MAGNA LOGO                                      Exhibit 99.1
                                                Magna International Inc.
                                                337 Magna Drive
                                                Aurora, Ontario L4G 7K1
                                                Tel   (905) 726-2462
                                                Fax   (905) 726-7164

                            PRESS RELEASE
             MAGNA ANNOUNCES FOURTH QUARTER AND 2005 RESULTS

February 28, 2006, Aurora, Ontario, Canada . . . Magna International Inc.
(TSX: MG.SV.A, MG.MV.B; NYSE: MGA) today reported financial results
for the fourth quarter and year ended December 31, 2005.
    <<

    -------------------------------------------------------------------------
                                   THREE MONTHS ENDED        YEAR ENDED
                                       DECEMBER 31,          DECEMBER 31,
                                  --------------------- ---------------------
                                     2005       2004       2005       2004
                                  ---------- ---------- ---------- ----------

    Sales                         $ 5,854    $ 5,653    $22,811    $20,653

    Operating income              $   125    $   250(1) $   942    $ 1,125(1)

    Net income                    $    83    $   177(1) $   639    $   676(1)

    Diluted earnings per share    $  0.75    $  1.81(1) $  5.90    $  6.95(1)

    (1) Operating income, net income and diluted earnings per share have been
        restated to reflect the accounting policy change described in Note 2
        of the unaudited interim consolidated financial statements attached
        to this Press Release.

    -------------------------------------------------------------------------
      All results are reported in millions of U.S. dollars, except per
                               share figures.
    -------------------------------------------------------------------------

    YEAR ENDED DECEMBER 31, 2005
    ----------------------------

    We posted record sales of $22.8 billion for the year ended December 31,
2005, an increase of 10% over the year ended December 31, 2004. The higher
sales level for the year ended December 31, 2005 reflects increases of 17% in
North American average dollar content per vehicle and 11% in European average
dollar content per vehicle, each over the year ended December 31, 2004. During
the year ended December 31, 2005, North American vehicle production was
essentially level and European vehicle production declined 4%, each in
comparison to the year ended December 31, 2004. Complete vehicle assembly
volumes increased 1% for the year ended December 31, 2005, compared to the
year ended December 31, 2004. However, as a result of lower assembly volumes
for all vehicles accounted for on a full cost basis, complete vehicle assembly
sales declined 8% or $340 million to $4.1 billion for the year ended
December 31, 2005 compared to $4.5 billion for the year ended December 31,
2004.
    Our operating income was $942 million for the year ended December 31,
2005 compared to $1.1 billion for the year ended December 31, 2004, and we
earned net income for the year ended December 31, 2005 of $639 million,
compared to $676 million for the year ended December 31, 2004.
    Diluted earnings per share were $5.90 for the year ended December 31,
2005, compared to $6.95 for the year ended December 31, 2004.
    For the year ended December 31, 2005, we generated cash from operations
before changes in non-cash operating assets and liabilities of $1.5 billion,
and generated $158 million in non-cash operating assets and liabilities. Total
investment activities for the year ended December 31, 2005 were $1.2 billion,
including $848 million in fixed asset additions, $187 million to purchase
subsidiaries and a $127 million increase in other assets.

    THREE MONTHS ENDED DECEMBER 31, 2005
    ------------------------------------

    We posted sales of $5.9 billion for the fourth quarter ended December 31,
2005, an increase of 4% over the fourth quarter of 2004. North American
average dollar content per vehicle increased 8% and European average dollar
content per vehicle was essentially unchanged, each compared to the fourth
quarter of 2004. During the fourth quarter of 2005, North American vehicle
production increased 3% and European vehicle production was essentially level,
each compared with the fourth quarter of 2004. Complete vehicle assembly
volumes increased 12% for the fourth quarter ended December 31, 2005, compared
to the fourth quarter of 2004. However, as a result of lower assembly volumes
in aggregate for vehicles accounted for on a full cost basis, complete vehicle
assembly sales declined 12% or $145 million to $1.1 billion for the fourth
quarter of 2005 compared to $1.2 billion for the fourth quarter of 2004.
    Our operating income was $125 million for the fourth quarter of 2005
compared to $250 million for the fourth quarter of 2004, and we earned net
income for the fourth quarter ended December 31, 2005 of $83 million, compared
to $177 million for the fourth quarter ending December 31, 2004.
    Diluted earnings per share were $0.75 for the fourth quarter ended
December 31, 2005, compared to $1.81 for the fourth quarter ending
December 31, 2004.
    During the three months ended December 31, 2005, we generated cash from
operations before changes in non-cash operating assets and liabilities of
$408 million, and generated $750 million in non-cash operating assets and
liabilities. Total investment activities for the third quarter of 2005 were
$367 million, including $321 million in fixed asset additions, $19 million to
purchase subsidiaries and a $27 million increase in other assets.

    IMPAIRMENT CHARGES, RESTRUCTURING CHARGES AND OTHER CHARGES AND GAINS
    ---------------------------------------------------------------------

    During the years ended December 31, 2005 and 2004, we recorded a number
of unusual items, including impairment charges associated with long-lived
assets and goodwill, restructuring charges associated with our assessment of
our global operating structure and capacity, and other special charges and
gains.
    For the years ended December 31, 2005 and 2004, the aggregate net charge
before income taxes and minority interest for unusual items totalled
$145 million and $45 million, respectively. On a per share basis, the
aggregate net charge for unusual items totalled $1.05 and $0.28, respectively.
    For the fourth quarter ended December 31, 2005 and 2004, the aggregate
net charge before income taxes and minority interest for unusual items
totalled $157 million and $19 million, respectively. On a per share basis, the
aggregate net charge for unusual items totalled $1.07 and $0.06, respectively.
    In addition, we expect to incur additional restructuring and
rationalization charges during 2006 in the range of $30 to $40 million,
related to activities that were initiated in 2005.
    A more detailed discussion of our consolidated financial results for the
fourth quarter and year ended December 31, 2005 is contained in the
Management's Discussion and Analysis of Results of Operations and Financial
Position and the unaudited interim consolidated financial statements and notes
thereto, which are attached to this Press Release.
    Siegfried Wolf, Magna's co-Chief Executive Officer commented: "2005 was a
year of significant transition for Magna. Following the privatizations of our
former public subsidiaries, we completed an assessment of our global operating
footprint. While the results of this assessment ultimately had a negative
impact on our short-term financial results, we believe management's decisions
were necessary to better position us for the future."
    Don Walker, Magna's co-Chief Executive Officer added: "Looking back at
2005, despite difficult industry conditions, including significantly higher
commodity costs, lower production volumes on key Magna programs, and increased
pressure for price concessions from our customers, we reported solid operating
results. This is the result of the hard work and dedication of our employees
around the world."

    OTHER MATTERS
    -------------

    Our Board of Directors yesterday declared a quarterly dividend with
respect to our outstanding Class A Subordinate Voting Shares and Class B
Shares for the quarter ended December 31, 2005. The dividend of U.S. $0.38 per
share is payable on March 24, 2006 to shareholders of record on March 10,
2006.

    2006 OUTLOOK
    ------------

    All amounts below exclude the impact of any potential future
acquisitions.
    Our outlook is unchanged from the outlook provided in our Press Release
dated January 12, 2006.
    For the full year 2006, we expect sales to be between $22.0 billion and
$23.3 billion, based on full year 2006 light vehicle production volumes of
approximately 15.8 million units in North America and approximately
15.8 million units in Europe. Full year 2006 average dollar content per
vehicle is expected to be between $750 and $780 in North America and between
$300 and $325 in Europe. We expect our full year 2006 complete vehicle
assembly volumes to be relatively unchanged, and expect our full year 2006
complete vehicle assembly sales to be between $3.3 billion and $3.6 billion.
We expect our full year 2006 operating margin, excluding unusual items(2), to
be approximately 5%. We expect our full year 2006 income tax rate, excluding
unusual items(2), to be between 31% and 32%. We expect earnings growth in full
year 2006 compared to 2005, excluding unusual items(2), from both years.
    In addition, we expect that full year 2006 spending for fixed assets will
be in the range of $850 million to $900 million.

    (2) Unusual items for 2005 include charges associated with
        rationalization and restructuring activities, (including
        restructuring charges arising from the privatization of our former
        public subsidiaries during 2005), charges associated with operations
        that supplied MG Rover, impairment charges, and certain non-recurring
        gains. Unusual items for 2006 are expected to include charges
        associated with rationalization and restructuring activities
        commenced in 2005.

    We are the most diversified automotive supplier in the world. We design,
develop and manufacture automotive systems, assemblies, modules and
components, and engineer and assemble complete vehicles, primarily for sale to
original equipment manufacturers of cars and light trucks in North America,
Europe, Asia and South America. Our capabilities include the design,
engineering, testing and manufacture of automotive interior systems, seating
systems, closure systems; metal body and structural systems; exterior and
interior mirror and engineered glass systems; plastic body, lighting and
exterior trim systems, various powertrain and drivetrain systems; retractable
hard top and soft top roof systems; as well as complete vehicle engineering
and assembly.
    We have over 82,000 employees in 224 manufacturing operations and
60 product development and engineering centres in 22 countries.

    -------------------------------------------------------------------------
    We will hold a conference call for interested analysts and shareholders
    to discuss our fourth quarter results on Tuesday, February 28, 2006 at
    8:00 a.m. EST. The conference call will be co-chaired by Mark T. Hogan,
    President and Vincent J. Galifi, Executive Vice-President and Chief
    Financial Officer. The number to use for this call is 1-800-840-6238. The
    number for overseas callers is 1-416-620-2406. Please call in 10 minutes
    prior to the call. We will also webcast the conference call at
    www.magna.com. The slide presentation accompanying the conference call
    will be available on our website Tuesday morning prior to the call.

    For further information, please contact Louis Tonelli, Vice-President,
    Investor Relations at 905-726 7035.

    For teleconferencing questions, please call 905-726-7103.
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    FORWARD-LOOKING STATEMENTS
    --------------------------

    The previous discussion contains statements that, to the extent that they
are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation.
Forward-looking statements may include financial and other projections, as
well as statements regarding our future plans, objectives or economic
performance, or the assumptions underlying any of the foregoing. We use words
such as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions to identify forward-looking statements. Any such forward-looking
statements are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe are
appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to
a number of risks, assumptions and uncertainties. These risks, assumptions and
uncertainties include, but are not limited to, the impact of: cyclicality of
the automotive industry due to global economic and political conditions
(including acts of terrorism) and resulting changes in consumer demand for
automobiles; declining market share and production volumes of some of our
customers; our reliance on a small number of automobile manufacturers, several
of which are rated as below investment grade by credit rating agencies; shifts
in market share among vehicles, including those we assemble; the termination,
loss, renegotiation of the terms of, or delay in the implementation of any
significant production or assembly contract; competition from suppliers with
manufacturing operations in low cost countries; risks associated with
conducting business internationally; increased commodity prices and our
ability to offset such increases; deterioration of the financial condition of
the supply base and certain customers; intense pricing pressures; increased
pressure from our customers to absorb various fixed costs; product warranty
and recall costs; product liability risks; fluctuations in relative currency
values; our facility rationalization efforts; our success in improving results
at our underperforming divisions; goodwill and fixed asset impairments; legal
proceedings to which we are or may become a party; changes in governmental
regulations, including environmental laws and regulations; our relationship
with our controlling shareholder; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual
report on Form 40-F filed with the United States Securities and Exchange
Commission, and subsequent filings. In evaluating forward-looking statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to update or
revise any forward-looking statements to reflect subsequent information,
events, results or circumstances or otherwise.

    -------------------------------------------------------------------------
    For further information about Magna, please see our website at
    www.magna.com. Copies of financial data and other publicly filed
    documents are available through the internet on the Canadian Securities
    Administrators' System for Electronic Document Analysis and Retrieval
    (SEDAR) which can be accessed at www.sedar.com and on the United States
    Securities and Exchange Commission's Electronic Data Gathering, Analysis
    and Retrieval System (EDGAR) which can be accessed at www.sec.gov.
    -------------------------------------------------------------------------


    MAGNA INTERNATIONAL INC.
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
    FINANCIAL POSITION
    -------------------------------------------------------------------------

    All amounts in this Management's Discussion and Analysis of Results of
Operations and Financial Position ("MD&A") are in U.S. dollars and all tabular
amounts are in millions of U.S. dollars, except per share figures and average
dollar content per vehicle, which are in U.S. dollars, unless otherwise noted.
When we use the terms "we", "us", "our", or "Magna", we are referring to Magna
International Inc. and its subsidiaries and jointly controlled entities,
unless the context otherwise requires.
    This MD&A should be read in conjunction with the accompanying unaudited
consolidated financial statements for the three months and year ended
December 31, 2005, which are prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"). This MD&A has been prepared as of
February 27, 2006.

    OVERVIEW
    -------------------------------------------------------------------------

    We are a leading global supplier of technologically advanced automotive
systems, assemblies, modules and components. We follow a corporate policy of
functional and operational decentralization. We conduct our operations through
divisions, which function as autonomous business units that operate within
corporate policies. As at December 31, 2005, we had 224 manufacturing
divisions and 60 product development and engineering centres in 22 countries.
We design, develop and manufacture automotive systems, assemblies, modules and
components, and engineer and assemble complete vehicles for sale to original
equipment manufacturers ("OEMs") of cars and light trucks in North America,
Europe, Asia and South America. Our product capabilities span a number of
major automotive areas including: interiors; seating; closures; metal body
systems; exterior and interior mirrors and engineered glass; electronics;
plastic body, lighting and exterior trim systems; various powertrain and
drivetrain systems; retractable hard top and soft top roof systems; and
complete vehicle engineering and assembly.
    Historically, we had supplied these products and services through global
product groups, three of which were publicly traded companies in which we had
a controlling interest. In April 2005, we completed our previously announced
plans to take each of these publicly traded subsidiaries private (the
"Privatizations").
    Shortly after we completed the Privatizations, we began to reorganize and
segment our operations on a geographic basis, among North America, Europe and
Rest of World (primarily Asia and South America).
    Our success is primarily dependent upon the levels of North American and
European (and currently to a lesser extent Asian and South American) car and
light truck production by our customers. OEM production volumes in different
regions may be impacted by factors which may vary from one region to the next,
including general economic conditions, interest rates, fuel prices and
availability, infrastructure, legislative changes, environmental emission and
safety issues and labour and/or trade relations.
    Given these differences between the regions in which we operate, we have
segmented our operations on a geographic basis between North America, Europe,
and Rest of World. The role of the North American and European management
teams is to manage our interests to ensure a coordinated effort across our
different product capabilities. In addition to maintaining key customer,
supplier and government contacts in their respective markets, our regional
management teams centrally manage key aspects of our operations while
permitting our divisions enough flexibility through our decentralized
structure to foster an entrepreneurial environment.

    HIGHLIGHTS
    -------------------------------------------------------------------------

    During 2005, we reported solid financial results, including record sales
of $22.8 billion. The higher sales level was achieved as a result of increases
in our North American and European dollar content per vehicle. In North
America, vehicle production was unchanged at 15.7 million units, while our
content per vehicle increased 17% to $731, both as compared to 2004. In
Europe, Western European vehicle production declined 4% to 16.0 million units,
while our content per vehicle increased 11% to $317, both as compared to 2004.
    Operating income for 2005 decreased 16% to $942 million from $1.1 billion
for 2004. Excluding the unusual items recorded in 2005 and 2004 (see "Unusual
Items" below), operating income for 2005 decreased $83 million or 7%. The
decrease in operating income was primarily as a result of higher commodity
prices, lower production volumes on certain of our high content programs,
incremental customer price concessions, the negative impact of start-up costs
at new facilities during 2005, and non-cash costs related to the
Privatizations, including additional depreciation and amortization and stock
compensation expense. The factors contributing to the decrease in operating
income were partially offset by additional margins earned as a result of the
launch of new programs during or subsequent to 2004, the acquisition of the
New Venture Gear, Inc. ("NVG") business in September 2004, productivity and
efficiency improvements at certain facilities, and the closure of several
facilities that were incurring losses during 2004.
    Net income for 2005 decreased 5% to $639 million from $676 million for
2004. Excluding the unusual items recorded in 2005 and 2004 (see "Unusual
Items" below), net income for 2005 increased $51 million or 7%. The increase
in net income was primarily as a result of reductions in income taxes and
minority interest partially offset by the decrease in operating income.
    Diluted earnings per share for 2005 decreased 15% to $5.90 from $6.95 for
2004. Excluding the unusual items recorded in 2005 and 2004 (see "Unusual
Items" below), diluted earnings per share decreased $0.28 from 2004 to 2005 as
a result of an increase in the weighted average number of diluted shares
outstanding during the year, primarily as a result of the Class A Subordinate
Voting Shares issued on completion of the Privatizations, partially offset by
the increase in net income (excluding unusual items).

    Unusual Items

    During 2005 and 2004, we recorded certain unusual items as follows:

                                  2005                       2004
                      --------------------------- ---------------------------
                                         Diluted                     Diluted
                                        Earnings                    Earnings
                      Operating     Net      per  Operating     Net      per
                         Income  Income    Share     Income  Income    Share
    -------------------------------------------------------------------------
    Impairment
     charges(1)          $ (131)  $  (98)  $(0.90)  $  (36)  $  (22)  $(0.23)
    Restructuring
     charges(2)             (59)     (48)   (0.44)     (26)     (17)   (0.17)
    Charges associated
     with MG Rover(3)       (15)     (13)   (0.12)       -        -        -
    Settlement gain(4)       26       16     0.15        -        -        -
    Foreign currency
     gain(4)                 18       18     0.17        -        -        -
    Gain on sale of
     facility(4)             16       10     0.09        -        -        -
    Pension curtailment
     gain(4)                  -        -        -       29       18     0.18
    Stock option
     modification(4)          -        -        -      (12)     (12)   (0.12)
    Future tax
     recovery(4)              -        -        -        -        6     0.06
    -------------------------------------------------------------------------
    Total unusual items  $ (145)  $ (115)  $(1.05)  $  (45)  $  (27)  $(0.28)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Impairment Charges

        In conjunction with our annual goodwill impairment analysis and
        consideration of other indicators of impairment of long-lived assets
        at certain operations, we recorded impairment charges as follows:

                                          2005                  2004
                                  --------------------- ---------------------
                                  Operating        Net  Operating        Net
                                     Income     Income     Income     Income
        ---------------------------------------------------------------------

        (a) Long-lived asset
             impairments:
            Europe                 $     89   $     63   $     20   $     15
            North America                21         14         16          7

        (b) Goodwill impairment:
            Europe                       21         21          -          -
        ---------------------------------------------------------------------
                                   $    131   $     98   $     36    $    22
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (a) Long-lived Asset Impairments

            During 2005, we recorded asset impairments of $89 million in
            Europe relating to certain exterior systems facilities in the
            United Kingdom, Belgium and Germany, and a closure systems
            facility in the Czech Republic. In North America, we recorded an
            asset impairment of $21 million related to an exterior systems
            facility in Canada and certain powertrain facilities in the
            United States.

            During 2004, we recorded asset impairments of $20 million in
            Europe relating to certain exterior systems facilities in Germany
            and Belgium. In North America, we recorded an asset impairment of
            $16 million related to our plan to cease operations at an
            exterior systems facility in Canada.

        (b) Goodwill Impairment

            In conjunction with our annual business planning cycle, we
            completed our goodwill impairment analysis. As a result of this
            analysis, we recorded a $21 million goodwill impairment charge
            related to our exterior systems reporting unit in Europe.

    (2) Restructuring Charges

        In connection with the Privatizations and industry conditions
        generally, during 2005 we completed an assessment of our global
        operating structure and capacity. As a result of this assessment, we
        began to implement a rationalization strategy that includes operating
        group restructuring and plant consolidations, sales and closures.
        These actions are necessary to ensure that we remain globally
        competitive.

        In Europe, restructuring charges totalled $33 million in 2005
        compared to $7 million in 2004. The restructuring charges in 2005
        related primarily to severance costs at three facilities:

        -  a mirrors facility in Ireland;
        -  an exterior systems facility in Belgium; and
        -  an engineering centre in France.

        The European restructuring charges in 2004 related to costs incurred
        with respect to the reorganization and closure of certain interiors
        facilities in Germany and the United Kingdom.

        In North America, restructuring charges totalled $21 million in 2005
        compared to $19 million in 2004. The restructuring charges in 2005
        related primarily to severance costs incurred as a result of the
        Privatizations and the consolidation and/or closure of certain
        exterior systems, powertrain and stampings facilities in Canada and
        the United States. The restructuring charges in 2004 related
        primarily to accelerated depreciation and amortization on certain
        program specific assets that went out of service earlier than
        originally planned.

        In addition, we expect to incur additional restructuring and
        rationalization charges during 2006 in the range of $30 million to
        $40 million related to activities that were initiated in 2005.
        Specifically, in January 2006, we reached an agreement with the
        workers council at an exterior systems facility in Belgium that
        covers non-contractual termination benefits for employees at this
        facility. As a result, we will record the $8 million cost of this
        agreement in the first quarter of 2006.

    (3) MG Rover

        In April 2005, MG Rover Group Limited ("MG Rover") was placed into
        administration, which is similar to Chapter 11 bankruptcy protection
        in the United States (the "MG Rover situation"). As a result, we
        recorded charges of $15 million related to our MG Rover assets and
        supplier obligations during 2005.

    (4) Other Unusual Items

        In addition to the above, during 2005 we also recorded the following
        unusual items:

        -  the receipt of $26 million awarded by a court in a lawsuit
           commenced by us in 1998 in respect of defective materials
           installed by a supplier in a real estate project;
        -  an $18 million foreign currency gain on the repatriation of funds
           from Europe; and
        -  a $16 million gain on sale of a non-core seat component facility
           in North America.

        -  In addition to the above, during 2004 we also recorded the
           following unusual items:

        -  a $29 million pension curtailment gain as a result of freezing
           certain defined benefit pension plans since no further benefits
           accrue under these plans;
        -  a $12 million one-time charge to compensation expense as a result
           of modifying option agreements with certain of our former
           employees; and
        -  a $6 million future income tax recovery as a result of a reduction
           in future income tax rates in Europe.

    Significant Issues

    In addition to the unusual items described above, the most significant
issues that affected our financial results in 2005 included:

    1.  Commodity Pricing

        During 2005, we paid more for raw materials, including purchased
        components, used in our production compared to 2004. Although a
        significant portion of our steel, resins and other components are
        covered under customer resale programs or short-term and long-term
        contracts, increased commodity prices negatively impacted our results
        in 2005, as compared to 2004. At the same time, scrap steel prices
        have decreased which negatively impacted our results in 2005, as
        compared to 2004.

    2.  Production on Key Programs

        In the North American market, 2005 saw the continued trend of
        declining production and market share of General Motors ("GM") and
        Ford, two of our largest customers. While North American vehicle
        production volumes in 2005 remained relatively consistent with 2004
        vehicle production volumes, GM and Ford production volumes declined
        by 7% and 6%, respectively. More importantly, production volumes on
        certain of our high content programs declined even further.
        Production volumes for the Ford Freestar and Mercury Monterey, the
        Ford Explorer and Mercury Mountaineer and the GMT800 platform
        declined 42%, 30% and 13%, respectively in 2005.

        Although we experienced declines in volumes on these key programs, we
        had increases in production volumes on certain other high content
        programs. Production volumes for the Chrysler 300 and 300C, and the
        Dodge Caravan, Grand Caravan and Chrysler Town & Country increased
        38% and 11%, respectively.

    3.  Pricing Pressures

        Given the increasingly competitive nature of the automotive industry,
        we faced additional price concessions from our customers in 2005 as
        compared to 2004.

    4.  Launches

        During 2005, some of our recently completed production facilities
        launched significant programs, including:

        -  a plant in Hermosillo, Mexico that began to supply various
           stampings for the Ford Fusion, Mercury Milan and Lincoln Zephyr;
        -  a facility in Bowling Green, Kentucky that began to supply frames
           for the new Ford Explorer and Mercury Mountaineer; and
        -  a fascia mould and paint facility in Georgia that began to supply
           fascias, rocker panels and body side mouldings for the Mercedes
           M-Class and R-Class.

        Within the next year, the facility in Kentucky will launch the frame
        for the new Ford F-Series Super Duty pickup trucks.

        As anticipated, the new facilities in Mexico, Kentucky and Georgia
        incurred start-up losses in 2005, however, we expect an improvement
        in profitability at these facilities as they continue to ramp-up
        production.

        In addition to the programs launched at these new facilities, we also
        launched several new programs at existing facilities, including:

        -  the Chevrolet Cobalt and Pontiac Pursuit;
        -  the Ford Mustang;
        -  the Dodge Charger;
        -  the Mercedes A-Class, B-Class and M-Class; and
        -  the Land Rover Discovery.

    5.  Privatizations

        During 2005, we successfully completed the privatizations of our
        former public subsidiaries: Tesma International Inc.; Decoma
        International Inc.; and Intier Automotive Inc. The Privatizations
        have allowed us to improve our strategic positioning, particularly
        with respect to the development of vehicle modules that cross our
        traditional product lines, and to better exploit our various
        competencies, particularly our complete vehicle expertise. In
        addition, the Privatizations have allowed us to re-align our product
        portfolio, as we did by combining the powertrain capabilities of our
        former Tesma and Magna Drivetrain businesses, and to avoid
        duplication of investment, particularly in new markets. We were also
        able to improve our financial liquidity by completing a new five-year
        revolving term facility that expires on October 12, 2010. The
        facility has a North American tranche of $1.57 billion, a European
        tranche of (euro) 300 million and an Asian tranche of $50 million.
        The new facility replaced the various existing credit lines in place
        prior to the Privatizations.

        Our operating results for 2005 were negatively impacted by non-cash
        costs related to the Privatizations, including $30 million due to the
        amortization of fair value increments (reflected in the preliminary
        purchase accounting) and $7 million due to additional stock option
        compensation expense. Offsetting the additional amortization was a
        reduction in minority interest expense since no minority interest
        expense was recorded subsequent to the first quarter of 2005.
        Finally, our diluted earnings per share were negatively impacted as a
        result of the 11.9 million additional Class A Subordinate Voting
        Shares that were included in the weighted average number of diluted
        shares outstanding as a result of the Privatizations.

    6.  Income taxes

        During 2005, we realized a significant decrease in our effective
        income tax rate (excluding the unusual items above) compared to 2004,
        primarily as a result of a decrease in income tax rates in Austria
        and Mexico, an increase in utilization of losses not previously
        benefited, a reduction in losses not benefited and tax settlements in
        certain jurisdictions. In addition to the lower income tax rates, we
        believe that our effective income tax rate will remain below
        historical levels as we expect to capitalize on income tax planning
        strategies that may continue to be available as a result of the
        Privatizations.

    Key Achievements

    In addition to managing the significant issues described above, we also
took important steps to further strengthen and better position our Company for
the future, including:

    1.  Strengthened Management

        With the successful completion of the Privatizations, our management
        team was further strengthened. In April 2005, we announced that
        Donald Walker and Siegfried Wolf had been appointed as co-Chief
        Executive Officers with responsibility for North America and Europe,
        respectively. Don and Siegfried, along with Manfred Gingl, Mark Hogan
        and Vincent Galifi, combine to create a strong management partnership
        that has the complementary skills necessary to lead us in our
        continuing evolution and to protect the decentralized and
        entrepreneurial culture needed for Magna to remain a leader in the
        global automotive industry. This culture, combined with the
        commitment and dedication of our many managers and employees, has
        been and will remain the cornerstone of our success.

    2.  Strengthened Customer Relationships

        In July, DaimlerChrysler announced the development of a deeper
        relationship with a select group of key suppliers. Magna was
        identified as one of DaimlerChrysler's Highly Integrated Partnership
        Organizations ("HI-POs"). This improved model of co-operation with
        suppliers is intended to provide numerous benefits to the HI-POs,
        including early involvement in the product development of future
        models. As an example of this early involvement, DaimlerChrysler
        announced that Magna had been awarded the vehicle interior, excluding
        seats, for a future model of the Chrysler Group, scheduled for launch
        in model year 2008.

        Similarly, in September Ford announced that it was entering into new
        long term "Aligned Business Framework" agreements with select
        suppliers, and identified Magna and six other automotive component
        suppliers as the first of the strategic suppliers in the initial
        phase of Ford's new framework. The framework anticipates a
        significant reduction over time in the number of suppliers to Ford.

    3.  Progress in Diversifying our Customer Base

        During 2005, we continued our progress in broadening our customer
        base:

        -  we were awarded our first ever transfer case business from Nissan
           for two vehicle programs, one of which is built in North America
           and the other in Japan. These important awards demonstrate our
           ability to introduce our four-wheel and all-wheel drive competence
           to new customers;
        -  we were awarded significant new interiors and stamping business
           with an Asian-based OEM for a vehicle built in North America;
        -  we recently launched a new metal stamping facility in France to
           supply PSA on various vehicle programs;
        -  we were awarded seating and interiors business in Korea; and
        -  we signed a joint venture agreement to supply mirrors in India.

    4.  Acquisition of Car Top Systems

        In December, we announced that we had signed an agreement to purchase
        CTS Fahrzeug-Dachsysteme GmbH ("CTS") from Porsche AG. CTS, which
        stands for Car Top Systems, is one of the world's leading
        manufacturers of retractable hard top and soft top roof systems, a
        product area that we believe has good growth potential. The
        acquisition, which was completed in February of 2006, will allow us
        to leverage our current closure systems and complete vehicle
        capabilities. For the year ended December 31, 2004, CTS reported
        sales of approximately (euro) 400 million. CTS has six facilities in
        Europe and two facilities in North America, with approximately
        1,100 employees.


    INDUSTRY TRENDS AND RISKS
    -------------------------------------------------------------------------

    A number of trends have had a significant impact on the global automotive
industry in recent years, including:

    -   growth of Asian-based OEMs in North America and Europe and declining
        production volumes at certain of our traditional North American and
        European customers;
    -   increased pressure by OEMs on automotive component suppliers to
        reduce their prices, including through annual retroactive price
        reductions, and to bear various additional costs;
    -   growth of the automotive industry in China, India and other Asian
        countries, as well as parts of eastern Europe, and the migration of
        manufacturing to such lower cost countries;
    -   deterioration of the financial condition of the supply base and
        certain OEMs;
    -   increased engineering capabilities required in order to be awarded
        new business for more complex systems and modules;
    -   increased prevalence of vehicles built off high-volume global vehicle
        platforms;
    -   volatility of steel, resin and other commodity prices; and
    -   increases in gas prices prompting consumers to purchase passenger
        cars instead of large SUVs.

    The following are some of the more significant risks that could affect
our ability to achieve our desired results:

    -   The global automotive industry is cyclical and consumer demand for
        automobiles is sensitive to changes in certain economic and political
        conditions, including interest rates and international conflicts
        (including acts of terrorism). As a result of these conditions, some
        of our customers are currently experiencing reduced consumer demand
        for their vehicles, leading to declining vehicle production volumes.
        A continued reduction in vehicle production volumes by any of our
        significant customers could have a material adverse effect on our
        profitability.

    -   Rising healthcare, pension and other post-employment benefit costs
        are having a significant adverse effect on the profitability and
        competitiveness of a number of North American and European OEMs and
        automotive component suppliers. Increased raw material prices,
        including steel and resins, are also adversely affecting OEMs and
        automotive component suppliers. Other economic conditions, such as
        increased gas prices, have affected and could further threaten sales
        of certain models, such as full-size sport utility vehicles. All of
        these conditions, coupled with a decline in market share and overall
        production volumes, could further threaten the financial condition of
        some of our customers, putting additional pressure on us to reduce
        our prices and exposing us to greater credit risk. In the event that
        our customers are unable to satisfy their financial obligations or
        seek protection from their creditors, as in the case of MG Rover, we
        may incur additional expenses as a result of such credit exposure,
        which could have a material adverse effect on our profitability and
        financial condition.

    -   Although we supply parts to all of the leading OEMs, a significant
        majority of our sales are to four OEMs, two of which are rated as
        below investment grade by credit rating agencies. We are attempting
        to further diversify our customer base, particularly to increase our
        business with Asian-based OEMs. A decline in overall production
        volumes by any of our four largest customers could have an adverse
        effect on our profitability, particularly if we are unable to further
        diversify our customer base. Moreover, while we supply parts for a
        wide variety of vehicles produced in North America and Europe, we do
        not supply parts for all vehicles produced, nor is the number or
        value of parts evenly distributed among the vehicles for which we do
        supply parts. Shifts in market share among vehicles (including shifts
        away from vehicles we assemble) or the early termination, loss,
        renegotiation of the terms of, or delay in the implementation of any
        significant production or assembly contract could have an adverse
        effect on our profitability.

    -   The competitive environment in the automotive industry has been
        intensifying as our customers seek to take advantage of lower
        operating costs in China, other countries in Asia and parts of
        eastern Europe. As a result, we are facing increased competition from
        suppliers which have manufacturing operations in low cost countries.
        While we continue to expand our manufacturing footprint with a view
        to taking advantage of manufacturing opportunities in low cost
        countries, we cannot guarantee that we will be able to fully realize
        such opportunities. Additionally, establishment of manufacturing
        operations in emerging market countries carries its own risks,
        including those relating to political and economic instability;
        trade, customs and tax risks; currency exchange rates; currency
        controls; insufficient infrastructure; and other risks associated
        with conducting business internationally.

    -   Over the last year we have experienced significant price increases
        for key commodities used in our parts production, particularly steel
        and resin. We expect steel prices will remain at elevated levels in
        2006 compared to levels earlier this decade. Approximately half of
        our steel is acquired through resale programs operated by the OEMs,
        which do not expose us to steel price increases, and the balance is
        acquired through spot, short-term and long-term contracts. However,
        a steel supplier has challenged its long-term agreements with us for
        certain steel products while steel prices were rising and, to the
        extent that it successfully continues to dispute, terminate or
        otherwise refuses to honour its contracts, our exposure to steel
        price increases will increase to the extent that steel prices remain
        at elevated levels. We also sell scrap steel, which is generated
        through our parts production process, and the revenues from these
        sales have reduced some of our exposure to steel price increases in
        the past. However, if scrap steel prices decline, while steel prices
        remain high, our ability to reduce our exposure to steel price
        increases will diminish. To the extent we are unable to fully
        mitigate our exposure to increased commodity prices by engineering
        products with reduced steel, resin or other commodity content, or by
        passing additional steel and resin costs to our customers, such
        additional commodity costs could have a material adverse effect on
        our profitability.

    -   We rely on a number of suppliers to supply us with a wide range of
        components required in connection with our business. Economic
        conditions, intense pricing pressures, increased commodity prices and
        a number of other factors have left many automotive components
        suppliers in varying degrees of financial distress. The continued
        financial distress or the insolvency or bankruptcy of one of our
        major suppliers could disrupt the supply of components to us from
        these suppliers, possibly resulting in a temporary disruption in the
        supply of products by us to our customers. Additionally, the
        financial distress or the insolvency or bankruptcy of a significant
        supplier to one of our customers could disrupt the supply of products
        to such customer, resulting in a reduction in production by our
        customer. Such a reduction in our customer's production could
        negatively impact our production, resulting in unrecoverable losses,
        which could have an adverse effect on our profitability. Any
        prolonged disruption in the supply of critical components by our
        suppliers or suppliers to one of our customers, the inability to
        re-source production of a critical component from a financially
        distressed automotive components sub-supplier, or any temporary
        shut-down of one of our production lines or the production lines of
        our customers, could have a material adverse effect on our
        profitability. Additionally, the insolvency, bankruptcy or financial
        restructuring of any of our critical suppliers could result in us
        incurring unrecoverable costs related to the financial work-out of
        such suppliers and/or increased exposure for product liability,
        warranty or recall costs relating to the components supplied by such
        suppliers to the extent such suppliers are not able to assume
        responsibility for such amounts, which could have an adverse effect
        on our profitability.

    -   We have entered into, and will continue to enter into, long-term
        supply arrangements with our customers which provide for, among other
        things, price concessions over the supply term. To date, these
        concessions have been fully or partially offset by cost reductions
        arising principally from product and process improvements and price
        reductions from our suppliers. However, the competitive automotive
        industry environment in North America, Europe and Asia has caused
        these pricing pressures to intensify. Some of our customers have
        demanded, and in light of challenging automotive industry conditions
        may continue to demand, additional price concessions and/or
        retroactive price reductions. We may not be successful in offsetting
        all of these price concessions through improved operating
        efficiencies, reduced expenditures or reduced prices from our
        suppliers. To the extent that we are not able to offset price
        concessions through cost reductions or improved operating
        efficiencies, such concessions could have a material adverse effect
        on our profitability.

    -   We continue to be pressured to absorb costs related to product
        design, engineering and tooling, as well as other items previously
        paid for directly by OEMs. In particular, some OEMs have requested
        that we pay for design, engineering and tooling costs that are
        incurred up to the start of production and recover these costs
        through amortization in the piece price of the applicable component.
        Some of these costs cannot be capitalized, which could adversely
        affect our profitability until the programs in respect of which they
        have been incurred are launched. In addition, since our contracts
        generally do not include any guaranteed minimum purchase
        requirements, if estimated production volumes are not achieved, these
        costs may not be fully recovered, which could have an adverse effect
        on our profitability.

    -   Our customers continue to demand that we bear the cost of the repair
        and replacement of defective products which are either covered under
        their warranty or are the subject of a recall by them. If our
        products are, or are alleged to be, defective, we may be required to
        participate in a recall of those products, particularly if the actual
        or alleged defect relates to vehicle safety. Warranty provisions are
        established based on our best estimate of the amounts necessary to
        settle existing or probable claims on product default issues. Recall
        costs are costs incurred when government regulators and/or our
        customers decide to recall a product due to a known or suspected
        performance issue, and we are required to participate either
        voluntarily or involuntarily. Costs typically include the cost of the
        product being replaced, the customer's cost of the recall and labour
        to remove and replace the defective part. We continue to experience
        increased customer pressure to assume greater warranty
        responsibility. Currently we only account for existing or probable
        claims, however, the obligation to repair or replace such products
        could have a material adverse effect on our profitability and
        financial condition.

    -   Contracts from our customers consist of blanket purchase orders which
        generally provide for the supply of a customer's annual requirements
        for a particular vehicle, instead of a specified quantity of
        products. These blanket purchase orders can be terminated by a
        customer at any time and, if terminated, could result in us incurring
        various pre-production, engineering and other costs which we may not
        recover from our customer and which could have an adverse effect on
        our profitability.

    -   We are also subject to the risk of exposure to product liability
        claims in the event that the failure of our products results in
        bodily injury and/or property damage. Currently, we have bodily
        injury coverage under insurance policies. This coverage will continue
        until August 2006 and is subject to renewal on an annual basis and a
        per claim deductible. A successful claim against us in excess of our
        available insurance coverage could have an adverse effect on our
        profitability and financial condition.

    -   Although our financial results are reported in U.S. dollars, a
        significant portion of our sales and operating costs are realized in
        Canadian dollars, euros, British pounds and other currencies. Our
        profitability is affected by movements of the U.S. dollar against the
        Canadian dollar, the euro, the British pound and other currencies in
        which we generate revenues and incur expenses. However, as a result
        of hedging programs employed by us, primarily in Canada, foreign
        currency transactions are not fully impacted by the recent movements
        in exchange rates. We record foreign currency transactions at the
        hedged rate where applicable. Despite these measures, significant
        long-term fluctuations in relative currency values, in particular a
        significant change in the relative values of the U.S. dollar,
        Canadian dollar, euro or the British pound, could have an adverse
        effect on our profitability and financial condition.

    -   In response to the increasingly competitive automotive industry
        conditions, we may further rationalize some of our production
        facilities. In the course of such rationalization, we will incur
        costs related to plant closings and relocations and employee
        severance costs. Such costs could have an adverse effect on our
        short-term profitability. In addition, we are working to turnaround
        financially underperforming divisions, however, there is no guarantee
        that we will be successful in doing so with respect to some or all
        such divisions.

    -   We recorded significant impairment charges in 2005 and may do so in
        the future. Goodwill must be tested for impairment annually, or more
        frequently when an event occurs that more likely than not reduces the
        fair value of a reporting unit below its carrying value. We also
        evaluate fixed assets and other long-lived assets for impairment
        whenever indicators of impairment exist. The bankruptcy of a
        significant customer or the early termination, loss, renegotiation of
        the terms of, or delay in the implementation of any significant
        production contract could be indicators of impairment. In addition,
        to the extent that forward-looking assumptions regarding the impact
        of improvement plans on current operations, in-sourcing and other new
        business opportunities, program price and cost assumptions on current
        and future business, the timing of new program launches and future
        forecasted production volumes are not met, any resulting impairment
        loss could have a material adverse impact on our profitability.

    -   From time to time, we may be contingently liable for contractual and
        other claims with customers, suppliers and former employees. On an
        ongoing basis, we attempt to assess the likelihood of any adverse
        judgements or outcomes to these claims, although it is difficult to
        predict final outcomes with any degree of certainty. At this time, we
        do not believe that any of the claims which we are party to will have
        a material adverse effect on our financial position, however, we
        cannot provide any assurance to this effect.


    RESULTS OF OPERATIONS
    -------------------------------------------------------------------------

    Accounting Change

    Financial Instruments - Disclosure and Presentation

    In 2003, the Canadian Institute of Chartered Accountants ("CICA") amended
Handbook Section 3860 "Financial Instruments - Disclosure and Presentation"
("CICA 3860") to require certain obligations that may be settled with an
entity's own equity instruments to be reflected as a liability. The amendments
require us to present our Preferred Securities and Subordinated Debentures as
liabilities, with the exception of the equity value ascribed to the holders'
option to convert the 6.5% Convertible Subordinated Debentures into Class A
Subordinate Voting Shares, and to present the related liability carrying costs
as a charge to net income. We adopted these new recommendations effective
January 1, 2005 on a retroactive basis.
    The impact of this accounting policy change on the consolidated balance
sheet as at December 31, 2004 was as follows:

    Increase in other assets                                        $      2
    -------------------------------------------------------------------------

    Decrease in income taxes payables                               $      1
    Increase in long-term debt                                           216
    Decrease in debentures' interest obligation                           38
    Decrease in minority interest                                         68
    -------------------------------------------------------------------------

    Decrease in other paid-in-capital                               $     75
    Increase in retained earnings                                          2
    Decrease in currency translation adjustment                           34
    -------------------------------------------------------------------------

    The impact of this accounting policy change on the consolidated
statements of income was as follows:

                                                  Three months          Year
                                                         ended         ended
                                                   December 31,  December 31,
                                                          2004          2004
    -------------------------------------------------------------------------

    Increase in interest expense                     $       2     $      31
    Decrease in income taxes                                 -           (11)
    Decrease in minority interest                           (1)           (4)
    -------------------------------------------------------------------------
    Decrease in net income                                  (1)          (16)
    Decrease in financing charges on Preferred
     Securities and other paid-in-capital                    1            16
    Decrease in foreign exchange gain on
     redemption of Preferred Securities                      -           (18)
    -------------------------------------------------------------------------
    Change in net income available to Class A
     Subordinate Voting and Class B Shareholders     $       -     $     (18)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Reduction of earnings per Class A
     Subordinate Voting or Class B Share
      Basic                                          $       -     $   (0.18)
      Diluted                                        $       -     $   (0.18)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comparative Period Amounts

    European Average Dollar Content per Vehicle

    Our reporting of European average dollar content per vehicle has
historically included sales related to our complete vehicle assembly business.
Effective with the first quarter of 2005, European average dollar content per
vehicle includes only European production sales. The comparative period
European average dollar content per vehicle has been restated to conform to
the current period's presentation. We do not have any complete vehicle
assembly sales in North America.

    Average Foreign Exchange

                                  For the three months      For the year
                                   ended December 31,     ended December 31,
                                 ---------------------  ---------------------
                                  2005    2004  Change   2005    2004  Change
    -------------------------------------------------------------------------

    1 Canadian dollar equals
     U.S. dollars                0.853   0.821   + 4%   0.826   0.770   + 7%
    1 euro equals U.S. dollars   1.188   1.302   - 9%   1.244   1.245     -
    1 British pound equals
     U.S. dollars                1.747   1.872   - 7%   1.819   1.834   - 1%
    -------------------------------------------------------------------------

    The preceding table reflects the average foreign exchange rates between
the most common currencies in which we conduct business and our U.S. dollar
reporting currency. The significant changes in these foreign exchange rates
for the three months and year ended December 31, 2005 impacted the reported
U.S. dollar amounts of our sales, expenses and income.
    The results of operations whose functional currency is not the U.S.
dollar are translated into U.S. dollars using the average exchange rates in
the table above for the relevant period. Throughout this MD&A, reference is
made to the impact of translation of foreign operations on reported U.S.
dollar amounts where relevant.
    Our results can also be affected by the impact of movements in exchange
rates on foreign currency transactions (such as raw material purchases or
sales denominated in foreign currencies). However, as a result of hedging
programs employed by us, primarily in Canada, foreign currency transactions in
the current period have not been fully impacted by the recent movements in
exchange rates. We record foreign currency transactions at the hedged rate
where applicable.
    Finally, holding gains and losses on foreign currency denominated
monetary items, which are recorded in selling, general and administrative
expenses, impact reported results.

    RESULTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2005
    -------------------------------------------------------------------------

    Sales

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes
     (millions of units)
      North America                             15.722     15.732         -
      Europe                                    15.959     16.558      -  4%
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                           $    731   $    623      + 17%
      Europe                                  $    317   $    285      + 11%
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                         $ 11,499   $  9,798      + 17%
        Europe                                   5,058      4,724      +  7%
        Rest of World                              171        139      + 23%
      Complete Vehicle Assembly                  4,110      4,450      -  8%
      Tooling, Engineering and Other             1,973      1,542      + 28%
    -------------------------------------------------------------------------
    Total Sales                               $ 22,811   $ 20,653      + 10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total sales reached a record level, increasing 10% or $2.2 billion to
$22.8 billion for 2005 compared to $20.7 billion for 2004.

    External Production Sales - North America

    External production sales in North America increased 17% or $1.7 billion
to $11.5 billion for 2005 compared to $9.8 billion for 2004. This increase in
production sales reflects a 17% increase in our North American average dollar
content per vehicle as North American vehicle production volumes for 2005
remained relatively consistent with 2004 vehicle production volumes.
    Our average dollar content per vehicle grew by 17% or $108 to $731 for
2005 compared to $623 for 2004, primarily as a result of:

    -   the launch of new programs during or subsequent to the year ended
        December 31, 2004, including:
        -  the Chevrolet Cobalt and Pontiac Pursuit;
        -  the Hummer H3;
        -  the Ford Mustang;
        -  the Chevrolet HHR;
        -  the Mercedes M-Class; and
        -  the Pontiac Montana SV6, Saturn Relay, Buick Terazza and Chevrolet
           Uplander;
    -   the acquisition of the North American operations of NVG in September
        2004;
    -   an increase in reported U.S. dollar sales due to the strengthening of
        the Canadian dollar against the U.S. dollar; and
    -   increased production and/or content on certain programs, including:
        -  the Chrysler 300 and 300C; and
        -  the Dodge Caravan, Grand Caravan and Chrysler Town & Country.

    The factors contributing to the growth in our average dollar content per
vehicle were partially offset by:

    -   the impact of lower production and/or content on certain high content
        programs, including:
        -  the GMT800 platform;
        -  the Ford Freestar and Mercury Monterey;
        -  the Dodge Ram Pickup;
        -  the Mazda Tribute and Ford Escape; and
        -  the GMC Canyon and Chevrolet Colorado;
    -   programs that ended production during or subsequent to the year ended
        December 31, 2004; and
    -   incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 7% or $334 million to
$5.1 billion for 2005 compared to $4.7 billion for 2004. This increase in
production sales reflects an 11% increase in our European average dollar
content per vehicle partially offset by a 4% decline in European vehicle
production volumes.
    Our average dollar content per vehicle grew by 11% or $32 to $317 for
2005 compared to $285 for 2004, primarily as a result of:

    -   the launch of new programs during or subsequent to the year ended
        December 31, 2004, including:
        -  the Mercedes A-Class;
        -  the Mercedes B-Class;
        -  the Land Rover Discovery;
        -  the Land Rover Range Rover Sport; and
        -  the Volkswagen Passat;
    -   the acquisition of the European operations of NVG in September 2004;
        and
    -   increased production and/or content on certain programs, including:
        -  the BMW 1-Series; and
        -  the Volkswagen Transporter and Multivan.

    The factors contributing to the growth in our average dollar content per
vehicle were partially offset by:

    -   the impact of lower production and/or content on certain programs,
        including:
        -  the Mercedes E-Class; and
        -  the Volkswagen Golf;
    -   the end of production on certain programs, including the end of
        production on all MG Rover programs as a result of the MG Rover
        situation; and
    -   incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 23% or
$32 million to $171 million for 2005 compared to $139 million for 2004. The
increase in production sales is primarily a result of:

    -   the ramp-up of production at new facilities in China;
    -   increased production at our powertrain facilities in Korea; and
    -   increased production at a closure systems facility in Brazil.

    The factors contributing to the increase in production sales were
partially offset by the closure of an exterior systems facility in Brazil and
an engineered glass facility in Malaysia.

    Complete Vehicle Assembly Sales

    The terms of our various vehicle assembly contracts differ with respect
to the ownership of components and supplies related to the assembly process
and the method of determining the selling price to the OEM customer. Under
certain contracts, we are acting as principal, and purchased components and
systems in assembled vehicles are included in our inventory and cost of sales.
These costs are reflected on a full-cost basis in the selling price of the
final assembled vehicle to the OEM customer. Other contracts provide that
third party components and systems are held on consignment by us, and the
selling price to the OEM customer reflects a value-added assembly fee only.
    Production levels of the various vehicles assembled by us have an impact
on the level of our sales and profitability. In addition, the relative
proportion of programs accounted for on a full-cost basis and programs
accounted for on a value-added basis also impact our levels of sales and
operating margin percentage, but may not necessarily affect our overall level
of profitability. Assuming no change in total vehicles assembled, a relative
increase in the assembly of vehicles accounted for on a full-cost basis has
the effect of increasing the level of total sales and, because purchased
components are included in cost of sales, profitability as a percentage of
total sales is reduced. Conversely, a relative increase in the assembly of
vehicles accounted for on a value-added basis has the effect of reducing the
level of total sales and increasing profitability as a percentage of total
sales.

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Sales           $  4,110   $  4,450      -  8%
    -------------------------------------------------------------------------

    Complete Vehicle Assembly Volumes (Units)
      Full-Costed:
        BMW X3, Mercedes E-Class and G-Class,
         Saab 9(3) Convertible                 151,027    163,169      -  7%
      Value-Added:
        Jeep Grand Cherokee, Chrysler 300,
         Chrysler Voyager                       79,478     64,075      + 24%
    -------------------------------------------------------------------------
                                               230,505    227,244      +  1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Although assembly volumes increased 1% or 3,261 units, complete vehicle
assembly sales decreased 8% or $340 million to $4.1 billion for 2005 compared
to $4.5 billion for 2004. The decrease in complete vehicle assembly sales is
primarily the result of lower assembly volumes for all vehicles accounted for
on a full-cost basis, partially offset by:

    -   higher assembly volumes for the Jeep Grand Cherokee which is
        accounted for on a value-added basis as a result of the launch of a
        new model in January 2005; and
    -   the start of assembly in the second quarter of 2005 of the
        Chrysler 300 for distribution in European markets and certain other
        markets outside North America.

    Tooling, Engineering and Other

    Tooling, engineering and other sales increased 28% or $431 million to
$2.0 billion for 2005 compared to $1.5 billion for 2004.
    In 2005 the major programs for which we recorded tooling, engineering and
other sales were:

    -   the BMW X5;
    -   the Jeep Wrangler;
    -   the Mercedes M-Class and R-Class;
    -   GM's next generation full-size pickup and sport utilities platform;
    -   the Ford F-Series Super Duty;
    -   the Ford Fusion, Mercury Milan and Lincoln Zephyr;
    -   the Hummer H3; and
    -   the Dodge Caliber.

    In 2004 the major programs for which we recorded tooling, engineering and
other sales were:

    -   the Ford Fusion and Mercury Milan;
    -   the Ford Explorer and Mercury Mountaineer; and
    -   the Mercedes M-Class and R-Class.

    In addition, tooling, engineering and other sales increased as a result
of the strengthening of the Canadian dollar against the U.S. dollar.

    Gross Margin

    Gross margin increased $23 million to $2.98 billion for 2005 compared to
$2.96 billion for 2004. Gross margin as a percentage of total sales decreased
to 13.1% for 2005 compared to 14.3% for 2004.
    On a year-over-year basis, the unusual items, discussed in the
"Highlights" section above, negatively impacted gross margin by $40 million
and accounted for a 0.1% decrease in gross margin as a percentage of sales. In
addition to these items, gross margin as a percentage of sales was negatively
impacted by:

    -   an increase in commodity prices, combined with lower scrap steel
        prices;
    -   a decrease in production volumes for several of our high content
        programs including the GMT800 platform, and the Ford Freestar and
        Mercury Monterey;
    -   inefficiencies at certain facilities;
    -   the acquisition of the NVG business, which currently operates at
        margins that are lower than our consolidated average gross margin;
    -   incremental customer price concessions;
    -   costs incurred during 2005 at new facilities in preparation for
        programs that launched during 2005 or for programs that will be
        launching subsequent to the end of the year, including:
        -  a new frame facility in Kentucky for the recently launched Ford
           Explorer and the upcoming launch of the next generation F-Series
           Super Duty pickup trucks; and
        -  a new fascia moulding and paint facility in Georgia to support the
           launches of the Mercedes M-Class and R-Class; and
    -   an increase in tooling and other sales that earn low or no margins.

    The factors contributing to the decrease in gross margin as a percentage
of sales were partially offset by:

    -   productivity and efficiency improvements at certain divisions;
    -   price reductions from our suppliers;
    -   decreased complete vehicle assembly sales for certain vehicles
        accounted for on a full-cost basis; and
    -   incremental gross margin earned on program launches.

    Depreciation and Amortization

    Depreciation and amortization costs increased 19% or $113 million to
$711 million for 2005 compared to $598 million for 2004. Depreciation and
amortization costs for 2004 included $14 million of accelerated depreciation
recorded on certain program specific assets that went out of service earlier
than originally planned. Excluding this accelerated depreciation, the
$127 million increase in depreciation was primarily as a result of:

    -   an increase in assets employed in the business to support future
        growth;
    -   amortization of fair value increments related to the Privatizations;
    -   acquisitions completed during or subsequent to 2004; and
    -   an increase in reported U.S. dollar depreciation and amortization due
        to the strengthening of the Canadian dollar against the U.S. dollar.

    Selling, General and Administrative ("SG&A")

    SG&A expenses as a percentage of sales decreased to 5.3% for 2005
compared to 5.7% for 2004. SG&A expenses increased 1% or $12 million to
$1,198 million for 2005 compared to $1,186 million for 2004.
    The unusual items discussed in the "Highlights" section above effectively
reduced SG&A expenses by $21 million on a year-over-year basis. Excluding
these items, the $33 million increase in SG&A expenses is primarily a result
of:

    -   increased spending as a result of the acquisition of NVG;
    -   additional stock compensation expense as a result of the
        Privatizations;
    -   an increase in reported U.S. dollar SG&A due to the strengthening of
        the Canadian dollar against the U.S. dollar; and
    -   higher infrastructure costs to support the increase in sales levels,
        including spending to support program launches.

    Impairment Charges

    Impairment charges increased $95 million to $131 million for 2005
compared to $36 million for 2004. For a complete discussion of the impairment
charges see the "Highlights" section above and note 3 of the accompanying
unaudited consolidated financial statements for the three months and year
ended December 31, 2005.

    Earnings before Interest and Taxes ("EBIT")(1)

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    North America                             $    733   $    886      - 17%
    Europe                                          82        176      - 53%
    Rest of World                                    2         10      - 80%
    Corporate and Other                            131         79      + 66%
    -------------------------------------------------------------------------
    Total EBIT                                $    948   $  1,151      - 18%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (1) EBIT is defined as operating income as presented on our unaudited
        consolidated financial statements before net interest expense.


    Included in EBIT for the years ended December 31, 2005 and 2004 were the
following unusual items, which have been discussed in the "Highlights" section
above.

                                                             2005       2004
    -------------------------------------------------------------------------

    North America
      Impairment charges                                 $    (21)   $   (16)
      Restructuring charges                                   (21)       (19)
      Pension curtailment gain                                  -         29
      Gain on sale of facility                                 16          -
    -------------------------------------------------------------------------
                                                              (26)        (6)
    Europe
      Impairment charges                                     (110)       (20)
      Restructuring charges                                   (33)        (7)
      Charges associated with MG Rover                        (15)         -
    -------------------------------------------------------------------------
                                                             (158)       (27)
    Corporate and other
      Restructuring charges                                    (5)         -
      Settlement gain                                          26          -
      Foreign currency gain                                    18          -
      Stock option modification                                 -        (12)
    -------------------------------------------------------------------------
                                                               39        (12)
    -------------------------------------------------------------------------
                                                         $   (145)   $   (45)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    North America

    EBIT in North America decreased 17% or $153 million to $733 million for
2005 compared to $886 million for 2004. Excluding the North American unusual
items discussed above, the remaining $133 million decrease in EBIT is
primarily the result of:

    -   increased commodity prices, including steel and resin.
    -   lower earnings as a result of a decrease in production volumes for
        several of our high content programs including:
        -  the GMT800 platform;
        -  the Ford Freestar and Mercury Monterey;
        -  the Mazda Tribute and Ford Escape; and
        -  the Dodge Ram Pickups;
    -   costs incurred during 2005 at new facilities in preparation for
        programs that launched during 2005 or for programs that will be
        launching subsequent to the end of the year, including;
        -  a new frame facility in Kentucky for the recently launched Ford
           Explorer and the upcoming launch of the next generation F-Series
           Super Duty pickup trucks; and
        -  a new fascia moulding and paint facility in Georgia to support the
           launches of the Mercedes M-Class and R-Class;
    -   amortization of fair value increments related to the Privatizations;
        and
    -   incremental customer price concessions.

    The factors contributing to the decrease in EBIT were partially offset
by:

    -   margins earned on new programs that launched during 2005 including
        the Chevrolet Cobalt and Pontiac Pursuit;
    -   productivity and efficiency improvements at certain divisions;
    -   the acquisition of the NVG business in September 2004;
    -   lower employee profit sharing as a result of the decrease in Magna's
        consolidated earnings; and
    -   reduced costs incurred at a new facility that launched during 2005.

    Europe

    EBIT in Europe decreased 53% or $94 million to $82 million for 2005
compared to $176 million for 2004. Excluding the European unusual items
described above, EBIT increased $37 million in Europe, primarily as a result
of:

    -   increased profits earned in our complete vehicle assembly operations,
        including the launch of the Chrysler 300 during 2005;
    -   the closure of facilities that generated losses in 2004;
    -   productivity and efficiency improvements at certain divisions;
    -   lower employee profit sharing as a result of the decrease in Magna's
        consolidated earnings; and
    -   increased margin earned on new programs that launched during or
        subsequent to 2004.

    The factors contributing to the increase in EBIT were partially offset
by:

    -   operating inefficiencies at certain facilities;
    -   lower margins as a result of the decrease in sales on certain
        high-content programs;
    -   amortization of fair value increments related to the Privatizations;
    -   increased commodity prices; and
    -   incremental customer price concessions.

    Rest of World

    EBIT in the Rest of World decreased 80% or $8 million to $2 million for
2005 compared to $10 million for 2004. The decrease in EBIT is primarily the
result of costs incurred at new facilities, primarily in China, as we continue
to pursue opportunities in this growing market. Partially offsetting these
costs was the additional margin earned on the increased production sales
discussed above.

    Corporate and Other

    Corporate and other EBIT increased 66% or $52 million to $131 million for
2005 compared to $79 million for 2004. Excluding the Corporate and Other
unusual items described above, EBIT was relatively unchanged, increasing only
by $1 million as a result of:

    -   increased affiliation fees earned as a result of the increase in
        sales; and
    -   decreased executive incentive compensation as a result of the
        decrease in Magna's consolidated earnings.

    The factors contributing to the increase in EBIT were partially offset
by:

    -   an increase in stock compensation expense related to the
        Privatizations; and
    -   a decrease in equity income earned.

    Interest Expense

    Interest expense decreased 77% or $20 million to $6 million for 2005
compared to $26 million for 2004. The reduction in net interest expense is
primarily the result of:

    -   a reduction of interest expense related to the Preferred Securities
        which were redeemed for cash in the third quarter of 2004; and
    -   a reduction in interest expense as a result of the repayments of
        long-term debt during 2004 and 2005, including the Decoma bank
        facility and certain government debt.

    The factors contributing to the decrease in net interest expense were
partially offset by interest that has been accreted on the senior unsecured
zero-coupon notes that were issued in connection with the NVG acquisition.

    Operating Income

    Operating income decreased 16% or $183 million to $942 million for 2005
compared to $1.125 billion for 2004. Excluding unusual items, operating income
for 2005 decreased 7% or $83 million. The decrease in operating income is
primarily as a result of:

    -   higher commodity prices;
    -   lower production volumes on certain of our high content programs;
    -   incremental customer price concessions;
    -   the negative impact of start-up costs at new facilities during 2005;
        and
    -   non-cash costs related to the Privatizations, including additional
        depreciation and amortization and stock compensation expense.

    The factors contributing to the decrease in operating income were
partially offset by:

    -   additional margins earned as a result of the launch of new programs
        during or subsequent to 2004;
    -   the acquisition of NVG;
    -   productivity and efficiency improvements at certain divisions; and
    -   the closure of several facilities that were incurring losses during
        2004.

    Income Taxes

    Our effective income tax rate on operating income (excluding equity
income) decreased to 31.3% for 2005 from 34.8% for 2004. In 2005 and 2004, the
income tax rates were negatively impacted by the unusual items discussed
above. Excluding the unusual items, our effective income tax rate decreased to
29.8% for 2005 compared to 34.2% for 2004. The decrease in the effective
income tax rate is primarily the result of a decrease in income tax rates in
Austria and Mexico, an increase in utilization of losses not previously
benefited, a reduction in losses not benefited and tax settlements in certain
jurisdictions.

    Minority Interest

    Minority interest expense decreased by $51 million to $11 million for
2005 compared to $62 million for 2004. The decrease in minority interest
expense is a result of the elimination of minority interest for Tesma, Decoma
and Intier for the periods subsequent to the Privatizations.

    Net Income

    Net income decreased by 5% or $37 million to $639 million for 2005
compared to $676 million for 2004. Excluding the $88 million related to
unusual items described above, net income increased $51 million as a result of
reductions in income taxes and minority interest partially offset by the
decrease in operating income, all as discussed above.

    Earnings per Share

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Earnings per Class A Subordinate
     Voting or Class B Share
      Basic                                   $   5.99   $   6.99      - 14%
      Diluted                                 $   5.90   $   6.95      - 15%
    -------------------------------------------------------------------------

    Average number of Class A Subordinate
     Voting and Class B Shares outstanding
      Basic                                      106.7       96.7      + 10%
      Diluted                                    109.0       97.3      + 12%
    -------------------------------------------------------------------------

    Diluted earnings per share decreased 15% or $1.05 to $5.90 for 2005
compared to $6.95 for 2004. Included in the $1.05 decrease in diluted earnings
per share is the net decrease in diluted earnings per share of $0.77 related
to the unusual items discussed above.
    Excluding the unusual items, diluted earnings per share decreased $0.28
from 2004 to 2005 as a result of a 12% increase in the weighted average number
of diluted shares outstanding during the year partially offset by the increase
in net income (excluding unusual items).
    The increase in the weighted average number of diluted shares outstanding
was a result of:

    -   approximately 11.9 million additional Class A Subordinate Voting
        Shares that were included in the weighted average number of shares
        outstanding as a result of the Privatizations;
    -   approximately 1.1 million additional Class A Subordinate Voting
        Shares that are issuable as a result of assuming Decoma's obligation
        for its 6.5% Convertible Subordinated Debentures;
    -   0.4 million additional Class A Subordinate Voting Shares that were
        issued on the exercise of stock options during 2005; and
    -   an increase in the number of options outstanding as a result of
        assuming the outstanding Tesma, Decoma and Intier stock options.

    The increase in the weighted average number of shares outstanding was
partially offset by a lower average trading price for our Class A Subordinate
Voting Shares, which results in fewer options becoming dilutive.

    Return on Funds Employed ("ROFE")(1)

    An important financial ratio that we use across all of our operations to
measure return on investment is ROFE.
    ROFE for 2005 was 15.4%, a decrease from 22.7% for 2004. Unusual items
negatively impacted 2005 ROFE by 2.2% and 2004 ROFE by 0.8%.
    Excluding these unusual items, the 5.9% decrease in ROFE can be
attributed to a decrease in our EBIT (excluding unusual items), as described
above, combined with an increase in our average funds employed for 2005
compared to 2004. The increase in our average funds employed was primarily as
a result of:

    -   the acquisition of the NVG business in September 2004;
    -   the Privatizations, which added approximately $500 million of funds
        employed;
    -   an increase in our average investment in non-cash operating assets
        and liabilities; and
    -   increased funds employed for new facilities associated with recent or
        upcoming launches.

    -------------------------------------------------------------------------
    (1) ROFE is defined as EBIT divided by the average funds employed for the
        period. Funds employed is defined as long term assets, excluding
        future tax assets plus non-cash operating assets and liabilities.
        Non-cash operating assets and liabilities are defined as the sum of
        accounts receivable, inventory, income taxes recoverable and prepaid
        assets less the sum of accounts payable, accrued salaries and wages,
        other accrued liabilities, income taxes payable and deferred
        revenues.


    FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
    -------------------------------------------------------------------------

    Cash Flow from Operations

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Net income from continuing operations     $    639   $    676
    Items not involving current cash flows         901        805
    -------------------------------------------------------------------------
                                                 1,540      1,481   $     59
    Changes in non-cash operating assets
     and liabilities                               158       (100)
    -------------------------------------------------------------------------
    Cash provided from operating activities   $  1,698   $  1,381   $    317
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flow from operations before changes in non-cash operating assets and
liabilities increased $59 million to $1.540 billion for 2005 compared to
$1.481 billion for 2004. The increase in cash flow from operations was due to
a $96 million increase in items not involving current cash flows offset by a
$37 million decrease in net income (as explained above).
    The increase in items not involving current cash flows was due to:

    -   a $113 million increase in depreciation and amortization;
    -   a $95 million increase in impairment charges;
    -   a $24 million increase in other non-cash charges, including:
        -  an $18 million foreign currency gain on the repatriation of funds
           from Europe in 2005;
        -  a $16 million gain recorded on the sale of a non-core seat
           component facility in 2005; and
        -  a $12 million stock option modification charge recorded in 2004;
           offset by
        -  a $29 million pension curtailment gain recorded in 2004; and
    -   a $6 million decrease in equity income.

    These increases were partially offset by:

    -   a $51 million decrease in minority interest expense as a result of
        the Privatizations; and
    -   a $91 million decrease in future taxes and non-cash portion of
        current taxes.

    Cash provided from non-cash operating assets and liabilities amounted to
$158 million for 2005 which was comprised of the following sources and (uses)
of cash:

                                                             2005       2004
    -------------------------------------------------------------------------

    Accounts receivable                                  $   (280)  $   (313)
    Inventory                                                 (83)       (82)
    Prepaid expenses and other                                 11         21
    Accounts payable and other accrued liabilities            510        293
    Income taxes payable                                      (20)       (11)
    Deferred revenues                                          20         (8)
    -------------------------------------------------------------------------
    Changes in non-cash operating assets and liabilities $    158   $   (100)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The increase in accounts receivable is primarily a result of an increase
in tooling receivables for programs that launched in the fourth quarter of
2005 and the increase in inventory is primarily a result of an increase in
tooling inventory for programs that will be launching early in 2006. The
increase in accounts payable and other accrued liabilities is primarily
related to the increase in tooling receivables and tooling inventory.

    Capital and Investment Spending

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Fixed assets                              $   (848)  $   (859)
    Other assets                                  (127)       (81)
    -------------------------------------------------------------------------
    Fixed and other assets additions              (975)      (940)
    Purchases of subsidiaries                     (187)      (417)
    Proceeds from disposals                        111         83
    -------------------------------------------------------------------------
    Cash used in investing activities         $ (1,051)  $ (1,274)  $    223
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In 2005 we invested $848 million in fixed assets. While investments were
made to refurbish or replace assets consumed in the normal course and for
productivity improvements, most of the investment was for component
manufacturing, painting and assembly equipment and facilities for programs
that launched late in 2005 or will be launching in future years. In
particular, the major programs for which we invested capital in 2005 were:

    -   the new Ford Explorer and F-Series Super Duty pickup trucks in
        Kentucky;
    -   GM's next generation full-size pickup and sport utilities platform;
    -   the Peugeot 207 in France;
    -   the Chrysler 300 in Austria; and
    -   the Jeep Grand Cherokee in Austria.

    Included in 2004 fixed asset spending was $46 million for the
construction of a new facility to support frame programs for the Ford Explorer
and F-Series Super Duty pick-up trucks. In December 2004 we entered into a
sale-leaseback transaction with MI Developments Inc. ("MID") for this facility
(see "RELATED PARTIES" below).
    We also invested $127 million in other assets in 2005 primarily
representing:

    -   fully reimbursable planning and engineering costs relating to
        programs that launched during 2005 or will be launching in 2006; and
    -   long-term tooling receivables.

    Purchase of subsidiaries on the statement of cash flows includes the
$184 million cash portion of the Privatizations, specifically:

    -   On February 6, 2005 we acquired the outstanding 56% equity interest
        in Tesma that we did not previously own. Total consideration for the
        outstanding Class A Subordinate Voting Shares of Tesma not owned by
        us was $613 million, which was satisfied by issuing 6.7 million Magna
        Class A Subordinate Voting Shares and cash of $103 million;
    -   On March 6, 2005 we acquired the outstanding 27% equity interest in
        Decoma that we did not previously own. Total consideration for the
        outstanding Class A Subordinate Voting Shares of Decoma not owned by
        us was $239 million, which was satisfied by issuing 2.9 million Magna
        Class A Subordinate Voting Shares and cash of $31 million; and
    -   On April 3, 2005 we acquired the outstanding 15% equity interest in
        Intier that we did not previously own. Total consideration paid for
        the outstanding Class A Subordinate Voting Shares of Intier not owned
        by us was $202 million, which was satisfied by issuing 2.3 million
        Magna Class A Subordinate Voting Shares and cash of $50 million.

    During 2004, we acquired NVG and the cash portion of the purchase price,
net of $3 million of cash acquired, amounted to $348 million. During 2005, an
$18 million cash adjustment was received with respect to the acquisition of
NVG.
    We also completed a number of small acquisitions during 2004 and 2005,
including a number of manufacturing facilities and engineering centres. The
cash portion of these acquisitions amounted to $21 million in 2005 and
$69 million in 2004.
    For 2005, proceeds from disposal were $111 million, which included:

    -   the cash proceeds received on the sale of a non-core seat component
        facility;
    -   a cash payment received in respect of fully reimbursable planning and
        engineering costs capitalized in prior periods;
    -   proceeds from normal course fixed and other asset disposals.

    For 2004, proceeds from disposals were $83 million, which includes:

    -   the $46 million received from MID related to the sale-leaseback
        transaction discussed above; and
    -   proceeds from normal course fixed and other asset disposals.

    Financing

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Repayments of debt                        $   (329)  $   (410)
    Issues of debt                                  49        293
    Issues of Class A Subordinate
     Voting Shares                                  20         26
    Issues of shares by subsidiaries                 1         25
    Dividends paid to minority interests            (1)       (22)
    Dividends                                     (166)      (142)
    -------------------------------------------------------------------------
    Cash used in financing activities         $   (426)  $   (230)  $   (196)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The repayments of debt in 2005 included:

    -   in January, we repaid the first series of senior unsecured
        zero-coupon notes issued in connection with the NVG acquisition; and
    -   in March we repaid the outstanding borrowing of Cdn$197 million under
        the former Decoma term credit facility and the facility was
        cancelled.

    The repayments of debt in 2004 included:

    -   in September, we redeemed of all of the outstanding Preferred
        Securities for $300 million in cash;
    -   government debt repayments; and
    -   a reduction of bank indebtedness in addition to ordinary course term
        debt payments (see "Contractual Obligations" below).

    The issues of debt in 2005 consisted primarily of borrowings to support
investments in capital, including government debt and capital leases.
    The issues of debt in 2004 consisted primarily of the issuance, in
connection with the NVG acquisition, of five series of senior unsecured
zero-coupon notes with an aggregate issue price of Cdn$365 million
($287 million on issue date).
    During 2005, we issued $20 million in Class A Subordinate Voting Shares
on the exercise of stock options compared to $26 million during 2004.
    The issue of shares by our subsidiaries in 2004 is comprised primarily of
the issue of $15 million in Intier Class A Subordinate Voting Shares to the
Intier employee deferred profit sharing plan and other issues of shares on the
exercise of stock options for each of our three formerly public subsidiaries.
    Cash dividends paid during 2005 were $1.52 per Class A Subordinate Voting
or Class B Share, aggregating $166 million which reflects an increase in cash
dividends paid over the $142 million for 2004.

    Financing Resources

                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Liabilities
      Bank indebtedness                       $     89   $    136
      Long-term debt due within one year           131         84
      Long-term debt                               700        984
      Minority interest                              -        634
    -------------------------------------------------------------------------
                                                   920      1,838   $   (918)
    Shareholders' equity                         6,565      5,335      1,230
    -------------------------------------------------------------------------
    Total capitalization                      $  7,485   $  7,173   $    312
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total capitalization increased by 4% or $312 million to $7.5 billion for
2005 as compared to $7.2 billion for 2004. The increase in capitalization is a
result of a $1.2 billion increase in shareholders' equity, offset in part by a
$918 million decrease in liabilities.
    The decrease in liabilities is primarily a result of:

    -   the decrease in minority interest as a result of the Privatizations;
        and
    -   decreases in long-term debt as a result of the repayment of:
    -   the first series of our senior unsecured notes related to the
        acquisition of NVG; and
    -   the outstanding debt on Decoma's term debt facility.

    The increase in shareholders' equity is a result of:

    -   an increase in share capital as a result of the Class A Subordinate
        Voting Shares that were issued in connection with the Privatizations
        and on the exercise of stock options, partially offset by repurchases
        for issuance to certain executives on a restricted basis pursuant to
        our long term retention arrangements; and
    -   net income earned during 2005.

    The increases in equity were partially offset by:

    -   dividends paid; and
    -   a decrease in the currency translation adjustment.

    During 2005, our cash resources increased by $163 million to $1.7 billion
as a result of the cash provided from operating activities, partially offset
by the cash used in investing and financing activities as discussed above. In
addition to our cash resources, we had term and operating lines of credit
totalling $2 billion of which $1.8 billion was unused and available.
    On October 12, 2005 we completed a new five-year revolving term facility
that expires on October 12, 2010. The facility has a North American tranche of
$1.57 billion, a European tranche of (euro) 300 million and an Asian tranche
of $50 million.

    Maximum Number of Shares Issuable

    The following table presents the maximum number of shares that would be
outstanding if all of the outstanding stock options and Subordinated
Debentures issued and outstanding at February 24, 2006 were exercised or
converted:

    Class A Subordinate Voting and Class B Shares                109,301,880
    Subordinated Debentures(i)                                     1,096,582
    Stock options(ii)                                              4,576,537
    -------------------------------------------------------------------------
                                                                 114,974,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)  The above amounts include shares issuable if the holders of the 6.5%
         Convertible Subordinated Debentures exercise their conversion option
         but exclude Class A Subordinate Voting Shares issuable, only at our
         option, to settle interest and principal related to the 6.5%
         Convertible Subordinated Debentures. The number of Class A
         Subordinate Voting Shares issuable at our option is dependent on the
         trading price of Class A Subordinate Voting Shares at the time we
         elect to settle 6.5% Convertible Subordinated Debenture interest and
         principal with shares.

         The above amounts also exclude Class A Subordinate Voting Shares
         issuable, only at our option, to settle the 7.08% Subordinated
         Debentures on redemption or maturity. The number of shares issuable
         is dependent on the trading price of Class A Subordinate Voting
         Shares at redemption or maturity of the 7.08% Subordinated
         Debentures.

    (ii) Options to purchase Class A Subordinate Voting Shares are
         exercisable by the holder in accordance with the vesting provisions
         and upon payment of the exercise price as may be determined from
         time to time and pursuant to our stock option plans.


    Contractual Obligations and Off-Balance Sheet Financing

    At December 31, 2005, we had contractual obligations requiring annual
payments as follows.

                                             2007-    2009-    2011-
                                    2006     2008     2010     2015    Total
    -------------------------------------------------------------------------

    Operating leases with MID    $   126  $   244  $   241  $   588  $ 1,199
    Operating leases with
     third parties                   124      203      137      166      630
    Long-term debt                   131      260      393       47      831
    Access fees with Magna
     Entertainment Corp. ("MEC")       8       15       15       22       60
    Purchase obligations(i)
    -------------------------------------------------------------------------
    Total contractual
     obligations                 $   389  $   722  $   786  $   823  $ 2,720
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) We had no unconditional purchase obligations other than those related
        to inventory, services, tooling and fixed assets in the ordinary
        course of business.


    Our obligations with respect to employee future benefit plans, which have
been actuarially determined, were $216 million at December 31, 2005. These
obligations are broken down as follows:

                                                      Termination
                                                         and Long
                                                          Service
                                    Pension  Retirement   Arrange-
                                  Liability   Liability     ments      Total
    -------------------------------------------------------------------------

    Projected benefit obligation   $    234   $     90   $    144   $    468
    Less plan assets                   (185)         -          -       (185)
    -------------------------------------------------------------------------
    Unfunded amount                      49         90        144        283
    Unrecognized past service
     costs and actuarial losses         (18)       (34)       (15)       (67)
    -------------------------------------------------------------------------
    Amount recognized in other
     long-term liabilities         $     31   $     56   $    129   $    216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Our off-balance sheet financing arrangements are limited to operating
lease contracts.
    The majority of our facilities are subject to operating leases with MID
or with third parties. Operating lease payments in 2005 for facilities leased
from MID and third parties were $123 million and $71 million, respectively.
Operating lease commitments in 2006 for facilities leased from MID and third
parties are expected to total $126 million and $71 million, respectively. Our
existing leases with MID generally provide for periodic rent escalations based
either on fixed-rate step increases or on the basis of a consumer price index
adjustment (subject to certain caps).
    We also have operating lease commitments for equipment. These leases are
generally of shorter duration. Operating lease payments for equipment totaled
$54 million for 2005, and are expected to total $53 million in 2006.
    Although our consolidated contractual annual lease commitments decline
year by year, we expect that existing leases will either be renewed or
replaced, resulting in lease commitments being sustained at current levels, or
we will incur capital expenditures to acquire equivalent capacity.
    Long-term receivables in other assets are reflected net of outstanding
borrowings from a customer's finance subsidiary of $59 million since we have a
legal right of set-off of the customer's long-term receivable payable to us
against such borrowings and intend to settle the related amounts
simultaneously.

    Foreign Currency Activities

    Our North American operations negotiate sales contracts with OEMs for
payment in both U.S. and Canadian dollars. Materials and equipment are
purchased in various currencies depending upon competitive factors, including
relative currency values. The North American operations use labour and
materials which are paid for in both U.S. and Canadian dollars. Our Mexican
operations generally use the U.S. dollar as the functional currency.
    Our European operations negotiate sales contracts with OEMs for payment
principally in euros and British pounds. The European operations' material,
equipment and labour are paid for principally in euros and British pounds.
    We employ hedging programs, primarily through the use of foreign exchange
forward contracts, in an effort to manage our foreign exchange exposure, which
arises when manufacturing facilities have committed to the delivery of
products for which the selling price has been quoted in foreign currencies.
These commitments represent our contractual obligations to deliver products
over the duration of the product programs, which can last for a number of
years. The amount and timing of the forward contracts will be dependent upon a
number of factors, including anticipated production delivery schedules and
anticipated production costs, which may be paid in the foreign currency.
Despite these measures, significant long-term fluctuations in relative
currency values, in particular a significant change in the relative values of
the U.S. dollar, Canadian dollar, euro or British pound, could have an adverse
effect on our profitability and financial condition (as discussed throughout
this MD&A).

    RELATED PARTIES
    -------------------------------------------------------------------------

    Mr. Stronach, our Chairman of the Board, and two members of his family
are trustees of the Stronach Trust. The Stronach Trust controls us through the
right to direct the votes attaching to 66% of Magna's Class B Shares and also
controls MID, and therefore MEC, through the right to direct the votes
attaching to 66% of MID's Class B Shares. Various land and buildings used in
our operations are leased from MID under operating lease agreements which are
effected on normal commercial terms. Lease expense included in the
consolidated statements of income with respect to MID for the years ended
December 31, 2005 and 2004 was $123 million and $128 million, respectively.
Included in accounts payable are trade amounts owing to MID and its
subsidiaries in the amount of $2 million.
    During 2004, MID provided project management services to us in connection
with the construction of a new plant. In December 2004, the land and building
for this plant were sold to MID for $46 million and the assumption of related
development liabilities of $12 million, representing our cost of these assets.
The land and building have been leased back under a 17-year operating lease.
    We have agreements with affiliates of the Chairman of the Board for the
provision of business development and consulting services. In addition, we
have an agreement with the Chairman of the Board for the provision of business
development and other services. The aggregate amount expensed under these
agreements with respect to the years ended December 31, 2005 and 2004 was
$33 million and $40 million, respectively.
    During the year ended December 31, 2005, trusts which exist to make
orderly purchases of our shares for employees either for transfer to the EPSP
or to recipients of either bonuses or rights to purchase such shares from the
trusts, borrowed up to $51 million from us to facilitate the purchase of
Class A Subordinate Voting Shares. At December 31, 2005, the trusts'
indebtedness to us was $21 million.
    Investments include $3 million, at cost, in respect of an investment in a
company that was established to acquire our shares for sale to employees.
    During the year ended December 31, 2004, we renewed our agreements with
MEC for the use of their golf course and clubhouse meeting, dining and other
facilities in Aurora, Ontario and in Oberwaltersdorf, Austria for annual
payments of Cdn $5.0 million and (euro) 2.5 million, respectively, for a
period of 10 years ending December 31, 2014. The expense included in the
consolidated statements of income with respect to these agreements for the
years ended December 31, 2005 and 2004 was $7 million.

    SUBSEQUENT EVENTS
    -------------------------------------------------------------------------

    On February 2, 2006 we acquired CTS for a cash purchase price of
approximately (euro) 170 million plus assumed debt.
    CTS is one of the world's leading manufacturers of roof systems for the
automotive industry and is based in Germany. CTS manufactures soft tops, hard
tops and modular retractable hard tops. In addition to Porsche, its customers
include DaimlerChrysler, Ferrari, Peugeot and General Motors. For the year
ended December 31, 2004, CTS reported sales of approximately (euro) 400
million. CTS has six facilities in Europe and two facilities in North America,
with approximately 1,100 employees.


    RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED DECEMBER 31, 2005
    -------------------------------------------------------------------------

    Sales
                                                   For the three months
                                                     ended December 31,
                                             --------------------------------
                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Vehicle Production Volumes
     (millions of units)
      North America                              3.910      3.790       + 3%
      Europe                                     4.065      4.069         -
    -------------------------------------------------------------------------

    Average Dollar Content Per Vehicle
      North America                           $    762   $    706       + 8%
      Europe                                  $    306   $    307         -
    -------------------------------------------------------------------------

    Sales
      External Production
        North America                         $  2,980   $  2,674      + 11%
        Europe                                   1,242      1,250      -  1%
        Rest of World                               48         35      + 37%
      Complete Vehicle Assembly                  1,051      1,196      - 12%
      Tooling, Engineering and Other               533        498      +  7%
    -------------------------------------------------------------------------
    Total Sales                               $  5,854   $  5,653      +  4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total sales reached a record level in the fourth quarter of 2005,
increasing 4% or $201 million to $5.9 billion for the fourth quarter of 2005
compared to $5.7 billion for the fourth quarter of 2004.

    External Production Sales - North America

    External production sales in North America increased 11% or $306 million
to $3.0 billion for the fourth quarter of 2005 compared to $2.7 billion for
the fourth quarter of 2004. This increase in production sales reflects an 8%
increase in our North American average dollar content per vehicle combined
with a 3% increase in North American vehicle productions volumes.
    Our average dollar content per vehicle grew by 8% or $56 to $762 for the
fourth quarter of 2005 compared to $706 for the fourth quarter of 2004,
primarily as a result of:

    -  the launch of new programs during or subsequent to the fourth quarter
       of 2004, including:
       -  the Chevrolet Cobalt and Pontiac Pursuit;
       -  the Chevrolet HHR;
       -  the Hummer H3;
       -  the Dodge Charger;
       -  the Ford Fusion;
       -  the Pontiac Torrent;
       -  the Mercedes M-Class;
       -  the Chevrolet Impala; and
       -  the Mercedes R-Class;
    -  increased production and/or content on certain programs, including
       increased production for the Dodge Caravan, Grand Caravan and Chrysler
       Town & Country; and
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Canadian dollar against the U.S. dollar.

    The factors contributing to the growth in our average dollar content per
vehicle were partially offset by:

    -  the impact of lower production and/or content on certain programs,
       including:
       -  the GMT800 platform;
       -  the Mazda Tribute and Ford Escape;
       -  the Dodge Ram Pickup;
       -  the Jeep Grand Cherokee;
       -  the Dodge Durango;
       -  the Cadillac STS; and
       -  the Ford Freestar and Mercury Monterey;
    -  programs that ended production during or subsequent to the fourth
       quarter of 2004; and
    -  incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe decreased 1% or $8 million to
$1.242 billion for the fourth quarter of 2005 compared to $1.250 billion for
the fourth quarter of 2004. This decrease in production sales reflects
marginal decreases in European vehicle production volumes and our European
average dollar content per vehicle.
    Our average dollar content per vehicle decreased by $1 to $306 for the
fourth quarter of 2005 compared to $307 for the fourth quarter of 2004,
primarily as a result of a decrease in reported U.S. dollar sales due to the
weakening of the euro and British pound against the U.S. dollar. Excluding the
impact of foreign exchange, our European content per vehicle increased
primarily as a result of:

    -  the launch of new programs during or subsequent to the fourth quarter
       of 2004, including:
       -  the Volkswagen Passat; and
       -  the Land Rover Range Rover Sport; and
    -  increased production and/or content on certain programs, including:
       -  the Volkswagen Transporter and Multivan;
       -  the Mercedes B-Class; and
       -  the Volvo V70.

    The factors contributing to the increase in our average dollar content
per vehicle were partially offset by:

    -  the impact of lower production and/or content on certain programs,
       including:
       -  the MINI Cooper; and
       -  the Mercedes E-Class; and
    -  incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 37% or
$13 million to $48 million for the fourth quarter of 2005 compared to
$35 million for the fourth quarter of 2004. The increase in production sales
is a result of:

    -  the ramp-up of production at new facilities in China;
    -  increased production at our powertrain facilities in Korea; and
    -  an increase in production at a closure systems facility in Brazil.


    Complete Vehicle Assembly Sales
                                                   For the three months
                                                     ended December 31,
                                             --------------------------------
                                                  2005       2004     Change
    -------------------------------------------------------------------------

    Complete Vehicle Assembly
     Sales                                    $  1,051      1,196      - 12%
    -------------------------------------------------------------------------
    Complete Vehicle Assembly Volumes (Units)
      Full-Costed:
        BMW X3, Mercedes E-Class and G-Class,
         Saab 9(3) Convertible                  39,610     41,823      -  5%
      Value-Added:
         Jeep Grand Cherokee, Chrysler 300,
          Chrysler Voyager                      25,574     16,479      + 55%
    -------------------------------------------------------------------------
                                                65,184     58,302      + 12%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Although assembly volumes increased 12% or 6,882 units, complete vehicle
assembly sales decreased 12% or $145 million to $1.051 billion for the fourth
quarter of 2005 compared to $1.196 billion for the fourth quarter of 2004. The
decrease in complete vehicle assembly sales is primarily the result of:

    -  a decrease in reported U.S. dollar sales due to the weakening of the
       euro against the U.S. dollar;
    -  lower assembly volumes for vehicles accounted for on a full-cost
       basis, including:
       -  the BMW X3;
       -  the Saab 93 Convertible; and
       -  the Mercedes G-Class.

    The factors contributing to the decrease in complete vehicle assembly
sales were partially offset by:

    -  higher assembly volumes for:
       -  the Jeep Grand Cherokee which is accounted for on a value-added
          basis as a result of the launch of a new model in January 2005; and
       -  the Mercedes E-Class which is accounted for on a full-cost basis;
          and
       -  the start of assembly in the second quarter of 2005 of the Chrysler
          300 for distribution in European markets and certain other markets
          outside North America.

    Tooling, Engineering and Other

    Tooling, engineering and other sales increased 7% or $35 million to
$533 million for the fourth quarter of 2005 compared to $498 million for the
fourth quarter of 2004.
    In the fourth quarter of 2005 the major programs for which we recorded
tooling, engineering and other sales were:

    -  the BMW X5;
    -  the Jeep Wrangler; and
    -  GM's next generation full-size pickup and sport utilities platform.

    In the fourth quarter of 2004 the major programs for which we recorded
tooling, engineering and other sales were:

    -  the Ford Fusion, Mercury Milan and Lincoln Zephyr; and
    -  the Ford Explorer and Mercury Mountaineer.

    In addition, tooling, engineering and other sales increased as a result
of the strengthening of the Canadian dollar against the U.S. dollar.

    EBIT
                                                   For the three months
                                                     ended December 31,
                                             --------------------------------
                                                  2005       2004     Change
    -------------------------------------------------------------------------

    North America                             $    194   $    196
    Europe                                         (93)        29
    Rest of World                                   (3)         3
    Corporate and Other                             28         26
    -------------------------------------------------------------------------
    Total EBIT                                $    126   $    254      - 50%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in EBIT for the fourth quarter of 2005 and 2004 were the
following items, which are described above in the Highlights section.

                                                        For the three months
                                                         ended December 31,
                                                       ----------------------
                                                             2005       2004
    -------------------------------------------------------------------------

    North America
      Impairment charges                                 $    (21)  $    (16)
      Restructuring charges                                   (12)       (12)
      Pension curtailment gain                                  -         29
    -------------------------------------------------------------------------
                                                              (33)         1
    Europe
      Impairment charges                                     (105)  $    (20)
      Restructuring charges                                   (17)         -
    -------------------------------------------------------------------------
                                                             (122)       (20)
    Corporate and other
      Restructuring charges                                    (2)         -
    -------------------------------------------------------------------------
                                                         $   (157)  $    (19)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBIT in North America decreased 1% or $2 million to $194 million for the
fourth quarter of 2005 compared to $196 million for the fourth quarter of
2004. Excluding the North American unusual items listed above, EBIT increased
$32 million primarily as a result of:

    -  margins earned on new programs that launched during or subsequent to
       the fourth quarter of 2004 including the Chevrolet Cobalt and Pontiac
       Pursuit;
    -  reduced costs incurred at certain new facilities that launched during
       2005;
    -  improved operations and productivity improvements at certain
       facilities;
    -  price reductions from our suppliers;
    -  the closure of an exterior systems facility during the first quarter
       of 2005 which improved our results as this division incurred operating
       losses during the fourth quarter of 2004; and
    -  a reduction in employee profit sharing as a result of the decrease in
       our consolidated earnings.

    The factors contributing to the increase in EBIT were partially offset
by:

    -  lower earnings as a result of a decrease in production volumes for
       several of our high content programs including the GMT800 platform,
       and the Mazda Tribute and Ford Escape;
    -  operating inefficiencies and launch costs incurred during the fourth
       quarter of 2005 for programs that launched during 2005 or for programs
       that will be launching subsequent to the end of the year, including a
       new fascia moulding and paint facility in Georgia to support the
       launches of the Mercedes M-Class and R-Class;
    -  amortization of fair value increments related to the Privatizations;
    -  incremental customer price concessions; and
    -  increased commodity prices, including steel and resin.

    Europe

    EBIT in Europe decreased $122 million to a loss of $93 million for the
fourth quarter of 2005 compared to earnings of $29 million for the fourth
quarter of 2004. Excluding the European unusual items listed above, EBIT
decreased by $20 million, primarily as a result of:

    -  lower margins as a result of the decrease in sales on certain
       high-content programs;
    -  operating inefficiencies at certain facilities;
    -  amortization of fair value increments related to the Privatizations;
    -  increased commodity prices;
    -  a provision for estimated product warranty costs; and
    -  incremental customer price concessions.

    The factors contributing to the decrease in EBIT were partially offset
by:

    -  productivity and efficiency improvements at certain divisions;
    -  increased margin earned on new programs that launched during or
       subsequent to the fourth quarter of 2004; and;
    -  a reduction in employee profit sharing as a result of the decrease in
       our consolidated earnings.

    Rest of World

    EBIT in the Rest of World decreased $6 million to a loss of $3 million
for the fourth quarter of 2005 compared to earnings of $3 million for the
fourth quarter of 2004. The decrease in EBIT is primarily the result of costs
incurred at new facilities primarily in China as we continue to pursue
opportunities in this growing market. Partially offsetting these costs was the
additional margin earned on the increased production sales as discussed above.

    Corporate and Other

    Corporate and other EBIT increased 8% or $2 million to $28 million for
the fourth quarter of 2005 compared to $26 million for the fourth quarter of
2004. Excluding the Corporate and other unusual items listed above, EBIT
increased $4 million primarily as a result of:

    -  increased affiliation fees as a result of the increase in sales; and
    -  decreased incentive compensation as a result of the decrease in
       Magna's consolidated earnings.


    CRITICAL ACCOUNTING POLICIES
    -------------------------------------------------------------------------

    Our discussion and analysis of our results of operations and financial
position is based upon the unaudited consolidated financial statements, which
have been prepared in accordance with Canadian GAAP. The preparation of the
unaudited consolidated financial statements requires management to make
estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosure of contingent
assets and liabilities. We base our estimates on historical experience and
various other assumptions that we believe to be reasonable in the
circumstances, the results of which form the basis for making judgements about
the carrying value of assets and liabilities. On an ongoing basis, we evaluate
our estimates. However, actual results may differ from these estimates under
different assumptions or conditions.
    We believe the following critical accounting policies affect the more
significant judgements and estimates used in the preparation of our unaudited
consolidated financial statements. Management has discussed the development
and selection of the following critical accounting policies with the Audit
Committee of the Board of Directors and the Audit Committee has reviewed our
disclosure relating to critical accounting policies in this MD&A.

    Revenue Recognition

    (a) Separately Priced Tooling and Engineering Service Contracts

    With respect to our contracts with OEMs for particular vehicle programs,
    we perform multiple revenue-generating activities. The most common
    arrangement is where, in addition to contracting for the production and
    sale of parts, we also have a separately priced contract with the OEM for
    related tooling costs. Under these arrangements, we either construct the
    tools at our in-house tool shops or contract with third party tooling
    vendors to construct and supply tooling to be used by us in the
    production of parts for the OEM. On completion of the tooling build, and
    upon acceptance of the tooling by the OEM, we sell the separately priced
    tooling to the OEM pursuant to a separate tooling purchase order.

    Such multiple element arrangements also include providing separately
    priced engineering services in addition to tooling and subsequent
    assembly or production activities. On completion, and upon acceptance by
    the OEM, we generally sell the separately priced engineering services to
    the OEM prior to the commencement of subsequent assembly or production
    activities.

    During 2004, we adopted CICA Emerging Issues Committee Abstract No. 142,
    "Revenue Arrangements with Multiple Deliverables" ("EIC-142")
    prospectively for new revenue arrangements with multiple deliverables
    entered into by us on or after January 1, 2004. Under EIC-142, separately
    priced tooling and engineering services are accounted for as a separate
    revenue element only in circumstances where the tooling and engineering
    has value to the customer on a standalone basis and there is objective
    and reliable evidence of the fair value of the subsequent parts
    production or vehicle assembly. Based on the typical terms and process
    for the negotiation of separately priced tooling contracts, we anticipate
    that substantially all such tooling contracts will continue to be
    accounted for as separate revenue elements. Because of the unique
    contracts related to multiple element arrangements involving engineering
    and subsequent assembly or production activities, all significant
    arrangements will be evaluated in order to determine whether the
    engineering component of the arrangement qualifies as a separate revenue
    element. If the engineering component is not considered to be a separate
    revenue element, revenues and costs of sales on such activities would be
    deferred and amortized on a gross basis over the subsequent assembly or
    production program.

    Revenues from engineering services and tooling contracts that qualify as
    separate revenue elements are generally recognized on a percentage of
    completion basis. The percentage of completion method recognizes revenue
    and cost of sales over the term of the contract based on estimates of the
    state of completion, total contract revenue and total contract costs.
    Under such contracts, the related receivables could be paid in full upon
    completion of the contract, in installments or in fixed amounts per
    vehicle based on forecasted production volumes. In the event that actual
    production volumes are less than those forecasted, a reimbursement for
    any shortfall will be made annually.

    Tooling and engineering contract prices are generally fixed; however,
    price changes, change orders and program cancellations may affect the
    ultimate amount of revenue recorded with respect to a contract. Contract
    costs are estimated at the time of signing the contract and are reviewed
    at each reporting date. Adjustments to the original estimates of total
    contract costs are often required as work progresses under the contract
    and as experience is gained, even though the scope of the work under the
    contract may not change. When the current estimates of total contract
    revenue and total contract costs indicate a loss, a provision for the
    entire loss on the contract is made. Factors that are considered in
    arriving at the forecasted loss on a contract include, amongst others,
    cost over-runs, non-reimbursable costs, change orders and potential price
    changes.

    For U.S. GAAP purposes, we adopted EITF 00-21, "Accounting for Revenue
    Arrangements With Multiple Deliverables" prospectively for new revenue
    arrangements with multiple deliverables entered into by us on or after
    January 1, 2004, which harmonized our Canadian and U.S. GAAP reporting
    for such arrangements. For separately priced in-house tooling and
    engineering services contracts provided in conjunction with subsequent
    production or assembly services entered into prior to January 1, 2004,
    the revenues and costs of sales on such activities continue to be
    deferred and amortized on a gross basis over the remaining life of the
    production or assembly program for U.S. GAAP purposes.

    (b) Contracts With Purchased Components

    Revenues and cost of sales from separately priced tooling and engineering
    service contracts are presented on a gross basis in the consolidated
    statements of income when we are acting as principal and are subject to
    significant risks and rewards of the business. Otherwise, components of
    revenue and related costs are presented on a net basis. To date,
    substantially all separately priced engineering service and tooling
    contracts have been recorded on a gross basis.

    As reported above, the reporting of sales and cost of sales for our
    vehicle assembly contracts is affected by the contractual terms of the
    arrangement.

    In addition to our assembly business, we also enter into production
    contracts where we are required to coordinate the design, manufacture,
    integration and assembly of a large number of individual parts and
    components into a modular system for delivery to the OEM's vehicle
    assembly plant. Under these contracts, we manufacture a portion of the
    products included in the module but also purchase components from various
    sub-suppliers and assemble such components into the completed module. We
    recognize module revenues and cost of sales on a gross basis when we have
    a combination of: primary responsibility for providing the module to the
    OEM; responsibility for styling and/or product design specifications;
    latitude in establishing sub-supplier pricing; responsibility for
    validation of sub-supplier part quality; inventory risk on sub-supplier
    parts; exposure to warranty; exposure to credit risk on the sale of the
    module to the OEM; and other factors. To date, revenues and cost of sales
    on our module contracts have been reported on a gross basis.

    Amortized Engineering and Customer Owned Tooling Arrangements

    We incur pre-production engineering research and development ("ER&D")
costs related to the products we produce for OEMs under long-term supply
agreements. We expense ER&D costs, which are paid for as part of the
subsequent related production and assembly program, as incurred unless a
contractual guarantee for reimbursement exists.
    In addition, we expense all costs as incurred related to the design and
development of moulds, dies and other tools that we will not own and that will
be used in, and reimbursed as part of the piece price amount for, subsequent
related production or assembly program unless the supply agreement provides us
with a contractual guarantee for reimbursement of costs or the non-cancellable
right to use the moulds, dies and other tools during the supply agreement, in
which case the costs are capitalized.
    ER&D and customer-owned tooling costs capitalized in "Other assets" are
amortized on a units of production basis over the related long-term supply
agreement.

    Impairment of Goodwill and Other Long-lived Assets

    Goodwill is subject to an annual impairment test or more frequently when
an event occurs that more likely than not reduces the fair value of a
reporting unit below its carrying value.
    We evaluate fixed assets and other long-lived assets for impairment
whenever indicators of impairment exist. Indicators of impairment include
prolonged operating losses or a decision to dispose of, or otherwise change
the use of, an existing fixed or other long-lived asset. If the sum of the
future cash flows expected to result from the asset, undiscounted and without
interest charges, is less than the reported value of the asset, an asset
impairment must be recognized in the consolidated financial statements. The
amount of impairment to be recognized is calculated by subtracting the fair
value of the asset from the reported value of the asset.
    We believe that accounting estimates related to goodwill and long-lived
asset impairment assessments are "critical accounting estimates" because:
(i) they are subject to significant measurement uncertainty and are
susceptible to change as management is required to make forward-looking
assumptions regarding the impact of improvement plans on current operations,
in-sourcing and other new business opportunities, program price and cost
assumptions on current and future business, the timing of new program launches
and future forecasted production volumes; and (ii) any resulting impairment
loss could have a material impact on our consolidated net income and on the
amount of assets reported on our consolidated balance sheet.

    Warranty

    We record product warranty liabilities based on individual customer
agreements. Under most customer agreements, we only account for existing or
probable claims on product default issues when amounts related to such issues
are probable and reasonably estimable. Under certain complete vehicle
engineering and assembly contracts, we record an estimate of future
warranty-related costs based on the terms of the specific customer agreements
and the specific customers' warranty experience.
    Product liability provisions are established based on our best estimate
of the amounts necessary to settle existing claims on product default issues.
Recall costs are costs incurred when government regulators and/or our
customers decide to recall a product due to a known or suspected performance
issue, and we are required to participate either voluntarily or involuntarily.
Costs typically include the cost of the product being replaced, the customer's
cost of the recall and labour to remove and replace the defective part. When a
decision to recall a product has been made or is probable, our estimated cost
of the recall is recorded as a charge to net earnings in that period. In
making this estimate, judgment is required as to the number of units that may
be returned as a result of the recall, the total cost of the recall campaign,
the ultimate negotiated sharing of the cost between the customer and us and,
in some cases, the extent to which a supplier to us will share in the recall
cost.

    Future Income Tax Assets

    At December 31, 2005, we had recorded future tax assets (net of related
valuation allowances) in respect of loss carryforwards and other deductible
temporary differences of $85 million and $123 million, respectively. The
future tax assets in respect of loss carryforwards relate primarily to U.S.
and Mexican operations.
    We evaluate quarterly the realizability of future tax assets by assessing
our valuation allowance and by adjusting the amount of such allowance, if
necessary. The factors used to assess the likelihood of realization are our
forecast of future taxable income and available tax planning strategies that
could be implemented to realize the future tax assets. We have, and we
continue to use tax planning strategies to realize future tax assets in order
to avoid the potential loss of benefits.
    At December 31, 2005, we had gross income tax loss carryforwards of
approximately $603 million, which relate to operations in the United Kingdom,
Belgium, Germany, Italy, Spain and Austria, the tax benefits of which have not
been recognized in our unaudited consolidated financial statements. Of the
total losses, $252 million expire between 2006 and 2025 and the remainder have
no expiry date. If operations improve to profitable levels in these
jurisdictions, and such improvements are sustained for a prolonged period of
time, our earnings will benefit from these loss carryforward pools except for
the benefit of losses obtained on acquisition which would reduce related
goodwill and intangible balances.

    Employee Benefit Plans

    The determination of the obligation and expense for defined benefit
pension, termination and long service arrangements and other post retirement
benefits, such as retiree healthcare and medical benefits, is dependent on the
selection of certain assumptions used by actuaries in calculating such
amounts. Those assumptions include, among others, the discount rate, expected
long-term rate of return on plan assets and rates of increase in compensation
costs. Actual results that differ from the assumptions used are accumulated
and amortized over future periods and, therefore, impact the recognized
expense and recorded obligation in future periods. Significant changes in
assumptions or significant new plan enhancements could materially affect our
future employee benefit obligations and future expense. At December 31, 2005,
we had unrecognized past service costs and actuarial experience losses of
$67 million that will be amortized to future employee benefit expense over the
expected average remaining service life of employees.


    COMMITMENTS AND CONTINGENCIES
    -------------------------------------------------------------------------

    From time to time, we may be contingently liable for litigation and other
claims. Refer to note 28 of our audited consolidated financial statements for
the year ended December 31, 2004 and note 9 of the accompanying unaudited
consolidated financial statements for the three months and year ended
December 31, 2005, which describe these claims.


    SELECTED ANNUAL CONSOLIDATED FINANCIAL DATA
    -------------------------------------------------------------------------

    The following selected consolidated financial data has been derived from,
and should be read in conjunction with the accompanying unaudited consolidated
financial statements for the year ended December 31, 2005, which are prepared
in accordance with Canadian GAAP.

                                                  2005       2004       2003
    -------------------------------------------------------------------------

    Income Statement Data

    Sales                                    $  22,811  $  20,653  $  15,345
    Net income from continuing operations    $     639  $     676  $     567
    Net income                               $     639  $     676  $     500

    Earnings per Class A Subordinate Voting
     or Class B Share
      From Continuing Operations
        Basic                                $    5.99  $    6.99  $    5.91
        Diluted                              $    5.90  $    6.95  $    5.89

    Earnings per Class A Subordinate Voting
     or Class B Share
      Basic                                  $    5.99  $    6.99  $    5.21
      Diluted                                $    5.90  $    6.95  $    5.19

    Cash dividends paid per Class A
     Subordinate Voting or Class B Share     $    1.52  $    1.48  $    1.36
    -------------------------------------------------------------------------


                                                  2005       2004       2003
    -------------------------------------------------------------------------

    Financial Position Data

    Working Capital                          $   2,215  $   2,183  $   1,937
    Total assets                             $  12,321  $  11,615  $   9,871
    Net cash:
      Cash and cash equivalents              $   1,682  $   1,519  $   1,528
      Bank indebtedness                            (89)      (136)      (298)
      Long term debt (including portion due
       within one year)                           (831)    (1,068)      (801)
    -------------------------------------------------------------------------
    Net cash                                 $     762  $     315  $     429
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Changes in the data from 2004 to 2005 are explained in "Results of
Operations - For the Year Ended December 31, 2005" section above.

    2004 COMPARED TO 2003

    External Production Sales - North America

    External production sales in North America increased 18% or $1.5 billion
to $9.8 billion for 2004 compared to $8.3 billion for 2003. This increase in
production sales reflects a 19% increase in our North American average dollar
content per vehicle over 2003, partially offset by a 1% decline in North
American vehicle production volumes from 2003.
    Our average dollar content per vehicle grew by 19% or $98 to $623 for
2004 compared to $525 for 2003. The increase relates primarily to:

    -  the launch of new programs during or subsequent to 2003, including:
        -  the Chevrolet Equinox;
        -  the GMC Canyon and Chevrolet Colorado;
        -  the Ford Freestar and Mercury Monterey;
        -  the Ford F-Series;
        -  the Chevrolet Malibu; and
        -  the Dodge Durango;
    -  acquisitions completed during 2004, including the NVG and Davis
       Industries Inc. ("Davis") acquisitions; and
    -  an increase in reported U.S. dollar sales due to the strengthening of
       the Canadian dollar against the U.S. dollar.

    These factors contributing to the growth in our average dollar content
per vehicle were partially offset by:

    -  the impact of lower content and/or production on certain programs
       including:
       -  the GMT800 platform;
       -  the GMC Envoy, Chevrolet Trailblazer and Buick Rainier; and
       -  the Ford Explorer and Mercury Mountaineer; and
    -  incremental customer price concessions.

    External Production Sales - Europe

    External production sales in Europe increased 25% or $935 million to
$4.7 billion for 2004 compared to $3.8 billion for 2003. This increase in
sales reflects a 23% increase in our European average dollar content per
vehicle combined with a 1% increase in European vehicle production volumes
over 2003.
    Our average dollar content per vehicle grew by $54 to $285 for 2004
compared to $231 for 2003, primarily as a result of:

    -  programs that launched during or subsequent to 2003, including:
       -  the BMW X3;
       -  the BMW 6-Series;
       -  the MINI Convertible; and
       -  the Mercedes E-Class; and
    -  higher reported U.S. dollar sales due to the strengthening of the euro
       and the British pound, each against the U.S. dollar.

    The factors contributing to the growth in our average dollar content per
vehicle were partially offset by:

    -  lower production on certain programs including:
       -  the Ford Transit;
       -  the MINI Cooper; and
       -  the smart for two; and
    -  incremental customer price concessions.

    External Production Sales - Rest of World

    External production sales in the Rest of World increased 53% or
$49 million to $139 million for 2004 compared to $90 million for 2003. The
increase in production sales is primarily a result of:

    -  the acquisition of the remaining interest in several joint venture
       mirror facilities in China;
    -  the ramp-up of production at new facilities in China;
    -  increased production at our powertrain facilities in Korea; and
    -  increased production at our closure systems facility in Brazil.

    Complete Vehicle Assembly Sales

    Complete vehicle assembly sales increased 176% or $2.8 billion to
$4.4 billion for 2004 compared to $1.6 billion for 2003. The increase in
complete vehicle assembly sales is primarily the result of:

    -  the launch of the BMW X3 program during the fourth quarter of 2003;
    -  higher reported U.S. dollar sales due to the strengthening of the euro
       and the British pound, each against the U.S. dollar; and
    -  the launch of the Saab 9(3) Convertible program during the third
       quarter of 2003.

    Tooling, Engineering and Other

    Tooling, engineering and other sales were $1.5 billion for 2004,
representing an increase of 2% or $26 million over 2003. The increase was
primarily the result of an increase in reported U.S. dollar sales due to the
strengthening of the Canadian dollar, euro and British pound, each against the
U.S. dollar.
    Excluding the impact of foreign exchange, tooling sales decreased in
2004, reflecting the launch of many programs during the third and fourth
quarters of 2003. In 2004 the major programs for which we recorded tooling,
engineering and other sales were:

    -  the Ford Fusion, Mercury Milan and Lincoln Zephyr;
    -  the Ford Explorer and Mercury Mountaineer; and
    -  the Mercedes M-Class and R-Class.

    In 2003, the major programs on which we recorded tooling, engineering and
other sales included:

    -  the BMW X3;
    -  the Saab 9(3) Convertible;
    -  the second and third row stow in floor seats for the DaimlerChrysler
       minivans;
    -  the Ford Freestar and Mercury Mountaineer; and
    -  the Ford Mustang.

    Net Income and Net Income from Continuing Operations

    Net income increased 35% or $176 million to $676 million for 2004
compared to $500 million for 2003. Net income in 2003 includes the results of
our former controlling interest in MEC, which has been presented as
discontinued operations. In 2003, we recognized a $68 million non-cash
impairment loss equal to the excess of the carrying value of our investment in
MEC over the fair value of MID's controlling interest in MEC on the
distribution date.
    Net income from continuing operations increased 19% or $109 million to
$676 million for 2004 compared to $567 million for 2003. Included in net
income from continuing operations are the following items (net of minority
interest and income taxes):

                                                  2004       2003     Change
    -------------------------------------------------------------------------
    Impairment charges                        $     22   $     13
    Restructuring charges                           17          5
    Pension curtailment gain                       (18)         -
    Stock options                                   12          -
    Other loss                                       -          6
    Future income tax charge (recovery)
     related to tax rate changes                    (6)        10
    -------------------------------------------------------------------------
                                              $     27   $     34   $     (7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The unusual items in 2004 have been discussed above in the "Highlights"
section. During 2003, the unusual items were as follows:

    -  impairment charges relating to certain exterior systems facilities in
       Europe;
    -  restructuring charges related to the reorganization and closure of
       certain facilities in Europe;
    -  a non-cash impairment loss at the date of the MID distribution equal
       to the excess of our carrying value of certain real estate properties
       of MID over their fair values; and
    -  a future income tax charge related to the increase in future income
       tax rates in Canada.

    Excluding the unusual items, net income from continuing operations
increased by $102 million as a result of an increase in gross margin of
$389 million and a decrease in minority interest expense of $3 million,
partially offset by increases in SG&A spending, depreciation and amortization,
income taxes and interest expense of $162 million, $78 million, $45 million
and $3 million, respectively, and a $2 million decrease in equity income.
    Gross margin as a percentage of total sales decreased to 14.3% for 2004
compared to 16.5% for 2003. Excluding the unusual items discussed above, gross
margin as a percentage of total sales for 2004 decreased 2.2% as a result of:

    -  the launches of the BMW X3 and the Saab 9(3) Convertible complete
       vehicle assembly programs;
    -  costs incurred for new facilities;
    -  inefficiencies at certain exterior systems facilities in Europe;
    -  the MID distribution as the distribution effectively added additional
       lease expense;
    -  a change in sales mix during 2004 to programs that operate at lower
       margins;
    -  the strengthening of the euro against the U.S. dollar;
    -  the NVG and Davis acquisitions;
    -  increased raw material prices; and
    -  incremental customer price concessions.

    Partially offsetting these decreases were:

    -  the positive impact of programs that launched during or subsequent to
       2003; and
    -  improved performance and productivity at a number of divisions.

    The increase in depreciation and amortization in 2004 was primarily a
result of:

    -  an increase in assets employed in the business to support future
       growth, including acquisitions completed during the year;
    -  an increase in reported U.S. dollar depreciation and amortization due
       to the strengthening of the euro, Canadian dollar and British pound,
       each against the U.S. dollar; and
    -  accelerated depreciation on certain program specific assets in 2004.

    These increases in depreciation were partially offset by a reduction of
depreciation as a result of the MID distribution.

    The increase in SG&A expenses relates primarily to:

    -  higher infrastructure costs to support the increase in sales levels,
       including spending to support launches;
    -  an increase in reported U.S. dollar SG&A due to the strengthening of
       the euro, Canadian dollar and British pound, each against the U.S.
       dollar; and
    -  increased SG&A spending as a result of acquisitions completed during
       or subsequent to 2003, including the NVG and Davis acquisitions.

    Earnings per Share

    Diluted earnings per share from continuing operations increased 18% or
$1.06 to $6.95 for 2004 compared to $5.89 for 2003. Excluding the unusual
items discussed above, diluted earnings per share from continuing operations
increased $1.00 as a result of the increase in net income from continuing
operations (excluding unusual items), offset in part by an increase in the
weighted average number of shares outstanding during the year, substantially
as a result of the exercise of stock options to acquire Class A Subordinate
Voting Shares.

    Financial Position

    The increase in total assets from 2003 to 2004 is a result of:

    -  the acquisition of NVG;
    -  investment in new and existing production facilities to support our
       continued growth, including:
       -  a new stamping facility in Mexico to support the launch of the Ford
          Fusion, Mercury Milan and Lincoln Zephyr;
       -  a new fascia moulding and paint facility in Georgia and an
          expansion of our Class A stamping facility in South Carolina, both
          to support the launch of the Mercedes M-Class; and
       -  a new frame facility in Kentucky for the new Ford Explorer and
          F-Series Super Duty pick-up trucks;
    -  the growth in total assets as the result of our strong financial
       performance; and
    -  the increase in the U.S. dollar reported amounts of our assets as a
       result of the strengthening of the Canadian dollar, euro and British
       pound, each against the U.S. dollar.

    The reduction in bank indebtedness occurred as a result of Decoma
replacing its $300 million 364 day revolving credit facility with a
$400 million three-year term facility which resulted in approximately
$215 million being recorded as long-term debt at December 31, 2004. In
addition, long-term debt increased primarily as a result of the issuance of
$287 million of senior unsecured zero-coupon notes in connection with the NVG
acquisition. These increases were partially offset by the $300 million cash
redemption of our Preferred Securities and periodic payments on long-term
debt.


    SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
    -------------------------------------------------------------------------

    The following selected consolidated financial data has been prepared in
accordance with Canadian GAAP.

                                         For the three month period ended
                                 --------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2005       2005       2005       2005
    -------------------------------------------------------------------------

    Sales                          $  5,718   $  5,858   $  5,381   $  5,854

    Net income                     $    172   $    225   $    159   $     83

    Earnings per Class A
     Subordinate Voting or
     Class B Share
      Basic                        $   1.69   $   2.10   $   1.47   $   0.76
      Diluted                      $   1.68   $   2.06   $   1.44   $   0.75
    -------------------------------------------------------------------------


                                         For the three month period ended
                                 --------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2004       2004       2004       2004
    -------------------------------------------------------------------------

    Sales                          $  5,103   $  5,113   $  4,784   $  5,653

    Net income                     $    179   $    188   $    132   $    177

    Earnings per Class A
     Subordinate Voting or
     Class B Share
      Basic                        $   1.85   $   1.94   $   1.37   $   1.82
      Diluted                      $   1.84   $   1.93   $   1.37   $   1.81
    -------------------------------------------------------------------------

    In general, sales increased from 2004 to 2005 as a result of product
launches, the acquisition of NVG in September 2004, and the strengthening of
the Canadian dollar against the U.S. dollar. The third quarter of both years
is generally affected by the normal seasonal effects of lower vehicle
production volumes as a result of OEM summer shutdowns.
    Included in the quarterly net income are the following unusual items that
have been discussed earlier in this MD&A:

                                         For the three month period ended
                                 --------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2005       2005       2005       2005
    -------------------------------------------------------------------------

    Impairment charges             $      -   $     (5)  $      -   $    (93)
    Restructuring charges                (4)        (7)       (11)       (26)
    Charges associated with MG Rover    (13)         -          -          -
    Foreign currency gain                 -         18          -          -
    Settlement gain                       -          -         16          -
    Gain on sale of facility              -         10          -          -
    -------------------------------------------------------------------------
                                   $    (17)  $     16   $      5   $   (119)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                         For the three month period ended
                                 --------------------------------------------
                                     Mar 31,    Jun 30,    Sep 30,    Dec 31,
                                       2004       2004       2004       2004
    -------------------------------------------------------------------------

    Impairment charges             $      -   $      -   $      -   $    (22)
    Restructuring charges                (4)         -         (6)        (7)
    Stock option modification           (12)         -          -          -
    Pension curtailment gain              -          -          -         18
    Future tax recovery                   -          -          -          6
    -------------------------------------------------------------------------
                                   $    (16)  $      -   $     (6)  $     (5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For more information regarding our quarter over quarter results, please
refer to our first, second and third quarter 2005 quarterly reports which are
available through the internet on the Canadian Securities Administrators'
System for Electronic Document Analysis and Retrieval (SEDAR) which can be
accessed at www.sedar.com.


    FORWARD-LOOKING STATEMENTS
    -------------------------------------------------------------------------

    The previous discussion contains statements that, to the extent that they
are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation.
Forward-looking statements may include financial and other projections, as
well as statements regarding our future plans, objectives or economic
performance, or the assumptions underlying any of the foregoing. We use words
such as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions to identify forward-looking statements. Any such forward-looking
statements are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe are
appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to
a number of risks, assumptions and uncertainties. These risks, assumptions and
uncertainties include, but are not limited to, the impact of: cyclicality of
the automotive industry due to global economic and political conditions
(including acts of terrorism) and resulting changes in consumer demand for
automobiles; declining market share and production volumes of some of our
customers; our reliance on a small number of automobile manufacturers, several
of which are rated as below investment grade by credit rating agencies; shifts
in market share among vehicles, including those we assemble; the termination,
loss, renegotiation of the terms of, or delay in the implementation of any
significant production or assembly contract; competition from suppliers with
manufacturing operations in low cost countries; risks associated with
conducting business internationally; increased commodity prices and our
ability to offset such increases; deterioration of the financial condition of
the supply base and certain customers; intense pricing pressures; increased
pressure from our customers to absorb various fixed costs; product warranty
and recall costs; product liability risks; fluctuations in relative currency
values; our facility rationalization efforts; our success in improving results
at our underperforming divisions; goodwill and fixed asset impairments; legal
proceedings to which we are or may become a party; changes in governmental
regulations, including environmental laws and regulations; our relationship
with our controlling shareholder; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual
report on Form 40-F filed with the United States Securities and Exchange
Commission, and subsequent filings. In evaluating forward-looking statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to update or
revise any forward-looking statements to reflect subsequent information,
events, results or circumstances or otherwise.



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited)
    (U.S. dollars in millions, except per share figures)

                                      Three months ended        Year ended
                                         December 31,          December 31,
                                    -----------------------------------------
                            Note       2005       2004       2005       2004
    -------------------------------------------------------------------------
                                             (restated             (restated
                                                note 2)               note 2)

    Sales                          $  5,854   $  5,653   $ 22,811   $ 20,653
    -------------------------------------------------------------------------

    Cost of goods sold                5,094      4,880     19,831     17,696
    Depreciation and
     amortization                       196        173        711        598
    Selling, general and
     administrative            8        314        314      1,198      1,186
    Interest expense, net                 1          4          6         26
    Equity income                        (2)        (4)        (8)       (14)
    Impairment charges         3        126         36        131         36
    -------------------------------------------------------------------------
    Income from operations
     before income taxes and
     minority interest                  125        250        942      1,125
    Income taxes                         42         72        292        387
    Minority interest          4          -          1         11         62
    -------------------------------------------------------------------------
    Net income                     $     83   $    177   $    639   $    676
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per Class A
     Subordinate Voting or
     Class B Share:
      Basic                        $   0.76   $   1.82   $   5.99   $   6.99
      Diluted                      $   0.75   $   1.81   $   5.90   $   6.95
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash dividends paid per
     Class A Subordinate
     Voting or Class B Share       $   0.38   $   0.38   $   1.52   $   1.48

    Average number of Class A
     Subordinate Voting and
     Class B Shares outstanding
     during the period
     (in millions):
      Basic                           108.4       96.8      106.7       96.7
      Diluted                         111.1       97.3      109.0       97.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    (Unaudited)
    (U.S. dollars in millions)

                                      Three months ended        Year ended
                                         December 31,          December 31,
                                    -----------------------------------------
                            Note       2005       2004       2005       2004
    -------------------------------------------------------------------------

    Retained earnings,
     beginning of period           $  3,368   $  2,796   $  2,935   $  2,384
    Net income                           83        177        639        676
    Dividends on Class A
     Subordinate Voting
     and Class B Shares                 (42)       (36)      (167)      (143)
    Adjustment for change in
     accounting policy
     related to financial
     instruments               2          -          -          2         20
    -------------------------------------------------------------------------
    Retained earnings,
     end of period                 $  3,409   $  2,937   $  3,409   $  2,937
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)
    (U.S. dollars in millions)

                                      Three months ended        Year ended
                                         December 31,          December 31,
                                    -----------------------------------------
                            Note       2005       2004       2005       2004
    -------------------------------------------------------------------------
                                             (restated             (restated
                                                note 2)               note 2)

    Cash provided from (used for):

    OPERATING ACTIVITIES
    Net income                     $     83   $    177   $    639   $    676
    Items not involving
     current cash flows                 325        198        901        805
    -------------------------------------------------------------------------
                                        408        375      1,540      1,481
    Changes in non-cash
     operating assets and
     liabilities                        750       (178)       158       (100)
    -------------------------------------------------------------------------
                                      1,158        197      1,698      1,381
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Fixed asset additions              (321)      (328)      (848)      (859)
    Purchase of subsidiaries   4        (19)         -       (187)      (417)
    Increase in other assets            (27)       (46)      (127)       (81)
    Proceeds from disposition            46         55        111         83
    -------------------------------------------------------------------------
                                       (321)      (319)    (1,051)    (1,274)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayments of debt         5        (96)       (27)      (329)      (410)
    Issues of debt             5          -          -         49        293
    Issues of Class A
     Subordinate Voting Shares            1          -         20         26
    Issues of shares by
     subsidiaries                         -         12          1         25
    Dividends paid to minority
     interests                            -         (8)        (1)       (22)
    Dividends                           (42)       (35)      (166)      (142)
    -------------------------------------------------------------------------
                                       (137)       (58)      (426)      (230)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents                    (9)        98        (58)       114
    -------------------------------------------------------------------------

    Net increase (decrease)
     in cash and cash
     equivalents during the
     period                             691        (82)       163         (9)
    Cash and cash equivalents,
     beginning of period                991      1,601      1,519      1,528
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 $  1,682   $  1,519   $  1,682   $  1,519
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)
    (U.S. dollars in millions)

                                                   December 31,  December 31,
                                          Note            2005          2004
    -------------------------------------------------------------------------
                                                                   (restated
                                                                      note 2)

    ASSETS
    Current assets
    Cash and cash equivalents                        $   1,682     $   1,519
    Accounts receivable                                  3,436         3,276
    Inventories                                          1,388         1,376
    Prepaid expenses and other                              97           110
    -------------------------------------------------------------------------
                                                         6,603         6,281
    -------------------------------------------------------------------------
    Investments                                            142           139
    Fixed assets, net                                    4,124         3,967
    Goodwill                               3,4             918           747
    Future tax assets                                      208           199
    Other assets                                           326           282
    -------------------------------------------------------------------------
                                                     $  12,321     $  11,615
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank indebtedness                                $      89     $     136
    Accounts payable                                     3,241         3,006
    Accrued salaries and wages                             474           449
    Other accrued liabilities                              394           350
    Income taxes payable                                    59            73
    Long-term debt due within one year                     131            84
    -------------------------------------------------------------------------
                                                         4,388         4,098
    -------------------------------------------------------------------------
    Deferred revenue                                        85            70
    Long-term debt                         4,5             700           984
    Other long-term liabilities                            241           240
    Future tax liabilities                                 342           254
    Minority interest                       4                -           634
    -------------------------------------------------------------------------
                                                         5,756         6,280
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                           7
      Class A Subordinate Voting Shares
       (issued: 108,184,395; December 31,
        2004 - 95,850,377)                               2,470         1,610
      Class B Shares
       (convertible into Class
        A Subordinate Voting Shares)
       (issued: 1,093,983)                                   -             -
    Contributed surplus                     8               65            16
    Retained earnings                                    3,409         2,937
    Currency translation adjustment                        621           772
    -------------------------------------------------------------------------
                                                         6,565         5,335
    -------------------------------------------------------------------------
                                                     $  12,321     $  11,615
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           See accompanying notes



    MAGNA INTERNATIONAL INC.
    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)
    (All amounts in U.S. dollars and all tabular amounts in millions unless
     otherwise noted)
    -------------------------------------------------------------------------

    1.  BASIS OF PRESENTATION

        The unaudited interim consolidated financial statements of Magna
        International Inc. and its subsidiaries (collectively "Magna" or the
        "Company") have been prepared in U.S. dollars following Canadian
        generally accepted accounting principles, as well as following the
        accounting policies as set out in the 2004 annual consolidated
        financial statements, except for the accounting change set out in
        note 2.

        The unaudited interim consolidated financial statements do not
        conform in all respects to the requirements of generally accepted
        accounting principles for annual financial statements. Accordingly,
        these unaudited interim consolidated financial statements should be
        read in conjunction with the 2004 annual consolidated financial
        statements.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments, which consist only of
        normal and recurring adjustments, necessary to present fairly the
        financial position at December 31, 2005 and the results of operations
        and cash flows for the three months and years ended December 31, 2005
        and 2004.

    2.  ACCOUNTING CHANGE

        Financial Instruments - Disclosure and Presentation

        In 2003, the Canadian Institute of Chartered Accountants ("CICA")
        amended Handbook Section 3860 "Financial Instruments - Disclosure and
        Presentation" ("CICA 3860") to require certain obligations that may
        be settled with an entity's own equity instruments to be reflected as
        a liability. The amendments require the Company to present its
        Preferred Securities and Subordinated Debentures as liabilities, with
        the exception of the equity value ascribed to the holders' option to
        convert certain of the Subordinated Debentures into Class A
        Subordinate Voting Shares, and to present the related liability
        carrying costs as a charge to income. The Company adopted these new
        recommendations effective January 1, 2005 on a retroactive basis.

        The impact of this accounting policy change on the consolidated
        balance sheet as at December 31, 2004 was as follows:

        Increase in other assets                                    $      2
        ---------------------------------------------------------------------

        Decrease in income taxes payable                            $      1
        Increase in long-term debt                                       216
        Decrease in debentures' interest obligation                       38
        Decrease in minority interest                                     68
        ---------------------------------------------------------------------

        Decrease in other paid-in-capital                           $     75
        Increase in retained earnings                                      2
        Decrease in currency translation adjustment                       34
        ---------------------------------------------------------------------

        The impact of this accounting policy change on the consolidated
        statements of income and retained earnings for the three months and
        year ended December 31, 2004 was as follows:

                                                     Three months       Year
                                                            ended      ended
                                                         December   December
                                                         31, 2004   31, 2004
        ---------------------------------------------------------------------

        Increase in interest expense                     $      2   $     31
        Decrease in income taxes                                -        (11)
        Decrease in minority interest                          (1)        (4)
        ---------------------------------------------------------------------
        Decrease in net income                                 (1)       (16)
        Decrease in financing charges on Preferred
         Securities and other paid-in-capital                   1         16
        Decrease in foreign exchange gain on
         redemption of Preferred Securities                     -        (18)
        ---------------------------------------------------------------------
        Decrease in net income available to Class A
         Subordinate Voting and Class B Shareholders     $      -   $    (18)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Reduction of earnings per Class A Subordinate
         Voting or Class B Share
          Basic                                          $      -   $  (0.18)
          Diluted                                        $      -   $  (0.18)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    3.  GOODWILL AND LONG-LIVED ASSETS

        In conjunction with the Company's annual goodwill impairment analysis
        and consideration of other indicators of impairment of its long-lived
        assets at certain operations, the Company has recorded impairment
        charges as follows:

                                     Three months ended         Year ended
                                         December 31,          December 31,
                                    -------------------- --------------------
                                       2005       2004       2005       2004
        ---------------------------------------------------------------------

        (a) Long-lived assets
             impairments:
            Europe                 $     84   $     20   $     89   $     20
            North America                21         16         21         16

        (b) Goodwill impairment:
            Europe                       21          -         21          -
        ---------------------------------------------------------------------
                                   $    126   $     36   $    131   $     36
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (a) Long-lived assets impairments

            Europe

            During 2005, the Company recorded asset impairments of
            $89 million ($63 million after tax) relating to certain assets
            and facilities including:

            In the United Kingdom, Belgium and Germany, the Company
            identified issues relating to certain exterior systems
            facilities, including: (i) recurring losses that were projected
            to continue as a result of existing sales levels and limited
            sales growth prospects at certain of these facilities; (ii)
            uncertain long-term production volumes for the United Kingdom
            market in general; (iii) excess paint capacity in the European
            market; and (iv) the resultant rationalization of painting and
            moulding facilities. As a result, an asset impairment of
            $80 million was recorded.

            The Company also identified an impairment at a closure systems
            facility in the Czech Republic. Due to recurring losses that were
            projected to continue as a result of existing sales levels and
            limited sales growth prospects, an asset impairment of $8 million
            was recorded.

            During 2004, the Company identified issues relating to certain
            exterior systems facilities, including recurring losses that were
            projected to continue throughout the Company's business planning
            period as a result of existing sales levels and limited sales
            growth prospects relative to certain assets at these facilities.
            As a result, an asset impairment of $20 million ($15 million
            after minority interest) was recorded.

            North America

            During 2005, the Company recorded an asset impairment of
            $21 million ($14 million after tax) relating to certain assets
            and facilities.

            The Company identified issues relating to an exterior systems
            facility in Canada, including losses that are projected to be
            incurred throughout the Company's business planning period as a
            result of existing and projected sales levels. As a result, an
            asset impairment of $12 million was recorded.

            The Company also identified issues relating to certain powertrain
            facilities in the United States, including: (i) ceasing
            operations at a facility; and (ii) recurring losses that are
            projected to continue. As a result, asset impairments of
            $9 million were recorded in respect of certain assets at these
            facilities.

            During 2004, the Company recorded asset impairments of
            $16 million ($7 million after tax and minority interest) relating
            to its plan to cease operations at an exterior systems facility
            in Canada.

        (b) Goodwill impairment

            In conjunction with its annual business planning cycle, the
            Company completed its goodwill impairment analysis. As a result
            of this analysis, the Company recorded a $21 million goodwill
            impairment charge related to its exterior systems reporting unit
            in Europe. This impairment charge has not been tax benefited.

    4.  ACQUISITIONS

        (a) For the year ended December 31, 2005

            (i)  Privatizations

                 In October 2004, Magna announced its proposal to take each
                 of its publicly traded subsidiaries private (the
                 "Privatizations"). The privatizations were completed over a
                 three month period as follows:

                 Tesma

                 On February 1, 2005, the shareholders of Tesma International
                 Inc. ("Tesma") approved a plan of arrangement that became
                 effective on February 6, 2005 under which Magna acquired the
                 outstanding 56% equity interest in Tesma that it did not
                 previously own. Total consideration for the outstanding
                 Class A Subordinate Voting Shares of Tesma not owned by the
                 Company was $613 million, which was satisfied by issuing
                 6.7 million Magna Class A Subordinate Voting Shares (note 7)
                 and cash of $103 million. In addition, Magna assumed
                 responsibility for the existing stock options of Tesma,
                 resulting in an increase in the purchase price of
                 $17 million, representing the fair value of the stock
                 options assumed. This fair value has been credited to
                 contributed surplus (note 8). The excess of the purchase
                 price over the Company's incremental interest in the book
                 value of the assets acquired and liabilities assumed was
                 $270 million.

                 Decoma

                 On February 28, 2005, the shareholders of Decoma
                 International Inc. ("Decoma") approved a plan of arrangement
                 that became effective on March 6, 2005 under which Magna
                 acquired the outstanding 27% equity interest in Decoma that
                 it did not previously own. Total consideration for the
                 outstanding Class A Subordinate Voting Shares of Decoma not
                 owned by the Company was $239 million, which was satisfied
                 by issuing 2.9 million Magna Class A Subordinate Voting
                 Shares (note 7) and cash of $31 million. In addition, Magna
                 assumed responsibility for the existing stock options of
                 Decoma, resulting in an increase in the purchase price of
                 $2 million, representing the fair value of the stock options
                 assumed. This fair value has been credited to contributed
                 surplus (note 8). The excess of the purchase price over the
                 Company's incremental interest in the book value of the
                 assets acquired and liabilities assumed was $78 million.

                 The Decoma plan of arrangement resulted in the amalgamation
                 of Magna and Decoma. As a result of this amalgamation,
                 Decoma's three-year term credit facility maturing
                 September 30, 2007 and Decoma's 6.5% Convertible
                 Subordinated Debentures maturing March 31, 2010 became
                 direct obligations of the Company.

                 Intier

                 On March 30, 2005, the shareholders of Intier Automotive
                 Inc. ("Intier") approved a plan of arrangement that became
                 effective on April 3, 2005 under which Magna acquired the
                 outstanding 15% equity interest in Intier that it did not
                 previously own. Total consideration for the outstanding
                 Class A Subordinate Voting Shares of Intier not owned by the
                 Company was $202 million, which was satisfied by issuing
                 2.3 million Magna Class A Subordinate Voting Shares (note 7)
                 and cash of $50 million. In addition, Magna assumed
                 responsibility for the existing stock options of Intier,
                 resulting in an increase in the purchase price of
                 $23 million, representing the fair value of the stock
                 options assumed. This fair value has been credited to
                 contributed surplus (note 8). The excess of the purchase
                 price over the Company's incremental interest in the book
                 value of the assets acquired and liabilities assumed was
                 $87 million.

            (ii) Other

                 During the year, the Company also completed the acquisition
                 of a number of small manufacturing facilities. The total
                 consideration for the above noted acquisitions amounted to
                 approximately $21 million (net of cash acquired) paid in
                 cash and $12 million of assumed debt.

            The purchase price allocations for these acquisitions are
            preliminary and adjustments to the current allocations may occur
            as a result of obtaining more information regarding asset
            valuations. On a preliminary basis, for each of Tesma, Decoma and
            Intier an allocation of the excess purchase price over the book
            value of assets acquired and liabilities assumed has been made to
            fixed assets and intangible assets.

        (b) For the year ended December 31, 2004

            On September 29, 2004, the Company completed the acquisition of
            the worldwide operations of DaimlerChrysler Corporation's ("DCC")
            wholly owned subsidiary, New Venture Gear, Inc. ("NVG"), a
            leading supplier of transfer cases and other drivetrain products.
            Total consideration for the acquisition amounted to $428 million
            which was satisfied with a combination of $348 million in cash
            (net of cash acquired of $3 million) and $80 million in
            zero-coupon notes payable to DCC, which have a face value of
            $95 million and are due in December 2008.

            The net effect on the Company's 2004 consolidated balance sheet
            was increases in non-cash operating assets and liabilities of
            $55 million, fixed assets of $241 million and goodwill of
            $132 million. During 2005, the purchase equation for the NVG
            acquisition was finalized which resulted in a net change to the
            Company's consolidated balance sheet consisting of an increase in
            non-cash operating assets and liabilities of $14 million, a
            decrease in fixed assets of $17 million, an increase in other
            assets of $6 million and an increase in future income taxes of
            $1 million with an offset to goodwill of $4 million. Goodwill was
            also reduced by an $18 million cash purchase price adjustment
            received in the year.

    5.  LONG-TERM DEBT

        On October 12, 2005, the Company completed a new five-year revolving
        term facility that expires on October 12, 2010. The facility has a
        North American tranche of $1.57 billion, a European tranche of
        (euro) 300 million and an Asian tranche of $50 million. In March
        2005, the Company repaid the outstanding borrowings of
        Cdn $197 million under the former Decoma term credit facility and the
        facility was cancelled.

        In September 2004, the Company redeemed all of the issued
        Cdn $165 million 8.65% Series A Preferred Securities and $170 million
        8.875% Series B Preferred Securities for an aggregate cash payment of
        $300 million.

        In connection with the NVG acquisition, the Company issued five
        series of senior unsecured zero-coupon notes with an aggregate issue
        price of Cdn $365 million ($287 million on issue date) and an
        aggregate amount due at maturity of Cdn $415 million. The notes,
        which mature at various dates to December 2008, were sold in Canada
        on an underwritten private placement basis.

    6.  EMPLOYEE FUTURE BENEFIT PLANS

        The Company recorded employee future benefit expenses as follows:

                                     Three months ended         Year ended
                                         December 31,          December 31,
                                    -------------------- --------------------
                                       2005       2004       2005       2004
        ---------------------------------------------------------------------

        Defined benefit pension
         plans and other          $      19   $    (15)  $     30   $     (1)
        Termination and long
         service arrangements             6          4         17         17
        Retirement medical
         benefits plan                    2          2          9          8
        ---------------------------------------------------------------------
                                  $      27   $     (9)  $     56   $     24
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        For the three months and year ended December 31, 2004, employee
        benefit expense is recorded net of a pension curtailment gain of
        $29 million.

    7.  CAPITAL STOCK

        (a) Changes in the Class A Subordinate Voting Shares for the three
            months and year ended December 31, 2005 are shown in the
            following table (numbers of shares in the following table are
            expressed in whole numbers):

                                                         Subordinate Voting
                                                       ----------------------
                                                        Number of     Stated
                                                           shares      value
        ---------------------------------------------------------------------

        Issued and outstanding at December 31, 2004    95,850,377   $  1,610
        Issued on privatization of Tesma(i)             6,687,709        510
        Issued on privatization of Decoma(i)            2,854,400        208
        Issued for cash under the Incentive
         Stock Option Plan                                170,106         13
        Issued under the Dividend Reinvestment Plan         2,438          -
        Exchange of subsidiary restricted stock
         for Magna restricted stock (i)                         -        (19)
        ---------------------------------------------------------------------
        Issued and outstanding at March 31, 2005      105,565,030      2,322
        Issued on privatization of Intier(i)            2,332,748        152
        Issued for cash under the Incentive
         Stock Option Plan                                 80,486          6
        Issued under the Dividend Reinvestment Plan         3,046          -
        Exchange of subsidiary restricted stock
         for Magna restricted stock(i)                          -         (8)
        ---------------------------------------------------------------------
        Issued and outstanding at June 30, 2005       107,981,310      2,472
        Issued for cash under the Incentive
         Stock Option Plan                                152,211          9
        Issued under the Dividend Reinvestment Plan         4,468          1
        Repurchase of Class A Subordinate
         Voting Shares(i)                                       -        (15)
        ---------------------------------------------------------------------
        Issued and outstanding at September 30, 2005  108,137,989      2,467
        Issued for cash under the Incentive
         Stock Option Plan                                 40,886          3
        Issued under the Dividend Reinvestment Plan         5,520          -
        ---------------------------------------------------------------------
        Issued and outstanding at December 31, 2005   108,184,395   $  2,470
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

            (i)  At December 31, 2005, 878,281 (2004 - 124,976) Magna Class A
                 Subordinate Voting Shares, which were purchased for a cash
                 consideration of $15 million (2004 - $4 million), have been
                 awarded on a restricted basis to certain executives. Since
                 this stock has not been released to the executives, it has
                 been reflected as a reduction in the stated value of the
                 Company's Class A Subordinate Voting Shares.

        (b) The following table presents the maximum number of shares that
            would be outstanding if all the dilutive instruments outstanding
            at February 24, 2006 were exercised or converted:

            Class A Subordinate Voting and Class B Shares        109,301,880
            Subordinated Debentures(i)                             1,096,582
            Stock options(ii)                                      4,576,537
            -----------------------------------------------------------------
                                                                 114,974,999
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)  The above amounts include shares issuable if the holders of
                 the 6.5% Convertible Subordinated Debentures exercise their
                 conversion option but exclude Class A Subordinate Voting
                 Shares issuable, only at the Company's option, to settle
                 interest and principal related to the 6.5% Convertible
                 Subordinated Debentures. The number of Class A Subordinate
                 Voting Shares issuable at the Company's option is dependent
                 on the trading price of the Class A Subordinate Voting
                 Shares at the time the Company elects to settle the 6.5%
                 Convertible Subordinated Debenture interest and principal
                 with shares.

                 The above amounts also exclude Class A Subordinate Voting
                 Shares issuable, only at the Company's option, to settle the
                 7.08% Subordinated Debentures on redemption or maturity. The
                 number of shares issuable is dependent on the trading price
                 of Class A Subordinate Voting Shares at redemption or
                 maturity of the 7.08% Subordinated Debentures.

            (ii) Options to purchase Class A Subordinate Voting Shares are
                 exercisable by the holder in accordance with the vesting
                 provisions and upon payment of the exercise price as may be
                 determined from time to time and pursuant to the Company's
                 stock option plans.

    8.  STOCK-BASED COMPENSATION

        (a) The following is a continuity schedule of options outstanding
            (number of options in the table below are expressed in whole
            numbers):

                                                          2005
                                           ----------------------------------
                                            Options outstanding
                                           ---------------------
                                                       Exercise      Options
                                               Options  price(i) exercisable
                                                   No.     Cdn$          No.
            -----------------------------------------------------------------

            Beginning of year                2,614,376    85.74    2,042,876
            Assumed on privatization         1,053,353    71.31      864,688
            Granted                             35,000    85.75            -
            Exercised                         (170,106)   61.09     (170,106)
            Vested                                   -        -        9,291
            Cancelled                                -        -            -
            -----------------------------------------------------------------
            March 31                         3,532,623    82.62    2,746,749
            Assumed on privatization         1,377,067    54.11      973,668
            Exercised                          (80,486)   53.67      (80,486)
            Vested                                   -        -       11,775
            Cancelled                          (17,033)   84.60            -
            -----------------------------------------------------------------
            June 30                          4,812,171    74.94    3,651,706
            Granted                                  -        -            -
            Exercised                         (152,211)   60.56     (152,211)
            Vested                                   -        -      281,020
            Cancelled                           (4,506)   94.66       (1,163)
            -----------------------------------------------------------------
            September 30                     4,655,454    75.39    3,779,352
            Exercised                          (40,886)   61.20      (40,886)
            Vested                                   -        -      386,936
            Cancelled                          (14,529)   95.05       (9,298)
            -----------------------------------------------------------------
            December 31                      4,600,039    75.46    4,116,104
            -----------------------------------------------------------------
            -----------------------------------------------------------------


                                                          2004
                                           ----------------------------------
                                            Options outstanding
                                           ---------------------
                                                       Exercise      Options
                                               Options  price(i) exercisable
                                                   No.     Cdn$          No.
            -----------------------------------------------------------------

            Beginning of year                3,046,450    82.31    1,991,950
            Assumed on privatization                 -        -            -
            Granted                             15,000   105.19            -
            Exercised                         (117,600)   62.63     (117,600)
            Vested                                   -        -       43,625
            Cancelled                           (3,000)   97.47            -
            -----------------------------------------------------------------
            March 31                         2,940,850    83.20    1,917,975
            Assumed on privatization                 -        -            -
            Exercised                         (414,474)   71.43     (414,474)
            Vested                                   -        -            -
            Cancelled                                -        -            -
            -----------------------------------------------------------------
            June 30                          2,526,376    85.13    1,503,501
            Granted                            100,000   100.69            -
            Exercised                                -        -            -
            Vested                                   -        -       44,375
            Cancelled                                -        -            -
            -----------------------------------------------------------------
            September 30                     2,626,376    85.72    1,547,876
            Exercised                                -        -            -
            Vested                                   -        -      507,000
            Cancelled                          (12,000)   81.19      (12,000)
            -----------------------------------------------------------------
            December 31                      2,614,376    85.74    2,042,876
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)  The exercise price noted above represents the weighted
                 average exercise price in Canadian dollars.

        (b) The fair value of stock options is estimated at the date of grant
            using the Black-Scholes option pricing model. The weighted
            average assumptions used in measuring the fair value of stock
            options granted or modified and the compensation expense recorded
            in selling, general and administrative expenses are as follows:

                                     Three months ended         Year ended
                                         December 31,          December 31,
                                    -------------------- --------------------
                                       2005       2004       2005       2004
            -----------------------------------------------------------------

            Risk free interest rate       -          -      3.24%      3.04%
            Expected dividend yield       -          -      2.18%      1.70%
            Expected volatility           -          -        23%        32%
            Expected time until
             exercise                     -          -    2 years    4 years
            -----------------------------------------------------------------

            Weighted average fair
             value of options
             granted or modified
             in period (Cdn$)      $      -   $      -   $  18.48   $  28.64
            -----------------------------------------------------------------

            Compensation expense
             recorded in selling,
             general and
             administrative
             expenses              $      2   $      1   $     15   $     15
            -----------------------------------------------------------------

            In connection with the privatization of Tesma, Decoma and Intier,
            the terms of outstanding Tesma, Decoma and Intier stock options
            were modified through either the exchange of Tesma, Decoma and
            Intier options for Magna replacement options or through
            adjustment provisions to existing options such that holders of
            Tesma, Decoma and Intier continuing options would be entitled to
            receive Magna Class A Subordinate Voting shares in lieu of Tesma,
            Decoma or Intier Class A Subordinate Voting Shares when
            exercised. Where the original options were granted prior to
            January 1, 2003 and were unvested at the date of privatization,
            the above modifications create incremental compensation expense
            over the remaining vesting period.

            During the year ended December 31, 2004, option agreements with
            certain former employees of the Company were modified, which
            resulted in a one-time charge to compensation expense of
            $12 million. This charge represents the remaining measured but
            unrecognized compensation expense related to the options granted
            during 2003, and the fair value at the date of modification of
            all options that were granted prior to January 1, 2003.

            If the fair value recognition provisions would have been adopted
            effective January 1, 2002 for all stock options granted after
            January 1, 2002, the Company's pro forma net income and pro forma
            basic and diluted earnings per Class A Subordinate Voting or
            Class B Share would have been as follows:

                                     Three months ended         Year ended
                                         December 31,          December 31,
                                    -------------------- --------------------
                                       2005       2004       2005       2004
            -----------------------------------------------------------------

            Pro forma net income   $     82   $    176   $    636   $    676

            Pro forma earnings
             per Class A
             Subordinate Voting
             or Class B Share
              Basic                $   0.75   $   1.81   $   5.96   $   6.99
              Diluted              $   0.75   $   1.80   $   5.87   $   6.95
            -----------------------------------------------------------------

        (c) At December 31, 2005, unamortized compensation expense related to
            the restricted stock arrangements was $43 million, and has been
            presented as a reduction of shareholders' equity.

        (d) Contributed surplus consists of accumulated stock option
            compensation expense less the fair value of options at the grant
            date that have been exercised and reclassified to share capital,
            the accumulated restricted stock compensation expense, and the
            value of the holders conversion option. The following is a
            continuity schedule of contributed surplus:

                                                             2005       2004
            -----------------------------------------------------------------

            Balance, beginning of year                   $     16   $      3
            Impact of privatization transactions (note 7)      20          -
            Stock-based compensation expense                    2         12
            Exercise of options                                (5)        (1)
            -----------------------------------------------------------------
            Balance, March 31,                                 33         14
            Impact of privatization transaction (note 7)       25          -
            Stock-based compensation expense                    5          -
            Exercise of options                                (2)         -
            -----------------------------------------------------------------
            Balance, June 30,                                  61         14
            Stock-based compensation expense                    3          1
            Exercise of options                                (3)         -
            -----------------------------------------------------------------
            Balance, September 30,                             61         15
            Stock-based compensation expense                    2          1
            Exercise of options                                (1)         -
            -----------------------------------------------------------------
            Balance, December 31,                              62         16
            Holders conversion option                           3          -
            -----------------------------------------------------------------
                                                         $     65   $     16
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    9.  COMMITMENTS AND CONTINGENCIES

        Effective August 30, 2004, a supplier purported to terminate its
        obligations to supply the Company with certain steel products at
        agreed upon prices under two supply agreements. The supplier
        subsequently continued to supply steel at an invoice price reflecting
        current market prices pending resolution of this matter, and the
        Company continued to pay for the steel products in question at the
        prices set out in the two supply agreements. The right of the
        supplier to terminate its obligations to supply steel under the
        supply agreements is being disputed by the Company pursuant to
        arbitration proceedings that were commenced in the fourth quarter of
        2004. The arbitration hearing is expected to be held in the fall of
        2006. If the supplier is successful in the arbitration, the Company's
        maximum potential exposure as at December 31, 2005 would be less than
        $85 million. However, the Company believes it has valid defenses to
        each of the claims and will continue to vigorously defend the
        supplier's claims.

    10. SEGMENTED INFORMATION

        Magna, a leading global supplier of technologically advanced
        automotive systems, assemblies, modules and components, follows a
        corporate policy of functional and operational decentralization. It
        conducts its operations through divisions, which function as
        autonomous business units that operate within corporate policies. As
        at December 31, 2005, Magna had 224 manufacturing divisions and
        60 product development and engineering centres in 22 countries. Magna
        designs, develops and manufactures automotive systems, assemblies,
        modules and components, and engineers and assembles complete vehicles
        for sale to original equipment manufacturers ("OEMs") of cars and
        light trucks in North America, Europe, Asia and South America ("Rest
        of World"). Magna's product capabilities span a number of major
        automotive areas including: interiors; seating; closures; metal body
        systems; exterior and interior mirrors and engineered glass;
        electronics; plastic body, lighting and exterior trim systems;
        various powertrain and drivetrain systems; retractable hard top and
        soft top roof systems; and complete vehicle engineering and assembly.

        Historically, the Company had supplied these products and services
        through global product groups, three of which (Tesma, Decoma and
        Intier) were publicly traded companies in which Magna had a
        controlling interest. During 2005 the Company acquired the
        outstanding equity interest in the publicly traded companies that it
        did not previously own (note 4). There were four key elements to
        Magna's rationale for the Privatizations:

        -  improve strategic positioning;
        -  exploit the Company's various competencies;
        -  better alignment of the Company's product portfolio; and
        -  avoid duplication of investment in infrastructure and development
           costs.

        Shortly after the Privatizations were completed, the Company began to
        reorganize its operations on a geographic basis, between North
        America, Europe and Rest of World. Accordingly, segment reporting has
        been restated to reflect the Company's new structure.

        Magna's success is directly dependent upon the levels of North
        American and European (and currently to a lesser extent on Rest of
        World) car and light truck production by its customers. OEM
        production volumes in each of North America and Europe may be
        impacted by a number of geographic factors, including general
        economic conditions, interest rates, fuel prices and availability,
        infrastructure, legislative changes, environmental emission and
        safety issues and labour and/or trade relations.

        Given these differences between the regions in which the Company
        operates, Magna's operations are segmented on a geographic basis
        between North America, Europe, and Rest of World. The role of the
        North American and European management teams is to manage the
        interests of the Company to ensure a coordinated effort across the
        different product capabilities. In addition to maintaining key
        customer, supplier and government contacts in their respective
        markets, the management teams centrally manage key aspects of their
        operations while permitting the divisions enough flexibility through
        its decentralized structure to foster an entrepreneurial environment.

        Consistent with the organizational changes described above, the
        Company's internal financial reporting has been revised to separately
        segment key internal operating performance measures between North
        America, Europe and Rest of World for purposes of presentation to the
        chief operating decision maker to assist in the assessment of
        operating performance, the allocation of resources and the long-term
        strategic direction and future global growth of the Company. The
        Company's reporting to Magna's Corporate Executive Team, Board of
        Directors and shareholders has also been revised accordingly.

        The following table shows certain information with respect to segment
        disclosures:

                                              Three months ended
                                               December 31, 2005
                                  -------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  1,719   $  1,647              $  1,078
          United States               1,394      1,339                 1,242
          Mexico                        332        321                   337
          Eliminations                 (125)         -                     -
        ---------------------------------------------------------------------
                                      3,320      3,307   $    194      2,657
        Europe
          Euroland                    2,233      2,183                 1,128
          Great Britain                 216        213                    66
          Other European countries      137        101                    87
          Eliminations                  (53)         -                     -
        ---------------------------------------------------------------------
                                      2,533      2,497        (93)     1,281
        Rest of World                    57         50         (3)        83
        Corporate and Other             (56)         -         28        103
        ---------------------------------------------------------------------
        Total reportable segments  $  5,854   $  5,854   $    126      4,124
        Current assets                                                 6,603
        Investments, goodwill and
         other assets                                                  1,594
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 12,321
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                              Three months ended
                                               December 31, 2004
                                  -------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  1,532   $  1,473              $  1,025
          United States               1,292      1,235                 1,028
          Mexico                        283        270                   320
          Eliminations                 (124)         -                     -
        ---------------------------------------------------------------------
                                      2,983      2,978   $    196      2,373
        Europe
          Euroland                    2,366      2,316                 1,257
          Great Britain                 234        216                    92
          Other European countries      142        107                   103
          Eliminations                  (66)         -                     -
        ---------------------------------------------------------------------
                                      2,676      2,639         29      1,452
        Rest of World                    40         36          3         61
        Corporate and Other             (46)         -         26         81
        ---------------------------------------------------------------------
        Total reportable segments  $  5,653   $  5,653   $    254      3,967
        Current assets                                                 6,281
        Investments, goodwill and
         other assets                                                  1,367
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 11,615
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                  Year ended
                                               December 31, 2005
                                  -------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  6,513   $  6,215              $  1,078
          United States               5,714      5,468                 1,242
          Mexico                      1,123      1,071                   337
          Eliminations                 (551)         -                     -
        ---------------------------------------------------------------------
                                     12,799     12,754   $    733      2,657
        Europe
          Euroland                    8,714      8,533                 1,128
          Great Britain                 918        904                    66
          Other European countries      580        442                    87
          Eliminations                 (190)         -                     -
        ---------------------------------------------------------------------
                                     10,022      9,879         82      1,281
        Rest of World                   209        178          2         83
        Corporate and Other            (219)         -        131        103
        ---------------------------------------------------------------------
        Total reportable segments  $ 22,811   $ 22,811   $    948      4,124
        Current assets                                                 6,603
        Investments, goodwill and
         other assets                                                  1,594
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 12,321
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                  Year ended
                                               December 31, 2004
                                  -------------------------------------------
                                                                       Fixed
                                      Total   External                assets,
                                      sales      sales     EBIT(i)       net
        ---------------------------------------------------------------------

        North America
          Canada                   $  5,860   $  5,604              $  1,025
          United States               4,426      4,165                 1,028
          Mexico                        976        920                   320
          Eliminations                 (543)         -                     -
        ---------------------------------------------------------------------
                                     10,719     10,689   $    886      2,373
        Europe
          Euroland                    8,698      8,541                 1,257
          Great Britain                 928        897                    92
          Other European countries      514        384                   103
          Eliminations                 (207)         -                     -
        ---------------------------------------------------------------------
                                      9,933      9,822        176      1,452
        Rest of World                   162        142         10         61
        Corporate and Other            (161)         -         79         81
        ---------------------------------------------------------------------
        Total reportable segments  $ 20,653   $ 20,653   $  1,151      3,967
        Current assets                                                 6,281
        Investments, goodwill and
         other assets                                                  1,367
        ---------------------------------------------------------------------
        Consolidated total assets                                   $ 11,615
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)  EBIT represents operating income before interest income or
             expense.

    11. SUBSEQUENT EVENTS

        On February 2, 2006, Magna acquired CTS Fahrzeug-Dachsysteme GmbH,
        Bietingheim-Bissingen ("CTS") for a cash purchase price of
        approximately (euro) 170 million plus assumed debt.

        CTS is one of the world's leading manufacturers of roof systems for
        the automotive industry and is based in Germany. CTS manufactures
        soft tops, hard tops and modular retractable hard tops. In addition
        to Porsche, its customers include DaimlerChrysler, Ferrari, Peugeot
        and General Motors. CTS has six facilities in Europe and two
        facilities in North America.

    12. COMPARATIVE FIGURES

        Certain of the comparative figures have been reclassified to conform
        to the current period's method of presentation.

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