Page 12 Varroc Lighting Systems Employee Newsletter – September 2018

Varroc Lighting Systems Corporate Social Responsibility Report

2018

About the Report

Varroc Lighting Systems is excited to present our company’s first Corporate Social Responsibility report. Our commitment to corporate social responsibility is demonstrated in how we conduct our business: providing a safe workplace for our employees, minimizing impact to the environment, being a positive corporate citizen in the communities we operate, and prioritizing ethical business practices at all our global locations. Each of these principles influences our strategy planning, decision making process and daily operations.

This report provides an overview of our company’s history, including an understanding of our business structure and business strategy; describes our efforts to mitigate our environmental footprint and drive sustainable solutions within the automotive industry; and discusses our commitment to employee engagement and community involvement.

In this report, we also disclose how we identified the reporting material and engaged our stakeholders in this process. We are committed to continually improving our business practices, and we hope to take the next step as a socially responsible company by sharing our development. Included in this report is information spanning fiscal year 2018.

Material Topics and Stakeholder Engagement

In order to determine the topics for this report, we created an initial list by examining the Automobile Industry Action Group (AIAG) resources, the Global Reporting Initiative (GRI), and other peer and customer reports. To narrow down this wide-ranging set of topics, we engaged our stakeholders to ensure that we were prioritizing the material that our stakeholders cared about the most.

The following stakeholder groups have influenced the material that is included in this report:

• Varroc Lighting Systems Board of Directors • Investors • Varroc Lighting Systems Leadership • Lenders • Communities • Regulatory Bodies • Customers • Suppliers • Employees

Varroc Lighting Systems 2018 CSR Report 3 Material Topics and Stakeholder Engagement

A list of report topics was created based on stakeholder group feedback and guidance. Topics are broken up into the three main categories of Governing Ethics, Environmental Concerns, and Social Considerations.

Shareholder Expectations

As a publicly-owned company, performing in accordance with our shareholder’s expectations is an important business goal for us.

Varroc Lighting Systems 2018 CSR Report 4 About Varroc Lighting Systems

Varroc Lighting Systems is a premier developer and manufacturer of next-generation external lighting systems and vehicle control electronics for the automotive and two- wheeler industries.

Focused on safety, mobility, and style, Varroc Lighting Systems brings leading-edge technology to the mainstream automotive market with high-quality and cost-competitive solutions.

Headquartered in Plymouth, Michigan, U.S., the company has more than 7,300 employees worldwide with operations in 17 countries and capabilities on every continent where vehicles are produced. Varroc Lighting Systems is a key member of the Varroc Group family of automotive components businesses.

Vision and Mission

VISION MISSION ​​To be a €2 billion supplier of innovative We bring leading-edge lighting solutions for automobiles and 2- technology to the mainstream wheelers worldwide by 2022, contributing to automotive market with high- ongoing improvement to safety, mobility, and quality cost competitive style. solutions. Be a partner of choice for vision and signaling As the industry transforms, our systems to automotive manufacturers, to become success is based on speed, agility, the fastest growing global leader. and creativity to deliver customized solutions with superior service. We are a company that respects and rewards its customers and shareholders alike, while fostering an environment that empowers employees and encourages the constant pursuit of excellence.​​​​ 5 History

From carriage lamps to adaptive driving beams, Varroc Lighting Systems has long been at the forefront of automotive exterior lighting technology. For nearly 140 years, we have specialized in producing high-performance lighting fixtures with a focus on delivering market-leading technologies, flexible service, and value.

Josef Rotter starts Joro, a coach lamp company, in the .

Josef Rotter renames his company Autopal.

Ford Motor Company builds Carplastic, a lighting plant in Monterrey, Mexico.

Ford Motor Company acquires Autopal plants in the Czech Republic to support their global expansion.

Visteon Corporation is established by Ford Motor Company to design, develop, and deliver fully-intergrated automotive systems. Carplastic and Autopal become part of Visteon.

Visteon Corporation adds two joint ventures to their portfolio: TVAP in and TYC in .

Varroc Lighting Systems established through the acquisition of Visteon’s lighting operations by Varroc Group.

Varroc Lighting Systems 2018 CSR Report 6 Business Structure

Varroc Lighting Systems is headquartered in Plymouth, Michigan. The executive leadership team merges functional expertise with collaborative decision making to drive business forward. As ambassadors of our company’s mission, the Varroc leadership team creates an environment for success. The company is led by an experienced management team supported by a 4-member Board of Directors.

Varroc Lighting Systems Board of Directors

Varroc Lighting Systems Leadership

7 Locations

Varroc Lighting Systems operates 20 locations in 17 countries on five continents, with capabilities on every continent where vehicles are produced. Our workforce of more than 7,200 people includes 700+ engineers in Asia, Europe, and North and South America. We have design, , , and testing capabilities around the world, with manufacturing facilities located in lower-cost countries such as China, Czech Republic, India, and Mexico.

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8 Products

Varroc Lighting Systems specializes in designing and developing high-performance, next-generation external lighting systems and vehicle control electronics for the automotive industry.

We create automotive lighting that drives brand recognition and contributes to vehicle safety.

Our products include headlamps, signal lamps, and vehicle control electronics for both two- wheelers and four-wheeled vehicles. We offer an expansive array of automotive lighting technologies, including LED, matrix, laser, DMD, MEMS, and our proprietary Surface-LED technology.

Awards

Association Memberships

• Automotive Industry Action Group • Original Equipment Suppliers Association

Varroc Lighting Systems 2018 CSR Report 9 Governing Ethics

At Varroc Lighting Systems, we adhere to five key values:

Sincerity Humility Integrity Passion Self Discipline

These SHIPS values are the foundation of our business, guide our strategy, and define our culture. Adherence to our values ensures that ethical practices occur through all levels of our company.

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Varroc Lighting Systems 2018 CSR Report 10 Ethics and Integrity Policy

At Varroc Lighting Systems, we foster an inclusive environment that provides equal opportunity to our employees, customers, suppliers and the community at large. This policy applies to all locations and levels of the company.

We comply with all applicable laws in every country in which we do business as well as with all applicable laws against discrimination and harassment, and laws prohibiting child and forced labor.

The Varroc Lighting Systems Ethics and Integrity Policy can be found on the Corporate Social Responsibility page of the Varroc Lighting Systems website.

All employees have an obligation to report known or suspected violations of the policy. We encourage the communication of concerns relating to the lawful and ethical conduct of business, financial reporting, accounting practices, internal controls, and audits. Those who raise bona fide concerns are protected from any retaliation, and confidential and anonymous mechanisms for reporting have been put in place. Concerns and suspected violations of the Ethics and Integrity policy can always be discussed with managers or Human Resources. Employee training covers these Varroc Lighting policies. Those who engage in conduct that is contrary to the ethical standards set forth in the policy may be subject to discipline up to and including termination of employment.

Pledges that are included in the Varroc Ethics and Integrity Policy include:

• Committing to Diversity and Inclusion • Complying with International Business and Governmental Regulations • Ensuring Compliance with Insider Trading • Ensuring Fair Dealing and Competition • Ensuring the Avoidance of Conflicts of Interest • Protecting Intellectual Property, Confidentiality and Privacy • Protecting Safety, Health, and the Environment 11 Human Rights Compliance

Varroc Lighting complies with all applicable laws that protect against discrimination and harassment, and laws prohibiting child and forced labor. Our published Anti-Slavery and Human Trafficking Statement was made in accordance with the Modern Slavery Act 2015 section 54(1). This statement can be found on the Varroc Lighting Systems website.

Modern slavery encompasses the crimes of slavery, servitude, forced or compulsory labor, and human trafficking. Varroc Lighting Systems is committed to ensuring that there is no modern slavery in any part of our business or supply chains. To ensure that all those in our supply chain and contractors comply with our values and ethics, we require suppliers to abide by the Varroc Global Terms and Conditions to be included in our supply base. Additionally, we have a compliance team in place consisting of executive management from manufacturing, finance, human resources, engineering, and sales. Employees are trained on Varroc policies and processes that are directed at employee behavior to ensure that our staff has an elevated level of understanding of the risks of modern slavery in our supply chains and business.

Diversity, Inclusion, and Equal Opportunity

As a global company, we know that diversity in talent and thought yields superior results. With locations in 17 countries, our employees are able to experience a variety of cultures, collaborate and share ideas, and learn from colleagues around the globe.

At Varroc Lighting Systems, we​​ work to create an inclusive ​environment that provides equal opportunities for our employees, customers, suppliers and the community. We create a culture in which there is no place for harassment or discrimination in any form, that every employee has the opportunity to contribute fully to the success of Varroc Lighting Systems.

12 Social Considerations

Employee Protections

Varroc Lighting Systems’ success comes directly from our employees. Our employees uphold the Varroc Lighting Systems’ cultural values and are committed to advancing Varroc excellence. Because of this, Varroc ensures that we have the necessary programs and support systems in place to foster employee achievement and growth.

Our company has numerous policies in place to ensure integrity and respect in the workplace. The Varroc Code of Basic Working Conditions serves as the basis of our relationship with our employees and supports our Core Values. It creates a culture in which harassment and discriminatory treatment of any form is not tolerated. We require that our business partners throughout our supply chains also adopt and enforce similar workplace codes of conduct.

Provisions that are included in the Code of Basic Working Conditions are: • Compensation and Benefits • Compliance with Laws Regulating Work Hours • Freedom of Association and Collective Bargaining • Intolerance of Forced Labor • Intolerance of Harassment and Discrimination • Maintenance of the Environment, Health and Safety • Rejection of Child Labor

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Varroc Lighting Systems 2018 CSR Report 13 Social Considerations

Environmental, Health and Safety

All Varroc Lighting Systems locations have implemented an integrated environmental, health and safety management system that is compliant with the ISO 14001 Environmental and OHSAS 18001 Health and Safety Management Systems. This system is certified to these standards by a third-party registrar, Bureau Veritas. Key to the success of this program is establishing annual objectives and targets and implementing improvement programs to reduce safety risks and environmental aspects of our operations.

Additionally, our Global Environmental, Health and Safety Policy establishes measures for the continual improvement of our environmental, health, and safety performance.

Varroc Lighting Systems 2018 CSR Report 14 Social Considerations

Occupational Wellness, Health, and Safety

The safety of our employees is our top priority. To safeguard employee health and safety, we have established eighteen Varroc Lighting Systems Corporate Health and Safety Standards that describe best practices for dealing with health and safety concerns, and confirm that each employee is trained and knowledgeable in our corporate standards. Additionally, our Varroc Integrated Management System is certified to the OHSAS 18001 Health and Safety Management System standard. Varroc Lighting Systems has zero tolerance for unsafe acts or conditions.

In 2015, we introduced an EH&S Quality Management application to improve the tracking of our company-wide safety performance. This application allows for reporting on any incidents that have occurred in our manufacturing plants to facilitate communication and remediation measures. The management tool tracks our Lost Time Case Rate, Severity Rate, and Recordable Case Rate. Our FY18 corporate goals are to maintain a Lost Time Case Rate lower than 0.10, a Severity Rate lower than 3.5, and a Recordable Case Rate lower than 0.50. Varroc Lighting Systems will continue to advance our safety performance through the process of continual review and improvement. proactively when safety concerns are identified.

Varroc Lighting Systems encourages employee wellness through a variety of activities, including wellness challenges, healthy snack offerings, and onsite health screenings.

Specific initiatives to increase safety awareness and improve employee health and wellness include:

Global safety campaign, including articles in company newsletters and signage in facilities.

In 2018, our Plymouth, Michigan office launched a wellness program that addressed four areas of employee wellness. Events and activities are designed to benefit employees in at least one of the wellness dimensions.

Varroc Lighting Systems 2018 CSR Report 15 Occupational Wellness, Health & Safety

Our plant in Monterrey, Mexico implemented a new forklift alert system. A blue light installed on the back of the vehicle projects an angle mark onto the floor, making it easier for pedestrians to avoid accidents.

Employees at our , India plant celebrated National Safety Week by taking a safety oath, taking part in spot safety quizzes, and creating short plays about plant safety.

Employees in Czech Republic, India, Mexico, and the United States were able to participate in onsite medical care, including flu shots, hearing and eye tests, and blood pressure checks.

The Czech Republic team participated in the 2nd Annual Varroc Expedition, hiking to the peak of Lysa Hora in the Beskydy Mountains, a height of 1,323 meters.

16 Social Considerations

Talent Management

Varroc is invested in attracting and retaining the best possible talent. The Varroc Lighting Systems Job Requisition System is our company’s online tool that provides designated Human Resources and management approvers with a format to create and review all job requisitions globally in order to quickly and effectively manage the job requisition process.

Varroc’s business strategy drives our talent management strategy. This includes talent assessments, which help to develop a succession plan that supports workforce planning. Workforce planning links to our Performance Leadership System and reinforces compensation planning. The Varroc Talent Management, or vTM process, is a deliberate, proactive process designed to ensure the continued effective performance of our organization through the identification, assessment, development and movement of employees who can deliver sustained, superior business results. vTM allows for a unified and comprehensive approach to identifying, developing and retaining talent.

Our Performance Leadership System, or PLS allows for a shared understanding of goals and communicates organizational objectives to employees. The PLS provides for development of SMART goals, an employee individual development plan, or IDP, and employee competency assessment and development. It is designed to make sure that performance goals that support the execution of the company's business strategies, development plans to increase individual and organizational capabilities, and access to coaching and feedback from our managers to support us in achieving those objectives.

Employee Recognition

Varroc Lighting Systems understands the role our employees play in our company’s growth, operational excellence, and continuous improvement. Guided by our SHIPS values, we strive to create a culture of engaged, empowered, and accountable employees.

In order to formally recognize the contributions of our employees, we have established a Global Employee Recognition Program.

This program features six components: • Brilliance Award • Innovation Awards • Quality Awards • Spot Awards • Operations Awards • Service Awards

Varroc Lighting Systems 2018 CSR Report 17 Social Considerations

Local Community Initiatives

Varroc Lighting Systems has made a strong commitment to community involvement. We strive to be a positive corporate citizen in our communities.

Varroc Lighting Systems focuses corporate social responsibility in three areas:

• Community health & wellness • Environmental stewardship • STEM education

Leadership at each location works closely with employees and community partners to identify programs and organizations that best align with our SHIPS values.

Through monetary and in-kind donations and employee participation, Varroc Lighting Systems supports more than a dozen organizations throughout the world, including the following:

• Anti-Childhood Cancer Association of Monterrey (Mexico) • Arpan Blood Bank (India) • Beat Plastic Pollution (India) • Casa INDI (Mexico) • Child and Family Services of Michigan - Operation Good Cheer (US) • CONALEP de Nuevo Leon (Mexico) • EyesOn Design - Henry Ford Health System/Detroit Institute of Ophthalmology (US) • Friends of the Rouge (US) • Křižovatka Foundation (Czech Republic) • Meals of Hope (US) • Mexico Scouts Tapatón 2018 (Mexico) • Nový Jičín City Celebration (Czech Republic) • Plymouth-Canton Community Schools (US) • Society of Women Engineers – University of Michigan – Dearborn (US) • St. Jude’s Children’s Research Hospital (US) • Světluška Foundation (Czech Repubic)

• Take Our Daughters and Sons to Work Day (US) 18 Local Community Engagement

19 Social Considerations

Customer Expectations As an automotive supplier, customer satisfaction is integral to our success. Varroc Lighting Systems innovates with the end user in mind and we work to foster and maintain a positive relationship with all our customers. Continuous improvement is a cornerstone of our business philosophy, and reviews with customers allow us to improve the quality of our products. Our proprietary knowledge and expertise allow us to adapt and optimize our technologies to meet customer needs and align with safety standards.

Varroc Lighting’s engineers and designers use the latest technology to seamlessly integrate lighting into a vehicle’s design for optimal performance and safety. As design programs move from concept to the production phase, we follow our structured programming through our enterProj application. This is a suite of 12 tools that allow for global alignment of key functions during the life cycle of a project. Our Varroc enterProj system permits us to manage project goals, risks, and changes that may come up over the course of a project. Additionally, we employ the use of a Technical Design Review (TDR) to drive excellence throughout every phase of project development. These implementations allow us to deliver world-class lighting solutions for our customers. Customer safety is another element that is considered at every level of our company’s operations. Varroc is committed to the design, engineering, and manufacturing of products that meet or exceed all applicable laws, regulations, voluntary standards and industry practices. Acknowledging the trust that customers and consumers place in us, we strive to produce high-quality products and services with a commitment to continuous improvement in product performance. Through this dedication, we create products that consistently earn high marks for safety.

Privacy is another Varroc Lighting Systems guarantee. Inventions, ideas, and other forms of intellectual property are a vital part of Varroc’s success. As a result, we are diligent about protecting valuable company technology through patents, trade secret protection, copyrights, and trademarks. Varroc is equally committed to avoiding the unauthorized use of the intellectual property of other companies or individuals. Varroc also protects corporate data and knowledge through a comprehensive set of global IT policies. These policies provide guidance on safeguarding the company’s business information and assets from unauthorized access or disclosure and ensure that information transmitted over our communication systems is properly controlled.

Varroc Lighting Systems 2018 CSR Report 20 Social Considerations

Subcontractor and Supplier Relations

Varroc Lighting Systems understands the necessity of engaging our supply base to work together to further our company efforts. We require that our business partners throughout our supply chain adopt and enforce workplace codes of conduct that are consistent with ours.

Before suppliers can become our business partners, we require them to complete a Global Supplier Request Form. To make certain that our supply base is acting consistently with the Varroc values and Ethics code, we require our suppliers to behave according to our Global Purchase Order Terms and Conditions. Additionally, suppliers must comply with the SEC rules and regulations surrounding “conflict minerals” and be familiar with our Varroc Lighting Systems Conflict Mineral Policy Statement.

The Varroc Supplier Assessment is our evaluation that is used to gauge the performance of our suppliers. This allows us to evaluate a wide-ranging set of our suppliers’ business practices. If a supplier does not pass their assessment, the supplier will be given an action plan to remedy their failures

Varroc Lighting is committed to an aggressive supplier diversity program, and recognizes the importance of having suppliers with diversity credentials. Our organization understands that diverse businesses provide unique opportunities to improve efficiencies within our industry. We are always seeking to explore relationships with diverse businesses, and these relationships are critical to our continued success.

Varroc Lighting Systems 2018 CSR Report 21 Environmental Concerns

Varroc Lighting Systems is continually improving our environmental performance, working to minimize the creation of solid and liquid waste, and eliminating other practices that could have a harmful impact on the environment. To do this, we have applied an ISO 14001 environmental management system in our facilities.

To further manage our impacts, we recently implemented an environmental management program that utilizes an online reporting system. This online EH&S Quality Management system tracks all waste, water usage, and energy usage in our global manufacturing plants. Our corporate goals are focused on increasing energy efficiency, decreasing water usage, and improving our waste management program.

Product Design Considerations

Throughout the product design process, decisions are made to help reduce the environmental impact of our products. Our aim is to help our customers fulfill the public desire for environmental solutions from the automotive industry.

Our engineering team is dedicated to developing and incorporating product technologies such as LED headlamps and rear lamps, adaptive front lighting systems, projector lamps, signature DRL and rear lamps, and Matrix LED lamps. Varroc Lighting has partnered with OEMs to rapidly move towards LED functionality in exterior lighting. This technology, once implemented, can reduce our customers’ electric demand and improve vehicle fuel economy. Additionally, efficiency technology includes molding optimization to reduce weight and improve other physical properties of our products.

Varroc Lighting Systems 2018 CSR Report 22 Environmental Concerns

Another important consideration in our design process is the materials that make up our products. Our published Varroc Lighting Systems Conflict Mineral Policy Statement ensures that we comply with the Dodd-Frank Wall Street Reform and Consumer Act of 2010 regarding the mining of certain minerals from the “Conflict Region.”

Additionally, we comply with the European Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) and Restriction of Hazardous Substances (RoHS) regulations. To confirm that no restricted chemicals are in use at any Varroc sites, we have a Chemical Management System in place to monitor all materials entering our facilities.

Operational Considerations

Energy Use

Most of our company’s carbon footprint stems from energy consumption at Varroc Lighting Systems manufacturing locations. Manufacturing is focused on process technologies to deliver headlamps, rear lamps, vehicle control electronics, and other exterior lighting products to our customers.

Our energy consumption data is managed through our online reporting tool that is used in all Varroc Lighting Systems manufacturing plants. Operating more efficiently allows us to decrease our direct and indirect energy usage. This is an important company goal to not only improve our environmental footprint, but to also increase our profitability.

Our energy consumption in FY 2018 corresponded to total Greenhouse Gas emissions of 73,017 metric-ton CO2e. This number makes up our company’s direct (scope one) GHG emissions, and our indirect (scope two) GHG emissions. To better manage our global Greenhouse Gas footprint, we produce company emissions inventories and respond annually to the CDP Supply Chain Survey.

Varroc Lighting Systems set a target to reduce our scope one and two emissions by 10% from fiscal year 2015 to fiscal year 2018, normalized to value add (revenue minus material spend). We have successfully achieved a reduction of 22.6% through improved equipment efficiency with increased productivity as well as energy efficiency projects.

Varroc Lighting Systems 2018 CSR Report 23 Environmental Concerns

Operational Considaerations Water Use

While our operations are not water intensive, we still make a conscious effort to track our global water use. Our Environmental, Health, and Safety policy includes a focus on water efficiency and conservation. Our priority regarding Varroc Lighting Systems’ water use is ensuring that there is no water stress in the regions that source our water. Using the WBCSD Global Water Tool, we have confirmed that no Varroc facilities are located in a high-risk area for water. Water resource considerations are factored into location planning for new operations, site expansions, and new market exploration.

To be good water stewards, our current company goal is to decrease our water use by 5% year-over-year. For fiscal year 2018, we achieved this with the following performance:

Waste Management

We have identified many areas throughout our operations where we can work to reduce waste. One action Varroc is taking to decrease the amount of waste from our manufacturing plants is reusing or recycling waste material instead of landfilling. We have also been successful using returnable dunnage and eliminating the use of cardboard in our plants.

Our current company goal is to decrease our waste generation by 5% year-over-year. For fiscal year 2018, we achieved this goal with the following performance:

24 Environmental Concerns

Operational Considerations

Biodiversity Protection

Our locations do not operate in sensitive ecological areas. Additionally, although we have programs to make sure that we reduce our impact, our operations do not pose a significant threat to ecosystem biodiversity.

Our parent company, Varroc Engineering Pvt. Ltd., strives to preserve the environment in which they operate. Recently, Varroc completed a project to clean up the Kham River in , India. The river had been polluted with liquid and solid wastes, but by using modern technology like the Green Bridge System, Varroc provided ecologically corrected free-flowing water for downstream irrigation. They also cleared the riverfront of unwanted toxins, making it beautiful and positively impacting the lives of people living near the banks of the Kham River.

Concluding Statements

Thank you for taking the time to learn more about Varroc Lighting Systems and our CSR policies. We are excited for our future and look forward to continued successes with our corporate sustainability programs.

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