6,592) 18,475 2019 14,288 (9,297) 4,991 Other expenses primarily include indirect taxes, provisions and other miscellaneous expenses. Other income primarily includes rental income, gains on the disposal of property plant and equipment and other miscellaneous income. Other expenses, net in 2021 and 2019 include releases of provisions relating to legal disputes following developments favorable to Ferrari. 262 FERRARI N.V.AR 20219. NET FINANCIAL EXPENSES The following table sets out details of financial income and expenses, including the amounts reported in the consolidated income statement within the net financial expenses line item, as well as interest income from financial services activities, recognized under net revenues, and interest expenses and other financial charges from financial services activities, recognized under cost of sales. (€ thousand) Financial income: Interest income from bank deposits Other interest income and financial income Interest income and other financial income Finance income from financial services activities Total financial income Total financial income relating to: Industrial activities (A) Financial services activities (reported in net revenues) Financial expenses: Capitalized borrowing costs Other interest and financial expenses Interest expenses and other financial expenses Interest expenses from banks and other financial institutions Interest and other finance costs on bonds and notes Write-downs of financial receivables Other financial expenses Total financial expenses Net expenses from derivative financial instruments and foreign currency exchange rate differences Total financial expenses and net expenses from derivative financial instruments and foreign currency exchange rate differences Total financial expenses and net expenses from derivative financial instruments and foreign currency exchange rate differences relating to: For the years ended December 31, 2021 2020 2019 399 4,741 5,140 55,043 60,183 5,140 55,043 1,874 (3,315) (1,441) (11,310) (22,947) (1,467) (5,991) 610 517 1,127 65,878 67,005 1,127 65,878 2,591 (3,258) (667) (14,330) (20,116) (9,502) (14,580) 1,690 4,116 5,806 66,386 72,192 5,806 66,386 2,671 (2,427) 244 (27,432) (20,703) (4,739) (13,949) (43,156) (59,195) (66,579) (11,880) (27,652) (26,392) (55,036) (86,847) (92,971) Industrial activities (B) Financial services activities (reported in cost of sales) (38,397) (16,639) (50,219) (36,628) (47,888) (45,083) Net financial expenses relating to industrial activities (A+B) (33,257) (49,092) (42,082) Interest and other finance costs on bonds and notes for the year ended December 31, 2019 includes costs of €8,142 thousand for the partial repurchase of bonds following a cash tender offer in July 2019 (in particular the repurchase price and premium incurred, as well as previously unamortized issuance costs). 263 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS10. INCOME TAXES Income tax expense is as follows: (€ thousand) Current tax expense Deferred tax (benefit)/expense Taxes relating to prior periods Total income tax expense For the years ended December 31, 2021 218,540 (12,001) 2,556 2020 120,115 (62,474) 514 2019 137,303 32,145 7,208 209,095 58,155 176,656 The Italian Group’s entities participate in a group regimes. The Decree and related amendments should Italian tax consolidation under Ferrari N.V. not have any impact on income taxes of the Group for Income tax expense amounted to €209,095 thousand, will continue to follow updates in the legislation as they €58,155 thousand and €176,656 thousand for the become known. the years ended December 31, 2021 and management years ended December 31, 2021, 2020 and 2019, respectively. In the fourth quarter of 2020, Ferrari benefited from the measures introduced in Italy by the art. 110 of Income taxes for the years ended December 31, 2021, the Law Decree n. 104/2020, converted in the Law 2020 and 2019 benefited from the application of the n. 126/2020, enacting “Urgent measures to support Patent Box tax regime, which provides tax benefits and relaunch the economy”, which reopened the for companies that generate income through the use, voluntary step up of tangible and intangible assets, both direct and indirect, of intangible assets. Starting with the application of a substitute tax at a rate of 3 in 2020 the Group has applied the Patent Box tax percent. In particular, Ferrari S.p.A. benefited from regime for the period from 2020 to 2024, in line with the one-time partial step-up of its trademark for the tax regulations applicable in Italy, and determined tax purposes, which resulted in the recognition in the income eligible for the Patent Box regime with 2020 of deferred tax assets for €83,700 thousand recognition of the Patent Box tax benefit in three equal and a substitute tax liability for €9,000 thousand, annual installments. resulting in a net tax benefit of €74,700 thousand. There was no cash effect in 2020 from the step-up of The Law Decree (Decree) n. 146 enacted by the Italian the trademark. The deferred tax asset will be utilized authorities, effective from October 22, 2021 and as over a 50-year period (following the introduction of amended by the 2022 Italian budget law, introduces the 2022 Italian budget law (Law 234/2021) which a series of urgent economic and tax measures and provides for an extension from 18 years to 50 years will replace the current Patent Box tax regime with a of the amortization period for tax purposes for any 110% “super tax deduction” for certain costs related trademarks and goodwill that benefited from the to eligible intangible assets. The Decree provides for step-up regime) and the substitute tax will be paid in a specific transitional procedure between the two three equal annual installments starting in 2021. 264 FERRARI N.V.AR 2021The table below provides a reconciliation between actual income tax expense and the theoretical income tax expense, calculated on the basis of the applicable corporate tax rate in effect in Italy, which was 24.0 percent for each of the years ended December 31, 2021, 2020 and 2019. (€ thousand) Theoretical income tax expense Tax effect on: Permanent and other differences Italian Regional Income Tax (IRAP) Effect of changes in tax rates and tax regulations Differences between foreign tax rates and the theoretical Italian tax rate and tax holidays Taxes relating to prior years Withholding tax on earnings Income tax expense Effective tax rate For the years ended December 31, 2021 2020 2019 250,136 160,088 210,088 (79,267) (129,016) (76,187) 32,422 633 2,077 2,556 539 22,662 800 1,734 514 1,373 27,997 733 3,457 7,208 3,360 209,095 58,155 176,656 20.1% 8.7% 20.2% The increase in the effective tax rate from 8.7 and 2019 is included within “permanent and other percent in 2020 to 20.1 percent in 2021 was primarily differences” in the tax rate reconciliation above. attributable to the tax benefits from the measures introduced in Italy by the art. 110 of the Law Decree The Italian Regional Income Tax (“IRAP”) is only No. 104/2020, converted in the Law n. 126/2020, applicable to Italian entities and is calculated on a enacting “Urgent measures to support and relaunch measure of income defined by the Italian Civil Code the economy”, which allowed Ferrari a one-time as the difference between operating revenues partial step-up of its trademark for tax purposes and costs, before financial income and expense, resulting in a net tax benefit of €74,700 thousand in and in particular before the cost of fixed-term 2020 (as further described above) and to a lesser employees, credit losses and any interest included extent, the effects of deductions for eligible research in lease payments. IRAP is calculated using financial and development costs. The net benefit from the information prepared under Italian accounting step up is included within “permanent and other standards. IRAP is applied on the tax base at 3.9 differences” for 2020 in the tax rate reconciliation percent for each of the years ended December 31, above. The Patent Box benefit relating to 2021, 2020 2021, 2020 and 2019. The analysis of deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020, is as follows: (€ thousand) Deferred tax assets: To be recovered after 12 months To be recovered within 12 months Deferred tax liabilities: To be realized after 12 months To be realized within 12 months Net deferred tax assets/(liabilities) At December 31, 2021 2020 94,808 73,949 95,209 57,012 168,757 152,221 (78,496) (17,477) (96,179) (17,295) (95,973) (113,474) 72,784 38,747 265 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 10. INCOME TAXES The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows: (€ thousand) At December 31, 2020 Recognized in consolidated income statement Charged to equity Translation differences and other changes At December 31, 2021 Deferred tax assets arising on: Provisions Deferred income Employee benefits Foreign currency exchange rate differences Cash flow hedge reserve Inventory obsolescence Allowances for doubtful accounts Depreciation Trademark step-up Patent box Other 90,663 52,241 2,931 516 — 61,726 5,643 17,551 83,700 27,902 6,027 12,712 (606) — 95 — 7,131 (474) 7 837 37,791 3,927 — — 110 — 8,455 — — — — — — Total deferred tax assets 348,900 61,420 8,565 606 103,981 — — (1) — 250 9 (3) — — 4,374 5,235 51,635 3,041 610 8,455 69,107 5,178 17,555 84,537 65,693 14,328 424,120 Deferred tax liabilities arising on: Depreciation (7,550) 1,217 Capitalization of development costs (264,087) (47,349) Employee benefits Foreign currency exchange rate differences Cash flow hedge reserve Tax on undistributed earnings Other (844) (559) (9,505) (15,861) (11,747) (209) 33 — (1,543) (1,568) Total deferred tax liabilities (310,153) (49,419) Total net deferred tax assets/(liabilities) 38,747 12,001 — — — — 9,505 — — 9,505 18,070 (448) (6,781) (2) — — — — (819) (311,438) (1,053) (526) — (17,404) (14,134) (1,269) (351,336) 3,966 72,784 266 FERRARI N.V.AR 2021(€ thousand) At December 31, 2019 Recognized in consolidated income statement Charged to equity Translation differences and other changes At December 31, 2020 Deferred tax assets arising on: Provisions Deferred income Employee benefits Foreign currency exchange rate differences Cash flow hedge reserve Inventory obsolescence Allowances for doubtful accounts Depreciation Trademark step-up Patent box Other 100,298 53,843 2,930 1,437 1,786 51,972 5,407 17,564 — — 17,695 (8,748) (1,602) — (920) — 10,032 239 (10) 83,700 27,902 (8,298) — — 1 — (1,786) — — — — — — Total deferred tax assets 252,932 102,295 (1,785) Deferred tax liabilities arising on: Depreciation (8,881) 764 Capitalization of development costs (224,851) (39,238) Employee benefits Foreign currency exchange rate differences Cash flow hedge reserve Tax on undistributed earnings Other (750) (399) — (13,983) (12,593) (94) (160) — (1,878) 785 — — — — (9,505) — — Total deferred tax liabilities (261,457) (39,821) (9,505) (887) — — (1) — (278) (3) (3) — — (3,370) (4,542) 90,663 52,241 2,931 516 — 61,726 5,643 17,551 83,700 27,902 6,027 348,900 567 (7,550) 2 — — — — 61 630 (264,087) (844) (559) (9,505) (15,861) (11,747) (310,153) Total net deferred tax assets/(liabilities) (8,525) 62,474 (11,290) (3,912) 38,747 The decision to recognize deferred tax assets is made for each company in the Group by assessing whether the conditions exist for the future recoverability of such assets by taking into account the basis of the most recent forecasts from budgets and business plans. Deferred taxes on the undistributed earnings of subsidiaries have not been recognized, except in cases where it is probable the distribution will occur in the foreseeable future. At December 31, 2021, the aggregate amount of temporary differences related to remaining distributable earnings of the Group’s subsidiaries where deferred tax liabilities have not been recognized amounted to €186,806 thousand (€164,803 thousand at December 31, 2020). 267 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS11. OTHER INFORMATION BY NATURE respectively, and amortization amounted to €225,892 thousand, €208,685 thousand and €160,464 thousand Personnel costs in 2021, 2020 and 2019 amounted to for the years ended December 31, 2021, 2020 and €483,747 thousand, €389,927 thousand and €385,182 2019, respectively. thousand, respectively. These amounts include costs that were capitalized in connection with product 12. EARNINGS PER SHARE development activities. In 2021, 2020 and 2019 the Group had an average number of employees of 4,571, BASIC EARNINGS PER SHARE 4,428 and 4,164, respectively. Basic earnings per share is calculated by dividing the profit attributable to equity holders of Ferrari by the Depreciation amounted to €230,097 thousand, weighted average number of common shares issued €217,952 thousand and €191,482 thousand for the and outstanding during the period. years ended December 31, 2021, 2020 and 2019, The following table provides the amounts used in the calculation of basic earnings per share for the years ended December 31, 2021, 2020 and 2019: Profit attributable to owners of the Company € thousand 830,767 607,817 695,818 Weighted average number of common shares for basic earnings per common share thousand 184,446 184,806 186,767 Basic earnings per common share € 4.50 3.29 3.73 For the years ended December 31, 2021 2020 2019 DILUTED EARNINGS PER SHARE common shares that would be issued for the Group’s For the years ended December 31, 2021, 2020 and equity incentive plans (assuming 100 percent of the 2019, the weighted average number of shares for target awards vested). See Note 21 “Share-Based diluted earnings per share was increased to take into Compensation” for additional details related to the consideration the theoretical effect of the potential Group’s equity incentive plans. The following table provides the amounts used in the calculation of diluted earnings per share for the years ended December 31, 2021, 2020 and 2019: Profit attributable to owners of the Company € thousand 830,767 607,817 695,818 Weighted average number of common shares for diluted earnings per common share thousand 184,722 185,379 187,535 Diluted earnings per common share € 4.50 3.28 3.71 For the years ended December 31, 2021 2020 2019 13. GOODWILL The assumptions used in this process represent management’s best estimate for the period under At December 31, 2021 and 2020 goodwill amounted to consideration. The estimate of the value in use of €785,182 thousand. the CGU for purposes of performing the annual impairment test was based on the following In accordance with IAS 36, goodwill is not amortized assumptions: and is tested for impairment annually, or more • The expected future cash flows covering the period frequently if facts or circumstances indicate that from 2022 through 2025 have been derived from the asset may be impaired. Impairment testing is the Ferrari business plan. In particular the estimate performed by comparing the carrying amount and considers expected EBITDA adjusted to reflect the the recoverable amount of the CGU. The recoverable expected capital expenditure. These cash flows amount of the CGU is the higher of its fair value less relate to the CGU in its condition when preparing costs of disposal and its value in use. the financial statements and exclude the estimated 268 FERRARI N.V.AR 2021cash flows that might arise from restructuring plans tax discount rate appropriate for that currency, or other structural changes. Volumes and sales mix determined by using a base WACC of 6.84 percent used for estimating the future cash flows are based in 2021 (6.83 percent in 2020 and 6.80 percent in on assumptions that are considered reasonable 2019). The WACC used reflects the current market and sustainable and represent the best estimate of assessment of the time value of money for the expected conditions regarding market trends for period being considered and the risks specific to the the CGU over the period considered. CGU under consideration. • The expected future cash flows include a normalized terminal period used to estimate the future results The recoverable amount of the CGU was significantly beyond the time period explicitly considered, which higher than its carrying amount. Furthermore, the were calculated by using the specific medium/long- exclusivity of the business, its historical profitability term growth rate for the sector equal to 2.0 percent and its future earnings prospects indicate that the in 2021 (2.0 percent in 2020 and 2019). carrying amount of the goodwill will continue to be • The expected future cash flows have been recoverable, even in the event of difficult economic estimated in Euro, and discounted using a post- and market conditions. 14. INTANGIBLE ASSETS (€ thousand) Gross carrying amount at January 1, 2020 Additions Reclassifications Translation differences and other movements Externally acquired development costs Development costs internally generated Patents, concessions and licenses Other intangible assets Total 1,567,080 678,989 207,491 48,603 2,502,163 236,913 83,190 — 26,867 3,337 5,008 (3,337) 351,978 — (1,846) (98) 2 (1,942) — — Balance at December 31, 2020 1,803,993 760,333 237,597 50,276 2,852,199 Additions Reclassifications Translation differences and other movements 261,457 101,682 — — — — 17,151 3,200 (59) 4,537 (3,200) 7 384,827 — (52) Balance at December 31, 2021 2,065,450 862,015 257,889 51,620 3,236,974 Accumulated amortization at January 1, 2020 1,034,368 410,930 176,301 42,626 1,664,225 Amortization 139,546 41,008 26,048 2,083 208,685 Translation differences and other movements — — (2) 1 (1) Balance at December 31, 2020 1,173,914 451,938 202,347 44,710 1,872,909 Amortization 146,664 47,808 29,495 1,925 225,892 Balance at December 31, 2021 1,320,578 499,746 231,842 46,635 2,098,801 Carrying amount at: January 1, 2020 December 31, 2020 December 31, 2021 532,712 268,059 630,079 308,395 744,872 362,269 31,190 35,250 26,047 5,977 5,566 4,985 837,938 979,290 1,138,173 Additions primarily related to externally acquired and internally generated development costs for new and existing models. 269 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSAdditions Divestitures Reclassifications 15. PROPERTY, PLANT AND EQUIPMENT (€ thousand) Land Industrial buildings Plant, machinery and equipment Other assets Advances and assets under construction Total Gross carrying amount at January 1, 2020 23,609 408,658 2,361,520 192,528 201,396 3,187,711 Additions Divestitures Reclassifications 5,805 22,210 114,839 24,445 214,706 382,005 — — (791) 2,795 (11,423) (5,048) (127) (17,389) 79,937 3,500 (86,232) — Translation differences and other movements (23) (2,417) (36) (1,881) — (4,357) Balance at December 31, 2020 29,391 430,455 2,544,837 213,544 329,743 3,547,970 16,936 17,852 122,893 20,930 186,846 365,457 (13) (3,412) (46,067) (5,586) (135) (55,213) Translation differences and other movements 20 1,736 376 3,722 40,046 144,684 2,573 1,633 (197,599) (6,574) 45 3,810 Balance at December 31, 2021 50,056 486,677 2,766,723 233,094 318,900 3,855,450 Accumulated amortization at January 1, 2020 Depreciation Divestitures Translation differences and other movements Balance at December 31, 2020 Depreciation Divestitures Reclassifications Translation differences and other movements Balance at December 31, 2021 Carrying amount at: January 1, 2020 — — — — — — — — — — 167,132 1,823,839 127,088 — 2,118,059 17,778 (602) (138) 180,868 19,306 (10,654) (2,713) 1,426 (1,990) — — — 217,952 (13,969) (702) 184,170 1,995,479 141,691 — 2,321,340 17,875 191,247 20,975 (608) (284) 692 (43,991) (4,892) (1,123) 12 284 758 — — — — 230,097 (49,491) (1,123) 1,462 201,845 2,141,624 158,816 — 2,502,285 23,609 241,526 537,681 65,440 201,396 1,069,652 of which right-of use assets under IFRS 16 — 15,834 7,612 34,319 — 57,765 December 31, 2020 29,391 246,285 549,358 71,853 329,743 1,226,630 of which right-of use assets under IFRS 16 — 25,574 5,041 29,127 — 59,742 December 31, 2021 50,056 284,832 625,099 74,278 318,900 1,353,165 of which right-of use assets under IFRS 16 — 21,613 3,484 28,661 — 53,758 Additions mainly related to advances and assets under construction, including tracts of land adjacent to our facilities in Maranello as part of our expansion plans, as well as plant, machinery and equipment, primarily related to car production and engine assembly lines (including those for models to be launched in future years), industrial tools used for the production of cars and personalization programs. 270 FERRARI N.V.AR 2021The following table summarizes the changes in the carrying amount of right-of-use assets for the year ended December 31, 2021 and 2020: (€ thousand) Balance at January 1, 2020 Additions Disposals Depreciation Translation differences and other movements Balance at January 1, 2021 Additions Disposals Depreciation Translation differences and other movements Balance at December 31, 2021 Industrial buildings Plant, machinery and equipment 15,834 16,214 — 7,612 2,578 (24) (6,564) (5,159) 90 25,574 3,987 (2,780) (5,753) 585 21,613 34 5,041 1,409 — (1,348) (1,618) 3,484 Other assets Total 34,319 6,194 (2,303) (8,436) (647) 29,127 7,745 (473) (8,247) 509 28,661 57,765 24,986 (2,327) (20,159) (523) 59,742 13,141 (3,253) (15,348) (524) 53,758 Amounts recognized in the income statement in relation to leases for the year ended December 31, 2021 and 2020 were as follows: (€ thousand) Depreciation of right-of-use assets Interest expense on lease liabilities Variable lease payments not included in the measurement of lease liabilities Expenses relating to short-term leases and leases of low-value assets For the year ended December 31, 2021 15,348 868 1,622 3,671 2020 20,159 943 1,190 4,312 Total expenses recognized 21,509 26,604 For the year ended December 31, 2021 depreciation At December 31, 2021, the Group had contractual of right-of-use assets amounted to €15,348 thousand commitments for the purchase of property, plant and and interest expense on lease liabilities amounted to equipment amounting to €73,681 thousand (€101,361 €868 thousand (€20,159 thousand and €943 thousand, thousand at December 31, 2020). respectively, for the year ended December 31, 2020). 16. INVESTMENTS AND OTHER FINANCIAL ASSETS The composition of investments and other financial assets is as follows: (€ thousand) Investments accounted for using the equity method Other securities and financial assets Total investments and other financial assets At December 31, 2021 42,927 11,582 54,509 2020 34,663 8,178 42,841 271 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 16. INVESTMENTS AND OTHER FINANCIAL ASSETS INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Changes in the carrying amount of investments accounted for using the equity method during the period were as follows: Balance at January 1, 2020 Proportionate share of net profit for the year ended December 31, 2020 Proportionate share of remeasurement of defined benefit plans Balance at December 31, 2020 Additions Proportionate share of net profit for the year ended December 31, 2021 Proportionate share of remeasurement of defined benefit plans Balance at December 31, 2021 (€ thousand) 30,012 4,647 4 34,663 1,285 6,896 83 42,927 Investments accounted for using the equity method Additions relate to FS China Limited, a new joint mainly relate to the Group’s investment in Ferrari venture formed in China in 2021 to manage certain Financial Services GmbH, a German entity that brand activities in the local market, which had not yet offers retail client financing in certain markets in commenced operations as of December 31, 2021. EMEA (primarily the UK, Germany and Switzerland). Summarized financial information relating to FFS GmbH at and for the years ended December 31, 2021 and 2020 is presented below: (€ thousand) Assets Non-current assets Receivables from financing activities Other current assets Cash and cash equivalents Total assets Equity and liabilities Equity Debt Other liabilities Total equity and liabilities (€ thousand) Net revenues Cost of sales Selling, general and administrative costs Other expenses/(income), net Profit before taxes Income tax expense Net profit At December 31, 2021 2020 4,037 3,390 908,362 782,880 5,096 14,046 4,130 5,406 931,541 795,806 81,156 763,563 86,822 67,352 653,748 74,706 931,541 795,806 For the year ended December 31, 2021 46,103 16,971 8,565 2,730 17,837 4,045 13,792 2020 37,764 14,864 8,494 1,213 2019 34,680 15,655 8,892 (963) 13,193 11,096 3,898 9,295 3,010 8,086 272 FERRARI N.V.AR 2021OTHER SECURITIES AND FINANCIAL ASSETS group responsible for the promotion of the Formula Other securities and financial assets primarily include 1 World Championship), which are measured at fair Series C Liberty Formula One shares (the “Liberty value and amounted to €10,559 thousand at December Media Shares”) of Liberty Media Corporation (the 31, 2021 (€7,163 thousand at December 31, 2020). 17. INVENTORIES (€ thousand) Raw materials Semi-finished goods Finished goods Total inventories At December 31, 2021 99,382 121,201 319,992 2020 96,900 94,619 269,098 540,575 460,617 The increase in inventories is mainly due to higher car The amount of inventory write-downs recognized volumes. as an expense within cost of sales during 2021 was €9,392 thousand (€21,155 thousand in 2020 and €14,512 thousand in 2019). Changes in the provision for slow moving and obsolete inventories were as follows: (€ thousand) At January 1, Provision Use and other changes At December 31, 18. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS (€ thousand) Trade receivables Receivables from financing activities Current tax receivables Other current assets Total 2021 96,707 9,392 (4,001) 102,098 2020 83,673 21,155 (8,121) 96,707 At December 31, 2021 185,000 1,143,968 14,306 122,224 2020 184,260 939,607 12,438 76,471 1,465,498 1,212,776 273 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 18. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS TRADE RECEIVABLES The following table sets forth a breakdown of trade receivables by nature: (€ thousand) Trade receivables due from: Dealers Stellantis Group (*) companies Sponsorship and commercial activities Brand activities Other Total At December 31, 2021 2020 58,446 23,737 29,666 23,902 49,249 62,301 37,906 31,917 21,886 30,250 185,000 184,260 (*) Previously referred to as Fiat Chrysler Automobiles N.V. or FCA prior to the merger between FCA and Peugeot S.A. completed on January 16, 2021, which resulted in the creation of Stellantis N.V. Trade receivables due from dealers relate to controlled by the Stellantis Group. For additional receivables for the sale of cars across the dealer information, see Note 28, “Related Party Transactions”. network and are generally settled within 30 to 40 days from the date of invoice. Trade receivables due from sponsorship and Trade receivables due from Stellantis Group participation in the Formula 1 World Championship. companies mainly relate to the sale of engines and Trade receivables due from brand activities relate to car bodies to Maserati S.p.A. and Officine Maserati amounts receivable for licensing and merchandising Grugliasco S.p.A. (together “Maserati”) which are activities. The Group is not exposed to significant commercial activities mainly relate to the Group’s concentration of third party credit risk. The following table sets forth a breakdown of trade receivables by currency: (€ thousand) Trade receivables denominated in: Euro U.S. Dollar Pound Sterling Chinese Yuan Japanese Yen Other currencies Total At December 31, 2021 2020 78,286 84,590 3,908 2,478 11,348 4,390 111,191 51,295 6,560 1,398 8,921 4,895 185,000 184,260 Trade receivables are shown net of an allowance for doubtful accounts determined on the basis of insolvency risk and historical experience, adjusted for forward-looking factors specific to the receivables and the economic environment. Additional provisions to the allowance for doubtful accounts are recorded within selling, general and administrative costs in the consolidated income statement. 274 FERRARI N.V.AR 2021Changes in the allowance for doubtful accounts of trade receivables during the year were as follows: (€ thousand) At January 1, Additional provisions Utilizations Releases Other changes At December 31, RECEIVABLES FROM FINANCING ACTIVITIES Receivables from financing activities are as follows: (€ thousand) Client financing Dealer financing Total receivables from financing activities 2021 28,312 2,094 (1,835) (2,741) 154 25,984 2020 27,171 5,743 (2,860) (1,595) (147) 28,312 At December 31, 2021 2020 1,132,979 925,878 10,989 13,729 1,143,968 939,607 Receivables from financing activities relate to the financial services portfolio in the United States and are generally secured on the title of cars or other guarantees. Receivables from financing activities are shown net of an allowance for doubtful accounts determined on the basis of insolvency risks, adjusted for forward-looking factors specific to the receivables and the economic environment. Additional provisions to the allowance for doubtful accounts are recorded within cost of sales in the consolidated income statement. Changes in the allowance for doubtful accounts of receivables from financing activities during the year are as follows: (€ thousand) At January 1, Additional provisions Utilizations Releases Other changes At December 31, 2021 13,195 2,737 (4,507) (1,270) 1,049 11,204 2020 7,480 9,502 (3,078) — (709) 13,195 CLIENT FINANCING Receivables for client financing are generally secured Client financing relates to financing provided by on the titles of the related cars or other personal the Group to Ferrari clients to finance their car guarantees. acquisitions. During 2021 the average contractual duration at inception of such contracts was Client financing relates entirely to financial services approximately 66 months (67 months in 2020) and the activities in the United States and is denominated in weighted average interest rate was approximately 5.2 U.S. Dollars. percent (approximately 5.5 percent in 2020). 275 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 18. CURRENT RECEIVABLES AND OTHER CURRENT ASSETS DEALER FINANCING In 2021 the Group discontinued dealer financing secured by the titles of the cars sold through the dealer network. The Group still carries one existing longer term loan bearing a rate based on LIBOR plus a variable spread based on dealer’s performance. OTHER CURRENT ASSETS Other current assets are detailed as follows: (€ thousand) Italian and foreign VAT credits Prepayments Other Total other current assets At December 31, 2021 61,278 36,084 24,862 122,224 2020 31,620 38,826 6,025 76,471 Other includes security deposits, amounts due from personnel and other receivables. At December 31, 2021, the Group had provided guarantees through third parties amounting to €226,878 thousand (€169,186 thousand at December 31, 2020), principally to (i) banks for a U.S. Dollar denominated credit facility of FFS Inc., (ii) tax authorities for VAT reimbursements according to Italian legislation and (iii) customs authorities for duties on import and export activities. The analysis of receivables and other current assets by due date (excluding prepayments) is as follows: (€ thousand) Trade receivables Receivables from financing activities Client financing Dealer financing Current tax receivables Other current assets Total (€ thousand) Trade receivables Receivables from financing activities Client financing Dealer financing Current tax receivables Other current assets Total At December 31, 2021 Due within one year 137,694 197,207 196,018 1,189 14,306 84,417 Due between one and five years 70 820,363 810,563 9,800 — 998 Due beyond five years Overdue Total — 73,665 73,665 — — 155 47,237 52,733 52,733 — — 570 185,000 1,143,968 1,132,979 10,989 14,306 86,140 433,624 821,431 73,820 100,540 1,429,414 At December 31, 2020 Due within one year 137,564 159,778 156,154 3,624 10,314 36,971 Due between one and five years 69 657,073 646,968 10,105 2,124 247 Due beyond five years Overdue Total — 57,202 57,202 — — 180 46,627 65,554 65,554 — — 247 184,260 939,607 925,878 13,729 12,438 37,645 344,627 659,513 57,382 112,428 1,173,950 Overdue amounts represent receivables and other current assets where payments are past their due date. 276 FERRARI N.V.AR 202119. CURRENT FINANCIAL ASSETS AND OTHER FINANCIAL LIABILITIES (€ thousand) Financial derivatives Other financial assets Current financial assets At December 31, 2021 11,565 1,935 2020 38,636 1,448 13,500 40,084 Current financial assets and other financial liabilities mainly relate to foreign exchange derivatives. The following table sets forth a breakdown of derivative assets and liabilities at December 31, 2021 and 2020. (€ thousand) Cash flow hedges: Foreign currency derivatives Commodities Interest rate caps Total cash flow hedges At December 31, 2021 2020 Positive fair value Negative fair value Positive fair value Negative fair value 4,437 182 6,053 (34,973) (1,162) — 37,214 (2,060) 271 497 — — 10,672 (36,135) 37,982 (2,060) Other foreign currency derivatives 893 (385) 654 (80) Total 11,565 (36,520) 38,636 (2,140) Foreign currency derivatives that do not meet the requirements to be recognized as cash flow hedges are presented as other foreign currency derivatives. Interest rate caps relate to derivative instruments required as part of certain securitization agreements. The following tables provide an analysis of outstanding derivative financial instruments by foreign currency based on their fair value and notional amounts: (€ thousand) Currencies: U.S. Dollar Pound Sterling Japanese Yen Swiss Franc Chinese Yuan Other(1) Total amount At December 31, 2021 At December 31, 2020 Fair Value Notional Amount Fair Value Notional Amount (17,588) 1,773,022 31,474 1,363,667 (2,343) 116 (2,754) (1,125) (1,261) 154,353 282,482 76,953 91,248 108,822 450 3,533 535 490 14 118,795 197,170 76,282 37,644 105,159 (24,955) 2,486,880 36,496 1,898,717 (1) Other mainly includes the Australian Dollar, the Hong Kong Dollar and the Canadian Dollar. At December 31, 2021 and 2020, substantially all derivative financial instruments had a maturity of twelve months or less. 277 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 19. CURRENT FINANCIAL ASSETS AND OTHER FINANCIAL LIABILITIES CASH FLOW HEDGES risk management are treated as cash flow hedges The effects recognized in the consolidated income where the derivative qualifies for hedge accounting. statement mainly relate to currency risk management The amounts recorded in the cash flow hedge and in particular the exposure to fluctuations in the reserve within other comprehensive income will be Euro/U.S. Dollar exchange rate for sales in U.S. Dollars. recognized in the consolidated income statement according to the timing of the flows of the underlying The policy of the Group for managing foreign transactions. Management believes that substantially currency risk normally requires hedging of a portion all of the hedging effects arising from these derivative of projected future cash flows from trading activities contracts and recorded in the cash flow hedge and orders acquired (or contracts in progress) in reserve will be recognized in the consolidated income foreign currencies that will occur within the following statement within the following 12 months from the 12 months. Derivatives relating to foreign currency reporting date. The Group reclassified gains and losses, net of the related tax effects, from other comprehensive income/(loss) to the consolidated income statement as follows: (€ thousand) Net revenues/(costs) Income tax (expense)/benefit Total recognized in the consolidated income statement For the years ended December 31, 2021 7,275 (2,030) 5,245 2020 19,557 (5,456) 2019 (22,055) 6,153 14,101 (15,902) The ineffectiveness of cash flow hedges was not material for the years 2021, 2020 and 2019. 20. EQUITY SHARE CAPITAL based on the transaction trade date. The increase in common shares held in treasury primarily reflects the repurchase of shares by the Company through its At December 31, 2021 and 2020 the fully paid up share repurchase program, partially offset by shares share capital of the Company was €2,573 thousand, assigned under the Group’s equity incentive plans. The consisting of 193,923,499 common shares and Company restarted its multi-year share repurchase 63,349,112 special voting shares, all with a nominal program on March 12, 2021 following its temporary value of €0.01. At December 31, 2021, the Company suspension from March 30, 2020 as part of actions had 10,080,103 common shares and 4,190 special implemented by management to prudently manage voting shares held in treasury, while at December 31, liquidity as a result of the COVID-19 pandemic. At 2020, the Company had 9,175,609 common shares December 31, 2021 and 2020 the Company held in and 2,190 special voting shares. Shares in treasury treasury 3.92 percent and 3.57 percent of the total include shares repurchased under the Group’s share issued share capital of the Company, respectively.(1) repurchase program, which are recorded (1) The percentage of shares held in treasury compared to total issued share capital remains substantially the same if calculated considering only common shares held in treasury or if calculated considering common shares and special voting shares held in treasury. 278 FERRARI N.V.AR 2021The following table summarizes the changes in the number of outstanding common shares and outstanding special voting shares of the Company for the years ended December 31, 2021 and 2020: Common Shares Special Voting Shares Total Outstanding shares at December 31, 2019 185,283,323 63,346,921 248,630,244 Common shares repurchased under share repurchase program(1) Common shares assigned under equity incentive plans(2) Other changes (819,483) 284,050 — — — 1 (819,483) 284,050 1 Outstanding shares at December 31, 2020 184,747,890 63,346,922 248,094,812 Common shares repurchased under share repurchase program(3) Common shares assigned under equity incentive plans(4) Other changes(5) (1,167,592) 263,098 — — — (2,000) (1,167,592) 263,098 (2,000) Outstanding shares at December 31, 2021 183,843,396 63,344,922 247,188,318 (1) Includes shares repurchased between January 1, 2020 and December 31, 2020 based on the transaction trade date, for a total consideration of €119,771 thousand including transaction costs. (2) On March 16, 2020, 366,199 common shares, which were previously held in treasury, were assigned to participants of the equity incentive plans as a result of the vesting of certain performance share unit and retention restricted share unit awards. On March 17, 2020, the Company purchased 82,149 common shares, for a total consideration of €10,022 thousand, from a group of those employees who were assigned shares in order to cover the individual’s taxable income as is standard practice (Sell to Cover) in an over-the-counter transaction. See Note 21 “Share-Based Compensation” for additional details relating to the Group’s equity incentive plans. (3) Includes shares repurchased under the share repurchase program between January 1, 2021 and December 31, 2021 based on the transaction trade date, for a total consideration of €231,024 thousand, including transaction costs. (4) On March 16, 2021, 356,571 common shares, which were previously held in treasury, were assigned to participants of the equity incentive plans as a result of the vesting of certain performance share unit and retention restricted share unit awards. On March 17, 2021, the Company purchased 93,473 common shares, for a total consideration of €15,432 thousand, from a group of those employees who were assigned shares in order to cover the individual’s taxable income as is standard practice (Sell to Cover) in an over-the-counter transaction. See Note 21 “Share-Based Compensation” for additional details relating to the Group’s equity incentive plans. (5) Relates to the deregistration of certain special voting shares under the Company’s special voting shares term and conditions. THE LOYALTY VOTING STRUCTURE shares have only immaterial economic entitlements The purpose of the loyalty voting structure is to and, as a result, do not impact the Company’s reward ownership of the Company’s common earnings per share calculation. shares and to promote stability of the Company’s shareholder base by granting long-term shareholders RETAINED EARNINGS AND OTHER RESERVES of the Company with special voting shares. Following Retained earnings and other reserves includes: the separation of Ferrari from the Stellantis Group • a share premium reserve of €5,768,544 thousand (previously referred to as Fiat Chrysler Automobiles at December 31, 2021 (€5,768,544 thousand at N.V. or FCA prior to the merger between FCA and December 31, 2020); Peugeot S.A. completed on January 16, 2021, which • a legal reserve of €93 thousand at December 31, resulted in the creation of Stellantis N.V.) in 2016, 2021 and €19 thousand at December 31, 2020, Exor N.V. (“Exor”) and Piero Ferrari participate in the determined in accordance with Dutch law; Company’s loyalty voting program and, therefore, • a treasury reserve of €847,525 thousand at effectively hold two votes for each of the common December 31, 2021 and €616,629 thousand at shares they hold. Investors who purchase common December 31, 2020; shares may elect to participate in the loyalty voting • a share-based compensation reserve of €28,379 program by registering their common shares in the thousand at December 31, 2021 and €43,482 loyalty share register and holding them for three thousand at December 31, 2020. years. The loyalty voting program will be affected by means of the issue of special voting shares to Following approval of the annual accounts by the eligible holders of common shares. Each special shareholders at the Annual General Meeting of the voting share entitles the holder to exercise one vote Shareholders on April 15, 2021, a dividend distribution at the Company’s shareholder meetings. Only a of €0.867 per common share was approved, minimal dividend accrues to the special voting shares corresponding to a total distribution of €160,272 allocated to a separate special dividend reserve, and thousand (of which €160,101 thousand was paid in the special voting shares do not carry any entitlement 2021). The distribution was made from the retained to any other reserve of the Group. The special voting earnings reserve. 279 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 20. EQUITY Following approval of the annual accounts by the Following approval of the annual accounts by the shareholders at the Annual General Meeting of the shareholders at the Annual General Meeting of the Shareholders on April 16, 2020, a dividend distribution Shareholders on April 12, 2019, a dividend distribution of €1.13 per common share was approved, of €1.03 per common share was approved, corresponding to a total distribution of €208,765 corresponding to a total distribution of €193,328 thousand (of which €208,100 thousand was paid in thousand (of which €192,664 thousand was paid in 2020). The distribution was made from the retained 2019). The distribution was made from the retained earnings reserve. earnings reserve. OTHER COMPREHENSIVE INCOME/(LOSS) The following table presents other comprehensive income/(loss): (€ thousand) Items that will not be reclassified to the consolidated income statement in subsequent periods: Gains/(Losses) on remeasurement of defined benefit plans (1) Total items that will not be reclassified to the consolidated income statement in subsequent periods Items that may be reclassified to the consolidated income statement in subsequent periods: For the years ended December 31, 2021 2020 2019 (463) (463) 34 34 (2,078) (2,078) Gains/(Losses) on cash flow hedging instruments arising during the period (56,855) 59,666 (24,327) (Gains)/Losses on cash flow hedging instruments reclassified to the consolidated income statement Gains/(Losses) on cash flow hedging instruments Exchange differences on translating foreign operations Total items that may be reclassified to the consolidated income statement in subsequent periods Total other comprehensive income/(loss) Related tax impact Total other comprehensive income/(loss), net of tax (7,275) (19,557) 22,055 (64,130) 14,229 40,109 (11,731) (2,272) 2,652 (49,901) 28,378 380 (50,364) 18,070 (32,294) 28,412 (11,290) 17,122 (1,698) 1,066 (632) (1) Includes a gain of €83 thousand, a gain of €4 thousand, and a loss of €3 thousand for the years ended December 31, 2021, 2020 and 2019, respectively, related to the Group’s proportionate share of the remeasurement of defined benefit plans of FFS GmbH, for which the Group holds a 49.9 percent interest. Gains and losses on the remeasurement of defined benefit plans include actuarial gains and losses arising during the period and are offset against the related net defined benefit liabilities. 280 FERRARI N.V.AR 2021The tax effects relating to other comprehensive income/(loss) are summarized in the following table: (€ thousand) Gains/(Losses) on remeasurement of defined benefit plans Gains/(Losses) on cash flow hedging instruments Exchange (losses)/gains on translating foreign operations Total other comprehensive (loss)/income For the years ended December 31, 2021 Related tax impact Pre-tax balance Net Pre-tax balance balance 2020 Related tax impact Net Pre-tax balance balance 2019 Related tax impact Net balance (463) 110 (353) 34 1 35 (2,078) 456 (1,622) (64,130) 17,960 (46,170) 40,109 (11,291) 28,818 (2,272) 610 (1,662) 14,229 — 14,229 (11,731) — (11,731) 2,652 — 2,652 (50,364) 18,070 (32,294) 28,412 (11,290) 17,122 (1,698) 1,066 (632) TRANSACTIONS WITH NON-CONTROLLING INTERESTS upon achievement of the related service conditions. As a result, 243,363 common shares, which were With the exception of dividends paid to non- previously held in treasury, were assigned to controlling interests, there were no transactions participants of the plan in the first quarter of 2021. with non-controlling interests for the years ended There are no further awards outstanding for the December 31, 2021, 2020 or 2019. Equity Incentive Plan 2016-2020. POLICIES AND PROCESSES FOR MANAGING CAPITAL EQUITY INCENTIVE PLAN 2019-2021 Under the Equity Incentive Plan 2019-2021 the The Group’s objectives when managing capital are to Company awarded approximately 174 thousand 2019- create value for shareholders as a whole, safeguard 2021 PSUs and approximately 111 thousand 2019- business continuity and support the sustainable 2021 RSUs to the Executive Chairman, the former growth of the Group. As a result, the Group endeavors CEO, members of the FLT and other key employees of to maintain a satisfactory economic return for its the Group. The PSUs and RSUs cover the three-year shareholders and guarantee economic access to performance and service periods from 2019 to 2021. external sources of funds. 2019-2021 PSU AWARDS 21. SHARE-BASED COMPENSATION The vesting of the awards is based on the achievement of defined key performance indicators The Group has several equity incentive plans under as follows: which a combination of performance share units (i) TSR Target - 50 percent vest based on the (“PSUs”) and retention restricted share units (“RSUs”), achievement of the TSR ranking of Ferrari which each represent the right to receive one Ferrari compared to an industry specific Peer Group of common share, have been awarded to the Executive eight; Chairman, the Chief Executive Officer (“CEO”), (ii) EBITDA Target - 30 percent vest based on the members of the Ferrari Leadership Team (hereinafter achievement of an EBITDA target determined also the “FLT”, formerly Senior Management Team, and by comparing Adjusted EBITDA to the Adjusted so renamed as a result of the organizational changes EBITDA targets derived from the business plan; executed in January 2022) and other key employees of (iii) Innovation Target - 20 percent vest based on the Group. the achievement of defined objectives for technological innovation and the development EQUITY INCENTIVE PLAN 2016-2020 of the new model pipeline over the performance In the first quarter of 2021, 212,243 PSU awards period. vested (representing 100 percent of the target PSU awards) as a result of Ferrari’s third place Each target is settled independently of the others ranking in Total Shareholder Return (“TSR”) within targets. The total number of shares assigned upon the defined Peer Group for the performance period vesting of the PSU awards depends on the level of from 2016 to 2020, and 31,120 RSU awards vested achievement of the targets. 281 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 21. SHARE-BASED COMPENSATION Ferrari ranked third in the TSR ranking within the 2020-2022 PSU AWARDS defined Peer Group for the TSR Target and met the The vesting of the awards is based on the EBITDA Target and the Innovation Target for the achievement of defined key performance indicators performance period covering 2019, resulting in the as follows: vesting of 100 percent of the target awards. As a (i) TSR Target - 50 percent vest based on the result 17,572 awards vested and an equal number achievement of the TSR ranking of Ferrari of common shares, which were previously held in compared to an industry specific Peer Group of treasury, were assigned to participants of the plan eight; in the first quarter of 2020. For the performance (ii) EBITDA Target - 30 percent vest based on the period covering 2019 to 2020, Ferrari ranked third achievement of an EBITDA target determined in the TSR ranking within the defined Peer Group by comparing Adjusted EBITDA to the Adjusted for the TSR Target and achieved the EBITDA Target EBITDA targets derived from the business plan; and the Innovation Target, resulting in the vesting (iii) Innovation Target - 20 percent vest based on of 100 percent of the target awards. As a result the achievement of defined objectives for 80,510 awards vested in the first quarter of 2021 technological innovation and the development and an equal number of common shares, which of the new model pipeline over the performance were previously held in treasury, were assigned to period. participants of the plan in the first quarter of 2021. Each target is settled independently of the other For the performance period covering 2019 to 2021, targets. The awards vest in 2023 and the total number Ferrari ranked third in the TSR ranking within the of shares assigned upon vesting depends on the level defined Peer Group for the TSR Target and achieved of achievement of the targets. the EBITDA Target and the Innovation Target, resulting in the vesting of 100 percent of the target awards. As 2020-2022 RSU AWARDS a result 86,331 awards vested in the first quarter of The awards vest in 2023, subject to the recipient’s 2022 and an equal number of common shares held in continued employment with the Company at the time treasury will be assigned to participants of the plan in of vesting. the first quarter of 2022. EQUITY INCENTIVE PLAN 2021-2023 2019-2021 RSU AWARDS Under the Equity Incentive Plan 2021-2023 approved The remaining awards vest in 2022, subject to the in 2021, the Company awarded approximately 50 recipient’s continued employment with the Company thousand 2021-2023 PSUs and approximately 41 at the time of vesting. thousand 2021-2023 RSUs to the Executive Chairman, members of the FLT and other key employees of During 2020, 18,892 awards vested and an equal the Group. The PSUs and RSUs cover the three-year number of common shares, which were previously performance and service periods from 2021 to 2023. held in treasury, were assigned under the plan. For the service period covering 2019 to 2020, 32,694 awards 2021-2023 PSU AWARDS vested in the first quarter of 2021 and an equal The vesting of the awards is based on the number of common shares, which were previously achievement of defined key performance indicators held in treasury, were assigned to participants of as follows: the plan in the first quarter of 2021. For the service (i) TSR Target - 50 percent vest based on the period covering 2019 to 2021, 75,857 awards vested achievement of the TSR ranking of Ferrari in the first quarter of 2022 and an equal number of compared to an industry specific Peer Group of common shares held in treasury will be assigned to eight; participants of the plan in the first quarter of 2022. (ii) ii) EBITDA Target - 30 percent vest based on the INCENTIVE PLAN 2020-2022 achievement of an EBITDA target determined by comparing Adjusted EBITDA to the Adjusted Under the Equity Incentive Plan 2020-2022 the EBITDA targets derived from the Group’s Company awarded approximately 60 thousand 2020- business plan; 2022 PSUs and approximately 48 thousand 2020-2022 (iii) Innovation Target - 20 percent vest based on RSUs to the Executive Chairman, members of the FLT the achievement of defined objectives for and other key employees of the Group. The PSUs and technological innovation and the development RSUs cover the three-year performance and service of the new model pipeline over the performance periods from 2020 to 2022. period. 282 FERRARI N.V.AR 2021Each target is settled independently of the other targets. The awards vest in 2024 and the total number of shares assigned upon vesting depends on the level of achievement of the targets. 2021-2023 RSU AWARDS The awards vest in 2024, subject to the recipient’s continued employment with the Company at the time of vesting. Supplemental information relating to the Equity Incentive Plan 2021-2023 is summarized below. TSR TARGET The number of PSUs with a TSR Target that vest under the Equity Incentive Plan 2021-2023 is based on the Company’s TSR performance over the relevant performance period compared to an industry-specific Peer Group as summarized below. Ferrari TSR Ranking % of Target Awards that Vest 1 2 3 4 5 >5 150% 120% 100% 75% 50% 0% The defined Peer Group (including the Company) for the TSR Target is presented below. Ferrari Kering Aston Martin LVMH Burberry Moncler Hermes Richemont EBITDA TARGET The number of PSUs with an EBITDA Target that vest under the Equity Incentive Plan 2021-2023 is determined by comparing Adjusted EBITDA to the Adjusted EBITDA targets derived from the Group’s business plan, as summarized below. Actual Adjusted EBITDA Compared to Business Plan % of Awards that Vest +10% +5% Business Plan Target -5% <-5% 140% 120% 100% 80% 0% FAIR VALUES AND KEY ASSUMPTIONS The fair value of the PSU awards used for accounting purposes was measured at the grant date using a Monte Carlo Simulation model. The fair value of the RSU awards was measured using the share price at the grant date adjusted for the present value of future distributions which employees will not receive during the vesting period. The fair value of the PSUs and RSUs that were awarded under the equity incentive plans, which is determined based on actuarial calculations that apply certain assumptions and take into consideration the specific characteristics of the awards granted, is summarized in the following table. Equity Incentive Plan 2019-2021 2020-2022 2021-2023 PSUs RSUs €110.57 - €111.64 €119.54 - €120.56 €136.06 €139.39 €130.42 €171.86 283 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 21. SHARE-BASED COMPENSATION The key assumptions utilized to calculate the grant-date fair values of the PSUs that were awarded under the equity incentive plans are summarized below: Equity Incentive Plan Grant date share price Expected volatility Dividend yield Risk-free rate 2019-2021 2020-2022 2021-2023 €122.60 €142.95 €175.80 26.5% 0.83% 0% 26.6% 0.80% 0% 27.0% 0.75% 0% The expected volatility was based on the observed volatility of the defined Peer Group. The risk-free rate was based on the iBoxx sovereign Eurozone yield. OUTSTANDING SHARE AWARDS Changes to the outstanding number of PSU and RSU awards under all equity incentive plans of the Group are as follows: (number of awards) Balance at January 1, 2019 Granted(1) Forfeited Vested Balance at December 31, 2019 Granted(2) Forfeited Vested Balance at December 31, 2020 Granted(3) Forfeited Vested Balance at December 31, 2021 (1) Granted under the Equity Incentive Plan 2019-2021. (2) Granted under the Equity Incentive Plan 2020-2022. (3) Grander under the Equity Incentive Plan 2021-2023. Outstanding PSU Awards Outstanding RSU Awards 686,526 175,307 (32,832) (230,282) 598,719 48,173 (1,461) (230,592) 414,839 49,861 (19,775) (292,753) 152,172 118,264 110,968 (18,000) (40,087) 171,145 39,780 (1,460) (50,402) 159,063 41,460 (13,048) (63,814) 123,661 SHARE-BASED COMPENSATION EXPENSE For the years ended December 31, 2021, 2020 and 2019, the Group recognized €11,689 thousand, €17,401 thousand and €17,480 thousand, respectively, as share-based compensation expense and an increase to other reserves in equity in relation to the PSU awards and RSU awards of the Group’s equity incentive plans. At December 31, 2021, unrecognized compensation expense relating to the Group’s equity incentive plans amounted to €11,082 thousand and is expected to be recognized over the remaining vesting periods through 2023. In 2021 the Group also recognized share-based compensation expense of €2,206 thousand as part of commercial agreements with certain suppliers. 284 FERRARI N.V.AR 202122. EMPLOYEE BENEFITS The Group’s provisions for employee benefits are as follows: (€ thousand) Present value of defined benefit obligations: Italian employee severance indemnity (TFR) Pension plans Total present value of defined benefit obligations Other provisions for employees Total provisions for employee benefits At December 31, 2021 2020 18,430 — 18,430 82,770 101,200 19,825 105 19,930 40,055 59,985 DEFINED CONTRIBUTION PLANS amendments, accruing TFR for employees of all The Group recognizes the cost for defined Italian companies could be managed by the company contribution plans over the period in which the itself. Consequently, the Italian companies’ obligation employee renders service and classifies this to INPS and the contributions to supplementary by function in cost of sales, selling, general and pension funds take the form, under IAS 19 revised, of administrative costs and research and development “Defined contribution plans” whereas the amounts costs. The total income statement expense for defined recorded in the provision for employee severance contributions plans in the years ended December 31, pay retain the nature of “Defined benefit plans”. 2021, 2020 and 2019 was €15,729 thousand, €15,727 Accordingly, the provision for employee severance thousand and €13,650 thousand, respectively. indemnity in Italy consists of the residual obligation for TFR until December 31, 2006. This is an unfunded DEFINED BENEFIT OBLIGATIONS defined benefit plan as the benefits have already ITALIAN EMPLOYEE SEVERANCE INDEMNITY (TFR) been almost entirely earned, with the sole exception Trattamento di fine rapporto or “TFR” relates to the of future revaluations. Since 2007 the scheme has amounts that employees in Italy are entitled to receive been classified as a defined contribution plan, and when they leave the company and is calculated based the Group recognizes the associated cost, being the on the period of employment and the taxable earnings required contributions to the pension funds, over the of each employee. Under certain conditions the period in which the employee renders service. entitlement may be partially advanced to an employee during the employee’s working life. PENSION PLANS Certain Group companies previously sponsored non- The Italian legislation regarding this scheme was contributory defined benefit pension plans, for which amended by Law 296 of 27 December 2006 and the Group met the benefit payment obligations when subsequent decrees and regulations issued in they became due. Benefits provided under the plans the first part of 2007. Under these amendments, varied based on the employee’s length of service and companies with at least 50 employees are obliged to their salary in the final years leading up to retirement, transfer the TFR to the “Treasury fund” managed by among other variables. At December 31, 2021 the the Italian state-owned social security body (“INPS”) Group no longer sponsored any defined benefit or to supplementary pension funds. Prior to the pension plans. 285 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 22. EMPLOYEE BENEFITS The following table summarizes the changes in the defined benefit obligations: (€ thousand) Amounts at December 31, 2019 Recognized in the consolidated income statement Recognized in other comprehensive loss/(income) (*) Other Benefits paid Other changes Amounts at December 31, 2020 Recognized in the consolidated income statement Recognized in other comprehensive income/(loss)(*) Other Benefits paid Other changes Amounts at December 31, 2021 TFR liability Pension plans 21,795 25 2 (1,997) (1,842) (155) 19,825 6 463 (1,864) (2,127) 263 18,430 134 — (32) 3 — 3 Total 21,929 25 (30) (1,994) (1,842) (152) 105 19,930 — — (105) (105) — — 6 463 (1,969) (2,232) 263 18,430 (*) Relates to actuarial losses/(gains) from financial assumptions. Amounts recognized in the consolidated income statement are as follows: (€ thousand) For the years ended December 31, 2021 TFR Pension plans 6 — 6 — — — — Total TFR 6 — — 6 — 25 — 25 2020 Pension plans — — — — Total TFR — 25 — 25 — — — — 2019 Pension plans 26 — Total 26 — (518) (518) (492) (492) Current service cost Interest expense Past service adjustments Total recognized in the consolidated income statement Past service adjustments relate to gains recognized scheme future benefit payments for 2021 is equal in the consolidated income statement due to plan to 0.9 percent (0.4 percent in 2020 and 0.7 percent amendments and curtailments. in 2019). The average duration of the Italian TFR is approximately 8 years. Retirement or employee The discount rates used for the measurement of the leaving rates are developed to reflect actual and Italian TFR obligation are based on yields of high- projected Group experience and legal requirements quality (AA- rated) fixed income securities for which for retirement in Italy. the timing and amounts of payments match the timing and amounts of the projected benefit payments. For Current service cost is recognized by function in cost this plan, the single weighted average discount rate of sales, selling, general and administrative costs or that reflects the estimated timing and amount of the research and development costs. 286 FERRARI N.V.AR 2021The expected future benefit payments for the defined benefit obligations as of December 31, 2021 are as follows: (€ thousand) 2022 2023 2024 2025 2026 2027 - 2031 Total TFR 1,466 1,660 1,359 1,329 1,084 5,688 12,586 The sensitivity of the defined benefit obligations to changes in the weighted principal assumptions is: (€ thousand) At December 31, 2021 2020 Changes in Changes in Changes in Changes in assumption of +1% assumption of -1% assumption of +1% assumption of -1% discount rate discount rate discount rate discount rate Impact on defined benefit obligation (1,321) 1,507 (1,446) 1,656 The above sensitivity analysis is based on an assumed connection with other remuneration schemes, which change in the discount rate while holding all other are not subject to actuarial valuation, including long- assumptions constant. In practice, this is unlikely to term bonus plans. occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of At December 31, 2021, other provisions for employees the defined benefit obligation to significant actuarial comprised short-term bonus benefits amounting to assumptions the same method has been applied €79,273 thousand (€36,723 thousand at December as when calculating the defined benefit liability 31, 2020) and jubilee benefits granted to certain recognized in the statement of the financial position. employees by the Group in the event of achieving OTHER PROVISIONS FOR EMPLOYEES (€3,332 thousand at December 31, 2020). 30 years of service amounting to €3,497 thousand Other provisions for employees consist of the expected future amounts payable to employees in 23. PROVISIONS The provision for other risks primarily relates to disputes and matters which are not subject to legal proceedings, including contract-related disputes with suppliers, employees and other parties, as well as environmental risks. Movements in provisions are as follows: (€ thousand) Warranty and recall campaigns Legal proceedings and disputes Other risks At December 31, 2020 Additional provisions Utilization Releases Translation differences Reclassification and other movements At December 31, 2021 106,942 45,047 (33,695) (9,868) 26,349 3,643 (596) (16,111) 22,044 12,306 (2,067) (4,733) 341 326 822 — 108,767 90 28 13,701 28,400 Total provisions 155,335 60,996 (36,358) (30,712) 1,489 118 150,868 287 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 23. PROVISIONS WARRANTY AND RECALL CAMPAIGNS expenditures expected to be required to settle The provision for warranty and recall campaigns or otherwise resolve legal proceedings and represents the best estimate of commitments given disputes. This class of claims relates to allegations by the Group for contractual, legal, or constructive by contractual counterparties that the Group has obligations arising from product warranties given violated the terms of the arrangements, including by for a specified period of time. Warranty and recall terminating the applicable relationships. Judgments in campaigns provisions are recognized upon shipment these proceedings may be issued in 2022 or beyond, and estimated on the basis of the Group’s past although any such judgments may remain subject experience and contractual terms. Related costs are to ongoing judicial review. While the outcome of recognized within cost of sales. these proceedings is uncertain, any losses in excess Following an industry-wide recall in 2016, the Group material to the Group’s financial condition or results initiated a global recall campaign on cars mounted of operations. Additions to the provision for legal with Takata airbags manufactured using non- proceedings and disputes are recognized within of the provisions recorded are not expected to be desiccated phase stabilized ammonium nitrate. Due other expenses, net. to the uncertainty of recoverability of the costs from Takata, the Group recognized an aggregate provision Releases during 2021 primarily relate to a legal of €36,994 thousand in 2016 within cost of sales. At dispute following developments favorable to Ferrari December 31, 2021, the provision amounted to €3,011 during the fourth quarter of the year. thousand (€6,831 thousand at December 31, 2020). The gradual decrease in the provision reflects the OTHER RISKS performance of recall activities by the Group. The provision for other risks are related to LEGAL PROCEEDINGS AND DISPUTES proceedings, including disputes with suppliers, The provision for legal proceedings and disputes distributors, employees and other parties, as well as represents management’s best estimate of the environmental risks. disputes and matters which are not subject to legal The following table presents where the additional provisions to other risks recognized for the years ended December 31, 2021, 2020 and 2019 were recorded within the consolidated income statement. (€ thousand) Recorded in the consolidated income statement within: Cost of sales Selling, general and administrative costs Total 24. DEBT (€ thousand) For the years ended December 31, 2021 2020 2019 10,562 1,744 12,306 6,352 1,174 7,526 9,563 2,830 12,393 Balance at December 31, 2020 Proceeds from borrowings Repayments of borrowings Bonds and notes 1,835,022 149,495 (500,000) Asset-backed financing (Securitizations) 761,164 248,714 (177,270) Interest accrued/ (paid) and other (*) Translation differences Balance at December 31, 2021 2,593 49 — 1,487,110 67,556 900,213 Lease liabilities 62,290 — (21,605) 14,421 1,104 56,210 Borrowings from banks and other financial institutions Other debt Total debt 28,553 142,344 (20,959) 37,716 17,265 (25,302) 88 — 4,393 154,419 2,380 32,059 2,724,745 557,818 (745,136) 17,151 75,433 2,630,011 (*) Other changes in lease liabilities relates entirely to non-cash movements for the recognition of additional lease liabilities in accordance with IFRS 16. 288 FERRARI N.V.AR 2021The breakdown of debt by nature and by maturity is as follows: (€ thousand) At December 31, 2021 Due Due within between one year one and five years Due beyond Total five years 2020 Due Due within between one year one and five years Due beyond Total five years Bonds and notes 9,239 1,028,686 449,185 1,487,110 500,417 1,034,605 300,000 1,835,022 Asset-backed financing (Securitizations) 343,119 499,280 57,814 900,213 306,169 454,995 — 761,164 Lease liabilities 14,783 29,732 11,695 56,210 16,373 29,932 15,985 62,290 Borrowings from banks and other financial 116,919 37,500 institutions Other debt Total debt 32,059 — — — 154,419 28,553 32,059 37,716 — — — — 28,553 37,716 516,119 1,595,198 518,694 2,630,011 889,228 1,519,532 315,985 2,724,745 BONDS AND NOTES 2021 BOND 2025 BOND On May 27, 2020 the Company issued 1.5 percent On January 18, 2021 the Company fully repaid the coupon notes due May 2025 (“2025 Bond”), having a 2021 Bond for a total consideration of €501,250 principal of €650 million. The notes were issued at a thousand (including accrued interest). The bond was discount for an issue price of 98.898 percent, resulting previously issued in November 2017 on the regulated in net proceeds of €640,073 thousand, after related market of the Euronext Dublin (formerly the Irish expenses, and a yield to maturity of 1.732 percent. Stock Exchange) for a principal amount of €700 The bond was admitted to trading on the regulated million at a coupon of 0.25 and due in January 2021. market of Euronext Dublin. The amount outstanding In July 2019 the Company repurchased an aggregate of the 2025 Bond at December 31, 2021 was €648,984 nominal amount of €200,000 thousand following thousand, including accrued interest of €5,850 a cash tender offer. The amount outstanding at thousand (€647,042 thousand, including accrued December 31, 2020 was €501,151 thousand, including interest of €5,850 thousand at December 31, 2020). accrued interest of €1,199 thousand. 2029 AND 2031 NOTES 2023 BOND On July 31, 2019, the Company issued 1.12 percent On March 16, 2016, the Company issued 1.5 percent senior notes due August 2029 (“2029 Notes”) and 1.27 coupon notes due March 2023, having a principal percent senior notes due August 2031 (“2031 Notes”) of €500 million. The bond was issued at a discount through a private placement to certain US institutional for an issue price of 98.977 percent, resulting in investors, each having a principal of €150 million. net proceeds of €490,729 thousand, after the debt The net proceeds from the issuances amounted discount and issuance costs, and a yield to maturity of to €298,316 thousand and the yields to maturity on 1.656 percent. The net proceeds were used, together an annual basis equal the nominal coupon rates of with additional cash held by the Company, to fully the Notes. The Notes are primarily used for general repay a €500 million bank loan. The bond is unrated corporate purposes, including the funding of capital and was admitted to trading on the regulated market expenditures. of the Euronext Dublin (formerly the Irish Stock Exchange). Following a cash tender offer, on July 16, The amount outstanding of the 2029 Notes at 2019 the Company executed the repurchase of these December 31, 2021 was €150,052 thousand, including notes for an aggregate nominal amount of €115,395 accrued interest of €700 thousand (€149,971 thousand. The amount outstanding at December 31, thousand, including accrued interest of €700 thousand 2021 was €387,872 thousand and includes accrued at December 31, 2020). The amount outstanding of interest of €4,567 thousand (€386,814 thousand the 2031 Notes at December 31, 2021 was €150,111 including accrued interest of €4,567 thousand at thousand, including accrued interest of €794 thousand December 31, 2020). (€150,044 thousand including accrued interest of €794 thousand at December 31, 2020). 289 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 24. DEBT 2032 NOTES receivables in the United States as collateral. The On July 29, 2021, the Company issued 0.91 percent notes bear interest at a rate per annum equal to senior notes due January 2032 (“2032 Notes”) through the aggregate of a synthetic base rate substantially a private placement to certain US institutional replicating the LIBOR plus a margin of 75 basis investors having a principal of €150 million. The net points. At December 31, 2021 total proceeds net of proceeds from the issuance amounted to €149,495 repayments from the sales of financial receivables thousand and the yield to maturity on an annual basis under the program amounted to $775 million ($629 equals the nominal coupon rates of the Notes. The million at December 31, 2020). The securitization Notes are used for general corporate purposes. The agreement requires the maintenance of an interest amount outstanding of the 2032 Notes at December rate cap. 31, 2021 was €150,091 thousand, including accrued interest of €576 thousand. • revolving securitization program for funding of up to $285 million, which was renewed in November The abovementioned bonds and notes impose 2021 for a tenor of 24 months, by pledging leasing covenants on Ferrari including: (i) negative pledge financial receivables in the United States as clauses which require that, in case any security collateral. The notes bear interest at a rate per interest upon assets of Ferrari is granted in annum equal to the aggregate of LIBOR plus a connection with other notes or debt securities with margin of 65 basis points. At December 31, 2021 the consent of Ferrari are, or are intended to be, total proceeds net of repayments from the sales of listed, such security should be equally and ratably financial receivables under the program amounted extended to the outstanding notes, subject to certain to $245 million ($244 million at December 31, permitted exceptions; (ii) pari passu clauses, under 2020). The securitization agreement requires the which the notes rank and will rank pari passu with maintenance of an interest rate cap. all other present and future unsubordinated and unsecured obligations of Ferrari; (iii) events of default • the revolving securitization program for funding of for failure to pay principal or interest or comply with up to $110 million by pledging credit lines to Ferrari other obligations under the notes with specified customers secured by personal vehicle collections cure periods or in the event of a payment default or and personal guarantees in the United States as acceleration of indebtedness or in the case of certain collateral terminated in April 2021. The notes bore bankruptcy events; and (iv) other clauses that are interest at a rate per annum equal to the aggregate customarily applicable to debt securities of issuers of LIBOR plus a margin of 115 basis points. with a similar credit standing. A breach of these covenants may require the early repayment of the The consolidated total amount of the revolving notes. At December 31, 2021 and 2020, Ferrari was in securitization programs has been progressively compliance with the covenants of the notes. increased since inception as the underlying ASSET-BACKED FINANCING (SECURITIZATIONS) receivables portfolios have increased. Cash collected from the settlement of receivables As a means of diversifying its sources of funds, the under securitization programs is subject to certain Group sells certain of its receivables originated by restrictions regarding its use and is primarily its financial services activities in the United States applied to repay principal and interest of the related through asset-backed financing or securitization funding. Such cash amounted to €47,742 thousand at programs (the terms asset-backed financing and December 31, 2021 (€36,935 thousand at December securitization programs are used synonymously 31, 2020). throughout this document), without transferring the risks typically associated with the related receivables. LEASE LIABILITIES As a result, the receivables sold through securitization The Group recognizes lease liabilities in relation programs are still consolidated until collection from to right-of-use assets in accordance with IFRS the customer. During 2021, the following revolving 16 — Leases. At December 31, 2021 lease liabilities securitization programs were in place: amounted to €56,210 thousand (€62,290 thousand at December 31, 2020). • revolving securitization program for funding of up to $750 million, which was renewed in December 2020 for a tenor of 24 months and increased up to $800 million in December 2021, by pledging retail financial 290 FERRARI N.V.AR 2021BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS down by the Group. The new credit line replaces the funding previously provided by one of securitization Borrowings from banks at December 31, 2021 include programs in the US for funding of up to $110 million (i) an amortized term loan of €63 million borrowed that expired in April 2021 and was interest-bearing in June by Ferrari S.p.A. for a tenor of 36 months and at LIBOR plus 115 basis points, as noted above. In bearing fixed interest at 0.118 percent and (ii) financial October 2021 an undrawn committed credit line liabilities of FFS Inc to support financial services previously negotiated in April 2020 for €100 million activities, and in particular €61,919 thousand (€28,553 expired. At December 31, 2021 the Group had total thousand at December 31, 2020) relating to a U.S. committed credit lines available and undrawn Dollar committed credit facility for up to $100 million, amounted to €676 million (€700 million at December (drawn down for $70 million at December 31, 2021) 31, 2020). for a tenor of 24 months and bearing interest at LIBOR plus 75 basis points. In December 2019, the Company negotiated a €350 million unsecured committed revolving credit facility In April 2020, additional committed credit lines of (the “RCF”), which is intended for general corporate €350 million were secured with tenors ranging and working capital purposes. The RCF has a 5 year- from 18 to 24 months, doubling total committed tenor with two further one-year extension options, credit lines available to €700 million. In March 2021 exercisable on the first and second anniversary of the Group cancelled a credit line of €100 million the signing date on the Company’s request and the and simultaneously replaced it with a new credit line approval of each participating bank. In December for €150 million with a tenor of 23 months. In April 2020 and in December 2021 the first and the second 2021, the Group replaced an uncommitted credit one-year extension option were exercised by the line of $50 million, which was terminated, with a new Company and approved by all participating banks. At committed credit line for $100 million with a tenor December 31, 2021 the RCF was undrawn. of 24 months bearing interest at LIBOR plus 75 basis points. At December 31, 2021 the line had been drawn OTHER DEBT down for $70 million (€62 million), representing Other debt mainly relates to funding for operating and the only committed credit line that has been drawn financing activities of the Group. 25. OTHER LIABILITIES An analysis of other liabilities is as follows: (€ thousand) Deferred income Advances and security deposits Accrued expenses Payables to personnel Social security payables Other Total other liabilities At December 31, 2021 256,206 240,696 80,787 53,712 24,660 70,714 2020 270,826 253,442 60,788 33,127 23,261 46,018 726,775 687,462 Deferred income primarily includes amounts expects to recognize in net revenues approximately received under maintenance and power warranty €53 million in 2022, €50 million in 2023, €38 million programs of €218,982 thousand at December 31, in 2024 and €78 million in periods subsequent to 2021 and €214,153 thousand at December 31, 2020, 2024. Deferred income also includes amounts which are deferred and recognized as net revenues collected under various other agreements, which are over the length of the maintenance program. Of dependent upon the future performance of a service the total liability related to maintenance and power or other act of the Group. warranty programs at December 31, 2021, the Group 291 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 25. OTHER LIABILITIES Advances and security deposits primarily include advances received from clients for the purchase of Icona models and limited edition models. Upon shipment of the cars, the advances are recognized as revenue. Changes in the Group’s contract liabilities for maintenance and power warranties, and advances from customers, were as follows: (€ thousand) At January 1, 2021 Additional amounts arising during the period Amounts recognized within revenue Other changes At December 31, 2021 Maintenance and power warranty programs Advances from customers 214,153 249,506 77,713 (72,884) 605,730 (618,739) — 19 218,982 236,516 An analysis of other liabilities (excluding accrued expenses and deferred income) by due date is as follows: (€ thousand) At December 31, 2021 Due Due between within one and one year five years Due beyond five years 2020 Due Due between Total within one and one year five years Due beyond five years Total Total other liabilities (excluding accrued expenses and deferred income) 377,176 7,553 5,053 389,782 315,026 35,251 5,571 355,848 26. TRADE PAYABLES Trade payables of €797,832 thousand at December 31, be categorized within different levels of the fair value 2021 (€713,807 thousand at December 31, 2020) are hierarchy. In those cases, the fair value measurement entirely due within one year. The carrying amount of is categorized in its entirety in the same level of the trade payables is considered to be equivalent to their fair value hierarchy at the lowest level input that is fair value. significant to the entire measurement. 27. FAIR VALUE MEASUREMENT Levels used in the hierarchy are as follows: IFRS 13 — Fair Value Measurement establishes a • Level 1 inputs are quoted prices (unadjusted) in three level hierarchy for the inputs to the valuation active markets for identical assets and liabilities that techniques used to measure fair value by giving the the Group can access at the measurement date. highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1 • Level 2 inputs are inputs other than quoted prices inputs) and the lowest priority to unobservable inputs included within level 1 that are observable for the (level 3 inputs). In some cases, the inputs used to assets or liabilities, either directly or indirectly. measure the fair value of an asset or a liability might • Level 3 inputs are unobservable inputs for the assets and liabilities. 292 FERRARI N.V.AR 2021ASSETS AND LIABILITIES THAT ARE MEASURED AT FAIR VALUE ON A RECURRING BASIS The following table shows the fair value hierarchy for financial assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021 and 2020: (€ thousand) Investments and other financial assets - Liberty Media Shares Current financial assets Total assets Other financial liabilities Total liabilities (€ thousand) Investments and other financial assets - Liberty Media Shares Current financial assets Total assets Other financial liabilities Total liabilities Note Level 1 Level 2 Level 3 Total At December 31, 2021 16 19 19 10,559 — — 11,565 10,559 11,565 — — 36,520 36,520 — — — — — At December 31, 2020 Note Level 1 Level 2 Level 3 16 19 19 7,163 — — 38,636 7,163 38,636 — — 2,140 2,140 — — — — — 10,559 11,565 22,124 36,520 36,520 Total 7,163 38,636 45,799 2,140 2,140 There were no transfers between fair value hierarchy The par value of cash and cash equivalents usually levels for the periods presented. approximates fair value due to the short maturity of these instruments, which consist primarily of current The fair value of current financial assets and other bank accounts. financial liabilities relates to derivative financial instruments and is measured by taking into consideration market parameters at the balance ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE ON A RECURRING BASIS sheet date, using widely accepted valuation For financial instruments represented by short-term techniques. In particular, the fair value of foreign receivables and payables, for which the present value currency derivatives (forward contracts, currency of future cash flows does not differ significantly from swaps and options) and interest rate caps is carrying value, the Group assumes that carrying value determined by taking the prevailing foreign currency is a reasonable approximation of the fair value. In exchange rates and interest rates, as applicable, at the particular, the carrying amount of current receivables balance sheet date. and other current assets and of trade payables and other liabilities approximates their fair value. 293 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 27. FAIR VALUE MEASUREMENT The following table presents the carrying amount and fair value for the most relevant categories of financial assets and financial liabilities not measured at fair value on a recurring basis: (€ thousand) At December 31, 2021 2020 Note Carrying amount Fair value Carrying amount Fair value Receivables from financing activities 18 1,143,968 1,143,968 939,607 939,607 Client financing Dealer financing Total Debt 1,132,979 1,132,979 925,878 925,878 10,989 10,989 13,729 13,729 1,143,968 1,143,968 939,607 939,607 24 2,630,011 2,656,159 2,724,745 2,755,516 28. RELATED PARTY TRANSACTIONS TRANSACTIONS WITH STELLANTIS GROUP COMPANIES Pursuant to IAS 24, the related parties of Ferrari • the sale of engines to Maserati S.p.A. (“Maserati”); include Exor N.V., and together with its subsidiaries • the purchase of engine components for the use in the Exor Group, as well as all entities and individuals the production of Maserati engines from FCA US capable of exercising control, joint control or LLC; significant influence over the Group and its • a technical cooperation between the Group and subsidiaries. Related parties also include companies Stellantis Group with the aim to enhance the quality over which the Exor Group is capable of exercising and competitiveness of their respective products, control, joint control or significant influence, including while reducing costs and investments; Stellantis N.V., and together with its subsidiaries • transactions with Stellantis Group companies, the Stellantis Group, (previously referred to as mainly relating to the services provided by Stellantis Fiat Chrysler Automobiles N.V. or FCA prior to the Group companies, including human resources, merger between FCA and Peugeot S.A. completed payroll, tax, procurement of insurance coverage and on January 16, 2021, which resulted in the creation sponsorship revenues. of Stellantis), CNH Industrial N.V. and its subsidiaries (“CNH Industrial Group”) and Iveco Group N.V. and its subsidiaries (“Iveco Group”, which resulted from the recent demerger from CNH Industrial Group), as well TRANSACTIONS WITH EXOR GROUP COMPANIES (EXCLUDING STELLANTIS GROUP COMPANIES) as joint ventures and associates of Ferrari. In addition, • the Group incurs rental costs from Iveco S.p.A., a members of the Ferrari Board of Directors and company belonging to Iveco Group, related to the executives with strategic responsibilities and their rental of trucks used by the Formula 1 racing team; families are also considered related parties. • the Group earns sponsorship revenue from Iveco S.p.A. The Group carries out transactions with related parties on commercial terms that are normal in the respective markets, considering the characteristics TRANSACTIONS WITH OTHER RELATED PARTIES of the goods or services involved. Transactions • the purchase of components for Formula 1 racing carried out by the Group with these related parties cars from COXA S.p.A.; are primarily of a commercial nature and, in • consultancy services provided by HPE S.r.l.; particular, these transactions relate to: • sponsorship agreement relating to Formula 1 activities with Ferretti S.p.A.; • sale of cars to certain members of the Board of Directors of Ferrari N.V. and Exor. In accordance with IAS 24, transactions with related parties also include compensation to Directors and managers with strategic responsibilities. 294 FERRARI N.V.AR 2021The amounts of transactions with related parties recognized in the consolidated income statement are as follows: (€ thousand) For the years ended December 31, 2021 2020 2019 Net revenues Net Costs(1) financial expenses Net revenues Net Costs (1) financial expenses Net revenues Net Costs (1) financial expenses Stellantis Group companies Maserati 119,083 2,428 — — 18,465 — — — — 100,389 2,981 — — 13,323 — — — — 143,091 6,275 — 352 17,954 10,444 — — — 11,799 6,238 2,103 9,102 6,057 2,207 8,637 8,028 1,965 130,882 27,131 2,103 109,491 22,361 2,207 152,080 42,701 1,965 281 1,014 795 15,143 1 2 150 1,665 2 281 368 4 549 12,977 10 610 13,906 31 FCA US LLC Magneti Marelli (2) Other Stellantis Group companies Total Stellantis Group companies Exor Group companies (excluding the Stellantis Group) Other related parties Total transactions with related 131,958 43,288 2,106 110,190 37,003 2,219 152,971 56,975 2,000 parties Total for the Group 4,270,894 2,434,198 33,257 3,459,790 2,040,925 49,092 3,766,615 2,153,480 42,082 (1) Costs include cost of sales, selling, general and administrative costs and other expenses/(income), net. (2) Stellantis completed the sale of Magneti Marelli on May 2, 2019, following which Magneti Marelli (which subsequently operates under the name “Marelli”) is no longer a related party. Non-financial assets and liabilities originating from related party transactions are as follows: (€ thousand) Stellantis Group companies Maserati FCA US LLC Other Stellantis Group companies Total Stellantis Group companies Exor Group companies (excluding the Stellantis Group) At December 31, 2021 2020 Trade Trade receivables payables Other current assets Other Trade Trade liabilities receivables payables Other current assets Other liabilities 23,267 3,994 — 3,275 — — 6,454 37,662 — — 4,555 1,893 — — 470 3,075 121 1,074 244 2,512 104 16,955 — 94 23,737 10,344 121 7,528 37,906 8,960 104 17,049 382 1 8 5 183 396 108 139 Other related parties 144 3,276 998 1,065 643 3,558 1,496 1,759 Total transactions with related parties 24,263 13,621 1,127 8,598 38,732 12,914 1,708 18,947 Total for the Group 185,000 797,832 122,224 726,775 184,260 713,807 76,471 687,462 There were no other financial assets or financial liabilities originating from related party transactions at December 31, 2021 and 2020. 295 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 28. RELATED PARTY TRANSACTIONS EMOLUMENTS TO DIRECTORS AND KEY MANAGEMENT The fees of the Directors of Ferrari N.V. are as follows: (€ thousand) Directors of Ferrari N.V. For the years ended December 31, 2021 6,668 2020 8,151 2019 10,260 The aggregate compensation to Directors of Ferrari plans (€5,270 thousand in 2020 and €5,168 thousand N.V. for year ended December 31, 2021 was €6,668 in 2019); and thousand (€8,151 thousand in 2020 and €10,260 thousand in 2019), inclusive of the following: • €399 thousand for pension contributions (€222 thousand in 2020). • €5,445 thousand for salary and other short-term benefits (€624 thousand in 2020 and €1,786 In response to the healthcare crisis caused by the thousand in 2019); and COVID-19 pandemic, the Board of Directors pledged their full cash compensation from April 2020 to • €1,223 thousand for share-based compensation the end of 2020 to help fund Company initiatives to awarded under the Company’s equity incentive plans, support the communities in which Ferrari operates, (€7,527 thousand in 2020 and €15,963 thousand in with the Ferrari Leadership Team donating 25 percent 2019, including an acceleration of the costs relating of their salaries for the same period. to the equity incentive plan of the former Chairman and Chief Executive Officer (Mr. Sergio Marchionne)). 29. COMMITMENTS See Note 21 “Share-based compensation” for additional information related to the Company’s ARRANGEMENTS WITH KEY SUPPLIERS equity incentive plans. There was no equity-settled From time to time, in the ordinary course of business, compensation for Non-Executive Directors for the the Group enters into various arrangements with key years ended December 31, 2021, 2020 and 2019. third party suppliers in order to establish strategic and technological advantages. A limited number of The aggregate compensation for members of the these arrangements contain unconditional purchase FLT (excluding the CEO) in 2021 was €18,728 thousand obligations to purchase a fixed or minimum quantity (€14,199 thousand in 2020 and €19,839 thousand in of goods and/or services with fixed and determinable 2019), inclusive of the following: price provisions. • €14,088 thousand for salary and short-term ARRANGEMENTS WITH SPONSORS incentives (€8,707 thousand in 2020 and €14,671 Certain of the Group’s sponsorship contracts include thousand in 2019); terms whereby the Group is obligated to purchase a minimum quantity of goods and/or services from its • €4,241 thousand for share-based compensation sponsors. awarded under the Company’s equity incentive Future minimum purchase obligations under these supplier and sponsorship arrangements at December 31, 2021 were as follows: (€ thousand) Minimum purchase obligations At December 31, 2021 Due within one year 79,986 Due between Due between one and three three and five years 60,597 years 15,225 Due beyond five years Total 500 156,308 296 FERRARI N.V.AR 2021NON-CANCELLABLE LEASE AGREEMENTS The future aggregate minimum lease payments under non-cancellable leases, primarily relating to the lease of stores and industrial buildings, are as follows: (€ thousand) At December 31, 2021 Due within one year Due between Due between one and three three and five years years Due beyond five years Total Future minimum lease payments under lease agreements 14,629 19,275 12,433 11,260 57,597 30. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS the Group’s shipments, as the Group generally sells its models in the currencies of the various markets in which the Group operates, while the Group’s The Group is exposed to the following financial risks industrial activities are all based in Italy, and primarily connected with its operations: denominated in Euro. • financial market risk (principally relating to foreign currency exchange rates and to a lesser extent, The Group’s exposure to interest rate risk arises from interest rates and commodity prices), as the Group the need to fund certain activities and the necessity operates internationally in different currencies; to deploy surplus funds. Changes in market interest • liquidity risk, with particular reference to the rates may have the effect of either increasing or availability of funds and access to the credit markets, decreasing the Group’s net profit/(loss), thereby should the Group require them, and to financial indirectly affecting the costs and returns of financing instruments in general; and investing transactions. • credit risk, arising from normal commercial relations with final clients and dealers, as well as the The Group has in place various risk management Group’s financing activities. policies, which primarily relate to foreign exchange and commodity price, interest rate and liquidity risks. The These risks could significantly affect the Group’s Group’s risk management policies permit derivatives financial position, results of operations and cash to be used for managing such risk exposures at risk. flows, and for this reason the Group identifies and Counterparties to these agreements are major financial monitors these risks, in order to detect potential institutions. Derivative financial instruments can only be negative effects in advance and take the necessary executed for hedging purposes. action to mitigate them, primarily through the Group’s operating and financing activities and if required, In particular, the Group used derivative financial through the use of derivative financial instruments. instruments as cash flow hedges primarily for the purpose of limiting the negative impact of foreign The following section provides qualitative and currency exchange rate fluctuations on forecasted quantitative disclosures on the effect that these risks transactions denominated in foreign currencies. may have upon the Group. The quantitative data Accordingly, as a result of applying risk management reported in the following section does not have any policies with respect to foreign currency exchange predictive value. In particular, the sensitivity analysis on exposure, the Group’s results of operations have financial market risks does not reflect the complexity not been fully exposed to fluctuations in foreign of the market or the reaction which may result from currency exchange rates. However, despite these any changes that are assumed to take place. risk management policies and hedging transactions, FINANCIAL MARKET RISKS sudden adverse movements in foreign currency exchange rates could have a significant effect on the Due to the nature of the Group’s business, the Group Group’s earnings and cash flows. is exposed to a variety of market risks, including foreign currency exchange rate risk and to a lesser The Group also enters into interest rate caps as extent, interest rate risk and commodity price risk. required by certain of its securitization agreements. The Group’s exposure to foreign currency exchange Information on the fair value of derivative financial rate risk arises from the geographic distribution of instruments held is provided in Note 19. 297 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 30. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS INFORMATION ON FOREIGN CURRENCY EXCHANGE RATE RISK changes are recognized directly in equity as a component of other comprehensive income/(loss) The Group is exposed to risks resulting from changes under gains/(losses) from currency translation in foreign currency exchange rates, which can affect differences. its earnings and equity. In particular: • Where a Group company incurs costs in a currency The Group monitors its principal exposure to different from that of its revenues, any change in translation exchange risk, although the Group did not foreign currency exchange rates can affect the engage in any specific hedging activities in relation to operating results of that company. In 2021, the total translation exchange risk for the periods presented. trade flows exposed to foreign currency exchange rate risk amounted to the equivalent of 58 percent of Exchange differences arising on the settlement of the Group’s net revenues (58 percent in 2020 and 53 monetary items or on reporting monetary items at percent in 2019). rates different from those at which they were initially • The main foreign currency exchange rate to which recorded during the period or in previous financial the Group is exposed is the Euro/U.S. Dollar for sales statements, are recognized in the consolidated in U.S. Dollar in the United States and other markets income statement within the net financial income/ where the U.S. Dollar is the reference currency. In (expenses) line item or as cost of sales for charges 2021, the value of commercial activities exposed to arising from financial services companies. The Group fluctuations in the Euro/U.S. Dollar exchange rate uses specific financial derivatives to hedge these accounted for approximately 51 percent (53 percent exposures. in 2020 and 53 percent in 2019) of the total currency risk from commercial activities. In 2021 and 2020, The impact of foreign currency exchange rate the commercial activities exposed to the Euro/ differences recorded within financial income/ Japanese Yen exchange rate and to the Euro/Pound (expenses) for the year ended December 31, 2021, Sterling exchange rate exceeded 10 percent (in 2019 including the costs of hedging foreign currency the Euro/Japanese Yen and Euro/Pound Sterling exchange rate risk, amounted to net losses of €11,407 exceeded 10 percent) of the total currency risk from thousand (net losses of €27,029 thousand and €24,237 commercial activities. Other significant exposures thousand for the years ended December 31, 2020 and included the exchange rate between the Euro and 2019, respectively). the following currencies: Chinese Renminbi, Swiss Franc, Canadian Dollar and Australian Dollar. None All of the Group’s financial services activities are of these exposures, taken individually, exceeded conducted in the functional currencies of the related 10 percent of the Group’s total foreign currency financial services companies, therefore the impact of exchange rate exposure for commercial activities foreign currency exchange rate differences arising in 2021, 2020 and 2019. It is the Group’s policy to from financial services activities was zero in all use derivative financial instruments (primarily periods presented. forward currency contracts and currency options) to hedge up to 90 percent of the principal exposures Except as noted above, there have been no substantial to foreign currency exchange risk, typically for a changes in 2021 in the nature or structure of period of up to twelve months. exposure to foreign currency exchange rate risks or • Several subsidiaries are located in countries that in the Group’s hedging policies. are outside the Eurozone, in particular the United States, the United Kingdom (branch), Switzerland, The potential decrease in fair value of derivative Mainland China, Hong Kong, Japan, Australia and financial instruments held by the Group at December Singapore. As the Group’s reporting currency is the 31, 2021 to hedge against foreign currency exchange Euro, the income statements of those companies rate risks, which would arise in the case of a are translated into Euro using the average exchange hypothetical, immediate and adverse change of 10 rate for the period and, even if revenues and percent in the exchange rates of the major foreign margins are unchanged in local currency, changes currencies with the Euro, would be approximately in exchange rates can impact the amount of €98,165 thousand (€102,674 thousand at December revenues, costs and profit as translated into Euro. 31, 2020). Receivables, payables and future trade • The amount of assets and liabilities of consolidated flows for which hedges have been put in place were companies that report in a currency other than the not included in the analysis. It is reasonable to assume Euro may vary from period to period as a result of that changes in foreign currency exchange rates will changes in exchange rates. The effects of these produce the opposite effect, of an equal or greater 298 FERRARI N.V.AR 2021amount, on the underlying transactions that have an adequate level of funds readily available. The main been hedged. The sensitivity analysis is based on funding operations and investments in cash and currency hedging in place at the end of the period, marketable securities of the Group are centrally which can vary during the period and assumes managed or supervised by the treasury department unchanged market conditions other than exchange with the aim of ensuring effective and efficient rates, such as volatility and interest rates. For this management of the Group’s liquidity. The Group has reason, it is purely indicative. established various policies which are managed or supervised centrally by the treasury department with INFORMATION ON INTEREST RATE RISK the purpose of optimizing the management of funds The Group’s exposure to interest rate risk, though and reducing liquidity risk which include: less significant, arises from the need to fund financial • centralizing liquidity management through the use services activities and the necessity to deploy surplus of cash pooling arrangements funds. Changes in market interest rates may have the • maintaining a conservative level of available liquidity effect of either increasing or decreasing the Group’s • diversifying sources of funding net profit/(loss), thereby indirectly affecting the costs • obtaining adequate credit lines and returns of financing and investing transactions. • monitoring future liquidity requirements on the basis of business planning The Group’s most significant floating rate financial assets at December 31, 2021 were cash and cash Intercompany financing between Group entities is equivalents and certain receivables from financing not restricted other than through the application of activities (related to client and dealer financing), while covenants requiring that transactions with related 37 percent of the Group’s gross debt bears floating parties be conducted at arm’s length terms. rates of interest. At December 31, 2021, a decrease of 10 basis points in interest rates on floating rate Details on the maturity profile of the Group’s financial financial assets and debt, with all other variables assets and liabilities and on the structure of derivative held constant, would have resulted in a decrease in financial instruments are provided in Notes 19 and profit before taxes of €486 thousand on an annual 24. Details of the repayment of derivative financial basis (a decrease of €652 thousand at December 31, instruments are provided in Note 19. 2020). The analysis is based on the assumption that floating rate financial assets and debt which expire To preventively and prudently manage potential during the projected 12-month period will be renewed liquidity or refinancing risks in the foreseeable future, or reinvested in similar instruments, bearing the the Group has available undrawn committed credit hypothetical short-term interest rates. lines of €676 million which amounted to €700 million INFORMATION ON COMMODITY PRICE RISK at December 31, 2020. The Group’s exposure to commodity price risk, The Group believes that its total available liquidity though much less significant than foreign exchange (defined as cash and cash equivalents plus undrawn rate risk and interest rate risk, arises from the need committed credit lines), in addition to funds that to use a variety of raw materials in the Group’s will be generated from operating activities, will operations, including aluminum and precious metals enable Ferrari to satisfy the requirements of its such as palladium and rhodium. The Group monitors investing activities and working capital needs its exposure to commodity price risk and may hedge fulfill its obligations to repay its debt and ensure an a portion of such exposure through derivative appropriate level of operating and strategic flexibility. financial instruments (primarily commodity swaps). The Group therefore believes there is no significant LIQUIDITY RISK Liquidity risk arises if the Group is unable to obtain the CREDIT RISK risk of a lack of liquidity. funds needed to carry out its operations and meet Credit risk is the risk of economic loss arising from its obligations. The main determinant of the Group’s the failure to fully collect receivables. Credit risk liquidity position is the cash generated by or used in encompasses the direct risk of default and the risk operating and investing activities. of a deterioration of the creditworthiness of the From an operating point of view, the Group manages liquidity risk by monitoring cash flows and keeping counterparty. 299 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 30. QUALITATIVE AND QUANTITATIVE INFORMATION ON FINANCIAL RISKS The maximum credit risk to which the Group is overdue (€65,554 thousand at December 31, 2020). theoretically exposed at December 31, 2021 is Therefore, overdue receivables represent a minor represented by the carrying amounts of the financial portion of receivables from financing activities. assets presented in the consolidated statement of financial position sheet and the nominal value of the Receivables from financing activities relate entirely guarantees provided. to the financial services portfolio in the United States and such receivables are generally secured on the Dealers and clients are subject to a specific evaluation titles of cars or other guarantees. of their creditworthiness. Additionally, it is Group practice to obtain financial guarantees against risks Trade receivables amounting to €185,000 thousand at associated with credit granted for the purchase December 31, 2021 (€184,260 thousand at December of cars and parts. These guarantees are further 31, 2020) are shown net of the allowance for doubtful strengthened, where possible, by retaining title on accounts amounting to €25,984 thousand (€28,312 cars subject to financing agreements. thousand at December 31, 2020). After considering the allowance for doubtful accounts, €47,237 Credit positions of material significance are evaluated thousand of receivables were overdue (€46,627 on an individual basis. Where objective evidence thousand at December 31, 2020). exists that they are uncollectible, in whole or in part, specific write-downs are recognized. The amount 31. ENTITY-WIDE DISCLOSURES of the write-down is based on an estimate of the recoverable cash flows, the timing of those cash The following table presents an analysis of net flows, the cost of recovery and the fair value of any revenues by geographic location of the Group’s guarantees received. customers for the years ended December 31, 2021 and 2020, including the effects of foreign currency Receivables from financing activities amounting to hedge transactions. Revenues by geography €1,143,968 thousand at December 31, 2021 (€939,607 presented for material individual countries are thousand at December 31, 2020) are shown net of not necessarily correlated to shipments of cars the allowance for doubtful accounts amounting to as certain countries include revenues from €11,204 thousand (€13,195 thousand at December 31, sponsorship and commercial activities relating 2020). After considering the allowance for doubtful to Ferrari’s participation in the Formula 1 World accounts, €52,733 thousand of receivables were Championship. (€ thousand) Italy Rest of EMEA of which UK Americas (1) of which United States of America Mainland China, Hong Kong and Taiwan Rest of APAC (2) Total net revenues For the years ended December 31, 2021 2020 2019 409,992 322,573 391,156 1,869,864 1,634,515 1,628,496 457,060 484,701 531,088 1,097,904 883,228 1,001,946 930,316 332,971 560,163 747,373 191,907 427,567 867,376 350,851 394,166 4,270,894 3,459,790 3,766,615 (1) Americas includes the United States of America, Canada, Mexico, the Caribbean and of Central and South America. (2) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia, South Korea, Thailand, India and Malaysia. 300 FERRARI N.V.AR 2021The following table presents an analysis of non-current assets other than financial instruments and deferred tax assets by geographic location: (€ thousand) At December 31, 2021 Property, plant and equipment Goodwill Intangible assets Property, plant and equipment Goodwill 2020 Intangible assets Italy Rest of EMEA Americas (1) Mainland China, Hong Kong and Taiwan Rest of APAC (2) Total 1,322,257 785,182 1,137,910 1,199,325 785,182 979,022 5,597 16,003 5,898 3,410 — — — — — — — 263 5,809 14,497 4,120 2,879 — — — — — — — 268 1,353,165 785,182 1,138,173 1,226,630 785,182 979,290 (1) Americas includes the United States of America, Canada, Mexico, the Caribbean and of Central and South America. (2) Rest of APAC mainly includes Japan, Australia, Singapore, Indonesia, South Korea, Thailand, India and Malaysia. 32. SUBSEQUENT EVENTS The Group has evaluated subsequent events through February 25, 2022, which is the date the Consolidated Financial Statements were authorized for issuance, and identified the following matters: On January 26, 2022 Ferrari announced that CEVA Logistics will be a new Scuderia Ferrari team partner starting from the 2022 Formula 1 season. The multi-year agreement will also see CEVA involved in Ferrari’s other racing activities in GT racing and the Ferrari Challenge, with the Marseille-based company taking on the role of Official Logistics Partner for those series. On February 8, 2022 Ferrari announced a new partnership with Qualcomm Technologies, Inc. The San Diego, California-based company will be a Scuderia Ferrari Premium Partner through Snapdragon, Qualcomm’s premium product and experience brand leveraged across multiple platforms and categories, including automotive. The agreement with Qualcomm Technologies will have a strong technological impact aimed at accelerating the digital transformation process for Ferrari and its road cars. Starting from the first common projects already identified, such as the digital cockpit, the two companies will bring together ideas and expertise to explore new opportunities and a range of technological solutions. Under the common share repurchase program, from January 1, 2022 to February 18, 2022 the Company purchased an additional 390,819 common shares for total consideration of €80.1 million. At February 18, 2022 the Company held in treasury an aggregate of 10,470,922 common shares. On February 25, 2022, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders that the Company declare a dividend of €1.362 per common share, totaling approximately €250 million. The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be held on April 13, 2022. 301 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS302 FERRARI N.V.AR 2021INDEX TO COMPANY FINANCIAL STATEMENTS Income Statement / Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity 304 305 306 307 Notes to the Company Financial Statements 308 303 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSINCOME STATEMENT/ STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (€ thousand) Net revenues Other income Dividend income Cost of sales Selling, general and administrative costs Net financial expenses Profit/(Loss) before taxes Income tax benefit Net and comprehensive income/(loss) Note 3 3 4 5 6 7 For the years ended December 31, 2021 329 2020 180 13,463 10,040 200,000 1,974 35,087 26,084 — 1,759 27,437 26,771 150,647 (45,747) 9,239 10,748 159,886 (34,999) The accompanying notes are an integral part of the Company Financial Statements. 304 FERRARI N.V.AR 2021STATEMENT OF FINANCIAL POSITION AT DECEMBER 31, 2021 AND 2020 (€ thousand) Assets Property, plant and equipment Investments in subsidiaries Financial receivables Deferred tax assets Total non-current assets Trade receivables Tax receivables Other current assets Ferrari Group cash management pools Cash and cash equivalents Total current assets Total assets Equity and liabilities Share capital Share premium Other reserves Retained earnings Total equity Debt (Non-Current) Employee benefits Total non-current liabilities Debt (Current) Trade payables Tax payables Other current liabilities Total current liabilities Total liabilities Total equity and liabilities At December 31, Note 2021 2020 8 9 10 7 10 7 10 11 12 13 15 15 16 7 17 2,343 2,218 8,778,143 8,778,123 22,084 2,637 22,905 1,094 8,805,207 8,804,340 14,733 76,462 56,649 5,366 94,530 12,084 8,309 26,402 5,976 194,191 247,740 246,962 9,052,947 9,051,302 2,573 2,573 5,768,544 5,768,544 (767,646) (550,717) 284,924 285,310 5,288,395 5,505,710 1,479,713 1,336,792 2,700 1,389 1,482,413 1,338,181 2,149,879 2,180,773 11,397 81,557 39,306 11,337 1,024 14,277 2,282,139 2,207,411 3,764,552 3,545,592 9,052,947 9,051,302 The accompanying notes are an integral part of the Company Financial Statements. 305 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSSTATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (€ thousand) Cash and cash equivalents at the beginning of the year Cash flows from operating activities: Profit/(Loss) before taxes Depreciation Net financial expenses Other non-cash income and expenses Change in trade receivables Change in trade payables Change in other operating assets and liabilities Interest paid Total cash flows from operating activities Cash flows used in investing activities: Investments in property, plant and equipment Investments in subsidiaries Total cash flows used in investing activities Cash flows (used in)/from financing activities: Proceeds from bonds and notes Repayment of bonds and notes Net proceeds/(repayments) from financial liabilities with related parties Change in Ferrari Group cash management pools Repayment of lease liabilities Dividends paid to owners Share repurchases Total cash flows (used in)/from financing activities Total change in cash and cash equivalents Cash and cash equivalents at the end of the year For the years ended December 31, Note 2021 194,191 2020 56,542 150,647 (45,747) 8 6 15 15 15 11 15 434 26,084 12,439 (2,420) 407 17,016 (23,163) 181,444 (340) (20) (360) 373 26,771 24,205 (6,338) 1,663 38,431 (24,225) 15,133 (111) — (111) 149,495 640,073 (500,000) — 460,000 (178,000) 1,004 (244) (1,405) (148) (160,101) (208,100) (230,899) (129,793) (280,745) (99,661) 122,627 137,649 94,530 194,191 The accompanying notes are an integral part of the Company Financial Statements. 306 FERRARI N.V.AR 2021STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (€ thousand) At December 31, 2019 2,573 5,768,544 (438,277) 529,074 5,861,914 Share capital Share premium Other reserves Retained earnings Total equity Comprehensive loss Dividends to owners Share repurchases Share-based compensation Other changes At December 31, 2020 Comprehensive income Dividends to owners Share repurchases Share-based compensation Other changes — — — — — — — — — — — — (129,793) 17,401 (48) (34,999) (34,999) (208,765) (208,765) — — — (129,793) 17,401 (48) 2,573 5,768,544 (550,717) 285,310 5,505,710 — — — — — — — — — — — — 159,886 159,886 (160,272) (160,272) (230,899) 13,895 75 — — — (230,899) 13,895 75 At December 31, 2021 2,573 5,768,544 (767,646) 284,924 5,288,395 The accompanying notes are an integral part of the Company Financial Statements. 307 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSNOTES TO THE COMPANY FINANCIAL STATEMENTS 1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES Management considers the primary focus of these Company Financial Statements to be the legal entity perspective and considers that these Company Ferrari N.V. (the “Company” or “Ferrari” and together Financial Statements should reflect the cost of the with its subsidiaries the “Ferrari Group” or the subsidiaries as well as the amounts that are eligible “Group”) was incorporated as a public limited for distribution to the Company’s shareholders. company (naamloze vennootschap) under the laws of Management believes that the measurement of its the Netherlands on September 4, 2015. The Company subsidiaries at cost, as permitted under EU IFRS, was formed to ultimately act as a holding company for provides the best insight into the Company’s financial Ferrari S.p.A., which, together with its subsidiaries, is position and results, in addition to the information focused on the design, engineering, production and provided in the Consolidated Financial Statements. sale of luxury performance sports cars. The Company is listed under the ticker symbol all periods presented with the exception of the new RACE on the New York Stock Exchange and on the standards and amendments effective from January 1, Euronext Milan (previously named Mercato Telematico 2021 as noted below. The accounting policies were consistently applied to Azionario). The Company’s official seat (statutaire zetel ) is in are presented in thousands of Euro (€), except where Amsterdam, the Netherlands, and the Company’s otherwise indicated. The amounts in the Company Financial Statements corporate address is in Maranello, Italy at Via Abetone Inferiore 4. The Company is registered with the Dutch trade register under number 64060977. 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES DATE OF AUTHORIZATION FOR ISSUANCE FORMAT OF THE COMPANY FINANCIAL STATEMENTS The Company presents the income statement by function and uses a current/non-current classification for assets and liabilities in the statement of financial position. The separate financial statements of the Company STATEMENT OF CASH FLOWS (the “Company Financial Statements”) as of and for The statement of cash flows is prepared using the the years ended December 31, 2021 and 2020 were indirect method with a breakdown into cash flows authorized for issuance on February 25, 2022. from or used in operating, investing and financing BASIS OF PREPARATION activities. Cash inflows or outflows related to taxes are reported as changes in other operating assets The Company Financial Statements are prepared on a and liabilities as they are primarily settled through going concern basis using the historical cost method, transactions with related parties as a result of the modified as required for the measurement of certain Ferrari Group Italian tax consolidation. Dividends financial instruments. received are included as part of operating activities. STATEMENT OF COMPLIANCE The Company Financial Statements have been NEW STANDARDS AND AMENDMENTS EFFECTIVE FROM JANUARY 1, 2021 prepared in accordance with International Financial The following new standards, interpretations and Reporting Standards as adopted by the European amendments were effective on or subsequent to Union (“EU IFRS”) and with Part 9 of Book 2 of the January 1, 2021 and were adopted by the Company Dutch Civil Code. for the purpose of the preparation of the Company Financial Statements: MEASUREMENT BASIS • Amendments to IFRS 9 — Financial Instruments, The Company Financial Statements were prepared IAS 39 — Financial Instruments: Recognition and using the same accounting policies as set out in Measurement, IFRS 7 — Financial Instruments: the notes to the consolidated financial statements Disclosures, IFRS 4 — Insurance Contracts and IFRS at December 31, 2021 (the “Consolidated Financial 16 — Leases; Statements”), except for the measurement of the • Amendments to IFRS 4 — Insurance Contracts; investments as presented under “Investments in • Amendments to IFRS 16 for COVID-19-related rent subsidiaries” in the Company Financial Statements. concessions beyond 30 June 2021. 308 FERRARI N.V.AR 2021There was no effect from the adoption of these In May 2020 the IASB issued Annual Improvements amendments. Further information on these standards to IFRSs 2018 - 2020 Cycle. The improvements have is provided in Note 2 of the Consolidated Financial amended four standards with effective date January Statements. NEW STANDARDS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD (“IASB”) AND ENDORSED BY THE EUROPEAN UNION (“EU”) BUT NOT YET EFFECTIVE 1, 2022: i) IFRS 1 — First-time Adoption of International Financial Reporting Standards in relation to allowing a subsidiary to measure cumulative translation differences using amounts reported by its parent, ii) IFRS 9 — Financial Instruments in relation to which fees an entity includes when applying the ‘10 percent’ test for derecognition of financial liabilities, The standards, amendments and interpretations iii) IAS 41 — Agriculture in relation to the exclusion of issued by the IASB that will have mandatory application taxation cash flows when measuring the fair value in 2022 or subsequent years are listed below: of a biological asset, and iv) IFRS 16 — Leases in relation to an illustrative example of reimbursement In May 2017 the IASB issued IFRS 17 — Insurance for leasehold improvements. The Company does Contracts, which establishes principles for the not expect any material impact from the adoption of recognition, measurement, presentation and these amendments. disclosure of insurance contracts issued as well as guidance relating to reinsurance contracts held and investment contracts with discretionary participation features issued. In June 2020 the IASB issued amendments to IFRS 17 aimed at helping companies NEW STANDARDS, AMENDMENTS, CLARIFICATIONS AND INTERPRETATIONS ISSUED BY IASB BUT NOT YET ENDORSED BY THE EU implement IFRS 17 and make it easier for companies In January 2020 the IASB issued amendments to explain their financial performance. The new to IAS 1 — Presentation of Financial Statements: standard and amendments are effective on or after Classification of Liabilities as Current or Non-Current January 1, 2023. to clarify how to classify debt and other liabilities as current or non-current, and in particular how to In May 2020 the IASB issued amendments to IFRS 3 — classify liabilities with an uncertain settlement rate Business combinations to update a reference in IFRS 3 and liabilities that may be settled by converting to to the Conceptual Framework for Financial Reporting equity. These amendments are effective on or after without changing the accounting requirements for January 1, 2023. The Company does not expect business combinations. These amendments are any material impact from the adoption of these effective on or after January 1, 2022. The Company amendments. does not expect any material impact from the adoption of these amendments. In February 2021 the IASB issued amendments to IAS 1 — Presentation of Financial Statements and In May 2020 the IASB issued amendments to IAS 16 IFRS Practice Statement 2: Disclosure of Accounting — Property, Plant and Equipment. The amendments policies which require companies to disclose their prohibit a company from deducting from the cost material accounting policy information rather than of property, plant and equipment amounts received their significant accounting policies and provide from selling items produced while the company is guidance on how to apply the concept of materiality preparing the asset for its intended use. Instead, a to accounting policy disclosures. These amendments company should recognize such sales proceeds are effective on or after January 1, 2023. The and the related cost in the income statement. These Company does not expect any material impact from amendments are effective on or after January 1, 2022. the adoption of these amendments. The Company does not expect any material impact from the adoption of these amendments. In February 2021 the IASB issued amendments to IAS 8 — Accounting Policies, Changes in Accounting In May 2020 the IASB issued amendments to IAS 37 — Estimates and Errors: Definition of Accounting Provisions, Contingent Liabilities and Contingent Assets, Estimates which clarify how companies should which specify which costs a company includes when distinguish changes in accounting policies assessing whether a contract will be loss-making. from changes in accounting estimates. These These amendments are effective on or after January amendments are effective on or after January 1, 1, 2022. The Company does not expect any material 2023. The Company does not expect any material impact from the adoption of these amendments. impact from the adoption of these amendments. 309 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES In May 2021 the IASB issued amendments to IAS the investment less costs of disposal and its value in 12 — Income Taxes: Deferred Tax related to Assets use. Where the carrying amount of an asset exceeds and Liabilities Arising From a Single Transaction that its recoverable amount, the asset is considered clarify how companies account for deferred tax on impaired and is written down to its recoverable transactions such as leases and decommissioning amount. Any resulting impairment is recognized in the obligations. These amendments are effective on or income statement. An assessment is made at each after January 1, 2023. The Company does not expect reporting date as to whether there is any indication any material impact from the adoption of these that previously recognized impairment losses may amendments. no longer exist or may have decreased. If such an indication exists, the Company makes an estimate In December 2021 the IASB issued an amendment to of the recoverable amount. A previously recognized IFRS 17 — Insurance Contracts: Initial Application of impairment loss is reversed only if there has been IFRS 17 and IFRS 9 - Comparative Information, which a change in the estimates used to determine the provides a transition option relating to comparative asset’s recoverable amount since the last impairment information about financial assets presented on loss was recognized. If that is the case, the carrying initial application of IFRS 17. The amendment is aimed amount of the asset is increased to its recoverable at helping entities to avoid temporary accounting amount, up to a maximum of the carrying amount mismatches between financial assets and insurance that would have been determined if no impairment contract liabilities, and therefore improve the loss had been recognized for the asset in prior usefulness of comparative information for users of periods. Such a reversal is recognized in the income financial statements. The amendment is effective statement. There was no impairment of investments on or after January 1, 2023. The Company does not in subsidiaries for the periods presented in these expect any material impact from the adoption of this Company Financial Statements. amendment. INVESTMENTS IN SUBSIDIARIES FOREIGN CURRENCY TRANSACTIONS The financial statements are prepared in Euro, Investments in subsidiaries are stated at cost, less which is the Company’s functional and presentation impairment (if any). Dividend income from the currency. Transactions in foreign currencies are Company’s subsidiaries is recognized in the income recorded at the exchange rate prevailing at the date statement when the right to receive payment is of the transaction. established. IMPAIRMENT OF INVESTMENTS IN SUBSIDIARIES Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign currency exchange rate prevailing at that At each reporting date, the Company assesses date. Exchange differences arising on the settlement whether there is an indication that investments in of monetary items or on reporting monetary items at subsidiaries may be impaired. If any such indication rates different from those at which they were initially exists, the Company makes an estimate of the recorded during the period or in previous financial asset’s recoverable amount. The recoverable statements are recognized in the income statement. amount is defined as the higher of the fair value of 310 FERRARI N.V.AR 2021FOREIGN CURRENCY TRANSLATION The Company has a branch in the United Kingdom (UK) that operates in Pound Sterling. At each reporting period, the assets and liabilities within the UK branch are translated to Euro using the exchange rate at the balance sheet date and the income statement is translated using the average exchange rate for the period. Translation differences resulting from the application of this method are classified as translation differences within other comprehensive income/(loss) until the disposal of the branch. The cumulative translation differences at December 31, 2021 amounted to gains of €75 thousand (losses of €47 thousand at December 31, 2020). The principal foreign currency exchange rates used to translate other currencies into Euro were as follows: U.S. Dollar Pound Sterling 2021 2020 Average At December 31, Average At December 31, 1.1827 0.8596 1.1326 0.8403 1.1422 0.8897 1.2271 0.8990 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recognized at cost net of accumulated depreciation and, if applicable, impairment. Depreciation is calculated on a straight line basis over the useful lives of the assets as follows: Asset Category Buildings Office equipment Other assets Depreciation Rates 10% 20% - 22% 20% - 25% LEASES Lease payments are discounted using the interest The Company recognizes a right-of-use asset and rate implicit in the lease. If that rate cannot be a corresponding lease liability at the date at which determined, the Company’s incremental borrowing the leased asset is available for use. Each lease rate is used, being the rate that the Company would payment is allocated between the principal liability have to pay to borrow the funds necessary to obtain and finance costs. Finance costs are charged to the an asset of similar value in a similar economic income statement over the lease period using the environment with similar terms and conditions. effective interest rate method. The right-of use asset is depreciated on a straight-line basis over the lease term. In determining the lease term, management Right-of-use assets are measured at cost comprising economic incentive to exercise an extension option, the following: (i) the amount of the initial measurement or not exercise a termination option. Extension of lease liability, (ii) any lease payments made at or options (or periods after termination options) are only before the commencement date less any lease included in the lease term if the lease is reasonably incentives received, (iii) any initial direct costs and, if certain to be extended (or not terminated). considers all facts and circumstances that create an applicable, (iv) restoration costs. Payments associated with short-term leases and leases of low-value TRADE RECEIVABLES assets are recognized as an expense in the income Trade receivables are amounts due for goods sold or statement on a straight-line basis. services provided in the ordinary course of business. Trade receivables are initially recognized at fair value Lease liabilities are measured at the net present and subsequently measured at amortized cost using value of the following: (i) fixed lease payments, (ii) the effective interest rate method, less any provision variable lease payments that are based on an index for allowances. or a rate and, if applicable, (iii) amounts expected to be payable by the lessee under residual value CASH AND CASH EQUIVALENTS guarantees, and (iv) the exercise price of a purchase Cash and cash equivalents include cash on hand, option if the lessee is reasonably certain to exercise deposits held at call with banks and other short-term, that option. Lease liabilities do not include any highly liquid investments with original maturities of non-lease components that may be included in the three months or less. There are no liens, pledges, related contracts. collateral or restrictions on cash and cash equivalents. 311 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents do not include amounts in OTHER INCOME Ferrari Group cash management pools. Other income primarily relates to services performed DEBT Debt is measured at amortized cost using the by the Company on behalf of its subsidiaries for certain corporate services rendered and other recharge fees. effective interest rate method. INCOME TAXES TRADE PAYABLES Current and deferred taxes are recognized as income tax benefit or income tax expense and are Trade payables are amounts payable for services, included in the income statement for the period, legal and professional fees and other expenses except tax arising from a transaction or event which incurred. Trade payables are all due within one year. is recognized, in the same or a different period, either DEFERRED INCOME in other comprehensive income/(loss) or directly in equity. Tax uncertainties are accounted for in Deferred income relates to amounts received in accordance with IFRIC 23. advance under certain agreements, primarily relating to marketing-related events hosted for third party DIVIDENDS dealers, which are reliant on the future performance Dividends payable by the Company are reported as of a service or other act of the Company. Deferred a change in equity in the period in which they are income is recognized as net revenues or other approved by the shareholders as applicable under income when the Company has fulfilled its obligations local rules and regulations. Dividend income is under the terms of the various agreements. Deferred recognised in the income statement on the date that income is recorded on the statement of financial the right to receive payment is established. position within “other liabilities”. NET REVENUES SHARE-BASED COMPENSATION The Company has implemented equity incentive Net revenues relate to the sale of demo vehicles and plans that provide for the granting of share-based spare parts to third party dealers as well as revenues compensation to the Chairman, the Chief Executive generated for marketing-related events hosted by Officer, all other members of the Ferrari Leadership the Company on behalf of third party dealers, such Team and other key employees of the Group. The as new car launches. Revenue is recognized when Company also provides share-based compensation control over a product or service is transferred to the as part of commercial agreements with certain customer. Revenue is measured at the transaction suppliers. The share-based compensation price which is based on the amount of consideration arrangements are accounted for in accordance with that the Company expects to receive in exchange IFRS 2 — Share-based Payments, which requires the for transferring the promised goods or services Company to recognize share-based compensation to the customer and excludes any sales incentives based on fair value of awards granted. Share- as well as taxes collected from customers that are based compensation for the equity-settled awards remitted to government authorities. The transaction containing market performance conditions is price includes estimates of variable consideration measured at the grant date fair value of the award to the extent it is probable that a significant reversal using a Monte Carlo simulation model, which requires of revenue recognized will not occur. The Company the input of subjective assumptions, including the enters into contracts that may include both products expected volatility of the Company’s common stock, and services, which are generally capable of being the dividend yield, interest rates and a correlation distinct and accounted for as separate performance coefficient between the common stock and the obligations where appropriate. The Company relevant market index. The fair value of the awards accounts for a contract with a customer when which are conditional only on a recipient’s continued there is a legally enforceable contract between service to the Company is measured using the share the Company and the customer, the rights of the price at the grant date adjusted for the present value parties are identified, the contract has commercial of future distributions which employees will not substance, and collectability of the contract receive during the vesting period. consideration is probable. 312 FERRARI N.V.AR 2021Share based compensation is recognized over the service period. Pursuant to an agreement between the Company and various subsidiaries of the Group, the Company recharges subsidiaries for share-based compensation relating to equity instruments awarded to employees of the subsidiaries under the equity incentive plans. The Company’s portion of the share-based compensation for the equity incentive plans is recognized as an expense within selling, general and administrative costs or cost of sales in the income statement depending on the function of the employee with an offsetting amount recorded as an increase to equity, whilst share-based compensation recharged to the subsidiaries of the Group is recognized as a financial receivable (until payment is received) with an offsetting amount recorded as an increase to equity. Share-based compensation expense relating to commercial agreements with certain suppliers is recognized over the period in which the supplier’s services are received and classified within the consolidated income statement depending on the function of the supplier’s services, with an offsetting increase to equity. SEGMENT REPORTING As disclosed in the Consolidated Financial Statements, the Group has determined that it has one operating and one reportable segment based on the information reviewed by its Chief Operating Decision Maker in making decisions regarding the allocation of resources and to assess performance. USE OF ESTIMATES The Company Financial Statements are prepared in accordance with EU IFRS, which requires the use of estimates, judgments, and assumptions that affect the carrying amount of assets and liabilities, the disclosure of contingent assets and liabilities and the amounts of income and expenses recognized. The estimates and associated assumptions are based on elements that are known when the financial statements are prepared, on historical experience and on any other factors that are considered to be relevant. The estimates and underlying assumptions are reviewed periodically and continuously by the Company. If the items subject to estimates do not perform as assumed, then the actual results could differ from the estimates, which would require adjustment accordingly. The effects of any changes in estimate are recognized in the income statement in the period in which the adjustment is made, or prospectively in future periods. The estimates and assumptions that management considers most critical for the Company Financial Statements relate to investments in subsidiaries and in particular, relating to impairment indicators. See Note 9 for further details. 3. NET REVENUES AND OTHER INCOME Net revenues for the year ended December 31, 2021 amounted to €329 thousand (€180 thousand for the year ended December 31, 2020) and primarily related to marketing-related events hosted on behalf of third party dealers and other customers. Other income for the year ended December 31, 2021 amounted to €13,463 thousand (€10,040 thousand for the year ended December 31, 2020) and primarily related to costs recharged to Ferrari S.p.A. In 2020, net revenues were impacted by a reduced number of events hosted caused by the COVID-19 pandemic. For further information on the impacts of the COVID-19 pandemic, see “COVID-19 Pandemic Update” and “Result of Operations” included in the Annual Report. 4. DIVIDEND INCOME Dividend income for the year ended December 31, 2021 amounted to €200,000 thousand and related entirely to a dividend from Ferrari S.p.A, approved on April 9, 2021 and received on May 4, 2021. 313 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS5. SELLING, GENERAL AND ADMINISTRATIVE COSTS Selling, general and administrative costs consisted of the following: (€ thousand) Personnel expenses Shared services provided by Ferrari S.p.A. Legal and professional services Insurance Other expenses For the years ended December 31, 2021 14,822 4,414 4,850 9,606 1,395 2020 11,783 4,494 4,530 6,046 584 Total selling, general and administrative costs 35,087 27,437 Personnel expenses include costs related to the Branch and 10 of which relate to the Italian Branch). equity incentive plans (see Note 14), compensation All employees work outside of the Netherlands. for directors and employees. Detailed information on Board of Directors and key management Shared service costs mainly relate to services compensation is included in the “Corporate provided by Ferrari S.p.A. for human resources, Governance” and “Remuneration of Directors” payroll, tax, legal, accounting and treasury. sections to the Annual Report. At December 31, 2021 the Company had 26 full time listing fees and expenses for legal, financial and other Legal and professional services mainly relate to equivalent employees, 15 of which relate to the UK consulting services. Branch and 11 of which relate to the Italian Branch (at December 31, 2020 the Company had 24 full time The increase in insurance costs in 2021 compared to equivalent employees, 14 of which relate to the UK 2020 is primarily related to insurance costs incurred on behalf of and recharged to subsidiaries. 6. NET FINANCIAL EXPENSES Net financial expenses consisted of the following: (€ thousand) Interest expenses: of which: Interest and other finance costs on bonds and notes Interest on intercompany borrowings Interest on leases Foreign exchange rate differences Other financial expenses Other financial income Net financial expenses For the years ended December 31, 2021 25,262 22,947 2,216 99 (256) 1,098 (20) 26,084 2020 25,689 20,116 5,406 167 247 971 (136) 26,771 Other financial expenses primarily include bank fees and charges and other financial income primarily includes interest income on cash and cash equivalents held with banks. 314 FERRARI N.V.AR 20217. INCOME TAXES Income taxes for the years ended December 31, 2021 and 2020 are summarised below: (€ thousand) Current income tax benefit Deferred income tax benefit/(expense) Total income tax benefit For the years ended December 31, 2021 7,702 1,537 9,239 2020 11,023 (275) 10,748 The table below provides a reconciliation between actual income tax benefit and the theoretical income tax expense, calculated on the basis of the applicable corporate tax rate in effect in Italy, which was 24.0 percent for each of the years ended December 31, 2021 and 2020: (€ thousand) Profit/(Loss) before tax Theoretical income tax (expense)/benefit Tax effect on: Non-taxable dividends Non-deductible costs Other permanent differences Total income tax benefit For the years ended December 31, 2021 150,647 (36,155) 45,600 (130) (76) 9,239 2020 (45,747) 10,979 — (155) (76) 10,748 The following table provides a summary of tax receivables and tax payables for the years ended December 31, 2021 and 2020: (€ thousand) Tax receivables Tax payables Net tax (payables)/receivables At December 31, 2021 76,462 81,557 (5,095) 2020 8,309 1,024 7,285 Tax receivables of €76,462 thousand at December The increase in tax payables was primarily 31, 2021 (€8,309 thousand at December 31, 2020) attributable to an increase in taxable profit in 2021 primarily relate to amounts due from related parties compared to 2020 and the effects of a net tax for the Group tax consolidation in Italy. benefit recognized in 2020 from the partial step up of trademarks for tax purposes amounting to €75 Tax payables of €81,557 thousand at December million. The increase in tax receivables was primarily 31, 2021 (€1,024 thousand at December 31, 2020) attributable to amounts due from related parties in primarily relate to amounts due to the tax authorities relation to the Group tax consolidation in Italy driven for the Group tax consolidation in Italy. by the aforementioned increase in tax payables. 315 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 7. INCOME TAXES The following table summarises deferred tax assets at December 31, 2021 and 2020: (€ thousand) Deferred tax assets To be recovered after 12 months To be recovered within 12 months Total deferred tax assets 8. PROPERTY, PLANT AND EQUIPMENT (€ thousand) Cost Accumulated depreciation Total income tax expense At December 31, 2021 2020 1,312 1,325 2,637 600 494 1,094 At December 31, 2021 4,612 (2,269) 2,343 2020 3,924 (1,706) 2,218 Property, plant and equipment relates to office furniture and equipment in the UK Branch, as well as buildings recognised as right-of-use assets in 2021 of €1,940 thousand (€2,073 thousand at December 31, 2020). There are no liens, pledges, collateral or restrictions on use over property, plant and equipment. Depreciation charges of €434 thousand for the year ended December 31, 2021 (€373 thousand for the year ended December 31, 2020) were recorded within selling, general and administrative costs, of which €317 thousand related to right-of-use assets (€306 thousand in 2020). See Note 15 “Debt” for information related to the related lease liabilities. 9. INVESTMENTS IN SUBSIDIARIES Investment in subsidiaries amounted to €8,778,143 thousand at December 31, 2021 (€8,778,123 thousand at December 31, 2020), and included investments in Ferrari S.p.A. amounting to €8,778,000 thousand and New Business 33 S.p.A. amounting to €143 thousand. IMPAIRMENT TESTING At December 31, 2021, the market capitalization of Ferrari N.V. amounted to approximately €41.8 billion (€34.9 billion at December 31, 2020). Considering the share price of the Company at December 31, 2021 and at the date of authorization of the Company Financial Statements, no impairment indicators were identified. 10. TRADE RECEIVABLES, FINANCIAL RECEIVABLES AND OTHER CURRENT ASSETS TRADE RECEIVABLES (€ thousand) Trade receivables Financial receivables Other current assets Total At December 31, 2021 14,733 22,084 56,649 93,466 2020 12,084 22,905 26,402 61,391 Trade receivables at December 31, 2021 included €14,013 thousand due from related parties (primarily Ferrari S.p.A.) for corporate services rendered and fees charged and €720 thousand due from third parties for marketing-related events (€9,983 thousand and €2,101 thousand respectively at December 31, 2020). 316 FERRARI N.V.AR 2021The carrying amount of trade receivables is deemed to approximate their fair value. There are no overdue balances and no allowance for expected credit losses has been recorded for trade receivables. The following sets forth a breakdown of trade receivables by currency: (€ thousand) Trade receivables denominated in: Euro Pound Sterling Total FINANCIAL RECEIVABLES At December 31, 2021 2020 12,158 2,575 14,733 8,343 3,741 12,084 At December 31, 2021, non-current financial receivables of €22,084 thousand (€22,905 thousand at December 31, 2020) related to receivables from subsidiaries, mainly Ferrari S.p.A. and primarily for recharges of share-based compensation relating to equity instruments awarded to employees of the subsidiaries of the Group under the Group’s equity incentive plans, pursuant to an intercompany agreement. OTHER CURRENT ASSETS Other current assets of €56,649 thousand at December 31, 2021 (€26,402 thousand at December 31, 2020) primarily include VAT credits and prepaid expenses. The increase in 2021 primarily related to VAT. 11. FERRARI GROUP CASH MANAGEMENT POOLS Ferrari Group cash management pools relate to the Company’s participation in a group-wide cash management system that is managed centrally by Ferrari S.p.A. and amounted to €5,366 thousand at December 31, 2021 (€5,976 thousand at December 31, 2020). Amounts in cash management pools at December 31, 2021 and 2020 were entirely denominated in Pound Sterling. Ferrari Group cash management pools 5,976 (1,004) 394 5,366 Balance at January 1, 2021 Net proceeds received Translation differences Balance at December 31, 2021 12. CASH AND CASH EQUIVALENTS Cash and cash equivalents amounted to €94,530 thousand at December 31, 2021 (€194,191 thousand at December 31, 2020) and were primarily denominated in Euro. The carrying amount of cash and cash equivalents is deemed to be in line with their fair value. There was no restricted cash at December 31, 2021 and 2020. Credit risk associated with cash and cash equivalents is considered limited as the counterparties are leading national and international banks. 13. EQUITY SHARE CAPITAL At December 31, 2021 and 2020 the fully paid up share capital of the Company was €2,573 thousand, consisting of 193,923,499 common shares and 63,349,112 special voting shares, all with a nominal value of €0.01. At December 31, 2021, the Company had 10,080,103 common shares and 4,190 special voting shares held in treasury, while at December 31, 2020, the Company had 9,175,609 common shares and 2,190 special voting shares held in treasury. Shares in treasury include shares repurchased under the Group’s share repurchase program, which 317 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 13. EQUITY are recorded based on the transaction trade date. 12, 2021 following its temporary suspension from The increase in common shares held in treasury March 30, 2020 as part of actions implemented by primarily reflects the repurchase of shares by the management to prudently manage liquidity as a result Company through its share repurchase program, of the COVID-19 pandemic. At December 31, 2021 and partially offset by shares assigned under the Group’s 2020 the Company held in treasury 3.92 percent and equity incentive plans. The Company restarted its 3.57 percent of the total issued share capital of the multi-year share repurchase program on March Company, respectively.(2) The following table summarizes the changes in the number of outstanding common shares and outstanding special voting shares of the Company for the year ended December 31, 2021: Common shares Special voting shares Total Outstanding shares at December 31, 2019 185,283,323 63,346,921 248,630,244 Common shares repurchased under share repurchase program(1) Common shares assigned under equity incentive plans(2) Other changes (819,483) 284,050 — — — 1 (819,483) 284,050 1 Outstanding shares at December 31, 2020 184,747,890 63,346,922 248,094,812 Common shares repurchased under share repurchase program(3) Common shares assigned under equity incentive plans(4) Other changes(5) (1,167,592) 263,098 — — — (2,000) (1,167,592) 263,098 (2,000) Outstanding shares at December 31, 2021 183,843,396 63,344,922 247,188,318 (1) Includes shares repurchased between January 1, 2020 and December 31, 2020 based on the transaction trade date, for a total consideration of €119,771 thousand including transaction costs. (2) On March 16, 2020, 366,199 common shares, which were previously held in treasury, were assigned to participants of the equity incentive plans as a result of the vesting of certain performance share unit and retention restricted share unit awards. On March 17, 2020, the Company purchased 82,149 common shares, for a total consideration of €10,022 thousand, from a group of those employees who were assigned shares in order to cover the individual’s taxable income as is standard practice (“Sell to Cover”) in an over-the-counter transaction. See Note 21 “Share-Based Compensation” for additional details relating to the Group’s equity incentive plans. (3) Includes shares repurchased under the share repurchase program between January 1, 2021 and December 31, 2021 based on the transaction trade date, for a total consideration of €231,024, including transaction costs. (4) On March 16, 2021, 356,571 common shares, which were previously held in treasury, were assigned to participants of the equity incentive plans as a result of the vesting of certain performance share unit and retention restricted share unit awards. On March 17, 2021, the Company purchased 93,473 common shares, for a total consideration of €15,432 thousand, from a group of those employees who were assigned shares in order to cover the individual’s taxable income as is standard practice (“Sell to Cover”) in an over-the-counter transaction. See Note 21 “Share-Based Compensation” for additional details relating to the Group’s equity incentive plans. (5) Relates to the deregistration of certain special voting shares under the Company’s special voting shares term and conditions. THE LOYALTY VOTING STRUCTURE in the loyalty voting program by registering their The purpose of the loyalty voting structure is to common shares in the loyalty share register and reward ownership of the Company’s common holding them for three years. The loyalty voting shares and to promote stability of the Company’s program will be affected by means of the issue of shareholder base by granting long-term special voting shares to eligible holders of common shareholders of the Company with special voting shares. Each special voting share entitles the holder shares. Following the separation of Ferrari from to exercise one vote at the Company’s shareholder the Stellantis Group (previously referred to as Fiat meetings. Only a minimal dividend accrues to the Chrysler Automobiles N.V. or FCA prior to the merger special voting shares allocated to a separate special between FCA and Peugeot S.A. completed on January dividend reserve, and the special voting shares 16, 2021, which resulted in the creation of Stellantis do not carry any entitlement to any other reserve N.V.) in 2016, Exor N.V. (“Exor”) and Piero Ferrari of the Group. The special voting shares have only participate in the Company’s loyalty voting program immaterial economic entitlements and, as a result, and, therefore, effectively hold two votes for each do not impact the Company’s earnings per share of the common shares they hold. Investors who calculation. purchase common shares may elect to participate (2) The percentage of shares held in treasury compared to total issued share capital remains substantially the same if calculated considering only common shares held in treasury or if calculated considering common shares and special voting shares held in treasury. 318 FERRARI N.V.AR 2021SHARE PREMIUM The share premium reserve amounted to €5,768,544 thousand at both December 31, 2021 and December 31, 2020. RETAINED EARNINGS Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 15, 2021, a dividend distribution of €0.867 per common share was approved, corresponding to a total distribution of €160,272 thousand (of which €160,101 thousand was paid in 2021). The distribution was made from the retained earnings reserve. Following approval of the annual accounts by the shareholders at the Annual General Meeting of the Shareholders on April 16, 2020, a dividend distribution of €1.13 per common share was approved, corresponding to a total distribution of €208,765 thousand (of which €208,100 thousand was paid in 2020). The distribution was made from the retained earnings reserve. OTHER RESERVES Other reserves includes, among others: • a treasury reserve of €847,525 thousand at December 31, 2021 and €616,629 thousand at December 31, 2020. • a share-based compensation reserve of €28,379 thousand at December 31, 2021 and €43,482 thousand at December 31, 2020. • a legal reserve of €93 thousand at December 31, 2021 and €19 thousand at December 31, 2020, determined in accordance with Dutch law. Pursuant to Dutch law, limitations exist relating to the distribution of shareholders’ equity up to at least the total amount of the legal reserve, as well as other reserves mandated per the Company Articles of Association. At December 31, 2021, the legal and non-distributable reserves of the Company amounted to €93 thousand (€19 thousand at December 31, 2020) and included the following: • The UK Branch operates in the Pound Sterling. At each reporting period end, the assets and liabilities within the UK branch are translated to Euro and the respective foreign currency translation gain or loss is recorded in other comprehensive income. At December 31, 2021, the cumulative translation reserve amounted to €87 thousand (€13 thousand at December 31, 2020). • The Company records a statutory non-distributable reserve equal to 1 percent of the nominal value of the special voting shares. At December 31, 2021 and 2020, this reserve amounted to €6 thousand. RECONCILIATION OF EQUITY AND NET PROFIT/(LOSS) The reconciliation of equity as per the Consolidated Financial Statements to equity as per the Company Financial Statements is provided below: (€ thousand) At December 31, 2021 2020 Equity attributable to owners of the parent in the Consolidated Financial Statements of Ferrari N.V. 2,205,898 1,785,186 Intra-group restructuring OCI reserves in the Consolidated Financial Statements 5,969,427 5,969,427 (10,872) (43,233) Cumulative results of prior years of subsidiaries in the Consolidated Financial Statements (3,219,128) (2,576,312) Results of subsidiaries in the Consolidated Financial Statements Cumulative dividends in prior years Other changes Dividends Equity in the Company Financial Statements of Ferrari N.V. (870,881) (642,816) 1,016,700 1,016,700 (2,749) (3,242) 200,000 — 5,288,395 5,505,710 319 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 13. EQUITY The reconciliation of net profit as per the Consolidated Financial Statements to net profit/(loss) as per the Company Financial Statements is provided below: (€ thousand) Net profit attributable to owners of the parent in the Consolidated Financial Statements of Ferrari N.V. 830,767 607,817 Results of subsidiaries in the Consolidated Financial Statements Dividends Net profit/(loss) in the Company Financial Statements of Ferrari N.V. (870,881) (642,816) 200,000 — 159,886 (34,999) 2021 2020 14. SHARE-BASED COMPENSATION In the first quarter of 2021, 80,510 PSU awards vested (representing 100 percent of the target The Group has several equity incentive plans under PSU awards) as a result of the achievement of the which a combination of performance share units related performance conditions and 32,694 RSU (“PSUs”) and retention restricted share units (“RSUs”), awards vested upon achievement of the related which each represent the right to receive one Ferrari service conditions. As a result, 113,204 common common share, have been awarded to the Executive shares, which were previously held in treasury, Chairman, the Chief Executive Officer (“CEO”), were assigned to participants of the plan in the first members of the Ferrari Leadership Team (hereinafter quarter of 2021. In the first quarter of 2022, 86,331 also the “FLT”, formerly Senior Management Team, and PSU awards vested (representing 100 percent of the so renamed as a result of the organizational changes target PSU awards) and 75,857 RSU awards vested executed in January 2022) and other key employees of upon achievement of the related performance and the Group. service conditions for the period covering 2019 to 2021. As a result, 162,188 common shares held in EQUITY INCENTIVE PLAN 2016-2020 treasury will be assigned to participants of the plan in In the first quarter of 2021, 212,243 PSU awards the first quarter of 2022. vested (representing 100 percent of the target PSU awards) as a result of Ferrari’s third place EQUITY INCENTIVE PLAN 2020-2022 ranking in Total Shareholder Return (“TSR”) within Under the Equity Incentive Plan 2020-2022 the the defined Peer Group for the performance period Company awarded approximately 60 thousand 2020- from 2016 to 2020, and 31,120 RSU awards vested 2022 PSUs and approximately 48 thousand 2020-2022 upon achievement of the related service conditions. RSUs to the Executive Chairman, members of the FLT As a result, 243,363 common shares, which were and other key employees of the Group. The PSUs and previously held in treasury, were assigned to RSUs cover the three-year performance and service participants of the plan in the first quarter of 2021. periods from 2020 to 2022 and vest in 2023 based on There are no further awards outstanding for the the level of achievement of the related performance Equity Incentive Plan 2016-2020. targets or service conditions. EQUITY INCENTIVE PLAN 2019-2021 EQUITY INCENTIVE PLAN 2021-2023 Under the Equity Incentive Plan 2019-2021 the Under the Equity Incentive Plan 2021-2023 approved Company awarded approximately 174 thousand 2019- in 2021, the Company awarded approximately 50 2021 PSUs and approximately 111 thousand 2019- thousand 2021-2023 PSUs and approximately 41 2021 RSUs to the Executive Chairman, the former thousand 2021-2023 RSUs to the Executive Chairman, CEO, members of the FLT and other key employees of members of the FLT and other key employees of the Group. The PSUs and RSUs cover the three-year the Group. The PSUs and RSUs cover the three-year performance and service periods from 2019 to 2021. performance and service periods from 2021 to 2023 and vest in 2024 based on the level of achievement of the related performance targets or service conditions. 320 FERRARI N.V.AR 2021OUTSTANDING SHARE AWARDS Changes to the outstanding number of PSU and RSU awards under all equity incentive plans of the Group are as follows: (number of awards) Balance at January 1, 2020 Granted(1) Forfeited Vested Balance at December 31, 2020 Granted(2) Forfeited Vested Balance at December 31, 2021 (1) Granted under the Equity Incentive Plan 2020-2022 (2) Grander under the Equity Incentive Plan 2021-2023 Outstanding PSU Awards Outstanding RSU Awards 598,719 48,173 (1,461) (230,592) 414,839 49,861 (19,775) (292,753) 152,172 171,145 39,780 (1,460) (50,402) 159,063 41,460 (13,048) (63,814) 123,661 SHARE-BASED COMPENSATION EXPENSE in relation to share-based compensation recharged For the years ended December 31, 2021 and 2020, the to subsidiaries (€7,405 thousand and €9,996 thousand Company recognized €11,689 thousand and €17,401 respectively for the year ended December 31, 2020). thousand, respectively, as share-based compensation expense and an increase to other reserves in equity At December 31, 2021, unrecognized compensation in relation to the PSU awards and RSU awards of the expense relating to the Group’s equity incentive plans Group’s equity incentive plans. amounted to €11,082 thousand and is expected to be recognized over the remaining vesting periods Pursuant to an agreement between the Company through 2023. and various subsidiaries of the Group, the Company recharges subsidiaries for share-based compensation See Note 21 “Share-based Compensation” to the relating to equity instruments awarded to employees of Consolidated Financial Statements for additional the subsidiaries under the equity incentive plans. Of the details relating to the Group’s equity incentive plans. share-based compensation recognized in 2021, €2,891 thousand was recognized as an expense in cost of In 2021 the Company also recognized share-based sales and selling, general and administrative costs, and compensation expense of €2,206 thousand as part of €8,798 thousand was recorded as financial receivables commercial agreements with certain suppliers. 15. DEBT (€ thousand) Bonds and notes 1,835,022 149,495 (500,000) 2,593 1,487,110 Balance at January 1, 2021 Proceeds from borrowings Repayments of borrowings Net interest accrued/ (paid) and other Balance at December 31, 2021 Financial liabilities with related parties 1,680,236 2,390,000 (1,930,000) 2,307 — (244) 105 78 2,140,341 2,141 3,517,565 2,539,495 (2,430,244) 2,776 3,629,592 Balance at January 1, 2020 Proceeds from borrowings Repayments of borrowings Net interest accrued/ (paid) and other Balance at December 31, 2020 Bonds and notes 1,185,470 640,073 — 9,479 1,835,022 Financial liabilities with related parties 1,858,478 1,770,000 (1,948,000) 2,590 — (148) (242) (135) 1,680,236 2,307 Lease liabilities Total Lease liabilities Total 3,046,538 2,410,073 (1,948,148) 9,102 3,517,565 321 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 15. DEBT The breakdown of debt at December 31, 2021 and 2020 by nature and by maturity is as follows: (€ thousand) At December 31, 2021 2020 Due Due within between one year two and five years Due beyond five years Due Total Due within between one year two and five years Due beyond five years Total Bonds and notes 9,239 1,028,686 449,185 1,487,110 500,417 1,034,605 300,000 1,835,022 Financial liabilities with related parties Lease liabilities 2,140,341 299 — 882 — 2,140,341 1,680,236 — — 1,680,236 960 2,141 120 1,201 986 2,307 Total 2,149,879 1,029,568 450,145 3,629,592 2,180,773 1,035,806 300,986 3,517,565 BONDS AND NOTES 2021 BOND discount for an issue price of 98.898 percent, resulting in net proceeds of €640,073 thousand, after related On January 18, 2021 the Company fully repaid the expenses, and a yield to maturity of 1.732 percent. 2021 Bond for a total consideration of €501,250 The bond was admitted to trading on the regulated thousand (including accrued interest). The bond was market of Euronext Dublin. The amount outstanding previously issued in November 2017 on the regulated of the 2025 Bond at December 31, 2021 was €648,984 market of the Euronext Dublin (formerly the Irish thousand, including accrued interest of €5,850 Stock Exchange) for a principal amount of €700 thousand (€647,042 thousand, including accrued million at a coupon of 0.25 and due in January 2021. interest of €5,850 thousand at December 31, 2020). In July 2019 the Company repurchased an aggregate nominal amount of €200,000 thousand following 2029 AND 2031 NOTES a cash tender offer. The amount outstanding at On July 31, 2019, the Company issued 1.12 percent December 31, 2020 was €501,151 thousand, including senior notes due August 2029 (“2029 Notes”) and 1.27 accrued interest of €1,199 thousand. percent senior notes due August 2031 (“2031 Notes”) 2023 BOND through a private placement to certain US institutional investors, each having a principal of €150 million. On March 16, 2016, the Company issued 1.5 percent The net proceeds from the issuances amounted coupon notes due March 2023, having a principal of to €298,316 thousand and the yields to maturity on €500 million. The bond was issued at a discount for an an annual basis equal the nominal coupon rates of issue price of 98.977 percent, resulting in net proceeds the Notes. The Notes are primarily used for general of €490,729 thousand, after the debt discount and corporate purposes, including the funding of capital issuance costs, and a yield to maturity of 1.656 percent. expenditures. The net proceeds were used, together with additional cash held by the Company, to fully repay a €500 million The amount outstanding of the 2029 Notes at bank loan. The bond is unrated and was admitted to December 31, 2021 was €150,052 thousand, trading on the regulated market of the Euronext Dublin including accrued interest of €700 thousand (formerly the Irish Stock Exchange). Following a cash (€149,971 thousand, including accrued interest of tender offer, on July 16, 2019 the Company executed €700 thousand at December 31, 2020). The amount the repurchase of these notes for an aggregate outstanding of the 2031 Notes at December 31, 2021 nominal amount of €115,395 thousand. The amount was €150,111 thousand, including accrued interest outstanding at December 31, 2021 was €387,872 of €794 thousand (€150,044 thousand including thousand and includes accrued interest of €4,567 accrued interest of €794 thousand at December 31, thousand (€386,814 thousand including accrued 2020). interest of €4,567 thousand at December 31, 2020). 2032 NOTES 2025 BOND On July 29, 2021, the Company issued 0.91 percent On May 27, 2020 the Company issued 1.5 percent senior notes due January 2032 (“2032 Notes”) through coupon notes due May 2025 (“2025 Bond”), having a a private placement to certain US institutional principal of €650 million. The notes were issued at a investors having a principal of €150 million. The net 322 FERRARI N.V.AR 2021proceeds from the issuance amounted to €149,495 extended to the outstanding notes, subject to certain thousand and the yield to maturity on an annual basis permitted exceptions; (ii) pari passu clauses, under equals the nominal coupon rates of the Notes. The which the notes rank and will rank pari passu with Notes are used for general corporate purposes. The all other present and future unsubordinated and amount outstanding of the 2032 Notes at December unsecured obligations of Ferrari; (iii) events of default 31, 2021 was €150,091 thousand, including accrued for failure to pay principal or interest or comply with interest of €576 thousand. other obligations under the notes with specified cure periods or in the event of a payment default or The abovementioned bonds and notes impose acceleration of indebtedness or in the case of certain covenants on Ferrari including: (i) negative pledge bankruptcy events; and (iv) other clauses that are clauses which require that, in case any security customarily applicable to debt securities of issuers interest upon assets of Ferrari is granted in with a similar credit standing. A breach of these connection with other notes or debt securities with covenants may require the early repayment of the the consent of Ferrari are, or are intended to be, notes. At December 31, 2021 and 2020, Ferrari was in listed, such security should be equally and ratably compliance with the covenants of the notes. FINANCIAL LIABILITIES WITH RELATED PARTIES Financial liabilities with related parties at December 31, 2021 are broken down as follows: (€ thousand) Counterparty Currency Total amount outstanding at December 31, 2021 Due date Interest Rate Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Total Euro Euro Euro Euro Euro Euro Euro 110,045 January 2022 (*) EURIBOR 6M + 60bps 80,019 80,032 70,003 500,123 800,091 January 2022 (*) EURIBOR 6M + 60bps January 2022 (*) EURIBOR 6M + 60bps January 2022 (*) EURIBOR 3M + 60bps March 2022 EURIBOR 6M + 60bps October 2022 EURIBOR 6M + 60bps 500,028 November 2022 EURIBOR 6M + 60bps 2,140,341 (*) The financial liabilities due in January 2022 were refinanced with Ferrari S.p.A. for €400 million due in January 2023 at interest rates similar to the original liabilities. Financial liabilities with related parties at December 31, 2020 are broken down as follows: (€ thousand) Counterparty Currency Total amount outstanding at December 31, 2020 Due date Interest Rate Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Ferrari S.p.A. Total Euro Euro Euro Euro Euro 70,002 150,028 160,027 800,146 March 2021 EURIBOR 3M + 60bps March 2021 EURIBOR 6M + 60bps March 2021 EURIBOR 6M + 60bps October 2021 EURIBOR 6M + 60bps 500,033 November 2021 EURIBOR 3M + 60bps 1,680,236 During 2021, certain debt agreements with Ferrari At December 31, 2021 a 10 basis point increase in S.p.A. were renewed. Net proceeds from financial interest rates on the floating rate financial liabilities, liabilities with related parties amounted to €460,000 with all other variables held constant, would have thousand in 2021 (net repayments of €178,000 resulted in a decrease in profit before tax of €2,140 thousand in 2020). thousand on an annualized basis (decrease of €1,680 thousand at December 31, 2020). 323 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ 15. DEBT The carrying amount of the financial liabilities with related parties approximates fair value. Information on covenants of the notes, fair value measurement and qualitative and quantitative information on financial risks are provided in Note 24, Note 27 and Note 30, respectively, to the Consolidated Financial Statements. Further information on the Group’s liquidity is provided in the “Liquidity and Capital Resources” section of this Annual Report. Based on this information the Company deems the going concern assumption adequate. LEASE LIABILITIES At December 31, 2021 lease liabilities amounted to €2,141 thousand (€2,307 thousand at December 31, 2020). REVOLVING CREDIT FACILITIES In April 2020, additional committed credit lines of €350 million were secured with tenors ranging from 18 to 24 months, doubling total committed credit lines available to €700 million. In March 2021 the Company cancelled a credit line of €100 million and simultaneously replaced it with a new credit line for €150 million with a tenor of 23 months. In October 2021 an undrawn committed credit line previously negotiated in April 2020 for €100 million expired. At December 31, 2021 the Company had total committed credit lines available and undrawn amounted to €650 million (€700 million at December 31, 2020). In December 2019, the Company negotiated a €350 million unsecured committed revolving credit facility (the “RCF”), which is intended for general corporate and working capital purposes. The RCF has a 5 year-tenor with two further one-year extension options, exercisable on the first and second anniversary of the signing date on the Company’s request and the approval of each participating bank. In December 2020 and in December 2021 the first and the second one-year extension option were exercised by the Company and approved by all participating banks. At December 31, 2021 the RCF was undrawn. CONTRACTUAL OBLIGATIONS The following table summarizes payments due under our significant commitments at December 31, 2021: (€ million) Long-term debt (1) Interest on long-term debt (2) Lease liabilities and other Total contractual obligations Payments due by period Less than 1 year 1 to 3 years 3 to 5 years — 20 — 20 385 31 1 417 650 14 1 665 After 5 years 450 20 — 470 Total 1,485 85 2 1,572 (1) Amounts presented relate to the principal amounts of long-term debt, excluding lease liabilities and the related interest expense that will be paid when due. The table above does not include short-term debt obligations. (2) Amounts include interest payments based on contractual terms and current interest rates on our long-term debt. Interest rates based on variable rates included above were determined using the current rates in effect at December 31, 2021. 16. TRADE PAYABLES (€ thousand) Due to related parties Due to third parties Total trade payables 2021 8,963 2,434 2020 9,157 2,180 11,397 11,337 Due to related parties primarily relates to amounts payable to Ferrari S.p.A. for corporate services rendered and costs recharged. Due to third parties relates to costs for marketing-related events and legal and professional services. 324 FERRARI N.V.AR 2021The following sets for a breakdown of trade payables by currency: (€ thousand) Euro Pound Sterling Total trade payables 2021 6,352 5,045 2020 6,235 5,102 11,397 11,337 Trade payables are due within one year and their carrying amount at the reporting date is deemed to approximate their fair value. 17. OTHER CURRENT LIABILITIES Other current liabilities amounted to €39,306 thousand at December 31, 2021 (€14,277 thousand at December 31, 2020) and primarily relate to indirect tax payables, payables to personnel and deferred income. Deferred income principally relates to advances received from dealers for marketing-related events, such as new car launches. 18. EARNINGS PER SHARE Earnings per share information is provided in Note 12 to the Consolidated Financial Statements. 19. NOTE TO THE STATEMENT OF CASH FLOWS OPERATING ACTIVITIES Other non-cash income and expenses primarily includes share-based compensation expense amounting to €13,895 thousand in 2021 (€17,400 thousand in 2020). 20. AUDIT FEES The fees for services provided by the Company’s independent auditors, Ernst & Young Accountants LLP, and its member firms and/or affiliates, to the Company and its subsidiaries are broken down as follows: (€ thousand) Audit fees Audit-related fees All other fees Total 2021 1,160 329 79 1,568 2020 1,160 321 — 1,481 Audit fees of Ernst & Young Accountants LLP amounted to €80 thousand in 2021 (€80 thousand in 2020) and are included in the table above. 325 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS21. REMUNERATION Detailed information on the remuneration of the Board of Directors and senior management is included in the “Corporate Governance” and “Remuneration of Directors” sections to the Annual Report. 22. COMMITMENTS AND CONTINGENCIES At December 31, 2021 and 2020, the Company provided guarantees over certain debt of its subsidiary Ferrari Financial Services Inc. The book value of the related debt at December 31, 2021 and 2020 was €61,919 thousand and €28,553 thousand, respectively. For intercompany financial guarantees issued by the Company, there is no expected default and therefore the financial guarantees are not recognized. 23. RELATED PARTY TRANSACTIONS Pursuant to IAS 24, the related parties with which the Company has transactions are Ferrari S.p.A. and other companies within the Ferrari Group. The Group carries out transactions with related parties on commercial terms that are normal in their respective markets, considering the characteristics of the goods or services involved. Related party transactions include: • Dividends received from Ferrari S.p.A. (Note 4) • Corporate services and recharge of expenses to Ferrari S.p.A. (Note 5) • Share services received from Ferrari S.p.A. mainly related to human resources, payroll, tax, legal, accounting and treasury. (Note 5) • Participation in a Ferrari Group-wide cash management system where the operating cash management, main funding operations and liquidity investment of the Ferrari Group are centrally coordinated by Ferrari S.p.A. Amounts recorded as Ferrari Group cash management pools represented the Company’s participation in such pools. (Note 11) • Financial liabilities and receivables with Ferrari S.p.A. or other subsidiaries of the Group. (Note 15 and Note 16) • Key management compensation. (Note 21) The impact of transactions with related parties on the Company Financial Statements is disclosed separately in the relevant notes. 326 FERRARI N.V.AR 202124. ORGANIZATIONAL STRUCTURE The following table sets forth the Company’s subsidiaries and associates at December 31, 2021. During 2021, no changes occurred in the organizational structure. Country Nature of business Shares held by the Group 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 25% Name Directly held interests Ferrari S.p.A. New Business 33 S.p.A. Indirectly held through Ferrari S.p.A. Ferrari North America Inc. Ferrari Japan KK Italy Italy USA Japan Manufacturing Holding company Importer and distributor Importer and distributor Ferrari Australasia Pty Limited Australia Importer and distributor Ferrari International Cars Trading (Shanghai) Co. L.t.d. China Importer and distributor Ferrari (HK) Limited Hong Kong Importer and distributor Ferrari Far East Pte Limited Singapore Service company Ferrari Management Consulting (Shanghai) Co. L.t.d. China Service company Ferrari South West Europe S.a.r.l. France Service company Ferrari Central Europe GmbH Germany Service company G.S.A. S.A. in liquidation Mugello Circuit S.p.A. Ferrari Financial Services, Inc. Indirectly held through other Group entities Switzerland Service company Italy USA Racetrack management Financial services Ferrari Auto Securitization Transaction, LLC(1) USA Financial services Ferrari Auto Securitization Transaction - Lease, LLC(1) USA Financial services Ferrari Auto Securitization Transaction - Select, LLC(1) USA Financial services Ferrari Financial Services Titling Trust(1) 410 Park Display, Inc.(2) Associated companies valued at cost USA USA Financial services Retail Fondazione Casa di Enzo Ferrari Italy Service company Branches UK Branch UK Sales and after sales support (1) Shareholding held by Ferrari Financial Services Inc. (2) Shareholding held by Ferrari North America Inc. 327 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS25. SUBSEQUENT EVENTS The Company has evaluated subsequent events through February 25, 2022, which is the date the Company Financial Statements were authorized for issuance, and identified the following matters: On January 26, 2022 Ferrari announced that CEVA Logistics will be a new Scuderia Ferrari team partner starting from the 2022 Formula 1 season. The multi-year agreement will also see CEVA involved in Ferrari’s other racing activities in GT racing and the Ferrari Challenge, with the Marseille-based company taking on the role of Official Logistics Partner for those series. On February 8, 2022 Ferrari announced a new partnership with Qualcomm Technologies, Inc. The San Diego, California-based company will be a Scuderia Ferrari Premium Partner through Snapdragon, Qualcomm’s premium product and experience brand leveraged across multiple platforms and categories, including automotive. The agreement with Qualcomm Technologies will have a strong technological impact aimed at accelerating the digital transformation process for Ferrari and its road cars. Starting from the first common projects already identified, such as the digital cockpit, the two companies will bring together ideas and expertise to explore new opportunities and a range of technological solutions. Under the common share repurchase program, from January 1, 2022 to February 18, 2022 the Company purchased an additional 390,819 common shares for total consideration of €80.1 million. At February 18, 2022 the Company held in treasury an aggregate of 10,470,922 common shares. On February 25, 2022, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders that the Company declare a dividend of €1.362 per common share, totaling approximately €250 million. The proposal is subject to the approval of the Company’s shareholders at the Annual General Meeting to be held on April 13, 2022. February 25, 2022 Board of Directors John Elkann Benedetto Vigna Piero Ferrari Delphine Arnault Francesca Bellettini Eddy Cue Sergio Duca John Galantic Maria Patrizia Grieco Adam Keswick 328 FERRARI N.V.AR 2021329 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSOTHER INFORMATION OTHER INFORMATION INDEPENDENT AUDITOR’S REPORT The report of the Company’s independent auditor, Ernst & Young Accountants LLP, the Netherlands, is set forth at the end of this Annual Report. DIVIDENDS Dividends will be determined in accordance with article 23 of the Articles of Association of Ferrari N.V. The relevant provisions of the Articles of Association read as follows: 1. The Company shall maintain a special capital reserve to be credited against the share premium exclusively for the purpose of facilitating any issuance or cancellation of special voting shares. The special voting shares shall not carry any entitlement to the balance of the special capital reserve. The Board of Directors shall be authorized to resolve upon (i) any distribution out of the special capital reserve to pay up special voting shares or (ii) re-allocation of amounts to credit or debit the special capital reserve against or in favor of the share premium reserve. 2. The Company shall maintain a separate dividend reserve for the special voting shares. The special voting shares shall not carry any entitlement to any other reserve of the Company. Any distribution out of the special voting rights dividend reserve or the partial or full release of such reserve will require a prior proposal from the Board of Directors and a subsequent resolution of the meeting of holders of special voting shares. 3. From the profits, shown in the annual accounts, as adopted, such amounts shall be reserved as the Board of Directors may determine. 4. The profits remaining thereafter shall first be applied to allocate and add to the special voting shares dividend reserve an amount equal to one percent (1%) of the aggregate nominal value of all outstanding special voting shares. The calculation of the amount to be allocated and added to the special voting shares dividend reserve shall occur on a time-proportionate basis. If special voting shares are issued during the financial year to which the allocation and addition pertains, then the amount to be allocated and added to the special voting shares dividend reserve in respect of these newly issued special voting shares shall be calculated as from the date on which such special voting shares were issued until the last day of the financial year concerned. The special voting shares shall not carry any other entitlement to the profits. 5. Any profits remaining thereafter shall be at the disposal of the general meeting of Shareholders for distribution of profits on the common shares only, subject to the provision of paragraph 8 of this article. 6. Subject to a prior proposal of the Board of Directors, the general meeting of Shareholders may declare and pay distribution of profits and other distributions in United States Dollars. Furthermore, subject to the approval of the general meeting of Shareholders and the Board of Directors having been designated as the body competent to pass a resolution for the issuance of shares in accordance with Article 6, the Board of Directors may decide that a distribution shall be made in the form of shares or that Shareholders shall be given the option to receive a distribution either in cash or in the form of shares. 7. The Company shall only have power to make distributions to Shareholders and other persons entitled to distributable profits to the extent the Company’s equity exceeds the sum of the paid in and called up part of the share capital and the reserves that must be maintained pursuant to Dutch law and the Company’s Articles of Association. No distribution of profits or other distributions may be made to the Company itself for shares that the Company holds in its own share capital. 332 FERRARI N.V.AR 20218. The distribution of profits shall be made after the adoption of the annual accounts, from which it appears that the same is permitted. 9. The Board of Directors shall have power to declare one or more interim distributions of profits, provided that the requirements of paragraph 7 hereof are duly observed as evidenced by an interim statement of assets and liabilities as referred to in Section 2:105 paragraph 4 of the Dutch Civil Code and provided further that the policy of the Company on additions to reserves and distributions of profits is duly observed. The provisions of paragraphs 2 and 3 hereof shall apply mutatis mutandis. 10. The Board of Directors may determine that distributions are made from the Company’s share premium reserve or from any other reserve, provided that payments from reserves may only be made to the Shareholders that are entitled to the relevant reserve upon the dissolution of the Company. 11. Distributions of profits and other distributions shall be made payable in the manner and at such date(s) - within four (4) weeks after declaration thereof - and notice thereof shall be given, as the general meeting of Shareholders, or in the case of interim distributions of profits, the Board of Directors shall determine. 12. Distributions of profits and other distributions, which have not been collected within five (5) years and one (1) day after the same have become payable, shall become the property of the Company. BRANCH OFFICES Please make reference to Note 24 of the Company Financial Statements included in this Annual Report. 333 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTSINDEPENDENT AUDITOR’S REPORT TO: THE SHAREHOLDERS AND AUDIT COMMITTEE OF FERRARI N.V. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 2021 INCLUDED IN THE ANNUAL REPORT assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence OUR OPINION regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en We have audited the financial statements for the beroepsregels accountants (VGBA, Dutch Code of year ended December 31, 2021 of Ferrari N.V. (herein Ethics). referred to as the company and together with its subsidiaries the group), based in Amsterdam. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our In our opinion the accompanying financial statements opinion. give a true and fair view of the financial position of Ferrari N.V. as at December 31, 2021 and of its INFORMATION IN SUPPORT OF OUR OPINION result and its cash flows for the year then ended in We designed our audit procedures in the context accordance with International Financial Reporting of our audit of the financial statements as a whole Standards as adopted by the European Union (EU- and in forming our opinion thereon. The following IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. information in support of our opinion and any findings were addressed in this context, and we do not provide The financial statements comprise: a separate opinion or conclusion on these matters. • the consolidated and company statement of financial position as at December 31, 2021 OUR UNDERSTANDING OF THE BUSINESS • the following statements for 2021: the Ferrari N.V. is among the world’s leading luxury consolidated and company income statement brands. The activities of Ferrari N.V. comprise of and the consolidated and company statements of the design, engineering, production and sale of comprehensive income, changes in equity and cash luxury performance sports cars. The Ferrari group flows is structured in group entities and we tailored our • the notes comprising a summary of the significant group audit approach accordingly. We paid specific accounting policies and other explanatory attention in our audit to a number of areas driven by information. the operations of the group and our risk assessment. BASIS FOR OUR OPINION We start by determining materiality and identifying We conducted our audit in accordance with Dutch and assessing the risks of material misstatement of law, including the Dutch Standards on Auditing. Our the financial statements, whether due to fraud or responsibilities under those standards are further error in order to design audit procedures responsive described in the Our responsibilities for the audit of to those risks, and to obtain audit evidence that is the financial statements section of our report. sufficient and appropriate to provide a basis for We are independent of Ferrari N.V. in accordance misstatement resulting from fraud is higher with the EU Regulation on specific requirements than for one resulting from error, as fraud may regarding statutory audit of public-interest entities, involve collusion, forgery, intentional omissions, the Wet toezicht accountantsorganisaties (Wta, misrepresentations, or the override of internal our opinion. The risk of not detecting a material Audit firms supervision act), the Verordening control. inzake de onafhankelijkheid van accountants bij 334 FERRARI N.V.AR 2021MATERIALITY Materiality €50 million (2020: €33 million). Benchmark applied 5% of profit before taxes. Explanation determining our materiality because the users of the financial statements of profit-oriented entities like We consider an earnings-based measure, particularly profit before taxes, an appropriate basis for Ferrari tend to focus on the financial performance of the company. We have also taken into account misstatements and/ North America Inc. as two group entities, which, in or possible misstatements that in our opinion are our view, required an audit of their complete financial material for the users of the financial statements for information. Specific scope audit procedures on qualitative reasons. certain balances and transactions were performed We agreed with the audit committee that procedures were performed on the remaining on four other entities. Risk-based analytical misstatements in excess of €2.5 million, which are entities. identified during the audit, would be reported to them, as well as smaller misstatements that in our view must In establishing the overall approach to the audit, we be reported on qualitative grounds. determined the work to be performed by us, as group SCOPE OF THE GROUP AUDIT Young Global member firms and operating under our As Ferrari N.V. is the parent of a group of entities, the coordination and supervision. We have performed financial information of this group is included in the the following procedures: consolidated financial statements. • We have had regular virtual team meetings with EY auditors, and by component auditors from Ernst & Italy, all component auditors and management and Because we are ultimately responsible for the opinion, reviewed the audit work performed on the group we are also responsible for directing, supervising consolidation, financial statements and related and performing the group audit. In this respect we disclosures, assessed the effect of COVID-19 and the have determined the nature and extent of the audit key audit matter related to Ferrari S.p.A.: warranty procedures to be carried out for group entities. and recall campaigns provision. We reviewed the Decisive were the size and/or the risk profile of audit files of the component auditor and determined the group entities or operations. On this basis, we the sufficiency and appropriateness of the work selected group entities for which an audit or review performed. had to be carried out on the complete set of financial • Other component auditors included in the group information or on specific items. audit scope received detailed instructions, including key risks and audit focus areas, and we determined All group entities were included in the scope of our the sufficiency and appropriateness of the work group audit. We identified Ferrari S.p.A. and Ferrari performed. In total these procedures represent 98% of the group’s total assets, 97% of net revenues and 100% of profit before taxes. 19% 78% ASSETS 3% REVENUE 3% 1% 14% PROFIT BEFORE TAX 6% 82% 94% Full scope Specific scope Limited scope Other procedures 335 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 2021 INCLUDED IN THE ANNUAL REPORT By performing the procedures mentioned above at OUR AUDIT RESPONSE RELATED TO FRAUD RISKS components of the group, together with additional We identify and assess the risks of material procedures at group level, we have been able to misstatement of the financial statements due to fraud. obtain sufficient and appropriate audit evidence about During our audit we obtained an understanding of the group’s financial information to provide an opinion the entity and its environment and the components on the consolidated financial statements. of the system of internal control, including the risk TEAMING AND USE OF SPECIALISTS process for responding to the risks of fraud and We ensured that the audit teams both at group monitoring the system of internal control and how the and at component levels included the appropriate audit committee exercises oversight, as well as the assessment process and the board of director’s skills and competences which are needed for the outcomes. audit of a listed client in the automotive industry. We included specialists in the areas of IT audit, forensics, We refer to section Risk Management Process and sustainability, treasury, share based payments and Internal Control Systems of the board of directors income tax and have made use of our own experts in report for its (fraud) risk assessment. the areas of valuations and actuaries. OUR FOCUS ON CLIMATE RISKS AND THE ENERGY TRANSITION We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as the code of conduct, Climate objectives will be high on the public agenda whistle blower procedures and incident registration. in the next decades. Issues such as CO2 reduction impact financial reporting, as these issues entail risks We evaluated the design and the implementation and, where considered appropriate, tested the operating for the business operation, the valuation of assets effectiveness, of internal controls designed to (‘stranded assets’) and provisions or the sustainability mitigate fraud risks. of the business model and access to financial markets of companies with a larger CO2 footprint. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to As part of our audit of the financial statements, financial reporting fraud, misappropriation of assets we evaluated the extent to which climate-related and bribery and corruption in co-operation with risks and the possible effects of the energy our forensic and legal specialists. We evaluated transition are taken into account in estimates and whether these factors indicate that a risk of material significant assumptions, as well as in the design misstatement due to fraud is present. of relevant internal control measures by Ferrari N.V. Furthermore, we read the report of the board We incorporated elements of unpredictability in our of directors and considered whether there is any audit. We also considered the outcome of our other material inconsistency between the non-financial audit procedures and evaluated whether any findings information in section Risk Management Process were indicative of fraud or non-compliance. and Internal Control Systems and, the Non Financial Statement and the financial statements. As in all of our audits, we addressed the risks related to management override of controls, however, when Our audit procedures to address the assessed identifying and assessing fraud risks, we rebutted the climate-related risks and the possible effects of the presumption that there are risks of fraud in revenue energy transition did not result in a key audit matter. recognition. For the risk related to management OUR FOCUS ON FRAUD AND NON- COMPLIANCE WITH LAWS AND REGULATIONS override of controls we have performed procedures among others to evaluate key accounting estimates for management bias that may represent a risk of material misstatement due to fraud, in particular OUR RESPONSIBILITY relating to important judgment areas and significant Although we are not responsible for preventing fraud accounting estimates as disclosed in Note 2 and Note or non-compliance and we cannot be expected to 23 to the financial statements. We have also used detect non-compliance with all laws and regulations, data analysis to identify and address high-risk journal it is our responsibility to obtain reasonable assurance entries. that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error. 336 FERRARI N.V.AR 2021These risks did however not require significant auditor’s attention in addition to the following fraud risk identified during our audit. Risks related to management override of controls In our audit approach we considered that the risks related to management override of controls would primarily impact the warranty and recall campaigns provision due to the complexity of the process and assumptions involved in estimating the warranty liabilities for new models (and recall campaign) for which Fraud Risk management does not have sufficient historical data and for which management performs an estimation of reasonably expected costs based on available data. We considered whether these assumptions in the determination of the warranty and recall campaigns provision indicate a management bias that may represent a risk of material misstatement due to fraud and determined this as key audit matter. Our audit approach We describe the audit procedures responsive to the risk of management override in the description of our audit approach for the key audit matter ’Warranty and recall campaigns provision’. We considered available information and made to continue as a going concern and to continue its enquiries of relevant executives, directors (including operations for at least the next 12 months. internal audit, legal, compliance, human resources and regional directors) and the audit committee. We discussed and evaluated the specific assessment The fraud risk we identified, enquiries and other judgment and maintaining professional skepticism. with the board of directors exercising professional available information did not lead to specific indications for fraud or suspected fraud potentially We considered whether the board of directors’ going materially impacting the view of the financial concern assessment, based on our knowledge and statements. understanding obtained through our audit of the financial statements or otherwise, contains all events OUR AUDIT RESPONSE RELATED TO RISKS OF or conditions that may cast significant doubt on the NON-COMPLIANCE WITH LAWS AND REGULATIONS company’s ability to continue as a going concern. If We assessed factors related to the risks of non- we conclude that a material uncertainty exists, we compliance with laws and regulations that could are required to draw attention in our auditor’s report reasonably be expected to have a material effect on to the related disclosures in the financial statements the financial statements from our general industry or, if such disclosures are inadequate, to modify our experience, through discussions with the board of opinion. directors, reading minutes, inspection of internal audit and compliance reports, and performing substantive Based on our procedures performed, we did not tests of details of classes of transactions, account identify serious doubts on the entity’s ability to balances or disclosures. continue as a going concern for the next 12 months. We also inspected lawyers’ letters and Our conclusions are based on the audit evidence correspondence with regulatory authorities and obtained up to the date of our auditor’s report. remained alert to any indication of (suspected) non- However, future events or conditions may cause a compliance throughout the audit. Finally we obtained company to cease to continue as a going concern. written representations that all known instances of non-compliance with laws and regulations have been OUR KEY AUDIT MATTERS disclosed to us. Key audit matters are those matters that, in our professional judgment, were of most significance OUR AUDIT RESPONSE RELATED TO GOING CONCERN in our audit of the financial statements. We As disclosed in section ‘Going concern’ in Note 1 have communicated the key audit matter to the to the financial statements, the board of directors audit committee. The key audit matter is not a made a specific assessment of the company’s ability comprehensive reflection of all matters discussed. 337 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 2021 INCLUDED IN THE ANNUAL REPORT In comparison with previous year, our key audit matter did not change. Risk Warranty and recall campaigns provision As more fully described in the notes 2 and 23 to the consolidated financial statements, the group establishes a provision for product warranties at the time a sale is recognized to guarantee the performance of vehicles from defects that may become apparent within a certain period or term. In addition, the group periodically initiates recall campaigns to address various client satisfaction, safety and emissions issues related to cars sold. The provision includes the management’s estimate of the expected cost to fulfill the obligations over the contractual warranty or campaign period. Such estimate is developed using assumptions related to expected costs to be incurred based on the group’s historical claims or costs experience, including the costs of parts and services. As part of our risk assessment we considered the risk of management override of controls. As at December 31, 2021, the warranty and recall campaigns provision amounts to €109 million. Future costs of these actions are subject to numerous uncertainties, including the enactment of new laws and regulations, the number of vehicles affected by warranty actions or recall campaigns and the nature of the corrective action that may result in the reassessment of the established provision. The costs related to this provision are recognized within cost of sales. Auditing the warranty and recall campaign provision was complex in consideration of the judgment required to develop assumptions around future costs to be incurred for warranty and recall campaigns, especially for newly launched models or vehicles, and the complexity of the calculation involved. The procedures performed to address the matter in our audit included, among others, obtaining an understanding of the warranty and recall campaign provisioning process and evaluating the group’s accounting policy thereon. We evaluated the design and tested operating effectiveness of internal controls relevant to this area, specifically related to the management’s assumptions developed to estimate future costs to be incurred. We evaluated the methodology, including calculation, and assumptions used by the management in estimating future costs for Our audit approach warranty programs and recall campaigns, and assessed any changes, or the lack thereof, from the prior year. We tested the completeness and accuracy of the underlying data and the journal entries recorded by the management. We further completed analytical procedures over the accrued provision and retrospective analyses comparing the provisions recorded by the group against actual spending for warranty and recall service costs to evaluate the cost assumptions used by the management. Lastly, we evaluated the adequacy of the warranty and recall campaign disclosures included in the notes to the consolidated financial statements, including significant judgements made by the management. Key observations We concur with the assessment and recording of the warranty and recall campaigns provision and the related disclosures as included in the notes to the consolidated financial statements. REPORT ON OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT less than the scope of those performed in our audit of the financial statements. The board of directors is responsible for the The annual report contains other information in preparation of the other information, including the addition to the financial statements and our auditor’s management report in accordance with Part 9 of report thereon. Book 2 of the Dutch Civil Code and other information required by Part 9 of Book 2 of the Dutch Civil Code. Based on the following procedures performed, we The board of directors is responsible for ensuring conclude that the other information: that the remuneration report is drawn up and • is consistent with the financial statements and does published in accordance with Sections 2:135b and not contain material misstatements 2:145 sub section 2 of the Dutch Civil Code. • contains the information as required by Part 9 of Book 2 for the management report and the other information as required by Part 9 of Book 2 of the REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS AND ESEF Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code for ENGAGEMENT the remuneration report. We were engaged by the audit committee as auditor of Ferrari N.V. on September 29, 2015, as of the audit We have read the other information. Based on our for the year 2015 and have operated as statutory knowledge and understanding obtained through auditor ever since that date. our audit of the financial statements or otherwise, we have considered whether the other information NO PROHIBITED NON-AUDIT SERVICES contains material misstatements. By performing We have not provided prohibited non-audit services these procedures, we comply with the requirements as referred to in Article 5(1) of the EU Regulation on of Part 9 of Book 2 and Section 2:135b sub-Section 7 of specific requirements regarding statutory audit of the Dutch Civil Code and the Dutch Standard 720. The public-interest entities. scope of the procedures performed is substantially 338 FERRARI N.V.AR 2021EUROPEAN SINGLE ELECTRONIC REPORTING FORMAT (ESEF) Ferrari N.V. has prepared the annual report in ESEF. of the financial statements that are free from material misstatement, whether due to fraud or error. The requirements for this are set out in the Delegated As part of the preparation of the financial statements, Regulation (EU) 2019/815 with regard to regulatory the board of directors is responsible for assessing technical standards on the specification of a single the company’s ability to continue as a going concern. electronic reporting format (hereinafter: the RTS on Based on the financial reporting frameworks ESEF). mentioned, the board of directors should prepare the financial statements using the going concern In our opinion, the annual report, prepared in the basis of accounting unless the board of directors XHTML format, including the partially marked-up either intends to liquidate the company or to cease consolidated financial statements, as included in the operations, or has no realistic alternative but to do so. reporting package by Ferrari N.V., complies in all The board of directors should disclose events and material respects with the RTS on ESEF. circumstances that may cast significant doubt on the company’s ability to continue as a going concern in The board of directors is responsible for preparing the financial statements. the annual report, including the financial statements, in accordance with the RTS on ESEF, whereby the board of directors combines the various components OUR RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS into a single reporting package. Our objective is to plan and perform the audit Our responsibility is to obtain reasonable assurance sufficient and appropriate audit evidence for our engagement in a manner that allows us to obtain for our opinion whether the annual report in this opinion. reporting package complies with the RTS on ESEF. Our procedures, taking into account Alert 43 of absolute, level of assurance, which means we may not the NBA (the Netherlands Institute of Chartered detect all material errors and fraud during our audit. Our audit has been performed with a high, but not Accountants), included amongst others: Misstatements can arise from fraud or error and are • obtaining an understanding of the company’s considered material if, individually or in the aggregate, financial reporting process, including the they could reasonably be expected to influence the preparation of the reporting package economic decisions of users taken on the basis of • obtaining the reporting package and performing these financial statements. The materiality affects validations to determine whether the reporting the nature, timing and extent of our audit procedures package containing the Inline XBRL instance and the evaluation of the effect of identified document and the XBRL extension taxonomy files, misstatements on our opinion. has been prepared in accordance with the technical specifications as included in the RTS on ESEF We have exercised professional judgment and have • examining the information related to the maintained professional skepticism throughout consolidated financial statements in the reporting the audit, in accordance with Dutch Standards on package to determine whether all required mark- Auditing, ethical requirements and independence ups have been applied and whether these are in requirements. The ‘Information in support of our accordance with the RTS on ESEF. opinion’ section above includes an informative DESCRIPTION OF RESPONSIBILITIES REGARDING THE FINANCIAL STATEMENTS summary of our responsibilities and the work performed as the basis for our opinion. Our audit further included among others: RESPONSIBILITIES OF BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTS • performing audit procedures responsive to the risks identified, and obtaining audit evidence that is The board of directors is responsible for the sufficient and appropriate to provide a basis for our preparation and fair presentation of the financial opinion statements in accordance with EU-IFRS and Part 9 of • obtaining an understanding of internal control Book 2 of the Dutch Civil Code. Furthermore, the board relevant to the audit in order to design audit of directors is responsible for such internal control as procedures that are appropriate in the it determines is necessary to enable the preparation circumstances, but not for the purpose of 339 AR 2021BOARD REPORTFINANCIAL STATEMENTSOTHER INFORMATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS/ DESCRIPTION OF RESPONSIBILITIES REGARDING THE FINANCIAL STATEMENTS expressing an opinion on the effectiveness of the The information included in this additional report is company’s internal control consistent with our audit opinion in this auditor’s report. • evaluating the appropriateness of accounting policies used and the reasonableness of accounting We provide the audit committee with a statement that estimates and related disclosures made by the we have complied with relevant ethical requirements board of directors regarding independence, and to communicate with • evaluating the overall presentation, structure and them all relationships and other matters that may content of the financial statements, including the reasonably be thought to bear on our independence, disclosures and where applicable, related safeguards. • evaluating whether the financial statements represent the underlying transactions and events in From the matters communicated with the audit a manner that achieves fair presentation. committee, we determine the key audit matters: those COMMUNICATION matters that were of most significance in the audit of the financial statements. We describe these matters We communicate with the audit committee in our auditor’s report unless law or regulation regarding, among other matters, the planned scope precludes public disclosure about the matter or when, and timing of the audit and significant audit findings, in extremely rare circumstances, not communicating including any significant findings in internal control the matter is in the public interest. that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of Ernst & Young Accountants LLP the EU Regulation on specific requirements regarding statutory audit of public-interest entities. O.E.D. Jonker Amsterdam, February 25, 2022 340 FERRARI N.V.AR 2021Ferrari N.V. Official Seat: Amsterdam, The Netherlands Dutch Trade Registration Number: 64060977 Administrative Offices: Via Abetone Inferiore 4 I-41053, Maranello (MO) Italy INDEX TO CONSOLIDATED FINANCIAL STATEMENTSINDEX TO COMPANY FINANCIAL STATEMENTS

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