FTE Holding Gmbh (Formerly Falcon (BC) Germany Holding 2 Gmbh)

FTE Holding GmbH (formerly Falcon (BC) Germany Holding 2 GmbH)

Financial results for the twelve months ended December 31, 2016

April 28, 2016

Contents

1. Presentation of financial and other information ...... 3

2. Business Structure...... 6

3. Consolidated Income Statement Consolidated Statement of EBITDA Consolidated Statement of Cash Flows ...... 30

4. Consolidated Balance Sheet ...... 38

5. Capitalization, Liquidity and other financial data ...... 41

6. Material risk factors and material subsequent events ...... 45

7. Description of the Management and Shareholders of the Company and all material affiliate transactions ...... 50

8. Description of all material debt instruments ...... 54

9. Audited IFRS Consolidated Financial Statements as of December 31, 2016 of FTE Holding GmbH ...... 64

1. Presentation of financial and other information

Corporate and financing structure Falcon (BC) Germany Holding 3 and Falcon (BC) Germany Holding 2 (renamed into FTE Holding GmbH) were formed in connection with the acquisition of FTE Verwaltungs GmbH by Falcon (BC) Germany Holding 3 (the "Transaction"). The following simplified chart sets forth certain aspects of our corporate and financing structure after giving effect to the Transaction.

The Issuer closed the issuance of 9.000% Senior Secured Notes with an aggregate principal amount of € 240.0 million on July 12, 2013. The acquisition of the Target by the Issuer closed on the same date, July 12, 2013, with the transfer of the entire share capital of the Target (excluding treasury shares) to the Issuer. The Issuer merged with the Target effective as of January 1, 2013 and was subsequently renamed FTE Verwaltungs GmbH.

On November 8, 2013, FTE Verwaltungs GmbH (former Falcon (BC) Germany Holding 3 GmbH) signed an agreement to sell € 23.3 million newly issued Senior Secured Notes in a Private Placement. Closing of the new issue was on November 22, 2013.

The net cash proceeds were used in 2014 for an upstream loan to its indirect parent company FTE Group Holding GmbH (formerly Falcon (BC) Germany Holding 1 GmbH) who used such funds for a partial repayment of shareholder loans granted by its shareholders

On June 2, 2016, FTE’s owner Bain Capital Private Equity signed an agreement to sell FTE to Valeo Group. The transaction is subject to customary regulatory and anti-trust approvals and is expected to be closed in 2017.

Financial and operational data The Holding and the Issuer were formed on February 21, 2013; opening balance sheets for these entities were created on April 5, 2013 and they were registered on April 9, 2013. These companies obtained control over the Target within the meaning of IFRS 3 on July 12, 2013.

The Holding prepared IFRS consolidated financial information as of December 31, 2016 and for the period from January 1, 2016 to December 31, 2016 with comparative data as of December 31, 2015 and for the period from January 1, 2015 to December 31, 2015.

The financial results of the Holding and its subsidiaries are reported on a consolidated basis. This report contains data that was neither prepared in accordance with IFRS nor any other generally accepted accounting principles. It is for informational purposes only and does not purport to represent or to be indicative of the consolidated results of operations or financial position that the Group would have reported had the transaction and related financing as defined in the Offering Memorandum been completed as of the dates presented, and should not be taken as representative of the Group’s future consolidated results of operations or financial position, nor does it purport to project the Group’s financial position as of any future date or results of operations for any future period.

The financial data presented in

 the consolidated income statement for the twelve-month periods ended December 31, 2016 and December 31, 2015 respectively;  the consolidated statement of cash flows for the twelve-month periods ended December 31, 2016 and December 31, 2015 respectively;  the consolidated statement of balance sheets as of December 31, 2016 and December 31, 2015 respectively.

The financial data as of December 31, 2016 and of December 31, 2015 are based on the audited IFRS consolidated financial statements of the Holding as of December 31, 2016 and of December 31, 2015 included in section 9.

Some financial information in this report has been rounded and, as a result, the figures shown as totals in this report may vary slightly from the exact arithmetic aggregation of the figures that precede them. Percentage figures have not been calculated on the basis of rounded figures, but have instead been calculated on the basis of such amounts prior to rounding.

Unless otherwise indicated, all financial information in this report has been prepared on the basis of IFRS applicable at the relevant date and is presented in million Euro. IFRS differs in certain material aspects from generally accepted accounting principles in the US.

Other financial measures Certain financial measures and ratios related thereto in this report, including EBITDA and Adjusted EBITDA (collectively, the “EBITDA Metrics”), are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented in this report because we believe that they are among the measures used by management to evaluate the cash available to us to fund ongoing, long-term obligations and they are frequently used by securities analysts, high yield investors and other interested parties for valuation purposes or as a common measure of the ability of issuers to incur and meet debt service obligations. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to net income (loss), operating income or any other performance measures derived in accordance with IFRS.

We believe that this information, along with comparable IFRS measures, is useful to investors because it provides a basis for measuring the operating performance in the periods presented. These measures are used in the internal management of our business, along with the most directly comparable IFRS financial measures, in evaluating the operating performance.

The EBITDA Metrics have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results or any performance measures under IFRS as set forth in our financial statements. Some of these limitations are:

 they do not reflect our cash expenditures or future requirements for capital expenditures;  they do not reflect changes in, or cash requirements for, our working capital needs;  they do not reflect the interest expense or cash requirements necessary to service interest or principal payments on our debt;  they do not reflect any cash income taxes that we may be required to pay;  they are not adjusted for all non-cash income or expense items that are reflected in our consolidated income statement;  they do not reflect the impact of earnings or charges resulting from certain matters that we consider not to be indicative of our ongoing operations;  assets are depreciated or amortized over differing estimated useful lives and often have to be replaced in the future, and these measures do not reflect any cash requirements for such replacements; and  other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, the EBITDA Metrics should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our IFRS results and using these non-IFRS measures only supplementary to evaluate our performance. You are encouraged to evaluate each of the adjustments reflected in our presentation of the EBITDA Metrics and whether you consider each to be appropriate.

Industry Data In this report, we may rely on and refer to information regarding our business and the market in which we operate and compete. We have obtained this information from various third party sources, including providers of industry data, discussions with our customers and our own internal estimates. We cannot assure you that any of this information is accurate or correctly reflects our position in the industry, and none of our internal surveys or information has been verified by any independent sources. We do not make any representation or warranty as to the accuracy or completeness of any such information set forth in this report.

Forward looking statements and other qualifications The following discussion and analysis is based on and should be read in conjunction with our historical financial information included elsewhere in this annual report. Certain capitalized terms used herein defined have the meaning set out in the Offering Memorandum relating to the issuance of € 240.0 million senior secured notes dated July 9, 2013.

The discussion may include forward looking statements, which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties, which could cause actual events or conditions to differ materially from those implied herein. You are cautioned not to place undue reliance on these forward looking statements. These forward statements are made as of the date of this report and are not intended to give any assurance as to future results.

2. Business Structure

Overview

The Group is an international automotive supplier. As a Tier 1 supplier, the Group supplies all mayor vehicle manufacturers operating around the world, as well as automotive manufacturers operating in the relevant local market, with its actuator products for the clutch and brakes segment as well as innovative hi-tech components for the various vehicle transmissions.

We sell our products directly to original equipment manufacturers (“OEMs”). We also manufacture and sell a range of spare and remanufactured parts to wholesalers, distributors and other participants in the automotive parts aftermarket. In line with our international direction, the Group employs a global workforce of approximately 3,800 employees and has production and development locations in Germany (Ebern, Fischbach and Mühlhausen), Slovakia, the Czech Republic, Denmark, the USA, Mexico, Brazil and China. The Group ensures its direct customer contact through 20 technical support offices located in 15 countries across 4 continents in close proximity to our customers. This provides close, efficient communication with our business partners. Accordingly, the Group has technical support offices at various locations in Germany and also beyond Germany in France, the UK, Sweden, Denmark, Slovakia, Czech Republic and Italy as well as in NAFTA and South America. In Asia, technical support offices are established both in Japan and South Korea as well as in India and in China. In the twelve months ended December 31, 2016, we recorded revenues of € 551.3 million and an Adjusted EBITDA of € 94.7 million.

We produce two main categories of products and produce and sell certain other parts:

Clutch Products (65% of 2016 revenues) We are one of the world’s leading supplier of Manual Shift Technology with hydraulic clutch components for manual transmissions. Approximately 40% of all hydraulic manual transmission cars produced worldwide in 2016 included our products. Our core clutch products are essential to our customers’ manual transmission systems and are used to convert the pressure of a driver’s foot on the clutch pedal into the movement of the clutch mechanism through hydraulic pressure. We work closely with our OEM customers to design and produce our specialized hydraulic clutch products, which include master cylinders (which convert the pressure of a driver’s foot on the clutch pedal into hydraulic pressure), slave cylinders and concentric slave cylinders (which convert hydraulic pressure into movement of the clutch), clutch pipe assemblies and sensors. The content per car (defined as the aggregate value of components included in a vehicle comprised, in part, of our products) of our clutch products ranges from approximately € 10 to € 30 on average.

Outside our core clutch product portfolio, we have developed and gained customers for innovative products for transmissions by replacing metal components with plastic components with electronics integrated. These Electric Shift and Electric Pump technologies (EST / EPT) are innovative, weight saving and cost efficient solutions, which can be used in vehicles with dual- clutch transmissions, automatic transmissions and hybrid transmissions as well as in electrical vehicles. In this growth area going forward the content per car ranges in between € 20 € to € 100 on average.

Brake Products (24% of 2016 revenues) Our brake products use hydraulic pressure to convert or enhance the pressure of a driver’s foot on the brake pedal into the movement of brake pads. Our brake products portfolio includes wheel cylinders (which convert hydraulic pressure into pressure on the brake pads), brake boosters (which enhance the pressure applied to the brake pads), brake pipe systems, sensors and complete drum brakes. The content per car of our brake products ranges from € 10 to € 40 on average.

Other (11% of 2016 revenues) We also manufacture and supply aftermarket products that can be used in both clutch and brake systems and certain specialized hydraulic and electronically activated components. In addition to our work with, and supply of products to, OEM customers, we are also active in the global passenger car and commercial vehicle spare and remanufactured parts aftermarket. We produce new brake and clutch parts and refurbish used brake calipers for a wide range of vehicles for the automotive aftermarket. Our aftermarket product range includes approximately 12,000 parts for approximately 37,000 vehicle models.

We sell our products through three channels: to OEMs as part of their new car production, to OEMs as part of their spare and replacement part offering, which is referred to as the original equipment supplier (“OES”) aftermarket and the independent aftermarket (“IAM”). 73% of our revenues came from OEMs, 5% from OES aftermarket and 22% from the IAM. In 2016 approximately 27%, 53% and 70% of our revenues were generated by our top one, top five and top ten customers, respectively.

We believe that our success is based on our ability to develop innovative and reliable products. We develop and manufacture specialized materials used in our products, particularly plastic and rubber. We have developed complex material mixtures that allow our products to withstand extreme heat and pressure with reduced weight and increased reliability. Our rubber and plastic fabrication facilities in Germany provide most of the specialized rubber and plastic that we use in our clutch and brake products. Our customers look to us for innovative products, such as dual concentric slave cylinders for DCT systems and electrical pumps for automatic transmissions, hybrid- and electrical vehicles. Since our products perform “mission-critical” functions in our customers’ vehicles, failure rates must be low. We are committed to producing the highest quality products.

We have stable and long-standing relationships with our key OEM customers. We have been serving our top five OEM customers for more than 30 years and our top ten OEM customers for an average of 25 years. We have also expanded our customer base in Asia by establishing new relationships with major Asian OEMs and transmission manufacturers. As a result of the longevity of our OEM customer relationships, we have been able to cooperate with some OEMs on development projects and thereby respond to changes in the requirements of the OEMs that we supply. OEMs develop new vehicle platforms over the course of several years and then produce vehicles based on those platforms, typically for the following four to seven years. We supply products for transmission platforms, which typically last five to eight years. We work with our OEM customers during the platform development phase to create products tailored to the particular customer’s specifications. Our 20 technical support offices and the engineers we send to our OEM customers facilitate this close product development interaction. Once we have been chosen as the supplier for a particular platform, there are high barriers for OEM customers to switch suppliers. Over the last 5 years we had an average renewal rate of approximately 90% for supplying components for subsequent OEM platforms. For our core clutch business, we currently provide our products to approximately 130 platforms for 17 OEM customers.

We are often the single supplier of particular components to many of our OEM customers and for the year ended December 31, 2016, we were the sole supplier for approximately 85% of the platforms served.

We have a geographically diversified global production footprint with ten production facilities in seven countries over four continents. We have focused our expansion outside our traditional markets in Europe on NAFTA, South America and Asia, where we have been able to capture the increasing demand for our products, in part driven by a significant increase in vehicle production, particularly in the United States, Mexico and China.

Strategy

The Group’s international growth strategy is continuously pursued through ongoing and systematic research and development work and, by replacing metal with plastic and by integrating electrical components, with innovative, weight-saving and cost-effective products in the areas of Electrical Shift Technology and Electrical Pump Technology. With these new products, which can also be used in the area of automatic and hybrid drives as well as electrical vehicles, and with the brake calipers reconditioning business in the aftermarket acquired at the end of 2014, the Group has enhanced its leading market and innovation position for clutch actuating products in the field of manual shift technology. Following the growth of 2016 and in the years ahead, the Asia region is becoming even more important and is becoming established as the second strongest region within the Group behind the European region, with its moderate growth, and ahead of NAFTA and South America region.

The following are the key elements of our strategy:

Maintain and Enhance Our Market Position in the Global Manual Transmission Clutch Product Market Maintain strong position by continued focus on quality and relationships Our focus on quality and our strong relationships with our OEM customers are central elements of our strategy. We believe that our reputation for delivering high-quality, mission-critical products and our technological leadership in plastics and hydraulics technology will continue to make us a valuable partner for our OEM customers. We plan to continue to work closely with our OEM customers to develop and deliver products that are customized to their requirements. We also plan to further strengthen our market position through organic growth and are also open to considering selective acquisitions.

Enhance global position by emerging market development We aim to leverage our leading market position and proven track record in the manual transmission clutch market to grow our sales to OEMs globally by providing advanced and localized solutions driven by customer demands for value-added products. In particular, we plan to leverage our strong, long-standing relationships with current OEM customers and seek selective and profitable investments in order to increase our sales to those OEMs in emerging markets and capture additional market share. We believe that vehicle production within emerging markets, particularly China, Brazil and India, will increasingly use hydraulic actuation for manual transmissions and grow at a pace above global average. We continue to gain market share in emerging markets, which we believe is indicative of the growing sophistication, maturity and demand for high-quality products in these regions. As we expand in emerging markets, we plan to continue to increase sales to local OEMs. We believe our local facilities and local technical support offices will allow us to provide superior service to customers in these regions.

Further develop market position in aftermarket The automotive parts aftermarket is an attractive high-margin area of growth, and we aim to expand our share of the automotive aftermarket by increasing sales to third-party distributors, enhancing our global position in emerging markets and competing for new customers. Building on our experience in original equipment aftermarket sales and brake calipers remanufacturing, we seek to expand sales of our newly developed products into aftermarket sales channels. We believe that increasing our aftermarket sales of spare parts will further enhance the continuity and predictability of our revenues and contribute to our profitability.

Build on Product Developments to Successfully Enter other Transmission Markets as well as the Electrical Vehicle Market We believe that the number of OEMs requiring dual clutch transmission components will increase over the coming years, as OEMs install more fuel-efficient transmission options in their cars. We meanwhile supply a product portfolio of component parts for DCT directly to OEMs and to Tier 1 transmission suppliers, which we believe will offer weight and cost advantages, along with significant packaging and assembly benefits.

Three key products that we have developed for DCT have each already been contracted for supply to at least one major OEM platform. We intend to grow with the DCT market by offering our existing products to other OEM customers and by selectively expanding our product range to increase the number of components we supply per vehicle. Furthermore, our new products in the fields of Electrical Shift Technology (EST) and Electrical Pump Technology (EPT) can also be used in the area of automatic, hybrid and electronic drives.

Following the successful market launch of the first plastic transmission oil pump, the modular EPT kit was enhanced with high-performance variants. These pumps are intended for use in automatic and duplex clutch gearboxes as well as in electrical vehicles and can be used there for cooling and lubrication as well as serving as additional oil pumps. In the case of EST products, the emphasis in 2016 was on developing an additional gear shift module that is planned for a new duplex clutch gearbox for an Asian customer. The first prototypes have already been delivered and successfully tested. The plastic cooling oil valve (COV) has already been readied for series production and successfully validated. Production has started in Q1/2016.

A new product was developed for the Group with the parking lock actuator (PLA) for electrically activating the parking function for automatic and duplex clutch gearboxes. This development is being followed with interest by potential customers and will continue in 2017 with the manufacturing and testing of prototypes.

Continue to Invest in Product Development to Drive Product Innovation and Medium-Term Revenue Growth Product development is central to our business, and we plan to continue developing and introducing new products through our significant research and development program. Integrating our research and development function with our production processes allows us to efficiently manage our new product development to meet recent technological trends, including higher fuel efficiency, improved product reliability and lower cost.

We plan to meet these requirements by continuing to improve our products’ reliability, developing alternative materials and expanding into new product areas. We plan to continue to work closely with key OEMs during the product development process and leverage our core technologies to innovate new solutions across all transmission systems, as recently demonstrated by the launch of our CPx product for the hybrid and electrical transmission market gear shift actuator module and lubrication oil pump.

Selectively Develop our Market Position in Brake Products We believe that our diverse product portfolio comprising both clutch and brake products helps to strengthen our relationships with OEMs, which are able to turn to us for innovative, high-quality products for their mission-critical transmission and braking systems. We plan to develop our brake business selectively according to our product lines in order to continue providing a high- quality product offering to our customers and to capture market share.

Continue Further Cost Savings and Operating Efficiency Initiatives We plan to continue to make our manufacturing process more efficient. By continuously monitoring and improving our manufacturing processes, we seek to identify and exploit operational, cost and time savings in cooperation with our employee representatives. We also aim to increase our purchases from low-cost countries and maximize savings in purchases from our suppliers. In addition, we plan to leverage our leading research and development capabilities through our global production footprint to serve our global OEM. Our international production capacity allows us to provide our products closer to the production locations of our customers.

Strengths

Global Market Leader in Attractive Segments of the Transmission Market Leader in core clutch components business We are the world’s leading supplier of hydraulic clutch components for manual automobile transmissions. More than 40% of all hydraulic clutch actuated manual transmission cars produced in 2016, include our products. We believe that our leading market position allows us to maintain our profitability and provides us with significant competitive advantages.

Strong presence in high growth regions Since cars with manual transmissions tend to be more affordable than cars with automatic transmissions, we expect growing demand for manual transmissions especially in emerging markets as car ownership continues to expand in those emerging markets. In response to these trends, we have built presences in fast-growing emerging markets, including Brazil (where approximately 50% of cars produced in Brazil with hydraulic clutch actuated manual transmissions include our products) and China (where almost 20% of cars produced in China with hydraulic clutch actuated manual transmissions include our products). We have developed and are developing global production capabilities and technical relationships with OEMs that enable us to further extend our core hydraulic clutch products market leadership in these growth markets.

High exposure to resilient and high-margin aftermarket sector We also produce and sell products into the automotive aftermarket, a market segment that has shown resilience and attractive margins through difficult macroeconomic periods. We hold a leading market position for spare and replacement clutch actuation components in Western Europe and NAFTA, a significant presence in South America and a growing position in Asia that should allow us to grow our revenues from the automotive aftermarket in the future.

Well positioned to benefit from global automotive industry trends We focus on technological trends, market segments with strong structural and product attributes that are becoming increasingly important to OEM customers, such as reduced weight and increased fuel efficiency. Our core clutch business is based on hydraulic clutch technologies which we believe are replacing cable-based manual clutch system designs. Additionally, our research and development capacity positions us well to be a leading participant in other growing transmission component markets such as double-clutch, automatic, hybrid and electric drives.

Innovative Technology Leader for High-Quality Products Specialist manufacturer of high-quality, mission-critical products with low relative price and high cost of failure We believe providing superior product quality to our customers is a key competitive necessity for our business and paramount to our success. Our products are essential to the performance, durability and reliability of the vehicles in which they are installed, and the cost of replacement is very high relative to the cost of the product. We have approximately 100 test benches located in our production facilities in Germany, NAFTA and China to detect defects before products are delivered to our customers. The quality of our products is reflected in our low warranty costs, which were less than 0.3% of revenues for the financial year ended December 31, 2016. We have been recognized by our customers with numerous awards for the high quality of our products.

Track record of innovation driven by consistent substantial research and development spend We believe that our combination of technological innovation and history of producing high-quality products is also central to our continuing success. We have a track record of product innovation driven by a dedicated team of more than 300 research employees in facilities in Germany, China and the United States. We typically spend approximately 5% - 6% of our revenue on research and development activities. We have developed sophisticated plastic compounds to build durable, low-weight products which had previously been made only out of metal. We believe we were the first manufacturer to develop and produce plastic clutch master cylinders and were the first to introduce high-performance concentric slave cylinders for manual transmissions. As further examples, we have developed and brought into series production the first plastic transmission oil pump and an innovative gear shift actuator module.

Ability to enter fast-growing market segments through innovation

The global automotive market is trending towards increased fuel efficiency, CO2 emission reduction, hybrid solutions, low-cost production and increased product reliability. We believe that our technological leadership and core research and development competencies position us well to respond to those trends. Our innovative products and market-leading production processes are developed through our targeted research and development platform, which is fully integrated with our product design and manufacturing process. We work closely with key OEMs in developing new products as they develop their new car platforms, allowing us to quickly adapt to our customers’ demands. This cooperative interaction has led, for example, to the development of our new DCT product line, which gives us access to a fast-growing new transmission segment, aligns us with customer needs and complements our existing business. We were the first company to market an integrated low-weight plastic gear shift module for DCTs. Furthermore, our new products in the fields electrical shift and pump technologies enable us to better access the automated and hybrid transmission markets as well as the market of electric drives.

Long-standing OEM Relationships and Growing Global Presence Supplier of choice to leading OEM customers Our stable and long-standing relationships with our OEM customers create high barriers to entry for potential competitors and high supplier switching costs for our customers. We have been serving our top five OEM customers for more than 30 years and our top ten OEM customers for an average of 25 years. We believe there are very few suppliers which, like us, have such long- standing relationships with the largest global OEMs, and there are an even smaller number of suppliers which, like us, are capable of delivering solutions to complex projects globally and on a consistent and high-quality basis across the product portfolios or we consider our loyal customer base a competitive advantage.

Historically reliable sales visibility from contracted sales and high contract renewal rates Our highly advanced technological capabilities, global manufacturing and managerial footprint, significant operational scale and track record of financial stability enable us to be a supplier that can support an OEM throughout the full product life cycle, including as a development partner during the early stages of vehicle platform development. This ability to support the development process of OEMs and act as a global supplier is an important differentiator and competitive advantage, especially for innovative product solutions, and would take significant investment and many years to attempt to replicate. From operational, technical and logistical perspectives, OEMs face substantial switching costs in replacing the supplier of a particular component or sub-system, particularly during the life cycle of a specific vehicle platform, and the supplier of a particular car platform is often also chosen for subsequent generations of that platform. This is largely due to the long lead-time and significant investment required to set up the production and supply processes, and to the efficiencies and savings gained through experience with the manufacturing processes of particular products.

Track record of expansion to follow OEMs into emerging markets As our main OEM customers have expanded their production capacity in emerging markets, we have built facilities to provide locally manufactured products to their plants. Our first emerging market production facility opened in Mexico in 1997, followed by Brazil in 1998 and the establishment of a joint venture in China in 2003. As demand for our products grew in China and Brazil, we responded by opening our own production facility in China in 2009 and established a new production facility in Brazil in 2010. We continue to actively explore expansion opportunities in emerging markets to be close to the production lines of our OEM customers in those markets and to generate new business with local OEMs.

Strong Profitability and Consistent Cash Generation Attractive profitability levels and cash generation in our core clutch products business Our core clutch products business has been historically enabled us to produce strong profits and cash flow. We have been able to maintain high margins and preserve cash throughout the economic cycle. Over the last three fiscal years, we have achieved an average Adjusted EBITDA margin of 17.0%. Predictable revenues and cash flow are the result of long-term contracts with our OEM customers. Once a project has been nominated to a supplier, it is rare for an OEM to switch to another supplier, given the high operational, technical and logistical costs of switching, particularly during the life cycle of a specific vehicle platform.

We have a track record of high contract renewal rates in our core clutch business, which have averaged higher than 80% over the past five years. Typically, a high portion of our projected original equipment sales for the following five years is already contracted, giving us some visibility for our expected production levels.

Strong degree of resilience through the cycle We believe our regionally diversified OEM customer base and our expanding presence into new products and growth markets help to mitigate the risk that may result from possible fluctuations in demand in our core clutch products business in Europe. We believe that our consistent profitability is driven by our diversified customer base and sizable aftermarket business, which represents 22% of revenues for the fiscal year ended December 31, 2016, and a significant portion of our profits. Since the last downturn in 2009, we have also reduced our cost of sales in our core clutch business by increasing operational efficiency through localized production facilities, automated processes and global sourcing. Our cash flow has enabled us to repay debt and reduce leverage over time, which allows us to return greater value to our investors.

Strong and Experienced Management Team Our management team has a proven track record of achieving long-term profitable growth as well as establishing the Group as a technology, quality and innovation leader in the clutch component market. Our management team has more than 200 years of combined experience in the automotive industry with a proven ability to execute our strategic plans and sustain and expand valuable customer relationships. We believe that under the leadership of our strong management team we will continue to enhance our product portfolio, expand our global production footprint and grow revenues.

Business Description

Our Customers As the leading Tier 1 supplier for hydraulic clutch components, we have a diversified global customer base and long-term customer relationships with OEMs and with distributors, retailers and other participants in the automotive products aftermarket. We have been serving our top five OEM customers for more than 30 years and our top ten OEM customers for an average of 25 years. Our products are sold to almost all top OEMs. We believe that we can leverage our strong OEM customer and aftermarket customer relationships to further increase our customer base. We also sell aftermarket products as co-manufacturers (for example, of clutch kits) to other manufacturer, parts distributors, central buying groups and retailers.

Our extensive global footprint and technical expertise have enabled us to win mandates on global projects with the top OEMs around the globe. Mandates in the automotive OEM business involve long-term production arrangements based on the life cycle of the specific model or platform. As a consequence of our strategic and long-term relationships with our OEM customers, and given the material operational, technical and logistical costs of switching suppliers during the life cycle of a specific vehicle platform, we have good visibility on our mid-term revenues based on continuous stable economy.

Our geographical diversification strategy is aligned with the ongoing expansion by OEMs into growth economies and the consolidation of their existing presence in established markets. We are well established within the European marketplace, with strong performance also in the North American market. New relationships with OEMs have enabled us to grow our presence in Asia.

With locations and customers throughout Europe, NAFTA, South America and Asia, we are well placed to grow further as OEMs seek to establish their presence in growth markets and to grow outside their home markets.

We have general framework contracts with most of our OEM customers that stipulate the general terms and conditions for all sales to the respective OEM customer. For specific parts, our OEM customers generally appoint us as the supplier by way of a nomination letter. A nomination letter usually provides a commitment by the OEM to source for a certain period (usually five or more years) a certain portion or all of its demand for a certain part from us and includes pricing agreements. These agreements do not generally stipulate minimum volumes of purchases from us. Conversely, the agreements usually require us to maintain a certain minimum production capacity for the parts nominated. It is customary in the relationships between us and our OEM customers to readjust prices if the actual volumes deviate significantly from the volumes forecasted by the OEM. We use a combination of the projections of our own customers and third- party market research estimates of the volume of vehicles expected to be produced by that OEM to determine our estimated contracted sales for each part supplied.

Our Suppliers We purchase various manufactured components and raw materials for use in our manufacturing processes. The majority of these components and raw materials are available from several sources. We maintain a strategic supplier list and employ continuous supplier portfolio management to ensure that we only purchase the highest-quality products at the most competitive prices. We focus on preferred suppliers for new sourcing, and seek to build favorable relationships with our key suppliers to ensure excellent service, sustainable cost advantages and speedy delivery and to enhance our competitive advantage in the marketplace. Our suppliers, like our OEM customers, are increasing their global footprint and as such we believe we have built stable supply relationships in the countries in which we operate. We have strong relationships with our suppliers in low-cost countries in Eastern Europe and China. Due to our size and our position in the marketplace, we expect to be able negotiate competitive contracts from suppliers.

The primary products we purchase from our suppliers are sheet metal formed parts, bearings, resin, cold formed parts and sensors. Our contracts with suppliers typically provide for annual price reductions and require our suppliers to keep their prices competitive by passing through price reductions to us or entitling us to claim a price reduction if we, based on benchmarking, conclude that the prices charged by the supplier are above the market rate. Our contracts with OEMs often contain agreed pricing, although some contain surcharges for raw material costs or price adjustment mechanisms for variable raw material prices. We are partly able to pass through increased aluminum costs to our customers but our ability to pass through the increased costs of other raw materials such as steel and plastics is limited.

Our Products We produce a range of clutch products that are essential to our customers’ transmission systems. Our clutch products are designed for manual, automated manual transmissions, such as DCT as well as automated and hybrid transmissions as well as electrical vehicles. We started delivering our new EST/EPT- products into DCT in the second half of 2014 with an increased ramp up in 2015/2016 and we will place these components into the first electrical vehicle within the upcoming years. We also produce products for brake systems, as well as complete drum brakes. Additionally, we supply clutch and brake products in the automotive aftermarket, offering our own remanufactured rebranded products. We sell our products to OEMs and in the OES and independent spare parts aftermarket. Furthermore, our new products in the fields electrical shift and pump technologies enable us to access the automated and hybrid transmission markets as well as the market of electric drives.

The following table identifies the different transmissions our products (including new products in development / prototype stage) are placed in:

Our Clutch Products for Manual Transmissions Manual transmissions are disconnected from the engine manually by the driver in order to change gear and avoid stalling the engine while the car comes to a stop. We produce master cylinders, slave cylinders, concentric slave cylinders, clutch pipe assemblies and sensors, all of which are incorporated into the manual transmissions of the vehicles produced by our OEM customers.

The following simplified diagram shows the powertrain for a manual transmission:

The following simplified diagram shows the mechanics for a manual transmission and explains how the system works and what the components we produce do within the system:

(1) The driver disconnects the clutch from the engine by stepping on the clutch pedal. (2) The master cylinder converts the pressure of the driver’s foot on the clutch pedal into hydraulic pressure. The clutch pedal moves a piston in the clutch master cylinder, which moves a volume of fluid. (3) The pressure generated by this movement of fluid is transferred through the clutch pipe to a slave cylinder. (4) An external slave cylinder is mounted on the transmission. A concentric slave cylinder is mounted inside the transmission. A piston in the slave cylinder is moved by the hydraulic fluid pressure. The slave cylinder moves a release lever which, in turn, releases the clutch. (5) Sensors in the master or the slave cylinder can measure the current status of the cylinder and optimize the clutching process or direct other vehicle functions.

Master Cylinder The clutch master cylinder is directly connected to the clutch pedal. It features an internal piston that moves according to the amount of pressure applied via the pedal. Our clutch master cylinders are durable and highly efficient. To improve safety, comfort and responsiveness, sensors can be integrated into our master cylinders to support a vehicle’s start-lock, cruise control, electronic park brake or automatic start/stop systems. Our master cylinders are predominantly made of plastic in order to reduce weight. The unit is built from recyclable materials in order to conform to environmental standards.

Clutch Pipes The clutch pipe is filled with hydraulic fluid. It conveys the pressure applied at the pedal to the external clutch slave cylinder or concentric slave cylinder. Because the clutch pipe acts as a bridge between the clutch pedal and the transmission, it could potentially also transmit engine vibrations. In order to eliminate adverse influences like this and to ensure comfortable operation of the clutch pedal and give the driver a feeling for the right pressure to apply, our clutch pipes are fitted with a frequency modulator that absorbs unwanted vibrations. Our clutch pipes are highly efficient

and can be quickly adapted to meet the specifications of a new

platform. They can also be made from plastic to reduce weight and cost and we only use renewable raw materials in order to comply with environmental standards.

Slave Cylinder The slave cylinder transfers the pressure applied through the clutch pipe to open and close the clutch directly by applying pressure to a lever on the clutch. This is accomplished with a piston that is moved forward or backward by the hydraulic fluid. Our slave cylinders are easy to install and are highly reliable and efficient. They automatically adjust to offset routine wear and tear on the clutch. Our slave cylinders are predominantly made of plastic in order to reduce weight.

Concentric Slave Cylinder Concentric slave cylinders are compact and easy to install. Like the clutch slave cylinder, our concentric slave cylinders contain a single piston to move the clutch. They have a plastic housing which is resistant to high temperatures and are designed for an operating pressure of up to 40 bar.

Controlled Pistons (CPx) Our controlled pistons are used in a variety of applications to provide precise, electronic control of hydraulic loads for either manual or automated manual transmissions. They are used in trucks and hybrid vehicles. The unit offers a power solution that is cost-efficient, fast and controllable. It is unique in terms of overall efficiency, power dynamics and integrated electronics. Our controlled pistons produce virtually no noise or pulsation and are

suitable for a variety of hydraulic fluids including mineral oil and brake fluid. They are predominantly made from aluminum and plastic.

Sensors Our sensors can be integrated into our master cylinders, slave cylinders and concentric slave cylinders. They assist with certain vehicle functions such as start-lock (the vehicle starts only if the clutch is fully depressed), cruise control (cruise control is switched off as soon as the clutch pedal is depressed), electronic parking brake (the brake is operated as a function of clutch travel) and automatic start/stop (the engine is stopped automatically when the vehicle stops (for example, at a traffic light)).

Our new EST/EPT- Products for DCT, other Transmissions and Electrical Vehicles Dual clutch transmissions (DCTs) can be considered as two manual transmissions operating in parallel. A DCT has two clutches: one for odd-numbered gears and one for even-numbered gears. During gear shifts, the next gear is preselected and ready to be engaged in the inactive part of the gearbox before the torque (turning force) is moved from one clutch to the other without interruption. Gear shifts are carried out by electro-hydraulic or electro-mechanic movement. DCTs can be operated in fully automatic mode or in manual mode via a shift lever or steering wheel- mounted paddles that enable sequential shifting.

The following simplified schematic diagram shows a dual clutch transmission with two side-by- side clutches.

We have developed and brought into series production three products for our DCT product portfolio and have received nomination letters from certain OEM customers for the supply of all or some of these products for their future DCT platforms.

Dual Concentric Slave The dual concentric slave cylinder is a derivative of our concentric Cylinder slave cylinder. The dual concentric slave cylinder is predominantly made of plastic and aluminum and works like a conventional concentric slave cylinder, but with two concentric pistons instead of one. Independently of each other, the pistons move each of the two clutches in the DCT and are powered electro-hydraulically via a power pack. Valves control the volume of hydraulic fluid. The position of the pistons is determined by two small electrical sensors, which work reliably and independently of each other at

temperatures from -40°C to +180°C.

Gear Shift Module Gear shift modules are key elements for shifting gears in DCTs and automated gearshifts and enable fast and safe gear shifting. Our gear shift modules simplify what was previously a complex system of different parts by taking those parts and housing them all in one easy-to-install unit. Customer-specific developments, from a single cylinder without sensors to a multi-cylinder module with integrated displacement sensors, are available in our product portfolio. The housings for our shift actuators are made of high-quality technical plastics which allow for a significant cost reduction compared to metal-based shift actuators, cost-efficient manufacturing, freedom in design and freedom from wear throughout the service life of the product. They are self-ventilating to allow proper functioning during use and after long idle periods.

Lubrication Oil Our pumps for gearbox lubrication are made of glass-fibre reinforced Pump plastics. The application in dry-pump gearbox lubrication systems with no

splash-losses leads to reductions in CO2 emission as well as reductions in the amount of oil used in transmission systems.

Our Brake Products Our brake products are subject to continual development in terms of design, function, material and technology. We develop concepts for maximum safety and aim to ensure the shortest braking distance for our customers’ vehicles.

Drum Brakes A drum brake system consists of hydraulic wheel cylinders, brake shoes and a brake drum. When the brake pedal is applied by the driver, the two curved brake pads, which have a friction material lining, are forced by hydraulic wheel cylinders against the inner surface of a rotating brake drum. The result of this contact produces friction which enables the vehicle to slow down or stop. Our cost- effective drum brakes have longer maintenance intervals and reduce wear on the brake pads. They are easily integrated with the vehicle’s hand brake, are easy to repair and because they are made from steel and aluminum that is heat-conductive and wear-resistant, they are highly resistant to wear and tear.

Wheel Cylinders The wheel cylinder sits inside the brake drum and pushes the brake pads onto the brake drum. Our aluminum wheel cylinders are lightweight, durable, highly resistant to corrosion and suitable for recycling.

Brake Boosters A brake booster increases the force applied by the brake pedal, thereby reducing the effort needed to slow the car. Our brake boosters achieve a significantly higher brake force than conventional brake boosters using the same pedal force. Our brake boosters are made from aluminum and steel and are lightweight, compact and highly resistant to corrosion. We supply brake boosters with integrated parking brake sensors.

Brake Hoses Brake hoses are used in brake systems to transfer hydraulic pressure. The design and composition of our brake hoses can be adapted to our customers’ requirements. Our brake hoses and brake pipes are designed to meet high pressures generated by the braking system and to meet customer demand for impermeability of oils, fluids and gasses.

Our Aftermarket Products We are a supplier in the automotive aftermarket, offering our own remanufactured, third-party rebranded products. Our range of brake and clutch components comprises more than 12,000 spare parts in OEM quality for nearly 37,000 vehicle types. And we are continually adding more while updating the list of newly available products. When new vehicle types are launched, we start offering premium-quality parts for them within 18 months.

Our Employees The following table shows our average headcount in our functional areas for the years 2015 and 2016:

Annual average number of employees by functional area 2015 2016

Production 2,874 2,880 Research and development 305 323 Selling 106 106 General administration 222 212 Total w/o temporary employees 3,507 3,521

Temporary employees 190 190 Total incl. temporary employees 3,697 3,835

The following table shows our average headcount in each of the countries in which we operate for the years 2015 and 2016:

Annual average number of employees by country 2015 2016

Germany 2,162 2,230 Czech Republic 605 584 Slovakia 265 410 Denmark 84 30 United States 161 72 Mexico 163 235 Brazil 87 76 China 170 199 Total incl. temporary employees 3,697 3,835

In line with our operating efficiency initiatives, we relocated two production units in 2016: the production unit in Auburn Hills (USA) moved to the plant in Puebla (Mexico) as well as Støvring (Denmark) for calipers-remanufacturing moved to Prešov (Slovakia).

We have collective bargaining agreements that set forth key terms of employment in several countries. In Germany (other than at FTE Mühlhausen), we are bound by the collective bargaining agreements with the Metal and Electric Industry, Bavaria (Metall- und Elektroindustrie Bayern) and the Plastics Processing Industry, Bavaria (Kunststoff verarbeitende Industrie Bayern). Our collective bargaining agreements in Germany set forth requirements relating, among other things, to salary, working time and termination periods.

Our employees in Germany (other than at FTE Mühlhausen) are represented by works councils and many of our employees in other countries are represented by works councils and trade unions. A supervisory board (Aufsichtsrat) has been established in Germany pursuant to the provisions of the German Co-Determination Act (Mitbestimmungsgesetz). The supervisory board has twelve members: six representatives of the shareholders and six representatives of the employees.

We have had no material labor-related work stoppages and believe that our employee relations are good.

Our Manufacturing Processes Since our foundation, we have been committed to innovation. We develop technical solutions, handling everything from inception and design all the way to production. Together with our OEM customers, we subject our products to a process of continuous development and optimization. We utilize a broad range of in-house manufacturing processes, including plastic injection molding and metal and rubber fabrication, and a wide range of assembly and in-line testing technologies.

We have a dedicated organization for driving new process innovations, promoting consistent process standards and quality levels across our worldwide manufacturing facilities, supporting our product development teams with manufacturing expertise, implementing new processes in our plants and supporting our joint venture partners.

We continually seek to improve our manufacturing processes. Our manufacturing process engineers work together with our customers’ application engineers and product design engineers and are involved in the product development process from project inception to serial production. They also conduct continuous improvement activities during serial production. This allows us to offer to our OEM customers innovative, high-quality and cost-effective new products and continuous optimizations of our existing products. In order to realize cost effective and lightweight products, developing innovative plastic products is becoming more and more important. We have plastic injection molding centers in Fischbach (Germany), Puebla (NAFTA), Maua (Brazil) and Taicang (China). We cooperate with leading resin manufacturers to develop customized raw materials, such as fiber-reinforced plastic, that are exclusively supplied to us. Some of the complex plastic injection molding tools we use are developed and manufactured in-house in our tool shop in Ebern (Germany). Typical examples of internally manufactured plastic components are housings and pistons for clutch master and slave cylinders (made by injection molding), plastic clutch pipes (made by plastic extrusion) or housings and pistons for EST / EPT -products such as oil pumps and gear shift moduls (using plastic insert molding technology of metal components).

Metal fabrication remains important to achieve robust products, such as the housings for concentric slave cylinders (for both manual and other transmission applications) and CPx products. We have broad experience in cast-iron and aluminum machining, and we have developed customized machine centers and cutting tools in cooperation with leading machine and tooling manufacturers. We also anodize, coat and harden aluminum components. Our metal fabrication centers are located in Ebern (Germany), Podborany (Czech Republic) and Puebla (Mexico).

The durability of our products relies on rubber components, such as seals, diaphragms and hoses. Within our manufacturing rubber fabrication centers, we develop and manufacture a wide range of rubber raw materials. We process these materials by pressing, injection molding, over- molding and extrusion. Additionally, we conduct coating and cutting processes for rubber components, along with visual inspections using proprietary automated testing equipment. Our rubber fabrication centers are located in Ebern (Germany) and Mühlhausen (Germany).

We assemble finished products in all our manufacturing locations. Depending on the manufacturing location, different degrees of automation are employed, with fully or semi- automated production processes for plants in high-cost countries and manual assembly stations for plants in low cost countries. To support workstation design, special tools for ergonomic workplace design and standard time calculation are in place. We have also developed specialized processes for the assembly of electro-mechanical products, including sensor fabrication and assembly and sensor teaching processes. We also have technologies and procedures in place to ensure a functional test of each of our products at the end of the production line. All of our manufacturing centers employ a make-or-buy approach in deciding between inhouse fabrication and external sourcing. In addition, all of our in-house manufacturing activities are continuously benchmarked against external suppliers.

Our Property, Plant and Equipment As of December 31, 2016, we operated ten production, distribution and R&D facilities in seven countries. Our headquarters is located in Ebern, Germany. The following table provides an overview of our facilities:

Location Activity Owned / Area Founded Leased (m²)

Mauá, Plastic injection molding and Leased 11,342 1998 Brazil assembly

Taicang, Plastic injection molding, Leased 9,650 2011 China machining and assembly

Podbořany High-volume metal fabrication Owned 79,179 2006 Czech Republic and assembly, R&D

Aars, R&D for calipers business Leased 1,000 2014 Denmark

Ebern Rubber component and hose Owned 133,456 1943 Germany fabrication, low-volume metal fabrication, group functions (e.g. R&D, sales, purchasing), European distribution center

Ebern / Plastic injection molding, Owned 74,004 1999 Fischbach, sensor production and Germany assembly

Mühlhausen Pipe fabrication, rubber hose Owned / 43,815 1992 Germany fabrication and assembly Leased

Puebla, Plastic injection molding, Owned / 47,035 1997 Mexico metal fabrication and Leased assembly

Prešov, Assembly for drum brake, pipe Leased 16,813 2004 Slovakia and rubber hose Remanufacturing brake calipers

Auburn Hills, Distribution and R&D Leased 58,000 2004 United States

In 2016 the production unit in Auburn Hills (USA) moved finally to the plant in Puebla (Mexico) as well as the production unit in Støvring (Denmark) for calipers-remanufacturing to Prešov (Slovakia). A development center for brake calipers business remained in Aars (Denmark).

As of 1 April 2016 SFMC s.r.o. (Prešov, Slovakia) merged with FTE automotive Slovakia s.r.o.

Our facilities in the Czech Republic, Mexico and Slovakia assemble both clutch and brake products. Our facilities in other countries typically assemble either clutch or brake products.

Our Acquisitions By agreement ("Business Transfer Agreement") dated September 1, 2014 ("Signing") and taking effect on November 1, 2014 ("Closing"), The Group acquired the brake calipers business of SBS Automotive A/S, Støvring, Denmark ( SBS Automotive) as part of an asset deal at a purchase price in the amount of DKK 210.8 million (€ 28.3 million). In addition to acquiring assets and liabilities, absorbing employees, and entering into existing agreements in connection with the brake calipers business, the remaining 51% of the shares in SFMC s.r.o., Prešov, Slovakia (SFMC) were purchased as part of a share deal. Therefore a credit facility of the existing RCF in the amount of € 15.0 million was utilized to finance the acquisition of the calipers business in Denmark and the remaining amount of € 13.3 million out of operating cash. Out of the € 15.0 million RCF utilization € 5.0 million were paid back in 2015 and € 10.0 million were paid back in 2016.

Our Joint Ventures The Group entered into a joint venture arrangement and Zheijang Asia-Pacific Machine Electric Limited Company in August 2003. The Group holds a 49% stake in the joint venture which was transferred to the Group in 2004. The joint venture produces brake wheel cylinders and pipes for motor vehicles.

Our Research and Development Intellectual Property We operate in a highly competitive and globalized industry and must constantly change and adapt to meet the needs and expectations of our customers. We consider innovation and research and development to be key success factors for the differentiation of our products and services from those of our competitors. Our innovative products and market-leading processes are developed through our targeted research and development platform, which has a dedicated team of more than 300 employees located in Germany, in Denmark, in Czech Republic and in the United States. Our financial commitment to research and development is significant, because we typically commit approximately 5% - 6% of our revenues to research and development activities. We deploy our research and development resources both to develop products in partnership with our OEM customers and in the creation of proprietary new designs and technologies independent of the OEMs.

Our clutch and brake products are essential to the transmission and braking systems in the vehicles produced by our OEM customers. The design and manufacture of these products are driven by the requirements and expectations of the OEMs that we supply, and we partner and work closely with them, from the early stages of development through to final production, to ensure that their requirements and expectations are met.

We seek to create close collaborations with our clients in order to co-develop clutch and brake technologies for future vehicle platforms. Our past investment in the research and development of DCT products is indicative of our commitment to the development of the next generation of mission-critical automotive transmission components. Across our product lines, we aim to leverage our extensive plastics manufacturing know-how and hydraulics experience in order to develop cost-effective and weight-, space- and emission-saving designs.

Our close working relationships with OEMs results in a deep understanding of our customers’ requirements and constraints. This enables us to provide innovative, customized and cost- effective products that address their needs and which consolidate our relationship with them as a core supplier and co-developer of strategic importance.

We have obtained many patents to cover our products, their design and our manufacturing processes and strive to secure further patents on our developments. As of December 31, 2016, we held more than 300 patents for key technologies in clutch and gear actuation. We file and monitor our patents and other intellectual property rights, to the prosecution of infringements thereof and to the protection of our proprietary information.

Environment, Health and Safety Our operations are subject to a wide range of environmental laws and regulations in various jurisdictions, including those governing the management and disposal of hazardous materials, the cleanup of contaminated sites and occupational health and safety. Our operations include the use and storage of hazardous materials, which can have an impact on soil and groundwater. Other environmentally sensitive substances required for the operation of sites, such as fuel and heating and lubricating oil, are used and stored at our sites. In addition, many of the sites at which we operate have been used for various industrial purposes for many years. As a result, some of our sites could be affected by soil and groundwater contamination. In some cases, we are obligated to perform further investigation or cleanup operations.

We are required to obtain and maintain permits from governmental authorities for many of our operations. These laws, regulations and permits are subject to change over time and require the ongoing improvement and retrofitting of plants, equipment and operations, which can, at times, require substantial investment. All our plants are validated according to ISO 14001 and additionally all European plants have been validated according to ISO 50001 in 2016.

Over the past five years, we have had no material environmental issues, actions, claims or liabilities and are currently not aware of any such issues, actions, claims or liabilities. With regards to health and safety, we are aware of the risks in our business and have policies in place that ensure that our employees have a safe and healthy working environment. We use the same criteria when assessing the performance of any of our companies in terms of health and safety and no difference is established between the companies operating in the different countries in which we are present.

Insurance We believe that we have economically reasonable insurance coverage with respect to product and environmental liability, property insurance, business interruption insurance and other insurance (e.g., automobile, credit and freight insurance). Furthermore, we consider the insurance coverage level relating to our directors and officers (D&O insurance) to be economically reasonable.

Legal Proceedings In the normal course of our business, we may be involved in legal, arbitration or administrative proceedings. On the basis of current information, we do not expect that the actual claims, lawsuits and other proceedings to which we are subject, or potential claims, lawsuits and other proceedings relating to matters of which we are aware, will ultimately have a material adverse effect on our results of operations, financial condition or liquidity. We note, however, that the outcome of legal proceedings is extremely difficult to predict with certainty, and we offer no assurance in this regard.

Key Factors Affecting Our Results of Operations

Our results of operations, financial condition and liquidity have been influenced in the periods discussed in this report by the following events, facts, developments and market characteristics. We believe that these factors have influenced and are likely to continue to influence our operations in the future:

Global Automotive Market We are a Tier 1 supplier to large original equipment manufacturers (“OEMs”) in the automotive industry and are therefore highly dependent on developments in the global automotive market. In 2016, our largest, five largest and ten largest customers represented approximately 27%, 53% and 70% of our revenues, respectively. Our revenue is primarily impacted by our OEM customers’ production requirements. General global macroeconomic conditions, such as unemployment, interest rates (and, more generally, overall monetary and fiscal policy), gasoline prices, consumer confidence and the availability of vehicle financing, cause cyclicality in the automotive industry which affects the production requirements of our OEM customers and therefore the volume of products that they require from us. The volume of automotive production and the level of new vehicle purchases regionally and worldwide are cyclical and have fluctuated, sometimes significantly from year-to-year, and growth in the industry has become increasingly dependent on emerging markets. With increased economic growth in our emerging markets and recovery in our more traditional markets, we expect to experience (and have experienced) increased vehicle production levels, with a consequent increase in the demand for our products and a positive impact on our revenues. We would expect slower economic growth to have the correlative effect.

Product Mix We sell our products to OEMs and in the automotive aftermarket. Our clutch and brake product portfolio is diverse, and we have increasingly continued to produce and sell products into the automotive aftermarket. The automotive aftermarket is an attractive high-margin area of growth, and as we continue to balance our portfolio with a mix of products that includes a growing number of products for the independent aftermarket (“IAM”) our profit margins have increased accordingly. Our mix of products has the effect of reducing margin instability by blending revenues from products sold to OEMs and those sold into the IAM. Our OEM brake business generates lower margins than our clutch OEM business.

Internationalization and Diversification We have followed OEM customers as they expand in emerging markets. As demand for our products grew in China and Brazil, we responded by opening our own production facility in China in 2009 and opening a new production facility in Brazil in 2010 to support our existing facility there. Our results are impacted by increases or decreases in demand for our OEM customers and our products in an increasingly diverse range of geographic end markets. As the world’s leading supplier of hydraulic clutch components for manual transmissions, we believe we are well positioned to take advantage of any increase in demand for manual transmissions as car ownership expands in emerging markets, particularly because manual transmissions tend to be more affordable than cars with automatic transmissions.

Product Pricing Pressure from our customers to reduce prices is characteristic of the automotive supply industry. Virtually all OEMs have policies of seeking price reductions each year. We take steps to reduce costs, particularly through efficiency savings and productivity enhancements, and minimize or resist price reductions so as to reduce the impact on our products’ profit margins. However, to the extent our cost reductions are not sufficient to support committed price reductions, our profit margins could be negatively affected. 26

Raw Material Costs Overall commodity volatility is an ongoing concern for our business and has been a considerable operational and financial focus for us. Most of the raw materials that we use, such as steel, plastic, rubber and aluminum, are subject to price volatility. We have sought to minimize the effect that volatility of plastic and rubber prices has on our business by manufacturing most of the specialized rubber and plastic that we use at our own rubber and plastic fabrication facilities in Germany, NAFTA, Brazil and China. While this reduces our dependence on third-party suppliers and therefore our vulnerability to any price increases that they may impose, we are still susceptible to the volatility in prices for oil and certain other compounds that are used to manufacture our plastic and rubber. We continue to monitor commodity costs and work with our suppliers and customers to manage changes in such costs. We are generally, although not always, able to pass through increased aluminum costs to our customers but our ability to pass through the increased costs of other raw materials like steel or plastic is limited. Even if we do succeed in passing through increased prices for raw materials to our customers, the recovery is typically on a delayed basis.

Personnel Costs For the year 2016 we had an average of 3,835 global employees. The costs for the salaries / wages and benefits of our employees form a major portion of our overall costs and, as our workforce grows, these costs will increase. We seek to minimize the impact of personnel costs on our profitability by relocating certain of our operations to lower-cost countries in Eastern Europe, Mexico and Asia. Such countries, as well as Germany, have been experiencing wage inflation, which is increasing our operating costs. In the year 2016 we had 1,504 employees at our facilities in Eastern Europe, South / Central Americas and Asia.

Research and Development Innovation capabilities and product quality are key factors to maintain the profitability of our business in the long term. Research and development expenses reflect the cost of undertaking research and development activities in our worldwide research and development centers. In the year 2016 we employed more than 300 people within our global research and development network. During each of the financial years 2016 and 2015, our research and development expenses and capitalized development costs in relation to total revenue accounted for in a range of 4% - 6%, respectively.

Vehicle Cycles In our industry, once a project has been nominated to a preferred supplier, it is rare for an OEM to switch to another supplier, given the prohibitive operational, technical and logistical costs of switching for both the OEM and the potential new supplier, particularly during the life cycle of a specific vehicle model. Vehicle models typically have long, multi-year product life cycles. Given these factors, while the actual revenues which we derive from a project ultimately depend on our OEM customers’ production volumes achieved for the respective car models, we believe we have good visibility on mid-term revenues.

Currency We seek to limit our foreign exchange transaction risk by purchasing and manufacturing products in the same country in which we sell to our final customer. However, the translation of foreign currencies back to the euro may have a significant impact on our revenues and financial results. Various exchange rates have an unfavorable impact on revenues when the euro is relatively strong compared with other currencies and a favorable impact on revenues when the euro is relatively weak compared with other currencies. Currency transactions are translated into the relevant functional currency using the exchange rates prevailing at the date of the relevant transaction.

Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation of monetary assets and liabilities are recognized in consolidated profit or loss. The functional currency of our foreign operations is the local currency. Assets and liabilities of our foreign operations are translated into euro using the applicable period-end rates of exchange. Results of operations are translated at applicable average rates prevailing throughout the period. The effect from this translation is recognized in equity under reserve for transitions, without affecting profit or loss.

Explanation of Key Income Statement Line Items

The following is a brief description of the revenue and expenses that are included in the line items of our income statement.

Revenues Our revenue is mainly derived from sales of hydraulic components for clutch and brake systems to our OEM customers. We also derive revenues from the manufacture and supply spare and aftermarket products and certain other specialized hydraulic products that can be used in both clutch and brake systems. These systems and components are sold to OEMs and through the aftermarket.

Cost of Sales Cost of sales comprises the acquisition and production costs incurred for the products and merchandise sold. Cost of sales contains primarily the cost of material, personnel expenses and depreciation and amortization and impairment losses.

Distribution Expenses Our distribution expenses generally comprise expenses for sales personnel, marketing and advertising.

Administrative Expenses The general administrative expenses comprise mainly tangible asset overhead and personnel costs, as well as depreciation, amortization and attributable to the administrative area.

Research and Development Expenses Our research and development expenses mainly include expenses for labor costs for personnel (for example, for our research and development engineers) and the costs of producing and testing prototypes. A portion of research and development expenses are capitalized at the cost of manufacturing products less accumulated depreciation and accumulated impairments if certain criteria are fulfilled. Manufacturing costs comprise the individual costs directly attributable to a particular production process as well as proportional overhead costs.

Restructuring Expenses Restructuring expenses mainly include severance payments to employees.

Share of Profits (Losses) from Entities Recognized at Equity Share of profits or losses from entities recognized as equity includes our share of the profits or losses of our associated companies and joint ventures. Associated companies are companies over which we are able to exercise significant influence regarding their financial and business policies. Significant influence is generally assumed to exist if we directly or indirectly hold at least 20% of the voting rights. Joint ventures are entities that we manage jointly with partners. Joint management refers to a contractual agreement which requires unanimous decisions between all parties to the joint venture regarding the financial and business policies of the joint venture.

Net Finance Expenses Net finance cost is the sum of financial income and financial expenses. Financial income primarily consists of income from capitalization of interest expenses from research and development (qualified assets) in accordance with International Accounting Standard (“IAS”) 38 and IAS 23 and foreign exchange gains from loans denominated in foreign currencies. Financial expenses mainly comprise interest expenses from bonds and other financial expenses.

Income Taxes Our income taxes consist of corporation tax and trade tax.

3. Consolidated Income Statement Consolidated Statement of EBITDA Consolidated Statement of Cash Flows

Consolidated Income Statement

January 1 January 1 Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Revenues 504.9 551.3 46.4 9.2% Cost of sales -404.1 -435.2 -31.1 -7.7%

Gross profit 100.8 116.1 15.3 15.2%

Distribution expenses -14.6 -14.6 -0.1 -0.5% Administrative expenses -23.1 -20.9 2.2 9.5% Research and development expenses -25.0 -27.9 -2.8 -11.4% Restructuring expenses -2.5 -0.7 1.8 70.4%

Profit from operations 35.5 51.9 16.4 46.2%

Results from associated companies and joint ventures 1.0 1.1 0.1 12.4% Finance income 3.1 3.8 0.8 24.8% Finance expenses -29.3 -27.3 2.0 6.9% Finance result -25.3 -22.4 2.9 11.5%

Profit before income taxes 10.2 29.5 19.3 >100.0%

Income taxes -5.7 -14.9 -9.2 >-100.0% Deferred taxes 2.2 2.6 0.4 17.5% Tax result -3.5 -12.3 -8.8 >-100.0%

Net profit 6.7 17.2 10.5 >100.0%

Revenues Revenues increased by € 46.4 million, or 9.2%, to € 551.3 million in the twelve months ended December 31, 2016 from € 504.9 million in the twelve months ended December 31, 2015. This increase was primarily due to higher sales volume of Electric Shift Transmission (EST) and Electric Pump Transmission (EPT) products in Germany and in Asia.

The following table sets forth, by customer location, our revenues for the twelve months ended December 31, 2015 and 2016:

January 1 January 1 Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Revenues (by customer location)

Germany(1) 136.5 159.0 22.4 16.4% Europe (excluding Germany)(1) 214.7 215.1 0.4 0.2% Americas 74.6 74.0 -0.6 -0.8% Asia 75.4 99.8 24.5 32.5% Rest of world 3.7 3.4 -0.3 -7.8% Total 504.9 551.3 46.4 9.2%

(1) Figures 2015 have been adjusted for caliper sales-split Europe / Germany.

The following table sets forth our revenues by product categories (to the extent reported so far) for the twelve months ended December 31, 2015 and 2016, reflecting our product portfolio changes:

January 1 January 1 Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Revenues (by product category)

Clutch systems 314.4 358.2 43.7 13.9% Brake systems 126.1 130.2 4.0 3.2% Other(1) 64.4 63.0 -1.4 -2.1% Total 504.9 551.3 46.4 9.2%

(1) Other sales revenues contain primarily spare parts and merchandise.

The following table sets forth our revenues by new product categories for the twelve months ended December 31, 2015 and 2016, reflecting our product portfolio changes:

January 1 January 1 Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Revenues (by product categories)

BAT(1) 126.1 130.2 4.0 3.2% thereof brake calipers 47.5 46.0 -1.6 -3.3% MST(2) 284.1 282.0 -2.0 -0.7% EST(3) 58.8 96.4 37.6 64.0% EPT(4) 2.7 9.0 6.3 >100.0% Other(5) 33.3 33.7 0.4 1.3% Total 504.9 551.3 46.4 9.2%

(1) BAT is an acronym for Brake Actuation Technology including brake caliper business. (2) MST is an acronym for Manual Shift Transmission. (3) EST is an acronym for Electric Shift Transmission including CPx (controlled piston unit). (4) EPT is an acronym for Electric Pump Transmission. (5) Other revenues contain primarily spare parts and merchandise.

Germany Revenues in Germany increased by € 22.4 million, or 16.4%, to € 159.0 million in the twelve months ended December 31, 2016 from € 136.5 million in the twelve months ended December 31, 2015 primarily due to increased sales volume of EST and EPT products.

Europe (excluding Germany) Revenues in Europe (excluding Germany) increased by € 0.4 million, or 0.2%, to € 215.1 million in the twelve months ended December 31, 2016 from € 214.7 million in the twelve months ended December 31, 2015 due to ramp up of new projects which were partially offset by one-time sales in 2015.

Americas Revenues in Americas decreased by € 0.6 million, or 0.8%, to € 74.0 million in the twelve months ended December 31, 2016 from € 74.6 million in the twelve months ended December 31, 2015 primarily due to continuing difficult economic market conditions in Brazil and unfavorable currency effects.

Asia Revenues in Asia increased by € 24.5 million, or 32.5%, to € 99.8 million in the twelve months ended December 31, 2016 from € 75.4 million in the twelve months ended December 31, 2015 due to increasing sales of EST products in China.

Cost of Sales Cost of sales increased by € 31.1 million, or 7.7%, to € 435.2 million (or 78.9% of revenues) in the twelve months ended December 31, 2016 from € 404.1 million (or 80.0% of revenues) in the twelve months ended December 31, 2015. The increase was mainly driven by higher sales volume.

Gross Profit Gross profit increased by € 15.3 million, or 15.2%, to € 116.1 million in the twelve months ended December 31, 2016 from € 100.8 million in the twelve months ended December 31, 2015. Gross profit was mainly affected by higher sales volume partially offset by unfavorable currency effects compared to the previous year.

Distribution Expenses Distribution expenses increased by € 0.1 million, or 0.5%, to € 14.6 million in the twelve months ended December 31, 2016 from € 14.6 million in the twelve months ended December 31, 2015 due to higher advertising expenses.

Administrative Expenses Administrative expenses decreased by € 2.2 million, or 9.5%, to € 20.9 million in the twelve months ended December 31, 2016 from € 23.1 million in the twelve months ended December 31, 2015 mainly due to lower one-time expenses, lower management bonus and lower headcount.

Research and Development Expenses Research and development expenses increased by € 2.8 million, or 11.4%, to € 27.9 million in the twelve months ended December 31, 2016 from € 25.0 million in the twelve months ended December 31, 2015. This increase was mainly the result of increased depreciation from capitalized new R&D projects, higher R&D expenses and increase of headcount.

Restructuring Expenses Restructuring expenses decreased by 1.8 million in the twelve months ended December 31, 2016 compared to previous year, primarily comprising of severance expenses in connection with production relocations in Europe and in NAFTA in 2015 and in 2016.

Finance Result In 2016 the finance amounted to a loss of € 22.4 million after a loss of € 25.3 million in the twelve months ended December 31, 2015. The improvement was primarily a result of the revaluation of existing intercompany loans caused by changes in currency exchange rates.

Taxes Tax result ended up at a loss of € 12.3 million in the twelve months ended December 31, 2016 after a loss of € 3.5 million in the twelve months ended December 31, 2015. This was mainly the result of increased profits and lower tax reimbursements in 2016.

Net Profit Net profit increased by € 10.5 million to a profit of € 17.2 million in the twelve months ended December 31, 2016 from a profit of € 6.7 million in the twelve months ended December 31, 2015. This increase of net profit was mainly driven by higher sales volume and lower one-time expenses.

The following table presents the reconciliation from Net profit for the period to Adjusted EBITDA:

Consolidated Statement of EBITDA

January 1 January 1 Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Net profit 6.7 17.2 10.5 >100.0% Deferred taxes -2.2 -2.6 -0.4 -17.5% Current income taxes 5.7 14.9 9.2 >100.0% Finance result 25.3 22.4 -2.9 -11.5% Profit from operations 35.5 51.9 16.4 46.2% Depreciation and amortization 38.6 37.1 -1.5 -3.9% EBITDA(1) (14) 74.1 89.0 14.9 20.1% EBITDA Margin(2) (14) 14.7% 16.1%

Personnel restructuring(3) 2.5 0.7 -1.8 -70.4% Operational excellence projects(4) 2.6 1.6 -1.0 -38.9% Management reorganization(5) 0.0 0.0 0.0 N/A Pension interests(6) 1.6 1.9 0.3 16.6% Bank charges(7) 0.2 0.3 0.1 25.0% Allowances for doubtful accounts and customer insolvency(8) 0.0 0.0 0.0 N/A Consumption of revalued inventories(9) 0.3 0.3 0.0 0.0% Integration projects(10) 1.4 0.1 -1.2 -91.1% Transaction costs(11) 1.2 0.8 -0.4 -32.3% Non-recurring items(12) 2.9 0.0 -2.9 -100.0% Adjusted EBITDA(13) (15) 86.8 94.7 7.9 9.1% Adjusted EBITDA Margin(14) (15) 17.2% 17.2%

(1) EBITDA represents profit from operations (representing net profit for the period before deferred income taxes, current income taxes and finance result) before depreciation, amortization (including impairment losses). (2) EBITDA Margin represents EBITDA divided by revenues. (3) Represents costs relating to severance payments for employees in connection with restructuring our manufacturing capacity, mainly in Germany. (4) Includes consulting fees in connection with the optimization and improvement of several processes such as for supply chain, logistics, human resources and sales and distribution and consulting fees in connection with the Group strategy review. (5) Includes costs related to the reorganization of our management structure and strategy. (6) Represents non-cash accrued interest on defined benefit pension obligations. These items have been included in personnel costs, but are regarded by management as financial in nature. (7) Represents costs related to the collection and factoring of customer receivables, particularly in the aftermarket business. These items are included in administration costs, but are regarded by management as financial in nature. (8) Net sum of the recognition and release of allowances for doubtful accounts and customer insolvency, based on management’s determination of the likelihood of receipt of payment from certain customers. These items are recognized in costs of goods sold and administration costs, but are regarded as non-operational in nature. (9) Represents the part of the PPA 2013 based revaluation of inventories that were sold/consumed and therefore recognized in Cost of Sales. (10) Represents costs relating to integration of acquisitions. (11) Transaction costs include mainly costs for the acquisition of the Target and new acquisitions. (12) Includes non-recurring impacts in the reported period (e.g. accrual for risk of lawsuits, potential warranty claims) (13) Adjusted EBITDA represents EBITDA as adjusted for certain infrequent charges and nonoperational costs identified, showed in the table above.

(14) Adjusted EBITDA Margin represents Adjusted EBITDA divided by revenues. (15) EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are not specifically defined under IFRS or any other generally accepted accounting principles and you should not consider them as an alternative to net income (loss) or any other performance measures derived in accordance with IFRS. Our management believes that EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are meaningful for investors because they provide an analysis of our operating results, profitability and ability to service debt and because EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are used by our management to track our business development, establish operational and strategic targets and make important business decisions. EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are also measures commonly reported and widely used by analysts, investors and other interested parties in our industry. To facilitate the analysis of our operations, these indicators exclude amortization, impairment and depreciation expenses from operating profit in order to eliminate the impact of general long-term capital investment. Although we are presenting these measures to enhance the understanding of our historical operating performance, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered an alternative to operating profit as indicators of our operating performance, or as alternatives to cash flows from operating activities as measures of our liquidity.

EBITDA, EBITDA Margin EBITDA increased by € 14.9 million, or 20.1%, to € 89.0 million (or 16.1% of revenues) in the twelve months ended December 31, 2016 from € 74.1 million (or 14.7% of revenues) in the twelve months ended December 31, 2015. EBITDA increased due to growing sales volume and lower one-time expenses.

Adjusted EBITDA increased by € 7.9 million, or 9.1%, to € 94.7 million (or 17.2% of revenues) in the twelve months ended December 31, 2016 from € 86.8 million (or 17.2% of revenues) in the twelve months ended December 31, 2015 due to higher sales volume.

Consolidated Statement of Cash Flows

January 1 January 1

Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Cash Flows from Operating Activities Profit before income taxes 10.2 29.5 19.3 >100.0% Adjustments for Depreciation and amortization 38.6 37.1 -1.5 -3.9% Finance result 26.9 24.2 -2.6 -9.9% Other non-cash expenses and income -2.3 -0.3 2.0 86.4% Total adjustments 63.2 61.0 -2.2 -3.5% Changes in Working Capital and Other Assets and Liabilities Trade receivables -8.0 -4.5 3.5 44.0% Other assets 5.4 -3.8 -9.2 >-100.0% Inventories -12.2 -2.7 9.4 77.4% Trade payables 10.7 7.5 -3.2 -29.9% Total change in working capital -4.1 -3.5 0.6 14.4%

Changes in pension provisions -1.7 -1.8 -0.1 -4.2% Changes in provisions 4.1 -0.2 -4.4 >-100.0% Changes in other liabilities 2.7 -2.5 -5.2 >-100.0% Total change in working capital and other assets and liabilities 1.1 -8.0 -9.1 >-100.0%

Interests paid / received -24.9 -24.4 0.5 2.0% Income taxes paid / received -4.2 -8.8 -4.6 >-100.0% Net cash flows from operating activities 45.4 49.4 4.0 8.8%

Cash Flows from Investing Activities Investments in property, plant and equipment -20.3 -22.6 -2.3 -11.3% Investments in intangible assets -0.6 -1.3 -0.7 >-100.0% Proceeds from disposals of tangible and intangible assets 0.1 0.1 0.0 2.4%

Investments in development costs -9.1 -10.0 -0.9 -10.2% Net cash flows from investing activities -29.9 -33.9 -3.9 -13.1%

January 1 January 1

Holding to to December 31, December 31, (€ million) 2015 2016 Change % Change

Cash Flows from Financing Activities Dividends received 0.7 0.8 0.1 13.1% Repayment and drawing of loans RCF -5.0 -10.0 -5.0 -100.0% Net cash flows from financing activities -4.3 -9.2 -4.9 >-100.0%

Changes in cash and cash equivalents 11.2 6.3 -4.9 -43.4% Currency adjustments 0.2 -0.1 -0.3 >-100.0% Cash and cash equivalents at beginning of the period 29.1 40.5 11.4 39.3% Cash and cash equivalents at end of period 40.5 46.8 6.3 15.4%

Cash Flows from Operating Activities As a result of our growing business cash flows from operating activities profit increased by € 4.0 million, or 8.8%, to € 49.4 million in the twelve months ended December 31, 2016 from € 45.4 million in the twelve months ended December 31, 2015, even though severance payments for the production relocations in Europe and in NAFTA, as well as lower tax reimbursements reduced the cash flows compared to previous year.

Cash Flows from (used in) Investing Activities Cash used in investing activities amounted to a cash outflow of € 33.9 million in the twelve months ended December 31, 2016 compared to € 29.9 million in the twelve months ended December 31, 2015 due to an increase of investments in development as well as in property, plant and equipment.

Cash Flows from Financing Activities In 2016 we repaid our RCF in an amount of € 10.0 million.

Cash and Cash Equivalents at end of period Cash increased by € 6.3 million compared to the previous year mainly due to the growing business. The increase was partially offset by severance payments for the production relocations, by lower tax reimbursement and by higher investing activities. Furthermore we repaid a total of € 10.0 million of our RCF in 2016. Our cash was also impacted by interest payments of € 24.9 million mainly to our bond holders in 2016.

4. Consolidated Balance Sheet

Holding December 31, December 31, (€ million) 2015 2016 Change % Change

Non-Current Assets

Property, plant and equipment 110.3 112.5 2.3 2.1% Shares in associated companies and joint ventures 4.3 4.4 0.1 2.4% Other assets 0.5 1.3 0.8 >100.0% Goodwill 97.5 97.5 0.0 0.0% Other intangible assets 121.7 117.6 -4.1 -3.4% Deferred tax assets 1.9 1.8 -0.1 -4.3% Non-current assets 336.2 335.2 -1.0 -0.3% Current Assets

Inventories 73.7 76.6 2.9 4.0% Trade receivables 65.2 69.4 4.2 6.5% Receivables shareholder 0.2 0.2 0.1 29.6% Income tax receivables 3.9 2.0 -1.9 -49.3% Other current assets 26.3 30.4 4.1 15.7% Cash and cash equivalents 40.5 46.8 6.3 15.4% Current assets 209.8 225.4 15.6 7.5%

Total assets 546.0 560.6 14.6 2.7%

Holding December 31, December 31, (€ million) 2015 2016 Change % Change Equity

Share capital 0.0 0.0 0.0 0.0% Capital reserve 90.6 90.6 0.0 0.0% Currency translation reserve -1.4 -3.1 -1.7 >-100.0% Retained earnings -19.1 -14.2 4.9 25.7% Net profit for the period 6.7 17.2 10.5 >100.0% Total equity 76.8 90.5 13.8 17.9% Liabilities

Non-Current Liabilities

Notes 255.1 256.6 1.5 0.6% Pension provisions 66.0 68.6 2.6 3.9% Provisions 2.3 1.7 -0.7 -28.6% Other liabilities 0.7 0.2 -0.5 -70.7% Deferred tax liabilities 27.5 24.0 -3.5 -12.7% Non-current liabilities 351.7 351.1 -0.6 -0.2%

Holding December 31, December 31, (€ million) 2015 2016 Change % Change

Current Liabilities Other financial liabilities 8.1 0.0 -8.1 -100.0% Trade payables 45.4 52.7 7.3 16.0% Pension provisions 1.8 1.9 0.1 3.1% Provisions 19.4 20.0 0.5 2.7% Other current liabilities 41.0 38.4 -2.6 -6.4% Current income tax liabilities 1.8 6.1 4.3 >100.0% Current liabilities 117.5 119.0 1.4 1.2% Total liabilities 469.2 470.1 0.8 0.2%

Total equity and liabilities 546.0 560.6 14.6 2.7%

Property, Plant and Equipment Property, plant and equipment increased by € 2.3 million, or 2.1%, to € 112.5 million as of December 31, 2016 from € 110.3 million as of December 31, 2015 due to higher investing activities in connection with our new EST / EPT -projects.

Intangible Assets Intangible assets decreased by € 4.1 million, or 1.9%, to € 215.1 million as of December 31, 2016 from € 219.3 million as of December 31, 2015. This decrease was mainly due to the amortization of the purchase price allocation for the acquisition of the Holding.

Inventories Inventories increased by € 2.9 million, or 4.0%, to € 76.6 million as of December 31, 2016 from € 73.7 million as of December 31, 2015. This increase resulted mainly from our growing business. See also “Capitalization, liquidity and other financials – Trade Working Capital" (Note 5).

Trade Receivables Trade receivables increased by € 4.2 million, or 6.5%, to € 69.4 million as of December 31, 2016 from € 65.2 million as of December 31, 2015 mainly due to our growing business. See also “Capitalization, liquidity and other financials – Trade Working Capital" (Note 5).

Income Tax Receivables Income tax receivables decreased by € 1.9 million, or 49.3%, to € 2.0 million as of December 31, 2016 from € 3.9 million as of December 31, 2015 mainly due to tax reimbursements.

Other Current Assets Other current assets increased by € 4.1 million, or 15.7%, to € 30.4 million as of December 31, 2016 from € 26.3 million as of December 31, 2015 mainly due to higher VAT receivables.

Cash and cash equivalents As a result of our growing business cash increased by € 6.3 million, or 15.4%, to € 46.8 million as of December 31, 2016 from € 40.5 million as of December 31, 2015. The increase was partially offset by severance payments for the production relocations, by lower tax reimbursement and by higher investing activities. Furthermore we repaid a total of € 10.0 million of our RCF in 2016. Our cash was also impacted by interest payments of € 24.9 million mainly to our bond holders in 2016. 39

Equity Equity increased by € 13.8 million, or 17.9%, to € 90.5 million as of December 31, 2016 from € 76.8 million as of December 31, 2015 due to the positive net result in year 2016.

Notes The Notes are composed of the following items:

Holding December 31, December 31, (€ million) 2015 2016 Change % Change

Bonds nominal 263.3 263.3 0.0 0.0% Agio 1.1 0.9 -0.2 -19.5% Transaction costs -9.3 -7.6 1.7 18.6%

Notes 255.1 256.6 1.5 0.6%

Pension Provisions The decrease of the interest rate for pension provisions in Germany resulted in an increase of pension provisions by € 2.6 million, or 3.9%, to € 70.5 million as of December 31, 2016 from € 67.8 million as of December 31, 2015.

Deferred Tax Liabilities Deferred tax liabilities decreased by € 3.5 million, or 12.7%, to € 24.0 million as of December 31, 2016 from € 27.5 million as of December 31, 2015 due to interest rate changes related to pension provisions and amortization of the purchase price allocation for the acquisition of the Holding.

Other Financial Liabilities Other financial liabilities decreased by € 8.1 million, or 100.0%, to € 0.0 million as of December 31, 2016 from € 8.1 million as of December 31, 2015 mainly due to the repayment of the RCF.

Trade Payables Trade payables increased by € 7.3 million, or 16.0%, to € 52.7 million as of December 31, 2016 from € 45.4 million as of December 31, 2015 mainly due to our growing business. See also “Capitalization, liquidity and other financials – Trade Working Capital" (Note 5).

Other Liabilities and Provisions Other liabilities and provisions decreased by € 3.3 million, or 5.2%, to € 60.2 million as of December 31, 2016 from € 63.5 million as of December 31, 2015 mainly due to decrease of provisions for restructuring (severance payments).

Current Income Tax Liabilities Other income tax liabilities increased by € 4.3 million, or >100.0%, to € 6.1 million as of December 31, 2016 from € 1.8 million as of December 31, 2015 mainly due to increased taxable income 2016.

5. Capitalization, Liquidity and other financial data

Liquidity Our principal source of liquidity is, in general, our operating cash flow. The ability to generate cash from our operations depends on our future operating performance, which is in turn dependent, to some extent, on general economic, financial, competitive, market, regulatory and other factors, many of which are beyond our control.

Our long-term indebtedness primarily consists of the Notes. The amounts available under the Revolving Credit Facility are subject to our compliance with certain conditions, including certain financial maintenance ratios.

Although we believe that our expected cash flows from operations, together with available borrowings and cash on hand, will be adequate to meet our anticipated liquidity and debt service needs, we cannot assure that our business will generate sufficient cash flows from operations or that future debt and equity financing will be available to us in an amount sufficient to enable us to pay our debts when due, including the Notes, or to fund our other liquidity needs.

We believe that the potential risks to our liquidity include:

 a reduction in operating cash flows due to a decrease of operating profit from our operations, which could be the result of a downturn in our performance or in the industry as a whole;  the failure or delay of our customers to make payments due to us;  a failure to maintain working capital requirements; and  the need to fund expansion and other development capital expenditures.

If our future cash flows from operations and other capital resources (including borrowings under our current or any future credit facility) are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to:

 reduce or delay our business activities and capital expenditures;  sell our assets;  obtain additional debt or equity financing; or  restructure or refinance all or a portion of our debt, including the Notes, on or before maturity.

We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of the Notes and any future debt may limit our ability to pursue any of these alternatives.

Available Sources of Liquidity Our principal sources of liquidity in the medium term are cash provided by operations and cash from our short- and long-term borrowings.

Trade Working Capital The following table summarizes our trade working capital for the periods indicated:

Holding December 31, December 31, (€ million) 2015 2016 Change % Change

Trade receivables 65.2 69.4 4.2 6.5%

Other current assets 26.3 30.4 4.1 15.7%

Inventories 73.7 76.6 2.9 4.0%

Trade payables (45.4) (52.7) (7.3) 16.0%

Trade working capital(1) 119.8 123.7 4.0 3.3%

(1) Trade working capital is not specifically defined under IFRS or any other generally accepted accounting principles and you should not consider it as an alternative to net income (loss) or any other performance measures derived in accordance with IFRS. Our management believes that trade working capital is meaningful for investors because it provides an analysis of our operating results, profitability and ability to service debt and because trade working capital is used by our management to track our business development, establish operational and strategic targets and make important business decisions. Trade working capital is also a measure commonly reported and widely used by analysts, investors and other interested parties in our industry. To facilitate the analysis of our operations, this indicator excludes amortization, impairment and depreciation expenses from operating profit in order to eliminate the impact of general long-term capital investment. Although we are presenting this measure to enhance the understanding of our historical operating performance, trade working capital should not be considered an alternative to operating profit as an indicator of our operating performance, or an alternative to cash flows from operating activities as a measure of our liquidity.

Trade working capital increased by € 4.0 million from € 119.8 million as of December 31, 2015 to € 123.7 million as of December 31, 2016. This increase was mainly due to our growing business, in particular higher sales volume of Electric Shift Transmission (EST) and Electric Pump Transmission (EPT) products in Germany as well as in China.

Our typical working capital cycle is mainly driven by production seasonality and payment terms of our OEM customers and suppliers. The customers usually require us to manufacture and deliver components according to their production schedules, which vary seasonally throughout the year. As such, our receivables tend to decrease at the end of the year, which results in working capital levels that are typically lower at the end of December compared to the average for the year. After the decrease in working capital in December, working capital typically increases in the first months of the following year due to the build-up of customer orders and activity after the restart of the year.

LTM Adjusted EBITDA For the twelve months ended December 31, 2016, LTM Adjusted EBITDA amounted to € 94.7 million and as of December 31, 2016 net financial debt amounted to € 216.5 million. This resulted in a ratio of net financial debt to LTM Adjusted EBITDA of 2.29.

The following table presents the Ratio of net financial debt to LTM Adjusted EBITDA:

twelve twelve twelve twelve twelve Change months months months months months December 2016 Holding ended ended ended ended ended to December March June September December September 2016 31, 31, 30, 30, 31, (€ million) 2015 2016 2016 2016 2016 Change % Change

Net financial debt(1) (3) 232.8 257.6 242.5 243.8 216.5 -27.3 -11.2%

LTM Adjusted EBITDA(2) (3) 86.8 87.9 92.3 95.6 94.7 -0.9 -0.9% Ratio of net financial debt to LTM Adjusted EBITDA 2.68 2.93 2.63 2.55 2.29 -0.26 -10.4%

(1) Represents the amount of the Notes minus the amount of cash available. (2) Adjusted EBITDA represents EBITDA as adjusted for certain infrequent charges and nonoperational costs identified. (3) Net financial debt and LTM Adjusted EBITDA are not specifically defined under IFRS or any other generally accepted accounting principles and you should not consider them as an alternative to net income (loss) or any other performance measures derived in accordance with IFRS. Our management believes that net financial debt and LTM Adjusted EBITDA are meaningful for investors because they provide an analysis of our operating results, profitability and ability to service debt and because net financial debt and LTM Adjusted EBITDA are used by our management to track our business development, establish operational and strategic targets and make important business decisions. Net financial debt and LTM Adjusted EBITDA are also measures commonly reported and widely used by analysts, investors and other interested parties in our industry. To facilitate the analysis of our operations, these indicators exclude amortization, impairment and depreciation expenses from operating profit in order to eliminate the impact of general long-term capital investment. Although we are presenting these measures to enhance the understanding of our historical operating performance, net financial debt and LTM Adjusted EBITDA should not be considered an alternative to operating profit as indicators of our operating performance, or as alternatives to cash flows from operating activities as measures of our liquidity.

Gross Total Capital Expenditure The following table sets forth our gross total capital expenditure for the periods indicated:

Holding January 1 January 1 to to December 31, December 31, (€ million) 2015 2016 Change % Change

Gross total capital expenditure(1) 29.9 33.9 3.9 13.1%

(1) Gross total capital expenditure is not specifically defined under IFRS or any other generally accepted accounting principles and you should not consider it as an alternative to net income (loss) or any other performance measures derived in accordance with IFRS. Our management believes that gross total capital expenditure is meaningful for investors because it provides an analysis of our operating results, profitability and ability to service debt and because gross total capital expenditure is used by our management to track our business development, establish operational and strategic targets and make important business decisions. Gross total capital expenditure is also a measure commonly reported and widely used by analysts, investors and other interested parties in our industry. To facilitate the analysis of our operations, this indicator excludes amortization, impairment and depreciation expenses from operating profit in order to eliminate the impact of general long-term capital investment. Although we are presenting this measure to enhance the understanding of our historical operating performance, gross total capital expenditure should not be considered an alternative to operating profit as an indicator of our operating performance, or an alternative to cash flows from operating activities as a measure of our liquidity.

Gross total capital expenditure increased by € 3.9 million, or 13.1%, to € 33.9 million in the twelve months ended December 31, 2016 from € 29.9 million in the twelve months ended December 31, 2015 due to increased investments, particularly in connection with our new Electric Shift Transmission (EST) and Electric Pump Transmission (EPT) projects.

Contractual Obligations

Our consolidated contractual obligations as of December 31, 2016 were as follows (excluding indebtedness and short term purchase obligations):

Total Less than More than

December 31, 1 1-5 5 (€ million) 2016 year years years

Operating leases 13.5 6.4 6.9 0.2

Acquisition of property, plant & equipment 6.6 N/A N/A N/A

Security deposits 4.1 N/A N/A N/A

Gas procurement contracts 0.8 0.8 0.0 N/A

Energy procurement contracts 5.6 5.6 0.0 N/A

Total contractual obligations 30.7

6. Material risk factors and material subsequent events

Material changes to the risk factors There were no material changes to the risk factors disclosed in the most recent consolidated financial statements of the Holding for the period ended December 31, 2016.

Material risk factors

Critical Accounting Policies The preparation of the consolidated financial statements under IFRS requires assumptions and estimates to be made which can impact the valuation of the assets and liabilities recognized, the income and expenses, as well as the disclosure of contingent liabilities. Estimates and the underlying assumptions are based on historical experience and numerous other factors within the scope of the particular circumstances. Actual amounts may deviate from estimated amounts. All estimates and assumptions are reviewed on a regular basis. Changes in estimates are adjusted within the current period in the event that the change only affects the current period. Otherwise the change is recorded in either previous or future periods. We have summarized below our accounting policies that require the more subjective judgment of our management in making assumptions or estimates regarding the effects of matters that are inherently uncertain and for which changes in conditions may significantly affect our results of operations and financial condition. For more information see the notes to our consolidated financial statements included in section 9.

Revenue Recognition Revenues are recognized without value-added tax and net of sales reductions such as customer rebates and discounts. Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue arising from royalties is recognized on an accrual basis in accordance with the substance of the relevant agreement. Interest income is recognized pro rata temporis on the basis of the outstanding amount using the effective interest method until maturity, if it is determined that receipt of such payments is sufficiently probable. Dividend income is recognized when the legal right to payment arises.

Impairment Test of Goodwill Acquired goodwill is capitalized and subject to an impairment test at least annually and when there are indications that there could be an impairment of the cash-generating unit (triggering events). We manage our business as one segment. The carrying value of this cash generating unit is compared with its recoverable amount. These calculations are subject to assumptions. A change in the assumptions can affect the value in use and could lead to the recognition of impairment losses. In the event that the carrying value exceeds the recoverable value, an impairment has occurred and the carrying value is written down to the recoverable amount. The recoverable amount of a cash generating unit represents the higher of its fair value less costs to sell and its value in use. An impairment loss recognized for goodwill is not allowed to be reversed in a subsequent period when the reason for the impairment no longer exists. For more information see the notes to our consolidated financial statements included in section 9.

Pension Provisions The companies in our Group have various pension schemes in accordance with the local requirements and practices in the countries in which they operate. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date together with adjustments for actuarial gains or losses. 45

The present value of the defined benefit obligation is determined by the estimated future cash outflows using interest rates of government securities which have terms to maturity approximating the terms of the related liability. The revised standard IAS 19 was issued in June 2011 and had to be applied for annual periods beginning on or after January 1, 2013. The net present value of the pension liability depends on a number of factors that have to do with the actuarial assumptions. The assumptions applied for the determination of the net pension expense (or income) include the discount rate. Every change in the assumptions will have an effect on the carrying value of the pension liability. In the case of defined contribution plans (specifically for the German Group Companies), The Group makes contributions to pension schemes based on legal or contractual requirements. Once the contributions have been paid, no further obligations exist for us. Current contributions are recognized as pension expenditure in the respective year. Pension costs are determined from the annual actuarial calculations of the liabilities and comprise the current service cost and interest cost.

Taxes The Group is subject to payment of income taxes in various countries. Therefore, significant assumptions are required to determine the worldwide income tax provision. If the final taxation of the transactions deviates from the originally assumed calculation, this will have an effect on the current and deferred taxes in the period when the taxation is finally determined.

Provision for Warranties The provision for warranties is based on historical experience that might differ from the actual amount for warranties. Ongoing negotiations on warranty terms with major customers might lead to adjustments of the provision in future periods. The assumptions and estimates are based in each case on the current knowledge and currently available data. The actual development can differ from the estimates. If the actual amounts differ from the estimated amounts, the carrying amounts of the relevant assets and liabilities are accordingly adjusted.

Legal Disputes Within the scope of their operating activities, FTE Holding GmbH and the companies in which it holds shares directly or indirectly are involved in both domestic and international disputes and regulatory proceedings. Legal disputes and proceedings of this type can arise particularly with regard to suppliers, distributors, customers, employees, or investors. The involved parties can incur payment and other obligations due to these disputes and proceedings. In particular, in cases in which customers from the USA assert faults to vehicles either individually or as part of class action lawsuits, very cost-intensive measures can become necessary, and high payments may become due for compensation or punitive damages

Whenever manageable and economically feasible, insurance policies were concluded to provide protection against these risks to a reasonable extent, or provisions were formed which were deemed appropriate for the residual identifiable risks. According to the company's assessment, these risks will not have any long-term impact on the company's economic situation because of this. However, as some risks cannot be assessed in whole or in part, it cannot be ruled out that damages can arise anyway which are not covered by the insured and/or provision amounts.

In the normal course of business the company and its subsidiaries are subject to various legal proceedings and claims, including commercial or contractual disputes, product liability claims, product warranties and other matters. It is the opinion of management that the outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations, or cash flow of the Group. With respect to warranty matters and connected claims, although the Group cannot ensure that the future costs of these claims by customers will not be material, the Group believes its established reserves are adequate to cover potential settlements.

Market Risks As part of its operating activities, the Group is exposed to various financial risks, including changes to the market prices of financial instruments, foreign currency exchange rates and interest rates. Group risk management focuses on the unpredictability of financial markets, and endeavours to minimize potential negative effects on the Group's financial position. In this context, the Group deploys interest-rate derivatives such as swaps and caps, where required, in order to hedge against interest-rate risks.

Currency Translation Functional Currency Items included in the financial statements for our various Group companies are measured using the currency that we believe best reflects the economic substance of the underlying events and circumstances relevant to that company (functional currency). The euro, the functional and reporting currency of the Group, is used in our consolidated financial statements.

Transaction and Balances Foreign currency transactions are translated into the relevant functional currency using the exchange rates prevailing at the date of such transactions. Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation of monetary assets and liabilities are recognized in consolidated profit or loss. The functional currency of our foreign operations is the local currency.

Group Companies Results and financial position for all foreign operations included in the consolidated financial statements that have a different functional currency from our reporting currency are translated into our reporting currency as follows: assets and liabilities for each of the balance sheets are translated at the balance sheet date: while income and expenses for each of the income statements are translated using annual average rates. All resulting foreign exchange differences are recognized through other comprehensive income as a separate part of equity (translation reserve).

Currency Risks Due to its international operations, the Group is exposed to currency risks relating to various currencies. We aim to offset by a risk through corresponding cash flows. Currency risks are partially offset by purchasing goods, raw materials and services in the corresponding currency, as well as by rendering other service contributions along the value chain.

Several Group subsidiaries are located outside the Eurozone. As the Euro is the reporting currency, these subsidiaries' financial statements are translated into Euros in the consolidated financial statements. Translation effects that arise if the net asset positions translated into Euros change due to exchange-rate fluctuations are reported within equity in Group’s consolidated financial statements.

Given a +/-5% change in exchange rates, currency translation would have the following impact on EBITDA: If the Euro climbs by 5% against the other currencies, the result is a negative impact on EBITDA of € -1.4 million (previous year: € -0.4 million). If it falls by 5% against the other currencies, the result is a positive impact on EBITDA of € +1.5 million (previous year: € +1.4 million).

Given a +/-5% change in exchange rates, currency translation would have the following impact on the equity: If the Euro climbs by 5% against the foreign currencies, the result is a negative impact on equity of € -3.8 million. If it falls by 5% against the foreign currencies, the result is a positive impact on equity of € +4.1 million.

The amount of exchange rate losses reported in the consolidated statement of comprehensive income arising from the realization and measurement of currency receivables and liabilities, and from the measurement of currency positions of the year-end, amounted to the following:

January 1 January 1, to December 31, to December 31, (€ million) 2015 2016

Net result Realized currency gains and losses 2.4 -2.2 Unrealized currency gains and losses -2.7 3.3

Net exchange rate gain (+), loss (-) -0.3 1.1

As of December 31, 2016 currency effects of € -3.1 million were recognized directly in equity (previous year € -1.4 million).

Interest Rate Risks On July 12, 2013, the Group issued a € 240.0 million bond with a 9% coupon interest rate. This bond matures on July 15, 2020. The semi-annual coupon payments occur on January 15 and July 15. Additional € 23.3 million was issued on November 22, 2013. The issue price was 106.6% of the nominal amount.

Besides this bond, on July 2, 2013 the Group entered into a credit agreement (super senior revolving credit facility agreement) for € 42.5 million with effect as of July 12, 2013, of which € 15.0 million were utilized as of December 31, 2014 for an acquisition. With repayments of € 5.0 million each made in November 2015, in May 2016 as well as in November 2016, the credit line was repaid in full. Please refer to note (35).

The term of this agreement is six years. Interest is based on EURIBOR when utilizing the credit facility in Euros, or on LIBOR when utilizing it in another currency, plus a margin of 3.5 to 4.0% per annum.

Pursuant to IFRS 7, interest-rate risks are presented using a sensitivity analysis. The show the effects of changes in market interest rates on interest payments, interest income, and interest expenses. A move up (down) in the yield curve would have had no effect on earnings before tax in 2016 due to the bond carrying a fixed interest rate. With regard to the RCF a shift up (down) in the yield curve of 100 basis points in 2016 would have increased (decreased) the earnings before tax and the equity by € 0.1 million.

Liquidity Risk Along with the management of interest-rate and currency risks, liquidity management forms a central pillar of financial management at the Group, and is steered centrally. Liquidity management aims to ensure that the Group enjoys adequate liquidity at all times. This is ensured with cash and cash equivalents, as well as the credit agreement (super senior revolving credit facility agreement) of € 42.5 million. Cash management is conducted continuously with the help of medium-term liquidity plans. Liquidity is managed centrally within the Group in order to ensure that Group companies have constant access to sufficient liquidity. Liquidity / cash controlling is performed mainly using the key indicators of net working capital, operating cash flow and cash position.

Credit Risk The Group is not exposed to any significant credit risks. Credit risks derive from cash and cash equivalents, derivative financial instruments and bank deposits. The maximum default risk for the receivables is equivalent to the respective level of the carrying amount. Default risks with major customers are classed as low, see note (18). Transactions involving derivative financial instruments and cash are entered into only with major multinational banks.

Commodity Risk The primary raw materials used in our business are aluminum, steel, resins and plastics.

Derivative Financial Instruments and Hedging Derivative financial instruments are generally deployed within the Group only for hedging transactions to reduce currency, interest-rate and market price risks for operating activities, and consequently in connection with financing transactions. No hedging transactions were entered into in 2016.

Capital Management The objective of capital management is to ensure a solid financial profile. In particular, the fulfilment of operating payment obligations at all times and the capital service for external lenders should be guaranteed. Furthermore, the Group aims to obtain sufficient financial flexibility to continue along its growth course. The Group currently has an external rating. The Group-wide financial risk profile is controlled and monitored centrally by Group Treasury.

The Group's equity of December 31, 2016 was € 90.5 million (previous year: € 76.8 million) and thus 16.2% (previous year: 14.1%) of the balance sheet total. The non-current borrowing costs consist of the Notes with a term until July 15, 2020 (please refer to note (34)). Furthermore, in order to also secure the financial flexibility of the Group, liquidity is held in the form of a "super senior revolving credit facility agreement" and cash. If there is a shareholder change of the majority shareholder ("change of control"), the bondholders have the right to have their bonds repaid.

Material subsequent Events No material events occurred after the reporting date.

7. Description of the Management and Shareholders of the Company and all material affiliate transactions

Management As provided by German corporate and co-determination law, the Issuer has an Executive Board (Geschäftsführung). The principal function of the Executive Board is to run the company and to lead the business. The Executive Board develops the strategy, ensures that the strategy is implemented and is responsible for annual and long-term planning and for the preparation of the annual and Group financial statements. It regularly and promptly reports to the supervisory board on all events that are of material importance for the affairs and future development of the Group. The Executive Board has two members. Set forth below are the names and ages of the Executive Board members, and their positions. All Executive Board members can be reached at Andreas-Humann-Strasse 2, 96014 Ebern in Germany.

Name Age Position

Dr. Andreas Thumm 56 Chief Executive Officer Niklas Beyes 46 Chief Financial Officer

Dr. Andreas Thumm — Chief Executive Officer Dr. Andreas Thumm, born April 10, 1960, has been a member of the Executive Board since April 1, 2009, when he joined FTE as CEO. He started his career in 1991 at Behr Group, where he held various positions. In his latest position, Dr. Thumm was a member of the Board of the Behr Group from 2003–2008. As CEO, he is responsible for Sales, Human Resources, Quality, Enterprise Development and Communication as well as head of the Supervisory Committees of the entities in North America and China. He has over 25 years of experience working in the automotive industry and obtained his doctorate in aerospace engineering from the University of Stuttgart, Germany in 1991.

Niklas Beyes — Chief Financial Officer Niklas Beyes, born January 2, 1971, joined the Group as the CFO on July 1, 2015 and has been a member of the Executive Board. After obtaining the Master of Business Economics at the University of Göttingen, Germany, in 1995, he started his career as an auditor for Deloitte & Touche in Berlin, where he served multinational companies as a Certified Public Accountant of Germany and the US as well as a certified German Tax Advisor. For the last 12 years Niklas Beyes worked in various leading international Finance and Executive Board functions for different automotive suppliers, such as Neumayer Tekfor (located in the USA), Schaeffler and SKF. As CFO at FTE, he is responsible for Finance / Controlling, Purchasing and Information Technology as well as head of the Supervisory Committees of the entities in Brazil, in Czech Republic and in Slovakia.

Other Management — Group Function Committee The Executive Board is assisted by eight managers, each of whom oversees a specific aspect of our business. The members of the Executive Board and those eight managers form the Group function committee. The following table sets forth the names, ages and positions of the current members of our executive management team (in addition to the members of the Executive Board).

Name Age Position

Michael Mueller 54 Head of Research and Development

Dr. Reiner Roessle 54 Chief Operating Officer

Richard Diem 48 Head of Sales (OE)

Erik Lundtoft (till 09/30/2016) 60 Head of Aftermarket-Sales

Dirk Beckmann (since 10/01/2016) 57 Head of Aftermarket-Sales

Jens Lommatzsch-Diwinski 47 Head of Purchasing

Matthias Lehmann-Hansen 59 Head of Quality

Sabine Tedden (since 08/01/2016) 54 Head of Human Resources

Thomas Boschen 59 Head of Controlling and IT Business Applications

Michael Mueller — Head of Research and Development Michael Mueller, born November 12, 1962, joined FTE in 2005 as head of research and development for brake products. Mr. Mueller was appointed head of research and development for FTE’s entire research and development activities in 2007. He began his career in 1990 at Audi AG, where he held various positions. He has over 25 years of experience working in the automotive industry, most recently for Audi. Mr. Mueller obtained a degree in mechanical engineering from the Technical University in Munich, Germany.

Dr. Reiner Roessle — Chief Operating Officer Dr. Reiner Roessle, born May 15, 1962, joined FTE in 2010 as head of operations. Dr. Roessle has expertise in the area of mechanical engineering. He began his career in 1996 at ITT Automotive. He has over 20 years of experience working in the automotive industry. Dr. Roessle obtained his doctorate in industrial engineering from the Swiss Federal Institute of Technology in Zurich, Switzerland.

Richard Diem — Head of Sales (OE) Richard Diem, born October 25, 1968, is head of the sales department for OE sales, having joined FTE in 1999. Mr. Diem has expertise in the area of mechanical engineering. He started his career in 1995 at Webasto System Komponenten GmbH & Co. KG. He has over 20 years of experience working in the automotive industry. Mr. Diem obtained a degree in mechanical engineering from the Technical University in Munich, Germany.

Dirk Beckmann — Head of Aftermarket-Sales (since 10/01/2016) Dirk Beckmannn, born February 2, 1960, joined FTE in 2016 as head of Aftermarket-Sales. Mr. Beckmann has expertise in the area of product management, sales and marketing. He started his career in 1980 at Hoesch-Export continuing his career at Hella Group where he spent 26 years in various international Aftermarket-Sales & Product Management-positions. The last five years he spent at Shaeffler Group and is therefore looking back on more than 35 years of automotive industry experience.

Erik Lundtoft — Head of Aftermarket-Sales (till 09/30/2016)

Jens Lommatzsch-Diwinski — Head of Purchasing Jens Lommatzsch-Diwinski, born April 9, 1969, joined FTE in 2009 as head of purchasing. Mr. Lommatzsch-Diwinski has expertise in the area of industrial engineering. He started his career in 1997 at Siemens Automotive. He has around 20 years of experience working in the automotive industry. Mr. Lommatzsch-Diwinski obtained a degree in industrial engineering from the University of Applied Sciences in Stralsund, Germany.

Matthias Lehmann-Hansen — Head of Quality Matthias Lehmann-Hansen, born March 23, 1957, joined FTE in 2012 as head of quality. Mr. Lehmann-Hansen has expertise in the area of quality management automotive. He started his career in 1986 at Cherry Microswitch. He has over 30 years of experience working in the automotive industry. Mr. Lehmann-Hansen obtained a technical degree in energy from the Berlin School of Technology in Berlin, Germany.

Sabine Tedden — Head of Human Resources (since 08/01/2016) Sabine Tedden, born January 8, 1963, joined FTE in 2016 as Head of Human Resources. Mrs. Tedden has collected expertise in all HR-areas over the last 25 years in various international Groups. She obtained the Master of Business Economics at the University of Passau, Germany in 1992.

Thomas Boschen — Head of Controlling and IT Business Applications Thomas Boschen, born June 18, 1957, joined FTE in 2011 as head of controlling and IT business applications. Mr. Boschen has expertise in the area of finance and information technology. He started his career in 1984 at GETRAG Getriebe- und Zahnradfabrik. He has over 30 years of experience working in the automotive industry. Mr. Boschen obtained a degree in economics from the University Stuttgart-Hohenheim, Germany.

Management Employment Contracts The managing directors of the Group have a service contract with an unlimited term which can be terminated with nine months’ notice or terminates automatically if they reach statutory retirement age.

Share Ownership Funds advised by Bain Capital (subsequently Bain Capital) is party to a shareholders’ agreement with management regarding the investment by management members in the business. Key management team members together hold 11.9% of the ordinary shares in LuxCo, and approximately 2.9% of the equity capital structure, which consists of ordinary shares, PECs and preference shares in LuxCo, and therefore indirectly hold an equivalent amount of equity interests in the Issuer.

All of the ordinary shares in LuxCo have voting rights. LuxCo does not have a “board” elected by the shareholders; rather, it is managed by its general partner LuxCo GP, which is 100% owned by Bain Capital. As sole shareholder of the general partner, Bain Capital has the right to appoint all of the directors of LuxCo GP who effectively manage the affairs of LuxCo. The shareholders’ meeting of LuxCo has relatively limited rights. As holders of 88.1% of the ordinary shares in LuxCo, Bain Capital is able to control any decisions taken at a shareholders’ meeting. The shares in LuxCo do not give the management team veto rights over strategic matters. However, management have certain customary rights (for example, pre-emptive rights on new issuances to Bain Capital and tag-along rights) pursuant to the shareholders' agreement.

Corporate Governance The Executive Board has structured its business processes in accordance with applicable German laws and has incorporated certain best practices for managing a German company, as provided by the principles of the German Corporate Governance Code (the “Governance Code”). By their very nature, the recommendations and suggestions in the Governance Code relating to capital market activities have only limited direct relevance for a non-listed company. In many aspects, the administrative procedures in the Group nevertheless satisfy the requirements of the Governance Code, such as in terms of the structure of the procedures and processes of its committees.

Certain Relationships and related Party Transactions In the course of ordinary business activities, the Group regularly enters into agreements with companies within the Group. These agreements mainly relate to the supply of finished and unfinished products within the Group, the provision of billing, IT and accounting services and the rendering of other intra-group services, such as business advisory, treasury and finance, marketing, human resources and tax.

Upon the completion of the Acquisition, the Group entered into a consulting services agreement with Bain Capital Partners, LLC. Under the terms of the Notes, we are permitted to pay up to € 5.0 million a year to Bain Capital Partners, LLC or an affiliate or advisor company of Bain Capital Partners, LLC for annual management, consulting, monitoring or advisory fees and related expenses. In addition, at completion of the Acquisition, the Group entered into a transaction services agreement and an advisory services agreement with an affiliate of Bain Capital Partners, LLC pursuant to which we are required to pay a fee for certain transaction and advisory services rendered by Bain Capital Partners, LLC or such affiliate in connection with the transactions undertaken from time to time.

In addition, the Group has business relations with subsidiaries which result from deliveries and services in the ordinary course of business as well as from granting of loans. For further details, please see Note 50 to our 2016 Audited Financial Statements.

Shareholder The Group is the direct, wholly-owned subsidiary of the Issuer and LuxCo indirectly (through HoldCo and Parent as wholly-owned intermediate holding companies) owns the entire share capital of the Issuer.Bain Capital controls LuxCo and holds approximately 97.1% of the total capital, which includes ordinary shares, PECs and preference shares. LuxCo established a management equity participation program under which management holds 11.9% of the ordinary shares of LuxCo and 2.9% of the total equity capital structure of LuxCo. Bain Capital controls the management of LuxCo through LuxCo GP (which is wholly owned by Bain Capital) and through its ownership of approximately 88.1% of the ordinary shares in LuxCo.

8. Description of all material debt instruments

Revolving Credit Facility

General The Issuer, the Parent, Morgan Stanley Bank International Limited, Bank of Ireland and Landesbank Baden-Württemberg, as arrangers, the financial institutions named therein, as original lenders, and Bank of Ireland, as agent and security agent, entered into the Senior Facility Agreement. The Senior Facility Agreement provides for borrowings up to an aggregate of € 42.5 million on a committed basis. Loans may be made in euro, U.S. dollars and sterling or, if certain conditions are met, other currencies. Subject to certain exceptions, loans may be borrowed, repaid and reborrowed at any time. Loans may be used for capital expenditure, permitted acquisitions, working capital and other general corporate purposes.

Borrowers and Guarantors The Issuer is the original borrower under the Revolving Credit Facility. The Parent may request that it or its other subsidiaries be added as borrowers, subject to certain conditions. The Guarantors are guarantors under the Revolving Credit Facility. The Revolving Credit Facility requires that each material company (as defined in the Senior Facility Agreement) becomes a guarantor. Additional subsidiaries may also be required to become guarantors to comply with the Coverage Test (defined below).

Maturity and Amortization The Revolving Credit Facility matures on the sixth anniversary of the Completion Date. Loans must be repaid in full on or prior to that date.

Interest Rate The interest rate on cash advances under the Revolving Credit Facility is the aggregate of EURIBOR, in the case of a loan in euro, or LIBOR, in the case of a loan in any other currency, the applicable margin and mandatory costs (if any). The margin may range from 3.50% to 4.00% based on the Consolidated Senior Secured Leverage Ratio (as defined in “Description of the Senior Secured Notes”).

Security The collateral for the Revolving Credit Facility is the same as for the Notes and shared with the holders of the Notes. Under the terms of the Intercreditor Agreement, proceeds from the enforcement of the collateral (or any transaction in lieu thereof) will be required to be applied to repay indebtedness outstanding under the Revolving Credit Facility and certain hedging agreements in priority to the Notes.

Mandatory Prepayments The Revolving Credit Facility requires that (subject to certain exceptions) if to the extent that more than 50% of the aggregate principal amount of the Notes on the Completion Date are repurchased, the Revolving Credit Facility will be cancelled and prepaid on a pro rata basis until the Revolving Credit Facility has been reduced to € 20.0 million after which no further cancellation and prepayment will be required. Upon the occurrence of a change of control (as defined in the Revolving Credit Facility), the Revolving Credit Facility will be cancelled and all loans will become immediately due and payable.

Covenants The Senior Facility Agreement contains substantially the same incurrence covenants as apply to the Notes. The Senior Facility Agreement also contains certain additional affirmative and negative covenants and a financial covenant. Set forth below is a brief description of such covenants, all of which are subject to customary exceptions and qualifications. 54

Affirmative Covenants The affirmative covenants include, among others: (i) providing certain financial information, including annual, quarterly and monthly financial statements and an annual budget; (ii) compliance with laws and regulations, including as to environmental and pensions matters; (iii) the payment of taxes; (iv) the maintenance of material assets; (v) the maintenance of pari passu ranking; (vi) further assurance provisions; (vii) the requirement that the aggregate EBITDA (as defined in the Senior Facility Agreement) and gross assets (as defined in the Senior Facility Agreement) of the guarantors of the Revolving Credit Facility are equal to or exceed 80% of our consolidated EBITDA (as defined in the Senior Facility Agreement) (the “Coverage Test”); and (viii) the granting of additional guarantors and security in prescribed circumstances.

Negative Covenants The negative covenants include restrictions, with respect to, among others: (i) changing the general nature of the business; (ii) the activities of the Parent and the Issuer; (iii) changing the center of main interests of obligors and subsidiaries incorporated in the European Union; (iv) changing the Group’s auditors unless to a “big four” accountancy firm; and (v) compliance with certain anti-money laundering and sanction laws. The negative covenants in the Senior Facility Agreement are substantially the same as the negative covenants in the Indenture.

Financial Covenant The Senior Facility Agreement includes a financial covenant requiring the Super Senior Leverage Ratio (as defined in the Senior Facility Agreement not to exceed 1.15:1. The Super Senior Leverage Ratio is calculated based on the ratio of consolidated total net drawn debt under the Revolving Credit Facility to EBITDA in respect of any twelve-month testing period). The financial covenant is calculated and tested semi-annually on a rolling twelve-month basis by reference to our annual consolidated financial statements and our consolidated quarterly financial statements. The Parent has three equity cure rights in respect of the financial covenant.

Events of Default The Senior Facility Agreement provides for substantially the same events of default as under the Notes. In addition, the Senior Facility Agreement provides for customary events of default, subject to customary materiality qualifications and grace periods, including: (i) the failure to pay principal, interest or fees under the Revolving Credit Facility; (ii) breach of financial covenant; (iii) representations or warranties are or are found to be untrue or misleading when made or deemed repeated; (iv) cross-default to the Notes; (v) the insolvency of a Material Company (as defined in the Senior Facility Agreement), (vi) the entry into certain insolvency proceedings of a Material Company (as defined in the Senior Facility Agreement) unlawfulness and invalidity; (vii) the failure to comply with a material term of the Intercreditor Agreement; (viii) the cessation of business; (ix) audit qualification; (x) expropriation; (xi) repudiation and rescission; (xii) litigation; and (xiii) creditor’s process.

Intercreditor Agreement To establish the relative rights of certain creditors under the financing arrangements, the Issuer, each of the Guarantors and certain other members of the Group (together, along with any other members of the Group that accede to the Intercreditor Agreement, the “Debtors”) will enter into an intercreditor agreement dated on or about the date of pricing of the Offering, with, among others, the Security Agent, the lenders under the Revolving Credit Facility (the “RCF Lenders”) and the agent under the Revolving Credit Facility (the “RCF Agent”).

The Intercreditor Agreement will set forth, among other things: • the relative ranking of certain indebtedness and security of the Debtors; • when payments can be made in respect of certain indebtedness of the Debtors; • when enforcement actions can be taken in respect of that indebtedness; • the terms pursuant to which that indebtedness will be subordinated; • turnover provisions; • when security and guarantees will be released to permit a sale of any assets subject to transaction security; and • the order for applying proceeds from enforcement action and other amounts received by the Security Agent.

The Intercreditor Agreement will contain provisions relating to other and future indebtedness that may be incurred that is permitted by the Revolving Credit Facility and the Indenture, including:

• obligations to counterparties to certain hedging agreements (“Hedge Counterparties,” and such obligations, the “Hedging Liabilities,” and each finance document relating thereto, a “Hedging Agreement”); • indebtedness entitled to be treated pari passu with the Revolving Credit Facility (excluding Hedging Liabilities) in respect of the Collateral and under the terms of the Intercreditor Agreement (such indebtedness, together with the Revolving Credit Facility, the “Credit Facility Lender Liabilities,” and the holders of such indebtedness, the “Credit Facility Lenders,” and each finance document relating thereto, a “Credit Facility Document” and each such financing a “Credit Facility”); and • indebtedness entitled to be treated pari passu with the Notes (excluding Hedging Liabilities) in respect of the Collateral and under the terms of the Intercreditor Agreement (such indebtedness, together with the Notes, the “Senior Secured Notes Liabilities,” and the holders of such indebtedness, the “Senior Secured Notes Creditors” and each finance document relating thereto, a “Senior Secured Notes Document”).

The following description is a summary of certain provisions to be contained in the Intercreditor Agreement. It does not restate the Intercreditor Agreement in its entirety, and we urge you to read that document (a copy of which will be available on our website) because it, and not the description that follows, defines your rights as holders of the Notes.

Ranking and Priority Ranking and Priority of Liabilities The Intercreditor Agreement will provide that the liabilities shall rank in right and priority of payment in the following order and are postponed and subordinated to any prior-ranking liabilities as follows:

• first, the “Super Senior Liabilities” consisting of the Credit Facility Lender Liabilities and interest rate exposure or currency exposure Hedging Liabilities solely in respect of a Credit Facility or the Senior Secured Notes Liabilities (the “Priority Hedging Liabilities”) (the holders of such Super Senior Liabilities, the “Super Senior Creditors”), the “Senior Secured Liabilities” consisting of the Senior Secured Notes Liabilities and certain Hedging Liabilities in respect of interest rate exposure or currency exposure Hedging Liabilities and other non-speculative Hedging Liabilities in the ordinary course of business (the “Senior Secured Hedging Liabilities”) (the holders of the Senior Secured Liabilities, the “Senior Secured Creditors”) and amounts due to the Trustee or any other agent or trustee acting in respect of Senior Secured Liabilities (together the “Senior Secured Notes Trustees” and such amounts owed to the Senior Secured Notes Trustees, the “Senior Secured Notes Trustee Amounts”) pari passu and without any preference between them;

• second, certain intercompany obligations of the Parent and its subsidiaries (the “Group”) to other members of the Group (the “Intra-Group Liabilities”) pari passu between themselves and without any preference between them (members of the Group are required to accede to the Intercreditor Agreement in respect of loans or grants to a Debtor in an aggregate amount of € 10.0 million or more); and • third, investor debt consisting of liabilities owed to certain shareholders of the Parent (the “Shareholder Liabilities”).

Ranking and Priority of Security The Intercreditor Agreement will provide that the security shall secure (but only to the extent such security is expressed to secure such liabilities) pari passu and without any preference between them, the Super Senior Liabilities, the Senior Secured Liabilities and the Senior Secured Notes Trustee Amounts. Under the Intercreditor Agreement, all proceeds from enforcement of the security (irrespective of the manner in which such security is constituted) will be applied as provided under “—Application of Proceeds.”

Restrictions on Credit Facility Lender Liabilities and Senior Secured Notes Liabilities Permitted Payments The Intercreditor Agreement will not impose restrictions on payments to be made in respect of the Credit Facility Liabilities made pursuant to the Credit Facility Documents or the Senior Secured Notes Liabilities made pursuant to the Senior Secured Notes Documents.

Security and Guarantees The Credit Facility Lenders or the Senior Secured Notes Creditors may take, accept or receive the benefit of:

• any security in respect of their liabilities if, to the extent legally possible and subject to agreed security principles, at the same time it is offered to secure the other Super Senior Liabilities and Senior Secured Liabilities; • any guarantee, indemnity or other assurance against loss in respect of their liabilities in addition to those in the original form of the Revolving Credit Facility Agreement or the Indenture (as applicable), the Intercreditor Agreement and those already shared by the Super Senior Liabilities and Senior Secured Notes Liabilities if, to the extent legally possible and subject to agreed security principles, at the same time it is offered in respect the other Super Senior Liabilities and Senior Secured Liabilities; and • any guarantee, indemnity or security or other assurance against loss with the consent of the Majority Senior Secured Creditors (as defined below), in the case of the Credit Facility Lenders, or the Majority Super Senior Creditors (as defined below), in the case of the Senior Secured Notes Liabilities.

Enforcement of Collateral The Security Agent may refrain from enforcing the Collateral unless otherwise instructed by the relevant Instructing Group.

Instructing Group The Instructing Group entitled to give instructions to the Security Agent in respect of enforcement of security means the Majority Super Senior Creditors or the Majority Senior Secured Creditors (in each case acting through the representative of either the Majority Super Senior Creditors or the Majority Senior Secured Creditors, as applicable, each such representative a “Creditor Representative”). The “Majority Super Senior Creditors” consist of those Super Senior Creditors whose credit participations at that time aggregate more 66.67% of total super senior credit participations at that time. The “Majority Senior Secured Creditors” consist of those Senior Secured Creditors whose credit participations at that time aggregate more 50% of total senior secured credit participations at that time.

If there are conflicting enforcement instructions, the enforcement instructions provided by the Majority Senior Secured Creditors will prevail if the consultation procedures (as described below), if applicable, have been complied with and the instructions are consistent with the Security Enforcement Principles (as described below). Enforcement instructions provided by the Majority Super Senior Creditors will prevail if they are consistent with the Security Enforcement Principles (as described below) and:

• the Super Senior Liabilities have not been fully discharged within six months of the later of: • the date the Proposed Enforcement Instruction Date (as defined below); and • the first day that enforcement action could have been taken under applicable law; • the Security Agent has not commenced any enforcement of the security (or transaction in lieu thereof) or other enforcement action within three months of the Proposed Enforcement Instructions Date (as defined below); • the security has become enforceable as a result of the occurrence of an insolvency event and the Security Agent has not commenced any enforcement of the Collateral (or transaction in lieu thereof) or other enforcement action at that time (other than to the extent such insolvency event occurred as a result of action taken in accordance with the Intercreditor Agreement); • the relevant instructions with respect to enforcement from the Majority Senior Secured Creditors do not comply with the Security Enforcement Principles (as defined below); or • the enforcement instructions of the Majority Senior Secured Creditors will prevail with the prior consent of the Majority Super Senior Creditors and the enforcement instructions of Majority Super Senior Creditors will prevail with the prior written consent of the Majority Senior Secured Creditors, in each case, acting through their Creditor Representatives.

The enforcement instructions of Majority Super Senior Creditors will prevail after completion of a Second Consultation Period (as defined below) with no agreement reached as to the method of enforcement.

Enforcement Instructions and Consultation If the security has become enforceable and either the Majority Super Senior Creditors or the Majority Senior Secured Creditors (each, a “Creditor Group”) wish to instruct the Security Agent to commence enforcement of any security, or refrain from enforcing the security, such group of creditors must deliver a copy of the proposed instructions as to enforcement (the “Enforcement Proposal”) to the Security Agent and the Creditor Representative for each of the other creditor groups at least five business days prior to the proposed date of issuance of instructions under such enforcement proposal (the “Proposed Enforcement Instruction Date”).

Until the occurrence of either the date of the discharge in full of all of the Super Senior Liabilities (the “Super Senior Discharge Date”) or the date of the discharge in full of all of the Senior Secured Liabilities (the “Senior Secured Discharge Date”), if the Security Agent has received conflicting enforcement instructions then the Security Agent will promptly notify the relevant Creditor Representatives and such Creditor Representatives will consult with each other and the relevant Security Agent for a period of not less than 30 days (or such shorter period as the relevant Creditor Representatives may agree) (the “Initial Consultation Period”) from the date of the original Enforcement Proposal, with a view to agreeing instructions as to enforcement. For the purpose of triggering an initial consultation period, the failure to give instructions by either the Majority Super Senior Creditors or the Majority Senior Secured Creditors will be deemed to be an instruction inconsistent with any other instructions given.

Prior to the occurrence of either the Super Senior Discharge Date or the Senior Secured Discharge Date, if no instructions have been issued to the Security Agent within 30 days of receipt of any Enforcement Proposal and it is not reasonable to expect an enforcement satisfying the Security Enforcement Objective within six months of the Proposed Enforcement Instruction Date, the Creditor Representative for either the Super Senior Creditors or the Senior Secured Creditors may require a further consultation period of 30 days from the date such request was issued (the “Second Consultation Period”). If no agreement is reached as to the method of enforcement after the Second Consultation Period, the instructions of the Super Senior Creditors will prevail.

The Creditor Representatives will not be obligated to consult as described above if:

• the security has become enforceable as a result of an insolvency event; • the Majority Super Senior Creditors or the Majority Senior Secured Creditors determine in good faith that to do so and thereby delay commencement of enforcement could reasonably be expected to have a material adverse effect on (A) the Security Agent’s ability to enforce any of the security or (B) the potential amount of realization proceeds of any enforcement of the security available to such Creditor Group; or • the Creditor Representatives for the Super Senior Creditors and the Senior Secured Notes Creditors agree that no consultation period is required or agreed to a shorter consultation period.

A Creditor Representative may only give enforcement instructions that are consistent with the following security enforcement principles (the “Security Enforcement Principles”):

• Under the Security Enforcement Principles it shall be the aim of any enforcement of the security to ensure a prompt and expeditious enforcement of the security producing realization proceeds from the enforcement within six months of the Proposed Enforcement Instruction Date which is consistent with the rights and obligations of the Security Agent under this Agreement and applicable law (the “Security Enforcement Objective”). • Upon an enforcement of Collateral over, or in respect of a Distressed Disposal (as defined herein) of, either (a) any shares in a member of the Group or (b) assets (other than shares in a member of the Group) with an aggregate book value of not less than € 5.0 million (unless the enforcement is by way of sale by Public Auction (as defined below)), the Security Agent shall at the request of Bank of Ireland, as agent for the Revolving Credit Facility (acting on the instructions of the Majority Super Senior Creditors), obtain an opinion (a “Fairness Opinion”) from a reputable internationally recognized investment bank or any one of PricewaterhouseCoopers, Ernst & Young, KPMG or Deloitte & Touche, among others, or a third-party professional firm which is regularly engaged in providing valuations of businesses or assets similar or comparable to those charged under the security to be enforced (or, as the case may be, the subject of such Distressed Disposal) (a “Financial Advisor”) as selected by the relevant Creditor Representative requesting the opinion, that the consideration for the sale is fair from a financial point of view for a prompt and expeditious sale after taking into account all relevant circumstances. It is acknowledged that once an administrator, administrative receiver or other equivalent insolvency official is appointed, he or she will comply with applicable law in dealing with the assets subject to the security (or, as the case may be, the subject of such Distressed Disposal) and will not be obligated to follow the Security Enforcement Principles.

• Notwithstanding the above, if the security is being enforced pursuant to enforcement instructions provided to the Security Agent by the Majority Senior Secured Creditors, the Security Agent is not required to enforce by way of sale by Public Auction or provide a Fairness Opinion if the Security Agent is satisfied that: • the enforcement is in accordance with applicable law; • sufficient enforcement proceeds will be received by the Security Agent in cash to ensure that when the proceeds are applied as described under “— Application of Proceeds” the Super Senior Liabilities are repaid and discharged in full; • the enforcement complies with the requirements described under the Intercreditor Agreement; and • the security will be enforced and other action as to enforcement will be taken such that either all enforcement proceeds are received by the Security Agent in cash for distribution as described below under “—Application of Proceeds” or sufficient enforcement proceeds will be received by the Security Agent in cash to ensure that when the proceeds are so applied, the Super Senior Liabilities are repaid and discharged in full. • “Public Auction” means an auction or other competitive sale process in which more than one bidder participates or is invited to participate, which may or may not be conducted through a court or other legal proceeding, and which is conducted with the advice of an independent internationally recognized investment bank, provided that the holders of the Senior Secured Liabilities and the Credit Facility Lenders shall have a right to participate in such auction. • The Security Enforcement Principles may only be amended, varied or waived with the prior written consent of the Creditor Representatives for the Majority Super Senior Creditors and the Majority Senior Secured Creditors.

Release of the Guarantees and the Security Non-distressed Disposal In circumstances in which a disposal to a person is permitted under the relevant financing documents that is not being effected (i) at the request of the Instructing Group in circumstances in which the security has become enforceable, (ii) by enforcement of security or (iii) after an acceleration event in respect of the Credit Facility Lender Liabilities or the Senior Secured Notes Liabilities has occurred ((ii) and (iii), a “Distress Event” and a disposal in the circumstances of (i), (ii) or (iii), a “Distressed Disposal”), the Intercreditor Agreement will provide that the Security Agent is authorized to release the security interests over that asset and, if the relevant asset consists of shares in the capital of a Debtor, to release the security interests or any other claim relating to the Debt Documents over the assets of that Debtor and the shares in and assets of any of its subsidiaries.

Distressed Disposal Where a Distressed Disposal of an asset is being effected, the Intercreditor Agreement will provide that the Security Agent is authorized: (i) in respect of the disposal of an asset forming part of the security, to release the security interests, or any other claim over the relevant asset; (ii) if the asset that is disposed of consists of shares in the capital of a Debtor or a holding company of a Debtor, to release that Debtor or holding company and any subsidiary of that Debtor or holding company from all or any part of the liabilities under the Debt Documents and security interests over any security granted by that Debtor or holding company or any subsidiary of that Debtor or holding company or any claims in respect of Intra-Group liabilities or Shareholder Liabilities; (iii) if the asset that is disposed of consists of shares in the capital of a Debtor or a holding company of a Debtor, the disposal of all, but not part, of the liabilities under the Debt Documents and certain other liabilities and security interests over any security of the Debtor if the transferee will be treated as a Primary Creditor or secured party under the Intercreditor Agreement; and (iv) if the asset that is disposed of consists of shares in the capital of a Debtor or a holding company of a 60

Debtor, the transfer to another Debtor of all or any part of the disposed entity’s obligations under Intra-Group Liabilities or other liabilities owed to a Debtor. The “Primary Creditors” means the Super Senior Creditors, the Hedge Counterparties and the Senior Secured Notes Creditors.

The net proceeds from each Distressed Disposal (and any disposal of liabilities pursuant to (iii) above) shall be paid to the Security Agent for application in accordance with the provisions described under “—Application of Proceeds” as if those proceeds were an enforcement of the security. If a Distressed Disposal is being effected such that borrowing liabilities, guarantee liabilities or security will be released, it is a further condition to such release that:

• the Majority Senior Secured Creditors and, prior to the Super Senior Discharge Date, the Majority Senior Secured Creditors, in each case acting through their Creditor Representatives, have consented to the release; • the proceeds of such sale or disposal are to be received in cash and such sale or disposal is made pursuant to a public auction or the Security Agent has received a fairness opinion in respect of such sale or disposal (except there is no requirement for a such sale or disposal to be by public auction or for a fairness opinion when enforcement proceedings are approved or supervised by or on behalf of a court where there is a determination of value by or on behalf of the court or once an administrator, administrative receiver, provisional liquidator, liquidator or similar official is appointed); • the proceeds of such Distress Disposal are applied in accordance with the provisions described under “—Application of Proceeds”; • all enforcement proceeds are received in cash by the Security Agent; and • the Distressed Disposal is being conducted in such manner as the Security Agent (in its absolute discretion) considers will achieve the Security Enforcement Objective.

Turnover The Intercreditor Agreement will provide that if any of the Credit Facility Lenders, Senior Secured Notes Creditors or Hedge Counterparties receives or recovers or any proceeds in respect of guarantee liabilities owed to such creditor after a Distress Event, as a result of litigation or proceedings against a member of the Group or by way of set-off or the proceeds of the enforcement of any security, in each case, except in accordance with the order described below under “Application of Proceeds,” it shall:

• in relation to receipts or recoveries not received or recovered by way of set-off (i) hold that amount in trust for the Security Agent and promptly pay that amount or an amount equal to that amount to the Security Agent for application in accordance with the terms of the Intercreditor Agreement, and (ii) promptly pay an amount equal to the amount (if any) by which receipt or recovery exceeds the relevant liabilities owed to such creditor to the Security Agent for application in accordance with the terms of the Intercreditor Agreement; and • in relation to receipts and recoveries received or recovered by way of set-off, promptly pay an amount equal to that recovery to the Security Agent for application in accordance with the terms of the Intercreditor Agreement.

The Intercreditor Agreement will also require any require amounts received by creditors in respect of the Intra-Group Liabilities or Shareholder Liabilities that are not permitted payments or after the occurrence of a Distress Event or as recovered as a result of litigation or proceedings against a member of the Group to be turned over to the Security Agent.

Application of Proceeds The Intercreditor Agreement will provide that amounts received from the realization or enforcement of all or any part of the security or other amounts paid to the Security Agent for application as described below will be applied in the following order of priority:

• first, pari passu and pro rata in payment of the following amounts: (i) pari passu and pro rata to any sums owing to any Security Agent, any receiver or delegate, as the case may be, (ii) any Senior Secured Notes Trustee in respect of any Senior Secured Notes Trustee Amounts payable to it; and (iii) to each Creditor Representative other than a Hedge Counterparty (to the extent not included already) of the unpaid fees, costs, expenses and liabilities (and all interest thereon as provided in the relevant finance documents) of each Creditor Representative and any receiver, attorney or agent appointed by such Creditor Representative under any security document or the Intercreditor Agreement (to the extent that such security has been given in favor of such obligations); • second, pari passu and pro rata in or towards payment of all costs and expenses incurred by any agent, the Security Agent or any Primary Creditor in connection with any realization or enforcement of the security (or a transaction in lieu thereof) taken in accordance with the terms of the Intercreditor Agreement or any action taken at the request of any Security Agent; • third, in respect of recoveries resulting from the realization or enforcement of all or any part of the security (or transaction in lieu thereof), pari passu and pro rata in or towards payment to each Creditor Representative in respect of any Credit Facility Lender Liabilities on its own behalf and on behalf of the Credit Facility Lenders and to any Hedge Counterparties in respect of any Priority Hedging Liabilities for application towards the discharge of the Priority Hedging Liabilities and Credit Facility Lender Liabilities; • fourth, pari passu and pro rata to the Trustee and any other Creditor Representative on behalf of the Senior Secured Creditors for application towards the discharge of the Priority Hedging Liabilities, the Credit Facility Lenders Liabilities and related Arranger Liabilities, Senior Secured Notes Liabilities and the Senior Secured Hedging Liabilities; • fifth, if none of the Debtors is under any further actual or contingent liability under any Debt Document (other than any in respect of Shareholder Liabilities or Intra-Group Liabilities), in payment to any person whom the Security Agent is obligated to pay in priority to any Debtor; and • sixth, in payment of the surplus (if any) to the relevant Debtor or other person entitled to it.

Equalization The Intercreditor Agreement will provide that if, for any reason, any Credit Facility Lender Liabilities, Priority Hedging Liabilities, Senior Secured Notes Liabilities or Senior Secured Hedging Liabilities remain unpaid after enforcement and the application of recoveries in accordance with the Intercreditor Agreement and the resulting losses are not borne by the relevant creditors in the proportions that their respective exposures at the enforcement date bore to the aggregate credit participations of all such creditors, the creditors will make such payments from such recoveries among themselves as the Security Agent shall require to put the creditors in such a position that their losses are borne in those proportions.

Option to Purchase After a Distress Event, by giving not less than ten days’ notice to the Creditor Representative for the Credit Facility Lenders the holders of the Senior Secured Notes Liabilities will have the right to acquire or procure that a nominee acquires all (but not part) of the Super Senior Liabilities.

Any such purchase will be on terms which will include, without limitation, payment in full in cash of an amount equal to the Super Senior Liabilities then outstanding, including in respect of any broken funding costs, as well as certain costs and expenses of the Super Senior Creditors; after the transfer, no Super Senior Creditor will be under any actual or contingent liability to any Debtor; the purchasing holders of Notes indemnify each Super Senior Creditor for any actual or alleged obligation to repay or claw back any amount received by such Super Senior Creditor; and the relevant transfer shall be without recourse to, or warranty from, any Super Senior Creditor.

Amendments and Override In addition to customary minor, technical or administrative matter amendments by the Security Agent, the Issuer and each Creditor Representative, the Intercreditor Agreement will provide that it may be amended only with the consent of the Majority Super Senior Creditors, the requisite number of creditors under the Senior Secured Notes Liabilities, the Issuer and the Security Agent unless it is an amendment, waiver or consent that has the effect of changing or which relates to: (a) any amendment to the order of priority or subordination set forth in the Intercreditor Agreement; or (b) any amendment to the payment waterfall, turnover provisions, redistribution, new money and refinancing provisions, enforcement or amendment provisions set forth in the Intercreditor Agreement, which shall not be made without the written consent of:

• the Security Agent; • the Credit Facility Lenders to the extent required by the terms of the Credit Facility Documents; • Creditor Representative in respect of the Senior Secured Notes Liabilities; • each Hedge Counterparty (to the extent that the amendment or waiver would materially and adversely affect the Hedge Counterparty); and • in the case of amendments to the amendments provisions of the Intercreditor Agreement, the Issuer.

Subject to the paragraphs above and certain other exceptions, no amendment or waiver of the Intercreditor Agreement may impose new or additional obligations on or withdraw or reduce the rights of any party to the Intercreditor Agreement without the prior written consent of the party. Unless expressly stated otherwise in the Intercreditor Agreement, the Intercreditor Agreement will override anything in the debt documents to the contrary.

Additional Indebtedness In the event that any Debtor incurs any additional indebtedness, or refinances existing indebtedness, which is permitted to be designated as Super Senior Liabilities or Senior Secured Notes Liabilities under the terms of the Debt Documents and is entitled to be secured by the Collateral, the liabilities in respect of such additional Super Senior Liabilities or Senior Secured Notes Liabilities, as the case may be, will share in the proceeds of any enforcement of Collateral on a pro rata basis with the applicable group of creditors, provided that such creditor accedes to the Intercreditor Agreement (if not already a party).

Governing Law The Intercreditor Agreement is governed by English law.

9. Audited IFRS Consolidated Financial Statements as of December 31, 2016 of FTE Holding GmbH

The following statements represent the English translation of the audited consolidated financial statements as of December 31, 2016 according to International Financial Reporting Standards (IFRS). The condensed financial statements of FTE Holding GmbH as of December 31, 2016 are prepared in thousand Euro. For purposes of this reporting the disclosures are presented in million Euro.

(Translation - the German text is authoritative).

Consolidated Income Statement

January 1 January 1 to to December 31, December 31 (€ million) 2016 2015

Revenues 551.3 504.9 Cost of sales -434.0 -404.4

Gross profit 117.3 100.5

Distribution expenses -14.7 -14.7 Administration expenses -21.0 -23.7 Research and development expenses -27.9 -25.1

Profit from operations 53.8 37.1

Results from associated companies and joint ventures 1.1 1.0 Finance income 3.8 3.1 Finance expenses -29.1 -30.9 Finance result -24.2 -26.9

Profit before income taxes 29.5 10.2

Income taxes -14.9 -5.7 Deferred taxes 2.6 2.2

Net profit 17.2 6.7

Consolidated Statement of Comprehensive Income

January 1 January 1 to to December 31, December 31, (€ million) 2016 2015

Net profit 17.2 6.7

Foreign currency translation -1.7 1.0 Reclassifying profit / loss -1.7 1.0

Actuarial gains or losses on defined benefit plans -2.5 6.1 Deferred taxes 0.7 -1.7 Non-reclassifying profit / loss -1.8 4.3

Income and expenses recognized directly in other comprehensive income -3.5 5.4

Total comprehensive expenses and income 13.8 12.1

Consolidated Statement of Balance Sheet

December 31, December 31, (€ million) 2016 2015

Non-Current Assets Property, plant and equipment 112.5 110.3

Shares in associated companies and joint ventures 4.4 4.3 Other assets 1.3 0.5

Goodwill 97.5 97.5

Other intangible assets 117.6 121.7

Deferred tax assets 1.8 1.9

Non-current assets 335.2 336.2

Current Assets Inventories 76.6 73.7

Trade receivables 69.4 65.2

Receivables shareholder 0.2 0.2 Income tax receivables 2.0 3.9

Other current assets 30.4 26.3

Cash and cash equivalents 46.8 40.5

Current assets 225.4 209.8

Total assets 560.6 546.0

December 31, December 31, (€ million) 2016 2015

Equity

Share capital 0.0 0.0

Capital reserve 90.6 90.6

Retained earnings -14.2 -19.1 Currency translation reserve -3.1 -1.4 Net result for the period 17.2 6.7

Total equity 90.5 76.8

Liabilities Non-Current Liabilities

Notes 256.6 255.1

Pension provisions 68.6 66.0 Provisions 1.7 2.3

Other liabilities 0.2 0.7

Deferred tax liabilities 24.0 27.5

Non-current liabilities 351.1 351.7

Current Liabilities Other financial liabilities 0.0 8.1

Trade payables 52.7 45.4

Pension provisions 1.9 1.8 Provisions 20.0 19.4

Other current liabilities 38.4 41.0 Current income tax liabilities 6.1 1.8

Current liabilities 119.0 117.5

Total liabilities 470.1 469.2

Total equity and liabilities 560.6 546.0

Consolidated Statement of Cash Flows from January 1, 2016 until December 31, 2016

January 1 January 1 to to December 31, December 31, (€ million) 2016 2015

Cash Flows from Operating Activities Profit before income taxes 29.5 10.2 Depreciation on property, plant and equipment 19.2 20.5 Depreciation on intangible assets 17.9 18.1 Net finance result 24.2 26.9 Other non-cash expenses and income -0.3 -2.3 Changes in trade receivables -4.5 -8.0 Changes in other assets -3.8 5.4 Changes in inventories -2.7 -12.2 Changes in trade payables 7.5 10.7 Changes in pension provisions -1.8 -1.7 Changes in other provisions -0.2 4.1 Changes in other liabilities -2.5 2.7 Income taxes paid -11.1 -7.7 Income taxes received 2.3 3.5 Interests paid -24.4 -24.9

Net cash flows from operating activities 49.4 45.4

Cash flows from Investing Activities

Investments in property, plant and equipment -22.6 -20.3 Investments in intangible assets -1.3 -0.6 Proceeds from disposals of tangible and intangible assets 0.1 0.1 Investments in development costs -10.0 -9.1

Net cash flows from investing activities -33.9 -29.9

Cash flows from Financing Activities Dividends received 0.8 0.7 Repayment and drawing of loans RCF -10.0 -5.0

Net cash flows from financing activities -9.2 -4.3

January 1 January 1 to to December 31, December 31, (€ million) 2016 2015

Changes in cash and cash equivalents 6.3 11.2 Currency adjustments -0.1 0.2 Cash and cash equivalents at beginning of period 40.5 29.1

Cash and cash equivalents at end of period 46.8 40.5

Consolidated Statement of Changes in Equity from January 1, 2016 until December 31, 2016

Share Capital Retained Currency Net Total capital reserve earnings translation profit equity (€ million) reserve

January 1, 2016 0.0 90.6 -19.1 -1.4 6.7 76.8

Net profit 0.0 0.0 0.0 0.0 17.2 17.2

Not affecting net income realized in income and expenses 0.0 0.0 -1.8 0.0 0.0 -1.8 Foreign currency translation 0.0 0.0 0.0 -1.7 0.0 -1.7 Comprehensive income 0.0 0.0 -1.8 -1.7 17.2 13.8

Offset against retained earnings 0.0 0.0 6.7 0.0 -6.7 0.0

December 31, 2016 0.0 90.6 -14.2 -3.1 17.2 90.5

Consolidated Statement of Changes in Equity from January 1, 2015 until December 31, 2015

Share Capital Retained Currency Net Total capital reserve earnings translation profit equity (€ million) reserve

January 1, 2015 0.0 90.6 -24.9 -2.5 1.5 64.7

Net profit 0.0 0.0 0.0 0.0 6.7 6.7

Not affecting net income realized in income and expenses 0.0 0.0 4.3 0.0 0.0 4.3 Foreign currency translation 0.0 0.0 0.0 1.0 0.0 1.0

Comprehensive income 0.0 0.0 4.3 1.0 6.7 12.1

Offset against retained earning 0.0 0.0 1.5 0.0 -1.5 0.0

December 31, 2015 0.0 90.6 -19.1 -1.4 6.7 76.8

Notes to the Consolidated Financial Statements of FTE Holding GmbH for Financial Year 2016

Contents

A. General information ...... 3

B. Application of new accounting standards ...... 4

C. Scope of consolidation and consolidation principles ...... 7

D. Currency translation ...... 9

E. Accounting principles ...... 10 (1) Revenue recognition 10 (2) Cost of sales 10 (3) Balance sheet structure 10 (4) Tangible assets 11 (5) Intangible assets 12 (6) Assets held for sale 13 (7) Impairment of non-financial assets 13 (8) Financial instruments 14 (9) Leases 16 (10) Inventories 16 (11) Trade receivables 17 (12) Cash and cash equivalents 17 (13) Taxes 17 (14) Employee benefits 18 (15) Provisions 19 (16) Government grants 20 (17) Management judgements and assessments 20

F. Notes to the consolidated income statement ...... 21 (18) Revenue 21 (19) Cost of sales 22 (20) Selling and marketing expenses 22 (21) General administrative expenses 23 (22) Development costs 23 (23) Net financial result 24 (24) Income taxes/deferred taxes 25 (25) Other information on the income statement 27

G. Notes to the balance sheet ...... 28 (26) Property, plant, and equipment 28 (27) Intangible assets 29 (28) Equity accounted investments 31 (29) Inventories 32 (30) Trade receivables 32 (31) Other assets 34 (32) Cash and cash equivalents 35 (33) Equity 35 (34) Bonds 35 (35) Other financial liabilities 36 (36) Other liabilities 37 (37) Pension provisions 38 (38) Other provisions 41 (39) Deferred tax assets and liabilities 42 (40) Financial instruments 44

H. Other notes ...... 48 (41) Risk management, financial derivatives, and other information about capital management 48 (42) Non-current assets 51 (43) Notes to the cash flow statement 51 (44) Employees 52 (45) Auditor's fee 52 (46) Contingencies 52 (47) Assets and receivables pledged as collateral for liabilities 52 (48) Other financial obligations 54 (49) Legal disputes 54 (50) Related party disclosures 55 (51) Management stock participation program 56 (52) Executive bodies of FTE Holding GmbH 57 (53) Inclusion in the consolidated financial statements 57 (54) Significant events after the balance sheet date 57

A. General information FTE Holding GmbH is a corporation constituted under German law with headquarters located at Andreas-Humann-Strasse 2, 96106 Ebern, Germany.

FTE Holding GmbH and its subsidiaries (hereinafter referred to as the "FTE Group") form an automotive supply group that operates mainly in Europe and Asia, as well as in North and South America.

The FTE Holding GmbH Group is an international automotive supplier. As a tier 1 supplier the FTE Holding GmbH Group is focused on actuator products for clutches and brakes, particularly those used in cars. In addition, the FTE Holding GmbH Group produces demanding hi-tech products such as assemblies for automatic shift systems and sensor products.

The senior parent company is Falcon (BC) LuxCo S.C.A., Luxembourg. FTE Group Holding GmbH is the direct parent company. FTE Holding GmbH is included in the consolidated financial statements of FTE Group Holding GmbH.

Fundamentals

The main accounting methods used in preparing these consolidated financial statements are discussed below. Unless specified otherwise, these methods were uniformly applied to the financial years shown.

These consolidated financial statements as of 31 December 2016 have been prepared by applying Section 315a (3) of the German Commercial Code (HGB) ("Consolidated Financial Statements in Accordance with International Accounting Standards") pursuant to International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS) and the International Accounting Standards Board (IASB), as they are to be applied in the EU. They have been prepared in line with the IFRS standards and interpretations that are mandatory for financial years commencing on 1 January 2016.

The management prepared these consolidated financial statements on 20 February 2017.

The consolidated financial statements of FTE Holding GmbH are prepared in thousands of Euros (K€). When applying rounded amounts and percentages, differences may occur due to commercial rounding.

The preparation of the consolidated financial statements is always performed by applying the cost principle. Exceptions comprise assets held for sale and derivative financial instruments measured at fair value.

The consolidated income statement was prepared according to the cost of sales method pursuant to IAS 1.

Application of estimates The preparation of financial statements pursuant to IFRS standards requires the application of estimates and assumptions that affect the level and reporting of reported assets and liabilities, income and expenses, and contingent liabilities. The estimates and assumptions are based on historical experience and various other factors. The results of such estimates form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects that period only. If the revision also affects a future period, the revisions must be applied to all affected periods.

Note 17 explains management assessments in applying IFRS that significantly affect the consolidated financial statements, as well as estimates bearing a significant risk of a considerable adjustment in the following year.

B. Application of new accounting standards Standards, interpretations, and amendments of the standards to be applied for the first time In the 2016 financial year, the FTE Group was required to apply the following new standards, interpretations, and amendments to standards:

Standards, interpretations, and amendments of the standards to be Mandatory first-time applied for the first time application date Amendment to IAS 19: Performance-oriented plans: Employee 01.07.2014 (IASB)/ contributions 01.02.2015 (EU) Annual improvements to the IFRS cycle 2010-2012 (December 2013) 01.07.2014 (IASB)/ 01.02.2015 (EU) Amendments to IAS 16 and IAS 41: Fruit-bearing plants 01.01.2016 (IASB)/ 01.01.2016 (EU) Amendments to IFRS 11: Balancing of acquisitions of interests in 01.01.2016 (IASB)/ jointly controlled operations 01.01.2016 (EU) Amendments to IAS 16 and IAS 38: Clarification of acceptable 01.01.2016 (IASB)/ depreciation methods 01.01.2016 (EU) Annual improvements to the IFRS cycle 2012-2014 01.01.2016 (IASB)/ 01.01.2016 (EU) Amendments to IAS 1: Disclosure initiative 01.01.2016 (IASB)/ 01.01.2016 (EU) Amendments to IAS 27: Equity method in single-entity financial 01.01.2016 (IASB)/ statements 01.01.2016 (EU) Amendments to IFRS 10, IFRS 12 and IAS 28: Investment 01.01.2016 (IASB)/ companies Application of the exception from the consolidation 01.01.2016 (EU) obligation

Amendment to IAS 19: Performance-oriented plans: Employee contributions The amendment clarifies that contributions that are solely linked to the performance of the employee in the period in which they are provided (for example if the contributions are calculated as a fixed percentage proportion of the salary over the total hours of work) can also be regarded as a reduction of the costs of the short-term payments to employees. No changes arise for the FTE Group from the initial application of the standards.

Amendments to IAS 16 and IAS 38: Clarification of acceptable depreciation methods The amendments to IAS 16 and IAS 38 clarify that in the future, a sales-based depreciation method is not an appropriate depreciation method. This is due to the fact that revenues represent the generation of expected economic benefit and not the consumption thereof. A sales-based method remains permissible in certain cases, provided that this leads to the same result as the application of a performance-based method. No changes arise for the FTE Group from the initial application of the standards.

Annual improvements to the IFRS cycle 2012-2014 The standards IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures were amended by the annual improvements in the IFRS cycle 2012-2014. No changes arise for the FTE Group from the initial application of the standards.

Amendments to IAS 1: Disclosure initiative The following four amendments are intended to represent improvements to the financial reporting with respect to the disclosures in the notes: A stronger focus on the principle of materiality, a further sub-classification of the minimum breakdown items in the balance sheet and the disclosure of subtotals, greater flexibility with the preparation of the notes with respect to the sequence of the disclosures, the revocation of the requirements in IAS 1 with respect to the identification of significant accounting and valuation methods as a component of the disclosures in the notes. No changes arise for the FTE Group from the initial application of the standards.

Amendments to IAS 27: Equity method in single-entity financial statements IAS 27 “Amendments to Separate Financial Statements for Investment Entities” again allows the equity method as an accounting option for interests in subsidiaries, joint ventures and associated companies in an investor’s separate financial statements. However, the option remains to balance accounts according to IAS 39 or IFRS 9. No changes arise for the FTE Group from the initial application of the standards.

Accounting standards that are not yet to be applied, some of which have yet to be endorsed by the EU The IASB has published the following standards and interpretations that did not yet require mandatory application in the 2016 financial year. The EU has not yet recognized some of these standards and interpretations, and the FTE Group therefore does not yet apply them. The most important changes are described below.

Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses Amendments to IAS 12 Income Taxes clarify how tax assets from unrealised losses in conjunction with the valuation of debt instruments at fair value, which are recorded under other comprehensive income, are to be recognised. The impact on the FTE Group is still being examined.

Amendments to IFRS 15: IFRS clarifications IFRS 15 prescribes when and in what amount an IFRS reporter must recognise revenue. Furthermore, those preparing financial statements are required to provide the audience addressed by the financial statements with more informative and relevant disclosures than heretofore. The standard offers a principles-based, five-stage model for this that is applicable to all agreements with customers. The impact on the FTE Group is still being examined.

In addition, in May 2014 the IASB published the new IFRS 15, Revenue from Contracts with Customers, to be implemented by 01.01.2018. The FTE Group is currently examining possible effects on the balancing of sales revenues and their disclosure.

IFRS 9: Financial Instruments (July 2014) IFRS 9 Financial Instruments contains provisions for their recognition and valuation, derecognition and hedge accounting. The version of IFRS 9 that has now been published replaces all preceding versions. The first obligatory application is scheduled for financial years beginning on or after 1 January 2018. However, the rules governing a portfolio fair value hedge against interest fluctuation risks pursuant to IAS 39 have not been replaced. The impact on the FTE Group is still being examined.

IFRS 16: Leasing IFRS 16 governs the recognition, valuation, disclosure and disclosure obligations with respect to leasing relationships in the financial statements of companies that prepare their accounts according to IFRS. For the lessee the standard provides for a single accounting model. This model means for the lessee that all assets and liabilities from leasing agreements must be recognised in the balance sheet, unless the term is 12 months or less or it is a low-value asset (this is an option in each case). For accounting purposes, the lessee continues to differentiate between financing or rental leasing agreements (finance or operate lease). The IFRS 16 accounting model does not differ significantly here from the Leases in IAS 17. The impact on the FTE Group is still being examined.

C. Scope of consolidation and consolidation principles The consolidated financial statements as of 31 December 2016 contain the financial statements of FTE Holding GmbH and its subsidiaries, as well as an equity-accounted investment.

The subsidiaries include all companies (including structured companies) controlled by the FTE Group. The FTE Group is considered to control a portfolio company if there is risk exposure or entitlement to fluctuating returns due to its involvement in the portfolio company, and the FTE Group is able to use its power of disposition over the portfolio company in such a way to influence the amount of the returns of the portfolio company.

The following table shows a list of the consolidated companies and the interests held by the FTE Group:

Subsidiary Headquarters Country Interest FTE Verwaltungs GmbH Ebern Germany 100% FTE automotive GmbH Ebern Germany 100% FTE automotive systems GmbH Fischbach Germany 100% FTE automotive Möve GmbH Mühlhausen Germany 100% FTE Asia GmbH Ebern Germany 100% FTE automotive Denmark ApS Aars Denmark 100% SFMC s.r.o. (until 31 March 2016) Presov Slovakia 100% FTE automotive Slovakia s.r.o. Presov Slovakia 100% FTE automotive France S.a.r.l. Nanterre Cedex France 100% FTE automotive Czechia s.r.o. Podborany Czech Republic 100% FTE automotive UK Limited Coventry Great Britain 100% FTE Indústria e Comércio Ltda. Maua Brazil 100% FTE automotive USA Inc. Auburn Hills USA 100% FTE automotive North America Inc. Auburn Hills USA 100% FTE Mexicana S.A. de C.V. Puebla Mexico 100% FTE automotive (Taicang) Co., Ltd. Taicang China 100%

Companies over which FTE Holding GmbH can execute collective control are either included in the consolidated financial statements with the proportionate assets, liabilities, earnings and expenses or measured according to the equity method, depending on their type. In the absence of other contractual agreements, a majority of the voting rights generally takes control. If the voting rights are distributed equally, collective control generally results unless other (contractual) rights result in control by the shareholder.

As of 1 April 2016 SFMC s.r.o. merged with FTE automotive Slovakia s.r.o.

Associates on which FTE Holding GmbH can execute material influence within the meaning of IFRS are also measured according to the equity method. Significant influence is generally deemed to exist if FTE is directly or indirectly entitled to a voting rights interest of at least 20%, but less than 50%.

Associates are aggregated as equity-accounted investments.

Associated companies Headquarters Country Interest APG-FTE automotive Co. Ltd Hangzhou China 49%

The financial year of FTE Holding GmbH ends on 31 December 2016.The reporting date for the separate financial statements of the Group companies that are included in the scope of consolidation is the same as the reporting date for the consolidated financial statements. For consolidation purposes, the consolidated financial statements of FTE Holding GmbH were prepared on the basis of uniform accounting principles pursuant to IFRS 10.

The consolidation of a portfolio company commences on the day on which the investor obtains control over the company. It ends when the investor relinquishes control over the portfolio company.

In case of a step merger, the previously-acquired equity share of the company is redetermined using the fair value valid when the acquisition took place. The resulting profit or loss is to be recorded in the income statement.

Interests in subsidiaries Capital consolidation is performed by applying the purchase method pursuant to IFRS 3 (Business Combinations).

The purchase costs for the acquisition correspond to the fair value of the transferred assets, the issued equity capital instruments, and the liabilities that arise or are transferred on the transaction date. Incidental acquisition costs are expensed. Upon first consolidation, assets, liabilities and contingent liabilities identified as part of a merger are generally valued at their fair value on the date of acquisition, irrespective of the extent of the minority shares. The excess of the acquisition costs over the Group's share in the net assets measured at fair value is recognized as goodwill. If the acquisition costs are less than the fair value of the acquired identifiable assets and liabilities, the difference is reported directly in the consolidated income statement. Acquisition costs are expensed.

All receivables and liabilities, revenues, expenses and income, as well as intragroup profits and losses between the companies included in the consolidated financial statements are eliminated as part of consolidation.

These companies' financial statements are included by way of full consolidation.

Equity-accounted investments The shares in associated companies are balanced using the equity method and initially carried at their acquisition cost. The Group’s share in associated companies includes the goodwill arising upon acquisition. In subsequent periods, the acquisition costs are carried forward to include the proportion of net assets attributable to the FTE Group.

This entails increasing or decreasing the carrying amounts annually by the proportional net profits and losses, dividends distributed, and other equity changes. Impairment losses are applied to equity accounted investments if their recoverable amounts are less than their carrying amounts. Profits that require elimination arising from transactions with associates are offset against the participating interest's carrying amount through profit or loss.

D. Currency translation Functional currency

The items in the annual financial statements of each Group subsidiary are carried with the currency that best reflects the economic content of the underlying business transactions and circumstances relevant to the company (functional currency). All transactions denominated in a currency other than the functional currency are regarded as foreign currency transactions.

The consolidated financial statements are prepared in Euros, the functional currency of FTE Holding GmbH. The annual financial statements of foreign subsidiaries with functional currencies other than the Euro are translated in the consolidated financial statements into the Group currency of the Euro according to the modified balance sheet date rate method on the basis of the functional currency concept pursuant to IAS 21 (The Effects of Changes in Foreign Exchange Rates).

Accounting for business transactions Foreign currency transactions are translated into the functional currency by applying the rates prevailing on the transaction date. Currency gains and losses arising from the settlement of such business transactions and from the currency translation of monetary assets and liabilities are reported in the consolidated income statement.

Group companies Assets and liabilities of foreign Group companies with functional currencies other than the Euro are translated at the exchange rate prevailing on the balance sheet date (reporting date rate), while average exchange rates are applied to the translation of the consolidated income statement.

The difference arising from the currency translation is recognized directly in equity under the "foreign currency translation reserve" item.

Currency differences arising compared to the previous year's translation, or from the translation as of the first-time consolidation date within the FTE Group, are also recognized directly in equity under the "foreign currency translation reserve" item.

For the currency translation, the following main exchange rates are utilized for currency that is not represented within the European Economic and Monetary Union (EMU):

Reporting date rate Average rate 31.12.2016 31.12.2015 2016 2015 US Dollar USD 1.0541 1.0887 1.1069 1.1095 Brazilian Real BRL 3.4305 4.3117 3.8561 3.7004 Mexican Peso MXN 21.7719 18.9145 20.6673 17.6157 Czech Kroner CZK 27.02 27.025 27.033 27.283 Chinese Renminbi Yuan CNY 7.3202 7.0608 7.3522 6.9733 British Pound Sterling GBP 0.85618 0.73395 0.81948 0.72584 Danish Kroner DKK 7.4344 7.4625 7.4452 7.4585

E. Accounting principles

(1) Revenue recognition The revenues are generated mainly from the sale of goods. Pursuant to IAS 18, these revenues are reported excluding value added tax, and after deducting price reductions such as customer rebates and price discounts. Revenue from the sale of goods is recognized if the significant risks and opportunities connected with the asset's ownership have transferred to the buyer. License income is recognized on an accrual basis in line with the underlying contract. Interest income is reported pro rata temporis on the basis of outstanding amounts and effective interest until the maturity date, if it is ascertained that such income is likely to be received. Dividend income is reported when the legal entitlement to payment arises.

(2) Cost of sales Cost of sales comprises costs that have been incurred to produce and acquire merchandise to the extent that such merchandise is sold. It comprises all costs of sales reported for revenue recognition.

(3) Balance sheet structure Pursuant to IAS 1.66, assets are classified as current if

 the realization of the asset is expected within the normal business cycle, or the asset is held for sale within this period,

 the asset is primarily held for trading purposes,

 the realization of the asset is expected within twelve months after the balance sheet date, or

 it is in cash or cash equivalents, unless the exchange or utilization of the asset is restricted to the purpose of fulfilling an obligation for a period of at least twelve months after the balance sheet date. All other assets are classified as non-current.

Pursuant to IAS 1.69, liabilities are classified as current if

 the liabilities are expected to be settled within the normal business cycle,

 the liabilities are primarily held for trading purposes,

 the liabilities are expected to be settled within twelve months of the balance sheet date, or

 the company does not have an unlimited right to postpone the settlement of the liability by at least twelve months after the balance sheet date. If the liability is associated with terms and conditions that allow it to be settled by issuing equity capital instruments thanks to a counterparty option, this does not affect its classification. All other liabilities are classified as non-current.

Claims and obligations arising from deferred taxes are generally reported as non-current assets or liabilities. If assets and liabilities comprise both current and non-current components, they are divided into their maturity components and reported as current and non-current assets or liabilities according to the balance sheet structure.

(4) Tangible assets Property, plant and equipment are reported at cost less depreciation based on the estimated normal useful operating lives of the assets. The revaluation method pursuant to IAS 16.31 - 42 is not applied.

Along with costs directly attributable to the production process, costs for self-produced property, plant, and equipment comprise an appropriate proportion of production-related overhead costs. These include production-related depreciation and impairment losses, and an appropriate portion of administrative and social costs. Borrowing costs are not reported, as no qualified assets exist.

Depreciation is applied straight-line in accordance with prospective useful economic lives:

Useful life Years Buildings 25-50 years Improvements to buildings 3-10 years Equipment and machinery 6-15 years Furniture and office equipment and vehicle fleet 3-10 years

Land is not appreciated. Property, plant, and equipment with a cost of between € 150 and € 1,000 (low-cost assets) is written off fully in the year of purchase and reported correspondingly as asset additions and as depreciation in the analysis of non-current assets.

Disposal gains and losses are calculated by comparing sales proceeds with the corresponding carrying amounts, and reported through profit or loss.

Repair and maintenance expenses are expensed in the period in which they occur. Costs for major repairs and maintenance are allocated to the asset's carrying amount if the recognition criteria for property, plant and equipment are satisfied. Major repairs are depreciated over the residual useful life of the related assets. Carrying amounts of previous repairs and maintenance work are derecognized. The same accounting treatment is applied if assets need to be replaced at regular intervals.

Carrying amounts, normal operating useful lives, and depreciation methods are reviewed annually pursuant to IAS 16.51 and 16.61.

(5) Intangible assets Intangible assets comprise goodwill, customer lists, the brand, technology, patents, software, licenses and similar rights, as well as self-produced intangible assets deriving from development.

Goodwill Purchased goodwill is capitalized and tested at least annually for impairment pursuant to IAS 36, and where there are indications of impairment (so-called "triggering events"). Goodwill is tested for impairment in a single-step process at the level of the cash-generating units, or groups of cash-generating units to which it is allocated.

This entails comparing the carrying amount of the cash-generating unit to its recoverable amount. If the carrying amount exceeds the recoverable amount, an impairment exists, and the goodwill is written down to the recoverable amount.

The recoverable amount of the cash-generating unit corresponds to the higher of fair value less costs to sell and value in use.

Subsequent reversals to goodwill impairment losses are not permitted if the reasons for previous impairment no longer apply.

Development costs Research costs are not capitalized but are instead expensed in the period in which they are incurred pursuant to IAS 38.

Development costs are capitalized if the IAS 38 recognition criteria have been satisfied. After first- time capitalization, the asset is carried at cost less cumulative amortization and cumulative impairment losses. Capitalized development costs include all directly attributable specific costs, proportional overhead costs, and borrowing costs pursuant to IAS 23, and are amortized over the budgeted product life-cycle.

Other intangible assets Intangible assets with finite normal useful operating lives are capitalized according to the purchase cost principle pursuant to IAS 38, and amortized straight-line over their normal operating useful lives.

By contrast, intangible assets with indeterminate useful lives cannot be amortized. Borrowing costs for intangible assets whose production requires a considerable period of time (qualified asset), and which can be directly attributable to the production of these assets, are capitalized under the preconditions of IAS 23.

The accounting principles applied to intangible assets are as follows:

Useful life Depreciation method Self-produced or purchased applied Goodwill indefinite no scheduled purchased amortisation Software up to 4 years straight-line purchased and self- produced Technology and patents 8-10 years straight-line purchased Licenses up to 4 years straight-line purchased Development costs 5-10 years straight-line self-produced Customer lists 9-20 years straight-line purchased Brand 20 years straight-line purchased

In the consolidated income statement, amortization is reported especially under the cost of sales.

Carrying amounts, normal useful operating lives and amortization methods are reviewed annually.

(6) Assets held for sale Individual non-current assets or groups of assets are classified as "held for sale", and are reported separately in the balance sheet if their disposal has been approved, and it is extremely likely that disposal will occur. Assets classified as such are recognized at the lower of their carrying amount and fair value less costs to sell. Depreciation and amortization are discontinued when such assets are classified as "held for sale".

(7) Impairment of non-financial assets On each balance sheet date, an appraisal is undertaken to gauge whether indications exist that an asset might be impaired. If indications exist of impairment to property, plant, and equipment or intangible assets, the carrying amount of the asset is compared with its recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and value in use.

Fair value less costs to sell is the amount that could be achieved through the sale of an asset in a transaction on market terms between willing and knowledgeable parties in an arm's length transaction, and after deducting costs of disposal.

Value in use corresponds to the present value of future cash flows that can prospectively be generated from an asset.

If the carrying amount exceeds the higher of the two amounts (fair value less costs to sell and value in use), an impairment is applied to the lower recoverable amount.

If the reason for an earlier impairment applied to property, plant and equipment or intangible assets (excluding goodwill) no longer applies, the impairment is reversed to the level of amortized cost.

(8) Financial instruments A financial instrument is an agreement that results at one company in the creation of a financial asset and at the same time at another company in the creation of a financial liability or equity instrument.

Financial assets Financial assets particularly comprise cash and cash equivalents, trade receivables, and primary and derivative financial assets.

Financial liabilities Financial liabilities comprise a contractual obligation to render cash or another financial asset to another company. Financial liabilities mainly comprise mainly trade payables, bonds, bank borrowings, finance lease liabilities, and derivative financial liabilities.

The Group categorizes its financial instruments as follows:

a. Loans and receivables

b. Financial assets and liabilities measured at fair value through profit or loss

c. Available-for-sale financial assets

d. Financial liabilities which are measured at amortised cost Categorization depends on the respective purpose for which the financial instruments were concluded. The management determines categorization of the financial instruments used in the reporting period.

Categorization of the financial instruments to the respective measurement categories occurs on first-time recognition. To the extent permitted and required, recategorisations occur at the end of each financial year. a. Loans and receivables Financial assets with fixed or determinable payments that are not listed on an active market are categorized as loans and receivables. b. Financial assets and liabilities measured at fair value through profit or loss Financial assets measured at fair value through profit or loss comprise financial assets that are held for trading. A financial asset is allocated to this category if it was generally acquired with the intention of short-term resale. Derivatives also belong to this category. Assets of this category are reported as current assets if it is expected that the asset will be realized within twelve months. All other assets are classified as non-current. The same applies to financial liabilities. c. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are not allocated to any of the other categories.

Financial assets are allocated to non-current assets if the management does not intend to sell them within twelve months after the balance sheet date, or if they are not due within twelve months after the balance sheet date. If the management has expressed its firm intention to hold the financial instruments for less than twelve months from the balance sheet date, or if they must be sold or paid due to working capital requirements, they are reported as current assets.

Recognition and measurement of financial assets and liabilities Financial assets are measured at fair value on initial recognition. The carrying amount of financial instruments that are not measured at fair value through profit or loss includes directly attributable transaction costs.

The fair value of financial instruments that are traded on organized markets is determined by the listed market price on the balance sheet date. The fair value of financial instruments for which no active market exists is calculated by applying recognized valuation methods. If the market value of shares cannot be calculated reliably, they are measured at cost less impairment. The FTE Group reports financial assets and financial liabilities in the balance sheet, if the FTE Group obtains contractual rights or obligations.

Financial assets are derecognized if the rights to payments arising from the financial assets have expired or have been transferred, and the Group has essentially transferred all risks and opportunities connected with ownership. Financial liabilities are derecognized if the obligations have been satisfied, cancelled or expire.

"Financial assets and liabilities measured at fair value through profit or loss" and "available-for- sale financial assets" are subsequently measured at fair value. Loans and receivables, as well as financial liabilities which are measured at amortized cost are measured at amortized cost applying the effective interest method.

Realized and unrealized gains and losses arising from the market value changes to financial assets and financial liabilities that are "measured at fair value through profit or loss" are carried through profit or loss in the period in which they arise. Unrealized gains and losses arising from fair value changes to financial instruments categorized as "available-for-sale" are recognized directly in equity.

All standard market purchases and sales of financial assets are recognized on the settlement date, in other words, on the date on which an asset is delivered to, or by, the company. Derivatives form an exception. They are recognized on their trade date.

Standard market purchases and sales comprise purchases or sales of financial assets that prescribe the delivery of the assets within a period determined by market regulations or conventions.

An appraisal is conducted on each balance sheet date as to whether objective indications exist for the impairment of a financial asset, or group of financial assets. In the case of a financial asset or group of financial assets, an impairment exists only if, as a consequence of one or several events that have occurred after the initial recognition of the asset (loss-entailing event), an objective indication for impairment exists, and this loss-entailing event (or loss-entailing events) exert(s) an effect that can be reliably estimated on the estimated future cash flows of the financial asset or group of financial assets.

The following comprise potential objective indications of impairment: Indications of financial difficulties on the part of a customer or group of customers, non-compliance or non-payment of interest or capital amounts, the probability of declaring insolvency or of being subject to another type of financial restructuring, and identifiable facts that indicate a measurable reduction in estimated future capital flows, such as unfavourable changes to a borrower's solvency, or a financial situation in accordance with default.

(9) Leases The Group companies have entered into leases, including for operating and office equipment, and vehicles. These are classified as either financing leases or operating leases pursuant to IAS 17. Leases for property, plant and equipment where the Group assumes the significant risks and opportunities connected with ownership of the leased asset are classified as finance leases. IAS 17 includes rules to determine economic ownership of an asset based on the risks and opportunities connected with the lease transaction. In the case of a finance lease, the leased items are allocated to the lessee, whereas in the case of an operating lease they are allocated to the lessor.

In the case of a finance lease, the leased item is capitalized at the start of the lease at the lower of the fair value of the lease asset or the present value of the minimum lease payments. The related lease obligations are reported under other non-current liabilities after deducting financing costs. The lease instalments are split into interest and redemption components. The interest portion of the lease instalments is calculated with a periodically unchanging return on the net investment value over the lease duration, and reported in the income statement in the respective period. Property, plant, and equipment acquired on the basis of finance leases are depreciated over the shorter of either the normal useful operating life of the asset or the lease period.

Leases where the lessor retains the significant proportion of risks and opportunities connected with ownership are designated as operating leases. The equally distributed lease instalments, less any payments received from the lessor, are carried through profit or loss in the income statement over the contractual duration of the lease.

(10) Inventories Inventories are measured at the lower of cost or net realizable value. The purchase costs of raw materials are calculated using the weighted average. The production costs for finished goods and work in progress include direct material costs, direct labour, other individual costs and other production-related overheads. Production overheads also include production-related depreciation and amortisation. Borrowing costs and sales costs are not capitalized.

Net realizable value is the estimated sales price as part of normal business transactions less production costs and sales expenses.

Appropriate discounts are applied to the net realizable value, as well as for poorly marketable or outdated inventory items on the basis of historical data. If the net realizable value of previously devalued inventories has risen, the related value adjustment is reversed.

(11) Trade receivables Trade receivables are reported at the original invoicing amount less valuation allowances. Valuation allowances are taken into account if receivables are uncollectible or doubtful, and the valuation allowance can be reliably estimated. The valuation allowance amount is calculated as the difference between the carrying amount and the present value of the assumed payment receipt, which is discounted by applying the original effective interest rate of the financial asset.

If the reasons for valuation allowances or other impairment losses no longer apply, the valuation allowances or impairment losses are reversed, and the asset is written up accordingly.

(12) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, demand deposits and other short-term highly liquid financial assets due within three months. These are recorded in the balance sheet at acquisition cost.

(13) Taxes Income taxes comprise all effective taxes that are levied on the current taxable earnings of the subsidiaries included in the consolidated financial statements on the basis of their respective national tax laws, as well as deferred taxes.

Effective tax reimbursement claims and tax liabilities for current and previous periods are recognized at the amount at which reimbursement is expected from the tax authorities, or a payment is expected to be made to the tax authorities. The amounts are calculated on the basis of the respective national tax rates and tax laws prevailing on the balance sheet date.

Pursuant to IAS 12 (Income Taxes), deferred taxes are formed for all temporary differences between the values of assets and liabilities recognized pursuant to IFRS, and the tax values recognized for assets and liabilities (liability method), as well as for consolidation transactions and tax loss carry forwards. Deferred tax assets are formed where it is likely that the resulting tax reduction claims from the anticipated use will be realised.

The carrying amount of deferred tax assets is reviewed on each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable earnings will be available against which the deferred tax asset can be at least partially utilized. Unrecognized deferred tax reimbursement claims are reviewed on each balance sheet date and recognized to the extent that it is probable that future taxable earnings will enable realization of the deferred tax asset.

In application of IAS 12.39, no deferred taxes are recognized for temporary differences connected with interests in subsidiaries, associated companies or joint ventures as it is unlikely that the temporary differences will reverse within the foreseeable future.

Deferred tax receivables arising from temporary differences in relation to interests in subsidiaries, in associated companies and in joint agreements are applied, unless the date of reversal of the temporary differences can be determined by the Group and it is likely that the temporary differences will not be reversed in the foreseeable future because of this influence. Deferred tax receivables may only be applied to the extent that sufficient taxable income will be available against which the temporary differences can be used.

Deferred taxes are calculated based on the respective nationally specific tax rates expected on the realization date of the asset, or on the settlement date of the liability, in line with the statutory regulations prevailing on the balance sheet date. To the extent that deferred tax assets need to be taken into consideration that relate to consolidation bookings that cannot be attributed to individual Group companies, the parent company's tax rate is applied.

In line with IFRS, deferred tax assets and deferred tax liabilities are not discounted.

Deferred tax assets and deferred tax liabilities are offset if an enforceable right exists to offset effective tax reimbursement claims against effective tax liabilities, and these relate to income taxes for the same tax subject that are levied by the same tax authority.

The value added tax amount that is reimbursed by the tax authority, or levied by the tax authority, is reported in the balance sheet under receivables or liabilities.

Other taxes, such as those depending on consumption or assets, are included in production costs, sales costs, research and development costs, and general administrative costs.

(14) Employee benefits a. Performance-related pension schemes The Group companies operate various pension schemes depending on their national conditions and circumstances. A defined benefit pension scheme is a pension scheme where the amount of pension payments is determined on the basis of one or several factors such as age, number of years' service, and compensation. Pursuant to IAS 19, every year, external actuaries calculate obligations arising from defined benefit pension schemes applying the projected unit credit method.

The FTE Group applies the revised IAS 19 that was published in June 2011.

Actuarial gains and losses based on adjustments and changes made to past actuarial assumptions are recorded as "Other comprehensive income" directly in equity in the period they arise.

Unvested past service costs are recognized in profit and loss when they occur. The expected interest on the plan assets is calculated on the basis of the discount rate of the pension obligations. Replenishment and settlement amounts for partial retirement and lifetime working accounts are added in instalments through profit or loss over the remaining duration of the employment relationship.

Obligations from defined benefit pension schemes are derived from the present value of the defined benefit obligations on the reporting date, and adjustments for actuarial gains or losses. The present value of the total obligation is recognized at the estimated future outgoing payments, whereby interest rates derived from high-quality corporate bonds are applied that have maturities similar to the related obligations.

Pension expenses are calculated from the annual actuarial calculations of the obligations and include current costs for service and interest. b. Defined contribution pension schemes In the case of defined contribution pension schemes, the company pays contributions for pension schemes based on statutory or contractual provisions. Once the amounts have been paid, the company no longer has any further payment obligations. Current contribution payments are reported as pension expenses in the respective year. c. Benefits paid upon termination of an employment relationship Termination benefits are paid as soon as an employee's employment relationship is terminated before a planned retirement date, or as soon as an employee accepts a voluntary settlement as compensation for such benefits.

The Group reports termination benefits if a proven obligation exists to terminate the employment relationship of a currently employed individual pursuant to a detailed formal plan without an option to withdraw from the arrangement, or to render payments based on an offer to support voluntary early termination of employment relationships. d. Bonus plans Obligations from bonus schemes are reported among other obligations if at least one of the following conditions is satisfied:

 a formal scheme exists, and the amounts to be paid are determined before the financial accounts are prepared; or

 prior years' practice has generated a justified expectation among employees of a bonus payment, and the amount can be determined before the preparation of the annual financial statements. Obligations from bonus schemes that are settled within twelve months are to be measured at the prospective amount to be paid.

(15) Provisions Provisions are formed if the Group has a current (legal or de facto) obligation arising from a past event, such an obligation will probably result in an outflow of resources comprising economic benefits, and the level of the obligation can be reliably estimated. The amount of the provision corresponds to the best possible estimate of the amount required to settle the current obligation on the balance sheet date, whereby expected third-party reimbursements are not offset, but are instead recognized as a separate asset if realization is as good as certain.

Non-current provisions with a residual term of more than one year are recognized at the amount required to settle them, discounted to the balance sheet date on the basis of risk-adequate market interest rates, if the interest effect is significant.

Provisions for warranties are formed on the date when the respective goods are sold, or the respective services are rendered. The level of the provision is based on the historical trend of warranties, and an observation of all future possible warranty cases weighted according to their event probabilities.

If the Group expects a refund of a provision that is carried as a liability, the refund is capitalized as a separate asset pursuant to IAS 37.53. If the refund is in a close economic relationship with the obligation, the expense from the refund obligation is netted against the earnings from the corresponding refund claim in the income statement.

(16) Government grants Pursuant to IAS 20, government grants are not reported until sufficient certainty exists that the grants will actually be provided to the Group, and the Group will satisfy all preconditions required by the claim.

All government grants in the form of investment subsidies and premiums, to the extent that they relate to acquisition or production costs, are generally deducted from the acquisition or production costs of the respective asset. All other grants are carried through profit or loss in the period in which the corresponding expenses are incurred.

(17) Management judgements and assessments Preparing the consolidated financial statements pursuant to IFRS requires that assumptions and discretionary decisions are reached and judgements are made that impact the valuation of the accounted assets and liabilities, as well as the expenses and income.

Goodwill impairment testing The Group conducts annual goodwill impairment testing. The recoverable amount of the cash- generating unit (CTU) was calculated based on value in use. Such calculations are based on assumptions. Changes in assumptions can result in changes to the value in use, possibly resulting in the reporting of impairment losses.

Recognition and measurement of pension provisions and similar obligations The present value of the pension obligation depends on many factors based on actuarial assumptions. The assumptions applied when calculating net expenses (income) for pensions include the discounting rate. Any changes to these assumptions can affect the present value of the pension obligation.

Recognition and measurement of other provisions The Group is obligated to pay income taxes in various countries. This necessitates significant assumptions to calculate the global income tax provision. If the final taxation of business transactions differs from that assumed at the start, this will affect both effective and deferred taxes in the period in which the taxation is conclusively determined.

The provision for warranties is based on historical values that can differ from actual warranty amounts. Current negotiations about warranty provisions with important customers might result in adjustments to provisions in future periods.

All the assumptions and estimates are based on the current status of knowledge and currently available data. Actual outcomes can differ from the estimates. If the actual amounts differ from the estimated amounts, the carrying amounts of the liabilities are adjusted accordingly.

F. Notes to the consolidated income statement

(18) Revenue Revenue by region breaks down as follows:

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€ Germany (1) 158,956 136,530 Rest of Europe(1) 215,092 214,715 America 74,010 74,598 Asia 99,826 75,360 Remaining areas 3,426 3,716 551,310 504,919 (1) The prior-year revenues for the brake calliper business were reclassified from Rest of Europe to Germany.

The regional distribution of revenue follows the host country principle.

A change has arisen to the classification of revenues by product category. The overview below shows the classification of revenues according to the previous classification as well as the new classification.

Revenues under the previous product categories break down as follows:

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€ Clutch systems 358,161 314,425 Braking systems 130,161 126,129 Other(2) 62,988 64,365 551,310 504,919 (2) Other revenues primarily comprise spare parts and merchandise incl. CPx (control piston unit).

Revenues under the new product categories break down as follows:

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€

BAT(3) 130,162 126,129 thereof, reconditioned brake callipers 45,970 47,547 MST(4) 282,043 284,078 EST(5) 96,376 58,750 EPT(6) 8,986 2,655 Other(7) 33,743 33,307 551,310 504,919

(3) Brake activation technology incl. brake calliper business (4) Manual Shift Technology (5) Electrical Shift Technology incl. CPx (control piston unit) (6) Electrical Pump Technology (7) Other revenues primarily comprise spare parts and merchandise

Revenue of K€ 193,899 (prior year K€ 161,785) was generated with two customers in financial year 2016. Of this figure, K€ 148,709 (prior year K€ 121,030) was attributable to the largest customer and K€ 45,190 (previous year: K€ 40,755) to the second-largest customer.

The bulk of these revenues relate to brake activation technology including the brake calliper business (BAT), manual shift technology (MST) and electronic shift technology including CPx (control piston unit).

(19) Cost of sales

Cost of sales comprises the acquisition and production costs incurred for the products and goods that are sold. The cost of sales includes mainly materials expenses, personnel expenses, and depreciation, amortization and impairment losses. In addition to scheduled depreciation, the depreciation of K€ 28,356 (prior year K€ 30,394) also includes depreciation due to the purchase price allocation of K€ 13,149 (prior year K€ 13,149). There was no unscheduled depreciation and amortization during the reporting year (previous year: K€ 1,891).

(20) Selling and marketing expenses

Selling and marketing expenses of K€ 14,691 (prior year K€ 14,691) include both overhead costs for tangible assets and personnel costs, as well as depreciation, amortization and impairment losses for the sales and marketing area in the amount of K€ 453 (previous year: K€ 327) for the expenses arising for marketing and advertising.

(21) General administrative expenses

The general administrative expenses of K€ 20,955 (prior year K€ 23,650) comprise mainly tangible asset overhead and personnel costs, as well as depreciation, amortization, and impairment losses attributable to the administrative area in the amount of K€ 192 (previous year: K€ 140).

(22) Development costs Research and development costs show the following changes:

01.01.- 01.01.- 31.12.2016 31.12.2015 K€ K€ Research and development expenses 39,688 35,809 Less capitalized development costs -11,792 -10,749 27,896 25,060

Research and development costs include depreciation and amortization of K€ 8,083 (previous year: K€ 7,717). This includes amortization of capitalized development costs in the amount of K€ 6,471 (previous year: K€ 6,237), see note (27). There were no unscheduled write-downs during financial year 2016 (previous year K€ 1,873).

(23) Net financial result

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€

Result from equity accounted investments:

Income from associates 1,073 955 Result from equity accounted investments 1,073 955

Other financial expenses:

Bond interest expenses -23,697 -23,697 Reversal of deferred RFC transaction costs -543 -543 Reversal of deferred bond transaction costs -1,728 -1,557 Bank interest expenses -437 -484 Interest portion of additions to pension provisions -1,872 -1,605 Expenses from measurement of loans denominated in foreign currencies -342 -2,534 Other -522 -490 Other financial expenses -29,141 -30,910

Other financial income:

Expenses from measurement of loans denominated in foreign currencies 1,691 1,014 Income from capitalizing of interest on Development activities 1,789 1,669 Income from reversal of premium 223 206 Other 128 180 Other financial income 3,831 3,069

-24,237 -26,886

The net financial result includes total interest income and expenses from financial assets and liabilities calculated according to the effective interest method that are not measured at fair value through profit or loss.

Total interest income of K€ 0 (previous year: K€ 0) is offset by K€ 26,405 (previous year: K€ 26,281) of total interest expenses.

No income and expense items existed in the form of payments (e.g. commissions) that were not included in the effective interest calculation.

(24) Income taxes/deferred taxes

Effective income taxes actually paid or owed in the individual countries, and deferred taxes, are reported as income taxes. Such income taxes are composed of trade tax, corporation tax, the solidarity surcharge, and corresponding foreign income taxes.

FTE Holding GmbH and its foreign Group companies are subject to corporation and trade tax. The applicable corporation tax rate in the period under review is 15.0% (prior year 15.0%) plus the solidarity surcharge of 5.5% (prior year 5.5%). Trade tax is 12.5% (prior year 12.4%) of taxable trade income. The nominal tax rate amounts to 28.4% (previous year: 28.2%). The adjustment of the tax rate results from the increase in the collection rate for the Mühlhausen/Thüringen municipality with effect from 1 January 2016.

The expenses for income and revenue taxes are divided by origin as follows:

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€

Domestic -7,218 -3,487 Foreign -7,656 -2,185 Current tax expenses (-) / income (+) -14,874 -5,672 Domestic 2,581 2,102 Foreign -31 69 Deferred tax expenses (-) / income (+) 2,550 2,171 -12,324 -3,501

The notional income tax expense that would have been derived when applying the tax rate for the dominant Group company of 28.4% (previous year: 28.2%) is reconciled with the reported tax expense as follows: The non-deductible expenses mainly affect interest expenses that are not tax-deductible.

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€

Tax reconciliation calculation

Earnings before tax 29,545 10,227 Expected income tax expense (-)/ income (+) -8,376 -2,889 Differing foreign tax rates and changes to tax rates 753 622 Utilization of tax-free investment premiums, tax credits and other tax- free amounts 590 117 Tax effects on dividends -204 -30 Previous years' taxes -739 2,691 Non-deductible expenses -4,494 -3,996 Non-capitalized deferred taxes (tax credits and carryforwards) 358 -16 Other -212 0 Reported income tax expense -12,324 -3,501

The respective national specific tax rate is taken into account when calculating the company's deferred taxes. The tax rates applied in Germany and abroad range from 19% to 34%.

The calculation of deferred taxes on consolidation measures is based on the tax rates for the respective Group company. The effective income tax rate of FTE Holding GmbH of 28.4% (previous year: 28.2%) was applied for central consolidation measures.

Deferred tax assets are recognized on tax loss carryforwards if it appears sufficiently certain that they will be realized in the near future.

From the total carryforwards and tax credits in the amount of € 0.8m (previous year: € 11.7m), values in the amount of € 0.5m (previous year: € 2.4m) are expected to be utilized within an appropriate period. Therefore, deferred tax assets in the amount of € 0.1m (previous year: € 1.2m) were formed.

For carryforwards and tax credits in the amount of € 0.3m (previous year: € 9.3m) there were legal or economic restrictions in terms of their utilization. Therefore, no deferred tax assets were applied for this purpose.

No deferred tax assets were applied for interest carryforwards of € 45.2m (prior year: € 33.9m) because the interest carryforward can probably not be used.

Deferred taxes on so-called “outside basis differences” (differences between the net assets including the subsidiaries’ goodwill and the relevant tax value of the interests in the subsidiaries) were not formed because the reversal of the differences can be controlled through a dividend distribution, for example, and no significant tax effect is expected for the foreseeable future. The outside basis differences for the current financial year are € 0.1m. In the prior year there were deductible temporary differences in relation to interests in subsidiaries of € 13.7m.

Tax effects of components in the statement of comprehensive income

2016 2015 Deferred Deferred K€ Before tax After tax Before tax After tax taxes taxes Pensions -2,523 714 -1,809 6,062 -1,713 4,349

(25) Other information on the income statement The result for the period includes:

01.01.- 01.01.-

31.12.2016 31.12.2015 K€ K€

Wages and salaries 143,767 142,853 Social security costs 29,062 28,057 Personnel expenses 172,829 170,910

Cost of materials 267,416 238,832

Depreciation 37,083 38,578

The changes primarily result from the growth in business volume.

G. Notes to the balance sheet

(26) Property, plant, and equipment

Payments on Land Equipment Operating and account and and and office Total assets under buildings machinery equipment construction K€ K€ K€ K€ K€ Acquisition costs as of 34,480 74,030 13,349 15,187 137,046 01/01/2015 Additions 134 4,379 2,690 13,135 20,338 Disposals 0 -394 -136 0 -530 Reclassifications 1,624 13,117 2,310 -17,804 -753 Translation differences 71 -144 97 146 170 Acquisition costs as of 36,309 90,988 18,310 10,664 156,271 31/12/2015 Depreciation and amortisation -3,553 -18,227 -4,428 0 -26,208 as of 01/01/2015 Additions -2,560 -13,234 -4,700 0 -20,494 Disposals 0 370 90 0 460 Reclassifications 0 0 0 0 0 Translation differences -6 191 36 0 221 Depreciation and amortisation -6,119 -30,900 -9,002 0 -46,021 as of 31/12/2015 Acquisition costs as of 36,309 90,988 18,310 10,664 156,271 01/01/2016 Additions 214 6,652 4,049 11,727 22,642 Disposals 0 -1,726 -98 0 -1,824 Reclassifications 419 6,481 2,077 -9,587 -610 Translation differences -267 -480 -168 -80 -994 Acquisition costs as of 36,675 101,916 24,169 12,724 175,485 31/12/2016 Depreciation and amortisation -6,119 -30,900 -9,002 0 -46,021 as of 01/01/2016 Additions -2,242 -12,673 -4,308 0 -19,223 Disposals 0 1,650 57 0 1,707 Reclassifications 0 0 0 0 0 Translation differences 35 381 162 0 578 Depreciation and amortisation -8,326 -41,542 -13,091 0 -62,959 as of 31/12/2016 Remaining carrying amount as 30,190 60,088 9,307 10,664 110,250 of 31.12.2015 Remaining carrying amount as 28,349 60,374 11,078 12,724 112,526 of 31.12.2016

In 2016, no unscheduled depreciation was performed on equipment and machinery and operating and office equipment (prior year K€ 1,891).

Some of the property, plant and equipment is assigned as collateral. See note (47) for details.

(27) Intangible assets

Technology Development Customer Goodwill and Brand Other Total lists patents costs K€ K€ K€ K€ K€ K€ K€ Acquisition costs as 97,538 12,890 15,334 36,019 79,183 10,483 251,447 of 01/01/2015 Additions 0 0 0 10,749 0 593 11,342 Disposals 0 0 0 0 0 0 0 Reclassifications 0 0 0 0 0 753 753 Translation -13 -14 0 0 189 56 218 differences Acquisition costs as 97,525 12,876 15,334 46,768 79,372 11,885 263,760 of 31/12/2015 Depreciation and amortisation as of 0 -1,479 -1,151 -3,946 -12,224 -7,508 -26,308 01/01/2015 Additions 0 -1,402 -807 -6,237 -8,227 -1,411 -18,084 Disposals 0 0 0 0 0 0 0 Translation 0 0 0 0 -126 9 -117 differences Depreciation and amortisation as of 0 -2,881 -1,958 -10,183 -20,577 -8,910 -44,509 31/12/2015 Acquisition costs as 97,525 12,876 15,334 46,768 79,372 11,885 263,760 of 01/01/2016 Additions 0 0 0 11,792 0 1,303 13,095 Disposals 0 0 0 0 0 -27 -27 Reclassifications 0 0 0 0 0 610 610 Translation 13 8 0 0 60 115 196 differences Acquisition costs as 97,538 12,884 15,334 58,560 79,432 13,885 277,634 of 31/12/2016 Depreciation and amortisation as of 0 -2,881 -1,958 -10,183 -20,577 -8,910 -44,509 01/01/2016 Additions 0 -1,546 -803 -6,471 -7,498 -1,542 -17,861 Disposals 0 0 0 0 0 27 27 Translation 0 -1 0 0 -60 -89 -149 differences Depreciation and - amortisation as of 0 -4,428 -2,761 -16,654 -28,135 -62,492 10,514 31/12/2016 Remaining carrying amount as of 97,525 9,995 13,376 36,585 58,796 2,975 219,252 31.12.2015 Remaining carrying amount as of 97,538 8,456 12,573 41,906 51,297 3,372 215,142 31.12.2016

In 2016 there was no unscheduled amortization of intangible assets (previous year: K€ 1,873).

The scheduled amortization of intangible assets with a limited useful life was included in the amount of K€ 9,771 (prior year K€ 10,628) in the cost of sales, in the amount of K€ 19 (prior year K€ 14) in selling and marketing expenses, in the amount of K€ 1,277 (prior year K€ 626) in general administrative expenses and in the amount of K€ 6,790 (prior year K€ 6,817) in research and development expenses.

The goodwill is primarily related to the acquisition of the interests in FTE Verwaltungs GmbH on 12.07.2013 and the acquisition of the brake calliper reconditioning business on 01.11.2014 and is allocated to a single cash generating unit that represents the smallest group of assets, which independently generates fund inflows.

The FTE Group conducted its annual impairment test at Group level as of 31 December 2016. For the purposes of the impairment test, the carrying amount of the cash-generating unit was set against the value in use.

The value in use was calculated by discounting the future cash flows based on current operating results, and a detailed five-year planning horizon, as well as the application of a weighted average cost of capital (WACC) of 9.47% (previous year: 9.65%). The calculation was based on the following assumptions:

 future cash flows are understood to include cash inflows and outflows excluding financing activities and taxes

 assumptions about potential changes to these planned cash flows resulting from a different level or timing

 calculation of the weighted average cost of capital after tax (WACC after tax), taking into account the

 risk-free rate of 0.8% (previous year: 1.5%)

 corporate risk (e.g., beta factor indebted in the amount of 1.2 based on peer group analysis multiplied by the market risk premium)

 borrowing costs, and

 peer group capital structure

 Iterative calculation of the weighted capital costs (WACC before tax)

The cash flows were calculated based on financial plans approved by the management that are also utilized for internal purposes. The selected planning horizon reflects the assumptions for the short- and medium-term trends. The average of the cash flows for the 5-year planning horizon was applied for the cash flow forecasts beyond the five-year detailed planning horizon.

The significant assumptions on which the management’s calculation of value in use is based include the following assumptions which are mainly internally calculated, and which primarily reflect past experience: sales trends, acquisition projects, follow-up orders, investments, internal cost-optimization programs (e.g. FTE Point). Sales growth, acquisition projects, follow-up orders, investments, internal cost optimisation programmes (e.g. FTE Point). A 1.0% p.a. growth rate was applied when determining the perpetual return.

In the goodwill impairment test, no impairment would have been necessary if EBIT had been 5% lower, or WACC 1% higher.

Brand, customer lists, and development costs include the costs of the assets acquired by corporate acquisitions, and the following acquired or self-produced assets. Other intangible assets particularly comprise software.

The capitalized development costs include all directly attributable specific costs, proportional overhead costs, and borrowing costs pursuant to IAS 23, and are amortized over the planned product life-cycle. Borrowing costs of K€ 1,789 (previous year: K€ 1,699) were capitalized by applying a 9.0% (previous year: 9.0%) borrowing cost. In the period under review, K€ 11,792 (previous year: K€ 10,749) – including borrowing costs – was capitalized for 39 (previous year 34) development projects.

(28) Equity accounted investments Interests in associates In 2003, Zhejiang Asia-Pacific Machine Electric Ltd. and the FTE Group founded APG-FTE automotive Co. Ltd. with registered headquarters in China, Hangzhou, Zhejiang. Its carrying amount as of 31 December 2016 was calculated based on the company's preliminary IFRS financial statements as of 31 December 2016.

The Group's share of profits and losses arising from associates, as well as the assets and liabilities based on the preliminary financial statements as of 31 December 2016, are as follows:

01.01. - 01.01. -

31.12.2016 31.12.2015 K€ K€

Revenue 13,495 12,347 Net income (comprehensive income) 2,190 1,949 Share of the period result 1,073 955

31.12.2016 31.12.2015 K€ K€

Current assets 12,271 7,617 Non-current assets 2,646 2,771 Current liabilities and provisions 3,251 1,541

The amortized carrying amount of the interests in associated companies, which is included under the "equity accounted investments" balance sheet item, amounted to K€ 4,439 (previous year: K€ 4,335) on the balance sheet date. In 2016, a dividend was collected in the amount of K€ 801 (previous year: K€ 708).

2016 2015 K€ K€

Net assets 01.01. 8,847 7,802 Profit/loss for the period 2,190 1,949 Dividends -1,634 -1,444 Currency effects -344 540 Net assets 31.12. 9,059 8,847

Interest in associates (49%) 4,439 4,335

Carrying amount 4,439 4,335

(29) Inventories

31.12.2016 31.12.2015 K€ K€

Raw materials, consumables and supplies 39,956 34,498 Work in progress 15,873 19,069 Finished goods and merchandise 15,539 14,790 Tools intended for sale 5,270 5,342 76,638 73,699

In the 2016 financial year, inventory write-downs of K€ 128 (previous year: K€ 738) were performed to the lower net selling price. These have already been taken into consideration in the figures listed above.

Some inventory is assigned as collateral, see note (47).

(30) Trade receivables

31.12.2016 31.12.2015 K€ K€

Trade receivables position 70,548 66,240 less: Valuation allowance applied to receivables -1,113 -1,022 Receivables position - net 69,435 65,218

The concentration of credit risk relating to receivables is limited due to the number of the Group’s international customers that cover a range of manufacturing and marketing companies in various end markets. As of 31.12.2016 and 31.12.2015 there were no indications that trade receivables that were not impaired could be uncollectible.

The valuation allowances applied to trade receivables changed as follows:

2016 2015 K€ K€

As of 01.01 -1,022 -1,122 Addition -70 -16 Consumption 1 4 Reversal 2 89 Currency effects -24 23 As of 31.12 -1,113 -1,022

The addition to and reversal of the valuation allowances for impaired receivables are reported under the “selling and marketing expenses” item in the consolidated income statement. Valuation allowances are consumed if no further incoming payments are expected. The term structure of receivables which are overdue, but not specifically impaired, is as follows:

31.12.2016 31.12.2015 K€ K€

Trade receivables, not due and not specifically impaired 62,262 56,704

Trade receivables, overdue and not specifically impaired

1 to 30 days overdue 1,127 2,901 31 to 90 days overdue 2,837 3,397 91 days overdue or more 3,206 2,191 7,170 8,489

Impaired trade receivables 1,117 1,047

Valuation adjustments applied to trade receivables -1,113 -1,022

Carrying amount of trade receivables 69,435 65,218

Some trade receivables are assigned as collateral, please refer to note (47).

(31) Other assets

31.12.2016 31.12.2015 K€ K€ a. Other financial assets

Non-current:

Rental deposits and other assets 442 492 Capitalized borrowing costs (RCF) 814 0 1,256 492 Current: Claims for compensation 14,027 14,026 Capitalized borrowing costs (RCF) 543 0 Receivables from employees 1,071 1,209 Receivables – suppliers 654 274 Lease deposits 135 72 Remaining assets 4,334 1,879 20,764 17,460

b. Other miscellaneous assets Current:

VAT receivables 6,683 6,136 Other taxes 328 284 Prepaid fees and contributions 2,220 1,700 Government grants 0 121 Remaining assets 366 549 9,597 8,790 Other assets – total 31,617 26,742

The transaction costs are recognised under other assets following the full RCF repayment.

Warranty provisions are set, in part, against refund claims of K€ 11,667 (prior year K€ 11,667), which are carried as “Claims for compensation” under other assets. The company anticipates the exercising of the provision and a refund claim within a year.

As of the balance sheet date, no indications existed of potential default on the unimpaired financial assets.

Government grants The FTE Group received no government grants in 2016. The previous year, 2015, included a receivable arising from investment subsidies for the creation of new jobs and the training of new employees from the Czech state in the amount of K€ 121. This related to the subsidiary FTE Czechia.

(32) Cash and cash equivalents

31.12.2016 31.12.2015 K€ K€

Bank balances and cash in hand 46,791 40,540 46,791 40,540

Cash and cash equivalents comprise cash in hand, checks and bank deposits with an original term of less than three months.

(33) Equity As of 31 December 2016, FTE Holding GmbH reports unchanged subscribed capital of K€ 25 and additional paid-in capital of K€ 90,586, both of which are fully paid-in.

The foreign currency translation reserve comprises mainly the cumulative foreign currency translation differences arising from the separate financial statements of the foreign companies (Mexico, USA, Brazil, Czech Republic, China, and Denmark).

31.12.2016 31.12.2015 K€ K€

Consolidated companies -2,921 -1,699 Companies valued at equity -168 265 -3,089 -1,434

Please refer to the statement of changes in equity for more details.

(34) Bonds

31.12.2016 31.12.2015 K€ K€

Bonds 263,300 263,300 Premium 920 1,142 Transaction costs -7,573 -9,302 256,646 255,140

On 12 July 2013, the FTE Group issued a bond with a volume of K€ 240,000 with a 9% coupon interest rate. The bond's volume was increased by K€ 23,300 with the same conditions on 22 November 2013; the issue price was 106.6%. The bond matures on 15 July 2020. Interest payments are due every six months on January 15 and July 15. The loan conditions include various optional termination rights (“optional redemption”) on the part of FTE. In principle, accordingly a repayment of the loan is not possible until 15 July 2016 at a rate of 104.5%, for a return after 15 July 2017 the rate is 102.25%.

(35) Other financial liabilities The other financial liabilities are composed as follows:

31.12.2016 31.12.2015 K€ K€

RCF (super senior revolving credit facility) 0 10,000 Transaction costs 0 -1,900 0 8,100

The transaction costs are recognised under other assets following the full RCF repayment, see note (31).

RCF (super senior revolving credit facility) With an agreement dated 2 July 2013 and taking effect on 12 July 2013, the company opened a revolving credit facility (super senior revolving credit facility) with a banking syndicate with a total volume of € 42.5m and availability in various currencies to cover ongoing financing requirements. The term of the agreement is six years and ends on 12 July 2019. Interest is based on EURIBOR when utilizing the credit facility in EUR, or on LIBOR when utilizing it in another currency, plus a margin of 3.5 to 4.0% p.a. depending on adherence to the covenants and the term that has passed since the agreement took effect.

In addition, an annual commitment fee of 40% of the interest margin (3.5% to 4.0%, see above) on the amount of the available credit facility is charged for the provision of the credit facility.

The credit facility is collateralized by pledged bank accounts and shares of subsidiaries of the FTE Group, please refer to note (47).

A credit facility in the amount of € 15.0m was utilized to finance the acquisition of the brake calliper reconditioning business in Denmark at the end of 2014. A repayment of € 5.0m was made in November 2015. A further € 5.0m was repaid in both May 2016 and in November 2016. The credit line availed of was therefore repaid in full.

(36) Other liabilities The other liabilities are composed as follows:

31.12.2016 31.12.2015

K€ K€ Other financial liabilities Non-current:

Obligations to personnel ERA 154 602 Other 0 70 154 672

Current: Liabilities – interest 11,139 11,089 Outstanding invoices 9,083 10,145 Obligation to personnel ERA 463 463 Other personnel expenses 11,350 12,031 Other 9 9 32,044 33,737

b. Other miscellaneous liabilities Non-current:

Obligations to pension guarantee association 62 62 Other 0 2 62 64

Current: Wage tax and social security liabilities 3,418 3,846 VAT 432 402 Customer advances 456 1,873 Other 2,033 1,150 6,339 7,271 38,599 41,744

(37) Pension provisions a. Defined benefit pension schemes Defined benefit pension schemes are mainly constituted in German companies:

The employee pension scheme of the German FTE companies was governed until 31 December 2003 in the pension scheme guidelines of 22 December 1994, as well as in individual commitments in the form of direct commitments. It relates exclusively to pension commitments that have been frozen since the end of 2003.

From 1 January 2004, the employee pension scheme is valid pursuant to the company-level agreement of 17 November 2004 within the FTE pension scheme in the form of a building block model with employer contributions and voluntary employee contributions. These commitments relate mainly to capital commitments. Building blocks A and C are financed with current contributions through a congruently reinsured benefit fund that is to be classified as a defined contribution plan. Building block B does not entail current contributions, but instead performance- based contributions, and building block D entails employee contributions with employer contributions. Building blocks B and D entail congruently reinsured direct commitments.

The pension commitments are subject to longevity risk, as well as inflation risk due to statutory indexation requirements. The risks from the capital commitment are congruently reinsured by reinsurers.

Pursuant to IAS 19R, the pension provision for the defined benefit pension schemes is calculated on the basis of actuarial assumptions. The following parameters were applied in this context:

31.12.2016 31.12.2015 Discount rate 1.7% 2.5% Future pay increases 2.5% 2.5% Future pension increases 1.6% 1.8%

Since 2015, the discount rate is calculated based on a changed interest structure curve. The modification of the interest structure curve did not lead to any significant changes in the extent of the pension obligations. First-class, fixed-interest bonds with the same terms remain based on the amended database.

The provisioning amount in the balance sheet is calculated as follows:

31.12.2016 31.12.2015 K€ K€ Present value of defined benefit pension obligations 73,733 71,026 Fair value of plan assets -3,276 -3,192 Obligation recognized on balance sheet 70,457 67,834 Current 1,855 1,799 Non-current 68,602 66,035 70,457 67,834

The change in the provision during the year under review is presented in the following table:

Change in provision 2016 2015 K€ K€ Obligation recognized on balance sheet at the beginning of the financial 67,834 73,991 year Net interest expense 1,679 1,485 Service cost 19 95 Revaluation due to changes in financial assumptions 2,244 -6,448 Revaluation due to portfolio effects 304 528 Revaluation due to market value changes to the fund assets -26 -141 Translation differences -17 -8 Allocations to plan assets -8 -17 Pension payments -1,602 -1,710 Benefits paid from plan assets 30 59 Provision at financial year-end 70,457 67,834

The net interest expense is reported within the net financial result, and the other employee pension expenses are reported within the relevant function costs of the consolidated income statement.

Biometric probabilities continue to be factored in based on the 2005 G Reference Tables published by Dr. Klaus Heubeck.

The table below shows the change in the defined benefit obligation (DBO) in the year under review:

Change in defined benefit obligation 2016 2015 K€ K€ Obligation recognized on the balance sheet at start of the financial year 71,026 77,024 Service cost 19 95 Interest expense 1,759 1,545 Revaluation due to changes in financial assumptions 2,244 -6,448 Revaluation due to portfolio effects 304 528 Translation differences -17 -8 Pension payments -1,602 -1,710 Defined benefit obligation at financial year-end 73,733 71,026

The defined benefit obligation is composed as follows:

Composition of defined benefit obligation 31.12.2016 31.12.2015 K€ K€ Financed by plan assets 3,276 3,192 Not financed by plan assets 70,457 67,834 Defined benefit obligation at financial year-end 73,733 71,026

The following table shows the change in plan assets in the year under review:

Change in plan assets 2016 2015 K€ K€ Market value of plan assets at start of the financial year 3,192 3,033 Interest income from plan assets 80 60 Payments from plan assets -30 -59 Employee contributions 7 16 Employer contributions 1 1 Revaluation 26 141 Market value of plan assets at financial year-end 3,276 3,192

The plan assets involve reinsurance policies that are not traded on the free market. This relates only to the building block commitments. With regard to 2017, the FTE Group expects pension commitments that are not covered by plan assets to amount to K€ 1,984 (previous year: K€ 1,879), and outgoing payments of K€ 130 (previous year: K€ 80) from plan assets.

Sensitivity analysis of main actuarial assumptions When calculating the sensitivity of the defined benefit obligation for actuarial assumptions, the same method was applied with which the pension provisions were calculated in the balance sheet (the present value of the defined benefit obligations was calculated to the end of the reporting period by applying the projected unit credit method).The sensitivities were calculated so that only the respective parameter (interest rate, salary trend) is modified, and all other parameters are unchanged, with the DBO being recalculated with the assumptions being changed in this manner. Dependencies and correlations were not taken into account as only one parameter was modified.

Change in defined Change in defined benefit obligation benefit obligation in % in % 2016 2015 Interest rate: +0.25 percentage points -4.1% -4.6% Interest rate: -0.25 percentage points 4.3% 4.4% Salary trend: +0.25 percentage points 0.3% 1.0% Salary trend: -0.25 percentage points -0.3% -1.0% Pension trend: +0.25 percentage points 3.1% 3.1% Pension trend: -0.25 percentage points -3.0% -2.9% Life expectancy: Age shift of 2 years 6.8% 6.5% The weighted average duration of the obligation amounts to 17 years (previous year: 18 years). b. Defined contribution pension schemes The contributions for several defined contribution pension schemes of the FTE Group based on contractual provisions that relate especially to the German Group companies amount to K€ 1,482 (previous year: K€ 1,194).

The contributions for several defined contribution pension schemes of the FTE Group based on statutory provisions amount to K€ 9,663 (previous year: K€ 9,249).

(38) Other provisions

Partial Pending Guarantee Restructuring Total retirement losses K€ K€ K€ K€ K€ As of 31 December 2014 14,621 2,889 138 0 17,648 Addition 3,531 561 261 1,180 5,533 Consumption -192 -745 -4 -103 -1,044 Reversal -388 0 -14 0 -402 Compounding 0 22 0 0 22 Currency translation 11 0 -30 19 0 As of 31 December 2015 17,583 2,727 351 1,096 21,757 Addition 1,133 1,976 70 95 3,274 Consumption -713 -1,246 -80 -902 -2,941 Reversal -200 -168 0 -150 -518 Currency translation 28 0 45 -15 58 As of 31 December 2016 17,831 3,289 386 124 21,630

The terms of the provisions are:

Partial Pending Guarantee Restructuring Total retirement losses K€ K€ K€ K€ K€ Up to 1 year 17,583 492 273 1,096 19,443 Between 1 and 5 years 0 2,235 78 0 2,314 As of 31 December 2015 17,583 2,727 351 1,096 21,757 Up to 1 year 17,831 1,750 281 115 19,977 Between 1 and 5 years 0 1,539 105 9 1,653 As of 31 December 2016 17,831 3,289 386 124 21,630

a. Warranty provisions The companies offer warranty periods of two to three years for their products. The warranty provision was formed at the year-end for prospective warranty claims. The applied rate is based on past experience of repair and return rates. The requisite provision is adjusted on the basis of average costs and individual calculations for certain cost-intensive specific cases. The provision is offset by the reimbursement claim of K€ 11,667 (previous year: K€ 11,667), which is reported under other assets. The company anticipates the exercising of the provision and a refund claim within a year. b. Partial retirement provision During the period under review, 18 (prior year 14) employees signed a partial retirement agreement. A total of seven (prior year four) employees retired. The discounting is based on a 0.41% interest rate (previous year: 2.25%). The provision amounts are secured by a corresponding insurance policy, which is adjusted each year. c. Restructuring provisions The restructuring provisions of K€ 124 (prior year K€ 1,096) primarily result from further reorganisation at the Denmark site.

(39) Deferred tax assets and liabilities The following table shows the deferred tax assets and deferred tax liabilities of the FTE Group as of 31 December 2016, before offsetting on the balance sheet:

31.12.2016 31.12.2016 K€ K€

Deferred Deferred tax tax assets liabilities

Non-current assets Intangible assets 0 31,078 Tangible assets 30 3,120 Other receivables and assets 6 0 36 34,198

Current assets Inventories 772 197 Other receivables and assets 299 663 1071 860

Non-current liabilities Bonds 0 1,597 Pension provisions 11,429 0 Other provisions 1,098 0 Other liabilities 254 150 12,781 1,747

Current liabilities Other balance sheet items 697 44 697 44 Tax loss carryforwards/tax credits 101 0 (of which K€ 101 is non-current) Total 14,686 36,849 Offsetting -12,869 -12,869 Deferred taxes – total 1,817 23,980

The following table shows the deferred tax assets and deferred tax liabilities of the FTE Group as of 31 December 2015, before offsetting on the balance sheet:

31.12.2015 31.12.2015 K€ K€

Deferred Deferred tax tax assets liabilities

Non-current assets Intangible assets 742 32,410 Tangible assets 66 4,528 Other receivables and assets 7 500 815 37,438

Current assets Inventories 511 259 Other receivables and assets 61 777 572 1,036

Non-current liabilities Bonds 0 1,946 Pension provisions 10,880 0 Other provisions 675 0 Other liabilities 111 57 11,666 2,003

Current liabilities Other balance sheet items 682 50 682 50 Tax loss carryforwards/tax credits 1,220 0 (of which K€ 226 is non-current) Total 14,955 40,527 Offsetting -13,057 -13,057 Deferred taxes – total 1,898 27,470

The following amounts calculated after corresponding offsetting are reported in the consolidated balance sheet:

Carrying Non- Current Offsetting amount 31 current Dec 2016 K€ K€ K€ K€

Deferred tax assets 1,869 12,817 -12,869 1,817 Deferred tax liabilities 904 35,945 -12,869 23,980

Carrying Non- Current Offsetting amount 31 current Dec 2015 K€ K€ K€ K€

Deferred tax assets 1,480 13,475 -13,057 1,898 Deferred tax liabilities 1,086 39,441 -13,057 27,470

(40) Financial instruments

Information about carrying amounts and market values of financial instruments Cash and cash equivalents are measured at amortized cost, which mainly corresponds to fair value.

Trade receivables and other current assets are measured at market value on first-time recognition; they are subsequently measured at amortized cost less impairment. Carrying amounts are similar to fair value due to their short-term maturity.

Liabilities and other obligations, as well as financial liabilities (both current and non-current), are measured at fair value on first-time recognition. Trade payables and other primary financial liabilities are subsequently measured at amortized cost.

The bond’s fair value is calculated based on the low trading volume at level 2 of the fair value hierarchy. The fair value is calculated using the bond’s market value on the relevant key date.

31.12.2016 IAS 39 valuation

Appendix IAS 39 Carrying Amortized Fair value Fair value IAS 37 IAS 17 Fair value measurement amount cost (directly (recognised valuation balance category to equity) in income) sheet valuation

K€ K€ K€ K€ K€ K€

Assets

Trade receivables (30) 69,435 69,435 0 0 0 0 69,435

Receivables from 241 241 0 0 0 0 241 shareholders

Other financial assets (31) 1,256 1,256 0 0 0 0 1,256 (non-current)

Other financial assets (31) 20,764 9,097 0 0 11,667 0 20,764 (current)

Cash and cash (32) 46,791 46,791 0 0 0 0 46,791 equivalents

Equity and liabilities

Liabilities from bonds (34) 256,646 256,646 0 0 0 0 277,334

Financial liabilities (35) [2] 0 0 0 0 0 0 0

Trade payables 52,691 52,691 0 0 0 0 52,691

Other financial (36) [2] 154 154 0 0 0 0 154 liabilities (non-current) Other financial (36) [2] 32,044 32,044 0 0 0 0 32,044 liabilities (current) Summary of measurement categories Loans and receivables [1] 138,487 126,820 0 0 11,667 0 138,487

Financial liabilities which are measured at [2] 341,535 341,535 0 0 0 0 362,223 amortised cost

31.12.2015 IAS 39 valuation

Notes IAS 39 Carrying Amortized Fair Fair value IAS 37 IAS 17 Fair value measurement amount cost value (recognised valuation balance category (directly in income) sheet to valuation equity)

K€ K€ K€ K€ K€ K€

Assets

Trade receivables (30) 65,218 65,218 0 0 0 0 65,218

Receivables from 186 186 0 0 0 0 186 shareholders

Other financial assets (31) 492 492 0 0 0 0 492 (non-current)

Other financial assets (31) 17,460 5,793 0 0 11,667 0 17,460 (current)

Cash and cash equivalents (32) 40,540 40,540 0 0 0 0 40,540

Equity and liabilities

Liabilities from loans (34) 255,140 255,140 0 0 0 0 279,130

Financial liabilities (35) [2] 8,100 8,100 0 0 0 0 8,100

Trade payables 45,409 45,409 0 0 0 0 45,409

Other financial liabilities (36) [2] 672 672 0 0 0 0 672 (non-current) Other financial liabilities (36) [2] 33,737 33,737 0 0 0 0 33,737 (current) Summary of measurement categories Loans and receivables [1] 123,896 112,229 0 0 11,667 0 123,896

Financial liabilities which are measured at [2] 343,058 343,058 0 0 0 0 367,048 amortised cost

Fair value hierarchy

The fair values are assigned according to the availability of observed market prices. In Stage 1 the fair values of financial instruments are shown for which an (unamended) price can be directly established on an active market. In Stage 2, fair values for financial instruments are determined based on direct or indirect observable market price listings. The Stage 3 fair values are calculated using valuation procedures for which factors that are not observable on an active market are drawn on.

Net result from financial instruments The following shows the net result from financial instruments by measurement category. The net result includes the balance of interest expenses and income, fair value measurement through profit or loss, the result from the disposal of financial assets and liabilities, from currency effects, and impairment losses and reversals to impairment losses arising from financial instruments. The net result for the 2016 financial year is as follows:

Net result 2016 2015 K€ K€

Loans and receivables 1,258 0 Measured at amortized cost Financial liabilities -26,405 -26,281 Total -25,147 -26,281

The earnings effects resulting from interest payments received and paid are included in the net result from financial liabilities measured at amortized cost.

The following table shows the impairment losses for each class of financial assets:

Impairment loss 2016 2015 K€ K€

Trade receivables 91 -100 91 -100

H. Other notes

(41) Risk management, financial derivatives, and other information about capital management As part of its international business operations, the FTE Group is also exposed to risks relating to its assets and liabilities. Risk management aims to limit such risks through ongoing operational and financially oriented activities. Depending on the evaluation of the risk, selected hedging instruments are deployed here.

For more information about risk management, please refer to the corresponding section of the management report.

Market risks As part of its operating activities, the Group is exposed to various financial risks, including changes to the market prices of financial instruments, foreign currency exchange rates and interest rates. Group risk management focuses on the unpredictability of financial markets, and endeavours to minimize potential negative effects on the Group's financial position. In this context, the Group deploys interest-rate derivatives such as swaps and caps, where required, in order to hedge against interest-rate risks.

Currency risks Due to its international orientation, the FTE Group is exposed to currency risks relating to various foreign currencies. The company seeks to offset currency risks through corresponding cash flows.

Foreign currency risk is partially offset by purchasing goods, raw materials and services in the relevant countries in the corresponding foreign currency, as well as by rendering other service contributions along the value chain.

Several FTE Group subsidiaries are located outside the Eurozone. As the Euro is the reporting currency, these subsidiaries' financial statements are translated into Euros in the consolidated financial statements. Translation effects that arise if the net asset positions translated into Euros change due to exchange-rate fluctuations are reported within equity in FTE’s consolidated financial statements.

Given a +/-5% change in exchange rates, currency translation would have the following impact on EBITDA: If the Euro climbs by 5% against the foreign currencies, the result is a negative impact on EBITDA of € -1.4m (previous year: € -0.4m). If it falls by 5% against the foreign currencies, the result is a positive impact on EBITDA of € +1.5m (previous year: € +1.4m). Given a +/-5% change in exchange rates, currency translation would have the following impact on the equity:

If the Euro climbs by 5% against the foreign currencies, the result is a negative impact on equity of € -3.8m. If it falls by 5% against the foreign currencies, the result is a positive impact on equity of € +4.1m.

The amount of exchange rate losses reported in the consolidated statement of comprehensive income arising from the realization and measurement of foreign currency receivables and liabilities, and from the measurement of foreign currency positions at year-end, amounted to the following:

Net result 2016 2015 K€ K€

Realized currency gains and losses (netted) 2,246 -2,446 Unrealized currency gains and losses (netted) -3,313 2,727 Netted exchange rate gain (-), loss (+) -1,067 281

Currency effects of K€ -3,089 (previous year: K€ -1,434) were recognized directly in equity as of 31 December 2016.

Interest-rate risks On 12 July 2013, the FTE Group issued a bond with a volume of K€ 240,000 with a 9% coupon interest rate. The bond's volume was increased by K€ 23,300 on 22 November 2013. The issue price was 106.6% of the nominal amount. This bond matures on 15 July 2020. Interest payments are due every six months on January 15 and July 15.

Besides this bond, on 2 July 2013 the FTE Group entered into a credit agreement (super senior revolving credit facility agreement) for K€ 42,500 with effect from 12 July 2013, of which K€ 15,000 was utilized as of 31 December 2014. A repayment of K€ 5,000 was made in November 2015. Further repayments were made in May 2016 and in November 2016 in the amount of K€ 5,000 in each case. The credit line availed of was therefore repaid in full, see note (35). The term of this agreement is six years. Interest is based on EURIBOR when utilizing the credit facility in Euros, or on LIBOR when utilizing it in another currency, plus a margin of 3.5 to 4.0% p.a.

Pursuant to IFRS 7, interest-rate risks are presented using a sensitivity analysis. These show the effects of changes in market interest rates on interest payments, interest income, and interest expenses.

A move up (down) in the yield curve would have had no effect on earnings before tax in 2016 due to the bond carrying a fixed interest rate. With regard to the RCF a shift up (down) in the yield curve of 100 basis points in 2016 would have increased (decreased) the earnings before tax and equity by € 0.1m.

Credit risk The Group is not exposed to any significant credit risks. Credit risks derive from cash and cash equivalents and bank deposits. The maximum default risk for the receivables is equivalent to the respective level of the carrying amount. Default risks with major customers are classed as low, see note (18). Transactions involving financial instruments and cash are entered into exclusively with strong banks.

Liquidity risk Along with the management of interest-rate and currency risks, liquidity management forms a central pillar of financial management at the FTE Group, and is steered centrally. Liquidity management aims to ensure that the FTE Group enjoys solvency at all times. This is ensured with cash and cash equivalents, as well as the credit agreement (super senior revolving credit facility agreement) of K€ 42,500, which was concluded on 2 July 2013 with effect from 12 July 2013. Cash management is conducted continuously using medium-term liquidity plans.

Liquidity is managed centrally within the Group in order to ensure that Group companies have constant access to sufficient liquidity. Controlling is performed mainly using the key indicators of net working capital, operating cash flow, and cash position.

Maturity analysis of undiscounted cash outflows from financial instruments

Between Between Between Between Between Up to 3 months From 31.12.2016 1 and 2 and 3 and 4 and 3 months and 5 years 2 years 3 years 4 years 5 years 1 year K€ K€ K€ K€ K€ K€ K€

Non-derivative financial instruments Bonds 11,848 11,848 23,697 23,697 286,997 0 0

Trade payables 52,691 0 0 0 0 0 0

Other financial 0 595 595 595 0 0 0 liabilities Other financial 17,951 2,956 154 0 0 0 0 liabilities Total 82,490 15,399 24,446 24,292 286,997 0 0

Between Between Between Between Between Up to 3 months From 31.12.2015 1 and 2 and 3 and 4 and 3 months and 5 years 2 years 3 years 4 years 5 years 1 year K€ K€ K€ K€ K€ K€ K€

Non-derivative financial instruments Bonds 11,848 11,848 23,697 23697 23697 286,997 0

Trade payables 45,409 0 0 0 0 0 0

Other financial 0 10,855 595 595 595 595 595 liabilities Other financial 19,522 3,126 603 0 0 0 0 liabilities Total 76,779 25,829 24,895 24,292 24,292 287,592 595

Derivative financial instruments and hedging Derivative financial instruments are generally deployed within the FTE Group only for hedging transactions to reduce currency, interest-rate and market price risks for operating activities, and consequently in connection with financing transactions. No significant hedging transactions were undertaken in 2016.

Capital management The objective of capital management is guaranteeing a solid financial profile. In particular, the fulfilment of operating payment obligations at all times and the capital service for external lenders should be guaranteed. Furthermore, the FTE Group aims to obtain sufficient financial flexibility to continue along its growth course.

The FTE Group currently has an external rating. The Group-wide financial risk profile is managed and monitored centrally by the FTE Group’s Group Treasury department. FTE meets all external capital requirements in relation to the RCF (revolving credit line) in the reporting period and in the previous period.

The Group's equity as at 31 December 2016 was K€ 90,546 (previous year: K€ 76,789), and was thus 16.2% (prior year: 14.1%) of the balance sheet total. In particular, the non-current borrowing costs consist of a bond (please refer to note (34)) with a term until 15 July 2020. Furthermore, in order to also secure the financial flexibility of the FTE Group, liquidity is held in the form of a "super senior revolving credit facility agreement" and cash.

If there is a change in the majority shareholder ("change of control"), the bondholders have the right to have their bonds repaid.

(42) Non-current assets

Non-current assets are distributed among regions as follows:

31.12.2016 31.12.2015 K€ K€

Germany 290,890 283,155 Rest of Europe 19,330 28,131 America 8,321 8,651 Asia 9,127 9,564 327,668 329,501

In addition to property, plant and equipment and other intangible assets, non-current assets also include goodwill.

(43) Notes to the cash flow statement The consolidated cash flow statement shows how cash and cash equivalents changed as the result of cash inflows and cash outflows over the course of the financial year. Pursuant to IAS 7, a differentiation is made between cash flows from operating activities, cash flows from investing activities, and cash flow from financing activities.

Funds included in the consolidated cash flow statement comprise cash and cash equivalents disclosed in the balance sheet, that is, cash in hand, checks and bank deposits with an original term of less than three months.

The cash flow from operating activities is derived indirectly starting with earnings before tax. The cash flows from investing in financing activities are calculated on a payment-related basis.

(44) Employees The average number of employees is as follows:

2016 2015 Europe 2,947 2,969 America 375 368 Asia 199 170 3,521 3,507

Temporary employees 314 190 3,835 3,697

The average roles of employees are distributed as follows:

2016 2015 Production 2,880 2,874 Development 323 305 Sales and marketing 106 106 Administration 212 222 3,521 3,507

(45) Auditor's fee The fee expensed in the financial year for the Group auditor in Germany is composed as follows:

2016 2015 K€ K€

Auditing services 252 289 Tax advice services 454 550 Other services 167 0 Total 873 839

(46) Contingencies Other contingent liabilities FTE Holding GmbH, and the companies in which it holds direct or indirect interests, are involved in both domestic and international legal disputes and regulatory proceedings in the course of their operating activities. To the extent that negative outcomes to these proceedings, or losses, are not considered likely, the FTE Group has not formed any provisions for proceedings of this type.

(47) Assets and receivables pledged as collateral for liabilities Extensive Group assets were pledged as collateral in the form of pledge agreements on the basis of notary and other agreements.

The secured party can assert his rights if insolvency proceedings are being opened, the secured receivables are due in whole or in part and are not settled. If this should arise, a due date notification must be issued under the terms of the loan agreement.

The following assets incorporated in the consolidated financial statements are pledged by the German operating and non-operating companies. The pledging serves as security for the RCF (revolving credit line) and the bond.

 Blanked assignment of receivables of K€ 39,487 (prior year K€ 30,821)

 Pledging of bank accounts of K€ 16,061 (prior year K€ 12,021)

 Transfer by way of security of all moveable items, including equipment and machinery, K€ 40,792 (prior year K€ 39,224), operating and business equipment K€ 7,423 (prior year K€ 6,513), inventories K€ 34,618 (prior year K€ 32,214) and cash in hand K€ 8 (prior year K€ 9)

 Total land charges of K€ 30,000 (prior year K€ 30,000)

In addition, the following company shares are also pledged:

 FTE Verwaltungs GmbH

 FTE automotive GmbH

 FTE automotive systems GmbH

 FTE automotive Möve GmbH

 FTE automotive Czechia s.r.o.

 FTE automotive North America Inc. and FTE automotive USA Inc.

 FTE Industria e Comercio LTDA

 FTE Mexicana S.A. de C.V.

(48) Other financial obligations The contractual commitments for the purchase of property, plant and equipment total K€ 6,568 on the balance sheet date (prior year K€ 7,057).

Collateral received amounts to a total of K€ 4,099 (previous year: K€ 4,762). These reflect bank guarantees received from tool and machine suppliers for advance payments rendered.

The obligations on the balance sheet date arising from non-cancellable operating lease, rental, and maintenance agreements are composed as follows, and mainly arise from leases for production buildings, furniture and office equipment, and vehicles:

31.12.2016 31.12.2015 K€ K€

Up to 1 year 6,429 4,632 Between 1 and 5 years 6,896 7,238 From 5 years 225 0 13,549 11,870

The minimum lease payments expensed in 2016 amounted to K€ 2,854 (previous year: K€ 2,478).

Energy and gas purchase contracts As of the balance sheet date, the following obligations existed arising from procurement agreements for energy and gas:

31.12.2016 31.12.2015 K€ K€

Obligations from gas procurement agreements

Up to 1 year 815 400 Between 1 and 5 years 20 130 835 530 Obligations from energy procurement agreements

Up to 1 year 5,589 5,197 Between 1 and 5 years 18 2192 5,607 7,389 6,442 7,919

(49) Legal disputes The company and its subsidiaries are involved in various legal disputes and actions in the course of their normal operating activities, including trade or contractual disputes, product liability actions, product guarantees and other proceedings. The management is of the view that the outcome of these proceedings will not have any significant adverse impact on FTE’s consolidated financial situation, earnings position or cash flow. In relation to warranties and associated actions, while FTE cannot guarantee that the future costs of these customer actions will not be substantial, it believes that the provisions that it has provided here are sufficient to cover any dispute settlements.

(50) Related party disclosures Individuals and companies that can be influenced by FTE Holding GmbH, that can exercise influence over FTE Holding GmbH, or that can be influenced by another related party of FTE Holding GmbH are regarded as related parties within the meaning of IAS 24. Transactions were performed at normal market terms.

Reciprocal services with joint ventures and associates

01.01.- 01.01.- Expenses/earnings 31.12.2016 31.12.2015 K€ K€ Supplies and services to APG-FTE automotive Co. Ltd. 2.763 2.517

Receivables/liabilities 31.12.2016 31.12.2015 K€ K€ Trade receivables due from

APG-FTE automotive Co. Ltd 663 103

Exchange of services with shareholders

01.01.- 01.01.- Expenses/earnings 31.12.2016 31.12.2015 K€ K€

Supplies and services from shareholders (direct and indirect) 834 912

01.01.- 01.01.- Receivables/liabilities 31.12.2016 31.12.2015 K€ K€

Liabilities from trade with 0 302 shareholders (direct and indirect)

Receivables from shareholders (direct and indirect) 241 186

Compensation of key management members

The following indicates the compensation of individuals who are directly or indirectly responsible for the planning, management and supervision of the company: Key management members include the managing directors and divisional managers.

01.01.- 01.01.- 31.12.2016 31.12.2015 K€ K€

Payments due short-term 3,255 3,520

Obligations arising from long-term benefit commitments (DBO) of K€ 57 (previous year: K€ 49) for senior management members are taken into account as of the balance sheet date.

(51) Management stock participation program

As part of a stock participation program, selected FTE Group employees were able to make direct cash investments in Falcon (BC) Luxco S.C.A. All of the shares were purchased at fair value on the granting date. The management holds a total of 13% of the shares in Falcon (BC) Luxco S.C.A. as of the balance sheet date. The management stock participation program is intended to serve as an incentive instrument, motivating the management in relation to the growth and long-term financial success of the FTE Group. To this end, exit events (disposal, IPO) were defined in the agreements whose occurrence will allow entitled management members to participate on an equal basis with investors in any appreciation in value of the FTE Group. In this instance, and depending on the exit event, the management would have either the right or obligation to sell their own shares. If participating members end their employment relationships before the occurrence of one of the exit events, they are obligated to offer their shares in Falcon (BC) Luxco S.C.A. for sale to the lead investor, Bain, or to a third party determined by Bain. Depending on the reason and timing for leaving the company, the level of the sales price for management shares varies between the shares' market value and the original investment amount.

Scenarios exist both where Falcon (BC) Luxco S.C.A. is obligated to pay a cash amount, and where Falcon (BC) Luxco S.C.A. has no direct payment obligations. Pursuant to IFRS 2, the granting of shares deriving from the participation and shareholders' agreements are to be treated as share-based payments as the scenarios that would result in a payment of a cash amount by Falcon (BC) Luxco S.C.A. are categorized as unlikely. As the managers pay the shares' fair value as part of purchase, the fair value of the allocation in a share-based settlement amounts to zero. For this reason, no expense needs to be reported at any time (either in the instance of an exit or if a manager leaves the company), as long as the assessment relating to the occurrence of a payment obligation does not change.

(52) Executive bodies of FTE Holding GmbH Management

Dr. Andreas Thumm, Ilsfeld, Chairman of the Management of FTE Holding GmbH.

Mr Niklas Beyes, Würzburg, Managing Director of FTE Holding GmbH

(53) Inclusion in the consolidated financial statements FTE Holding GmbH is included in the consolidated financial statements of FTE Group Holding GmbH, Ebern, which prepares consolidated financial statements for the largest group of companies. The consolidated financial statements and Group management report of FTE Group Holding GmbH, Ebern, for the 2016 financial year are prepared applying Section 315a (3) of the German Commercial Code (HGB) pursuant to IFRS applicable in the EU and supplementary German commercial law regulations, submitted in accordance with statutory regulations to the operator of the electronic Federal Gazette (Bundesanzeiger), and published in the electronic Federal Gazette following the submission.

(54) Significant events after the balance sheet date

No significant reportable events occurred between the balance sheet date and the date on which this report was created.

Ebern, 20 February 2017

FTE Holding GmbH

Management

______Dr. Andreas Thumm Niklas Beyes

List of abbreviations Para. Paragraph

BOP Governor and Company of the Bank of Ireland

EBIT Earnings before interest and taxes

EBITDA Earnings Before Interest, Taxes, Depreciation, and Amortisation

EU European Union

€ Euros

GmbH Gesellschaft mit beschränkter Haftung [limited liability company]

IAS International Accounting Standards

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standard m million n/a not applicable

OEM Original Equipment Manufacturer

OE business Original Equipment business

OES OEM spare parts business p.a. per annum

PPA Purchase Price Allocation

RCF Revolving Credit Facility

SIC Standard Interpretations Committee

SSRCF Super Senior Revolving Credit Facility

K€ Thousand Euro

Pt. Point e.g. For example i.a.t. in addition to