ANNUAL REPORT 2016/2017 ANNUAL REPORT 2016/2017 2016/2017 ANNUAL REPORT ANNUAL Digital Age

ANNUAL REPORT 2016/2017 ANNUAL REPORT 2016/2017 2016/2017 ANNUAL REPORT ANNUAL digital age. A strategy with vision:digital with age. 360° Astrategy digital our position of world’s one expanding the as automotive leading in the suppliers onlyare afew examples digitalisation to use to show how continue we actively These intelligenceapproaches. artificial through processes ouring production optimisare we and functions solutions driving autonomous to realise software isation of automobile lighting technology, intensively we working are to create digital aresult, the with we decisively pushing are ahead As opportunity. an as digitalisation? is clear: thing advancing One digitalisation primarily we understand aresult to now are as open us of models technologies? business new Which use digital of the through processes and offerings optimise our existing service we further here: how can At questions ourselves welevels. ask HELLA, two at all digitalisation. Progressing inexorably, as rapidly industry the it is gripping automotive other the market no current is changing trend as world Virtually - -

FINANCIAL REPORT HELLA BUSINESS DEVELOPMENT

EARNINGS FOR THE PERIOD EARNINGS PER SHARE NET CAPITAL EXPENDITURE in € million and change compared to in € and change compared to 2016/2017 prior year in % prior year in %

CURRENCY AND PORTFOLIO-ADJUSTED BUSINESS 343 4.3% SALES GROWTH DEVELOPMENT HELLA continued on its profitable 272 growth path in the fiscal year SALES

in € million 2016/2017. Currency and € million portfolio-adjusted sales growth 2015/2016 € 6,352 million 2016/2017 € 6,585 million increased by 4.3 %, while 3.08 reported sales rose by 3.7 % to EQUITY RATIO 26 % 2.42 as at 31 May 2017 3.7 % € 6.6 billion. Adjusted earnings Change before interest and taxes compared to prior year improved by 12.0 % to € 534 million 27 % € 6,585 and the adjusted EBIT margin by 0.6 percentage points to 8.1 %. 2015/2016 2016/2017 2015/2016 2016/2017 million The Automotive segment in particular contributed to the increase in sales and earnings. SEGMENT SALES PERMANENT EMPLOYEES in € million and change compared to prior year in %

AUTOMOTIVE +12 % ADJUSTED EARNINGS BEFORE INTEREST EARNINGS BEFORE INTEREST AND TAXES (ADJUSTED EBIT) AND TAXES (EBIT) in € million in € million +3.8 % 5,029 37,7162016/2017 4,843 476 +12 % 534 420 +21 % 507 AFTERMARKET 33,6892015/2016 2015/2016 2016/2017 2015/2016 2016/2017 39.5 % 1,222 +3.7% NET FINANCIAL DEBT / EBITDA 1,179 as at 31 May 2017 in % of sales in % of sales

SPECIAL APPLICATIONS +0.6 + 1.1 percentage percentage 7.5 % points % 6.6 % points % +0.3 % 8.1 7.7 385 2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 384 2015/2016 0.3 x 4.3 HELLA prior year prior to compared Change 3.7

BUSINESS DEVELOPMENT BUSINESS % 7.5

2016/2017 ADJUSTED EARNINGS BEFORE INTEREST INTEREST BEFORE EARNINGS ADJUSTED 2015/2016 476 2015/2016 2015/2016 AND TAXES (ADJUSTED EBIT) (ADJUSTED TAXES AND

% € € 6,585 million million € 6,585 € 6,352 million million € 6,352 %

in 6,585 in €million in in €million in percentage million

SALES % of sales % of points +12 +0.6 +0.6

SALES GROWTH SALES PORTFOLIO-ADJUSTED AND CURRENCY 534 8.1 2016/2017 2016/2017

increase in sales and earnings. and insales increase to the contributed particular AutomotiveThe in segment by 0.6by to 8.1 points percentage EBIT margin adjusted the and improved 12.0 by before taxes interest and € 6.6 Adjusted billion. earnings rose 3.7 by sales reported 4.3 by increased growth sales portfolio-adjusted 2016/2017. and Currency year fiscal inthe path growth profitable its on continued HELLA DEVELOPMENT BUSINESS 2016/2017 6.6 420 2015/2016 2015/2016 EARNINGS BEFORE INTEREST

% AND TAXES (EBIT) TAXES AND in in €million in percentage

% of sales % of %, while while %, points +21 + 1.1 1.1 + % to million €534

507 7.7

2016/2017 2016/2017 % to

%. %.

1,222 384 385 4,843 5,029 SPECIAL APPLICATIONS SPECIAL compared to prior year in % in year prior to compared change and €million in SALES SEGMENT AFTERMARKET AUTOMOTIVE 1,179 in € million and change compared to to compared change and €million in 2015/2016 EARNINGS FOR THE PERIOD THE FOR EARNINGS 272 prior year in % in year prior 26

2016/2017 2015/2016 2016/2017 343 +3.8 +3.7% +0.3

% %

37,716 33,689 PERMANENT EMPLOYEES 2015/2016 2.42 in € and change compared to to compared change €and in EARNINGS PER SHARE PER EARNINGS in year prior 2016/2017 2015/2016 27

% % 2016/2017 3.08 +12

% 39.5 DEBT FINANCIAL NET 0.3 NET CAPITAL EXPENDITURE CAPITAL NET as at 31 May 2017 31 May at as EQUITY RATIO EQUITY as at 31 May 2017 31 May at as /

EBITDA x %

€ million

FINANCIAL REPORT

Contents How HELLA is creating brilliant ideas brilliant creating is HELLA How TRAINING OF A QUESTION view digital all-round ensures Aglaia HELLA YEAR FISCAL THE OF HIGHLIGHTS YEAR MARKET EQUITY OUR AT BACK LOOKING STATEMENTS FINANCIAL CONSOLIDATED BOARD SUPERVISORY THE BY REPORT STATEMENT RESPONSIBILITY FOREWORD SHAREHOLDERS OUR TO REPORT MANAGEMENT GROUP FINANCIAL REPORT DATASHINING DIGITAL 360° JOURNAL: INDICATORS PERFORMANCE KEY NOTICE LEGAL GLOSSARY BODIES OF OVERVIEW AT AGLANCE HELLA CERTIFICATE AUDITOR’S INDUSTRY THE OF RULES THE CHANGE production in learning” “Deep APRODUCT AS SOFTWARE lights front to LCD brings HELLA BOARD MANAGEMENT OUR

180 175 181 174 176 178

CONTENTS 38 86 08 06 02 32 22 26 91 10 12 16

FINANCIAL REPORT 02 FOREWORD FOREWORD 03

Foreword

Ladies and Gentlemen,

HELLA is one of the technology and innovation leaders in the automotive industry. From this strong position, we successfully continued our path of profitable growth in fiscal year 2016/2017 and generated consolidated sales of € 6.6 billion. This means that sales rose by 4.3 per cent on a currency- and portfolio-adjusted basis. Taking these special items into account, reported consolidated sales show an increase of 3.7 per cent. In the second half of the fiscal year in particular, we were able to achieve the pick-up in growth momentum we had expected and increased reported sales by about 6.1 per cent compared to the previous year.

The improvement in profitability was even more pronounced. In particular due to the high level of efficiency of several complex new production ramp-ups, we increased our adjusted earnings before interest and taxes by 12.0 per cent to € 534 million and our adjusted EBIT margin by 0.6 percentage points to 8.1 per cent.

The basis for this sustained success is formed by two main aspects: firstly, our inno- 38,000 employees vative product solutions serving the core markets of the automotive industry such as worldwide are autonomous driving, electrification, digitalisation and individualisation and secondly, our approximately 38,000 employees worldwide working for HELLA every day. We are the basis of our especially grateful to them. success.

Automotive business drives sales and earnings performance

In fiscal year 2016/2017, the main sales driver was the Automotive segment, which increased by 3.8 per cent. As a result of several successful new production roll-outs, the segment recorded an increase in growth momentum, especially in the second half of the year. HELLA is benefiting equally from innovative lighting and electronics solutions. The comprehensive roll-out of technologically sophisticated LED headlamps as well as the launch of new electronic components for application in energy management and battery sensor technology are but two examples.

Thanks to numerous operational improvements, particularly in regard to new production roll-outs, we also increased profitability in the Automotive segment. Dr. Jürgen Behrend Dr. Rolf Breidenbach Managing General Partner President and CEO, Business Division Adjusted EBIT rose by 13.8 per cent and the adjusted operating result margin Electronics, Purchasing, Quality, rose by 0.7 percentage points to 8.8 per cent, contributing significantly to increased Legal and Compliance profitability at the Group level. > 02

FOREWORD Foreword Managing General Partner General Managing Behrend Dr. Jürgen

Legal and Compliance and Legal Electronics, Purchasing, Quality, Division Business CEO, and President Dr. Breidenbach Rolf

profitability at the Group level. level. Group the at profitability increased to significantly contributing cent, per 8.8 to points 0.7 by percentage rose margin result operating adjusted the and 13.8 by cent rose per EBIT Adjusted segment. Automotive the in profitability increased also we roll-outs, production new to regard in particularly improvements, operational numerous to Thanks examples. two but are technology sensor battery and management energy in application for components electronic new of launch the as well as lamps head LED sophisticated technologically of roll-out comprehensive The solutions. electronics and lighting innovative from equally benefiting is year. HELLA the of half second the in especially momentum, growth in increase an recorded segment the roll-outs, production new successful several of aresult As cent. per 3.8 by increased which segment, Automotive 2016/2017,the year was driver fiscal In sales main the performance earnings and Automotive business drives sales them. to grateful especially We day. are every HELLA for working worldwide employees 38,000 approximately our secondly, and individualisation and digitalisation electrification, driving, autonomous as such industry automotive the of markets core the serving solutions product vative inno- our firstly, aspects: main two by formed is success sustained this for basis The 8.1 to cent. per points 0.6percentage by margin EBIT adjusted our and million €534 to 12.0 by cent per taxes and interest before earnings adjusted our increased we ramp-ups, production new complex several of efficiency of level high the to due particular In pronounced. more even was profitability in improvement The year. previous the to 6.1 compared cent per about by sales reported increased and expected had we momentum growth in pick-up the achieve to able were we particular, in year fiscal the of half second the In cent. 3.7 per of increase an show sales consolidated reported account, into items special these Taking basis. portfolio-adjusted and acurrency- on cent per 4.3 by rose sales that means This billion. 6.6 of € sales 2016/2017 consolidated year fiscal generated and in growth profitable of path our continued successfully we position, strong this From industry. automotive the in leaders innovation and technology the of one is HELLA Gentlemen, and Ladies >

- success. the basis of our worldwide are employees 38,000 FOREWORD

FINANCIAL REPORT 04 FOREWORD FOREWORD 05

With sales growth of 3.7 per cent, trading in spare parts and accessories as well as business in garage equipment also made a significant contribution to our solid result Leveraging industry change and digitalisation for the year. Adjusted for the sale of the business segments Industries and Airport The automotive sector is undergoing major changes. Based on a solid entrepreneurial We have all the Lighting, sales in the Special Applications segment in fiscal year 2016/2017 also per- foundation and the clear strategic orientation, HELLA wants to actively shape these formed robustly growing by 5.2 per cent. prerequisites as changes on its path into the automotive future. Thanks to our business portfolio and our strong culture of innovation, we are in a good position to participate in the main an innovation market trends of the automotive industry. and technology Strong growth in international core markets leader to For example, HELLA offers software components for camera-based, assisted and We now HELLA’s profitable growth path is supported by a positive performance in all major automated driving, and has launched a battery management system for lithium-ion participate in the generate more international core markets. With sales up by 13 per cent, business in North, Central batteries that is specifically developed for full-hybrid and electric vehicles and is the creation of and South America in particular developed especially well in the past fiscal year. first to be released on the market. With the integration of a liquid crystal display (LCD) than 30 percent Our sales in the Asia/Pacific/Rest of World region also increased by around 7 percent into an LED headlamp, HELLA recently also reached a new milestone in automotive the mobility of of our sales compared to the previous year. HELLA now generates more than 30 per cent of its lighting technology and further advanced the digitalisation of light. This opens up tomorrow. in the growth total sales in the growth regions of the Americas and Asia. Sales in Europe entirely new opportunities for us to improve light management further and to offer remained stable at the prior year’s high level, improving by around 1 % compared additional functions to make driving even safer and more comfortable. regions with the prior fiscal year. of the Americas Digitalisation is playing an increasingly important role both in the market and Due to the high demand for innovative lighting and electronics solutions, the targeted internally. HELLA has already taken important steps. More than ever, it will be impor- and Asia. expansion of international production capacities is, among many other initiatives, tant for us to continue to expand our digital competencies continuously and at a fast a central cornerstone of our profitable growth path. We will be gradually doubling the pace as innovation is shifting from the actual hardware to the software sector. HELLA production capacities of our electronics plant in Shanghai and building new has all the prerequisites as an innovation and technology leader to continue from production sites in Lithuania and Mexico in order to meet the growing demand for a strong position to shape the mobility of tomorrow. From this foundation, we are HELLA products. firmly convinced that we will continue our path of profitable growth in the long term.

Financial freedom for entrepreneurship

Investing in the expansion of our global network is possible not least because of our solid financial policy, which we also pursued in the past fiscal year. Our equity ratio is still around 40 per cent and gives us the necessary freedom for entrepreneurial action with a long-term orientation.

As in previous years, we want to involve our shareholders in the success of the Lippstadt, August 2017 company. At the Annual General Meeting in September 2017, we will therefore be proposing a distribution of 30 per cent of the net profit for fiscal year 2016/2017 to our shareholders. This corresponds to a dividend of € 0.92 per share this year, which equates to a total of € 102 million. Around 70 percent of the surplus will thus remain within the Company and provide support for the solid financing of our long-term Dr. Jürgen Behrend Dr. Rolf Breidenbach profitable growth path. Managing General Partner President and CEO 04

of the Americas than 30 percent FOREWORD generate more more generate in the growth of our sales and Asia. We now regions regions

formed robustly growing by 5.2 per cent. per 5.2 by growing robustly formed 2016/2017 year per fiscal in also segment Applications Special the in sales Lighting, Airport and Industries segments business the of sale the for Adjusted year. the for result solid our to contribution asignificant made also equipment garage in business as well as accessories and parts spare in trading cent, 3.7 of per growth sales With support for the solid financing of our long-term profitable growth path. path. growth profitable long-term our of financing solid the for support provide and Company the within remain thus will surplus the of 70 percent Around €102 of million. atotal to equates year, which this €0.92 share of per adividend to corresponds This policy. dividend established our with accordance in shareholders 2016/2017year fiscal for our profit to net the of cent per 30 of adistribution proposing 2017, be therefore September in will we Meeting General Annual At the company. the of success the in shareholders our involve to want we years, previous in As orientation. along-term with action entrepreneurial for freedom necessary the us gives and cent per 40 around still is ratio equity year.Our fiscal past the in pursued also we which policy, financial solid our of because least not possible is network global our of expansion the in Investing entrepreneurship for freedom Financial year. fiscal past the in well especially developed particular in America South and Central North, in business 13 by cent, up per sales With markets. core international major all in performance positive by a supported is path growth HELLA’s profitable Strong growth in international core markets HELLA products. HELLA for demand growing the meet to order in Mexico and Lithuania in sites production new building and Shanghai in plant electronics our of capacities production the doubling gradually be will We path. growth profitable our of cornerstone a central initiatives, other many among is, capacities production international of expansion targeted the solutions, electronics and lighting innovative for demand high the to Due year. fiscal prior the with 1 around by improving level, high year’s prior the at stable remained Europe in Sales Asia. and Americas the of regions growth the in sales total its of cent per 30 than more generates now year. HELLA previous the to compared percent 7 around by increased also region of World Asia/Pacific/Rest the in sales Our % compared % compared

- Lippstadt, August 2017 August Lippstadt, Managing General Partner General Managing Behrend Dr. Jürgen firmly convinced that we will continue our path of profitable growth in the long term. long the in growth profitable of path our continue will we that convinced firmly are we foundation, this From tomorrow. of mobility the shape to position a strong from continue to leader technology and innovation an as prerequisites the all has HELLA sector. software the to hardware actual the from shifting is innovation as pace afast at and continuously competencies digital our expand to continue to us for tant impor be ever, will it than More steps. important taken already has HELLA internally. and market the in both role important increasingly an playing is Digitalisation comfortable. more and safer even driving make to functions additional offer to and further management light improve to us for opportunities new entirely up opens This light. of digitalisation the advanced further and technology lighting automotive in milestone anew reached also recently HELLA headlamp, LED an into (LCD) display crystal liquid of a integration the With market. the on released be to first the is and vehicles electric and full-hybrid for developed specifically is that batteries lithium-ion for system management abattery launched has and driving, automated and assisted camera-based, for components software offers HELLA example, For industry. automotive the of trends market main the in participate to position agood in are we innovation, of culture strong our and portfolio business our to Thanks future. automotive the into path its on changes these shape actively to wants HELLA orientation, strategic clear the and foundation entrepreneurial asolid on Based changes. major undergoing is sector automotive The Leveraging industry change and digitalisation President and CEO and President Dr. Breidenbach Rolf

- tomorrow. the mobility of creation of participate in the leader to technology and an innovation as prerequisites We have all the FOREWORD

FINANCIAL REPORT 06 THE MANAGEMENT BOARD THE MANAGEMENT BOARD 07

THE HELLA MANAGEMENT BOARD Dr. Werner Benade Markus Bannert Dr. Rolf Breidenbach Dr. Jürgen Behrend Stefan Osterhage Bernard Schäferbarthold Dr. Matthias Schöllmann at the global lead plant for automotive Business Division Business Division President and CEO, Business Managing General Human Resources, Finance and Controlling Sales Automotive lighting technology at the company Aftermarket & Lighting Division Electronics, Partner Information Technology headquarters in Lippstadt. This is where Special Applications Purchasing, Quality, and Logistics innovative headlamps and the latest Legal and Compliance generation of rear combination lamps come off the line. come off the line. the off come lamps combination rear of generation latest the and headlamps innovative where is This Lippstadt. in headquarters company the at technology lighting automotive for plant lead global the at BOARD MANAGEMENT HELLA THE 06

THE MANAGEMENT BOARD MANAGEMENT THE

Special Applications & Aftermarket Division Business Dr. Benade Werner

Lighting Division Business Bannert Markus

Legal and Compliance and Legal Quality, Purchasing, Division Electronics, Business CEO, and President Dr. Breidenbach Rolf

Partner General Managing Behrend Dr. Jürgen

and Logistics Information Technology Resources, Human Osterhage Stefan

Finance and Controlling and Finance Schäferbarthold Bernard Sales Automotive Schöllmann Dr. Matthias BOARD MANAGEMENT THE 07

FINANCIAL REPORT 08 HELLA SHARE HELLA SHARE 09

LOOKING BACK AT AT A GLANCE PERFORMANCE OF THE HELLA SHARE OUR EQUITY MARKET YEAR The HELLA Share in fiscal year 2016/2017 and 2016/2017 compared to the index Initial stock 11 November 2014 market quotation € 45.14 Ticker symbol HLE HELLA SHARE HELLA SHARE ISIN DE000A13SX22 +33 % BRIGHT CAPITAL MARKET 11 August 2016, led to a positive In the fiscal year 2016/2017 € 33.95 SETTING DESPITE performance of the HELLA share SIN A13SX2 the HELLA share price recorded UNCERTAINTIES during the first quarter in the fiscal Share class No-par value a positive performance. The capital markets reported a year 2016/2017. But the HELLA ordinary bearer positive performance during the share trended lower up until the shares Starting from a price of around +21 % reporting period (1 June 2016 to 31 end of the first half-year. Among MDAX Market Prime Standard May 2017). Thus, the MDAX record- other things, this was caused by a segments (Frankfurt € 34, the share reported a ed gains of 21 % during the HELLA sector-specific underperformance Stock Exchange) gain of some 33 % and ended fiscal year 2016/2017. The shares of almost all German automotive Regulated market XETRA starting price XETRA closing price of German automobile stocks, the suppliers. At the start of the second (Luxembourg +9 % the fiscal year with a XETRA 1 June 2016 31 May 2017 PRIME AUTOMOTIVE DAXsector Automobile (hereinafter half of the fiscal year, the HELLA Stock Exchange) closing price of € 45.14. referred to as Prime Automotive), share embarked on a prolonged Index MDAX closed the reporting period with a share price recovery. The price rise The price trend thus exceeded rise of 9 %. was supported by the publication of HELLA SHARE Triggered by political risks the financial results for the second Price development in the reporting the market performance. (outcome of the Brexit referendum period compared to selected indices quarter in January 2017. Following During the same period, the (indexed on 1 June 2016) MDAX Prime Automotive HELLA in the UK and of the presidential a short-lived sideways movement, elections in the USA), the financial the HELLA share, also support- € 222,222,224 DAXsector Automobile rose markets were characterised by ed by the release of the financial NOMINAL CAPITAL in % by around 9 % while the MDAX uncertainty and volatility during results for the third quarter in early 135 the first half of the fiscal year, April, began a steady upwards closed with gains of 21 %. in particular. An expansionary trend until shortly before the end of 130 central bank policy and robust the reporting period. economic figures led to a recovery 125 111,111,112 on the markets while the Prime LIQUIDITY OF THE HELLA SHARE NUMBER OF SHARES ISSUED Automotive stocks responded with The share’s liquidity substantially 120 significant price drops in the wake increased compared with the fiscal of the Brexit vote. year 2015/2016. In the reporting 115 The equity markets had a period, the average daily XETRA positive start to the second half of trading volume was around 154,000 € 5.02 billion 110 the fiscal year. This trend was sup- MARKET CAPITALISATION shares compared with 140,000 in on 31 May 2017 ported by the prospect of economic the prior year. An exceptionally high 105 policy measures by the new US trading volume was recorded in the administration, by a market-friend- second quarter of the fiscal year. * 60 % of the shares are 100 ly outcome of the elections in In the course of two private place- subject to a pool agreement France and the Netherlands and ments, on 1 February 2017 and on up until at least 2024. 95 by the persistently good economic 23 May 2017, around 2.2 million ** According to the definition development in Europe. and 2.3 million shares, respectively, of Deutsche Börse. 90 were placed. The shares are from HELLA SHARE PRICE holdings of the shareholder € 46.26 € 27.73 PERFORMANCE EXCEEDS HIGHEST PRICE LOWEST PRICE 85 family that are not tied to the pool in fiscal year in fiscal year MARKET DEVELOPMENT and formed part of the free float. 2016/2017 2016/2017 80 During the period of the fiscal E year 2016/2017, the HELLA share TUR UC 75 recorded a rise of 33 % and thus TR S 01.06.2016 01.07.2016 01.08.2016 01.09.2016 01.10.2016 01.11.2016 01.12.2016 01.01.2017 01.02.2017 01.03.2017 01.04.2017 01.05.2017 R outperformed the MDAX indices E AVERAGE D L and the Prime Automotive sector DAILY TRADING VOLUME O H index. After the HELLA share in fiscal year 2016/2017 E R recorded a decline in the wake of A 60 % H Shareholder family the consolidation phase on the S (pool-bound)* capital markets at the start of the € 5.67 million 40 % € 0.92 € 102 million fiscal year 2016/2017, the general is the amount of DIVIDEND per share the annual is the TOTAL AMOUNT Free float ** equity market recovery, together general meeting will be asked to approve in 2017 DISTRIBUTED AS DIVIDEND 153,667 shares with the publication of the results for the fiscal year 2015/2016 on Index segments Market Share class SIN ISIN Ticker symbol market quotation Initial stock 08 HIGHEST HIGHEST PRICE € € €

in fiscal year year fiscal in 153,667shares

46.26 2016/2017 € 222,222,224 5.67 million 5.67 NUMBER OF SHARES ISSUED SHARES OF NUMBER HELLA

MARKET CAPITALISATION 5.02billion DAILY TRADING VOLUME VOLUME TRADING DAILY The HELLA Share HELLA The AT AGLANCE 111,111,112 SHARE NOMINAL CAPITAL in fiscal year 2016/2017 year fiscal in 11 November 2014 Regulated market LOWEST PRICE LOWEST € Stock Exchange) Stock Exchange) Prime Standard DE000A13SX22 ordinary bearer in fiscal year year fiscal in on 31 May 2017 31 May on

(Luxembourg No-par value 2016/2017 27.73 AVERAGE AVERAGE (Frankfurt A13SX2 shares MDAX HLE

** *

of Deutsche Börse. Deutsche of definition the to According SH 2024. least at until up agreement apool to subject 60

AR are shares the % of closed with gains of gains 21 with closed 9 around by Automobile rose DAXsector the period, same the During marketthe performance. exceeded thus trend price The EH ofclosing € price XETRA with a year fiscal the gain of 33 some € of around aprice from Starting a positive performance. recorded price share HELLA the year 2016/2017 fiscal In the SHAREHELLA 2016/2017 O L a reported share the 34, D E R (pool-bound)* family Shareholder 60 S T R U C

% U

E % while the MDAX MDAX % while the % and ended ended % and 45.14. 45.14. 40 %.

float Free

% ** € 100 105 135 130 120 125 in % in 110 115 (indexed on 1 June 2016) 1June on (indexed indices selected to compared period reporting the in development Price SHARE HELLA compared to the index the to compared 2016/2017 and year fiscal in SHARE HELLA THE OF PERFORMANCE general meeting will be asked to approve in 2017 in approve to asked be will meeting general DIVIDEND of amount the is 85 80 90 95 75 XETRA starting price price starting XETRA

0.92 01.06.2016 1 June 2016 1 June €

33.95 01.07.2016

01.08.2016 XETRA closing price price closing XETRA per share the annual annual the share per 31 May 201731 May €

45.14 01.09.2016 01.10.2016

01.11.2016 01.12.2016 MDAX € DISTRIBUTED AS DIVIDEND AS DISTRIBUTED AMOUNT TOTAL the is +33 01.01.2017

+21 102million +9 HELLA SHARE HELLA MDAX PRIME AUTOMOTIVE PRIME 01.02.2017

% Prime Automotive

% 01.03.2017

% 01.04.2017 01.05.2017 HELLA OUR EQUITY MARKET YEAR OUR MARKET EQUITY LOOKING BACK AT development in Europe. in development economic good persistently the by and Netherlands the and France in elections the of outcome ly amarket-friend by administration, US new the by measures policy economic of prospect the by ported sup was trend This year. fiscal the of half second the to start positive vote. Brexit the of wake the in drops price significant with responded stocks Automotive Prime the while markets the on recovery to a led figures economic robust and policy bank central expansionary An particular. in year, fiscal the of half first the during volatility and uncertainty by characterised were markets financial the USA), the in elections presidential the of and UK the in referendum Brexit the of (outcome 9 of rise a with period reporting the closed Automotive), Prime as to referred AutomobileDAXsector (hereinafter the stocks, automobile German of 2016/2017. year shares The fiscal 21 of gains ed record MDAX the 2017). Thus, May 2016 31 (1 to June period reporting the during performance positive a reported markets capital The UNCERTAINTIES DESPITESETTING MARKET CAPITAL BRIGHT for the fiscal year 2015/2016 year on fiscal the for results the of publication the with together recovery, market equity 2016/2017, year general the fiscal the of start the at markets capital the on phase consolidation the of wake the in adecline recorded share HELLA the After index. sector Automotive Prime the and indices MDAX the outperformed 33 of arise recorded 2016/2017, share year HELLA the fiscal the of period the During DEVELOPMENT MARKET PERFORMANCE EXCEEDS PRICE SHARE HELLA The equity markets had a had markets equity The risks political by Triggered %. %. % during the HELLA HELLA the % during

% and thus thus % and

- - - the reporting period. period. reporting the of end the before shortly until trend upwards asteady began April, early in quarter third the for results financial the of release the by ed support also share, HELLA the movement, sideways a short-lived 2017. Following January in quarter second the for results financial the of publication the by supported was rise price The recovery. price share aprolonged on embarked share HELLA the year, fiscal the of half second the of start the At suppliers. automotive German all almost of sector-specific underperformance a by caused was this things, other Among half-year. first the of end the until up lower trended share 2016/2017.year HELLA the But fiscal the in quarter first the during share HELLA the of performance apositive 2016, to 11 led August and formed part of the free float. free the of part formed and pool the to tied not are that family shareholder the of holdings from are shares The placed. were respectively, shares, million 2.3 and million 2017, 2.2 May 23 around 2017 on and 1February on ments, place private two of course the In year. fiscal the of quarter second the in recorded was volume trading high exceptionally An year. prior the in 140,000 with compared shares 154,000 around was volume trading XETRA daily average the period, 2015/2016. reporting the year In fiscal the with compared increased substantially liquidity share’s The SHARE HELLA THE OF LIQUIDITY

HELLA SHARE HELLA

FINANCIAL REPORT 10 HELLA COMPANY PROFILE HELLA COMPANY PROFILE 11

HELLA GROUP AVERAGE GROWTH EXTERNAL SALES BY BUSINESS SEGMENT AT A GLANCE in the last six fiscal years Fiscal year 2016/2017 2016/2017 SALES SHORT PROFILE HELLA is a family-run ATTRACTIVE BUSINESS PORTFOLIO 76AUTOMOTIVE % 6 % company listed on the stock HELLA has been a partner to the tion leadership is helping us achieve 7.3per year % SPECIAL € 4,980 million APPLICATIONS market and one of the automotive industry and automotive this goal. As a result, HELLA is one € 384 million parts trade for more than 100 years. of the world’s leading suppliers of ADJUSTED EARNINGS 100 largest German industrial The company, headquartered in sophisticated LED headlamps, is BEFORE INTEREST AND TAXES TOTAL SALES Lippstadt (Germany), was founded the world market leader in 24-GHz (ADJUSTED EBIT) in € billion companies. As one of the in 1899. The business portfolio radar sensors and a leading inter- 42 % 1 8 % top 40 automotive suppliers comprises three segments: Auto- national manufacturer of intelligent AUTOMOTIVE AFTERMARKET motive, Aftermarket and Special battery sensors. LIGHTING € 1,185 million € 2,788 million worldwide, HELLA specialises Applications. The Automotive in innovative lighting systems segment is split into two business GLOBAL POSITIONING AND 8.8per year % divisions, Lighting and Electronics. CUSTOMER PROXIMITY 6.6 and vehicle electronics and Within these business divisions, HELLA has a global presence. HELLA develops, produces and This ensures our proximity to our 33 % is also an established provider distributes vehicle-specific solu- customers and enables us to lever- AUTOMOTIVE ELECTRONICS in the European aftermarket. tions for automobile manufacturers age growth opportunities globally. SALES BY REGION € 2,191 million and other automotive suppliers The success of this positioning is BASED ON THE HEADQUARTERS In the fiscal year 2016/2017, throughout the world. In the After- reflected in our sales distribution. OF HELLA’S CUSTOMERS Fiscal year 2016/2017 (in € million) the HELLA Group achieved market business segment, HELLA In fiscal year 2016/2017, we gener- and in % of consolidated sales combines the trading of automotive ated around one third of our sales sales of € 6.6 billion and parts and accessories with work- with customers in the growth shop equipment in the independent regions of Asia/Pacific and North, AUTOMOTIVE LIGHTING currently has around 38,000 34 % In the business division Lighting, HELLA devel- developed for full-hybrid and electric vehicles replacement parts market. In Central and South America, another ops and produces headlamps, rear combination and this is the first of its kind to be released on employees at more than the Special Applications business third with customers in our home lamps, signal lamps and interior lights plus the market. segment, we incorporate our market Germany, and the remaining 2,243GERMANY 125 sites in some 35 countries. lighting electronics components for almost all lighting technology and electronic third with customers from other of the well-known automobile manufacturers AFTERMARKET core expertise into applications for European countries. worldwide. Through its cooperation with The Aftermarket business segment is based on special purpose vehicles. 34 % premium original equipment manufacturers, three pillars: in the independent aftermarket we COMPREHENSIVE HELLA has established a particularly strong are one of the most important partners in the TECHNOLOGICAL EXCELLENCE PARTNER NETWORK position, especially in the area of innovative spare parts trade as well as in independent ga- Research and development are part We rely on a strong network of 2,218REST OF EUROPE of HELLA’s DNA and are there- partners. This means that HELLA lighting products. The volume segment is also rages in Europe, offering more than 40,000 spare W WORLD IDE ES fore an essential foundation on works together with a number very successfully served by HELLA. A key parts, wear parts and accessory parts as well YE LO which our competitive strength is of industry partners in different focus of the business division Lighting is as a comprehensive range of services. HELLA P M 16 % E built. One in every five employees forms of cooperation in order to currently the development of high-definition is also a wholesaler in Northern and Eastern 6 26 % 1,063 headlamps. Using several hundreds of thou- Europe. These activities are complemented by 1 works in this area. Research and successfully develop new ASIA, PACIFIC, ROW ,7 sands of individually controllable points of the business activities with high-grade garage 7 development expenses in fiscal technologies and markets. Our 3 41 % 17 % light allows for a much higher resolution and equipment, such as vehicle data equipment as year 2016/2017 accounted for 9.7 % equity-accounted joint ventures 16 % thus more precise control of light distribution. well as professional diagnostic tools and garage of consolidated sales. More than alone generated total sales of € 3.6 90 % of the expenses are accounted billion in the 2016/2017 fiscal year, 1,061 devices, which enable specialist vehicle repair 16 % NORTH, CENTRAL & AUTOMOTIVE ELECTRONICS and maintenance at the garage. for by the Automotive business effectively contributing € 52 million SOUTH AMERICA Our electronics solutions help to make vehicles segment. The main focus here is to our consolidated net profit. safer, more efficient and more comfortable. Our SPECIAL APPLICATIONS REST OF EUROPE on the development of innovative range of services in the Electronics business With its Special Applications business segment, GERMANY technologies for the key market COMMITED EMPLOYEES division includes technologies for driver as- HELLA is expanding its core business to other ASIA, PACIFIC, ROW trends within the automotive Our employees are the basis of our NORTH, CENTRAL & industry, e.g. autonomous driving, success. At the end of the 2016/2017 INVESTMENTS IN RESEARCH sistance, energy management systems, body industries. In the Special Applications segment, SOUTH AMERICA AND DEVELOPMENT electronics, sensors and actuators as well we develop, manufacture and distribute lighting energy efficiency and electrification, fiscal year, we employed around as systems for power steering. For example, and electronics products for special vehicles, digitalisation and individualisation. 38,000 permanent employees HELLA offers software components for cam- such as construction equipment, and agricultural worldwide. Approximately a quarter LEADING MARKET POSITION of these are employed in Germany. era-based, assisted and automated driving, and machinery, buses and trailers and caravans, as EMPLOYEES We want to count ourselves among The remaining 75 % work at has launched a battery management system for well as for the marine sector, using our extensive worldwide work in research 9.7of sales % lithium-ion batteries that is specifically technological expertise in the automotive sector. and development at HELLA the leading providers in the markets HELLA’s international locations, 6,764 in which we are active. Our consist- particularly in China, India, Eastern ent focus on technology and innova- Europe, the USA and Mexico. 9.7 8.8 7.3 of sales of AND DEVELOPMENT RESEARCH IN INVESTMENTS year per (ADJUSTED EBIT) TAXES AND INTEREST BEFORE ADJUSTED EARNINGS year per SALES years fiscal six last the in GROWTH AVERAGE 10 BASED ON THE HEADQUARTERS HEADQUARTERS THE ON BASED 2,243

Fiscal year 2016/2017 (in € million) €million) 2016/2017 (in year Fiscal 2,218 2,218 OF HELLA’S CUSTOMERS HELLA’S OF and in % of consolidated sales consolidated %of in and HELLA ASIA, PACIFIC, ROW PACIFIC, ASIA, NORTH, CENTRAL & CENTRAL NORTH, 1,063 SALES BY REGION BY SALES REST OF EUROPE OF REST SOUTH AMERICA SOUTH 1,061

COMPANY PROFILE COMPANY

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lithium-ion batteries that is specifically specifically is that batteries lithium-ion for system management abattery launched has and driving, automated and assisted era-based, cam for components software offers HELLA example, For steering. power for systems as well as actuators and sensors electronics, body systems, management energy sistance, as driver for technologies includes division business Electronics the in services of range Our comfortable. more and efficient more safer, vehicles make to help solutions electronics Our AUTOMOTIVE ELECTRONICS distribution. light of control precise more thus and resolution higher amuch for allows light of points controllable individually of sands thou of hundreds several Using headlamps. high-definition of development the currently is Lighting division business the of focus Akey HELLA. by served successfully very also is segment volume The products. lighting innovative of area the in especially position, strong aparticularly established has HELLA manufacturers, equipment original premium with cooperation its Through worldwide. manufacturers automobile well-known the of all almost for components electronics lighting plus lights interior and lamps signal lamps, combination rear headlamps, produces and ops devel HELLA Lighting, division business the In AUTOMOTIVE LIGHTING 76 ELECTRONICS AUTOMOTIVE AUTOMOTIVE AUTOMOTIVE € € € 4,980 million 2,788 million 2,191 million 42 33 LIGHTING

% %

EXTERNAL SALES BY BUSINESS SEGMENT BUSINESS BY SALES EXTERNAL Fiscal year 2016/2017 year Fiscal 6.6 - - - TOTAL SALES TOTAL - in € billion €billion in

the market. the on released be to kind its of first the is this and vehicles electric and full-hybrid for developed technological expertise in the automotive sector. automotive the in expertise technological extensive our using sector, marine the for as well as caravans, and trailers and buses machinery, agricultural and equipment, construction as such vehicles, special for products electronics and lighting distribute and manufacture develop, we segment, Applications Special the In industries. other to business core its expanding is HELLA segment, business Applications Special its With SPECIAL APPLICATIONS garage. the at maintenance and repair vehicle specialist enable which devices, garage and tools diagnostic professional as well as equipment data vehicle as such equipment, garage high-grade with activities business the by complemented are activities These Europe. Eastern and Northern in awholesaler also is HELLA services. of range acomprehensive as well as parts accessory and parts wear parts, spare 40,000 than more offering Europe, in rages ga independent in as well as trade parts spare the in partners important most the of one are we aftermarket independent the in pillars: three on based is segment business Aftermarket The AFTERMARKET

€ AFTERMARKET 8 1 APPLICATIONS SPECIAL 6 € 1,185 million 384 million

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% AT AGLANCE GROUP HELLA special purpose vehicles. purpose special for applications into expertise core electronic and technology lighting our incorporate we segment, business Applications Special the In market. parts replacement independent the in equipment shop work with accessories and parts automotive of trading the combines HELLA segment, business market After the In world. the throughout suppliers automotive other and manufacturers automobile for tions solu vehicle-specific distributes and produces develops, HELLA divisions, business these Within Electronics. and Lighting divisions, business two into split is segment Automotive The Applications. Special and Aftermarket motive, Auto segments: three comprises portfolio 1899. business in The founded was (Germany), Lippstadt in headquartered company, The 100 years. than more for trade parts automotive and industry automotive the to apartner been has HELLA BUSINESS PORTFOLIO ATTRACTIVE ent focus on technology and innova and technology on focus ent consist Our active. are we which in markets the in providers leading the among ourselves count to We want POSITION MARKET LEADING digitalisation and individualisation. electrification, and efficiency energy driving, autonomous e.g. industry, automotive the within trends market key the for technologies innovative of development the on is here focus main The segment. business Automotive the by for 90 than More sales. consolidated of 9.7 for 2016/2017year accounted fiscal in expenses development and Research area. this in works employees five every in One built. is strength competitive our which on foundation essential an fore there are and DNA HELLA’s of part are development and Research TECHNOLOGICAL EXCELLENCE

% of the expenses are accounted accounted are expenses the % of

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CUSTOMER PROXIMITY AND POSITIONING GLOBAL battery sensors. intelligent of manufacturer national inter aleading and sensors radar 24-GHz in leader market world the is headlamps, LED sophisticated of suppliers leading world’s the of one is HELLA aresult, As goal. this achieve us helping is leadership tion Europe, the USA and Mexico. Mexico. and USA the Europe, Eastern India, China, in particularly locations, international HELLA’s 75 remaining The Germany. in employed are these of aquarter Approximately worldwide. employees permanent 38,000 around employed we year, fiscal 2016/2017 the of end the At success. our of basis the are employees Our COMMITED EMPLOYEES profit. net consolidated our to million 52 € contributing effectively year, 2016/2017 the in fiscal billion €3.6 of sales total generated alone ventures joint equity-accounted Our markets. and technologies new develop successfully to order in cooperation of forms different in partners industry of anumber with together works HELLA that means This partners. of network astrong on We rely NETWORK PARTNER COMPREHENSIVE European countries. other from customers with third remaining the and Germany, market home our in customers with third another America, South and Central North, and Asia/Pacific of regions growth the in customers with sales our of third one around ated 2016/2017, year gener we fiscal In distribution. sales our in reflected is positioning this of success The globally. opportunities growth age lever to us enables and customers our to proximity our ensures This presence. aglobal has HELLA HELLA COMPANY PROFILE COMPANY % work at at % work

- - 11 -

FINANCIAL REPORT 12 HELLA HIGHLIGHTS HELLA HIGHLIGHTS 13

RADAR SENSORS NUMBER TEN MILLION At the electronics plant in Hamm, the ten millionth 24 GHz radar sensor comes off the production line. More than 120 vehicle series arealready equipped with this radar technology, making HELLA one of the world’s leading suppliers. In addition, HELLA in collaboration with partners has developed a new sensor generation based on the 77 GHz technology that will allow the precise 360° recognition of Highlights of the vehicle’s surroundings required for automated parking, in particular. The market launch of the new sensor is scheduled for 2020.

INDIVIDUAL LIGHT SIGNATURE With the slogan “Think modular” HELLA presents the new ”Shapeline“ the fiscal year August 2016 lighting series at the International Motor Show for Commercial Vehi- cles in Hanover. The new series will allow manufacturers to assemble August 2016 lighting systems on a modular principle. Rear and brake lights, October 2016 direction indicators and position lights are available in many different shapes and can be combined flexibly. This means that manufacturers October 2016 of commercial vehicles are able to create an individualised and, above ON THE BIG STAGE HELLA exhibits at AUTO Shanghai 2017, one of the world’s biggest November 2016 all, consistent look for every vehicle series, large or small. and most important motor shows. Around 1,500 visitors came to the December 2016 HELLA stall and were impressed by the large number of innovative EXPANSION OF E-COMMERCE product solutions addressing the key market trends of electrification January 2017 HELLA is further expanding its e-commerce activities in the 1,500VISITORS and energy efficiency, digitalisation, autonomous driving and Aftermarket segment. The acquisition of iParts, the leading online February 2017 individualisation. China has long since become one of the most shop for auto parts in Poland, aims to strengthen the company’s important automotive markets for HELLA. The company has been March 2017 own e-commerce activities and speed up further expansion. HELLA active on the Chinese market since 1980, and from the early 1990s itself has been represented in Poland’s online trading since 2015 March 2017 with its own production facilities. with the UCANDO brand. March 2017

April 2017 REVOLUTION THROUGH HOLOGRAPHIC TECHNOLOGY NEW HEADLAMP DIMENSION Working together with Covestro, one of the world’s largest polymer As part of a research project HELLA, working in collaboration with producers, HELLA has developed a new design for vehicle signal other project partners, has developed and constructed a headlamp lighting on the basis of holographic technology. The vehicle’s rear based on a liquid crystal display (LCD). The new LCD headlamp end consists of a three-part light, each part of which is equipped with projects a total of 30,000 pixels onto the road. The light pattern can holographic technology. The holographic foil is illuminated from behind thus be adjusted to different driving situations in an intelligent using LED light sources and reflectors. This creates and infinitely variable manner in real time. With the development 2016 a 3D effect, just as if the elements were of liquid crystal HD technology, HELLA continues to push ahead floating freely in the air. A world with the digitalisation of light. The new technology is expected to premiere from HELLA and Covestro. be first used from 2020. 2017

VISIT FROM THE PIONEER FAMILY-FRIENDLY COMPANY HELLA is among the 100 most important, family-run companies HELLA welcomes Nobel Prize winner Shuji Nakamura at the company’s in Germany. This is the result of a study conducted on behalf of headquarters in Lippstadt. Working in collaboration with two other Stiftung Familienunternehmen (Foundation for Family Businesses). scientists, Nakamura developed the blue light emitting diode in the The Managing General Partner of HELLA, Dr. Jürgen Behrend, early 1990s. This successful research gave rise to the ability to produce accepted the award at the company’s headquarters in Lippstadt. white light using LEDs in combination with luminescent material. For this, the scientists were awarded the Nobel Prize for Physics in 2014.

EXCELLENT QUALITY Customers honour HELLA for outstanding quality. HELLA has SOCIAL COMMITMENT received the Daimler Supplier Award 2016 from Daimler for The HELLA staff supports regional charitable projects in various outstanding quality services during the start-up phase of the fundraising campaigns. For example, the Christmas Campaign 2016 innovative HD84 headlamp of the new Mercedes-Benz E-class and was initiated under the aegis of the works council. The proceeds of during its high-quality series production. HELLA has also been the campaign went to “Aktion Lichtblicke” to support families suffer- recognised by the Ford Motor Company, receiving the Ford World ing hardship. Moreover, the staff supports several social projects in Excellence Award in the quality category for the first time. the immediate vicinity of the plant with the “Cent Donation” campaign.

THE WORKSHOP’S FRIEND NEW DEVELOPMENT CENTRE HELLA, as the Workshop’s Friend, supports independent workshops HELLA is opening a new development centre for automotive lighting throughout the entire repair process - ranging from the acceptance technology in Sindelfingen. The new facility near Stuttgart will help of a vehicle and vehicle diagnostics, including the identification service the growing demand for innovative lighting solutions and of errors and parts, to online repair assistance and technical advice. it acknowledges the strong presence of the automotive industry in The aim is to make the workshop process even faster and more southern Germany. profitable in future. the fiscal year of Highlights 12 product solutions addressing the key market trends of electrification electrification of trends market key the addressing solutions product and most important motor shows. Around 1,500 visitors came to the the to came 1,500 visitors Around shows. motor important most and HELLA is opening a new development centre for automotive lighting lighting automotive for centre development anew opening is HELLA Stiftung Familienunternehmen (Foundation for Family Businesses). Businesses). Family for (Foundation Familienunternehmen Stiftung

other project partners, has developed and constructed a headlamp aheadlamp constructed and developed has partners, project other HELLA stall and were impressed by the large number of innovative innovative of number large the by impressed were and stall HELLA projects a total of 30,000 pixels onto the road. The light pattern can can pattern light The road. the onto pixels 30,000 of atotal projects technology in Sindelfingen. The new facility near Stuttgart will help help will Stuttgart near facility new The Sindelfingen. in technology As part of a research project HELLA, working in collaboration with with collaboration in working HELLA, project aresearch of part As innovative HD84 headlamp of the new Mercedes-Benz E-class and and E-class Mercedes-Benz new the of headlamp HD84 innovative it acknowledges the strong presence of the automotive industry in in industry automotive the of presence strong the acknowledges it important automotive markets for HELLA. The company has been been has company The HELLA. for markets automotive important active on the Chinese market since 1980, and from the early 1990s early the from 1980, and since market Chinese the on active HELLA exhibits at AUTO Shanghai 2017, one of the world’s biggest biggest 2017, world’s the of one Shanghai AUTO at exhibits HELLA recognised by the Ford Motor Company, receiving the Ford World World Ford the receiving Company, Motor Ford the by recognised service the growing demand for innovative lighting solutions and and solutions lighting innovative for demand growing the service with the digitalisation of light. The new technology is expected to to expected is technology new The light. of digitalisation the with and infinitely variable manner in real time. With the development development the With time. real in manner variable infinitely and HELLA accepted the award at the company’s headquarters in Lippstadt. in headquarters company’s the at award the accepted HELLA is among the 100 most important, family-run companies companies family-run important, 100 most the among is HELLA of liquid crystal HD technology, HELLA continues to push ahead ahead push to continues HELLA technology, HD crystal liquid of during its high-quality series production. HELLA has also been been also has HELLA production. series high-quality its during individualisation. China has long since become one of the most most the of one become since long has China individualisation. based on a liquid crystal display (LCD). The new LCD headlamp headlamp LCD new The (LCD). display crystal aliquid on based in Germany. This is the result of a study conducted on behalf of of behalf on conducted astudy of result the is This Germany. in The Managing General Partner of HELLA, Dr. Jürgen Behrend, Behrend, Dr. Jürgen HELLA, of Partner General Managing The Customers honour HELLA for outstanding quality. HELLA has has HELLA quality. outstanding for HELLA honour Customers thus be adjusted to different driving situations in an intelligent intelligent an in situations driving different to adjusted be thus outstanding quality services during the start-up phase of the the of phase start-up the during services quality outstanding and energy efficiency, digitalisation, autonomous driving and driving autonomous digitalisation, efficiency, energy and received the Daimler Supplier Award 2016 from Daimler for for Daimler 2016 from Award Supplier Daimler the received Excellence Award in the quality category for the first time. time. first the for category quality the in Award Excellence HIGHLIGHTS with its own production facilities. production own its with FAMILY-FRIENDLY COMPANY COMPANY FAMILY-FRIENDLY NEW DEVELOPMENT CENTRE DEVELOPMENT NEW NEW HEADLAMP DIMENSION HEADLAMP NEW be first used from 2020. from used first be EXCELLENT EXCELLENT QUALITY ON THE BIG STAGE BIG THE ON southern Germany.

1,500 VISITORS

November 2016 November December 2016 December February 2017 February January 2017 January October 2016 October 2016 October August 2016 August 2016 August March 2017 March 2017 March 2017 March April 2017 April 2017 2016 with the UCANDO brand. UCANDO the with 2015 since trading online Poland’s in represented been has itself HELLA expansion. further up speed and activities e-commerce own company’s the strengthen to aims Poland, in parts auto for shop online leading the iParts, of acquisition The segment. Aftermarket the in activities e-commerce its expanding further is HELLA E-COMMERCE OF EXPANSION small. or large series, vehicle every for look consistent all, above and, individualised an create to able are vehicles commercial of manufacturers that means This flexibly. combined be can and shapes different many in available are lights position and indicators direction lights, brake and Rear principle. amodular on systems lighting assemble to manufacturers allow will series new The Hanover. in cles Vehi Commercial for Show Motor International the at series lighting ”Shapeline“ new the presents HELLA modular” “Think slogan the With SIGNATURE LIGHT INDIVIDUAL 2020. for scheduled is sensor new the of launch market The ticular. par in parking, automated for required surroundings vehicle’s the of recognition 360° precise the allow will that technology GHz 77 the on based generation sensor anew developed has partners with collaboration in HELLA addition, In suppliers. leading world’s the of one HELLA making technology, radar this with equipped arealready series vehicle 120 than More line. production the off comes sensor radar GHz 24 millionth ten the Hamm, in plant electronics the At MILLION TEN NUMBER SENSORS RADAR the immediate vicinity of the plant with the “Cent Donation” campaign. Donation” “Cent the with plant the of vicinity immediate the in projects social several supports staff the Moreover, hardship. ing suffer families support to Lichtblicke” “Aktion to went campaign the of proceeds The council. works the of aegis the under initiated was 2016 Campaign Christmas the example, For campaigns. fundraising various in projects charitable regional supports staff HELLA The SOCIAL COMMITMENT 2014. in Physics for Prize Nobel the awarded were scientists the this, For material. luminescent with combination in LEDs using light white produce to ability the to rise gave research successful This 1990s. early the in diode emitting light blue the developed Nakamura scientists, other two with collaboration in Working Lippstadt. in headquarters company’s the at Nakamura Shuji winner Prize Nobel welcomes HELLA PIONEER THE FROM VISIT Covestro. and HELLA from premiere air.world A the in freely floating were elements the if as just effect, a 3D creates This reflectors. and sources light LED using behind from illuminated is foil holographic The technology. holographic with equipped is which of part each light, athree-part of consists end rear vehicle’s The technology. holographic of basis the on lighting signal vehicle for design anew developed has HELLA producers, polymer largest world’s the of one Covestro, with together Working TECHNOLOGY HOLOGRAPHIC THROUGH REVOLUTION profitable in future. in profitable more and faster even process workshop the make to is aim The advice. technical and assistance repair online to parts, and errors of identification the including diagnostics, vehicle and avehicle of acceptance the from -ranging process repair entire the throughout workshops independent supports Friend, Workshop’s the as HELLA, FRIEND WORKSHOP’S THE

HELLA HIGHLIGHTS

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FINANCIAL REPORT DIGITAL The world around us consists of billions of individual bits of data, and they are driving it towards the future. HELLA is taking advantage of the opportunities provided by digitalisation in order to help shape the mobility of tomorrow with vision and through the use of wide-ranging ideas. 360° DIGITAL: a tour of the digital HELLA world. SHINING DATA SOFTWARE AS A A QUESTION OF CHANGE THE DIGITAL Digitalisation is PRODUCT TRAINING RULES OF changing automotive HELLA Aglaia is one In a pilot project, THE INDUSTRY lighting technology. of the world’s leading HELLA is premiering Digitalisation is break- HELLA is at the fore- suppliers of intelli- methods of artifi- ing up established front of this devel- gent visual sensor cial intelligence in market structures opment. The most systems. In a con- the form of “deep and is changing entire recent milestone: versation, Managing learning” in produc- industries. If you want the development of a Director Kay Talmi tion to additionally to be successful in headlamp with liquid talks about the rel- improve quality and this environment, you crystal HD technol- evance of computer efficiency. A visit to have to be prepared ogy, allowing fully vision for autono- the electronics plant to break new adaptive light distri- mous driving and in Hamm, Germany. ground. This is what bution in real time. new software-based HELLA is doing, as business models. the examples from Lippstadt, Berlin and 16 22 26 Silicon Valley show. 32 DIGITAL HELLA world. HELLA DIGITAL: 360° wide-ranging ideas. of use the through visionwith and of tomorrow mobility the shape toby digitalisation in order help provided of opportunities the tage advan future. is HELLA taking it the towards driving are they and of data, bits ofbillions individual of consists us around world The atour of digital the - DIGITAL 16 bution in real time. real in bution distri light adaptive fully allowing ogy, HD technol crystal liquid with headlamp a of development the recent milestone: most The opment. devel this of front fore the at is HELLA technology. lighting automotive changing is Digitalisation SHINING DATA - - - - business models. models. business software-based new and driving mous autono for vision computer of evance rel the about talks Talmi Kay Director Managing versation, acon In systems. sensor visual gent suppliers of intelli leading world’s the of one is Aglaia HELLA PRODUCT SOFTWARE ASA 22 - - - - in Hamm, Germany. Hamm, in plant electronics the to visit A efficiency. and quality improve additionally to tion produc in learning” “deep of form the in intelligence cial artifi of methods premiering is HELLA project, apilot In TRAINING A QUESTIONOF 26 - - Silicon Valley show. Valley Silicon and Berlin Lippstadt, from examples the as doing, is HELLA what is This ground. new break to prepared be to have you environment, this in successful be to want you If industries. entire changing is and structures market established up ing break is Digitalisation THE INDUSTRY RULES OF CHANGE THE 32

FINANCIAL REPORT https:// www.facebook.com/

360 DEGREES DIGITAL 2016 /2017 SHINING DATA 17

Shining data Digitalisation arrived in automotive technology a long time ago – and HELLA has been at the forefront of this development right from the start. How does the lighting expert position itself in this environment? How is HELLA driving digital light forward? And how did the first LCD headlamp research project develop?

means that light distribution can be adapted in an optimum way to traffic, weather and road conditions. Adaptive high beam assistants automatically ensure that oncoming traffic or cars ahead are not dazzled, through camera monitoring and a precise dimming of individual light sourc- of 140 metres. Michael Kleinkes, es, while the rest of the vehicle’s who is responsible for the light- surroundings remains fully ing technology development illuminated. Dynamic light guid- at HELLA, walks across a ance, moreover, allows bends to zebra crossing which high-pow- be better illuminated and traffic We are in er beam projectors project signs to be lit glare-free. the midst of onto the street of the otherwise “We are in the midst of digitalising completely darkened light There was a time when the digitalising automotive lighting”, testing facility. This kind of zebra options were limited. There says Kamislav Fadel. A Bul- automotive crossing could, for example, was onlyT one light source in the garian by birth, he is Executive lighting. This give night-time pedestrians headlamp for low beam and high Board member of the Lighting is opening up a signal to cross the street. A beam. You could either switch business division at HELLA and conceivable scenario in the case a light on or off, turn up or turn responsible for global lighting entirely new of partially or fully autonomous down the headlamp. Two options, development. “This opens up possibilities vehicles. 360° usually a function operated entirely new opportunities for us for addition- “Whether such a function manually. This or something like to improve light management ally improving will actually be viable will not HELLA BRINGS LCD this was the basic scenario in au- further and to offer additional least of all depend on the statu- tomotive lighting technology for functions to make driving even lighting control tory framework”, says Michael TO FRONT LIGHTS decades, a choice between zero safer and more comfortable.” and designing Kleinkes. The physicist, holder of A marvellous material: on the one hand liquid yet with and one. There was nothing in The merger of vehicle lighting new lighting a Ph.D., uses the zebra crossing between. Until new light sources and driver assistance systems is function to present the latest the structure of crystals. These properties have functions. made liquid crystals the most important raw material became available and additional progressing inexorably. The time technological innovation which sensor systems were integrated when it was simply a question Kamislav Fadel, HELLA recently unveiled in col- for screens. HELLA is now embarking on the next Member of the Executive into the vehicle, thereby turning of switching on and switching off laboration with other partners. step with the development of an LCD headlamp: Board, Business the first generation of high-resolution lighting systems everything upside down. is thus moving rapidly into the Division Lighting, Head of An LCD-based headlamp The latest-generation head- historical rear-view mirror. Lighting Development system. And indeed, the func- that combine digitally controlled LEDs with a lamps are intelligent, high-res- HELLA’s light tunnel, oppo- tions projected onto the road liquid-crystal display is to be launched in 2020. olution and multi-functional; the site the company headquarters for testing are razor-sharp numerous light sources inside in Lippstadt. A kind of simulated and feature a great deal of ad- the headlamps can be controlled night-time road, the largest of justability. The next milestone in individually via software. This its kind in Europe with a length digital lighting technology. > the first generation of high-resolution lighting systems systems lighting high-resolution of generation first the A marvellous material: on the one hand liquid yet with with yet liquid hand one the on material: A marvellous made liquid crystals the most important raw material material raw important most the crystals liquid made for screens. HELLA is now embarking on the next next the on embarking now is HELLA screens. for step with the development of an LCD headlamp: headlamp: LCD an of development the with step the structure of crystals. These properties have have properties These crystals. of structure the liquid-crystal display is to be launched in 2020. in launched be to is display liquid-crystal that combine digitally controlled LEDs with a with LEDs controlled digitally combine that HELLA BRINGSHELLA LCD TO FRONT LIGHTS 360° 360° www.facebook.com/ https://

Shining data Shining light forward? And how did the first LCD headlamp research project develop? project research first headlamp the how LCD did And light forward? digital position environment? in this How lighting itself is driving the HELLA expert at the forefront been Howhas of this does development right from the start. inDigitalisation automotive arrived time HELLA along –and ago technology DIGITAL DEGREES 360 individually via software. This This software. via individually controlled be can headlamps the inside sources light numerous the multi-functional; and olution high-res intelligent, are lamps down. upside everything turning thereby vehicle, the into integrated were systems sensor additional and available became sources light new Until between. in nothing was There one. and zero between achoice decades, for technology lighting tomotive au in scenario basic the was this like something or This manually. operated afunction usually Two options, headlamp. the down turn or up turn off, or on a light switch either You could beam. high and beam low for headlamp the in source light one only was There limited. were options the when atime was There The latest-generation head latest-generation The T 06/2017 2016 - - - dimming of individual light sourc light individual of dimming aprecise and monitoring camera through dazzled, not are ahead cars or traffic oncoming that ensure automatically assistants beam high Adaptive conditions. road and weather traffic, to way optimum an in adapted be can distribution light that means its kind in Europe with a length alength with Europe in kind its of largest the road, night-time simulated of Akind Lippstadt. in headquarters company the site mirror. rear-view historical the into rapidly moving thus is off switching and on switching of aquestion simply was it when time The inexorably. progressing is systems assistance driver and lighting vehicle of merger The comfortable.” more and safer even driving make to functions additional offer to and further management light improve to us for opportunities new entirely up opens “This development. lighting global for responsible and HELLA at division business Lighting the of member Board Executive is he birth, by garian ABul Fadel. Kamislav says lighting”, automotive digitalising glare-free. lit be to signs traffic and illuminated better be to bends allows moreover, ance, guid light Dynamic illuminated. fully remains surroundings vehicle’s the of rest the while es, HELLA’s light tunnel, oppo tunnel, HELLA’s light of midst the in are “We - -

- - Lighting Development Lighting of Head Lighting, Division Business Board, Executive the of Member Fadel, Kamislav functions. new lighting designing and lighting control improving ally addition for possibilities entirely new is opening up This lighting. automotive digitalising the midst of We are in

digital lighting technology. technology. lighting digital in milestone next The justability. ad of deal agreat feature and razor-sharp are testing for road the onto projected tions func the indeed, And system. headlamp LCD-based An partners. other with laboration col in unveiled recently HELLA which innovation technological latest the present to function crossing zebra the uses a Ph.D., of holder physicist, The Kleinkes. Michael says framework”, tory statu the on depend all of least not will viable be actually will vehicles. autonomous fully or partially of case the in scenario conceivable A street. the cross to a signal pedestrians night-time give example, for could, crossing zebra of kind This facility. testing light darkened completely otherwise the of street the onto project projectors beam er high-pow which crossing zebra a across walks HELLA, at development technology ing light the for responsible is who Kleinkes, Michael 140of metres. “Whether such a function afunction such “Whether SHINING DATA SHINING

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FINANCIAL REPORT 18 SHINING DATA SHINING DATA 19

LCD in the headlamp: research project The digitalisation of light tive sector possible: the tapping Overview of digital successfully completed 1 is not a revolution. It is an of new light sources (from halo- lighting technologies Use of liquid crystal displays in the headlamp - can it be done? The evolutionary, gradual process gen and xenon to LED or laser), In the course of the digitalisation of light HELLA looks at various different technological question was still an open one when which HELLA has steadily the actuators for adjusting and approaches. The four most important ones are: HELLA in April 2014 together with helped advance. Back in the pivoting light modules, increas- Porsche, Merck and other partners early 1990s, when xenon head- ingly powerful electronic control μAFS launched a project sponsored by the lights became ready for series units and interfaces between Adaptive front-lighting system with multi-pixel German Ministry of Education and LED chip. Each of the around 1,000 pixels per light production, the lighting expert electronics and headlamps and Research and explored the potential source can be individually controlled. Moderate of the technology. The result is took the first steps, integrating the sensor systems which today resolution, hence limited number of functionalities. impressive: liquid crystal HD tech- electronic control units into allow the geometry of the vehi- nology is expected to be deployed in the vehicle light – a novelty on cle’s surroundings to be detected Laser scanner A mirror is used to direct a laser light beam to the first series project in 2020. the market at the time, from via cameras and radar while 3 a special phosphorous plate. Promising, today’s perspective a precursor driving, to evaluate it and to con- but still relatively far from being ready for series of digital light. From then on the trol light distribution accordingly. production. functionalities increased step by On top of this, the innovation From the drawing board Digital mirror device step, the systems became more momentum in the area of pro- A strong LED light source illuminates a chip complex. In 2003 the Daimler to the final product cessor technology made similar Liquid crystal HD technology has been integrated with more than 500,000 micro-mirrors. E-Class was the world’s first advances. Ever faster micropro- 4 in a headlamp for the first time. The technology is Problem: can only be used for limited areas. vehicle to feature the dynamic cessors and supercomputers used in home entertainment, for example, and with LCD bend and cornering light devel- its high resolution and detail it offers entirely new became available; without which LED light is directed through a liquid crystal oped by HELLA. In 2009, the first possibilities for automotive lighting technology. real-time processing of the huge display. The crystals can be shifted, thus camera-based system went into volume of data from the vehicle’s the light’s polarisation direction series production, followed by surroundings would have been can be turned. Perspectively the first glare-free high beam impossible. over 50,000 pixels, light in the Volkswagen Touareg “Currently, various new extremely precise projections. in 2010 and the first Matrix LED 2 LEDs / Liquid crystal technological possibilities are headlamp in the Audi A8 in 2013. control mixture emerging to increase the reso- In 2016, the even higher-resolu- lution of lighting systems and, tion HD84 headlamp in the cur- hence, to implement new func- rent Mercedes Benz E-class was tions for improving road safety,” “At HELLA, the idea driving added. All world premieres in says Fadel. “We have considered development is always this: automotive lighting technology. every one of these new tech- what is the benefit of an “HELLA owes its innovation nologies in detail. As part of a For the innovation to the final leadership, especially in the comprehensive requirement future, consumer? What is digital light area, to a compre- and analysis process we finally the number the benefit for the hensive system competence,” Polariser reached the conclusion that we of pixels is to be automotive cus- says Michael Kleinkes. “From the should prioritise LCD-based increased to over 50,000. tomer?” says Fadel. headlamp to the control units Heat sink LED printed Optics headlamp systems over other The question that had to be “After all, the criterion and the imaging software that circuit board options.” clarified together was this: can is not the plethora of what delivers the object data back to Why LCD? Compared with the combination of LEDs and a has become technologically the headlamp control system - the other three digital-based liquid crystal display, such as feasible. Ultimately, the market everything comes from a single A multi-layered technology technologies that play a role in those we know from flat-screen Let there be light only benefits from functionalities From the heat sink to the LED light source and During the project term of around three years source with us. The fact that we the liquid crystal display: the new headlamp HELLA’s development activities TV sets for example, be used to the drafts gradually became more specific. if they are meaningful.” take innovative technologies consists of perfectly compatible modules. (see box on the right-hand side), design a headlamp which can It was then not a big step from 3D rendering of These are primarily from the original idea and make Different partners with specialist knowledge a liquid crystal display illuminat- master all different kinds of driv- the headlamp (image 3) to the test-ready applications that enhance the them ready for series production helped in its development. ed by LED light sources offers ing situations in an intelligent, prototype (image 4). safety and comfort of drivers: is a unique selling point on the a large number of decisive infinitely variable and targeted intelligent, glare-free high beam market today.” advantages. Thus, the prototype manner? And which at the same light, pedestrian road markings It was rapid progress in of an LCD-based headlamp time is superior to the estab- or the projection of pedestrian four different technological areas developed as part of a research lished premium headlamps as crossings, protection zones for that made the digitalisation of project is able to project up to far as its resolution and cyclists, warnings or navigation automotive light in the automo- 30,000 pixels onto the road. functionalities are concerned? symbols. > automotive light in the automo the in light automotive of digitalisation the made that areas technological different four today.” market the on point selling aunique is production series for ready them make and idea original the from technologies innovative take we that fact The us. with source asingle from comes everything - system control headlamp the to back data object the delivers that software imaging the and units control the to headlamp the “From Kleinkes. Michael says competence,” system hensive acompre to area, light digital the in especially leadership, technology. lighting automotive in premieres world All added. was E-class Benz Mercedes rent cur the in headlamp HD84 tion 2016, higher-resolu In even the 2013. in A8 Audi the in headlamp LED Matrix first 2010in the and Touareg Volkswagen the in light beam high glare-free first the by followed production, series into went system camera-based first 2009, In the HELLA. by oped devel light cornering and bend dynamic the feature to vehicle first world’s the was E-Class Daimler the 2003 In complex. more became systems the step, by step increased functionalities the on then From light. digital of aprecursor perspective today’s from time, the at market the on –anovelty light vehicle the into units control electronic integrating steps, first the took expert lighting the production, series for ready became lights head xenon 1990s, when early the in Back advance. helped steadily has HELLA which process gradual evolutionary, an is It arevolution. not is 18

SHINING DATA SHINING It was rapid progress in in progress rapid was It innovation its owes “HELLA light of digitalisation The

------Heat sink Heat 2 used in home entertainment, for example, and with with and example, for entertainment, home in used its high resolution and detail it offers entirely new new entirely offers it detail and resolution high its in a headlamp for the first time. The technology is is technology The time. first the for aheadlamp in Liquid crystal HD technology has been integrated integrated been has technology HD crystal Liquid possibilities for automotive lighting technology. lighting automotive for possibilities From the heat sink to the LED light source and and source light LED the to sink heat the From Different partners with specialist knowledge knowledge specialist with partners Different the liquid crystal display: the new headlamp headlamp new the display: crystal liquid the consists of perfectly compatible modules. modules. compatible perfectly of consists A multi-layered technology A multi-layered From the drawing board board drawing the From helped in its development. its in helped to the final product product final the to circuit board circuit printed LED control / LEDs Polariser Optics mixture crystal Liquid

1 30,000 pixels onto the road. road. the onto pixels 30,000 to up project to able is project aresearch of part as developed headlamp LCD-based an of prototype the Thus, advantages. decisive of number a large offers sources light LED by ed illuminat display crystal a liquid side), right-hand the on box (see activities HELLA’s development in arole play that technologies the other three digital-based options.” other over systems headlamp LCD-based prioritise should we that conclusion the reached finally we process analysis and requirement comprehensive a of part As detail. in nologies tech new these of one every considered have “We Fadel. says safety,” road improving for tions func new implement to hence, and, systems lighting of lution reso the increase to emerging are possibilities technological impossible. been have would surroundings vehicle’s the from data of volume huge the of processing real-time which without available; became supercomputers and cessors micropro faster Ever advances. similar made technology cessor pro of area the in momentum innovation the this, of top On accordingly. distribution light trol con to and it evaluate to driving, while radar and cameras via detected be to cle’s surroundings vehi the of geometry the allow today which systems sensor the and headlamps and electronics between interfaces and units control electronic powerful ingly increas modules, light pivoting and adjusting for actuators the laser), or LED to xenon and gen halo (from sources light new of tapping the possible: sector tive Why LCD? Compared with with Compared LCD? Why new various “Currently,

------

- - - - functionalities are concerned? functionalities and resolution its as far as headlamps premium lished estab the to superior is time same the at which And manner? targeted and variable infinitely intelligent, an in situations ing driv of kinds different all master can which aheadlamp design to used be example, for sets TV flat-screen from know we those as such display, crystal liquid a and LEDs of combination the can this: was together clarified be to had that question The 50,000. over to increased be to is pixels of number the future, the For 3 - 4 - resolution, hence limited number of functionalities. of number limited hence resolution, LED chip. Each of the around 1,000 pixels per light light per 1,000 pixels around the of Each chip. LED but still relatively far from being ready for series series for ready being from far relatively still but In the course of the digitalisation of light HELLA light of digitalisation the of course the In approaches. The four most important ones are: are: ones important most four The approaches. source can be individually controlled. Moderate Moderate controlled. individually be can source Adaptive front-lighting system with multi-pixel multi-pixel with system front-lighting Adaptive A mirror is used to direct a laser light beam to to beam light alaser direct to used is A mirror Problem: can only be used for limited areas. limited for used be only can Problem: A strong LED light source illuminates a chip achip illuminates source light LED A strong It was then not a big step from 3D rendering of of rendering 3D from step abig not then was It During the project term of around three years years three around of term project the During LED light is directed through a liquid crystal crystal aliquid through directed is light LED a special phosphorous plate. Promising, Promising, plate. phosphorous a special the drafts gradually became more specific. specific. more became gradually drafts the looks at various different technological technological different various at looks with more than 500,000 micro-mirrors. micro-mirrors. 500,000 than more with the headlamp (image 3) to the test-ready test-ready the 3) to (image headlamp the display. The crystals can be shifted, thus thus shifted, be can crystals The display. lighting technologies Digital mirror device device mirror Digital Overview of digital digital of Overview Let there be light light be there Let prototype (image 4). (image prototype Laser scanner the light’s polarisation direction direction polarisation light’s the production. production. μAFS μAFS LCD can be turned. Perspectively Perspectively turned. be can over 50,000 pixels, pixels, 50,000 over

extremely precise

projections.

symbols. symbols. navigation or warnings cyclists, for zones protection crossings, pedestrian of projection the or markings road pedestrian light, beam high glare-free intelligent, drivers: of comfort and safety the enhance that applications meaningful.” are they if functionalities from benefits only market the Ultimately, feasible. the first series project in 2020. in project series first the in deployed be to expected is nology tech HD crystal liquid impressive: is result The technology. the of potential the explored and Research and Education of Ministry German the by sponsored aproject launched partners other and Merck Porsche, with 2014 together April in HELLA when one open an still was question - headlamp the in displays crystal liquid of Use completed successfully project research headlamp: the in LCD development is always this: this: always is development has become technologically technologically become has These are primarily primarily are These driving idea the “At HELLA, what is the benefit of an of benefit the is what is not the plethora of what what of plethora the not is innovation to the final final the to innovation “After all, the criterion criterion the “Afterall,

can it be done? The The done? be it can > consumer? What is is What consumer? tomer?” says Fadel. Fadel. says tomer?” automotive cus automotive the for benefit the SHINING DATA SHINING

19 -

FINANCIAL REPORT 20 SHINING DATA

We owe our innovation leadership,

especially in the digital light area, to In the HELLA light a comprehensive system competence. testing facility in From the headlamp to the control Lippstadt new light functions can be units and image processing software visualised and assessed — everything comes from a single under conditions that closely mirror reality — a source with us. very decisive advantage Dr. Michael Kleinkes, Head of Lighting Technology Development on the market.

“It is precisely these functions 1 and many more that can best be realised on the basis of innovative LCD technology,” adds Michael Kleinkes. And we are able to visualise virtually every idea of a new function via high-performance projectors in our light testing facility and to assess the parameters of the function. This gives us a 2 very important advantage in the market.” The liquid crystal HD technology is expected to be first used from 2020. Further automobile business models will broaden the picture: “function on demand” models and options for software updates 3 and upgrades, individualisation and user ID concepts which should enable us to take lighting functions and preferences with us into third-party vehicles via a smartphone app in the future. ”The time horizon we have in mind for such developments is around five to ten years,” says Kamislav Fadel. “Trends such as autonomous driving, virtual reality, artificial intelli- A new dimension in headlamps: LCD technology permits fully adaptive, intelligence and the Internet of Things gent light distribution. As a result, (in addition to already play a major role for optimum, even illumination, image 1) numerous us now. All things considered, new functions can be realised, such as naviga- we are only at the start of the tion instructions (2) or signals to pedestrians (3). era of digital light.” light.” digital of era the of start the at only are we considered, things All now. us for role amajor play already Things of Internet the and gence intelli artificial reality, virtual driving, autonomous as such “Trends Fadel. Kamislav says years,” ten to five around is developments such for mind in future. the in app smartphone a via vehicles third-party into us with preferences and functions lighting take to us enable should which ID concepts user and individualisation upgrades, and updates software for options and models demand” on “function picture: the broaden will models business tomobile au Further 2020. from used first be to expected is technology market.” the in advantage important very a us gives This function. the of parameters the assess to and facility testing light our in projectors high-performance via function anew of idea every virtually visualise to able are we And Kleinkes. Michael adds technology,” LCD tive innova of basis the on realised be best can that more many and functions these precisely is “It 20

SHINING DATA SHINING ”The time horizon we have have we horizon time ”The HD crystal liquid The

- -

Head of Lighting Technology Development Technology Lighting of Head Kleinkes, Dr. Michael source with us. — everything comes from asingle units and image processing software From the headlamp to the control a comprehensive system competence. especially in the digital light area, to We owe our innovation leadership,

tion instructions (2) or signals to pedestrians (3). pedestrians to signals or (2) instructions tion naviga as such realised, be can functions new 1) numerous image illumination, even optimum, to addition (in aresult, As distribution. light gent intelli adaptive, fully permits technology LCD headlamps: in dimension A new

- - 1 3 2 on the market. the on advantage decisive very —a reality mirror closely that conditions under assessed and visualised be can functions light new Lippstadt in facility testing light HELLA the In

FINANCIAL REPORT 360 DEGREES DIGITAL 2016 /2017 SOFTWARE AS A PRODUCT 23 Software as In this way, we have been able to accumulate unique expertise in camera-based assistance a product systems with a clear focus on The Ullstein House in the Tempelhof suburb of Berlin. software over many years. An 80-metre-high brick building constructed in the 1920s Now you have launched an entirely new approach in that has recently become HELLA Aglaia’s head office. With front-camera software. over 300 employees, the company is one of the world’s What makes this approach leading suppliers of intelligent visual sensor systems. so special? We have developed an entirely In a conversation, Kay Talmi talks about the relevance of new business model entail- computer vision for autonomous driving, new software- ing an open software system that customers can assemble 360° based business models and the particular role played by in accordance with their own the Berlin location in HELLA’s global network. requirements. Put simply, our software system is not tied to any particular hardware. Instead, it can be implemented flexibly on different semiconductor HELLA AGLAIA ENSURES What are the main drivers producers’ platforms. As well as ALL-ROUND DIGITAL VIEW behind this rapid growth? this, customers are able to freely combine software components Managing Director Kay Talmi at the new head office We are moving away from assisted and towards autono- using our model as a basis. This of HELLA Aglaia in Berlin-Tempelhof. Its technological mous driving. This is a contin- means that, in addition to HELLA leadership has been expanded, ever since the company uous process that will unfold in components, they can also use that specialises in the function development of several stages. Camera-based proprietary or third-party solu- intelligent visual sensor systems became a HELLA detection functions play a crucial tions. New functions can be con- subsidiary in 2006. The latest milestone: a modular Kay Talmi, we are holding this role in all these stages. And veniently added by means of a system for camera software which enables customers conversation in your new this is precisely where our key software update. If, for example, to combine functions flexibly. office.K What was the reason for skills lie. Indeed, Aglaia has been the customer requires a further relocating within Berlin? exploring this area very closely application that is already avail- Kay Talmi: Over the last ten ever since its foundation in 1998. able in addition to a pre-installed years, HELLA Aglaia has grown In 2006, it became a wholly one, such as light control or from around 30 employees to owned subsidiary of HELLA. Its lane, traffic-sign, pedestrian some 300. At the moment, we We have first series-production order was or object detection, this can be are recruiting up to seven new for the development of a front retrofitted to the system. employees each month. Looking developed a camera for an American original ahead over the coming years, completely equipment manufacturer. In This approach sounds vaguely we could have a head count of as 2009, we decided to focus solely reminiscent of an app store much as 500. Quite simply, we new business on the provision of software in of the type used with smart needed more space. However, model for the camera business. Looking phones or tablets. the immediate surroundings are back, this absolutely proved Obviously, the comparison only far more important for us. Our camera to be the right decision. Since goes so far but you are not wrong new location in Tempelhof is a software. then, we have developed various in saying this. We are imple- veritable hot spot for Berlin’s Kay Talmi, ready-for-series-production menting a type of building-block digital economy and will doubt- Managing Director, systems for original equipment system with our product, giving lessly also spur our develop- HELLA Aglaia manufacturers in conjunction our customers almost limitless ment additionally. with a major hardware supplier. flexibility. > leadership has been expanded, ever since the company company the since ever expanded, been has leadership system for camera software which enables customers customers enables which software camera for system of HELLA Aglaia in Berlin-Tempelhof. Its technological technological Its Berlin-Tempelhof. in Aglaia HELLA of ALL-ROUND DIGITAL VIEW subsidiary in 2006. The latest milestone: a modular amodular milestone: latest The 2006. in subsidiary Managing Director Kay Talmi at the new head office office head new the at Talmi Kay Director Managing intelligent visual sensor systems became a HELLA aHELLA became systems sensor visual intelligent HELLA AGLAIA ENSURES AGLAIA ENSURES HELLA that specialises in the function development of of development function the in specialises that to combine functions flexibly. functions combine to 360° 360° the Berlin location in HELLA’s location Berlin the network. global role by played particular the and models business based software- new computer vision for driving, autonomous In aconversation, Kay Talmi relevance of the about talks of suppliers intelligentleading systems. sensor visual ofworld’s is the one over company the 300 employees, Aglaia’s HELLA recentlythat has become office. head With 1920s in the building constructed brick 80-metre-high An House in Ullstein the TempelhofThe of Berlin. suburb DIGITAL DEGREES 360 ment additionally. develop our spur also lessly doubt will and economy digital Berlin’s for spot hot veritable a is Tempelhof in location new Our us. for important more far are surroundings immediate the However, space. more needed we simply, Quite 500. as much as of count ahead have could we years, coming the over ahead Looking month. each employees new seven to up recruiting are we moment, At the 300. some to employees 30 around from grown has Aglaia HELLA years, ten last the Talmi: Over Kay Berlin? within relocating for reason the was What office. new your in conversation this Talmi,Kay holding weare a product Software as K 06/2017 2016 - - HELLA Aglaia Director, Managing Talmi, Kay software. camera model for business new completely developed a We have

with a major hardware supplier. supplier. hardware amajor with conjunction in manufacturers equipment original for systems ready-for-series-production various developed have we then, Since decision. right the be to proved absolutely this back, Looking business. camera the in software of provision the on solely focus to 2009, decided we In manufacturer. equipment original American an for camera afront of development the for was order series-production first Its HELLA. of subsidiary owned awholly became it 2006, In 1998. in foundation its since ever closely very area this exploring been has Aglaia Indeed, lie. skills key our where precisely is this And stages. these all in role acrucial play functions detection Camera-based stages. several in unfold will that process uous acontin is This driving. mous autono towards and assisted from away moving We are growth? rapid this behind drivers main the are What

- - flexibility. flexibility. limitless almost customers our giving product, our with system building-block of atype menting imple We are this. saying in wrong not are you but far so goes only comparison the Obviously, tablets. or phones smart with used type the of store app an of reminiscent vaguely sounds approach This system. the to retrofitted be can this detection, object or pedestrian traffic-sign, lane, or control light as such one, apre-installed to addition in able avail already is that application afurther requires customer the example, If,for update. software a of means by added veniently con be can functions New tions. solu third-party or proprietary use also can they components, HELLA to addition in that, means This abasis. as model our using components software combine freely to able are customers this, as well As platforms. producers’ semiconductor different on flexibly implemented be can it Instead, hardware. particular any to tied not is system software our simply, Put requirements. own their with accordance in assemble can customers that system software open an ing entail model business new entirely an developed We have special? so approach this makes What software. front-camera in approach new entirely an launched have you Now years. many over software on focus aclear with systems assistance camera-based in expertise unique accumulate to able been have we way, this In APRODUCT AS SOFTWARE

> - - - 23 - -

FINANCIAL REPORT 24 SOFTWARE AS A PRODUCT SOFTWARE AS A PRODUCT 25

We have been able to accumulate so that it can solve the problem unique expertise in camera-based itself?”. Against this backdrop, we at HELLA Aglaia want to assistance systems with a clear focus strengthen our role as software specialists within the HELLA on software over many years. Group. To give one example, we Kay Talmi, Managing Director, HELLA Aglaia are currently in the process of transferring the skills that we have amassed in artificial intelligence to other parts of the HEL- LA Group, such as production.

Looking forward over the next few years, what agenda do you have? Over the next few years, we will What other systems have been already offering. We are in the 2018 is not far off. primarily be facing challenges shaping the market until now? process of setting up suitable What does the future hold and system requirements aris- Generally speaking, producers sales and licensing models. At in the ensuing years? ing from autonomous driving supply their chips with fully the same time, we don’t want The situation changes with and working on developing pre-integrated functions. This to offer our software solely for automated or autonomous our “software-as-a-product” means that customers are al- passenger vehicles but also for driving, that is from Level 3. business model. For this reason, ways forced to accept the entire trucks and for construction and These driving situations cannot we have our own self-driving software package. If you want agricultural machinery. be addressed using conventional vehicle here in Berlin. We are to update later on, say, to add processes due to the complexity controlling it via software so a new traffic sign that was not How would you describe the involved. Approaches offering that we can already explore included in the original package, upcoming development steps the necessary understanding the content and functions that you have no choice but to wait culminating in self-driving of the situation are required to will be relevant in five to ten for the next-generation product. vehicles? What technological make autonomous driving pos- years’ time and determine the HELLA, by contrast, offers dy- challenges must be addressed? sible in urban traffic, for exam- software components that will namic change and flexibility with In the case of the lowest two ple, with all its road users, road be required. its new product. levels, i.e. assisted driving, the signs, intersections and traffic main challenge facing us today is lights. This understanding can What advantages do you have What has the response to supply cost-efficient solu- only be provided by processes from being based in Berlin? to HELLA’s new product tions suitable for integration in based on artificial intelligence. About Kay Talmi: Berlin is an ideal place for been like to date? high-volume vehicle segments After studying computer HELLA to attract and retain science at the Technical Market reaction is decidedly and meeting the requirements Does this mean that artificial talents from all around the University of Berlin, Kay intelligence will advance to favourable. We have won our of the 2018 Euro-NCAP pro- Talmi initially worked world. It is an attractive city first main contract and expect gramme. To achieve this goal, become a key competence for freelance on several offering a high quality of life. to supply a German premium we are making use of conven- HELLA Aglaia? software projects before What is more, we have here an vehicle manufacturer in 2019 and tional imaging processes that Yes, it most definitely does. In the he set up his company ecosystem of digital startups certainly by 2020 at the latest. I allow us to utilise cost-optimised medium term, this may result in Vision Pearls in 1998. meeting international standards am convinced that our philosophy hardware platforms. From 2018, a radical change in the program- Talmi joined Aglaia in 2004, as well as excellent universi- where he soon assumed of separating hardware from the Euro-NCAP programme mers’ professional profile and, overall responsibility for ties that are producing highly software will find our custom- provides for four main functions, hence, also in the way we work. development. He has been qualified programmers and ers’ approval. Products with which we are able to implement If self-teaching processes gain Managing Director of developers. This provides us unchangeable software will be with our software modules: traf- in importance, developers will HELLA Aglaia since 2009. with an ideal basis for remaining replaced by optional models, fic sign recognition, lane recogni- no longer be asking “How do I at the vanguard in our efforts flexible architectures and building tion, light assistant and pedestri- solve a problem?” but, “how do I to actively and creatively shape blocks of the type that HELLA is an and obstacle detection. offer the software the best input tomorrow’s mobility. blocks of the type that HELLA is is HELLA that type the of blocks building and architectures flexible models, optional by replaced be will software unchangeable with Products approval. ers’ custom our find will software from hardware separating of philosophy our that convinced am I latest. the at 2020 by certainly 2019 in and manufacturer vehicle premium aGerman supply to expect and contract main first our won We have favourable. decidedly is reaction Market to date? like been to HELLA’s product new response the has What product. new its with flexibility and change namic dy offers contrast, by HELLA, product. next-generation the for wait to but choice no have you package, original the in included not was that sign traffic a new add to say, on, later update to want you If package. software entire the accept to forced ways al are customers that means This functions. pre-integrated fully with chips their supply producers speaking, Generally now? until market the shaping been have systems other What 24

SOFTWARE AS APRODUCT AS SOFTWARE

assistance systems with aclear focus - - - unique expertise in camera-based We have been able to accumulate an and obstacle detection. obstacle and an pedestri and assistant light tion, recogni lane recognition, sign fic traf modules: software our with implement to able are we which functions, main four for provides programme Euro-NCAP the 2018, From platforms. hardware cost-optimised utilise to us allow that processes imaging tional conven of use making are we goal, this To achieve gramme. pro 2018 the of Euro-NCAP requirements the meeting and segments vehicle high-volume in integration for suitable tions solu cost-efficient supply to is today us facing challenge main the driving, assisted i.e. levels, two lowest the of case the In addressed? be must challenges technological What vehicles? culminating in self-driving steps development upcoming the describe you would How machinery. agricultural and construction for and trucks for also but vehicles passenger for solely software our offer to want don’t we time, same the At models. licensing and sales suitable up setting of process the in are We offering. already on software over many years. ------offer the software the best input input best the software the offer I do “how but, a problem?” solve I do “How asking be longer no will developers importance, in gain processes self-teaching If work. we way the in also hence, and, profile professional mers’ program the in change a radical in result may this term, medium the In does. definitely Yes, most it HELLA Aglaia? for akey competence become to advance will intelligence artificial that mean this Does intelligence. artificial on based processes by provided be only can understanding This lights. traffic and intersections signs, road users, road its all with ple, exam for traffic, urban in sible pos driving autonomous make to required are situation the of understanding necessary the offering Approaches involved. complexity the to due processes conventional using addressed be cannot situations driving These 3. Level from is that driving, autonomous or automated with changes situation The years? ensuing the in hold future the does What 2018 off. far not is Kay Talmi Kay , Managing Director, HELLA Aglaia Director, , Managing

- - - HELLA Aglaia since 2009. since Aglaia HELLA of Director Managing been has He development. for responsibility overall assumed soon he where 2004, in Aglaia joined Talmi 1998. in Pearls Vision company his up set he before projects software several on freelance worked initially Talmi Kay Berlin, of University Technical the at science computer studying After Talmi: Kay About tomorrow’s mobility. shape creatively and actively to efforts our in vanguard the at remaining for basis ideal an with us provides This developers. and programmers qualified highly producing are that ties universi excellent as well as meeting standards international startups digital of ecosystem an here have we more, is What life. of quality high a offering city attractive an is It world. the around all from talents retain and attract to HELLA for place ideal an is Berlin Berlin? in based being from have you do advantages What be required. will that components software the determine and time years’ ten to five in relevant be will that functions and content the explore already can we that so software via it controlling We are Berlin. in here vehicle self-driving own our have we reason, this For model. business our “software-as-a-product” developing on working and driving autonomous from ing aris requirements system and challenges facing be primarily will we years, few next the Over have? you do agenda what years, few next the over forward Looking production. as such Group, LA HEL the of parts other to gence intelli artificial in amassed have we that skills the transferring of process the in currently are we example, To one Group. give HELLA the within specialists software as role our strengthen to want Aglaia HELLA at we backdrop, this Against itself?”. problem the solve can it that so APRODUCT AS SOFTWARE

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FINANCIAL REPORT 26 A QUESTION OF TRAINING

A question of training Digitalisation is encompassing almost all steps along the automotive value chain. In a pilot project, HELLA is premiering methods of artificial intelligence in the form 360° of “deep learning” for the production of electronic components to additionally improve quality and efficiency. A visit to the pilot plant in Hamm, Germany. “DEEP LEARNING” IN PRODUCTION Laser-welding is a particularly demanding task The plant in Hamm is rich in the production process. Checking almost 8,000 in tradition but simultaneously welds in eight-second intervals in the course of a also the most modern electron- shift is a challenge for the human eye. This makes ics facility in the global HELLA the quality check error-prone. HELLA uses a network. Opened in 1961, it thermal imaging camera and artificial intelligence is the global electronics lead to optimise this step. plant. Production processes are designed and global quality standards for HELLA are defined at this site with a total floor area A team from HELLA of 22,000 square metres. It is Aglaia did not programme also where numerous innova- the system. Rather, they tive electronics solutions are trained it with countless produced: various control units, sample thermal images. Her eyes light up even today radio transmitter keys as well Coaching continued until the system had developed when she talks about the as systems and components for an algorithm allowing potentialH offered by this new driver assistance and efficient it to now tell whether a technology. Progress, efficiency energy management. weld had been performed and precision - these were the In her position as internal correctly or not. first thoughts that entered her factory manager, Trottenberg is head when she heard about it. responsible for the control units Stefanie Trottenberg is head of for electric power steering, the production of internal Factory 5 steering control module, SCM for at HELLA’s electronics plant in short. HELLA is one of the global Hamm. “This is exactly what I market leaders in this area, up found so fascinating about this to five million electronic control project from the outset,” she units a year can be produced at says smiling. the plant. > says smiling. says she outset,” the from project this about fascinating so found I what exactly is “This Hamm. in plant HELLA’sat electronics 5 Factory internal of production of head is Trottenberg Stefanie it. about heard she when head her entered that thoughts first the were -these precision and efficiency Progress, technology. new this by offered potential the about talks she when today even up light eyes Her visit topilot the Germany. in Hamm, plant efficiency. A and improve to additionally quality ponents com of electronic production for learning” the of “deep intelligence the form in of artificial methods premiering the automotive chain. value In apilot is HELLA project, all steps almost Digitalisation along is encompassing training of question A 26

H A QUESTION OF TRAINING OF A QUESTION the plant. plant. the at produced be can ayear units control electronic million five to up area, this in leaders market global the of one is HELLA short. for SCM module, control steering the steering, power electric for units control the for responsible is Trottenberg manager, factory management. energy efficient and assistance driver for components and systems as well as keys transmitter radio units, control various produced: are solutions electronics tive innova numerous where also is It metres. square 22,000 of area floor atotal with site this at defined are HELLA for standards quality global and designed are processes Production plant. lead electronics global the is 1961, in Opened it network. HELLA global the in facility ics electron modern most the also simultaneously but tradition in In her position as internal internal as position her In rich is Hamm in plant The >

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Aglaia did not programme programme not did Aglaia the system had developed developed had system the weld had been performed performed been had weld Coaching continued until until continued Coaching sample thermal images. images. thermal sample the system. Rather, they they Rather, system. the trained it with countless countless with it trained it to now tell whether a a whether tell now to it an algorithm allowing allowing algorithm an A team from HELLA HELLA from A team - correctly or not. not. or correctly thermal imaging camera and artificial intelligence intelligence artificial and camera imaging thermal shift is a challenge for the human eye. This makes makes This eye. human the for challenge is a shift in the production process. Checking almost 8,000 8,000 almost Checking process. production the in welds in eight-second intervals in the course of a of course the in intervals eight-second in welds Laser-welding is a particularly demanding task task demanding aparticularly is Laser-welding the quality check error-prone. HELLA uses a uses HELLA error-prone. check quality the “DEEP LEARNING” IN PRODUCTION to optimise this step. this optimise to 360°

FINANCIAL REPORT 28 A QUESTION OF TRAINING A QUESTION OF TRAINING 29

Production is always particularly challenging when pre-assembled module parts are “married” to each other on various lines, as engineers refer to the process. One particularly complex assembly step takes place when the two final main parts are welded by a laser and Progress, efficiency must then be checked. “Quality and precision – this checks are usually performed by means of fully automatic trio is what “deep checking systems at most learning” in the places along the line,” explains production phase is Stefanie Trottenberg. However, all about. she adds that this is not possible here as simple camera systems Stefanie Trottenberg, Head of Production at Internal Facto- are not able to reliably deter- ry 5 of the HELLA mine whether a weld exhibits electronics plant in Hamm any errors or not. “That’s why we had to implement a human sight check at this place and disrupt the automation line,” she says. “This is a tedious and difficult process that adversely affects the efficiency of our production. After all, products may occa- sionally still be defective even if by the thermal imaging camera the sight control does not show In real time could be combined with a deep any errors.” images of the weld learning approach. In this way a They reduce fuel consumption Trottenberg, who holds a taken by a thermal sub-form of artificial intelligence imaging camera are and CO2 emissions compared degree in mechanical engineer- entered the production chain. displayed on the with hydraulic power steering. ing, was not prepared to accept monitor. The pictures And, indeed, the second The production of SCM this compromise. “Nothing’s show the heat at the step did not take long to eventu- units is particularly complex impossible” - this engineering four welding points. ate. No sooner had they come up and demanding. There is a large philosophy has been a source of Some welds are in with the idea of using a thermal number of parts and most of motivation for her throughout order. Others are not. imaging camera than Gedicke the production steps are fully her entire career. Problems are And the system is able and Trottenberg received un- to tell the difference. automated. The components there to be solved. This prompt- expected support from Berlin: comprise sensitive high-perfor- ed the forming of a work group HELLA Aglaia had developed a mance technology. Delivering The production of within the plant tasked with self-learning software system. control units the highest possible safety for electric power considering ways of bridging the “We were pretty sure that this and quality standards to the steering is particularly automation gap. “As the quality was a suitable solution for our customer is both a commitment complex and demanding. of a weld can be readily detected problem,” remember Trotten- and a challenge. Some of the Most of the production during the cooling process, we berg and Gedicke. “A system assemblies are produced in steps are fully automat- quickly decided to use a thermal that only has to be trained with clean rooms. Those entering the ed. Stefanie Trottenberg imaging camera,” says Dr. Jens a sufficient number of thermal and Dr. Jens Gedicke production workshops have to Gedicke, technology expert formed a work group images to independently learn be grounded using ESD strips tasked with considering for laser welding at HELLA whether a weld is OK.” on their shoes in order to avoid ways of bridging the and head of the work group. HELLA Aglaia has been de- possible electrostatic discharge automation gap. In addition, as was to become veloping camera software since on components or assemblies. clear later, the pictures taken the end of the 1990s. > on components or assemblies. assemblies. or components on discharge electrostatic possible avoid to order in shoes their on strips ESD using grounded be to have workshops production the entering Those rooms. clean in produced are assemblies the of Some achallenge. and acommitment both is customer the to standards quality and safety possible highest the Delivering technology. mance high-perfor sensitive comprise components The automated. fully are steps production the of most and parts of number alarge is There demanding. and complex particularly is units steering. power hydraulic with CO and consumption fuel reduce They Hamm in plant electronics HELLA the 5of ry Facto Internal at Production of Head Stefanie Trottenberg, all about. production phase is learning” in the trio is what “deep and precision –this efficiency Progress, 28

A QUESTION OF TRAINING OF A QUESTION The production of SCM SCM of production The 2 emissions compared compared emissions

- - automation gap. the bridging of ways considering with tasked group awork formed Gedicke Dr. Jens and Trottenberg Stefanie ed. automat fully are steps production the of Most demanding. and complex particularly is steering power electric for units control of production The - clear later, the pictures taken taken pictures later, the clear become to was as addition, In group. work the of head and HELLA at welding laser for expert technology Gedicke, Dr. Jens says camera,” imaging athermal use to decided quickly we process, cooling the during detected readily be can aweld of quality “As the gap. automation the bridging of ways considering with tasked plant the within group awork of forming the ed prompt This solved. be to there are Problems career. entire her throughout her for motivation of asource been has philosophy engineering -this impossible” this compromise. “Nothing’s accept to prepared not was ing, engineer mechanical in degree errors.” any show not does control sight the if even defective be still sionally occa may products all, After production. our of efficiency the affects adversely that process difficult and atedious is “This says. she line,” automation the disrupt and place this at check sight ahuman implement to had we why “That’s not. or errors any exhibits aweld whether mine deter reliably to able not are systems camera simple as here possible not is this that adds she However, Trottenberg. Stefanie explains line,” the along places most at systems checking automatic fully of means by performed usually are checks “Quality checked. be then must and alaser by welded are parts main final two the when place takes step assembly complex particularly One process. the to refer engineers as lines, various on other each to “married” are parts module pre-assembled when challenging particularly Trottenberg, who holds a holds who Trottenberg, always is Production - - - - to tell the difference. the tell to able is system the And not. are Others order. in are welds Some points. welding four the at heat the show pictures The monitor. the on displayed are camera imaging athermal by taken weld the of images time real In the end of the 1990s. the of end the since software camera veloping OK.” is aweld whether learn independently to images thermal of number a sufficient with trained be to has only that “A system Gedicke. and berg Trotten remember problem,” our for solution asuitable was this that sure pretty were “We system. software self-learning a developed had Aglaia HELLA Berlin: from support expected un received Trottenberg and Gedicke than camera imaging athermal using of idea the with up come they had sooner No ate. eventu to long take not did step chain. production the entered intelligence artificial of sub-form a way this In approach. learning adeep with combined be could camera imaging thermal the by TRAINING OF A QUESTION HELLA Aglaia has been de been has Aglaia HELLA second the indeed, And,

> - - 29 - -

FINANCIAL REPORT A QUESTION OF TRAINING 31

There is a computer beneath the to be detected that are otherwise unit above which a screen can hidden from human view as they be seen. Every eight seconds a are concealed beneath too many new assembly, a new welding layers of data.” This makes it process. The laser does its possible, for example, to detect work, it welds in four places, conditions which in isolation are the laser beam shines brightly not problematic but cause errors behind the plexiglass screen as soon as they coincide. “As a for only a fraction of a second. result, we are able to identify A dozen thermal images are faulty parts a good deal earlier displayed on the monitor in and thus lower our quality costs HELLA is one of the world’s real time, all taken within a few even further,” he adds. “Although leading suppliers milliseconds of each other. The we still have a long road ahead of control units images show against a purple of us until it is fully realised, but for electric power background the heat chart of the it is definitely what production steering. They reduce welding process. Some welding will look like in the future.” fuel consumption and points are “in order”, others are CO2 emissions com- not. This can be seen by the pared with hydraulic power steering. distribution of heat. And this is where “deep learning” steps in. A team from HELLA Aglaia did not programme the system. Rather, they trained it with countless sample images of these temperature charts. Coaching continued until the system had developed an algorithm allowing it to distinguish between “OK” and “not OK”. This software system has now been in use at the electronics plant in Hamm for a good six months, initially in a pilot project. “However, The software systems on which But back to Hamm. A the preliminary results are so The preliminary HELLA Aglaia is currently tour of the factory reveals, in The Hamm facility promising that we are already in working help driverless cars to particular, just how automated is the electronics lead plant the process of looking into the results are so detect their surroundings. it is. Dozens of robot arms grab in the global HELLA network. possibility of transferring the promising that we Visual sensors identify pedestri- components, insert printed Production processes are application to other production designed and global quality ans and cyclists, traffic signs, circuit boards and other com- lines,” says Gedicke. are already looking standards for HELLA are into the possibility vehicles ahead and approach- ponents. Finally, a continuous defined here. Hamm is also Around 5,000 items of ing, transferring the data they furnace heats the assembly in where various control units, information are collected and of transferring the collect to the control system. In order to harden the adhesive. radio transmitter keys as stored during the produc- application to other most cases, this involves a As soon as this has been done, well as systems and compo- tion of an SCM unit, providing “deep learning” application, i.e. the assembly is transferred nents for driver assistance enormous potential for “deep production lines. an artificial neural network. to the final production stage, and efficient energy manage- learning”. “Things really take ment are produced. Dr. Jens Gedicke, The systems are trained manu- welding. The “marriage” takes off when we implement such Technology Expert in Laser Welding ally by entering sample images place inside a unit illuminated systems at various points along until a suitable algorithm is red in the interior. The thermal the production line and network generated as a basis for making imaging camera, the digital them with each other,” says Ge- future decisions. system’s eye, is inconspicuous. dicke. “This allows correlations Technology Expert in Laser Welding Laser in Expert Technology Gedicke, Dr. Jens lines. production application to other of transferring the into the possibility are already looking promising that we results are so preliminary The

future decisions. future decisions. making for abasis as generated is algorithm asuitable until images sample entering by ally manu trained are systems The an artificial neural network. network. neural artificial an i.e. application, learning” “deep a involves this cases, most In system. control the to collect they data the transferring ing, approach and ahead vehicles signs, traffic cyclists, and ans pedestri identify sensors Visual surroundings. their detect to cars driverless help working currently is Aglaia HELLA which on systems software The

- - - system’s eye, is inconspicuous. inconspicuous. is eye, system’s digital the camera, imaging thermal The interior. the in red illuminated aunit inside place takes “marriage” The welding. stage, production final the to transferred is assembly the done, been has this as soon As adhesive. the harden to order in assembly the heats furnace acontinuous Finally, ponents. com other and boards circuit printed insert components, grab arms robot of Dozens is. it automated how just particular, in reveals, factory the of tour But back to Hamm. A Hamm. to back But - in the global HELLA network. network. HELLA global the in and efficient energy manage energy efficient and well as systems and compo and systems as well where various control units, units, control various where is the electronics lead plant plant lead electronics the is designed and global quality quality global and designed defined here. Hamm is also also is Hamm here. defined nents for driver assistance assistance driver for nents Production processes are are processes Production radio transmitter keys as as keys transmitter radio standards for HELLA are are HELLA for standards The Hamm facility facility Hamm The ment are produced. are ment - - dicke. “This allows correlations correlations allows “This dicke. Ge other,” says each with them network and line production the along points various at systems such implement we when off take really “Things learning”. “deep for potential enormous providing unit, SCM an of tion produc the during stored and collected are information Gedicke. says lines,” production other to application the transferring of possibility the into looking of process the in already are we that promising so are results preliminary the “However, project. apilot in initially months, six agood for Hamm in plant electronics the at use in been now has system software OK”. This “not and “OK” between distinguish to it allowing algorithm an developed had system the until continued Coaching charts. temperature these of images sample less count with it trained they Rather, system. the gramme pro not did Aglaia HELLA from Ateam in. steps learning” distribution of heat. heat. of distribution the by seen be can This not. are others order”, “in are points welding Some process. welding the of chart heat the background apurple against show images other. The each of milliseconds afew within taken all time, real in monitor the on displayed are images thermal A dozen asecond. of afraction only for screen plexiglass the behind brightly shines beam laser the places, four in welds it work, its does laser The process. welding anew assembly, new a seconds eight Every seen. be can ascreen which above unit the beneath acomputer is There Around 5,000 items of of items 5,000 Around “deep where is this And - - - - future.” the in like look will production what definitely is it but realised, fully is it until us of ahead road along have still we “Although adds. he further,” even costs quality our lower thus and earlier deal agood parts faulty identify to able are we result, “As a coincide. they as soon as errors cause but problematic not are isolation in which conditions detect to example, for possible, it makes This data.” of layers many too beneath concealed are they as view human from hidden otherwise are that detected be to TRAINING OF A QUESTION power steering. power hydraulic with pared CO2 emissions com and consumption fuel reduce They steering. power electric for units control of leading suppliers world’s the of one is HELLA

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FINANCIAL REPORT 32 BRILLIANT VISIONS 360 DEGREES DIGITAL 2016 /2017 BRILLIANT VISIONS 33

Change the rules shop. It orders the spare parts, they are delivered and fitted. A long chain of individual steps, some of which are already digi- of the industry talised, but as a whole they take time and effort. What if the entire Digitalisation is rewriting the rulebook for markets and process, even starting before the business models. It is breaking open established market moment the problem emerges until the delivery of the repaired structures and is changing entire industries. This also applies vehicle to the customer, could be to the automotive business. If you want to be successful in this transformed into a process that environment, you have to be prepared to break new ground. has been efficiently digitalised from start to finish? This is what HELLA is doing, as the examples from Lippstadt, Working together with his Berlin and Silicon Valley show. team, Dominik Hess is occupied with these very questions. The aim is to develop the range of UCANDO’s business activities. In addition to the classic e-commerce business, a suitable service offering including a cost estimate can be drawn up in a nearby workshop and pro- Today’s topic: the future posed to the customer upon of the market for passenger request. The next milestone is car spare parts. Dominik Hess, an overarching digital service LIPPSTADT Managing Director of HELLA platform which pools HELLA’s HELLA Globe: subsidiary UCANDO, has trav- aftermarket activities in a single i-Circle elled to Lippstadt just for this digitalised process. This can event. The subsidiary has been lead to vehicles being booked in A Monday evening in HELLA based in Berlin since 2014 and for repairs even before the dam- Globe. The company’s own hotel specialises in online trading in age becomes evident. Which and conference centre is not far automotive spare parts for end With the tech- 360° might constitute a substantial from its head office in Lippstadt. customers. Its focus is primarily nological added value for operators of This is where around 30 HELLA on the Polish market. At the options availa- large car fleets, rental car firms executives and experts from dif- same time, UCANDO is pushing BRILLIANT IDEAS or haulage companies. ferent areas meet once a month ahead with the overarching ble to us today, With digitalisation the opportunities just grow. All the more Dominik Hess is looking for an innovation circle, i-circle development of digital solutions we are able important, then, to identify attractive innovations at an early even further into the future: for short. John Bessant, Profes- in wholesale. to look at the stage and implement them systematically. Networking “Another possibility is data sor of Innovation and Entrepre- “With the technological glasses for workshop employ- entire value can help here. This is because brilliant ideas usually spring neurship at Exeter University, options available to us today, we up when different kinds of people come together. For ees, which use image recogni- guides the attendees through the have to look at and map the en- tion and self-learning systems chain on the HELLA this is a key approach to the solution in order to take programme. He sees himself as tire value chain on the aftermar- to stipulate exactly what aftermarket advantage of the opportunities provided by the future. more of an impulse generator. ket in a completely new way,“ needs to be done and which The forum aims to realise a says Hess. One everyday ex- in a completely automatically order the spare cross-functional exchange on in- ample: the brake pads are worn new way. part in the process.“ Is this a novation issues, experience and and have to be replaced. The car Dominik Hess, vision of the future? Yes, but at ideas without any fixed expecta- owner notices the defect, makes Managing Director UCANDO HELLA the i-circle is already tions regarding the result. an appointment with the work- discussing this issue in depth. of the industry Change the rules tions regarding the result. result. the regarding tions expecta fixed any without ideas and experience issues, novation in on exchange cross-functional a realise to aims forum The generator. impulse an of more as himself sees He programme. the through attendees the guides University, Exeter at neurship Entrepre and Innovation of sor Profes Bessant, John short. for i-circle circle, innovation an for amonth once meet areas ferent dif from experts and executives HELLA 30 around where is This Lippstadt. in office head its from far not is centre conference and hotel own company’s The Globe. HELLA in evening A Monday i-Circle Globe: HELLA Silicon Valley and Berlin show. examples the Lippstadt, from as is HELLA doing, is what This environment, you have to ground. new to break prepared be in this If automotiveto you the to successful want be business. applies also This entire is changing industries. and structures market established open It is breaking models. business Digitalisation and is markets rewriting for the rulebook 32

LIPPSTADT BRILLIANT VISIONS BRILLIANT - - - - - an appointment with the work the with appointment an makes defect, the notices owner car The replaced. be to have and worn are pads brake the ample: ex everyday One Hess. says way,“ new acompletely in ket aftermar the on chain value tire en the map and at look to have we today, us to available options wholesale. in solutions digital of development overarching the with ahead pushing is UCANDO time, same At the market. Polish the on primarily is focus Its customers. end for parts spare automotive in trading online in specialises 2014 since and Berlin in based been has subsidiary The event. this for just Lippstadt to elled trav has UCANDO, subsidiary HELLA of Director Managing Hess, Dominik parts. spare car passenger for market the of “With the technological technological the “With future the Today’s topic: - - - - - ble to us today, in acompletely options availa Managing Director UCANDO Director Managing With the tech to look at the chain on the aftermarket entire value we are able new way. nological nological Dominik Hess,

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important, then, to identify attractive innovations at an early early an at innovations attractive identify to then, important, HELLA this is a key approach to the solution in order to take take to order in solution the to approach akey is this HELLA With digitalisation the opportunities just grow. All the more more the All grow. just opportunities the digitalisation With can help here. This is because brilliant ideas usually spring spring usually ideas brilliant because is This here. help can DIGITAL DEGREES 360 stage and implement them systematically. Networking Networking systematically. them implement and stage advantage of the opportunities provided by the future. future. the by provided opportunities the of advantage up when different kinds of people come together. For For together. come people of kinds different when up BRILLIANT IDEAS BRILLIANT 06/2017 2016 360° 360°

discussing this issue in depth. in issue this discussing already is i-circle the HELLA at Yes, but future? the of vision a this Is process.“ the in part spare the order automatically which and done be to needs what exactly stipulate to systems self-learning and tion recogni image use which ees, employ workshop for glasses data is possibility “Another future: the into further even companies. haulage or firms car rental fleets, car large of operators for value added asubstantial constitute might Which evident. becomes age dam the before even repairs for in booked being vehicles to lead can This process. digitalised single in a activities aftermarket HELLA’s pools which platform service digital overarching an is milestone next The request. upon customer the to posed pro and workshop nearby a in up drawn be can estimate cost a including offering service asuitable business, merce e-com classic the to addition In activities. business UCANDO’s of range the develop to is aim The questions. very these with occupied is Hess Dominik team, finish? to start from digitalised efficiently been has that aprocess into transformed be could customer, the to vehicle repaired the of delivery the until emerges problem the moment the before starting even process, entire the if What effort. and time take they awhole as but talised, digi already are which of some steps, individual of chain long A fitted. and delivered are they parts, spare the orders It shop. Dominik Hess is looking looking is Hess Dominik his with together Working VISIONS BRILLIANT

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FINANCIAL REPORT 360 DEGREES DIGITAL 2016 /2017 BRILLIANT VISIONS 35

do here. This is the only way for matically for HELLA, particularly decision-making process kicks SILICON VALLEY us to remain dynamic and agile on account of its high level of in involving representatives and to keep up with the increas- HELLA Ventures: technological expertise. This is from different specialist areas ing pace of innovation, which Venture Capital arm because technological know- and the HELLA Management is being pushed ahead mainly how is a sought-after commodity Board. “Ultimately, of course, for through digitalisation.“ Sunnyvale, a town with a popula- in Silicon Valley. “Some start-ups us quality always comes before The Incubator acts as a tion of 140,000 in California, right Our job is come to us specifically because speed,“ comments Waterman. kind of nurturing ground for in the heart of Silicon Valley, the to identify we stand out from pure capital “But we have streamlined the new start-up companies to be epicentre of the current digital backers thanks to our position entire process in such a way that developed from any size and industry disruption. This is where start-ups as an established technological we as HELLA are able to invest type of idea. This results in in- HELLA Ventures has been based which may be leader in the areas of lighting and successfully in young, for- novative software platforms and since October 2015. Here, too, the of interest to electronics,“ says Waterman. ward-looking companies even digital service models, just like main concern is the automobile Waterman and his team in the fast-moving digital age.“ new forms of value creation and future, new ideas, new business HELLA and are always looking to join forces One of many paths the company work organisations. By partici- models to be one step ahead of to the mobility with the relevant technology has chosen in order to be one pating directly in the spin-off of the market. of tomorrow. experts from the global HELLA step ahead in the automobile dynamic start-ups, HELLA gains Jason Waterman is Manag- organisation. As soon as a future. Jason Waterman, access at an early stage to future ing Director of HELLA Ventures. Managing Director of HELLA preliminary selection of potential automotive high-technology that Together with a team of five he Ventures in Silicon Valley investments has been made on involves reduced risk exposure is on the lookout for strategic in- site in Sunnyvale, a systematic for core business fields. On the vestments. “We are not so much other hand, if a development a creative lab which develops result is a better direct fit for the and works out new ideas,“ says HELLA portfolio, it is transferred Waterman. “Rather, our job is to internally. identify suitable start-up com- “We benefit from the fact panies which may be of interest that entrepreneurship is one of to HELLA and to the mobility of HELLA’s key corporate values,“ tomorrow. Then we make target- says Rupp. “It makes things a ed investments.“ Its focus is on lot easier. We cannot master start-ups offering innovative the challenges we face in this solutions for key market trends dynamic environment unless we in the automotive sector, such as BERLIN have efficient cooperation with autonomous driving, electrifica- HELLA Ventures: other HELLA experts and one tion or cloud services. To identify that is defined by entrepreneur- There are plenty of oppor- “Incubator“ and disruptive ial spirit.“ tunities to do so. Especially in co-working space One of the main questions Silicon Valley. Pitches, where innovations you is therefore this: What are poten- start-ups present their ideas and A lower ground floor office in to completely change the rules have to allow tial disruptive innovations which plans to a group of potential in- a former substation in Berlin’s of the game on the market or in for a substan- might give HELLA a sustained vestors, are almost an everyday Prenzlauer Berg district, a listed terms of user behaviour. competitive edge in the future? occurrence. “The standards of building that is an example of “In the traditional automo- tially greater In addition to the necessary flex- the pitches are at an extremely German industrial architecture. tive supply business, the ability amount of ibility the Incubator needs for its high level, the presentations and Around fifteen employees work to plan, efficiency and the weigh- risk and ex- work, Rupp attaches considera- business models are usually at tables and whiteboards in ing of opportunities against ble importance to close collabo- very well-founded,“ says Water- different teams. The atmosphere risks are the very essence of perimentation. ration with HELLA experts, other man. The biggest challenge for is a bit like that found in a small our corporate and development That is what start-up companies as well as HELLA Ventures is to filter out start-up company. This uncon- strategy,“ says Timon Rupp, who we do here. selected partner universities. attractive investment opportuni- ventional HELLA Ventures site, heads the Berlin Incubator. “To Concepts are introduced, dis- ties early on, before others do. Timon Rupp, which was founded in Septem- successfully identify disruptive Head of the HELLA Ventures cussed and some are discarded Networking and speed ber 2015, is called the “Incuba- innovations in the market, you “Incubator“ in Berlin in so-called pitching events. thus become essential success tor“. At a place such as this the have to allow for a substantially However, the most promising factors. But the luminous power automotive supplier occupies greater amount of entrepreneur- ideas are followed up, frequently of the HELLA brand also has a itself with disruptive innovations. ial risk combined with experi- on a collaborative basis in the positive impact in the pulsating That is, technologies, products or mentation at the highest possible co-working space of HELLA microcosm that is Silicon Valley. services that have the potential technical level. That is what we Ventures Berlin. Thus many doors open auto- “Incubator“ and and “Incubator“ co-working space co-working Ventures: HELLA services that have the potential potential the have that services or products technologies, is, That innovations. disruptive with itself occupies supplier automotive the this as such At aplace tor“. “Incuba the 2015,ber called is Septem in founded was which site, Ventures HELLA ventional uncon This company. start-up asmall in found that like abit is atmosphere The teams. different in whiteboards and tables at work employees fifteen Around architecture. industrial German of example an is that building alisted district, Berg Prenzlauer Berlin’s in substation a former in office floor ground A lower

BERLIN

- - - technical level. That is what we we what is That level. technical possible highest the at mentation experi with combined risk ial entrepreneur of amount greater asubstantially for allow to have you market, the in innovations disruptive identify successfully “To Incubator. Berlin the heads who Rupp, Timon says strategy,“ development and corporate our of essence very the are risks against opportunities of ing weigh the and efficiency plan, to ability the business, supply tive behaviour. user of terms in or market the on game the of rules the change completely to “In the traditional automo traditional the “In - - - - innovations you innovationsyou perimentation. perimentation. Head of the HELLA Ventures HELLA Ventures the of Head for asubstan have to allow tially greater That is what what is That risk and ex we here. do To identify “ amount of disruptive disruptive Incubator“ in Berlin in Incubator“ Timon Rupp, Rupp, Timon -

- Ventures Berlin. Ventures HELLA of space co-working the in basis acollaborative on frequently up, followed are ideas promising most However, the events. pitching so-called in discarded are some and cussed dis introduced, are Concepts universities. partner selected as well as companies start-up other experts, HELLA with ration collabo close to importance ble considera attaches Rupp work, its for needs Incubator the ibility flex necessary the to addition In future? the in edge competitive asustained HELLA give might which innovations disruptive tial poten are What this: therefore is spirit.“ ial entrepreneur by defined is that one and experts HELLA other with cooperation efficient have we unless environment dynamic this in face we challenges the master We easier. cannot lot a things makes “It Rupp. says values,“ HELLA’s corporate key of one is entrepreneurship that internally. transferred is it portfolio, HELLA the for fit direct abetter is result adevelopment if hand, other the On fields. business core for exposure risk reduced involves that high-technology automotive future to stage early an at access gains HELLA start-ups, dynamic of spin-off the in directly pating partici By organisations. work and creation value of forms new like just models, service digital and platforms software novative in in results This idea. of type and size any from developed be to companies start-up new for ground nurturing of kind through digitalisation.“ mainly ahead pushed being is which innovation, of pace ing increas the with up keep to and agile and dynamic remain to us for way only the is This here. do One of the main questions questions main the of One fact the from benefit “We a as acts Incubator The

------the market. market. the of ahead step one be to models business new ideas, new future, automobile the is concern main 2015. the too, Here, October since based been has Ventures HELLA where is This disruption. industry digital current the of epicentre the Valley, Silicon of heart the in right California, 140,000 in of tion apopula with atown Sunnyvale, Venture arm Capital Ventures: HELLA DIGITAL DEGREES 360 Thus many doors open auto open doors many Thus Valley. Silicon is that microcosm pulsating the in impact positive a has also brand HELLA the of power luminous the But factors. success essential become thus do. others before on, early ties opportuni investment attractive out filter to is Ventures HELLA for challenge biggest The man. Water says well-founded,“ very usually are models business and presentations the level, high extremely an at are pitches the of standards “The occurrence. everyday an almost are vestors, in potential of agroup to plans and ideas their present start-ups where Pitches, Valley. Silicon in Especially so. do to tunities services. cloud or tion electrifica driving, autonomous as such sector, automotive the in trends market key for solutions innovative offering start-ups on is focus Its investments.“ ed target make we Then tomorrow. of mobility the to and HELLA to interest of be may which panies com start-up suitable identify to is job our “Rather, Waterman. says ideas,“ new out works and develops which lab a creative much so not are “We vestments. in strategic for lookout the on is he five of ateam with Together Ventures. HELLA of Director ing

SILICON VALLEY Jason Waterman is Manag is Waterman Jason Networking and speed speed and Networking oppor of plenty are There 06/2017 2016 ------Managing Director of HELLA of Director Managing to the mobility which may be of tomorrow. of Ventures in Silicon Valley Silicon in Ventures of interest to HELLA and and HELLA to identify Jason Waterman, Waterman, Jason Our job is start-ups start-ups

site in Sunnyvale, a systematic asystematic Sunnyvale, in site on made been has investments potential of selection preliminary a as soon As organisation. HELLA global the from experts technology relevant the with forces join to looking always are Waterman. says electronics,“ and lighting of areas the in leader technological established an as position our to thanks backers capital pure from out stand we because specifically us to come start-ups “Some Valley. Silicon in commodity asought-after is how know- technological because is This expertise. technological of level high its of account on particularly HELLA, for matically Waterman and his team team his and Waterman future. automobile the in ahead step one be to order in chosen has company the paths many of One age.“ digital fast-moving the in companies ward-looking even for young, in successfully invest to able are HELLA as we that away such in process entire the streamlined have we “But Waterman. comments speed,“ before comes always quality us for course, of “Ultimately, Board. Management HELLA the and areas specialist different from representatives involving in kicks process decision-making

VISIONS BRILLIANT - 35

FINANCIAL REPORT 36 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 37

Group management report and consolidated annual financial statements of HELLA KGaA Hueck & Co. Fiscal year 2016/2017 FINANCIAL REPORTFINANCIAL

37 GROUP MANAGEMENT REPORT

38 General information on the HELLA Group 48 Economic report 58 Opportunity and risk report 66 Forecast report 68 Corporate governance of HELLA KGaA Hueck & Co. 80 Remuneration report

86 REPORT BY THE SUPERVISORY BOARD 90 CONSOLIDATED FINANCIAL STATEMENTS 174 AUDITORS' CERTIFICATE 175 RESPONSIBILITY STATEMENT 176 OVERVIEW OF BODIES 178 GLOSSARY 180 LEGAL NOTICE 181 KEY PERFORMANCE INDICATORS 36 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 37

Group management report and consolidated annual financial statements of HELLA KGaA Hueck & Co. Fiscal year 2016/2017 FINANCIAL REPORTFINANCIAL

37 GROUP MANAGEMENT REPORT

38 General information on the HELLA Group 48 Economic report 58 Opportunity and risk report 66 Forecast report 68 Corporate governance of HELLA KGaA Hueck & Co. 80 Remuneration report

86 REPORT BY THE SUPERVISORY BOARD 90 CONSOLIDATED FINANCIAL STATEMENTS 174 AUDITORS' CERTIFICATE 175 RESPONSIBILITY STATEMENT 176 OVERVIEW OF BODIES 178 GLOSSARY 180 LEGAL NOTICE 181 KEY PERFORMANCE INDICATORS 38 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 39

business activities. In the business division Lighting, HELLA economic fluctuations and market cycles. The validity of this offers all relevant lighting technology products for a vehicle business strategy proved its worth for HELLA at the peak of General information and has steadily expanded its position as one of the technolog- the global economic crisis during the fiscal year 2008/2009. ical leaders with numerous innovations for state-of-the-art Secondly, the international footprint of the Company and the on the HELLA Group lighting systems. The business division Electronics operates associated diversification of its customer portfolio enable it a focused segment/product line approach along the HELLA to participate in growth opportunities, for example on the core competencies together with regional and global focus Chinese and North American markets, while at the same areas. In the Aftermarket segment,HELLA is active at all rel- time reducing its economic dependency on individual cus - evant steps along the value chain in replacement part distri- tomers and markets. Against this backdrop, the HELLA bution, wholesale, garage equipment and, particularly, diag- Group's strategic goal is to continue investing in growth nostics, offering solutions that specifically address the target opportunities and in its global presence, particularly in the group in question. The Special Applications segment takes on Automotive segment. the technological concepts, innovations and competencies used in the Automotive segment and transfers and applies The fundamental strategic focus of the HELLA Group is sup- them to meet the needs of the respective target group mar- ported by further success factors. First of all, HELLA is steadily Business model kets in a customer-tailored manner. This relates to both the improving its operational excellence in order to safeguard its HELLA KGaA Hueck & Co. is one of the top 40 international of in the course of optimising the portfolio and transferred in further rollout of LED lighting systems as well as to the trans- profitable growth. It achieves this, for example, by optimisation automotive suppliers and among the 100 largest German the first quarter of the past fiscal year 2016/2017. fer of the electronics competency to the Special Applications of global production and development capacities and by sys - industrial companies. The HELLA Group's business activities segment. tematic promotion and further education of its staff. Moreover, are divided into three segments: Automotive, Aftermarket Further information on the business structure of the HELLA HELLA maintains systematic quality management in order to and Special Applications. Group is available in the company profile starting on PAGE For the Group and the segments, HELLA focuses its strate- continue reducing the number of customer line returns and 10. gic objective on market leadership, which, depending on the non-quality costs further. Secondly, in addition to the HELLA The Automotive segment combines the HELLA business ac- segment, product line or region, can be achieved in the core business, the network strategy is used to take a cooper- tivities in original equipment and the corresponding original short, medium or long term. Thus, in the Automotive seg - ation approach in which partnerships are forged with other replacement part business. The Automotive segment is sub- ment, HELLA pursues the goal of taking market leading companies, for example, as part of joint ventures. In particular, divided into two business divisions, Lighting and Electronics, Goals and strategies positions (top 1 to 3), globally or in specific regions, in the this is done to gain access to complementary technologies, where HELLA develops, produces and sells vehicle-specific The HELLA Group pursues a strategy across the entire Group respective market segments relevant for the Company's develop new markets or customer groups and benefit from solutions for automobile manufacturers and other automo- that is based on three strategic pillars: the continuous expan- competitiveness. The most important markets of the seg- economies of scale. In this way, the many different joint ven- tive suppliers throughout the world. The product portfolio of sion of technological leadership and of the Company's innova- ment are Europe, China and the NAFTA area. Furthermore, tures and company units accounted for using the equity the Business Division Lighting includes business with head- tive strength, further strengthening of its leading market po- HELLA also strives to attain a market-leading role in the method form part of the HELLA Group's strategic growth lamps, rear combination lamps, signal lights, interior lights, sition on attractive markets throughout the world and ensuring Aftermarket and Special Applications segments in each of trajectory. and lighting electronics. The business division Electronics a stable, risk-diversified business and customer portfolio. Its the relevant target group markets and sales regions. The focuses on the product divisions of body electronics, energy strategic objective is to remain on its profitable growth path. business activities in the Aftermarket focus on the strategi- management, as well as driver assistance systems and Further success factors enabling HELLA to achieve its over- cally important core market in Europe. International busi- components. arching objectives are the ongoing strengthening of opera- ness in Asia/Pacific/Rest of World (Row) and in North, Cen- Control Systems tional excellence and the Company's network strategy. tral and South America supplements this approach. Europe In the Aftermarket segment,HELLA pools trading vehicle parts is the core market of the Special Applications business MANAGEMENT OF THE HELLA GROUP and accessories and workshop equipment in the independent In order to secure and further expand its technological and segment. The HELLA Group's organisation is managed via a multidi - replacement parts market. Additionally, HELLA acts as a ser- innovation leadership, HELLA has positioned itself strategi- mensional matrix. It includes the three segments Automo - vice partner for wholesalers and garages, and operates as a cally along central market trends in the automotive industry: HELLA pursues the goal of a resilient and risk-diversified tive, Aftermarket and Special Applications with the business wholesaler itself in Northern and Eastern Europe. These activ- autonomous driving, energy efficiency and electrification, -dig business model. This pillar of the corporate strategy con- divisions and strategic business segments, the regions ities are complemented by the range of high-grade garage italisation and individualisation are particularly significant for sists of several elements: first, the two segments Aftermar - North, Central and South America, Asia / Pacific/RoW and equipment, such as vehicle data equipment as well as profes- HELLA . The huge transition from conventional lighting con- ket and Special Applications contribute to stable business Europe as well as the central functions. While the segments sional diagnostic tools and garage devices, which enable spe- cepts to high-resolution headlamp systems in lighting tech- development, since they provide a counterweight to the and regions are organised as profit centres, the central func- cialist vehicle repair and maintenance at the garage. nology, which will be software-controlled to a notably greater volatile automotive business. Compared to the Automotive tions are managed as cost centres, in shared service centres extent in future, and high demand for driver assistance sys- business, the Aftermarket segment is anti-cyclical. This ( HELLA Corporate Center) among other things. The seg - In the Special Applications segment, HELLA develops, man- tems and solutions for automated driving functions as well as means that when demand for new vehicles is lower, the ments have chief responsibility for strategic and operational ufactures and markets lighting technology and electronic energy-efficient technologies or technologies directed at need for repairs and replacement parts tends to increase. business development. The central functions fulfil a gover- products for specialist vehicles such as construction and e-mobility open up strategic growth potential for HELLA . The product groups in the Special Applications segment are nance and control function for the Group and the segments. agricultural machinery, buses, motor homes or the marine partly subject to different demand cycles. In this way the In the global network, the German locations in particular sector. In May of the fiscal year 2015/2016, the previous busi- Within this strategic focus, differentiated strategic approaches HELLA Group tries to maintain a balanced and stable busi - assume a leadership role in terms of technological develop- ness activities ndustries and Airport Lighting were disposed are pursued in the individual segments for the respective ness development, which is as independent as possible of ment and the industrialisation of the international locations. 38 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 39

business activities. In the business division Lighting, HELLA economic fluctuations and market cycles. The validity of this offers all relevant lighting technology products for a vehicle business strategy proved its worth for HELLA at the peak of General information and has steadily expanded its position as one of the technolog- the global economic crisis during the fiscal year 2008/2009. ical leaders with numerous innovations for state-of-the-art Secondly, the international footprint of the Company and the on the HELLA Group lighting systems. The business division Electronics operates associated diversification of its customer portfolio enable it a focused segment/product line approach along the HELLA to participate in growth opportunities, for example on the core competencies together with regional and global focus Chinese and North American markets, while at the same areas. In the Aftermarket segment,HELLA is active at all rel- time reducing its economic dependency on individual cus - evant steps along the value chain in replacement part distri- tomers and markets. Against this backdrop, the HELLA bution, wholesale, garage equipment and, particularly, diag- Group's strategic goal is to continue investing in growth nostics, offering solutions that specifically address the target opportunities and in its global presence, particularly in the group in question. The Special Applications segment takes on Automotive segment. the technological concepts, innovations and competencies used in the Automotive segment and transfers and applies The fundamental strategic focus of the HELLA Group is sup- them to meet the needs of the respective target group mar- ported by further success factors. First of all, HELLA is steadily Business model kets in a customer-tailored manner. This relates to both the improving its operational excellence in order to safeguard its HELLA KGaA Hueck & Co. is one of the top 40 international of in the course of optimising the portfolio and transferred in further rollout of LED lighting systems as well as to the trans- profitable growth. It achieves this, for example, by optimisation automotive suppliers and among the 100 largest German the first quarter of the past fiscal year 2016/2017. fer of the electronics competency to the Special Applications of global production and development capacities and by sys - industrial companies. The HELLA Group's business activities segment. tematic promotion and further education of its staff. Moreover, are divided into three segments: Automotive, Aftermarket Further information on the business structure of the HELLA HELLA maintains systematic quality management in order to and Special Applications. Group is available in the company profile starting on PAGE For the Group and the segments, HELLA focuses its strate- continue reducing the number of customer line returns and 10. gic objective on market leadership, which, depending on the non-quality costs further. Secondly, in addition to the HELLA The Automotive segment combines the HELLA business ac- segment, product line or region, can be achieved in the core business, the network strategy is used to take a cooper- tivities in original equipment and the corresponding original short, medium or long term. Thus, in the Automotive seg - ation approach in which partnerships are forged with other replacement part business. The Automotive segment is sub- ment, HELLA pursues the goal of taking market leading companies, for example, as part of joint ventures. In particular, divided into two business divisions, Lighting and Electronics, Goals and strategies positions (top 1 to 3), globally or in specific regions, in the this is done to gain access to complementary technologies, where HELLA develops, produces and sells vehicle-specific The HELLA Group pursues a strategy across the entire Group respective market segments relevant for the Company's develop new markets or customer groups and benefit from solutions for automobile manufacturers and other automo- that is based on three strategic pillars: the continuous expan- competitiveness. The most important markets of the seg- economies of scale. In this way, the many different joint ven- tive suppliers throughout the world. The product portfolio of sion of technological leadership and of the Company's innova- ment are Europe, China and the NAFTA area. Furthermore, tures and company units accounted for using the equity the Business Division Lighting includes business with head- tive strength, further strengthening of its leading market po- HELLA also strives to attain a market-leading role in the method form part of the HELLA Group's strategic growth lamps, rear combination lamps, signal lights, interior lights, sition on attractive markets throughout the world and ensuring Aftermarket and Special Applications segments in each of trajectory. and lighting electronics. The business division Electronics a stable, risk-diversified business and customer portfolio. Its the relevant target group markets and sales regions. The focuses on the product divisions of body electronics, energy strategic objective is to remain on its profitable growth path. business activities in the Aftermarket focus on the strategi- management, as well as driver assistance systems and Further success factors enabling HELLA to achieve its over- cally important core market in Europe. International busi- components. arching objectives are the ongoing strengthening of opera- ness in Asia/Pacific/Rest of World (Row) and in North, Cen- Control Systems tional excellence and the Company's network strategy. tral and South America supplements this approach. Europe In the Aftermarket segment,HELLA pools trading vehicle parts is the core market of the Special Applications business MANAGEMENT OF THE HELLA GROUP and accessories and workshop equipment in the independent In order to secure and further expand its technological and segment. The HELLA Group's organisation is managed via a multidi - replacement parts market. Additionally, HELLA acts as a ser- innovation leadership, HELLA has positioned itself strategi- mensional matrix. It includes the three segments Automo - vice partner for wholesalers and garages, and operates as a cally along central market trends in the automotive industry: HELLA pursues the goal of a resilient and risk-diversified tive, Aftermarket and Special Applications with the business wholesaler itself in Northern and Eastern Europe. These activ- autonomous driving, energy efficiency and electrification, -dig business model. This pillar of the corporate strategy con- divisions and strategic business segments, the regions ities are complemented by the range of high-grade garage italisation and individualisation are particularly significant for sists of several elements: first, the two segments Aftermar - North, Central and South America, Asia / Pacific/RoW and equipment, such as vehicle data equipment as well as profes- HELLA . The huge transition from conventional lighting con- ket and Special Applications contribute to stable business Europe as well as the central functions. While the segments sional diagnostic tools and garage devices, which enable spe- cepts to high-resolution headlamp systems in lighting tech- development, since they provide a counterweight to the and regions are organised as profit centres, the central func- cialist vehicle repair and maintenance at the garage. nology, which will be software-controlled to a notably greater volatile automotive business. Compared to the Automotive tions are managed as cost centres, in shared service centres extent in future, and high demand for driver assistance sys- business, the Aftermarket segment is anti-cyclical. This ( HELLA Corporate Center) among other things. The seg - In the Special Applications segment, HELLA develops, man- tems and solutions for automated driving functions as well as means that when demand for new vehicles is lower, the ments have chief responsibility for strategic and operational ufactures and markets lighting technology and electronic energy-efficient technologies or technologies directed at need for repairs and replacement parts tends to increase. business development. The central functions fulfil a gover- products for specialist vehicles such as construction and e-mobility open up strategic growth potential for HELLA . The product groups in the Special Applications segment are nance and control function for the Group and the segments. agricultural machinery, buses, motor homes or the marine partly subject to different demand cycles. In this way the In the global network, the German locations in particular sector. In May of the fiscal year 2015/2016, the previous busi- Within this strategic focus, differentiated strategic approaches HELLA Group tries to maintain a balanced and stable busi - assume a leadership role in terms of technological develop- ness activities ndustries and Airport Lighting were disposed are pursued in the individual segments for the respective ness development, which is as independent as possible of ment and the industrialisation of the international locations. 40 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 41

HELLA KGaA Hueck & Co. In the segments and business divisions, the respective Ex - In the fiscal year 2015/2016 the Management Board in consul- ecutive Boards support the responsible Management Board tation with the Shareholder Committee developed the control in operational and strategic management. Entrepreneurial model further. As a major guideline for this, the management Dr. Jürgen Behrend Dr. Rolf Breidenbach self-responsibility is the basic principle for managing the indicators have to provide a transparent picture of operational HELLA Managing General Partner President and CEO business at all levels. For important business transactions, performance. For this reason, in the fiscal year 2015/2016 the corporate structure the Group Management Board requires the approval of the EBIT margin was replaced with the adjusted EBIT margin – Business Segment Business Segment Business Segment HELLA KGaA Hueck & Co. Shareholder Committee, which, adjusted for special effects – as one of the key performance Automotive Aftermarket Special Applications through this process, co-determines the significant guide- indicators. Although this key performance indicator is not de- Sales Automotive Business Division Business Division Business Division lines for business. As the central representative body of the fined in the International Financial Reporting Standards, it is Dr. Matthias Schöllmann Lighting Electronics Aftermarket and Special Applications shareholders, the Shareholder Committee is involved on an reported as additional information by HELLA because it pres- Markus Bannert Dr. Rolf Breidenbach Dr. Werner Benade ongoing basis in monitoring and providing advice to the ents the results of operations - independently of exceptional Group Management Board. Besides this, the Shareholder effects which can have an adverse impact on an assessment Finance and Controlling Executive Board: Executive Board: Executive Board: Bernard Schäferbarthold Dr. Michael Babo, Dr. Christian Amsel, Stefan van Dalen, Committee has responsibility for personnel matters involv - of the Company's performance - in a more transparent form Dr. Andreas Brinkhoff, Heiko Berk, Dominik Görts, ing the managing directors of HELLA Geschäftsführungs- and facilitates a comparison over time. Michael Colberg, Dr. Naveen Gautam, Dr. Andreas Habeck, gesellschaft mbH. Along with the Shareholder Committee, Human Resources, Kamislav Fadel, Jens Grösch, Violetta Sosna, Information Technology Dr. Christof Hartmann, Michael Jaeger, Dr. Nicolas Wiedmann monitoring tasks are also performed by the Supervisory In addition, HELLA replaced the sales growth reported in the and Logistics Sandra Kißler, Ralf Kuhl, Board, which primarily deals with auditing and approving the fiscal year 2016/2017 with the adjusted sales growth as one of Stefan Osterhage John Kuijpers, Gerold Lucas, annual and consolidated financial statements, as well as the the most significant key performance indicators. This was in Dr. Ulf Merschmann, Bernd Münsterweg, Ignacio Moreno Betanzo, Frank Petznick, interim financial statements. Certain tasks in this context are order to present the consolidated sales development indepen- Purchasing, Quality, Michael Sohn, Jörg Weisgerber, delegated to the Audit Committee nominated by the Super- dent of exchange rate fluctuations and other special items. For Legal and Compliance Matthias Thiemann Joachim Ziethen Dr. Rolf Breidenbach visory Board. The Audit Committee primarily audits the fi- example, in the fiscal year 2016/2017 the Company booked nancial reports and functional capability of the internal con - special items due to the divestment of the Industries and Air- trol system and the risk and compliance management port Lighting business activities, which reduced consolidated system. sales.

Strategic planning and operational budget planning are sig- In addition to key financial performance indicators, the HELLA nificant internal control instruments for the Company. Each Group utilises non-financial performance indicators, primarily International HELLA companies month, a detailed meeting takes place at the meeting of the in the area of quality. One quality measurement indicator and Management Board of the HELLA Group and the Executive thus an indicator of customer satisfaction is rate of customer General Partners: Boards to discuss the budget and development compared line returns, which is measured as the number of defects iden- Dr. Jürgen Behrend, HELLA Geschäftsführungsgesellschaft mbH with the previous year; the Shareholder Committee is in- tified after delivery per one million parts ("parts per million" -

President and CEO of HELLA Geschäftsführungsgesellschaft mbH formed about this. Quarterly and half-year reports are also ppm). Key characteristics of the HELLA quality management prepared. are ensuring compliance with market-driven standards, dura- Dr. Rolf Breidenbach (Chair), Markus Bannert, Dr. Werner Benade, Stefan Osterhage, Bernard Schäferbarthold, Dr. Matthias Schöllmann bility and reliability with a high degree of user comfort. Chairman of the Supervisory Board PERFORMANCE INDICATORS Prof. Dr. Michael Hoffmann-Becking The HELLA Group is managed by the Management Board through key financial and non-financial performance indica- Shareholder Committee tors. The four main key financial performance indicators are Research and Development Manfred Wennemer (Chair), Roland Hammerstein, Dr. Gerd Kleinert, Klaus Kühn, Dr. Matthias Röpke, Konstantin Thomas sales growth, the EBIT margin, return on invested capital Along with operational performance, the exceptional re - As at 24 July 2017 (RoIC) and free cash flow (FCF). They were set by the Share- search and development culture at the Company forms the holder Committee for the Group's further operational and foundation of the ability to compete and the leading market strategic development in the fiscal year 2014/2015 and the position in many product divisions. More than 90 % of our Group management at present consists of Dr. Jürgen Beh- Managing Director for Finance and Controlling in the fiscal target values are based on multiple comparative indicators, research and development expenses are accounted for by the rend as Managing General Partner and the Managing Direc- year 2016/2017 and Dr. Werner Benade was appointed Man- for example, market conditions and competition, internal per- Automotive business segment. HELLA uses cutting-edge tors of HELLA Geschäftsführungsgesellschaft mbH with its aging Director of Aftermarket and Special Applications. Ber- formance standards and allocation of resources. Based on the technology to serve central market trends of the automotive President and CEO, Dr. Rolf Breidenbach. Following the resig- nard Schäferbarthold takes over from Dr. Wolfgang Ollig, resolution of the Shareholder Committee, the key perfor- industry: autonomous driving, energy efficiency and electrifi- nation of Dr Behrend at the end of September 2017, responsi- who left the company at his own request. Dr. Werner Benade mance indicators of sales growth and EBIT margin take on cation, digitalisation, and individualisation. bility for group management will be assigned solely to the took over the responsibility for the Aftermarket and Special great importance compared to the other key financial indica- Managing Directors of HELLA Geschäftsführungsgesellschaft Applications business division from Dr. Rolf Breidenbach, tors in the management of the Company. Accordingly, they are At € 636 million, research and development expenses in the mbH, chaired by Dr. Rolf Breidenbach. President and CEO of HELLA Geschäftsführungsgesellschaft the HELLA Group's most important key performance fiscal year 2016/2017 accounted for 9.7 % of consolidated mbH, who had fulfilled the role temporarily until Dr. Benade indicators. sales and were thus 0.1 percentage points below the prior Furthermore, Bernard Schäferbarthold took up the post as took office. year's level. The ratio of capitalised development costs to 40 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 41

President and CEO of HELLA Geschäftsführungsgesellschaft mbH formed about this. Quarterly and half-year reports are also ppm). Key characteristics of the HELLA quality management prepared. are ensuring compliance with market-driven standards, dura- Dr. Rolf Breidenbach (Chair), Markus Bannert, Dr. Werner Benade, Stefan Osterhage, Bernard Schäferbarthold, Dr. Matthias Schöllmann bility and reliability with a high degree of user comfort. Chairman of the Supervisory Board PERFORMANCE INDICATORS Prof. Dr. Michael Hoffmann-Becking The HELLA Group is managed by the Management Board through key financial and non-financial performance indica- Shareholder Committee tors. The four main key financial performance indicators are Research and Development Manfred Wennemer (Chair), Roland Hammerstein, Dr. Gerd Kleinert, Klaus Kühn, Dr. Matthias Röpke, Konstantin Thomas sales growth, the EBIT margin, return on invested capital Along with operational performance, the exceptional re - As at 24 July 2017 (RoIC) and free cash flow (FCF). They were set by the Share- search and development culture at the Company forms the holder Committee for the Group's further operational and foundation of the ability to compete and the leading market strategic development in the fiscal year 2014/2015 and the position in many product divisions. More than 90 % of our Group management at present consists of Dr. Jürgen Beh- Managing Director for Finance and Controlling in the fiscal target values are based on multiple comparative indicators, research and development expenses are accounted for by the rend as Managing General Partner and the Managing Direc- year 2016/2017 and Dr. Werner Benade was appointed Man- for example, market conditions and competition, internal per- Automotive business segment. HELLA uses cutting-edge tors of HELLA Geschäftsführungsgesellschaft mbH with its aging Director of Aftermarket and Special Applications. Ber- formance standards and allocation of resources. Based on the technology to serve central market trends of the automotive President and CEO, Dr. Rolf Breidenbach. Following the resig- nard Schäferbarthold takes over from Dr. Wolfgang Ollig, resolution of the Shareholder Committee, the key perfor- industry: autonomous driving, energy efficiency and electrifi- nation of Dr Behrend at the end of September 2017, responsi- who left the company at his own request. Dr. Werner Benade mance indicators of sales growth and EBIT margin take on cation, digitalisation, and individualisation. bility for group management will be assigned solely to the took over the responsibility for the Aftermarket and Special great importance compared to the other key financial indica- Managing Directors of HELLA Geschäftsführungsgesellschaft Applications business division from Dr. Rolf Breidenbach, tors in the management of the Company. Accordingly, they are At € 636 million, research and development expenses in the mbH, chaired by Dr. Rolf Breidenbach. President and CEO of HELLA Geschäftsführungsgesellschaft the HELLA Group's most important key performance fiscal year 2016/2017 accounted for 9.7 % of consolidated mbH, who had fulfilled the role temporarily until Dr. Benade indicators. sales and were thus 0.1 percentage points below the prior Furthermore, Bernard Schäferbarthold took up the post as took office. year's level. The ratio of capitalised development costs to 42 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 43

development expenses in accordance with the consolidated support regionally specific adaptation on the one hand and also Alongside the use of LED technology, the research and devel- other vehicle operators. In this context, light assumes promi- income statement came to 8.9 %, after 8.8 % in the fiscal year advance independent developments for the relevant markets opment activities of HELLA focus on LCD lighting systems, nent importance as a communications tool. In addition, HELLA 2015/2016. Research and development expenses reflect the on the other. In this way, HELLA achieves market-driven cus- among other things. The prioritisation of LCD technology is has been jointly operating the L-LAB as a research institute for business strategy oriented towards technological leadership tomisation of technologies and product designs to meet cus- the result of a requirements analysis for the optimum pre- lighting technology and mechatronics together with the Univer- and innovation and the structural expenses incurred as part tomer needs. sentation of new functions and their effective range in the sity of Paderborn since 2000. L-LAB was expanded in April 2015 of the globalisation initiative to strengthen the global HELLA traffic area. For example, a resolution of more than 50,000 with the addition of the Hamm-Lippstadt University of Applied development network. Furthermore, the research and de- BUSINESS DIVISION LIGHTING points of light for each headlamp with the simultaneous pro- Science and is exploring current issues relating to vehicle light- velopment expenses result from the preparation and imple- In the business division Lighting the development of high-res- jection in the full road space and high illuminance allow all ing and engaging in application-oriented basic research. mentation of several complex production ramp-ups in the olution lighting systems and the digitalisation of automotive security and comfort functions currently identified as relevant Automotive segment during the past fiscal year. lighting technology remain an overarching trend topic and are to be presented. BUSINESS DIVISION ELECTRONICS steadily gaining in importance. In this connection HELLA pur- As part of the development activities in the business division The number of employees in research and development grew sues a multi-pillar strategy: first, innovative lighting technol- In this connection, the fiscal year 2016/2017 saw the success- Electronics, HELLA supports automobile manufacturers and by 6.3 % to 6,764 worldwide in the fiscal year 2016/2017. This ogies continue to be rolled out in higher-volume vehicle seg- ful completion of the "VoLiFa 2020" research project to devel- suppliers in the development and implementation of for- means that around 18 % of HELLA employees work in research ments by means of modularisation concepts. Secondly, op a fully adaptive LCD-based lighting system, which HELLA ward-looking functions and technologies along the global and development. In addition, as part of its research and devel- HELLA continues to develop digital lighting systems with realised as overall project manager together with its partners market trends of autonomous driving, energy efficiency and opment activities HELLA also works closely together with ex- so-called high-definition headlamps for the premium seg- Porsche, Merck, Elmos, Schweizer Elektronic AG and the uni- electrification, digitalisation and individualisation. In this con- ternal service providers, academic institutes and research ment; these achieve a considerably higher resolution and versities of Paderborn and Stuttgart. The research collabora- text, HELLA is pursuing the strategic goal of developing the facilities. more exact control of light distribution than before with the tion has also been sponsored by the German Ministry of Ed - system understanding further and of developing new compo- help of more than one hundred thousand individually control- ucation and Research. In addition to LCD systems, HELLA has nents and systems and bringing them to market maturity in BUSINESS SEGMENT AUTOMOTIVE lable points of light (pixel). Vehicles' external lighting will be continued the development work on high-resolution LED light accordance with the relevant market trends. In the Automotive business segment HELLA sustains its in- controlled by software to a much greater extent in the future sources, DMD (digital mirror devices) technology and the use novative strength via high-performance pre-development. so that light distribution can be digitally modulated with indi- of laser light sources. With regard to the market trend of autonomous driving, HELLA As a result of the market trend of digitalisation, for example vidually controllable lighting elements, according to the further intensified the research and development activities in in the area of innovative lighting technologies, the pooling of course of the road, weather and traffic conditions, thus help - HELLA is also preparing OLED technologies for series pro - radar technology and front camera software during the past lighting and electronics competence is of major importance ing to realise new safety-relevant and comfort functions. duction and is researching holography lighting technology to fiscal year. HELLA is a long-standing market leader in the area in the Automotive segment, in particular, as in future, HELLA will continue its in-depth research and development be used, for example, in signal lighting. of 24 GHz radar narrowband technology, which is primarily high-resolution lighting systems will be software-based to a in this area. used for the rear area of vehicles. In the fiscal year 2016/2017, notably greater extent and will be controlled without the help With the opening of a development centre for automotive light- HELLA prepared the market launch of the fourth generation of mechanical actuators. Furthermore, in its research and The digitalisation of light also means that the lighting function ing technology in Sindelfingen, Germany, HELLA further ex- radar sensors on a 24 GHz basis with an expanded perfor- development activities HELLA is working intensively on new is decoupled from the headlamp's hardware. The opportunity panded its development capacity in the fiscal year 2016/2017, in mance of safety functions (e.g. exit wizard). Furthermore, production technologies to improve its operational excel- to make further individualised safety and comfort functions line with its network strategy. Moreover, along with its own HELLA is currently developing radar sensors on a 77 GHz basis lence further. available to customers and final consumers through software strong pre-development, HELLA maintains a range of research which realise fundamental safety and assistance functions in updates and upgrades, for example the projection of protec- co-operations. For example, in the fiscal year 2016/2017 a re- the front-side area, such as expanded total angle recognition Following the HELLA central strategy, worldwide development tion zones around cyclists, results in new development op- search project on high-resolution LED systems was completed. or the recognition of cross traffic in a forward direction.HELLA is co-ordinated principally from Germany. In contrast, there are portunities for lighting functions and further added value The project was realised in collaboration with the overall project is also securing its leading market position in radar technology local development centres in the large growth regions, which potential through new business models. manager Osram, Daimler AG, Infineon and two Fraunhofer in- on a sustained basis through strategic collaborations with joint stitutes and was sponsored by the German Ministry of Educa- ventures and further partners. tion and Research. Together with the Fraunhofer Application Center for Inorganic Phosphors in Soest, HELLA is continuing Via its subsidiary HELLA Aglaia, HELLA is furthermore under- Research and Development the development of a prototype of a high-resolution headlamp taking in-depth research and development work in cam- with a laser light source as part of the "HipE" project. Moreover, era-based driver assistance systems. The strategic focus is on 2016/2017 2015/2016 +/- two new collaborations started in fiscal year 2016/2017. The the introduction of an open software system that supports R&D employees 6,764 6,361 6.3 % "Smart Headlamp Technology" research project is developing several scalable hardware platforms and enables them to be

Expenses in € million an intelligent headlamp using a hardware-in-the-loop ap- expanded to include third-party software components and the proach, among other things. This allows the headlamp and retrofitting of further driving functions for highly automated Automotive 605 592 2.2 % vehicle environment to be depicted in real time with a suitable driving by means of software updates. The development activ- Aftermarket and Special Applications 32 32 - 0.7 % simulator. In addition to HELLA , participants in the collaboration ities of HELLA Aglaia are also concerned with new technolo - include the Fraunhofer Institute for Mechatronic System Design gies, e.g. artificial intelligence, required to realise autonomous Total 636 623 2.1 % IEM and the universities of Paderborn and Dortmund. The inter- driving functions. national research project "InterAct", sponsored by the EU, is in % of sales 9.7 9.8 developing a concept for autonomous vehicles to communicate Moreover, HELLA is researching and developing sensor solu- Where sums and percentages in the report have been rounded, differences may arise as a result of commercial rounding. with non-autonomous road users, i.e. pedestrians, cyclists and tions in the area of assisted driving, such as the SHAKE sensor 42 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 43

Expenses in € million an intelligent headlamp using a hardware-in-the-loop ap- expanded to include third-party software components and the proach, among other things. This allows the headlamp and retrofitting of further driving functions for highly automated Automotive 605 592 2.2 % vehicle environment to be depicted in real time with a suitable driving by means of software updates. The development activ- Aftermarket and Special Applications 32 32 - 0.7 % simulator. In addition to HELLA , participants in the collaboration ities of HELLA Aglaia are also concerned with new technolo - include the Fraunhofer Institute for Mechatronic System Design gies, e.g. artificial intelligence, required to realise autonomous Total 636 623 2.1 % IEM and the universities of Paderborn and Dortmund. The inter- driving functions. national research project "InterAct", sponsored by the EU, is in % of sales 9.7 9.8 developing a concept for autonomous vehicles to communicate Moreover, HELLA is researching and developing sensor solu- Where sums and percentages in the report have been rounded, differences may arise as a result of commercial rounding. with non-autonomous road users, i.e. pedestrians, cyclists and tions in the area of assisted driving, such as the SHAKE sensor 44 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 45

(short for structural health and knock emission), a struc- In the business division Electronics HELLA has further ex - accompanying benefits, such as enhanced safety through im- their environmental programme. In this way HELLA will im- ture-borne sound sensor for passenger vehicles, which uses panded the capacity of the international research and devel- proved visibility, greater robustness, increased efficiency and prove materials and energy efficiency in its plants on a sus- piezoelectric sensors in order to, for example, detect even the opment organisation by opening the E-LAB. The E-LAB was design freedom, in various vehicle types, such as tractors, tained basis and reduce energy consumption and the associ- tiniest damage to a vehicle and thus enables a body control established at the end of 2016 and together with university trailers and motorhomes. Besides the continuous develop- ated CO₂ emissions further. The HELLA location in Irapuato, unit to initiate customer-specific functions. This may take the institutes it is working on solutions to long-term trends in ment and production of customer-specific front and rear LED Mexico, came second in the Energy Efficiency Awards of the shape of an automated stop function during assisted parking, vehicle electronics. Moreover, HELLA maintains research lighting, in the fiscal year 2016/2017 HELLA presented the new federal state of Guanajuato in December 2016. as soon as the sensor identifies that contact has been made co-operations in collaboration with various other partners. In modular Shapeline series for the first time. It allows the man- with an obstacle during the parking process. This area is not the area of autonomous driving, the "AutoKonf" project car- ufacturers of commercial vehicles to create an individual and The subsidiary HELLA Fahrzeugteile Austria has covered by previous perception of surroundings systems. The ries out redundant monitoring of safety-relevant driving consistent image. Beyond the Shapeline series, the Special optimised its logistics processes. The switch to rail modularity of the sensor moreover opens up further areas of functions while the "KogniHome" project monitors the driv- Applications business segment is stepping up the develop- transport generated CO₂ savings of 62,820 kilograms and application in the immediate vehicle environment which can er's health. Furthermore, the research alliance "Open Fusion ment of modularisation concepts, for example in the area of the target of reducing CO₂ emissions by 50,000 kilograms be realised individually depending on the original equipment Platform" that is sponsored by the German Ministry of Educa- LED-based work lights for agricultural vehicles, for example of CO₂ was overfulfilled. manufacturer's requirements. At the end of the past calendar tion and Research is working to create an open data merger for tractors. Furthermore, the development activities of the year HELLA embarked on the series development of the sen- platform which supports the inexpensive realisation of au- segment are concerned with the further transfer of the elec- The subsidiary HELLA Slovakia Front Lighting s.r.o. has sor for a premium original equipment manufacturer, the start tonomous driving functions. The "Connected Driving" project tronics competence, for example in the areas of radar sensors improved, in collaboration with a customer, the transport of series production is scheduled for the second half of 2018. researches fundamental options for communication between and accelerator pedal sensors. The establishment of a pre-de- of goods and the packaging of empties between Slovakia vehicles and their surroundings. In the area of energy man- velopment organisation and further expansion of the develop- and Germany. The use of a different type of truck and With regard to the market trend of energy efficiency and elec- agement, high-voltage charging converters with high energy ment capacity in the Special Applications segment is also a more efficient transport of the empties packaging has led trification, HELLA 's focus is, among other things, on the elec- density are examined and developed further as part of the response to the increasing complexity and degree of innova- to the number of journeys being halved and 255 tonnes tronics of battery management systems for lithium-ion batter- "HELENE" project. tion of products. HELLA also cooperates with a network of per year in CO₂ savings. ies developed specifically for full hybrids and electric vehicles other OEM suppliers in developing and equipping a future-ori- and launched for the first time. Further series development BUSINESS SEGMENT AFTERMARKET ented concept cabin for agricultural and construction HELLA Plant 2 in Lippstadt / Germany is the only HELLA loca- activities by HELLA are geared to high-performance DC-DC In the Aftermarket business segment the focus is on trading vehicles. tion subject to EU-wide trading in greenhouse gas emission voltage transformers that allow safe energy supply across in spare parts, accessories and garage equipment. This certificates ("CO₂ certificates"). For the third trading period different voltage supply systems. Moreover, among other means that less research and development expenses for (from 2013 to 2020), the combustion plant has received an things HELLA is developing technologies for more efficient segment-specific products are incurred when compared with allotment notice for a term of eight years and an allotment of thermo and fuel management. For example, in the fiscal year the Automotive segment. In the area of independent replace - Sustainability 95,747 certificates at no charge. 2016/2017 HELLA completed the development of an electric ment part distribution, one focus is on expanding the product HELLA has committed to responsible use of resources. For cooling valve actuator which is used e.g. after an engine cold portfolio and intensifying the knowledge transfer from busi- HELLA , environmental protection is more than complying In the calendar year 2016, 15,263 tonnes of CO₂ were emitted, start in order to optimise the thermal budget and which went ness with original equipment manufacturers to independent with regulations. It is an integral part of the corporate culture the figure is substantially lower compared to previous years. into series production in the first quarter of 2017. In addition, the replacement part distribution. In the business with garage in the spirit of sustainability. The HELLA Group therefore This is due to the replacement of a turbine in May and June research and development activities of HELLA also continue to equipment, HELLA covers the full innovation and production strives constantly to improve resource consumption and de- 2016 because fewer operating hours were achieved, and the provide intensive support to the optimisation of conventional process; research and development activities continued to crease CO₂ emissions at both the process and product levels. shortfall in energy required had to be made up for with pur- internal combustion engines, for example in the area of vacu- occupy themselves with high-performance diagnostic units; Moreover, sustainable and environmentally friendly manage- chases from external energy suppliers. It was possible to um pumps in order to take the strict environmental and climate thus one main focus was on expanding the software compe- ment even in the supply chain forms an important part of the settle part of the fee from the allocation of surplus certificates protection requirements into account. tence in the business with diagnostics and garage equipment. HELLA environmental strategy. in the second trading period and the free allotment from the In wholesale, the research and development activities focus third period. The surplus certificates from the second trading In the area of individualisation HELLA is amongst other things on areas including expansion of the e-commerce operations, In the fiscal year 2016/2017, 90 % of HELLA production sites had period were used up in full with the current fee in April 2017. developing and producing new surface technologies for re- for example in connection with a service platform initially ISO 14001 environmental management certification. Starting in Due to the general reduction of the free allotment and other mote keys and ID transmitters. It is particularly thanks to their tailored for the Danish market, whose subsequent rollout is July 2017, the locations of the HELLA Group will be certified in factors, these certificates will no longer suffice in the future. high worth, individually tailored to the vehicle interior, that also planned for the Norwegian wholesale market. accordance with the new ISO14001:2015 standard. To integrate The purchase is to be realised in several steps during the cor- these new surface technologies meet the rising demands of further locations into the environmental network in the best responding fiscal years. In addition to the purchase of 5,000 end-customers with regard to quality, unique position and BUSINESS SEGMENT SPECIAL APPLICATIONS possible way in the future, HELLA carries out regional work - certificates in May 2015 another 7,950 certificates were pur- safety. In the Special Applications business segment, HELLA primarily shops in the growth regions each year, with a particular focus chased in September 2016. Another purchase is due to take benefits from the transfer of knowledge from the Automotive on Mexico and China. In addition, cross-functional internal au- place in summer 2017, which will cover the shortfall of 10,000 Furthermore, in the area of air quality management HELLA segment in order to develop and apply new products for man- dits promote mutual networking of the locations and support certificates. continues to intensify its research on the development of sen- ufacturers of special vehicles by using existing basic technolo- "good practice transfer". Audits are carried out by specially sors to measure air quality, particularly with regard to the gies and product concepts in the lighting and electronics areas. qualified regionalHELLA auditors, who receive theoretical and Moreover, with the continual optimisation of existing prod- measurements of the finest particles (PM2.5) in and around One key theme of the research and development activities of practical training based on a consistent standard. ucts and the development of new ones HELLA effectively the vehicle. the Special Applications segment is therefore the accelerated contributes to a reduction in energy consumption and vehicle introduction of LED technology in the original equipment of Moreover, in the past fiscal year all production sites defined emissions. In this way HELLA supports automobile manufac- specialist vehicles. HELLA is consistently implementing the and implemented specific environmental objectives as part of turers in meeting the European Union's exhaust regulations. 44 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 45

(short for structural health and knock emission), a struc- In the business division Electronics HELLA has further ex - accompanying benefits, such as enhanced safety through im- their environmental programme. In this way HELLA will im- ture-borne sound sensor for passenger vehicles, which uses panded the capacity of the international research and devel- proved visibility, greater robustness, increased efficiency and prove materials and energy efficiency in its plants on a sus- piezoelectric sensors in order to, for example, detect even the opment organisation by opening the E-LAB. The E-LAB was design freedom, in various vehicle types, such as tractors, tained basis and reduce energy consumption and the associ- tiniest damage to a vehicle and thus enables a body control established at the end of 2016 and together with university trailers and motorhomes. Besides the continuous develop- ated CO₂ emissions further. The HELLA location in Irapuato, unit to initiate customer-specific functions. This may take the institutes it is working on solutions to long-term trends in ment and production of customer-specific front and rear LED Mexico, came second in the Energy Efficiency Awards of the shape of an automated stop function during assisted parking, vehicle electronics. Moreover, HELLA maintains research lighting, in the fiscal year 2016/2017 HELLA presented the new federal state of Guanajuato in December 2016. as soon as the sensor identifies that contact has been made co-operations in collaboration with various other partners. In modular Shapeline series for the first time. It allows the man- with an obstacle during the parking process. This area is not the area of autonomous driving, the "AutoKonf" project car- ufacturers of commercial vehicles to create an individual and The subsidiary HELLA Fahrzeugteile Austria has covered by previous perception of surroundings systems. The ries out redundant monitoring of safety-relevant driving consistent image. Beyond the Shapeline series, the Special optimised its logistics processes. The switch to rail modularity of the sensor moreover opens up further areas of functions while the "KogniHome" project monitors the driv- Applications business segment is stepping up the develop- transport generated CO₂ savings of 62,820 kilograms and application in the immediate vehicle environment which can er's health. Furthermore, the research alliance "Open Fusion ment of modularisation concepts, for example in the area of the target of reducing CO₂ emissions by 50,000 kilograms be realised individually depending on the original equipment Platform" that is sponsored by the German Ministry of Educa- LED-based work lights for agricultural vehicles, for example of CO₂ was overfulfilled. manufacturer's requirements. At the end of the past calendar tion and Research is working to create an open data merger for tractors. Furthermore, the development activities of the year HELLA embarked on the series development of the sen- platform which supports the inexpensive realisation of au- segment are concerned with the further transfer of the elec- The subsidiary HELLA Slovakia Front Lighting s.r.o. has sor for a premium original equipment manufacturer, the start tonomous driving functions. The "Connected Driving" project tronics competence, for example in the areas of radar sensors improved, in collaboration with a customer, the transport of series production is scheduled for the second half of 2018. researches fundamental options for communication between and accelerator pedal sensors. The establishment of a pre-de- of goods and the packaging of empties between Slovakia vehicles and their surroundings. In the area of energy man- velopment organisation and further expansion of the develop- and Germany. The use of a different type of truck and With regard to the market trend of energy efficiency and elec- agement, high-voltage charging converters with high energy ment capacity in the Special Applications segment is also a more efficient transport of the empties packaging has led trification, HELLA 's focus is, among other things, on the elec- density are examined and developed further as part of the response to the increasing complexity and degree of innova- to the number of journeys being halved and 255 tonnes tronics of battery management systems for lithium-ion batter- "HELENE" project. tion of products. HELLA also cooperates with a network of per year in CO₂ savings. ies developed specifically for full hybrids and electric vehicles other OEM suppliers in developing and equipping a future-ori- and launched for the first time. Further series development BUSINESS SEGMENT AFTERMARKET ented concept cabin for agricultural and construction HELLA Plant 2 in Lippstadt / Germany is the only HELLA loca- activities by HELLA are geared to high-performance DC-DC In the Aftermarket business segment the focus is on trading vehicles. tion subject to EU-wide trading in greenhouse gas emission voltage transformers that allow safe energy supply across in spare parts, accessories and garage equipment. This certificates ("CO₂ certificates"). For the third trading period different voltage supply systems. Moreover, among other means that less research and development expenses for (from 2013 to 2020), the combustion plant has received an things HELLA is developing technologies for more efficient segment-specific products are incurred when compared with allotment notice for a term of eight years and an allotment of thermo and fuel management. For example, in the fiscal year the Automotive segment. In the area of independent replace - Sustainability 95,747 certificates at no charge. 2016/2017 HELLA completed the development of an electric ment part distribution, one focus is on expanding the product HELLA has committed to responsible use of resources. For cooling valve actuator which is used e.g. after an engine cold portfolio and intensifying the knowledge transfer from busi- HELLA , environmental protection is more than complying In the calendar year 2016, 15,263 tonnes of CO₂ were emitted, start in order to optimise the thermal budget and which went ness with original equipment manufacturers to independent with regulations. It is an integral part of the corporate culture the figure is substantially lower compared to previous years. into series production in the first quarter of 2017. In addition, the replacement part distribution. In the business with garage in the spirit of sustainability. The HELLA Group therefore This is due to the replacement of a turbine in May and June research and development activities of HELLA also continue to equipment, HELLA covers the full innovation and production strives constantly to improve resource consumption and de- 2016 because fewer operating hours were achieved, and the provide intensive support to the optimisation of conventional process; research and development activities continued to crease CO₂ emissions at both the process and product levels. shortfall in energy required had to be made up for with pur- internal combustion engines, for example in the area of vacu- occupy themselves with high-performance diagnostic units; Moreover, sustainable and environmentally friendly manage- chases from external energy suppliers. It was possible to um pumps in order to take the strict environmental and climate thus one main focus was on expanding the software compe- ment even in the supply chain forms an important part of the settle part of the fee from the allocation of surplus certificates protection requirements into account. tence in the business with diagnostics and garage equipment. HELLA environmental strategy. in the second trading period and the free allotment from the In wholesale, the research and development activities focus third period. The surplus certificates from the second trading In the area of individualisation HELLA is amongst other things on areas including expansion of the e-commerce operations, In the fiscal year 2016/2017, 90 % of HELLA production sites had period were used up in full with the current fee in April 2017. developing and producing new surface technologies for re- for example in connection with a service platform initially ISO 14001 environmental management certification. Starting in Due to the general reduction of the free allotment and other mote keys and ID transmitters. It is particularly thanks to their tailored for the Danish market, whose subsequent rollout is July 2017, the locations of the HELLA Group will be certified in factors, these certificates will no longer suffice in the future. high worth, individually tailored to the vehicle interior, that also planned for the Norwegian wholesale market. accordance with the new ISO14001:2015 standard. To integrate The purchase is to be realised in several steps during the cor- these new surface technologies meet the rising demands of further locations into the environmental network in the best responding fiscal years. In addition to the purchase of 5,000 end-customers with regard to quality, unique position and BUSINESS SEGMENT SPECIAL APPLICATIONS possible way in the future, HELLA carries out regional work - certificates in May 2015 another 7,950 certificates were pur- safety. In the Special Applications business segment, HELLA primarily shops in the growth regions each year, with a particular focus chased in September 2016. Another purchase is due to take benefits from the transfer of knowledge from the Automotive on Mexico and China. In addition, cross-functional internal au- place in summer 2017, which will cover the shortfall of 10,000 Furthermore, in the area of air quality management HELLA segment in order to develop and apply new products for man- dits promote mutual networking of the locations and support certificates. continues to intensify its research on the development of sen- ufacturers of special vehicles by using existing basic technolo- "good practice transfer". Audits are carried out by specially sors to measure air quality, particularly with regard to the gies and product concepts in the lighting and electronics areas. qualified regionalHELLA auditors, who receive theoretical and Moreover, with the continual optimisation of existing prod- measurements of the finest particles (PM2.5) in and around One key theme of the research and development activities of practical training based on a consistent standard. ucts and the development of new ones HELLA effectively the vehicle. the Special Applications segment is therefore the accelerated contributes to a reduction in energy consumption and vehicle introduction of LED technology in the original equipment of Moreover, in the past fiscal year all production sites defined emissions. In this way HELLA supports automobile manufac- specialist vehicles. HELLA is consistently implementing the and implemented specific environmental objectives as part of turers in meeting the European Union's exhaust regulations. 46 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 47

At the moment, the gradual switch of conventional lighting of employees in Europe excluding Germany rose by 2,179 To safeguard its competitiveness and as an essential part of conflict management, team development and personnel products to LED lighting technology leads to substantial sav- (+16.3 %) and in North, Central and South America by 1,337 its company culture HELLA promotes the further develop - management and on other specific issues. Another expansion ings potential for passenger vehicles and commercial vehi- employees (+28.5 %). In the region Asia/Pacific/RoW HELLA ment and qualification of its employees. In the fiscal year level of the programme has experienced executives, execu- cles alike. They provide the same output while consuming recruited new personnel; here the number of employees rose 2016/2017 the use of the IT-based personnel development tives in professional management positions and executives in less energy. In the Electronics area, HELLA is working inten- by 509 (+8.6 %). In Germany, personnel numbers remained platform "My Talent Compass" was expanded further. In this production as its target group. sively to create energy-efficient solutions, for example for stable at the prior year's level. context Germany saw the rollout not only of performance as- battery management systems, control modules for fuel sessment but also of the "learning management module", and HELLA also promotes diversity within the company, both as pumps and DC-DC converters. Furthermore, HELLA is the the annual talent review was transferred to the new system. part of its company culture and in order to further safeguard market leader in intelligent battery sensor technology. Permanent staff in theHELLA Group (at 31 May of each year) Moreover, the "Global Leadership Academy" concept has es- its market position. For example, a global mentoring initiative tablished a worldwide programme for the qualification of ex- for talented women in executive positions was created under 2015 31,864 (3.8 %) The HELLA supplier code of conduct was sent out to suppliers ecutives. As a first step, this option is aimed at young execu- the guiding principle of diversity. In this context the first of the HELLA Group, asking them to confirm in writing that 2016 33,689 (5.7 %) ti ve s w h o a re gi ve n t r a i ni n g o n a s p e c t s su c h a s co m m u ni c atio n , HELLA Women Summit was held in February 2017. the principles on issues of sustainability, working conditions, 2017 37,716 (12.0 %) health and safety and business ethics it stipulates are com - plied with by the suppliers themselves and by sub-suppliers and service providers they may employ. Alternatively, these companies can follow their own code of conduct provided that HELLA employs temporary staff supplied by personnel ser - its content is equivalent. In addition, HELLA has expanded its vices companies in addition to its own permanent workforce, general terms and conditions to include a demand that the as a result of fluctuating order volumes. To prevent HR man- Group's suppliers comply with the supplier code of conduct. agement indicators from becoming distorted, staff indicators Compliance with the principles of the HELLA supplier code of for the personnel services companies are not included in the conduct is checked during regular supplier audits. management indicators of the Group.

The HELLA Group's reporting on the fiscal year 2017/2018 will To continue its growth as an innovative technology company comply with the Corporate Social Responsibility Directive Im- HELLA has a permanent need for highly qualified and moti - plementation Act which has been adopted by the German vated staff. For this reason, in the past fiscal yearHELLA suc- parliament. cessfully established the "Tell your friend" programme, which was first initiated in the fiscal year 2015/2016. This programme uses bonus systems to motivate existing HELLA employees to promote working for HELLA in their own personal net - Human Resources work. Moreover, the launch of the "Kick-start programme" HELLA employed 37,716 employees worldwide as at the bal- has created the opportunity to join the project management ance sheet date of 31 May 2017. This equates to an increase of team directly, among other things. Furthermore, the " HELLA 12.0 % compared to the prior year. The development is attrib- International Graduate Programme" for HELLA trainees has utable, in particular, to numerous new product start-ups been given an international dimension, as a result of which during the fiscal year 2016/2017 and to the transfer of employ- the first three employees in China have begun their training ees from temporary employment agencies. The strongest using this global concept. In addition, HELLA grants masters growth was reported by the regions of Europe excluding scholarships to up-and-coming talent and focuses on a Germany and North, Central and South America. The number structured and interdisciplinary induction for new employees following their recruitment.

Permanent employees in the HELLA Group by region

31 May 2017 +/- Share

Germany 9,707 0 % 25.7 % Rest of Europe 15,568 16.3 % 41.3 % North, Central and South America 6,027 28.5 % 16.0 % Asia/Pacific/RoW 6,414 8.6 % 17.0 %

Permanent staff worldwide 37,716 12.0 % 100 %

Economic report 46 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT GENERAL INFORMATION ON THE HELLA GROUP 47

Permanent employees in the HELLA Group by region

31 May 2017 +/- Share

Germany 9,707 0 % 25.7 % Rest of Europe 15,568 16.3 % 41.3 % North, Central and South America 6,027 28.5 % 16.0 % Asia/Pacific/RoW 6,414 8.6 % 17.0 %

Permanent staff worldwide 37,716 12.0 % 100 %

Economic report 48 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 49

Economic report HELLA Group sales (in € millions and year-on-year growth in %) 2014/2015 5,835 (9.2%) 2015/2016 6,352 (8.9%) 2016/2017 6,585 (3.7%)

Sector performance by 1.4 % to 20.8 million new vehicles produced (prior year: 20.5 million). In the first half of the year, the international automo- Number of new vehicles produced in the fiscal year tive industry was largely at the prior year level but gained 2016/2017 rises by 5.7 %; significant momentum particularly in the second half of the International automotive industry loses momentum HELLA fiscal year 2016/2017 (+2.8 %). The number of new ve- in the second half of the year; hicles produced in the selective US market fell slightly com- General economic conditions Positive development in China, Europe pared with the prior year by 1.2 % to 11.8 million units (prior and North, Central and South America year: 12 million). Global gross domestic product rises by 3.1 % in the calendar year 2016; During the period of the HELLA fiscal year 2016/2017 (01 June European and US economies 2016 to 31 May 2017), the number of new vehicles produced grow by 1.7 % and 1.6 % respectively worldwide increased by 5.7 % to a total of 94.6 million units Business development and situation of (prior year: 89.5 million units) according to IHS Automotive the HELLA Group Global gross domestic product expanded moderately in the on the financial markets, the UK referendum on exiting the Light Vehicle Production data. The international automotive calendar year 2016 and grew by 3.1 % compared with the prior European Union held at the end of June 2016 did not generate industry performed slightly better (+7.0 %) in the first six Currency and portfolio adjusted sales increases by year, according to International Monetary Fund (IMF) esti- negative effects initially. According to the Statistical Office months of the fiscal year but lost momentum in the second 4.3 %; mates. This growth was supported in particular by a positive of the European Union (Eurostat), economic growth in the half of the year (+4.4 % ). Accelerated growth in the trend in the emerging markets and developing countries, Eurozone in both the third and the fourth quarter of the calen - second half of the fiscal year whose growth exceeded that of the industrialised countries dar year rose by 1.8 % over the prior year quarters and by as The core markets of Europe, Asia/Pacific and North, Central by more than 2.0 percentage points. Their economic perfor- much as 1.9 % in the first quarter of 2017. Domestic demand, and South America expanded during the reporting period. In fiscal year 2016/2017 (1 June 2016 to 31 May 2017), currency mance gained momentum especially in the second half of the fuelled by low inflation rates and low unemployment in part, With growth of 13 % to 27.4 million units (prior year: 24.3 mil- and portfolio-adjusted sales for the HELLA Group climbed by calendar year 2016. In contrast, flat global trade, the low level as well as investing activities supported by the European Cen- lion), China was an important driver of growth. However, in the 4.3 %. Taking into account negative exchange-rate effects of investment and productivity as well as economic and polit- tral Bank's expansionary monetary policy, impacted on the second half of the HELLA fiscal year (+5.4 %), China no longer (–0.3 percentage points) and the effects of the divestment of ical uncertainties slowed the growth of the international economy. The regional structural weaknesses of the labour achieved the double-digit growth rates it had reached in the the Industries and Airport Lighting business activities (–0.3 economy. market and the associated high unemployment in some Eu- first six months (+21.9 %). The expected gradual elimination at percentage points), reported sales rose by a total of 3.7 % to € ropean countries, together with the high public as well as the the start of 2017 of the tax incentives that had been introduced 6,585 million. The performance of sales adjusted for currency The economy in the core markets that are relevant for HELLA private debt burden, reduced economic strength in Europe. in October 2015 led to pre-emptive vehicle purchases, espe- and portfolio changes and the reported sales growth is there- performed well in the calendar year 2016. With growth of The selective economic area of Germany, which increased by cially in the last months of the calendar year 2016. The Asia/ fore within the forecast of mid single-digit percentage growth 6.7 %, China continued to exceed the global average and re- 1.8 %, largely matched the European level for the year 2016 as Pacific/Rest of the World (RoW) region reported an overall stated in the 2015/2016 annual report and in the interim finan- mained within the target corridor specified by the Chinese a whole. Eurostat stated that the growth rates in the second increase of 8.2% in new vehicle production to 50.3 million ve- cial reporting. The increase in sales throughout the Group government. At the same time, this is also China's lowest rate half of the calendar year 2016 and in the first quarter of 2017 hicles (prior year: 46.5 million units). was supported in particular by the accelerated growth in the of economic growth since 1990. The growth rates in the third ranged between 1.7 % and 1.8 %. Automotive segment in the second half of the fiscal year. and fourth quarters of the calendar year were also at this level The number of new vehicles produced in Europe rose by 2.7% compared with the prior year's quarters. The Chinese econo- According to the IMF, the United States posted an increase of over the prior year to a total of 21.9 million units (prior year: The markets of Asia/Pacific/RoW, North, Central and South my climbed in the first quarter of the calendar year 2017 by 1.6 % in calendar year 2016, with the second half of 2016 per- 21.3 million). However, the number of new cars produced in America as well as Europe without Germany were the most 6.9 % over the prior year. Private demand, government-backed forming better than the first. In the US, consumer spending the selective German passenger car market fell by 1.1 % to 5.9 important regional growth drivers for the HELLA Group in the infrastructure projects and fiscal measures were particularly was a supporting factor for the otherwise muted economic million units. Not taking into account the market development fiscal year 2016/2017. The HELLA Group achieved the highest positive. situation. This was also helped by the increase in the growing in Germany, the increase in new vehicles produced in Europe growth rate in North, Central and South America; Group sales assets of private households and the high level of employ- would have increased by 4.2 % over the prior year. here increased by 13.3 % compared to the prior year period to European gross domestic product was stable in the calendar ment. According to Eurostat, the US economy grew by 2.0 % € 1,061 million (prior year: € 937 million). In the Asia/Pacific/ year 2016, with GDP growing by 1.7 % during this period ac- in the first quarter of the calendar year 2017 over the same The automotive industry in North, Central and South America RoW region, sales rose by 7.0 % over the prior year to € 1,063 cording to the IMF. With the exception of short-term volatility quarter of the prior year. also expanded in the reporting period, with the volume rising million (prior year: € 993 million). HELLA Group sales in 48 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 49

Economic report HELLA Group sales (in € millions and year-on-year growth in %) 2014/2015 5,835 (9.2%) 2015/2016 6,352 (8.9%) 2016/2017 6,585 (3.7%)

Sector performance by 1.4 % to 20.8 million new vehicles produced (prior year: 20.5 million). In the first half of the year, the international automo- Number of new vehicles produced in the fiscal year tive industry was largely at the prior year level but gained 2016/2017 rises by 5.7 %; significant momentum particularly in the second half of the International automotive industry loses momentum HELLA fiscal year 2016/2017 (+2.8 %). The number of new ve- in the second half of the year; hicles produced in the selective US market fell slightly com - General economic conditions Positive development in China, Europe pared with the prior year by 1.2 % to 11.8 million units (prior and North, Central and South America year: 12 million). Global gross domestic product rises by 3.1 % in the calendar year 2016; During the period of the HELLA fiscal year 2016/2017 (01 June European and US economies 2016 to 31 May 2017), the number of new vehicles produced grow by 1.7 % and 1.6 % respectively worldwide increased by 5.7 % to a total of 94.6 million units Business development and situation of (prior year: 89.5 million units) according to IHS Automotive the HELLA Group Global gross domestic product expanded moderately in the on the financial markets, the UK referendum on exiting the Light Vehicle Production data. The international automotive calendar year 2016 and grew by 3.1 % compared with the prior European Union held at the end of June 2016 did not generate industry performed slightly better (+7.0 %) in the first six Currency and portfolio adjusted sales increases by year, according to International Monetary Fund (IMF) esti- negative effects initially. According to the Statistical Office months of the fiscal year but lost momentum in the second 4.3 %; mates. This growth was supported in particular by a positive of the European Union (Eurostat), economic growth in the half of the year (+4.4 % ). Accelerated growth in the trend in the emerging markets and developing countries, Eurozone in both the third and the fourth quarter of the calen - second half of the fiscal year whose growth exceeded that of the industrialised countries dar year rose by 1.8 % over the prior year quarters and by as The core markets of Europe, Asia/Pacific and North, Central by more than 2.0 percentage points. Their economic perfor- much as 1.9 % in the first quarter of 2017. Domestic demand, and South America expanded during the reporting period. In fiscal year 2016/2017 (1 June 2016 to 31 May 2017), currency mance gained momentum especially in the second half of the fuelled by low inflation rates and low unemployment in part, With growth of 13 % to 27.4 million units (prior year: 24.3 mil- and portfolio-adjusted sales for the HELLA Group climbed by calendar year 2016. In contrast, flat global trade, the low level as well as investing activities supported by the European Cen- lion), China was an important driver of growth. However, in the 4.3 %. Taking into account negative exchange-rate effects of investment and productivity as well as economic and polit- tral Bank's expansionary monetary policy, impacted on the second half of the HELLA fiscal year (+5.4 %), China no longer (–0.3 percentage points) and the effects of the divestment of ical uncertainties slowed the growth of the international economy. The regional structural weaknesses of the labour achieved the double-digit growth rates it had reached in the the Industries and Airport Lighting business activities (–0.3 economy. market and the associated high unemployment in some Eu- first six months (+21.9 %). The expected gradual elimination at percentage points), reported sales rose by a total of 3.7 % to € ropean countries, together with the high public as well as the the start of 2017 of the tax incentives that had been introduced 6,585 million. The performance of sales adjusted for currency The economy in the core markets that are relevant for HELLA private debt burden, reduced economic strength in Europe. in October 2015 led to pre-emptive vehicle purchases, espe- and portfolio changes and the reported sales growth is there- performed well in the calendar year 2016. With growth of The selective economic area of Germany, which increased by cially in the last months of the calendar year 2016. The Asia/ fore within the forecast of mid single-digit percentage growth 6.7 %, China continued to exceed the global average and re- 1.8 %, largely matched the European level for the year 2016 as Pacific/Rest of the World (RoW) region reported an overall stated in the 2015/2016 annual report and in the interim finan- mained within the target corridor specified by the Chinese a whole. Eurostat stated that the growth rates in the second increase of 8.2% in new vehicle production to 50.3 million ve- cial reporting. The increase in sales throughout the Group government. At the same time, this is also China's lowest rate half of the calendar year 2016 and in the first quarter of 2017 hicles (prior year: 46.5 million units). was supported in particular by the accelerated growth in the of economic growth since 1990. The growth rates in the third ranged between 1.7 % and 1.8 %. Automotive segment in the second half of the fiscal year. and fourth quarters of the calendar year were also at this level The number of new vehicles produced in Europe rose by 2.7% compared with the prior year's quarters. The Chinese econo- According to the IMF, the United States posted an increase of over the prior year to a total of 21.9 million units (prior year: The markets of Asia/Pacific/RoW, North, Central and South my climbed in the first quarter of the calendar year 2017 by 1.6 % in calendar year 2016, with the second half of 2016 per- 21.3 million). However, the number of new cars produced in America as well as Europe without Germany were the most 6.9 % over the prior year. Private demand, government-backed forming better than the first. In the US, consumer spending the selective German passenger car market fell by 1.1 % to 5.9 important regional growth drivers for the HELLA Group in the infrastructure projects and fiscal measures were particularly was a supporting factor for the otherwise muted economic million units. Not taking into account the market development fiscal year 2016/2017. The HELLA Group achieved the highest positive. situation. This was also helped by the increase in the growing in Germany, the increase in new vehicles produced in Europe growth rate in North, Central and South America; Group sales assets of private households and the high level of employ- would have increased by 4.2 % over the prior year. here increased by 13.3 % compared to the prior year period to European gross domestic product was stable in the calendar ment. According to Eurostat, the US economy grew by 2.0 % € 1,061 million (prior year: € 937 million). In the Asia/Pacific/ year 2016, with GDP growing by 1.7 % during this period ac- in the first quarter of the calendar year 2017 over the same The automotive industry in North, Central and South America RoW region, sales rose by 7.0 % over the prior year to € 1,063 cording to the IMF. With the exception of short-term volatility quarter of the prior year. also expanded in the reporting period, with the volume rising million (prior year: € 993 million). HELLA Group sales in 50 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 51

Administrative costs rose slightly by 5.4 % over the prior year Results of operations of the segments Adjusted earnings before interest and taxes (adjusted EBIT; in € millions and as a % of sales) to € 230 million in the reporting period (prior year: € 218 million). Administrative costs equate to 3.5 % of sales across the Sales in Automotive rise by 3.8 %, 2014/2015 445 (7.6%) Group (prior year: 3.4 %). adjusted EBIT by 13.8 %; 2015/2016 476 (7.5%) Aftermarket sales improve by 3.7 %; 2016/2017 534 (8.1%) The balance of other income and expenses improved slightly Special Applications increase sales by in the fiscal year 2016/2017 compared with the prior year to € 5.2 % in core business 15 million (prior year: € 14 million). The balance of other income and expenses in the prior year was weighed down, in particu- Sales in the Automotive segment in the fiscal year 2016/2017 lar, by the loss of the Chinese supplier. Special items were rose by 3.8 % over the prior year to € 5,029 million (prior year: Europe (excluding Germany) grew by 7.7 % compared with the is attributable, in particular, to the performance of new pro- booked in the reporting period in connection with the current € 4,843 million). The pace of growth in the segment picked up prior year to € 2,218 million (prior year: € 2,059 million). Sales duction rollouts in the Automotive segment that was better proceedings by the European Commission and further costs in the second half of the calendar year in particular. In this in the selective German market decreased by 5.1 % compared than expected initially. The HELLA Group had previously as- were incurred for the restructuring measures in Germany. period, sales in the Automotive segment rose by 7.0 % over with the prior year to € 2,243 million (prior year: € 2,362 sumed adjusted EBIT growth to be in the mid single-digits. the prior year period, compared with a moderate increase of million). Income from the network of joint ventures and other associates only 0.7 % in the first half of the year in preparation for project Not taking into account the divested business areas of Indus- fell slightly over the prior year to € 52 million (prior year: € 53 start-ups. Growth in the segment was supported above all by tries and Airport Lighting, the adjusted EBIT margin in the million). At 10.2 %, the contribution to HELLA Group's earnings the strong demand for innovative lighting solutions and for past fiscal year would have risen from 7.9 % to 8.3%, which before interest and taxes (EBIT) is consequently down on the electronic products, for example in radar technology and en- Results of operations corresponds to an adjusted EBIT of € 548 million (prior year: prior year figure of 12.6 %. ergy management. € 500 million). Significant increase of 12.0 % in adjusted EBIT; The net financial result in the fiscal year 2016/2017 is € –44 Growth was also promoted by positive business development Adjusted EBIT margin improves to 8.1 % Gross profit in the fiscal year 2016/2017 increased compared million after € –40 million in the prior year. in the Asia/Pacific/RoW region and in North, Central and with the prior year to € 1,812 million in the reporting period South America, especially in the NAFTA region. Automotive HELLA Group improved its profitability significantly over the (prior year: adjusted € 1,715 million, reported € 1,688 million). Expenses relating to income taxes amount to around € 120 sales in North, Central and South America rose by a total of prior year. Adjusted earnings before interest and taxes (ad- Special charges had been incurred in the same period of the million in the reporting period after € 108 million the year 14.4 % over the prior year to € 948 million (prior year: € 828 justed EBIT) therefore increased by 12.0 % in the fiscal year prior year due to the loss of a Chinese supplier; no adjustments before. million). In the Asia/Pacific/RoW region, sales in the Automo- 2016/2017 to € 534 million (prior year: € 476 million). As a were made in the reporting period. Accordingly, the gross tive segment climbed by 7.9 % to € 858 million (prior year: 795 consequence, the adjusted EBIT margin improved by 0.6 per- profit margin in the reporting period was 27.5 % (prior year: At € 343 million, earnings for the period in the fiscal year million). Growth of the Automotive segment in Europe, ex- centage points over the prior year to 8.1 % (prior year: 7.5 %). 27.0 % adjusted and 26.6 % reported). The improved margin is 2016/2017 improved significantly by 26.2 % over the prior year cluding Germany, picked up especially in the second half- This development is attributable in particular to a higher attributable in particular to the product mix effects, higher (€ 272 million). This equates to a higher return on sales of year, so that sales improved by 7.5 % overall in the fiscal year gross profit margin. utilisation of the global production capacities and operative 5.2 % (prior year: 4.3 %). Earnings per share are therefore € 2016/2017 to € 1,268 million (prior year: € 1,179 million). On the improvements at the Eastern European plants. 3.08 after € 2.42 in the prior fiscal year. other hand, this segment's sales in the selective German eco - The prior year's result had been weighed down by restruc- nomic region decreased by 4.8 % to € 1,906 million (prior year: turing costs in Germany (€ 9 million) and, in particular, costs Adjusted earnings before depreciation and amortization, in- € 2,001 million). totalling € 47 million incurred in connection with the loss of terest and taxes (adjusted EBITDA) increased by 10.1 % over the Chinese supplier; by contrast, expenses were incurred in the prior year to € 946 million (prior year: € 858 million). The the fiscal year 2016/2017 in connection with the proceedings adjusted EBITDA margin is therefore 14.4 % (prior year: 13.5 %). the European Commission initiated against the HELLA Reported EBITDA increased by 12.7 % to € 919 million (prior Group due to fines, potential claims for third-party damages year: € 816 million). This equates to an improved EBITDA mar- and legal expenses (totalling € 16 million) and restructuring gin of 14.0 % after 12.8 % in the previous fiscal year. measures in Germany (€ 10 million). These proceedings were ended mutually at the start of the fiscal year 2017/2018. Research and development expenses in fiscal year 2016/2017 Sales by segment for the fiscal years 2016/2017 and 2015/2016 Taking these special effects into account, earnings before rose by 2.1 % to € 636 million (prior year: 623 million), meaning (in € millions and year-on-year growth in %) interest and taxes (EBIT) improved accordingly in the fiscal that the R&E ratio of 9.7 % is slightly below the prior year level. Automotive Aftermarket Special Applications year 2016/2017 by 20.8 % to € 507 million (prior year: € 420 R&D expenses are attributable to development costs for new million). This resulted in a higher adjusted EBIT margin of projects acquired as well as to capital expenditures in new 2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 2015/2016 7.7 % (prior year: 6.6 %). technologies and product generations. Sales with third-party companies 4,980 3.7 % 4,804 1,185 4.9 % 1,129 384 0.5 % 383 The adjusted EBIT margin is therefore at the upper end of the Distribution expenses in the fiscal year 2016/2017 rose by 2.5 % Intersegment sales 49 39 38 49 1 1 expected range of an adjusted EBIT margin at the prior year over the prior year to € 506 million (prior year: € 494 million). Segment sales 5,029 3.8 % 4,843 1,222 3.7 % 1,179 385 0.3 % 384 level reported in the 2015/2016 annual report and in the inter- The distribution expenses ratio relative to sales is 7.7 % and im financial reporting. The better-than-forecast adjusted EBIT therefore down slightly on the prior year level of 7.8 %. 50 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 51

Administrative costs rose slightly by 5.4 % over the prior year Results of operations of the segments Adjusted earnings before interest and taxes (adjusted EBIT; in € millions and as a % of sales) to € 230 million in the reporting period (prior year: € 218 million). Administrative costs equate to 3.5 % of sales across the Sales in Automotive rise by 3.8 %, 2014/2015 445 (7.6%) Group (prior year: 3.4 %). adjusted EBIT by 13.8 %; 2015/2016 476 (7.5%) Aftermarket sales improve by 3.7 %; 2016/2017 534 (8.1%) The balance of other income and expenses improved slightly Special Applications increase sales by in the fiscal year 2016/2017 compared with the prior year to € 5.2 % in core business 15 million (prior year: € 14 million). The balance of other income and expenses in the prior year was weighed down, in particu- Sales in the Automotive segment in the fiscal year 2016/2017 lar, by the loss of the Chinese supplier. Special items were rose by 3.8 % over the prior year to € 5,029 million (prior year: Europe (excluding Germany) grew by 7.7 % compared with the is attributable, in particular, to the performance of new pro- booked in the reporting period in connection with the current € 4,843 million). The pace of growth in the segment picked up prior year to € 2,218 million (prior year: € 2,059 million). Sales duction rollouts in the Automotive segment that was better proceedings by the European Commission and further costs in the second half of the calendar year in particular. In this in the selective German market decreased by 5.1 % compared than expected initially. The HELLA Group had previously as- were incurred for the restructuring measures in Germany. period, sales in the Automotive segment rose by 7.0 % over with the prior year to € 2,243 million (prior year: € 2,362 sumed adjusted EBIT growth to be in the mid single-digits. the prior year period, compared with a moderate increase of million). Income from the network of joint ventures and other associates only 0.7 % in the first half of the year in preparation for project Not taking into account the divested business areas of Indus- fell slightly over the prior year to € 52 million (prior year: € 53 start-ups. Growth in the segment was supported above all by tries and Airport Lighting, the adjusted EBIT margin in the million). At 10.2 %, the contribution to HELLA Group's earnings the strong demand for innovative lighting solutions and for past fiscal year would have risen from 7.9 % to 8.3%, which before interest and taxes (EBIT) is consequently down on the electronic products, for example in radar technology and en- Results of operations corresponds to an adjusted EBIT of € 548 million (prior year: prior year figure of 12.6 %. ergy management. € 500 million). Significant increase of 12.0 % in adjusted EBIT; The net financial result in the fiscal year 2016/2017 is € –44 Growth was also promoted by positive business development Adjusted EBIT margin improves to 8.1 % Gross profit in the fiscal year 2016/2017 increased compared million after € –40 million in the prior year. in the Asia/Pacific/RoW region and in North, Central and with the prior year to € 1,812 million in the reporting period South America, especially in the NAFTA region. Automotive HELLA Group improved its profitability significantly over the (prior year: adjusted € 1,715 million, reported € 1,688 million). Expenses relating to income taxes amount to around € 120 sales in North, Central and South America rose by a total of prior year. Adjusted earnings before interest and taxes (ad- Special charges had been incurred in the same period of the million in the reporting period after € 108 million the year 14.4 % over the prior year to € 948 million (prior year: € 828 justed EBIT) therefore increased by 12.0 % in the fiscal year prior year due to the loss of a Chinese supplier; no adjustments before. million). In the Asia/Pacific/RoW region, sales in the Automo- 2016/2017 to € 534 million (prior year: € 476 million). As a were made in the reporting period. Accordingly, the gross tive segment climbed by 7.9 % to € 858 million (prior year: 795 consequence, the adjusted EBIT margin improved by 0.6 per- profit margin in the reporting period was 27.5 % (prior year: At € 343 million, earnings for the period in the fiscal year million). Growth of the Automotive segment in Europe, ex- centage points over the prior year to 8.1 % (prior year: 7.5 %). 27.0 % adjusted and 26.6 % reported). The improved margin is 2016/2017 improved significantly by 26.2 % over the prior year cluding Germany, picked up especially in the second half- This development is attributable in particular to a higher attributable in particular to the product mix effects, higher (€ 272 million). This equates to a higher return on sales of year, so that sales improved by 7.5 % overall in the fiscal year gross profit margin. utilisation of the global production capacities and operative 5.2 % (prior year: 4.3 %). Earnings per share are therefore € 2016/2017 to € 1,268 million (prior year: € 1,179 million). On the improvements at the Eastern European plants. 3.08 after € 2.42 in the prior fiscal year. other hand, this segment's sales in the selective German eco - The prior year's result had been weighed down by restruc- nomic region decreased by 4.8 % to € 1,906 million (prior year: turing costs in Germany (€ 9 million) and, in particular, costs Adjusted earnings before depreciation and amortization, in- € 2,001 million). totalling € 47 million incurred in connection with the loss of terest and taxes (adjusted EBITDA) increased by 10.1 % over the Chinese supplier; by contrast, expenses were incurred in the prior year to € 946 million (prior year: € 858 million). The the fiscal year 2016/2017 in connection with the proceedings adjusted EBITDA margin is therefore 14.4 % (prior year: 13.5 %). the European Commission initiated against the HELLA Reported EBITDA increased by 12.7 % to € 919 million (prior Group due to fines, potential claims for third-party damages year: € 816 million). This equates to an improved EBITDA mar- and legal expenses (totalling € 16 million) and restructuring gin of 14.0 % after 12.8 % in the previous fiscal year. measures in Germany (€ 10 million). These proceedings were ended mutually at the start of the fiscal year 2017/2018. Research and development expenses in fiscal year 2016/2017 Sales by segment for the fiscal years 2016/2017 and 2015/2016 Taking these special effects into account, earnings before rose by 2.1 % to € 636 million (prior year: 623 million), meaning (in € millions and year-on-year growth in %) interest and taxes (EBIT) improved accordingly in the fiscal that the R&E ratio of 9.7 % is slightly below the prior year level. Automotive Aftermarket Special Applications year 2016/2017 by 20.8 % to € 507 million (prior year: € 420 R&D expenses are attributable to development costs for new million). This resulted in a higher adjusted EBIT margin of projects acquired as well as to capital expenditures in new 2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 2015/2016 7.7 % (prior year: 6.6 %). technologies and product generations. Sales with third-party companies 4,980 3.7 % 4,804 1,185 4.9 % 1,129 384 0.5 % 383 The adjusted EBIT margin is therefore at the upper end of the Distribution expenses in the fiscal year 2016/2017 rose by 2.5 % Intersegment sales 49 39 38 49 1 1 expected range of an adjusted EBIT margin at the prior year over the prior year to € 506 million (prior year: € 494 million). Segment sales 5,029 3.8 % 4,843 1,222 3.7 % 1,179 385 0.3 % 384 level reported in the 2015/2016 annual report and in the inter- The distribution expenses ratio relative to sales is 7.7 % and im financial reporting. The better-than-forecast adjusted EBIT therefore down slightly on the prior year level of 7.8 %. 52 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 53

Regional market coverage by customer – HELLA Group Regional market coverage by customer – Aftermarket and Special Applications

2016/2017 2015/2016 2016/2017 2015/2016 Germany 19% 22% Absolute Absolute Relative Relative (in € million) (in € million) Rest of Europe 61% 58% Germany 2,243 34 % 2,362 37 % North, Central and South America 7% 7%

Rest of Europe 2,218 34 % 2,059 32 % Asia/Pacific/RoW 13% 13%

North, Central and South America 1,061 16 % 937 15 % Regional market coverage adjusted from end customer perspective to HELLA customer perspective for improved comparability to the market benchmark of "IHS light vehicle production".

Asia/Pacific/RoW 1,063 16 % 993 16 %

Consolidated sales 6,585 100 % 6,352 100 % remaining business activities in a difficult market environment generally has a long-term funding horizon, which ensures Regional market coverage adjusted from end customer perspective to HELLA customer perspective for improved comparability to the market benchmark of "IHS light vehicle production". in the agricultural sector reported robust sales that were up liquidity at all times even in the event of cyclical fluctuations. by 5.2 %. The second half of the fiscal year was favourable as The investment and funding policies are based on a balanced a result of a cyclical increase in demand. portfolio. Financial management aims to safeguard the In the context of the growth momentum that is supported by Segment sales in the Aftermarket segment in the fiscal year Group's liquidity and creditworthiness. production rollouts, the Automotive segment stepped up its 2016/2017 increased by 3.7 % over the prior year to € 1,222 Earnings before interest and taxes of the segment improved profitability significantly in the fiscal year 2016/2017 compared million (prior year: € 1,179 million). All of the Aftermarket overall in the fiscal year 2016/2017 compared with the prior CAPITAL STRUCTURE with the prior year. The segment's adjusted earnings before business segments made a positive contribution to the year period from € 8 million to € 20 million. This increase in The liquidity position comprising cash and current financial interest and taxes (adjusted EBIT) thus increased by 13.8% com- sales growth during the reporting period. The Aftermarket EBIT is due in particular to effects arising from the reclassifi- assets rose by € 184 million to € 1,098 million in the fiscal year. pared with the prior year adjusted EBIT to € 444 million (prior segment had a stabilising effect on the business perfor- cation of the production companies between Aftermarket and Dividends to shareholders and non-controlling interests paid year: adjusted € 390 million) and made a significant contribution mance of the HELLA Group, especially in the first half of the Special Applications, as well as to the effects of the divest- by the Group company came to € 87 million. Current and to the improved profitability at the Group level. The increase is fiscal year 2016/2017. ment and run-off of the Industries and Airport Lighting busi- non-current financial liabilities rose by € 225 million to € 1,377 attributable, in particular, to the performance of new production ness activities This adversely affected the segment result in million. rollouts that was better than initially expected. As no adjust- In the fiscal year 2016/2017, earnings before interest and particular in the second half of the fiscal year 2015/2016 (€ –19 ments were made in the segment in the reporting period, earn- taxes of the Aftermarket segment fell by 5.0 % over the prior million after € –6 million in the first half-year). The negative Net financial debt as the balance of cash and current financial ings before interest and taxes rose by 29.5 % over the prior year year to € 73 million (prior year: € 77 million), due to a higher effects arising in the fiscal year under review from the dispos- assets less current and non-current financial liabilities (prior year: reported € 343 million). The EBIT margin in relation percentage of purchased parts and increased distribution al of these sub-segments came to € 9 million in the first half climbed by a total of € 41 million to € 278 million. At the report- to segment sales thus comes to 8.8 % after 8.1 % (adjusted) and expenses, so that the EBIT margin was reduced to 6.0 % of the year and € 6 million in the second half of the fiscal year. ing date, the ratio of net financial debt to EBITDA stood at 0.3 7.1 % (reported) in the prior year. (prior year: 6.5 %). Not taking into account the reclassifica- Furthermore, costs of € 3 million incurred from relocating a (prior year: 0.3) tion between Aftermarket and Special Applications, the plant to Eastern Europe also had negative implications for the At the end of the fiscal year 2016/2017, the organisational segment's earnings before interest and taxes would have segment result. Based on the segment sales, the EBIT margin The corporate rating issued by Moody's remains in the invest- responsibility for production companies in the Aftermarket risen to € 81 million (prior year: € 80 million), equivalent to of the Special Applications segment thus came to 5.1 % after ment grade segment at Baa2 with a stable outlook. Moody's segment was assigned to the Special Applications segment, an EBIT margin of 6.2 % (prior year: 6.4 %). 2.1 % in the prior year. Not taking into account the reclassifi - last updated its credit opinion in April 2017. as it represents the original field of activity of these compa- cation of production companies, the segment's earnings be- nies more precisely. In order to ensure transparent segment Segment sales in the Special Applications segment rose by fore interest and taxes would have risen from € 5 million to € Alongside the financial liabilities shown on the face of the reporting over time, the figures for the reporting period as 0.3 % to € 385 million in the fiscal year 2016/2017 (prior year: € 12 million, equivalent to an EBIT margin of 4.0 % (prior year: balance sheet, obligations from operating leasing agree- well as for the prior year of the Aftermarket and Special 384 million). Business in accessories for trailers and caravans 1.6 %). ments exist but are of minor importance. The present value Applications segments were adjusted to allow for this expanded in the fiscal year 2016/2017. Adjusted for the divest- of the resultant minimum lease payments came to € 63 mil- restructuring. ed business segments of Industries and Airport Lighting, the lion at the balance sheet date.

Financial status The factoring programme was suspended, so that no receiv- Regional market coverage by customer – Automotive ables were sold as at 31 May 2017. The volume of receivables Adjusted free cash flow sold amounted to € 70 million in May 2016. 2016/2017 2015/2016 at € 149 million; Germany 38% 42% Ratio of net financial debt to At present, HELLA essentially employs three financial in- Rest of Europe 25% 25% EBITDA is 0.3x struments in the non-current segment: North, Central and South America 19% 17% The finances of theHELLA Group are managed centrally by Asia/Pacific/RoW 17% 17% the parent company. Funding is largely raised centrally and Regional market coverage adjusted from end customer perspective to HELLA customer perspective for improved comparability to the market benchmark of "light vehicle production". made available to the Group companies as required. HELLA 52 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 53

Regional market coverage by customer – HELLA Group Regional market coverage by customer – Aftermarket and Special Applications

Rest of Europe 2,218 34 % 2,059 32 % Asia/Pacific/RoW 13% 13%

Asia/Pacific/RoW 1,063 16 % 993 16 %

Financial status The factoring programme was suspended, so that no receiv- Regional market coverage by customer – Automotive ables were sold as at 31 May 2017. The volume of receivables Adjusted free cash flow sold amounted to € 70 million in May 2016. 2016/2017 2015/2016 at € 149 million; Germany 38% 42% Ratio of net financial debt to At present, HELLA essentially employs three financial in- Rest of Europe 25% 25% EBITDA is 0.3x struments in the non-current segment: North, Central and South America 19% 17% The finances of theHELLA Group are managed centrally by Asia/Pacific/RoW 17% 17% the parent company. Funding is largely raised centrally and Regional market coverage adjusted from end customer perspective to HELLA customer perspective for improved comparability to the market benchmark of "light vehicle production". made available to the Group companies as required. HELLA 54 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 55

CAPITAL MARKET BONDS which is recognised in the Group’s non-current assets as eco- in the prior year for the acquisition of further shares in whole- up in the second half of the calendar year. The Aftermarket At the balance sheet date, HELLA had three outstanding nomic property on account of the opportunity and risk struc- sale business in Denmark and Poland. segment also developed positively, so that the growth path capital market bonds with terms of between three-and- ture. In view of the considerable up-front investments in such embarked on in the prior fiscal year generally remained in- a-half and seven years. These comprise a bond of operating equipment, HELLA receives reimbursement pay- Dividends of € 86 million (prior year: € 86 million) were paid to tact. In addition, the segment had a stabilising effect, espe- € 300 million maturing in September 2017 and a bond of ments from customers as an advance on the delivery of parts, the shareholders. Liquidity increased by € 199 million over the cially in the first half of the fiscal year, while the Automotive € 500 million maturing in January 2020 and a bond of € which are reported as prepayments within deferred income. prior year to € 784 million. Including current financial assets, segment prepared itself for pending new production rollouts. 300 million issued in May 2017 that matures in 2024. These prepayments came to € 132 million in the fiscal year which essentially comprise securities of € 315 million (prior After disposing of the Industries and Airport Lighting sub-ac- under review (prior year: € 83 million). year: € 329 million), available funds increased from € 914 mil- tivities, the Special Applications segment continued on its PRIVATE PLACEMENT lion to € 1,098 million. On this basis, HELLA is able to satisfy consolidation course in the fiscal year 2016/2017, while sales A total of JPY 22 billion with a 30-year term was raised in Payments for procuring operating equipment are allocated to its payment obligations. in the remaining core business showed a positive trend. 2002 and 2003. This foreign currency liability is fully investing activities in the cash flow statement, whereas cash hedged against exchange rate fluctuations over its entire proceeds from customer reimbursements are assigned to Taking account of special effects, HELLA Group's earnings term. The liability was valued at € 182 million as at 31 May operating activities as prepayments for economic purposes. before interest and taxes (EBIT) totalled € 507 million and 2017. Financial position were therefore up 20.8 % over the previous year. Consolidated Regardless of the economic view taken in the annual financial profit after tax amounted to € 343 million, which equates to an SYNDICATED CREDIT FACILITY statements, the cash flow from equipment procurements Equity ratio of 39 % at the end of the fiscal year increase of 26.2 % compared with the fiscal year 2015/2016. In In June 2015, a five-year syndicated credit facility of € 450 and customer reimbursements in the internal capital expen- accordance with the adjustments to the dividend policy ad- million was agreed with a syndicate of international diture planning are combined within the net capital expendi- Total assets grew by a further € 643 million to € 5.6 billion opted as part of the initial public offering, under which some banks. This credit line has meanwhile been renewed for a ture indicator with the remaining cash proceeds and settle- during the fiscal year under review. The high liquidity position 30 % of the consolidated net profit attributable to the owners further year and now expires in June 2022. ments for property, plant and equipment and intangible of around € 1.1 billion again results in a substantial increase in of the parent company is to be distributed to shareholders, the assets. The reason is that the advanced payment method of total assets. The equity ratio stood at 39 % at the end of the Management Board will propose to the annual general meet- LIQUIDITY ANALYSIS the customer reimbursements eases the need for capital ex- fiscal year and was thus slightly below the prior year's level. ing (to be held on 28 September 2017) that a dividend of € 0.92 penditure in a closely related time frame and, therefore, is a The increase in total assets resulting from the high liquidity per share be distributed (prior year: € 0.77). As there are Cash generated from operating activities rose by € 90 million significant factor in the investment decision. Net capital ex- position influences the equity ratio significantly. The statement 111,111,112 no-par value shares, this is equivalent to a distri- over the prior year to € 713 million. This figure includes pay- penditure rose to € 517 million (7.9 % of sales) in the reporting of financial position was extended due to the new bond issued bution amount of € 102 million (€ 86 million). Since the most ments of € 10 million for restructuring after € 15 million in the period, up from € 463 million in the prior year (7.3 % of sales). in May 2017, which will be used to refinance the bond maturing recent capital increase in November 2014, the Company has prior year. Payments of € 34 million were also incurred in the in September 2017. The equity ratio in relation to total assets had 111,111,112 shares, this number likewise applying on the prior year from the loss of a Chinese supplier. Free cash flow before dividends and net capital expenditure adjusted for liquidity comes to 49 %. date of distribution. on financial assets or shares in associates came to € 69 mil- Cash generated from earnings before interest and taxes be- lion, down from € 76 million in the prior year. Adjusted for the The HELLA Group's financial position and assets and liabili - fore non-cash depreciation and amortisation (EBITDA) in- restructuring payments (€ 10 million) and the suspension of ties remained solid, underpinned by its business perfor- creased significantly over the prior year. EBITDA rose by 104€ the factoring programme (€ 70 million), the adjusted free Overall statement mance. Adjusted for the restructuring payments (€ 10 million) million to € 919 million. cash flow came to € 149 million (prior year: € 155 million). and the suspension of the factoring programme (€ 70 million), Dividend of € 0.92 per share proposed to the Annual adjusted free cash flow came to € 149 million after € 155 mil- This sales growth simultaneously was accompanied by an The Group received net inflows of € 1 million from investing General Meeting lion in the prior year. Net financial debt rose by a total of € 41 accumulation of working capital. The additional working cap- activities in connection with corporate investments, after million to € 278 million. At the reporting date the ratio of net ital arising from the increase in receivables and other assets net inflows of €4 million in the prior year. The inflow of funds Fiscal year 2016/2017 was positive for the HELLA Group from financial debt to EBITDA stood at 0.3 (prior year: 0.3). climbed by € 125 million, of which € 70 million resulted from was mainly a result of the sale of a subsidiary in Ireland. The the Management Board's perspective. HELLA continued to the suspension of the factoring programme. outflow of funds is due to the further expansion of the pursue its strategy of profitable growth in the fiscal year and As the good business development continued at the start of e-commerce operations. increased sales as well as earnings. As forecasted in the in- the fiscal year 2017/2018, the Management Board takes a By contrast, inventories rose by € 55 million. Trade payables terim financial statements, sales rose significantly particular- generally positive view of the results of operations, financial and other liabilities increased by € 69 million. Total inflows from financing activities came to € 135 million, ly in the second half of the HELLA fiscal year. Accordingly, position and net assets at the time the group management after outflows of € 87 million in the prior year. Net new bor- currency and portfolio-adjusted sales increased by 4.3 % and report was prepared. Taxes paid net of tax refunds came to € 107 million, down rowing stood at € 68 million, up from € 9 million in the prior reported sales were up by 3.7 % to € 6,585 million. In the con- from € 109 million in the prior year. year. HELLA successfully placed a new bond in May 2017. As text of the growth momentum generated through new pro- part of active management of the liquidity available to the duction rollouts, the HELLA Group also significantly increased Cash capital expenditure excluding payments for the acquisi- Group, € 12 million was received from securities during the its profitability and improved adjusted earnings before inter- Internal control in Group accounting tion of company shares or the increase or repayment of capital reporting year, after € 68 million in the prior year. For liquidity est and taxes (adjusted EBIT) by 12.0 % to € 534 million. This The Group-wide internal control system for accounting is an rose by € 102 million to € 649 million. It predominantly com- management purposes, capital is usually invested in short- resulted in a higher adjusted EBIT margin of 8.1 % important component and includes organisation, review and prised maintenance and expansion spending on buildings, term securities or securities with a liquid market, so that monitoring structures that ensure that business transactions machinery, plants and other equipment. HELLA also invested these funds can be made available for potential operating At the segment level, the Automotive segment in particular are properly recorded, evaluated and applied to the financial continuously in customer-specific operating equipment, requirements at short notice. A total of € 58 million was paid contributed to the rise in sales and the pace of growth picked reporting. Various analyses and evaluations are carried out 54 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 55

CAPITAL MARKET BONDS which is recognised in the Group’s non-current assets as eco- in the prior year for the acquisition of further shares in whole- up in the second half of the calendar year. The Aftermarket At the balance sheet date, HELLA had three outstanding nomic property on account of the opportunity and risk struc- sale business in Denmark and Poland. segment also developed positively, so that the growth path capital market bonds with terms of between three-and- ture. In view of the considerable up-front investments in such embarked on in the prior fiscal year generally remained in- a-half and seven years. These comprise a bond of operating equipment, HELLA receives reimbursement pay- Dividends of € 86 million (prior year: € 86 million) were paid to tact. In addition, the segment had a stabilising effect, espe- € 300 million maturing in September 2017 and a bond of ments from customers as an advance on the delivery of parts, the shareholders. Liquidity increased by € 199 million over the cially in the first half of the fiscal year, while the Automotive € 500 million maturing in January 2020 and a bond of € which are reported as prepayments within deferred income. prior year to € 784 million. Including current financial assets, segment prepared itself for pending new production rollouts. 300 million issued in May 2017 that matures in 2024. These prepayments came to € 132 million in the fiscal year which essentially comprise securities of € 315 million (prior After disposing of the Industries and Airport Lighting sub-ac- under review (prior year: € 83 million). year: € 329 million), available funds increased from € 914 mil- tivities, the Special Applications segment continued on its PRIVATE PLACEMENT lion to € 1,098 million. On this basis, HELLA is able to satisfy consolidation course in the fiscal year 2016/2017, while sales A total of JPY 22 billion with a 30-year term was raised in Payments for procuring operating equipment are allocated to its payment obligations. in the remaining core business showed a positive trend. 2002 and 2003. This foreign currency liability is fully investing activities in the cash flow statement, whereas cash hedged against exchange rate fluctuations over its entire proceeds from customer reimbursements are assigned to Taking account of special effects, HELLA Group's earnings term. The liability was valued at € 182 million as at 31 May operating activities as prepayments for economic purposes. before interest and taxes (EBIT) totalled € 507 million and 2017. Financial position were therefore up 20.8 % over the previous year. Consolidated Regardless of the economic view taken in the annual financial profit after tax amounted to € 343 million, which equates to an SYNDICATED CREDIT FACILITY statements, the cash flow from equipment procurements Equity ratio of 39 % at the end of the fiscal year increase of 26.2 % compared with the fiscal year 2015/2016. In In June 2015, a five-year syndicated credit facility of € 450 and customer reimbursements in the internal capital expen- accordance with the adjustments to the dividend policy ad- million was agreed with a syndicate of international diture planning are combined within the net capital expendi- Total assets grew by a further € 643 million to € 5.6 billion opted as part of the initial public offering, under which some banks. This credit line has meanwhile been renewed for a ture indicator with the remaining cash proceeds and settle- during the fiscal year under review. The high liquidity position 30 % of the consolidated net profit attributable to the owners further year and now expires in June 2022. ments for property, plant and equipment and intangible of around € 1.1 billion again results in a substantial increase in of the parent company is to be distributed to shareholders, the assets. The reason is that the advanced payment method of total assets. The equity ratio stood at 39 % at the end of the Management Board will propose to the annual general meet- LIQUIDITY ANALYSIS the customer reimbursements eases the need for capital ex- fiscal year and was thus slightly below the prior year's level. ing (to be held on 28 September 2017) that a dividend of € 0.92 penditure in a closely related time frame and, therefore, is a The increase in total assets resulting from the high liquidity per share be distributed (prior year: € 0.77). As there are Cash generated from operating activities rose by € 90 million significant factor in the investment decision. Net capital ex- position influences the equity ratio significantly. The statement 111,111,112 no-par value shares, this is equivalent to a distri- over the prior year to € 713 million. This figure includes pay- penditure rose to € 517 million (7.9 % of sales) in the reporting of financial position was extended due to the new bond issued bution amount of € 102 million (€ 86 million). Since the most ments of € 10 million for restructuring after € 15 million in the period, up from € 463 million in the prior year (7.3 % of sales). in May 2017, which will be used to refinance the bond maturing recent capital increase in November 2014, the Company has prior year. Payments of € 34 million were also incurred in the in September 2017. The equity ratio in relation to total assets had 111,111,112 shares, this number likewise applying on the prior year from the loss of a Chinese supplier. Free cash flow before dividends and net capital expenditure adjusted for liquidity comes to 49 %. date of distribution. on financial assets or shares in associates came to € 69 mil- Cash generated from earnings before interest and taxes be- lion, down from € 76 million in the prior year. Adjusted for the The HELLA Group's financial position and assets and liabili - fore non-cash depreciation and amortisation (EBITDA) in- restructuring payments (€ 10 million) and the suspension of ties remained solid, underpinned by its business perfor- creased significantly over the prior year. EBITDA rose by 104€ the factoring programme (€ 70 million), the adjusted free Overall statement mance. Adjusted for the restructuring payments (€ 10 million) million to € 919 million. cash flow came to € 149 million (prior year: € 155 million). and the suspension of the factoring programme (€ 70 million), Dividend of € 0.92 per share proposed to the Annual adjusted free cash flow came to € 149 million after € 155 mil- This sales growth simultaneously was accompanied by an The Group received net inflows of € 1 million from investing General Meeting lion in the prior year. Net financial debt rose by a total of € 41 accumulation of working capital. The additional working cap- activities in connection with corporate investments, after million to € 278 million. At the reporting date the ratio of net ital arising from the increase in receivables and other assets net inflows of €4 million in the prior year. The inflow of funds Fiscal year 2016/2017 was positive for the HELLA Group from financial debt to EBITDA stood at 0.3 (prior year: 0.3). climbed by € 125 million, of which € 70 million resulted from was mainly a result of the sale of a subsidiary in Ireland. The the Management Board's perspective. HELLA continued to the suspension of the factoring programme. outflow of funds is due to the further expansion of the pursue its strategy of profitable growth in the fiscal year and As the good business development continued at the start of e-commerce operations. increased sales as well as earnings. As forecasted in the in- the fiscal year 2017/2018, the Management Board takes a By contrast, inventories rose by € 55 million. Trade payables terim financial statements, sales rose significantly particular- generally positive view of the results of operations, financial and other liabilities increased by € 69 million. Total inflows from financing activities came to € 135 million, ly in the second half of the HELLA fiscal year. Accordingly, position and net assets at the time the group management after outflows of € 87 million in the prior year. Net new bor- currency and portfolio-adjusted sales increased by 4.3 % and report was prepared. Taxes paid net of tax refunds came to € 107 million, down rowing stood at € 68 million, up from € 9 million in the prior reported sales were up by 3.7 % to € 6,585 million. In the con- from € 109 million in the prior year. year. HELLA successfully placed a new bond in May 2017. As text of the growth momentum generated through new pro- part of active management of the liquidity available to the duction rollouts, the HELLA Group also significantly increased Cash capital expenditure excluding payments for the acquisi- Group, € 12 million was received from securities during the its profitability and improved adjusted earnings before inter- Internal control in Group accounting tion of company shares or the increase or repayment of capital reporting year, after € 68 million in the prior year. For liquidity est and taxes (adjusted EBIT) by 12.0 % to € 534 million. This The Group-wide internal control system for accounting is an rose by € 102 million to € 649 million. It predominantly com- management purposes, capital is usually invested in short- resulted in a higher adjusted EBIT margin of 8.1 % important component and includes organisation, review and prised maintenance and expansion spending on buildings, term securities or securities with a liquid market, so that monitoring structures that ensure that business transactions machinery, plants and other equipment. HELLA also invested these funds can be made available for potential operating At the segment level, the Automotive segment in particular are properly recorded, evaluated and applied to the financial continuously in customer-specific operating equipment, requirements at short notice. A total of € 58 million was paid contributed to the rise in sales and the pace of growth picked reporting. Various analyses and evaluations are carried out 56 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 57

as part of risk management with the objective of identifying s ub-groups are also included in the consolidated financial influencing factors on accounting and reporting early and to statements. The effectiveness of the internal accounting con- enable suitable measures for proper recording. Regulations trols is reviewed on a continuous basis by the Internal Audit that are applicable throughout the Group which, together with department. annual financial statement planning, determine the process for preparing the financial statements are codified in an -ac The employees responsible for financial reporting receive counting handbook. If there are changes to legal regulations regular training. Where necessary, support is provided by ex- and accounting standards, they are analysed promptly in ternal experts for the measurement of complex items, such terms of their impact on financial reporting and, where neces- as pension liabilities. Moreover, the control system incorpo- sary, directly included in consolidated reporting. rates further risk avoidance measures and measures to improve transparency, such as comprehensive plausibility The local companies are supported and monitored by the checks, segregation of duties, and the four eyes principle. Group's central accounting department when creating their Furthermore, the analyses carried out as part of risk manage- separate financial statements, which they are responsible for ment help to identify risks which influence financial reporting creating themselves. Finally, the consistency of the reported and to enable measures to be taken to mitigate these risks. and verified financial statement data is ensured through the The effectiveness of this internal control system is assessed relevant IT systems. The consolidation of the separate finan- by the responsible Group companies and departments using cial statements in the consolidated financial statements is an IT-based system and audited in spot checks performed by largely carried out centrally. In justified individual cases, the Internal Audit department. The Management and Supervi- for joint ventures for example, the financial statements of sory Boards are regularly informed of the results.

Opportunity and risk report 56 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT ECONOMIC REPORT 57

Opportunity and risk report 58 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 59

example, responsibility for (including recording and manag- A final overview of the major risk categories is then achieved ing) risks along the value chain lies in the first instance with by consolidating all risks. Opportunity and the specialist personnel in the operating units. Having a stan- dardised risk management process ensures that the Man- The risks identified are categorised and grouped in a risk over- agement Board is informed promptly and in a structured view schema in terms of their negative effects and their prob- risk report manner about the current risk situation of the Group. ability of occurrence. Risks are divided into three categories based on their impact ("minor", "noticeable" and "critical") and into two categories based on their probability of occurrence. A time frame of 1-5 years ("probable") or a time frame of 5-10 Risk management methodology years ("less probable") is used as a basis for the probability of HELLA applies a uniform methodology to implement an effec- occurrence. To detect in good time possible "developments tive risk management process across the entire Group for threatening the continuation of the company" (see section 91 identifying and analysing risks at an early stage and imple- (2) German Stock Corporation Act) due to the combined effects ments measures to minimise them. of several individual risks, risk aggregation is carried out using a Monte Carlo simulation. As an international automotive supplier, HELLA is exposed to independently of the respective drive train. As regards indi- A Group risk report is prepared describing all main risks on numerous opportunities and risks arising from the Group's vidualisation, one focus is on providing innovative product the basis of regular risk evaluations The Risk Management Based on the classifications of the COSO model (Committee corporate actions and its business strategy. The aim of op- solutions to enable design and functions to be tailored to cus- Coordinator informs HELLA 's Management Board of existing of Sponsoring Organizations of the Treadway Commission), portunity and risk management is to use opportunities to tomer requirements, for example in the area of individual risks, their evaluation and the measures performed. In the HELLA distinguishes between five main risk categories: make further progress along the profitable growth path, iden- concepts for the interior and exterior lighting of vehicles. event of any material changes arising in the risk position in the tify risks early on and manage them responsibly. intervening period, the Management Board is notified via Strategic risks For details about the company strategy and research and clearly defined report paths. This ensures that the Manage- Financial risks development activities, please refer to the General ment Board is able to exercise its supervisory duties and re- Compliance risks information on the HELLA Group from PAGE 41 of the Group spond to new developments in a timely manner. Furthermore, Operational risks (including HR risks, Opportunity management management report. the risk management system and the Group's general devel- sourcing risks, quality risks, IT risks) HELLA takes a decentralised approach to opportunity man - opment are regularly reviewed in close consultation with the External risks (including market risks) agement. Opportunity management is part of the strategy There are also growth opportunities for the HELLA Group in Supervisory Board and the Shareholder Committee. The risk and controlling process which also makes use of external relevant regional sales markets due to its global positioning. management system and the underlying methodology for The order in which these risks are presented here does not market analyses and forecasts. Through an ongoing process, In the Automotive segment, business activities are focused in identifying, evaluating, managing and reporting risks is con- indicate their significance, probability or impact. Hitherto un- new opportunities are systematically recorded, evaluated particular on the markets of Europe, China and the NAFTA tinuously developed. known risks can also have a negative impact on the HELLA and implemented if suitable. Opportunities arising from day- region, where there are opportunities due to the high poten- Group's economic or financial situation. For a list and a quan- to-day business are identified and acted on by operational tial for growth in the markets, especially in China and NAFTA. The Management Board mandates the implementation of the tification of the main risks, please refer to the table at the end management. Opportunities for the HELLA Group can arise HELLA pursues a specific strategic path for all relevant eco- risk management system, which is carried out by the Risk of the section. The respective measures taken by the HELLA especially from changes in the global or regional market and nomic areas to meet the specific requirements of the respec- Management Board at all levels of the Company. Responsibil- Group to restrict risks are included in the presentation of in- competitive situation, but also from technological trends and tive sales markets. ity for identifying and evaluating potential risks lies with the dividual risks (net review). from developments on the customer side. individual levels and organisational units within the Company. The head of the departments or units takes on the role of risk STRATEGIC RISKS Currently the automotive industry is being shaped by the key owner, which has various instruments on hand for identifying Strategic risks at HELLA essentially arise from the business market trends of autonomous driving, energy efficiency and Risk management system and evaluating risks. These include questionnaires on specific model, changes in the industry environment and the Compa- electrification, digitalisation and individualisation. The HELLA Risk is understood to be the probability of occurrence of in - activities, minutes of meetings and audit reports. In addition, ny's global positioning. Overall, it is assumed that strategic Group has identified these market trends as an opportunity ternal or external events that could jeopardise the achieve- all business divisions regularly take part in a risk manage- risks are of medium importance for HELLA .. for further corporate activity and strategically positioned it- ment of strategic or operational aims. Risk management is ment workshop. self alongside these market trends. For example, HELLA is therefore the entirety of all measures for a systematic han - Risks from the business model pressing on with the development of software-controlled, dling of risks and a core component of HELLA 's corporate Under the risk management strategy, new substantial risks As an automotive supplier, HELLA relies on a limited number high-resolution headlamp systems and working on hard- governance and the strategy and audit process. must be reported immediately. These are systematically of customers. This brings with it various risks arising from the ware and software solutions for assisted and automated grouped into individual risk areas and managed by the risk customers' economic situation and performance. To mitigate driving situations, for example in the areas of front camera The risk management system is coordinated by the Risk Man- leaders. All risk owners also regularly report any changes in these risks, the HELLA Group's strategy is to have a risk-re - systems and high-performance radar sensors. HELLA is agement Board at Group level, which determines the Compa- risks already reported as well as all new developments. duced business model. For example, the Company maintains benefiting from the trend towards energy efficiency and elec- ny's total risk position. In addition, responsibility for risk man- a balanced customer portfolio and long-term customer rela- trification by launching onto the market electronic solutions agement is defined at all organisational levels within the On this basis, developments and risks, which may have a crit- tionships, which simultaneously minimise the risks of a cus- specially developed for electric and full hybrid vehicles, or Group. This includes the HELLA Group's Management Board ical impact on the Company, are identified early on. Data is tomer default. Secondly, the Company's business structure which contribute to the vehicle's improved energy efficiency as well as all corporate functions and business segments. For collected from all business divisions and corporate functions. has a stabilising effect: whereas the Automotive segment is 58 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 59

example, responsibility for (including recording and manag- A final overview of the major risk categories is then achieved ing) risks along the value chain lies in the first instance with by consolidating all risks. Opportunity and the specialist personnel in the operating units. Having a stan- dardised risk management process ensures that the Man- The risks identified are categorised and grouped in a risk over- agement Board is informed promptly and in a structured view schema in terms of their negative effects and their prob- risk report manner about the current risk situation of the Group. ability of occurrence. Risks are divided into three categories based on their impact ("minor", "noticeable" and "critical") and into two categories based on their probability of occurrence. A time frame of 1-5 years ("probable") or a time frame of 5-10 Risk management methodology years ("less probable") is used as a basis for the probability of HELLA applies a uniform methodology to implement an effec- occurrence. To detect in good time possible "developments tive risk management process across the entire Group for threatening the continuation of the company" (see section 91 identifying and analysing risks at an early stage and imple- (2) German Stock Corporation Act) due to the combined effects ments measures to minimise them. of several individual risks, risk aggregation is carried out using a Monte Carlo simulation. As an international automotive supplier, HELLA is exposed to independently of the respective drive train. As regards indi- A Group risk report is prepared describing all main risks on numerous opportunities and risks arising from the Group's vidualisation, one focus is on providing innovative product the basis of regular risk evaluations The Risk Management Based on the classifications of the COSO model (Committee corporate actions and its business strategy. The aim of op- solutions to enable design and functions to be tailored to cus- Coordinator informs HELLA 's Management Board of existing of Sponsoring Organizations of the Treadway Commission), portunity and risk management is to use opportunities to tomer requirements, for example in the area of individual risks, their evaluation and the measures performed. In the HELLA distinguishes between five main risk categories: make further progress along the profitable growth path, iden- concepts for the interior and exterior lighting of vehicles. event of any material changes arising in the risk position in the tify risks early on and manage them responsibly. intervening period, the Management Board is notified via Strategic risks For details about the company strategy and research and clearly defined report paths. This ensures that the Manage- Financial risks development activities, please refer to the General ment Board is able to exercise its supervisory duties and re- Compliance risks information on the HELLA Group from PAGE 41 of the Group spond to new developments in a timely manner. Furthermore, Operational risks (including HR risks, Opportunity management management report. the risk management system and the Group's general devel- sourcing risks, quality risks, IT risks) HELLA takes a decentralised approach to opportunity man - opment are regularly reviewed in close consultation with the External risks (including market risks) agement. Opportunity management is part of the strategy There are also growth opportunities for the HELLA Group in Supervisory Board and the Shareholder Committee. The risk and controlling process which also makes use of external relevant regional sales markets due to its global positioning. management system and the underlying methodology for The order in which these risks are presented here does not market analyses and forecasts. Through an ongoing process, In the Automotive segment, business activities are focused in identifying, evaluating, managing and reporting risks is con- indicate their significance, probability or impact. Hitherto un- new opportunities are systematically recorded, evaluated particular on the markets of Europe, China and the NAFTA tinuously developed. known risks can also have a negative impact on the HELLA and implemented if suitable. Opportunities arising from day- region, where there are opportunities due to the high poten- Group's economic or financial situation. For a list and a quan- to-day business are identified and acted on by operational tial for growth in the markets, especially in China and NAFTA. The Management Board mandates the implementation of the tification of the main risks, please refer to the table at the end management. Opportunities for the HELLA Group can arise HELLA pursues a specific strategic path for all relevant eco- risk management system, which is carried out by the Risk of the section. The respective measures taken by the HELLA especially from changes in the global or regional market and nomic areas to meet the specific requirements of the respec- Management Board at all levels of the Company. Responsibil- Group to restrict risks are included in the presentation of in- competitive situation, but also from technological trends and tive sales markets. ity for identifying and evaluating potential risks lies with the dividual risks (net review). from developments on the customer side. individual levels and organisational units within the Company. The head of the departments or units takes on the role of risk STRATEGIC RISKS Currently the automotive industry is being shaped by the key owner, which has various instruments on hand for identifying Strategic risks at HELLA essentially arise from the business market trends of autonomous driving, energy efficiency and Risk management system and evaluating risks. These include questionnaires on specific model, changes in the industry environment and the Compa- electrification, digitalisation and individualisation. The HELLA Risk is understood to be the probability of occurrence of in - activities, minutes of meetings and audit reports. In addition, ny's global positioning. Overall, it is assumed that strategic Group has identified these market trends as an opportunity ternal or external events that could jeopardise the achieve- all business divisions regularly take part in a risk manage- risks are of medium importance for HELLA .. for further corporate activity and strategically positioned it- ment of strategic or operational aims. Risk management is ment workshop. self alongside these market trends. For example, HELLA is therefore the entirety of all measures for a systematic han - Risks from the business model pressing on with the development of software-controlled, dling of risks and a core component of HELLA 's corporate Under the risk management strategy, new substantial risks As an automotive supplier, HELLA relies on a limited number high-resolution headlamp systems and working on hard- governance and the strategy and audit process. must be reported immediately. These are systematically of customers. This brings with it various risks arising from the ware and software solutions for assisted and automated grouped into individual risk areas and managed by the risk customers' economic situation and performance. To mitigate driving situations, for example in the areas of front camera The risk management system is coordinated by the Risk Man- leaders. All risk owners also regularly report any changes in these risks, the HELLA Group's strategy is to have a risk-re - systems and high-performance radar sensors. HELLA is agement Board at Group level, which determines the Compa- risks already reported as well as all new developments. duced business model. For example, the Company maintains benefiting from the trend towards energy efficiency and elec- ny's total risk position. In addition, responsibility for risk man- a balanced customer portfolio and long-term customer rela- trification by launching onto the market electronic solutions agement is defined at all organisational levels within the On this basis, developments and risks, which may have a crit- tionships, which simultaneously minimise the risks of a cus- specially developed for electric and full hybrid vehicles, or Group. This includes the HELLA Group's Management Board ical impact on the Company, are identified early on. Data is tomer default. Secondly, the Company's business structure which contribute to the vehicle's improved energy efficiency as well as all corporate functions and business segments. For collected from all business divisions and corporate functions. has a stabilising effect: whereas the Automotive segment is 60 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 61

group accounting, and potential disruption to the liquidity by specialist departments, so that potential deficiencies in Impact descriptors Possible consequences situation. Financial risks are of medium importance overall. customer deliveries can be identified early on and HELLA 's 1 – minor If the risk occurs, there may be a minor effect on net profit, i.e. the impact on overall liquidity situation can be permanently monitored. The Negative outcomes from risks or lost opportunities unlikely to have a net profit for planned earnings is less than € 5 million permanent or significant effect on the Company's reputation or performance. For information on the material risks arising from the use of Group’s liquidity position is adequately secured by long-term No regulatory consequences financial instruments, please also refer to the presentation loans, euro bonds and yen bonds. All agreed financial cove- Minor adverse publicity of the financial instruments from PAGE 155 in the consoli- nants which, if breached, could lead to extraordinary termina- Minor reversible harm dated notes. tion rights for the lender with potentially accelerated payment 2 – noticeable If the risk occurs, there may be a considerable effect on net profit, i.e. the obligations are monitored continuously. In May 2017, HELLA Negative consequences of risks or lost opportunities impact on net profit for planned earnings is up to € 50 million. Exchange rate risks successfully placed a corporate bond of over € 300 million have a material impact on the Company. They can be managed without any Limited regulatory consequences major impact in the medium term. Various exchange rate risks may arise for the HELLA Group maturing in 2024 on the capital market. Local adverse publicity for the area concerned in connection with receivables, liabilities, cash and cash Major reversible harm equivalents, securities and contracts which must be per- COMPLIANCE RISKS formed in another currency. The Company initially minimises At HELLA , top priority is given to the observance of laws and 3 – critical If the risk occurs, there may be a very major effect on net profit, i.e. the Negative consequences of risks or lost opportunities have a material impact impact on net profit for planned earnings is greater than € 50 million. these risks by sourcing materials locally within the respective internal rules in order to avert any compliance breaches. on the Company. Substantial efforts are necessary to overcome the problems Substantial regulatory consequences currency and sales region. Currency risks are pooled, evalu- However, given the increasing complexity of regulatory that they cause and to develop a medium-term solution. However, the risks generally do not pose any medium-term risk to the Company's going-concern Sustained negative coverage in the national press ated and coordinated centrally to additionally optimise risk frameworks and despite taking extensive precautionary status. In extraordinary and extreme cases, the Company's going-concern Major sanctions imposed by the responsible authorities management. HELLA 's Foreign Currency Guideline defines measures, the risk of illegal conduct by individual employees status may be theoretically placed at risk. Closure of part of the business the strategy for addressing currency risks for each company cannot be excluded. Compliance risks that the HELLA Group Irreversible loss in the HELLA Group. Risk is initially analysed at the local level. is exposed to include in particular risks from investigations A hedging proposal based on the local data is prepared, which into breaches of competition law, patent risks, risks due to takes into account the extent of the risk and the limits set in cybercrime, and risks from non-compliance with safety and the Foreign Currency Guideline. The Treasury Committee data protection requirements. Overall, compliance risks are then makes a decision on the proposal. Currency risks are also classified as material due to their high regulatory com- Probability Occurrence Definition primarily hedged by means of currency forwards, which are plexity and dynamics. However, they are assumed to have Probable Once every 1-5 years Probability of occurrence of 20 % to 90 % or greater in this period structured on the basis of expected foreign-currency cash only medium importance for HELLA as no serious events Less probable Once every 5-10 years Probability of occurrence of less than 20 % in this period. flows. liable to jeopardise the Company's going-concern status are expected in the short term. Risks due to complexity in the transfer pricing strategy and group accounting Please also refer to Corporate Governance and Compliance in dependent on automobile manufacturer sales, the Aftermar- strategy and management processes. To reduce these risks, As European and international legislation is undergoing con- the corporate governance report from PAGE 74 in the Group ket business division is driven by sales of spare parts, acces- HELLA conducts an intensive and regular strategic process tinuous evolution, transfer pricing strategies, intercompany management report. sories and garage equipment. This occurs very largely an- to identify and appropriately manage opportunities and risks transaction processing and accounting requirements are be- ti-cyclically of trends in demand for new vehicles. In some arising from changes in the industry environment. It also coming increasingly more complex. This is creating new finan- Risks arising from antitrust proceedings respects, the Special Applications segment also follows dif- maintains an incubator in Berlin and an additional location in cial risks within the organisation that can arise from process In prior fiscal years, HELLA had already reported that Euro - ferent demand cycles compared with the Automotive Silicon Valley to better anticipate new sector and technology inefficiencies, accounting errors, breaches of tax regulations pean and US authorities had commenced anti-trust investi- segment. trends. and unnecessarily high tax payments. Continuous alignments gations into HELLA and other companies in the automotive and coordination between departments are therefore neces- lighting sector in 2012. As reported in the last interim Group Risks arising from changes Risks arising from the Company's global positioning sary to minimise the risks of deficiencies in the application of management report (6-month report 2016/2017), expenses in the industry environment As an international automotive supplier, HELLA has a pres- internal corporate regulations. The Group thus has a compre- of € 16 million were incurred in connection with the proceed- Economies and the automotive sector are becoming increas- ence in 35 countries worldwide, so the Company's sales are hensive and transparent transfer pricing policy, which is kept ings of the European Commission relating to fines, possible ingly dynamic. Major market trends in the automotive indus- distributed across the regions of Europe, Asia/Pacific/Rest up to date by the Transfer Pricing department. A global network claims for damages from third parties and other legal costs. try in particular are helping to drive significant change in the of World, and North, Central and America. As a result, this of contacts has also been established to facilitate communica- These proceedings were concluded at the start of the fiscal industry environment. This includes, for example, the in- global positioning of the Group can open up vulnerabilities to tions and collaboration within the Group and to avoid transfer year 2017/2018; in its ruling on 21 June 2017, the European creasing share of software content, which is drawing in new local or regional market fluctuations. Overall, the Group's pricing errors. Commission ended its proceedings in agreement with suppliers onto the market, while significantly shortening the global presence contributes, however, to a balanced and HELLA . HELLA agreed to a settlement by paying a fine of pace of product change. Thus, iteration cycles for new soft- risk-reduced business strategy, as individual local volatilities Risks arising from disruption to liquidity about € 10.4 million. There were no new developments in the ware solutions are now measured in months, while new ve- can balance each other out. A sound financial policy is part of the HELLA Group's corporate US proceedings during the past fiscal year; these are also not hicle models usually take three to four years to reach the management. Firstly, the Company's liquidity situation can be currently foreseeable. market. Owing to these changes in the industry environment, FINANCIAL RISKS adversely affected over the long term by a customer default. strategic risks can arise as a result of increasing pressure to The HELLA Group's international focus and operations pose Secondly, with the growing complexity of the products and innovate, which is something companies must master. Sec- a series of financial risks, particularly due to exchange rates, customer deliveries, the Company's trade credit receivables ondly, risks arise from the Company's increasingly complex the increased complexity of a transfer pricing strategy and are also rising. These requirements are continually monitored 60 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 61

group accounting, and potential disruption to the liquidity by specialist departments, so that potential deficiencies in Impact descriptors Possible consequences situation. Financial risks are of medium importance overall. customer deliveries can be identified early on and HELLA 's 1 – minor If the risk occurs, there may be a minor effect on net profit, i.e. the impact on overall liquidity situation can be permanently monitored. The Negative outcomes from risks or lost opportunities unlikely to have a net profit for planned earnings is less than € 5 million permanent or significant effect on the Company's reputation or performance. For information on the material risks arising from the use of Group’s liquidity position is adequately secured by long-term No regulatory consequences financial instruments, please also refer to the presentation loans, euro bonds and yen bonds. All agreed financial cove- Minor adverse publicity of the financial instruments from PAGE 155 in the consoli- nants which, if breached, could lead to extraordinary termina- Minor reversible harm dated notes. tion rights for the lender with potentially accelerated payment 2 – noticeable If the risk occurs, there may be a considerable effect on net profit, i.e. the obligations are monitored continuously. In May 2017, HELLA Negative consequences of risks or lost opportunities impact on net profit for planned earnings is up to € 50 million. Exchange rate risks successfully placed a corporate bond of over € 300 million have a material impact on the Company. They can be managed without any Limited regulatory consequences major impact in the medium term. Various exchange rate risks may arise for the HELLA Group maturing in 2024 on the capital market. Local adverse publicity for the area concerned in connection with receivables, liabilities, cash and cash Major reversible harm equivalents, securities and contracts which must be per- COMPLIANCE RISKS formed in another currency. The Company initially minimises At HELLA , top priority is given to the observance of laws and 3 – critical If the risk occurs, there may be a very major effect on net profit, i.e. the Negative consequences of risks or lost opportunities have a material impact impact on net profit for planned earnings is greater than € 50 million. these risks by sourcing materials locally within the respective internal rules in order to avert any compliance breaches. on the Company. Substantial efforts are necessary to overcome the problems Substantial regulatory consequences currency and sales region. Currency risks are pooled, evalu- However, given the increasing complexity of regulatory that they cause and to develop a medium-term solution. However, the risks generally do not pose any medium-term risk to the Company's going-concern Sustained negative coverage in the national press ated and coordinated centrally to additionally optimise risk frameworks and despite taking extensive precautionary status. In extraordinary and extreme cases, the Company's going-concern Major sanctions imposed by the responsible authorities management. HELLA 's Foreign Currency Guideline defines measures, the risk of illegal conduct by individual employees status may be theoretically placed at risk. Closure of part of the business the strategy for addressing currency risks for each company cannot be excluded. Compliance risks that the HELLA Group Irreversible loss in the HELLA Group. Risk is initially analysed at the local level. is exposed to include in particular risks from investigations A hedging proposal based on the local data is prepared, which into breaches of competition law, patent risks, risks due to takes into account the extent of the risk and the limits set in cybercrime, and risks from non-compliance with safety and the Foreign Currency Guideline. The Treasury Committee data protection requirements. Overall, compliance risks are then makes a decision on the proposal. Currency risks are also classified as material due to their high regulatory com- Probability Occurrence Definition primarily hedged by means of currency forwards, which are plexity and dynamics. However, they are assumed to have Probable Once every 1-5 years Probability of occurrence of 20 % to 90 % or greater in this period structured on the basis of expected foreign-currency cash only medium importance for HELLA as no serious events Less probable Once every 5-10 years Probability of occurrence of less than 20 % in this period. flows. liable to jeopardise the Company's going-concern status are expected in the short term. Risks due to complexity in the transfer pricing strategy and group accounting Please also refer to Corporate Governance and Compliance in dependent on automobile manufacturer sales, the Aftermar- strategy and management processes. To reduce these risks, As European and international legislation is undergoing con- the corporate governance report from PAGE 74 in the Group ket business division is driven by sales of spare parts, acces- HELLA conducts an intensive and regular strategic process tinuous evolution, transfer pricing strategies, intercompany management report. sories and garage equipment. This occurs very largely an- to identify and appropriately manage opportunities and risks transaction processing and accounting requirements are be- ti-cyclically of trends in demand for new vehicles. In some arising from changes in the industry environment. It also coming increasingly more complex. This is creating new finan- Risks arising from antitrust proceedings respects, the Special Applications segment also follows dif- maintains an incubator in Berlin and an additional location in cial risks within the organisation that can arise from process In prior fiscal years, HELLA had already reported that Euro - ferent demand cycles compared with the Automotive Silicon Valley to better anticipate new sector and technology inefficiencies, accounting errors, breaches of tax regulations pean and US authorities had commenced anti-trust investi- segment. trends. and unnecessarily high tax payments. Continuous alignments gations into HELLA and other companies in the automotive and coordination between departments are therefore neces- lighting sector in 2012. As reported in the last interim Group Risks arising from changes Risks arising from the Company's global positioning sary to minimise the risks of deficiencies in the application of management report (6-month report 2016/2017), expenses in the industry environment As an international automotive supplier, HELLA has a pres- internal corporate regulations. The Group thus has a compre- of € 16 million were incurred in connection with the proceed- Economies and the automotive sector are becoming increas- ence in 35 countries worldwide, so the Company's sales are hensive and transparent transfer pricing policy, which is kept ings of the European Commission relating to fines, possible ingly dynamic. Major market trends in the automotive indus- distributed across the regions of Europe, Asia/Pacific/Rest up to date by the Transfer Pricing department. A global network claims for damages from third parties and other legal costs. try in particular are helping to drive significant change in the of World, and North, Central and America. As a result, this of contacts has also been established to facilitate communica- These proceedings were concluded at the start of the fiscal industry environment. This includes, for example, the in- global positioning of the Group can open up vulnerabilities to tions and collaboration within the Group and to avoid transfer year 2017/2018; in its ruling on 21 June 2017, the European creasing share of software content, which is drawing in new local or regional market fluctuations. Overall, the Group's pricing errors. Commission ended its proceedings in agreement with suppliers onto the market, while significantly shortening the global presence contributes, however, to a balanced and HELLA . HELLA agreed to a settlement by paying a fine of pace of product change. Thus, iteration cycles for new soft- risk-reduced business strategy, as individual local volatilities Risks arising from disruption to liquidity about € 10.4 million. There were no new developments in the ware solutions are now measured in months, while new ve- can balance each other out. A sound financial policy is part of the HELLA Group's corporate US proceedings during the past fiscal year; these are also not hicle models usually take three to four years to reach the management. Firstly, the Company's liquidity situation can be currently foreseeable. market. Owing to these changes in the industry environment, FINANCIAL RISKS adversely affected over the long term by a customer default. strategic risks can arise as a result of increasing pressure to The HELLA Group's international focus and operations pose Secondly, with the growing complexity of the products and innovate, which is something companies must master. Sec- a series of financial risks, particularly due to exchange rates, customer deliveries, the Company's trade credit receivables ondly, risks arise from the Company's increasingly complex the increased complexity of a transfer pricing strategy and are also rising. These requirements are continually monitored 62 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 63

Patent risks Risks due to non-compliance resources, HELLA strives to ensure a proper and predictive material part of the vehicle type approval process. It is en- Like HELLA , competitors, suppliers and customers protect with data protection requirements management of its production process and also promotes sured by means of a comprehensive quality management technology using patents and other property rights. The exis- Since the Group holds personal data, it must adhere to the re- knowledge and technology transfer to potentially affected system, in which testing is overseen, results checked and tence of property rights cannot always be clearly determined, quirements of data protection legislation. With regard to the EU sites. control plans evaluated. particularly for certain processes, methods and applications. Data Protection Regulation adopted in May 2016, HELLA 's Eu- In individual cases there may therefore be a risk HELLA could ropean subsidiaries in particular face new challenges in this Risks arising from extended warranty periods Risks arising for disruptions in the supply chain be accused of breaching these third-party property rights. This area. Failure to observe data protection rules may have legal As the global market is highly competitive, a number of orig- HELLA is also dependent on its own supplier base. Any dis - may make the Group liable to pay damages or force it to acquire ramifications and harm the HELLA Group's reputation. To mi- inal equipment manufacturers have started to offer longer ruption in the supply chain would have an adverse effect on additional licences or refrain from using the relevant technol- nimise the risks associated with the illegal handling of personal warranty periods for their vehicles to heighten the appeal of production, logistics and sales as well as the Company's gen- ogy in certain countries. To avoid violating existing third-party data, HELLA has introduced and continues to develop effective their products. As a consequence of this, they likewise expect eral reputation. If any shortfalls arise on the part of exclusive property rights, HELLA systematically monitors new releases systems and control mechanisms. their components suppliers to offer longer warranty periods suppliers, this may lead to production and delivery shortages and compares these against its own technology portfolio. on the products they provide. Among other things, automo - as well as higher prices, higher material costs and quality Risks due to environmental bile manufacturers use warranty cost analyses to lower the problems, Accordingly, HELLA seeks to diversify its supplier Risks due to cybercrime protection and safety requirements warranty costs per vehicle. The resultant warranty compen- base. HELLA ’s suppliers are also constantly monitored and In the automotive industry, computers and computer-assisted As the volume of environmental rules is rising, HELLA may sation system has a detrimental effect on components sup- audited by teams of experts to avoid any interruptions in the systems are increasingly being used in the production and op- need to observe additional environmental and safety rules in pliers as they must bear part of the costs. HELLA is attempt- supply chain. Supply chain management operates uniformly eration of vehicles. For example, various sensors and audiovi- the future. Moreover, changes in legal requirements may have ing to minimise this risk further by improving product quality across the entire Company. By actively managing the Com- sual systems are fitted to vehicles to heighten safety and per- an adverse impact on market demand for HELLA products. As and responding appropriately to any product quality shortfall pany's own supplier chain, risks related to supplier develop- formance and enable other driving functions to be performed. an internationally active Group, HELLA must also comply with reports. ment were reduced compared with the previous year. By the Because of strong interconnectedness in the production and different regulatory systems. In particular, environmental pro- same token, an effective supplier performance management operation of vehicles, the risk of cybercrime is increasing, and tection and health regulations may be subject to frequent Quality risks programme can help to identify and address supplier issues software applications can open up the possibility to an attack change and become increasingly more stringent. This may Important characteristics of the HELLA Group's quality man- early on. by hackers if used carelessly. HELLA strives to minimise this result in additional costs for the Company to comply with the agement are ensuring compliance with market-driven stan- risk by participating in the international standardisation pro- new requirements. HELLA is continually working to improve dards, durability and reliability with a high degree of user Risks arising from failures cess in the automotive industry and by developing and imple- its sustainable and environmentally responsible business and comfort. Quality deficits, such as deficient product maturity, in information management menting secure software and hardware architecture. In con- has stepped up the monitoring and assessment of local envi- inadequate resources or insufficiently qualified staff, can re- The HELLA Group uses a complex IT structure in all areas of nection with this, it has also placed its activities to strengthen ronmental protection standards in the past fiscal year in order sult in additional costs with a direct impact on HELLA 's re- the Company. Moreover, since the applications in the areas of cybersecurity on a firm organisational footing. to ensure they are complied with. sults of operations and also a lasting effect on the Company's development and production are becoming ever more com- reputation. To reduce quality risks, HELLA follows the princi- plex and increasingly large amounts of data are having to be Risks due to non-compliance with safety standards OPERATIONAL RISKS ple of conformity of production (COP). Conformity of produc- processed with limited IT resources, there is a risk of failures HELLA 's customers are increasingly also demanding the ob- As products and production are becoming increasingly com- tion serves as proof that the Company is able to manufacture arising in the HELLA Group's information management. servance of safety standards. Failure to observe customer plex and demanding, operational risks arise, for example, in a given product series in accordance with all requirements. These potential failures in IT systems could interrupt opera - requirements may result in additional (and in some cases the areas of logistics, procurement, production and employee This includes the specifications and labelling requirements tions for several days in very rare exceptional cases. To min- substantial) costs for HELLA or project delays, with a direct qualifications. These include in particular risks due to shortag- stipulated in the type approval documentation. COP forms a imise these risks associated with information management, impact on the Company's sales and earnings. For this reason, es, deficiencies in quality, interruptions in the supplier chain HELLA seeks to satisfy customer requirements in full. and failures in information management. Overall, these risks Overview of the twelve most important Among other things, this necessitates the observance of cus- are of medium importance for HELLA . individual risks tomers' safety guidelines as well as the minimum information security standards (in accordance with ISO/IEC 27001). Risks arising from personnel and resource shortages No. Risks Risk category Impact descriptors Probability Although the failure to observe these standards does not Within the development, production and sales chain, the risk 1 Operational or organisational shortages Operational Noticeable Probable entail a breach of a legal requirement as such, it would still of personnel, operational or organisational shortages may 2 Legal and regulatory requirements Compliance Critical Probable mean that the Company had failed to meet its general duty of arise at individual locations. These can come from the reloca- 3 Warranties Operational Noticeable Probable care. This could prompt customers to recover damages from tion of complex projects and the restructuring of complex 4 Shortage of specialists Operational Noticeable Probable HELLA if, for example, confidential customer data were to be processes within the global HELLA network or through com- 5 Product development process Operational Noticeable Probable disclosed without authorisation. HELLA has therefore set up prehensive transfers of projects and technology. This may be 6 Customer requirements Operational Noticeable Probable and implemented a comprehensive information security pro- due to insufficient machinery capacity, inadequately trained 7 Compliance with product safety requirements Compliance Noticeable Less probable gramme. This programme includes various technical, organ- staff, poor supplier quality, general capacity problems and staff 8 IT security requirements Compliance Noticeable Probable isational and process-related measures to secure a continu- shortages. Operational or organisational shortages can have 9 Supplier development Operational Noticeable Probable ous improvement process within the context of information a significant impact on the business as they may lead to addi- security management. tional non-quality costs, delays in delivery, contractual penal- 10 Transfer of expertise Operational Noticeable Probable ties, and increased costs to provide employees with the nec- 11 Process deviations Compliance Noticeable Probable essary training and qualifications. To avoid these shortages in 12 Loss of receivables Financial Noticeable Probable 62 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 63

Patent risks Risks due to non-compliance resources, HELLA strives to ensure a proper and predictive material part of the vehicle type approval process. It is en- Like HELLA , competitors, suppliers and customers protect with data protection requirements management of its production process and also promotes sured by means of a comprehensive quality management technology using patents and other property rights. The exis- Since the Group holds personal data, it must adhere to the re- knowledge and technology transfer to potentially affected system, in which testing is overseen, results checked and tence of property rights cannot always be clearly determined, quirements of data protection legislation. With regard to the EU sites. control plans evaluated. particularly for certain processes, methods and applications. Data Protection Regulation adopted in May 2016, HELLA 's Eu- In individual cases there may therefore be a risk HELLA could ropean subsidiaries in particular face new challenges in this Risks arising from extended warranty periods Risks arising for disruptions in the supply chain be accused of breaching these third-party property rights. This area. Failure to observe data protection rules may have legal As the global market is highly competitive, a number of orig- HELLA is also dependent on its own supplier base. Any dis - may make the Group liable to pay damages or force it to acquire ramifications and harm the HELLA Group's reputation. To mi- inal equipment manufacturers have started to offer longer ruption in the supply chain would have an adverse effect on additional licences or refrain from using the relevant technol- nimise the risks associated with the illegal handling of personal warranty periods for their vehicles to heighten the appeal of production, logistics and sales as well as the Company's gen- ogy in certain countries. To avoid violating existing third-party data, HELLA has introduced and continues to develop effective their products. As a consequence of this, they likewise expect eral reputation. If any shortfalls arise on the part of exclusive property rights, HELLA systematically monitors new releases systems and control mechanisms. their components suppliers to offer longer warranty periods suppliers, this may lead to production and delivery shortages and compares these against its own technology portfolio. on the products they provide. Among other things, automo - as well as higher prices, higher material costs and quality Risks due to environmental bile manufacturers use warranty cost analyses to lower the problems, Accordingly, HELLA seeks to diversify its supplier Risks due to cybercrime protection and safety requirements warranty costs per vehicle. The resultant warranty compen- base. HELLA ’s suppliers are also constantly monitored and In the automotive industry, computers and computer-assisted As the volume of environmental rules is rising, HELLA may sation system has a detrimental effect on components sup- audited by teams of experts to avoid any interruptions in the systems are increasingly being used in the production and op- need to observe additional environmental and safety rules in pliers as they must bear part of the costs. HELLA is attempt- supply chain. Supply chain management operates uniformly eration of vehicles. For example, various sensors and audiovi- the future. Moreover, changes in legal requirements may have ing to minimise this risk further by improving product quality across the entire Company. By actively managing the Com- sual systems are fitted to vehicles to heighten safety and per- an adverse impact on market demand for HELLA products. As and responding appropriately to any product quality shortfall pany's own supplier chain, risks related to supplier develop- formance and enable other driving functions to be performed. an internationally active Group, HELLA must also comply with reports. ment were reduced compared with the previous year. By the Because of strong interconnectedness in the production and different regulatory systems. In particular, environmental pro- same token, an effective supplier performance management operation of vehicles, the risk of cybercrime is increasing, and tection and health regulations may be subject to frequent Quality risks programme can help to identify and address supplier issues software applications can open up the possibility to an attack change and become increasingly more stringent. This may Important characteristics of the HELLA Group's quality man- early on. by hackers if used carelessly. HELLA strives to minimise this result in additional costs for the Company to comply with the agement are ensuring compliance with market-driven stan- risk by participating in the international standardisation pro- new requirements. HELLA is continually working to improve dards, durability and reliability with a high degree of user Risks arising from failures cess in the automotive industry and by developing and imple- its sustainable and environmentally responsible business and comfort. Quality deficits, such as deficient product maturity, in information management menting secure software and hardware architecture. In con- has stepped up the monitoring and assessment of local envi- inadequate resources or insufficiently qualified staff, can re- The HELLA Group uses a complex IT structure in all areas of nection with this, it has also placed its activities to strengthen ronmental protection standards in the past fiscal year in order sult in additional costs with a direct impact on HELLA 's re- the Company. Moreover, since the applications in the areas of cybersecurity on a firm organisational footing. to ensure they are complied with. sults of operations and also a lasting effect on the Company's development and production are becoming ever more com- reputation. To reduce quality risks, HELLA follows the princi- plex and increasingly large amounts of data are having to be Risks due to non-compliance with safety standards OPERATIONAL RISKS ple of conformity of production (COP). Conformity of produc- processed with limited IT resources, there is a risk of failures HELLA 's customers are increasingly also demanding the ob- As products and production are becoming increasingly com- tion serves as proof that the Company is able to manufacture arising in the HELLA Group's information management. servance of safety standards. Failure to observe customer plex and demanding, operational risks arise, for example, in a given product series in accordance with all requirements. These potential failures in IT systems could interrupt opera - requirements may result in additional (and in some cases the areas of logistics, procurement, production and employee This includes the specifications and labelling requirements tions for several days in very rare exceptional cases. To min- substantial) costs for HELLA or project delays, with a direct qualifications. These include in particular risks due to shortag- stipulated in the type approval documentation. COP forms a imise these risks associated with information management, impact on the Company's sales and earnings. For this reason, es, deficiencies in quality, interruptions in the supplier chain HELLA seeks to satisfy customer requirements in full. and failures in information management. Overall, these risks Overview of the twelve most important Among other things, this necessitates the observance of cus- are of medium importance for HELLA . individual risks tomers' safety guidelines as well as the minimum information security standards (in accordance with ISO/IEC 27001). Risks arising from personnel and resource shortages No. Risks Risk category Impact descriptors Probability Although the failure to observe these standards does not Within the development, production and sales chain, the risk 1 Operational or organisational shortages Operational Noticeable Probable entail a breach of a legal requirement as such, it would still of personnel, operational or organisational shortages may 2 Legal and regulatory requirements Compliance Critical Probable mean that the Company had failed to meet its general duty of arise at individual locations. These can come from the reloca- 3 Warranties Operational Noticeable Probable care. This could prompt customers to recover damages from tion of complex projects and the restructuring of complex 4 Shortage of specialists Operational Noticeable Probable HELLA if, for example, confidential customer data were to be processes within the global HELLA network or through com- 5 Product development process Operational Noticeable Probable disclosed without authorisation. HELLA has therefore set up prehensive transfers of projects and technology. This may be 6 Customer requirements Operational Noticeable Probable and implemented a comprehensive information security pro- due to insufficient machinery capacity, inadequately trained 7 Compliance with product safety requirements Compliance Noticeable Less probable gramme. This programme includes various technical, organ- staff, poor supplier quality, general capacity problems and staff 8 IT security requirements Compliance Noticeable Probable isational and process-related measures to secure a continu- shortages. Operational or organisational shortages can have 9 Supplier development Operational Noticeable Probable ous improvement process within the context of information a significant impact on the business as they may lead to addi- security management. tional non-quality costs, delays in delivery, contractual penal- 10 Transfer of expertise Operational Noticeable Probable ties, and increased costs to provide employees with the nec- 11 Process deviations Compliance Noticeable Probable essary training and qualifications. To avoid these shortages in 12 Loss of receivables Financial Noticeable Probable 64 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 65

all IT systems are therefore centrally monitored and regularly the Company's economic situation is largely dependent on updated. The Company is also steadily investing in the IT in - the performance of the automotive industry and the overrid- frastructure and special cyber-security programs are being ing general economic conditions. HELLA is therefore exposed implemented to cut the risk of data loss. to fluctuations typical of the sector, which HELLA counters with a risk-diversified business model and an international Risks from shortages of specialists positioning. To safeguard its position as a technology leader and because of the Company's international expansion, HELLA is general- Risks arising from consolidation in the aftermarket ly reliant on qualified employees. HELLA is therefore in a The Aftermarket segment is exposed to a major risk posed by global competition for the specialists that the Group needs, so the ongoing market consolidation among customers. In that potential risks can arise from not adequately covering many cases, this consolidation is accompanied by increased personnel requirements. In growth markets such as China, price pressure, which can squeeze the Aftermarket business' India and eastern Europe in particular, HELLA is also exposed sales and earnings. In addition, customer consolidation and to the risk of a rising salary base for qualified specialists. A restricted access to products and components in the inde- shortage of staff would make its effect felt on development pendent spare parts trade as well as certain natural risks are activities in particular. HELLA is continually developing a classed as external risks. global recruitment, staff retention and training model to reduce the adverse effects of shortages of specialists and an inadequate expertise pool on project transfers. Statement on overall risk and EXTERNAL RISKS opportunities situation The external risks to which HELLA is exposed are mostly The Group's risk profile did not change significantly in the -re market risks, such as fluctuations in customer demand or porting year. Its transparent and systematic risk manage- slower global economic growth. HELLA has classified these ment helped ensure the overall risks within the Group were risks as difficult to forecast and largely beyond its control. The efficiently managed through structured processes. From to- importance of external risks is classified as medium. day's perspective, the Group's risks are limited and there are no risks posing an existential threat. Nor is the Company Risks arising from fluctuations aware of any actual or potential developments that could se- in general economic conditions riously threaten its going-concern status in the foreseeable HELLA generates around three-quarters of its sales in its future. original equipment manufacturer business. Consequently,

Forecast report 64 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT OPPORTUNITY AND RISK REPORT 65

Forecast report 66 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT FORECAST REPORT 67

Forecast report

Overall economic outlook Company outlook The macroeconomic outlook for 2017 and 2018 is subject to above the global average, and significantly so with a rate of In light of the projected general conditions and assuming there and an increase in adjusted earnings before interest and ta - an array of financial, economic and political uncertainties, 6.6 % in 2017 and 6.2 % in the following year, but it will no will be no significantly different outcomes owing to political, xes (adjusted EBIT) of 5-10 % compared to the past fiscal year. which are countered by factors and developments supporting longer top the high growth rates of previous years. In the economic or social crises, HELLA is expecting a positive busi- The parameter for the adjusted EBIT margin is approximately the growth of the global economy. case of the Eurozone, the IMF expects growth of 1.7 % in 2017 ness development for the HELLA Group in fiscal year 2017/2018. 8 percent. and 1.6 % in 2018. For the selective German economy, the The positive business outlook is supported, in particular, by the For instance, there is still uncertainty surrounding the US IMF raised its assessment in July of this year slightly against company's long-term strategic focus: HELLA is striving to build The forward-looking statements in this report are based government's future economic and foreign policy direction the April forecast, and anticipates growth of 1.8 % in the further on its technology and innovation leadership and on current assessments by HELLA 's management. They since the presidential elections in November 2016. The long- current calendar year and 1.6 % in the following year. The US strengthen its leading market position. The HELLA Group also are subject to risks and uncertainties which HELLA is not term effects of the UK's exit from the European Union, which economy is expected to perform somewhat better than in continues to see promising opportunities for driving forward able to control or assess precisely, such as the future mar- was officially applied for at the end of March 2017 and is to be prior years, with probable growth of 2.3 % in 2017 and 2.5 % sustained global expansion, particularly in growth regions ket environment and general economic conditions, actions implemented within the next two years, are also still hard to in 2018. such as China and NAFTA. Additionally, HELLA is pushing by other market players and government measures. If any discern. Meanwhile, financial and geopolitical risks are incre- ahead with another increase in operational excellence in the of these or other uncertainties and unknowns materialise, asing the uncertainty regarding the further trajectory of the company's global network. or if the assumptions on which such statements are based global economy. Among them are structural deficits, such as prove to be inaccurate, the actual results may differ mate- low growth in productivity and income inequality, and an in- Sector outlook For the current fiscal year 2017/2018 (1 June 2017 to 31 May rially from those expressed or implied in these creasing trend towards politico-economic protectionism. Within this global economic outlook, IHS Light Vehicle Pro- 2018), HELLA is expecting currency-adjusted sales growth statements. Additional uncertainty is coming from potential exchange rate duction is forecasting for the period of the HELLA fiscal volatility and from unpredictability in the interest rate envi- year 2017/2018 (1 June 2017 to 31 May 2018), a slight incre - ronment, for example in connection with a possible end to the ase of 1.1 % in global new production to 95.6 million units European Central Bank‘s expansionary monetary policy. (prior year: 94.6 million). During this period, all core markets relevant to HELLA will probably experience largely On the other hand, global economic development in emerging stable or moderate growth. For instance, Europe is expec- markets and developing countries, whose economic growth ted to grow by 1.5 % to 22.2 million units (prior year: 21.9 is expected to be well above the growth of the industrialised million units), while in the selective German market in the countries despite regional differences, is having a supportive same period new production is forecast to decrease by effect. 1.6 % to 5.8 million units (prior year: 5.9 million units). Growth in the Chinese market will be in the order of 1.1 % In April 2017, the International Monetary Fund (IMF) raised its to 27.7 million vehicles, and thus slightly weaker than in forecast for 2017 against its January outlook by 0.1 percenta- Europe (prior year: 27.4 million units). Asia/Pacific/Rest of ge points and is predicting a 3.5 % increase in global gross World is expected to grow by 1.2 % to 50.9 million vehicles domestic product (GDP). It also confirmed its forecast for 2018 (prior year: 50.3 million units). In the North, Central and and is expecting a GDP growth of 3.6 %. South America region, new production in the fiscal year 2017/2018 is expected to increase by 0.3 %, therefore main- According to IMF estimates for 2017 and 2018, a positive taining the prior year's level of 20.8 million units. A fall of trend in economic output is also forecast for the markets 3.2 % to 11.4 million in new production is forecast for the relevant for HELLA . China's economy will continue to power selective US market (prior year: 11.8 million units).

Corporate Governance of HELLA KGaA Hueck & Co. 66 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT FORECAST REPORT 67

Forecast report

Corporate Governance of HELLA KGaA Hueck & Co. 68 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 69

ting, for example, are passed by a simple majority vote, un- as Dr. Jürgen Behrend acts as General Partner; in this case, less mandatory legal provisions or the Articles of Association he has the casting vote. Accordingly, he holds ultimate res- Corporate Governance of stipulate otherwise. This also applies to resolutions appoin- ponsibility for management matters. ting or removing General Partners. Furthermore, the requi- HELLA KGaA Hueck & Co. site consent of the General Partners to specific resolutions of The Annual General Meeting is responsible for the appoint- the Annual General Meeting as prescribed by law is excluded ment and removal of General Partners; according to the Ar- according to the Articles of Association, to the extent permit- ticles of Association, the relevant resolution of the Annual ted by law. In this and many other respects, HELLA KGaA General Meeting is passed by a simple majority of the votes Hueck & Co. closely follows the example of an ordinary stock cast, provided that such resolution does not require the Ge- corporation. neral Partners' consent. Pursuant to the Articles of Associa- tion, Dr. Behrend may terminate his function as Managing More detailed information on the differences to a stock corpo- General Partner effective as per the end of a quarter, giving ration specific to the legal form can be found in the declaration three months' notice to the Shareholder Committee. He gave of conformity (Entsprechenserklärung) of the General Part- notice of such a termination for the end of September 2017. ners, the Shareholder Committee and the Supervisory Board The Shareholder Committee is responsible for the appoint- The General Partners, the Supervisory Board and the Share - of partners; the personally liable partners (Komplementär(e)) as of 31 May 2017, which has been published on the Company's ment and removal of the Managing Directors of HELLA Ge- holder Committee of HELLA KGaA Hueck & Co. are commit- (General Partner(s)) that are responsible for managing the website under HELLA .COM/DECLARATIONOFCONFORMITY and schäftsführungsgesellschaft mbH, as well as for determining ted to the principles of transparent and responsible corporate KGaA's business and are personally liable without restrictions is reproduced below. the terms and conditions of their service agreements. The governance and control of the Company, attaching great pri- for the KGaA's liabilities, and the (limited liability) shareholders Articles of Association stipulate that Dr. Behrend has the right ority to the standards of good corporate governance. As a (Kommandit-Aktionäre) that hold an interest in the nominal 1. Group management by the General Partners to make proposals for such appointments and removals, and family-owned business, HELLA 's main focus is on entrepre- capital of the KGaA. The legal status of the (limited liability) Group management at present consists of Dr. Jürgen Beh- can ultimately veto any such decision. These statutory rights neurial guidelines that implement long-term goals and sus- shareholders does not differ significantly from that of the rend as Managing General Partner and the Managing Direc- are linked to his position as Managing General Partner and tainability, as well as compliance with standards of law and shareholders of a German stock corporation. tors of HELLA Geschäftsführungsgesellschaft mbH with its will lapse upon his resignation. ethical standards. President and CEO, Dr. Rolf Breidenbach. Following the resi- The Company currently has two General Partners, Dr. Jürgen gnation of Dr Behrend at the end of September 2017, group 2. Supervisory Board: competencies, functions and With the following explanations, the General Partners, the Behrend, who, however, will be resigning as Managing Gene- management will be carried out by the Managing Directors of committees Supervisory Board and the Shareholder Committee report on ral Partner from the company at the end of September 2017, HELLA Geschäftsführungsgesellschaft mbH solely. There are The role of the Supervisory Board is to advise and supervise corporate governance at HELLA in accordance with Section and HELLA Geschäftsführungsgesellschaft mbH, which has further Executive Boards in the segments and business divi- the General Partners in their conduct of the Company's busi - 3.10 of the German Corporate Governance Code (Deutscher its registered office in Lippstadt. The shares in HELLA Ge- sions that are responsible for the operational and strategic ness. In this respect, the competencies of the Supervisory Corporate Governance Kodex – DCGK) and, at the same time, schäftsführungsgesellschaft mbH are held by the Company. management of the business units. Entrepreneurial self-re- Board of HELLA KGaA Hueck & Co. are limited due to its legal on the conduct of the Company's business in accordance with Further governing bodies of HELLA KGaA Hueck & Co. are sponsibility is the basic principle for managing the business form. As opposed to the Supervisory Board of a stock corpo- Section 315 (5) of the German Commercial Code (Handelsge- at all levels. For material business transactions, the Group ration, the KGaA Supervisory Board is not responsible for setzbuch – HGB). Furthermore, the report contains the infor- 1 the Shareholder Committee established in accordance Management Board requires the approval of the HELLA appointments and dismissals in relation to the Company's mation and explanations required under Section 315 (4) and with the Articles of Association, which currently consists KGaA Hueck & Co. Shareholder Committee, which codetermi- Management Board. Nor does it have any power to issue ru- (5) HGB. An additional disclosure of such information and of six shareholder representatives elected by the Annual nes the significant guidelines for business by means of this les of procedure for the Company's Management Board or explanations in the notes is not necessary. General Meeting, process. determine which business decisions require its consent. The 2 the Supervisory Board, which is constituted on a parity main responsibilities of the Supervisory Board include the basis of eight shareholder representatives and eight Pursuant to the Articles of Association, the General Partners review and approval of the annual financial statements and employee representatives pursuant to the German are jointly responsible for the management of the Company's the consolidated financial statements, including the manage- Report on Corporate Governance Co-Determination Act (Mitbestimmungsgesetz – business. Important decisions, in particular the corporate ment report and the Group management report. The Super- MitbestG), and strategy and decisions going beyond the day-to-day opera- visory Board further examines the proposal for the appropri- I. CORPORATE GOVERNANCE MODEL OF HELLA 3 the Annual General Meeting. tions, are made jointly by the General Partners after consul - ation of distributable profit and prepares resolution proposals KGAA HUECK & CO. AND THE HELLA GROUP tation between Dr. Jürgen Behrend und Dr. Rolf Breidenbach, in respect of each agenda item on which the Annual General HELLA KGaA Hueck & Co. is a German partnership limited by HELLA has established the Shareholder Committee that – as whereas the Managing Directors of HELLA Geschäftsfüh- Meeting is to decide. The exercise of the authorisations gran- shares (Kommanditgesellschaft auf Aktien – KGaA). Its legal the central representative body of the shareholders – is res- rungsgesellschaft mbH, headed by its CEO Dr. Breidenbach, ted to the General Partners to increase the nominal capital form is a combination with similarities to a German limited ponsible for advising and supervising the Management Board are responsible for the operational implementation of the from authorised capital and to buy back treasury shares is partnership (Kommanditgesellschaft – KG) on the one hand on a continuous basis and may play an active role in manage- strategy and conducting the day-to-day business. In ac- also subject to the Supervisory Board's consent. The Super- and to a German stock corporation (Aktiengesellschaft – AG) ment issues, for example by determining which business cordance with the Articles of Association and at the request visory Board reports annually on its activities to the Annual on the other, with the main focus being on stock corporation transactions require its consent. When taking advantage of of a General Partner, the Shareholder Committee decides General Meeting, which adopts a resolution on its release. law. As with a German stock corporation, the KGaA is a corpo- such organisational scope inherent in the legal form of the over any differences of opinion between the General Partners ration whose nominal capital is divided into shares. As in a KGaA, HELLA emphasises transparency and equal treatment concerning management actions. However, according to the German limited partnership, the KGaA has two different groups of all shareholders. Resolutions of the Annual General Mee - Company's Articles of Association, this does not apply as long 68 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 69

ting, for example, are passed by a simple majority vote, un- as Dr. Jürgen Behrend acts as General Partner; in this case, less mandatory legal provisions or the Articles of Association he has the casting vote. Accordingly, he holds ultimate res- Corporate Governance of stipulate otherwise. This also applies to resolutions appoin- ponsibility for management matters. ting or removing General Partners. Furthermore, the requi- HELLA KGaA Hueck & Co. site consent of the General Partners to specific resolutions of The Annual General Meeting is responsible for the appoint- the Annual General Meeting as prescribed by law is excluded ment and removal of General Partners; according to the Ar- according to the Articles of Association, to the extent permit- ticles of Association, the relevant resolution of the Annual ted by law. In this and many other respects, HELLA KGaA General Meeting is passed by a simple majority of the votes Hueck & Co. closely follows the example of an ordinary stock cast, provided that such resolution does not require the Ge- corporation. neral Partners' consent. Pursuant to the Articles of Associa- tion, Dr. Behrend may terminate his function as Managing More detailed information on the differences to a stock corpo- General Partner effective as per the end of a quarter, giving ration specific to the legal form can be found in the declaration three months' notice to the Shareholder Committee. He gave of conformity (Entsprechenserklärung) of the General Part- notice of such a termination for the end of September 2017. ners, the Shareholder Committee and the Supervisory Board The Shareholder Committee is responsible for the appoint- The General Partners, the Supervisory Board and the Share - of partners; the personally liable partners (Komplementär(e)) as of 31 May 2017, which has been published on the Company's ment and removal of the Managing Directors of HELLA Ge- holder Committee of HELLA KGaA Hueck & Co. are commit- (General Partner(s)) that are responsible for managing the website under HELLA .COM/DECLARATIONOFCONFORMITY and schäftsführungsgesellschaft mbH, as well as for determining ted to the principles of transparent and responsible corporate KGaA's business and are personally liable without restrictions is reproduced below. the terms and conditions of their service agreements. The governance and control of the Company, attaching great pri- for the KGaA's liabilities, and the (limited liability) shareholders Articles of Association stipulate that Dr. Behrend has the right ority to the standards of good corporate governance. As a (Kommandit-Aktionäre) that hold an interest in the nominal 1. Group management by the General Partners to make proposals for such appointments and removals, and family-owned business, HELLA 's main focus is on entrepre- capital of the KGaA. The legal status of the (limited liability) Group management at present consists of Dr. Jürgen Beh- can ultimately veto any such decision. These statutory rights neurial guidelines that implement long-term goals and sus- shareholders does not differ significantly from that of the rend as Managing General Partner and the Managing Direc- are linked to his position as Managing General Partner and tainability, as well as compliance with standards of law and shareholders of a German stock corporation. tors of HELLA Geschäftsführungsgesellschaft mbH with its will lapse upon his resignation. ethical standards. President and CEO, Dr. Rolf Breidenbach. Following the resi- The Company currently has two General Partners, Dr. Jürgen gnation of Dr Behrend at the end of September 2017, group 2. Supervisory Board: competencies, functions and With the following explanations, the General Partners, the Behrend, who, however, will be resigning as Managing Gene- management will be carried out by the Managing Directors of committees Supervisory Board and the Shareholder Committee report on ral Partner from the company at the end of September 2017, HELLA Geschäftsführungsgesellschaft mbH solely. There are The role of the Supervisory Board is to advise and supervise corporate governance at HELLA in accordance with Section and HELLA Geschäftsführungsgesellschaft mbH, which has further Executive Boards in the segments and business divi- the General Partners in their conduct of the Company's busi - 3.10 of the German Corporate Governance Code (Deutscher its registered office in Lippstadt. The shares in HELLA Ge- sions that are responsible for the operational and strategic ness. In this respect, the competencies of the Supervisory Corporate Governance Kodex – DCGK) and, at the same time, schäftsführungsgesellschaft mbH are held by the Company. management of the business units. Entrepreneurial self-re- Board of HELLA KGaA Hueck & Co. are limited due to its legal on the conduct of the Company's business in accordance with Further governing bodies of HELLA KGaA Hueck & Co. are sponsibility is the basic principle for managing the business form. As opposed to the Supervisory Board of a stock corpo- Section 315 (5) of the German Commercial Code (Handelsge- at all levels. For material business transactions, the Group ration, the KGaA Supervisory Board is not responsible for setzbuch – HGB). Furthermore, the report contains the infor- 1 the Shareholder Committee established in accordance Management Board requires the approval of the HELLA appointments and dismissals in relation to the Company's mation and explanations required under Section 315 (4) and with the Articles of Association, which currently consists KGaA Hueck & Co. Shareholder Committee, which codetermi- Management Board. Nor does it have any power to issue ru- (5) HGB. An additional disclosure of such information and of six shareholder representatives elected by the Annual nes the significant guidelines for business by means of this les of procedure for the Company's Management Board or explanations in the notes is not necessary. General Meeting, process. determine which business decisions require its consent. The 2 the Supervisory Board, which is constituted on a parity main responsibilities of the Supervisory Board include the basis of eight shareholder representatives and eight Pursuant to the Articles of Association, the General Partners review and approval of the annual financial statements and employee representatives pursuant to the German are jointly responsible for the management of the Company's the consolidated financial statements, including the manage- Report on Corporate Governance Co-Determination Act (Mitbestimmungsgesetz – business. Important decisions, in particular the corporate ment report and the Group management report. The Super- MitbestG), and strategy and decisions going beyond the day-to-day opera- visory Board further examines the proposal for the appropri- I. CORPORATE GOVERNANCE MODEL OF HELLA 3 the Annual General Meeting. tions, are made jointly by the General Partners after consul - ation of distributable profit and prepares resolution proposals KGAA HUECK & CO. AND THE HELLA GROUP tation between Dr. Jürgen Behrend und Dr. Rolf Breidenbach, in respect of each agenda item on which the Annual General HELLA KGaA Hueck & Co. is a German partnership limited by HELLA has established the Shareholder Committee that – as whereas the Managing Directors of HELLA Geschäftsfüh- Meeting is to decide. The exercise of the authorisations gran- shares (Kommanditgesellschaft auf Aktien – KGaA). Its legal the central representative body of the shareholders – is res- rungsgesellschaft mbH, headed by its CEO Dr. Breidenbach, ted to the General Partners to increase the nominal capital form is a combination with similarities to a German limited ponsible for advising and supervising the Management Board are responsible for the operational implementation of the from authorised capital and to buy back treasury shares is partnership (Kommanditgesellschaft – KG) on the one hand on a continuous basis and may play an active role in manage- strategy and conducting the day-to-day business. In ac- also subject to the Supervisory Board's consent. The Super- and to a German stock corporation (Aktiengesellschaft – AG) ment issues, for example by determining which business cordance with the Articles of Association and at the request visory Board reports annually on its activities to the Annual on the other, with the main focus being on stock corporation transactions require its consent. When taking advantage of of a General Partner, the Shareholder Committee decides General Meeting, which adopts a resolution on its release. law. As with a German stock corporation, the KGaA is a corpo- such organisational scope inherent in the legal form of the over any differences of opinion between the General Partners ration whose nominal capital is divided into shares. As in a KGaA, HELLA emphasises transparency and equal treatment concerning management actions. However, according to the German limited partnership, the KGaA has two different groups of all shareholders. Resolutions of the Annual General Mee - Company's Articles of Association, this does not apply as long 70 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 71

As a rule, the Supervisory Board convenes four times a year. 3. Shareholder Committee: competencies, functions and Managing Directors of HELLA Geschäftsführungsgesellschaft Independence of their respective members is also an im- Resolutions of the Supervisory Board are adopted by a simple committees mbH and on their individual total remuneration, as well as on portant issue to which the Supervisory Board and the majority of the votes cast; each member has one vote. In case The legal form of the KGaA makes it possible to create further the individual total remuneration of the other General Part- Shareholder Committee wish to pay due regard in connec - of a tie, the Chairman has the casting vote if the stalemate optional corporate bodies. The Company took advantage of ners and the remuneration system applied in this context. tion with their respective composition, while taking into continues after a second vote on the same matter. this opportunity. The Shareholder Committee, which has been Notwithstanding the above, the Personnel Committee is res- account the ownership structure. This is why both the Su- created pursuant to the Articles of Association and is elected ponsible for the resolution regarding the conclusion, amend- pervisory Board and the Shareholder Committee have set The Supervisory Board has a Nomination Committee consis- by the Annual General Meeting, supervises and advises the ment and termination of the agreements with the General the objective that at least two members must be indepen- ting of the Chairman of the Supervisory Board and another General Partners in their conduct of the Company's business Partners and the service agreements of the Managing Direc- dent. As to the definition of independence, Section 5.4.2 Supervisory Board member representing the limited liability and can issue rules of procedure for them. In addition, it de- tors of HELLA Geschäftsführungsgesellschaft mbH. DCGK is applied, whereby a member is, in particular, not shareholders as elected by the Supervisory Board. The Nomi- termines which of the General Partners' transactions require considered to be independent if that member has any per- nation Committee prepares the proposals of the Supervisory its prior consent. It has management powers and power of 4. Cooperation of Management Board, Supervisory sonal or business relationship with the Company, its corpo- Board to the Annual General Meeting for the election of Super- representation for the legal relationship between the Compa- Board and Shareholder Committee rate bodies, a controlling shareholder or any of its affiliates, visory Board members. Currently, the members of the Nomi- ny and the General Partners, and it represents the Company The General Partners, the Supervisory Board and the Share- which could give rise to a material conflict of interest that is nation Committee are Prof. Dr. Michael Hoffmann-Becking and in legal disputes with the General Partners. holder Committee work together on the basis of mutual trust not merely temporary. Elisabeth Fries. Furthermore, the Supervisory Board has an in the best interests of the Company. Control of the manage- Audit Committee consisting of four Supervisory Board mem- The Shareholder Committee exercises all rights attached to ment of the Company is primarily exercised by the Sharehol- When determining their respective composition, the Super- bers elected by the Supervisory Board, of which two are share- the Company's shares in HELLA Geschäftsführungsgesell- der Committee. The management board has a reporting duty. visory Board and the Shareholder Committee also take into holder representatives and two are employee representatives. schaft mbH. In particular, it appoints and removes the Mana- The Shareholder Committee advises the General Partners, account the age limits as defined in the internal rules of Currently the members of the Audit Committee are Klaus Kühn ging Directors and is responsible for deciding on their employ- and for important business transactions and measures, procedure, according to which as a rule, only those persons (Chairman), Prof. Dr. Michael Hoffmann-Becking, Manfred ment contracts. The Articles of Association stipulate that Dr. which are defined by the Shareholder Committee in the rules may be proposed as Supervisory Board members who, at Menningen and Paul Berger. The Audit Committee is respon- Behrend has the right to make proposals for such appoint- of procedure for the General Partners, the consent of the the time of election, have not yet completed 75 years of age. sible for monitoring the accounting processes, the effectiven- ments and removals, and can ultimately veto any such decis- Shareholder Committee must be obtained. The Supervisory Election as member of the Shareholder Committee shall be ess of the internal control system, the risk management sys- ion. These statutory rights are linked to his position as Mana- Board is also responsible for supervising the management. possible for the last time in the year in which the member tem and the internal audit system, as well as the audit of the ging General Partner and will lapse upon his resignation. For this purpose, the General Partners submit reports on a completes 70 years of age. financial statements and compliance. It can propose recom- periodic basis and the Supervisory Board exercises informa- mendations or proposals to ensure the integrity of the accoun- Furthermore, the Shareholder Committee may issue rules of tion and inspection rights. In their respective composition, the Supervisory Board and ting process. Furthermore, it issues a recommendation to the procedure for the Management Board of HELLA Geschäfts- Shareholder Committee consider first and foremost the Supervisory Board for its proposal regarding the election of the führungsgesellschaft mbH. The Shareholder Committee is 5. Objectives regarding the composition of the Supervi- professional and personal qualification of future members. auditor to be submitted to the Annual General Meeting. This also responsible for executing shareholders' resolutions. In sory Board and the Shareholder Committee In this context, the two bodies also consider diversity. recommendation must be substantiated in cases of inviting accordance with its rules of procedure, the Shareholder Com- tenders for the audit mandate and must include at least two mittee also reviews the annual and consolidated financial a) Content of the objectives for the committee composition Against the background of the duties of the Supervisory candidates. It decides instead of the Supervisory Board on the statements, the management report and the Group manage- and the competence profiles Board and the Shareholder Committee, and the accompa- agreements with the auditor (in particular the audit assign- ment report, as well as the proposal for the appropriation of Taking into account the specifics of the enterprise, the Super- nying requirements of the skills and knowledge of the ment, determination of the main points of the audit and the fee distributable profit; in addition, it submits resolution proposals visory Board and the Shareholder Committee have specified members, both the Supervisory Board and the Shareholder agreement) and takes appropriate measures in order to esta- in respect of each agenda item on which the Annual General objectives regarding their future composition, as well as dra- Committee have drawn up and agreed on a competence blish and monitor the independence of the auditor. The Audit Meeting is to decide. Further, the Shareholder Committee re- wing up competence profiles for each of all the bodies. These profile for the Board as a whole. The following competencies Committee also deals with any additional services provided by ports annually on its activities to the Annual General Meeting, objectives and competence profiles are to be taken into ac- should be embodied in at least one member in both the the auditor. It validates the Management Board report about which adopts a resolution on its release. count by the bodies in new elections in their respective elec- Supervisory Board and the Shareholder Committee: (1) ma- the conclusions of the selection process. It is responsible for tion proposals. This applies mutatis mutandis in the case of nagement experience in international markets, (2) industry approving the award of non-audit services to be undertaken by As a rule, the Shareholder Committee convenes five times a judicial appointments of Supervisory Board members. expertise in the automotive industry or other manufacturing the auditor that are not prohibited, whereby it may adopt direc- year. Resolutions of the Supervisory Board are adopted by a industries, (3) expertise in the areas of accounting or audi - tives in relation to tax advisory services that are not forbidden, simple majority of the votes cast; each member has one vote. In their respective composition, the Supervisory Board and ting and (4) experience in areas of law (for example compli- within the scope of which the award of such services does not In case of a tie, the Chairman has the casting vote if the stale- the Shareholder Committee shall take into account the inter- ance) that are relevant for HELLA . require individual authorisation. The Audit Committee also mate continues after a second vote on the same matter. national activities of the HELLA Group. For this reason, it is prepares the Supervisory Board's decisions on the approval of intended that both the Supervisory Board and the Shareholder b) Status of implementation of the composition objectives the annual financial statements and consolidated financial The Shareholder Committee has established a Personnel Committee have at least two members with relevant interna- and competence profiles statements. For this purpose, it is responsible for conducting Committee consisting of its Chairman and two further mem- tional experience, which means – for example – that they have In its current composition, the Shareholder Committee meets an initial review of the annual financial statements, the conso- bers elected by the Shareholder Committee. Besides Manfred worked abroad or have had significant interaction on an inter- all of the aforesaid composition objectives and the compe- lidated financial statements, the management report and the Wennemer, current Personnel Committee members are Ro- national level. Furthermore, the Supervisory Board and the tence profile. The current composition of the Supervisory Group management report, and the proposal for the appropri- land Hammerstein and Konstantin Thomas. The Personnel Shareholder Committee take into account potential conflicts Board, too, also meets all of the aforementioned composition ation of distributable profit. The auditor participates in these Committee is responsible for preparing the Shareholder of interest of the members when determining their respective objectives and competence profile except for the objective meetings of the Audit Committee. Committee's resolutions on the appointment and removal of composition. regarding the age limit. 70 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 71

As a rule, the Supervisory Board convenes four times a year. 3. Shareholder Committee: competencies, functions and Managing Directors of HELLA Geschäftsführungsgesellschaft Independence of their respective members is also an im- Resolutions of the Supervisory Board are adopted by a simple committees mbH and on their individual total remuneration, as well as on portant issue to which the Supervisory Board and the majority of the votes cast; each member has one vote. In case The legal form of the KGaA makes it possible to create further the individual total remuneration of the other General Part- Shareholder Committee wish to pay due regard in connec - of a tie, the Chairman has the casting vote if the stalemate optional corporate bodies. The Company took advantage of ners and the remuneration system applied in this context. tion with their respective composition, while taking into continues after a second vote on the same matter. this opportunity. The Shareholder Committee, which has been Notwithstanding the above, the Personnel Committee is res- account the ownership structure. This is why both the Su- created pursuant to the Articles of Association and is elected ponsible for the resolution regarding the conclusion, amend- pervisory Board and the Shareholder Committee have set The Supervisory Board has a Nomination Committee consis- by the Annual General Meeting, supervises and advises the ment and termination of the agreements with the General the objective that at least two members must be indepen- ting of the Chairman of the Supervisory Board and another General Partners in their conduct of the Company's business Partners and the service agreements of the Managing Direc- dent. As to the definition of independence, Section 5.4.2 Supervisory Board member representing the limited liability and can issue rules of procedure for them. In addition, it de- tors of HELLA Geschäftsführungsgesellschaft mbH. DCGK is applied, whereby a member is, in particular, not shareholders as elected by the Supervisory Board. The Nomi- termines which of the General Partners' transactions require considered to be independent if that member has any per- nation Committee prepares the proposals of the Supervisory its prior consent. It has management powers and power of 4. Cooperation of Management Board, Supervisory sonal or business relationship with the Company, its corpo- Board to the Annual General Meeting for the election of Super- representation for the legal relationship between the Compa- Board and Shareholder Committee rate bodies, a controlling shareholder or any of its affiliates, visory Board members. Currently, the members of the Nomi- ny and the General Partners, and it represents the Company The General Partners, the Supervisory Board and the Share- which could give rise to a material conflict of interest that is nation Committee are Prof. Dr. Michael Hoffmann-Becking and in legal disputes with the General Partners. holder Committee work together on the basis of mutual trust not merely temporary. Elisabeth Fries. Furthermore, the Supervisory Board has an in the best interests of the Company. Control of the manage- Audit Committee consisting of four Supervisory Board mem- The Shareholder Committee exercises all rights attached to ment of the Company is primarily exercised by the Sharehol- When determining their respective composition, the Super- bers elected by the Supervisory Board, of which two are share- the Company's shares in HELLA Geschäftsführungsgesell- der Committee. The management board has a reporting duty. visory Board and the Shareholder Committee also take into holder representatives and two are employee representatives. schaft mbH. In particular, it appoints and removes the Mana- The Shareholder Committee advises the General Partners, account the age limits as defined in the internal rules of Currently the members of the Audit Committee are Klaus Kühn ging Directors and is responsible for deciding on their employ- and for important business transactions and measures, procedure, according to which as a rule, only those persons (Chairman), Prof. Dr. Michael Hoffmann-Becking, Manfred ment contracts. The Articles of Association stipulate that Dr. which are defined by the Shareholder Committee in the rules may be proposed as Supervisory Board members who, at Menningen and Paul Berger. The Audit Committee is respon- Behrend has the right to make proposals for such appoint- of procedure for the General Partners, the consent of the the time of election, have not yet completed 75 years of age. sible for monitoring the accounting processes, the effectiven- ments and removals, and can ultimately veto any such decis- Shareholder Committee must be obtained. The Supervisory Election as member of the Shareholder Committee shall be ess of the internal control system, the risk management sys- ion. These statutory rights are linked to his position as Mana- Board is also responsible for supervising the management. possible for the last time in the year in which the member tem and the internal audit system, as well as the audit of the ging General Partner and will lapse upon his resignation. For this purpose, the General Partners submit reports on a completes 70 years of age. financial statements and compliance. It can propose recom- periodic basis and the Supervisory Board exercises informa- mendations or proposals to ensure the integrity of the accoun- Furthermore, the Shareholder Committee may issue rules of tion and inspection rights. In their respective composition, the Supervisory Board and ting process. Furthermore, it issues a recommendation to the procedure for the Management Board of HELLA Geschäfts- Shareholder Committee consider first and foremost the Supervisory Board for its proposal regarding the election of the führungsgesellschaft mbH. The Shareholder Committee is 5. Objectives regarding the composition of the Supervi- professional and personal qualification of future members. auditor to be submitted to the Annual General Meeting. This also responsible for executing shareholders' resolutions. In sory Board and the Shareholder Committee In this context, the two bodies also consider diversity. recommendation must be substantiated in cases of inviting accordance with its rules of procedure, the Shareholder Com- tenders for the audit mandate and must include at least two mittee also reviews the annual and consolidated financial a) Content of the objectives for the committee composition Against the background of the duties of the Supervisory candidates. It decides instead of the Supervisory Board on the statements, the management report and the Group manage- and the competence profiles Board and the Shareholder Committee, and the accompa- agreements with the auditor (in particular the audit assign- ment report, as well as the proposal for the appropriation of Taking into account the specifics of the enterprise, the Super- nying requirements of the skills and knowledge of the ment, determination of the main points of the audit and the fee distributable profit; in addition, it submits resolution proposals visory Board and the Shareholder Committee have specified members, both the Supervisory Board and the Shareholder agreement) and takes appropriate measures in order to esta- in respect of each agenda item on which the Annual General objectives regarding their future composition, as well as dra- Committee have drawn up and agreed on a competence blish and monitor the independence of the auditor. The Audit Meeting is to decide. Further, the Shareholder Committee re- wing up competence profiles for each of all the bodies. These profile for the Board as a whole. The following competencies Committee also deals with any additional services provided by ports annually on its activities to the Annual General Meeting, objectives and competence profiles are to be taken into ac- should be embodied in at least one member in both the the auditor. It validates the Management Board report about which adopts a resolution on its release. count by the bodies in new elections in their respective elec- Supervisory Board and the Shareholder Committee: (1) ma- the conclusions of the selection process. It is responsible for tion proposals. This applies mutatis mutandis in the case of nagement experience in international markets, (2) industry approving the award of non-audit services to be undertaken by As a rule, the Shareholder Committee convenes five times a judicial appointments of Supervisory Board members. expertise in the automotive industry or other manufacturing the auditor that are not prohibited, whereby it may adopt direc- year. Resolutions of the Supervisory Board are adopted by a industries, (3) expertise in the areas of accounting or audi - tives in relation to tax advisory services that are not forbidden, simple majority of the votes cast; each member has one vote. In their respective composition, the Supervisory Board and ting and (4) experience in areas of law (for example compli- within the scope of which the award of such services does not In case of a tie, the Chairman has the casting vote if the stale- the Shareholder Committee shall take into account the inter- ance) that are relevant for HELLA . require individual authorisation. The Audit Committee also mate continues after a second vote on the same matter. national activities of the HELLA Group. For this reason, it is prepares the Supervisory Board's decisions on the approval of intended that both the Supervisory Board and the Shareholder b) Status of implementation of the composition objectives the annual financial statements and consolidated financial The Shareholder Committee has established a Personnel Committee have at least two members with relevant interna- and competence profiles statements. For this purpose, it is responsible for conducting Committee consisting of its Chairman and two further mem- tional experience, which means – for example – that they have In its current composition, the Shareholder Committee meets an initial review of the annual financial statements, the conso- bers elected by the Shareholder Committee. Besides Manfred worked abroad or have had significant interaction on an inter- all of the aforesaid composition objectives and the compe- lidated financial statements, the management report and the Wennemer, current Personnel Committee members are Ro- national level. Furthermore, the Supervisory Board and the tence profile. The current composition of the Supervisory Group management report, and the proposal for the appropri- land Hammerstein and Konstantin Thomas. The Personnel Shareholder Committee take into account potential conflicts Board, too, also meets all of the aforementioned composition ation of distributable profit. The auditor participates in these Committee is responsible for preparing the Shareholder of interest of the members when determining their respective objectives and competence profile except for the objective meetings of the Audit Committee. Committee's resolutions on the appointment and removal of composition. regarding the age limit. 72 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 73

c) Names of the independent shareholders' members by the General Partners. Shareholders whose aggregate shareholding in HELLA KGaA Hueck & Co. of more than 10 % to all shareholders for submission of sales offers. The Gene- (Section 5.4.1 para. 4, sentence 3 DCGK) shareholding reaches one-twentieth of the nominal capital of the voting rights. ral Partners are authorised to use the treasury shares that In the opinion of the Shareholder Committee, all of its mem- (i.e. € 11,111,112) may request the convening of an Annual Ge- have been acquired with the consent of the Shareholder bers (Manfred Wennemer, Roland Hammerstein, Dr. Gerd neral Meeting in writing, stating the purpose and reasons No shares have been issued that confer multiple voting rights, Committee and the Supervisory Board or all legally permis- Kleinert, Klaus Kühn, Dr. Matthias Röpke and Konstantin therefor. In the same manner, shareholders whose aggregate preferential voting rights, maximum voting rights or special sible purposes. In particular, the shares may be recalled Thomas) are independent in accordance as defined by the shareholding equals or exceeds a pro rata amount of € rights granting powers of control. No shareholding of emplo- without any further resolution being passed by the Annual DCGK. This opinion is not inconsistent with the fact that Ro- 500,000 may request that items be included in the agenda and yees exists in the Company's capital that would not enable the General Meeting, may be sold through the stock exchange or land Hammerstein, Dr. Matthias Röpke and Konstantin Tho- published. Furthermore, shareholders whose shares in ag- employees to directly exercise their shareholder rights. via a public offer directed to all shareholders pro rata to their mas are parties of the pool agreement of the family sharehol- gregate represent a proportionate amount of € 100,000 may respective interests or in a different way with the exclusion ders of HELLA KGaA Hueck & Co., which holds a total of submit a request to the Management Board, under certain 9. Authorised capital/ authorisation to buy back of the shareholders' subscription right, provided the sale 60.00 % of the Company's voting rights. This does not justify conditions, that a special auditor be appointed by the court to shares takes place against cash consideration and at a price that the threat of a material conflict of interest that is not merely review a procedure in the context of the Company's establish- In accordance with Article 5 (4) of the Articles of Association, does not significantly fall below the stock exchange price; in temporary nor do the aforementioned members therefore ment or a procedure that has taken place within the past five the General Partners are authorised to increase the nominal addition, if the subscription right is excluded, the shares may have relations with a "controlling shareholder" within the me- years. capital with the approval of the Supervisory Board and the be offered and transferred against contributions in kind, in aning of Section 5.4.2. DCGK, as the pool agreement does not Shareholder Committee by a total amount of € 44 million by particular in connection with the acquisition of companies, allow any of its contracting parties to hold a majority of the The resolutions of the Annual General Meeting are passed by issuing, on one or more occasions on or before 9 October parts of companies or shares in companies or any other voting rights in the Company. a simple majority of the votes cast, unless mandatory law or 2019, new no par value bearer shares against cash contribu- assets, or may be used to service rights or obligations to the Articles of Association dictate otherwise and, where the tions and/or contributions in kind. In this context, the share - purchase shares of HELLA KGaA Hueck & Co. resulting from The Supervisory Board believes that all shareholder repre- law requires a capital majority, with a simple majority of the holders must generally be granted a subscription right. How- convertible bonds or bonds with warrants or similar instru- sentatives, namely Prof. Dr. Michael Hoffmann-Becking, Ma- nominal capital represented at the time of passing the reso- ever, the General Partners are authorised to exclude, with the ments, or in connection with employee share ownership nuel Frenzel, Elisabeth Fries, Stephanie Hueck, Klaus Kühn, lution. This also applies, in particular, to amendments to the approval of the Supervisory Board and the Shareholder Com- plans. Claudia Owen, Dr. Konstanze Thämer and Christoph Thomas, Articles of Association and to the passing of a resolution on a mittee, the shareholders' subscription rights as follows: first- are also independent within the meaning of the above. For the transformation into a stock corporation. The Supervisory ly, in case of a capital increase against contributions in kind In this context, treasury shares may also be acquired using reasons outlined above, there is nothing to preclude that, with Board is authorised to resolve amendments of these Articles for the purpose of acquiring a business, parts of a business put or call options or forward contracts, or a combination of the exception of Prof. Dr. Michael Hoffmann-Becking and of Association that only relate to the version. or participations in a business or other assets; secondly, in so these instruments (derivatives). Derivatives may be issued or Klaus Kühn, all shareholder representatives are parties of the far as is necessary in order to grant a subscription right for acquired, excluding any subscription right of the sharehol- pool agreement of the family shareholders. 7. Restrictions concerning the voting rights or the newly issued shares to the holders or creditors of bonds is- ders, with a credit or financial institution, or another approp- transfer of shares sued by the Company bearing option or conversion rights or riate counterparty that is experienced in the derivatives busi- 6. Composition of the subscribed capital/sharehol- According to the notifications received by the Company, obligations (warrants or convertible bonds), to the extent that ness, with the proviso that, on the basis of the derivatives, ders' rights 60.00 % of the Company's voting rights (a total of 66,666,669 such subscription rights would exist after exercise of their only shares will be delivered that were acquired in keeping The nominal capital of the Company amounts to € 222,222,224 no par value shares) were pooled as of 31 May 2017 by way of option or conversion right or fulfillment of their option or con- with the principle of equal treatment. Moreover, the issuance and is divided into 111,111,112 no par value bearer shares All a pool agreement of the family members of HELLA KGaA version obligation; thirdly, if the notional value of the new or acquisition of derivatives may be publicly offered to all shares have been fully paid in. The Articles of Association Hueck & Co. Currently, a total of 62 members of the family of shares in the nominal capital does not exceed 10 % of the shareholders or may be effected through the derivatives ex- stipulate the shareholders' right to the issuance of share cer- shareholders (Hueck and Röpke families), as well as two le- nominal capital existing at the time this authorisation beco- change Eurex or a comparable successor system after prior tificates representing their respective shares shall be exclu- gal entities, form part of this pool agreement. The pool agree- mes effective and at the time a resolution to exercise the au- announcement in the Company's designated publication me- ded to the extent legally permitted and, unless such issuance ment may be terminated subject to notice for the first time as thorisation is adopted, provided that the issue price is not si- dia, with the exclusion of any subscription rights. The term of is required, in accordance with the regulations applicable to of 31 May 2024 and stipulates, among other things, that any gnificantly lower than the stock exchange price, and further the derivatives must be selected such that the acquisition of the stock exchange on which the shares are admitted. exercise of the voting rights conferred by the pooled shares is provided the notional value in the nominal capital of any the shares through the exercise of derivatives takes place on subject to a vote in a meeting of the pool members to be held shares that have been issued or sold with the exclusion of 30 October 2019 at the latest. The shareholders exercise their rights provided for by law or prior to the Annual General Meeting. Without the consent of subscription rights on the basis of a corresponding authori - by the Articles of Association before or during the Annual the other pool members, pooled shares may be transferred sation in direct or analogous application of Section 186 (3) 10. Material agreements with change-of-control General Meeting and exercise their voting rights in this con- only to descendants of Eduard Hueck sen., Richard Hueck sentence 4 AktG must be included in the calculation; and clauses/compensation agreements text. Each no par value share carries one vote at the Annual sen. or Dr. Wilhelm Röpke or their respective spouses. fourthly, for the avoidance of fractional shares. HELLA KGaA Hueck&Co. has entered into the material agree- General Meeting. In addition, in the Annual General Meeting ments set out below which contain change-of-control provi- shareholders may express their opinion on items on the 8. Major shareholders/ special rights/ participation of The General Partners are authorised, until 30 October 2019, sions, for example as a result of a takeover bid: agenda, propose motions and address questions to the Ge- employees in the capital to acquire treasury shares up to a total of 10 % of the nominal neral Partners. According to the notifications received by the Company, the capital or – if lower – of the nominal capital existing at the The listed bonds currently outstanding which HELLA has is- members of the pool agreement of the family shareholders time the authorisation is exercised. The acquisition is made sued (a 1.25 % bond maturing in September 2017 with a nomi- The Annual General Meeting of HELLA KGaA Hueck & Co. is of HELLA KGaA Hueck & Co. held as per 31 May 2017 a total of at the discretion of the General Partners with the consent of nal value of € 300 million, a 2.375 % bond maturing in January usually held in the first four months of the fiscal year at the 60.00 % of the Company's voting rights as a pooled sharehol- the Shareholder Committee and the Supervisory Board 2020 with a nominal value of € 500 million and a 1.0 % bond Company's registered office or in another German city that ding. In addition, the members of the pool agreements also through the stock exchange or via a public offer request di- maturing in May 2024 with a nominal volume of € 300 million) has more than 50,000 inhabitants. The meeting is convened hold shares that do not form part of the pool. There is no direct rected to all shareholders, or via a public invitation addressed are subject to change-of-control clauses under which the 72 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 73

c) Names of the independent shareholders' members by the General Partners. Shareholders whose aggregate shareholding in HELLA KGaA Hueck & Co. of more than 10 % to all shareholders for submission of sales offers. The Gene- (Section 5.4.1 para. 4, sentence 3 DCGK) shareholding reaches one-twentieth of the nominal capital of the voting rights. ral Partners are authorised to use the treasury shares that In the opinion of the Shareholder Committee, all of its mem- (i.e. € 11,111,112) may request the convening of an Annual Ge- have been acquired with the consent of the Shareholder bers (Manfred Wennemer, Roland Hammerstein, Dr. Gerd neral Meeting in writing, stating the purpose and reasons No shares have been issued that confer multiple voting rights, Committee and the Supervisory Board or all legally permis- Kleinert, Klaus Kühn, Dr. Matthias Röpke and Konstantin therefor. In the same manner, shareholders whose aggregate preferential voting rights, maximum voting rights or special sible purposes. In particular, the shares may be recalled Thomas) are independent in accordance as defined by the shareholding equals or exceeds a pro rata amount of € rights granting powers of control. No shareholding of emplo- without any further resolution being passed by the Annual DCGK. This opinion is not inconsistent with the fact that Ro- 500,000 may request that items be included in the agenda and yees exists in the Company's capital that would not enable the General Meeting, may be sold through the stock exchange or land Hammerstein, Dr. Matthias Röpke and Konstantin Tho- published. Furthermore, shareholders whose shares in ag- employees to directly exercise their shareholder rights. via a public offer directed to all shareholders pro rata to their mas are parties of the pool agreement of the family sharehol- gregate represent a proportionate amount of € 100,000 may respective interests or in a different way with the exclusion ders of HELLA KGaA Hueck & Co., which holds a total of submit a request to the Management Board, under certain 9. Authorised capital/ authorisation to buy back of the shareholders' subscription right, provided the sale 60.00 % of the Company's voting rights. This does not justify conditions, that a special auditor be appointed by the court to shares takes place against cash consideration and at a price that the threat of a material conflict of interest that is not merely review a procedure in the context of the Company's establish- In accordance with Article 5 (4) of the Articles of Association, does not significantly fall below the stock exchange price; in temporary nor do the aforementioned members therefore ment or a procedure that has taken place within the past five the General Partners are authorised to increase the nominal addition, if the subscription right is excluded, the shares may have relations with a "controlling shareholder" within the me- years. capital with the approval of the Supervisory Board and the be offered and transferred against contributions in kind, in aning of Section 5.4.2. DCGK, as the pool agreement does not Shareholder Committee by a total amount of € 44 million by particular in connection with the acquisition of companies, allow any of its contracting parties to hold a majority of the The resolutions of the Annual General Meeting are passed by issuing, on one or more occasions on or before 9 October parts of companies or shares in companies or any other voting rights in the Company. a simple majority of the votes cast, unless mandatory law or 2019, new no par value bearer shares against cash contribu- assets, or may be used to service rights or obligations to the Articles of Association dictate otherwise and, where the tions and/or contributions in kind. In this context, the share - purchase shares of HELLA KGaA Hueck & Co. resulting from The Supervisory Board believes that all shareholder repre- law requires a capital majority, with a simple majority of the holders must generally be granted a subscription right. How- convertible bonds or bonds with warrants or similar instru- sentatives, namely Prof. Dr. Michael Hoffmann-Becking, Ma- nominal capital represented at the time of passing the reso- ever, the General Partners are authorised to exclude, with the ments, or in connection with employee share ownership nuel Frenzel, Elisabeth Fries, Stephanie Hueck, Klaus Kühn, lution. This also applies, in particular, to amendments to the approval of the Supervisory Board and the Shareholder Com- plans. Claudia Owen, Dr. Konstanze Thämer and Christoph Thomas, Articles of Association and to the passing of a resolution on a mittee, the shareholders' subscription rights as follows: first- are also independent within the meaning of the above. For the transformation into a stock corporation. The Supervisory ly, in case of a capital increase against contributions in kind In this context, treasury shares may also be acquired using reasons outlined above, there is nothing to preclude that, with Board is authorised to resolve amendments of these Articles for the purpose of acquiring a business, parts of a business put or call options or forward contracts, or a combination of the exception of Prof. Dr. Michael Hoffmann-Becking and of Association that only relate to the version. or participations in a business or other assets; secondly, in so these instruments (derivatives). Derivatives may be issued or Klaus Kühn, all shareholder representatives are parties of the far as is necessary in order to grant a subscription right for acquired, excluding any subscription right of the sharehol- pool agreement of the family shareholders. 7. Restrictions concerning the voting rights or the newly issued shares to the holders or creditors of bonds is- ders, with a credit or financial institution, or another approp- transfer of shares sued by the Company bearing option or conversion rights or riate counterparty that is experienced in the derivatives busi- 6. Composition of the subscribed capital/sharehol- According to the notifications received by the Company, obligations (warrants or convertible bonds), to the extent that ness, with the proviso that, on the basis of the derivatives, ders' rights 60.00 % of the Company's voting rights (a total of 66,666,669 such subscription rights would exist after exercise of their only shares will be delivered that were acquired in keeping The nominal capital of the Company amounts to € 222,222,224 no par value shares) were pooled as of 31 May 2017 by way of option or conversion right or fulfillment of their option or con- with the principle of equal treatment. Moreover, the issuance and is divided into 111,111,112 no par value bearer shares All a pool agreement of the family members of HELLA KGaA version obligation; thirdly, if the notional value of the new or acquisition of derivatives may be publicly offered to all shares have been fully paid in. The Articles of Association Hueck & Co. Currently, a total of 62 members of the family of shares in the nominal capital does not exceed 10 % of the shareholders or may be effected through the derivatives ex- stipulate the shareholders' right to the issuance of share cer- shareholders (Hueck and Röpke families), as well as two le- nominal capital existing at the time this authorisation beco- change Eurex or a comparable successor system after prior tificates representing their respective shares shall be exclu- gal entities, form part of this pool agreement. The pool agree- mes effective and at the time a resolution to exercise the au- announcement in the Company's designated publication me- ded to the extent legally permitted and, unless such issuance ment may be terminated subject to notice for the first time as thorisation is adopted, provided that the issue price is not si- dia, with the exclusion of any subscription rights. The term of is required, in accordance with the regulations applicable to of 31 May 2024 and stipulates, among other things, that any gnificantly lower than the stock exchange price, and further the derivatives must be selected such that the acquisition of the stock exchange on which the shares are admitted. exercise of the voting rights conferred by the pooled shares is provided the notional value in the nominal capital of any the shares through the exercise of derivatives takes place on subject to a vote in a meeting of the pool members to be held shares that have been issued or sold with the exclusion of 30 October 2019 at the latest. The shareholders exercise their rights provided for by law or prior to the Annual General Meeting. Without the consent of subscription rights on the basis of a corresponding authori - by the Articles of Association before or during the Annual the other pool members, pooled shares may be transferred sation in direct or analogous application of Section 186 (3) 10. Material agreements with change-of-control General Meeting and exercise their voting rights in this con- only to descendants of Eduard Hueck sen., Richard Hueck sentence 4 AktG must be included in the calculation; and clauses/compensation agreements text. Each no par value share carries one vote at the Annual sen. or Dr. Wilhelm Röpke or their respective spouses. fourthly, for the avoidance of fractional shares. HELLA KGaA Hueck&Co. has entered into the material agree- General Meeting. In addition, in the Annual General Meeting ments set out below which contain change-of-control provi- shareholders may express their opinion on items on the 8. Major shareholders/ special rights/ participation of The General Partners are authorised, until 30 October 2019, sions, for example as a result of a takeover bid: agenda, propose motions and address questions to the Ge- employees in the capital to acquire treasury shares up to a total of 10 % of the nominal neral Partners. According to the notifications received by the Company, the capital or – if lower – of the nominal capital existing at the The listed bonds currently outstanding which HELLA has is- members of the pool agreement of the family shareholders time the authorisation is exercised. The acquisition is made sued (a 1.25 % bond maturing in September 2017 with a nomi- The Annual General Meeting of HELLA KGaA Hueck & Co. is of HELLA KGaA Hueck & Co. held as per 31 May 2017 a total of at the discretion of the General Partners with the consent of nal value of € 300 million, a 2.375 % bond maturing in January usually held in the first four months of the fiscal year at the 60.00 % of the Company's voting rights as a pooled sharehol- the Shareholder Committee and the Supervisory Board 2020 with a nominal value of € 500 million and a 1.0 % bond Company's registered office or in another German city that ding. In addition, the members of the pool agreements also through the stock exchange or via a public offer request di- maturing in May 2024 with a nominal volume of € 300 million) has more than 50,000 inhabitants. The meeting is convened hold shares that do not form part of the pool. There is no direct rected to all shareholders, or via a public invitation addressed are subject to change-of-control clauses under which the 74 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 75

bond creditors may demand early repayment if a person or responsibility for each HELLA employee, irrespective of their the Compliance Board, which meets regularly as an advisory All new HELLA employees throughout the Group will conti - group of persons acting jointly gains control over HELLA position within the Company. As a result, processes and or- and decision-making body, include the Chief Compliance Of- nue to be invited to the e-learning module “Code of Conduct KGaA Hueck&Co. and the rating is lowered on account of this ganisational structures at HELLA are always aligned in such ficer, the Head of the Compliance Office and the heads of the and Compliance Fundamentals" as part of the onboarding within 120 days of the change of control. In addition, HELLA a way as to enable the entrepreneurial self-responsibility of following business areas: Corporate Finance, Risk Manage- process and their participation will be monitored. KGaA Hueck & Co. has been granted a syndicated cash credit its employees. ment, Corporate Audit, Corporate Communications and HR. facility of € 450 million on which it has not yet drawn. This Further details on the corporate philosophy and the principles facility expires on 1 June 2022 and is also subject to a change- The core of our corporate culture consists of seven basic va- In addition to the basic elements of compliance organisation, of corporate governance can be found online under of-control clause, under which the creditors may terminate lues of the HELLA Group, which were defined under the head- targets, culture and communications, the HELLA compliance WWW. HELLA .COM/CORPORATERESPONSIBILITY. the facility and call in all outstanding amounts if a person or line "Professionalism and a Human Approach" as the basis for system includes above all the pillars of the compliance program- a group of persons acting jointly gains control of HELLA KGaA lasting corporate success: entrepreneurial spirit, cooperati- me which must be developed (further) for each compliance issue: III. DETERMINATIONS REGARDING FEMALE Hueck & Co. In all these cases, control is particularly deemed on, sustainability, performance orientation, innovation, inte- risk analysis, information/instruction (prevention), controls and REPRESENTATION PURSUANT TO SECTION 76 (4) to have been gained if more than 50 % of the voting-entitled grity and exemplary behaviour by each and every individual. detection as well as reaction. AND SECTION 111 (5) AKTG AND INFORMATION shares are acquired. If any of the aforementioned instru- ABOUT THE GENDER QUOTA PURSUANT TO SEC - ments are prematurely called in as a result of such change of These values give rise to basic rules of behaviour which In order to strengthen the exchange between the individual TION 96 (2) AKTG control, this could have a significant effect on HELLA 's net HELLA has anchored in its Code of Conduct. They are binding central technical compliance divisions on cross-divisional The Management Board of HELLA KGaA Hueck & Co. had assets, financial condition and results of operations. for all Group employees all over the world. The Code of Con- topics and to support the focus of these specialist divisions on determined a target level of 9 % for female representation in duct brings together the basic rules on ethical dealings that the requirements of the compliance guidelines in developing the first management level below the Management Board. The Company has not entered into any compensation agree- apply within the HELLA Group between employees but also and expanding the respective compliance programme, regu- For the second management level below the Management ments with any members of management (General Partners in relation to business partners, public authorities and other lar meetings have been held since November 2016 between Board, the target level was set at 5.6 %. Both target levels and Managing Directors of HELLA Geschäftsführungsgesell- third parties in conformity with the law. It is an expression of the persons responsible in the central technical compliance were to be reached by 30 June 2017. schaft mbH) or employees in the event of any takeover bid. the self-perception of the HELLA Group, which is to meet the divisions, under the direction of the Compliance Office. responsibility towards the company in relation to sharehol- HELLA raised the female representation in the first manage- II. CORPORATE GOVERNANCE AND COMPLIANCE ders and society and to live up to the expectations of our Through worldwide in-class events and web-based training ment level from 6.94 % (April 2015) to 8.14 % (June 2017) and in In the interest of proper corporate governance, the members customers, suppliers and business partners anew every day. (e-learning), directives and other publications together with the second management level from 3.60 % (April 2015) to of the Management Board conduct the Company's business in The Code of Conduct for example is complemented by a Com- advice in day-to-day operations, the heads of the central spe- 4.88 % (June 2017). HELLA has taken various measures to accordance with statutory rules, the provisions of the Articles pliance Declaration on observing the rules of competition law. cialist compliance divisions ensure that all employees around specifically promote women and sees the clear effects of the- of Association of HELLA KGaA Hueck & Co. and HELLA Ge- the world are familiar with the correct way of handling statu- se measures in the increasing ratios, even though the objec- schäftsführungsgesellschaft mbH and the rules of procedure Compliance – compliant behaviour and acting with integrity tory and internal rules, including the HELLA Code of Conduct. tives set for June 2017 could not be achieved in full. Over the for the General Partners and HELLA Geschäftsführungsge- – is an integral part of the corporate culture, forms the basis These measures are a key preventative component of our next five years, HELLA is targeting a further, continuous rise sellschaft mbH. In addition, the Management Board acts in for the business activities and is a prerequisite for sustained continuous compliance management. in the female representation to 9.5 % in the first management accordance with the requirements set by the compliance gui- corporate success. The HELLA Corporate Compliance Office level and to 6 % in the second management level. delines, its Code of Conduct, the Corporate Governance Prin- is responsible for the Group-wide compliance organisation Alongside the establishment and expansion of the HELLA ciples, its resolutions and other corporate rules. and compliance management system that are anchored in compliance system and the HELLA compliance organisation, No further determinations by the Supervisory Board pursu - the fundamental HELLA compliance guideline. one focus of the Compliance Office in the past fiscal year was ant to Section 111 (5) sentence 4 AktG have been made for Management practices extending beyond statutory require- on the group-wide introduction of the web-based whistleblo - reasons specific to the Company's legal form. In contrast to a ments primarily result from our corporate philosophy. HELLA The Chief Compliance Officer and the Head of the Compliance wer portal "Tell US". Employees may report grave misconduct stock corporation, the Supervisory Board of a KGaA does not is firmly convinced that corporate success is founded on a Office coordinate the compliance organisation, enhancing the via this portal – day and night and anonymously if wished. "Tell have the authority to decide on the composition of the Ma- corporate culture based on values. Equally important is the HELLA compliance system, and are responsible for the topics Us" offers an additional channel of communication, if a perso- nagement Board. responsible treatment of employees, partners, society and of antitrust law, anti-corruption legislation and capital market nal conversation – which continues to be the primary channel the environment. law. They report regularly to the Management Board and to of communication in line with the culture of open communi- The composition of the Supervisory Board is governed by the the Audit Committee of the Supervisory Board. The Chief cation at HELLA – cannot be considered. The portal also ena- mandatory requirement of Section 96 (2) AktG which speci- HELLA 's primary goal is customer satisfaction. At its core, Compliance Officer reports to the President and CEO. Local bles the whistleblower to enter into an anonymous dialogue. fies that at least 30 % of its members must be women and at this corporate philosophy is based on a comprehensive un- compliance officers such as the Compliance Officer China and "Tell Us" notifications are logged centrally at the Compliance least 30 % must be men. This requirement is met. Currently, derstanding of quality that is not limited to product quality but Mexico report to the Head of the Compliance Office. For other Office and the Corporate Audit and Corporate Security depart- six of the 16 Supervisory Board members (and four of the which also covers all of the Company's activities. compliance matters (such as data protection, export control/ ments, and are processed according to the incident guideline eight shareholder representatives) are women, which corre- customs), specialist functions within the HELLA Group are – as in the past and with notifications incoming via other re - sponds to a quota of 37.5 %. So far, neither the shareholder For the corporate culture, too, customer satisfaction is the responsible as central technical compliance divisions who are porting channels as before. The processing including the representative's side nor the employee representative side point of departure and prime objective. It can be achieved only performing this task competently and independently with the closure of the process is documented in the "Tell Us" portal. has objected to the overall fulfillment of the quota if every employee internalises customer satisfaction indivi- support of the Compliance Office. The compliance organisati- The introduction of the whistleblower portal started in Ger- requirement. dually as their own target and takes personal responsibility on is supplemented by a Compliance Board and the local com- many in June 2016, followed gradually by most other coun- for achieving it. Consequently, the Company's guiding strate- pliance officers, who are responsible for compliance measu- tries in Europe and worldwide during the course of the last gic principle is to demand and promote entrepreneurial self- res within the individual companies. Permanent members of fiscal year. 74 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 75

bond creditors may demand early repayment if a person or responsibility for each HELLA employee, irrespective of their the Compliance Board, which meets regularly as an advisory All new HELLA employees throughout the Group will conti - group of persons acting jointly gains control over HELLA position within the Company. As a result, processes and or- and decision-making body, include the Chief Compliance Of- nue to be invited to the e-learning module “Code of Conduct KGaA Hueck&Co. and the rating is lowered on account of this ganisational structures at HELLA are always aligned in such ficer, the Head of the Compliance Office and the heads of the and Compliance Fundamentals" as part of the onboarding within 120 days of the change of control. In addition, HELLA a way as to enable the entrepreneurial self-responsibility of following business areas: Corporate Finance, Risk Manage- process and their participation will be monitored. KGaA Hueck & Co. has been granted a syndicated cash credit its employees. ment, Corporate Audit, Corporate Communications and HR. facility of € 450 million on which it has not yet drawn. This Further details on the corporate philosophy and the principles facility expires on 1 June 2022 and is also subject to a change- The core of our corporate culture consists of seven basic va- In addition to the basic elements of compliance organisation, of corporate governance can be found online under of-control clause, under which the creditors may terminate lues of the HELLA Group, which were defined under the head- targets, culture and communications, the HELLA compliance WWW. HELLA .COM/CORPORATERESPONSIBILITY. the facility and call in all outstanding amounts if a person or line "Professionalism and a Human Approach" as the basis for system includes above all the pillars of the compliance program- a group of persons acting jointly gains control of HELLA KGaA lasting corporate success: entrepreneurial spirit, cooperati- me which must be developed (further) for each compliance issue: III. DETERMINATIONS REGARDING FEMALE Hueck & Co. In all these cases, control is particularly deemed on, sustainability, performance orientation, innovation, inte- risk analysis, information/instruction (prevention), controls and REPRESENTATION PURSUANT TO SECTION 76 (4) to have been gained if more than 50 % of the voting-entitled grity and exemplary behaviour by each and every individual. detection as well as reaction. AND SECTION 111 (5) AKTG AND INFORMATION shares are acquired. If any of the aforementioned instru- ABOUT THE GENDER QUOTA PURSUANT TO SEC - ments are prematurely called in as a result of such change of These values give rise to basic rules of behaviour which In order to strengthen the exchange between the individual TION 96 (2) AKTG control, this could have a significant effect on HELLA 's net HELLA has anchored in its Code of Conduct. They are binding central technical compliance divisions on cross-divisional The Management Board of HELLA KGaA Hueck & Co. had assets, financial condition and results of operations. for all Group employees all over the world. The Code of Con- topics and to support the focus of these specialist divisions on determined a target level of 9 % for female representation in duct brings together the basic rules on ethical dealings that the requirements of the compliance guidelines in developing the first management level below the Management Board. The Company has not entered into any compensation agree- apply within the HELLA Group between employees but also and expanding the respective compliance programme, regu- For the second management level below the Management ments with any members of management (General Partners in relation to business partners, public authorities and other lar meetings have been held since November 2016 between Board, the target level was set at 5.6 %. Both target levels and Managing Directors of HELLA Geschäftsführungsgesell- third parties in conformity with the law. It is an expression of the persons responsible in the central technical compliance were to be reached by 30 June 2017. schaft mbH) or employees in the event of any takeover bid. the self-perception of the HELLA Group, which is to meet the divisions, under the direction of the Compliance Office. responsibility towards the company in relation to sharehol- HELLA raised the female representation in the first manage- II. CORPORATE GOVERNANCE AND COMPLIANCE ders and society and to live up to the expectations of our Through worldwide in-class events and web-based training ment level from 6.94 % (April 2015) to 8.14 % (June 2017) and in In the interest of proper corporate governance, the members customers, suppliers and business partners anew every day. (e-learning), directives and other publications together with the second management level from 3.60 % (April 2015) to of the Management Board conduct the Company's business in The Code of Conduct for example is complemented by a Com- advice in day-to-day operations, the heads of the central spe- 4.88 % (June 2017). HELLA has taken various measures to accordance with statutory rules, the provisions of the Articles pliance Declaration on observing the rules of competition law. cialist compliance divisions ensure that all employees around specifically promote women and sees the clear effects of the- of Association of HELLA KGaA Hueck & Co. and HELLA Ge- the world are familiar with the correct way of handling statu- se measures in the increasing ratios, even though the objec- schäftsführungsgesellschaft mbH and the rules of procedure Compliance – compliant behaviour and acting with integrity tory and internal rules, including the HELLA Code of Conduct. tives set for June 2017 could not be achieved in full. Over the for the General Partners and HELLA Geschäftsführungsge- – is an integral part of the corporate culture, forms the basis These measures are a key preventative component of our next five years, HELLA is targeting a further, continuous rise sellschaft mbH. In addition, the Management Board acts in for the business activities and is a prerequisite for sustained continuous compliance management. in the female representation to 9.5 % in the first management accordance with the requirements set by the compliance gui- corporate success. The HELLA Corporate Compliance Office level and to 6 % in the second management level. delines, its Code of Conduct, the Corporate Governance Prin- is responsible for the Group-wide compliance organisation Alongside the establishment and expansion of the HELLA ciples, its resolutions and other corporate rules. and compliance management system that are anchored in compliance system and the HELLA compliance organisation, No further determinations by the Supervisory Board pursu - the fundamental HELLA compliance guideline. one focus of the Compliance Office in the past fiscal year was ant to Section 111 (5) sentence 4 AktG have been made for Management practices extending beyond statutory require- on the group-wide introduction of the web-based whistleblo - reasons specific to the Company's legal form. In contrast to a ments primarily result from our corporate philosophy. HELLA The Chief Compliance Officer and the Head of the Compliance wer portal "Tell US". Employees may report grave misconduct stock corporation, the Supervisory Board of a KGaA does not is firmly convinced that corporate success is founded on a Office coordinate the compliance organisation, enhancing the via this portal – day and night and anonymously if wished. "Tell have the authority to decide on the composition of the Ma- corporate culture based on values. Equally important is the HELLA compliance system, and are responsible for the topics Us" offers an additional channel of communication, if a perso- nagement Board. responsible treatment of employees, partners, society and of antitrust law, anti-corruption legislation and capital market nal conversation – which continues to be the primary channel the environment. law. They report regularly to the Management Board and to of communication in line with the culture of open communi- The composition of the Supervisory Board is governed by the the Audit Committee of the Supervisory Board. The Chief cation at HELLA – cannot be considered. The portal also ena- mandatory requirement of Section 96 (2) AktG which speci- HELLA 's primary goal is customer satisfaction. At its core, Compliance Officer reports to the President and CEO. Local bles the whistleblower to enter into an anonymous dialogue. fies that at least 30 % of its members must be women and at this corporate philosophy is based on a comprehensive un- compliance officers such as the Compliance Officer China and "Tell Us" notifications are logged centrally at the Compliance least 30 % must be men. This requirement is met. Currently, derstanding of quality that is not limited to product quality but Mexico report to the Head of the Compliance Office. For other Office and the Corporate Audit and Corporate Security depart- six of the 16 Supervisory Board members (and four of the which also covers all of the Company's activities. compliance matters (such as data protection, export control/ ments, and are processed according to the incident guideline eight shareholder representatives) are women, which corre- customs), specialist functions within the HELLA Group are – as in the past and with notifications incoming via other re - sponds to a quota of 37.5 %. So far, neither the shareholder For the corporate culture, too, customer satisfaction is the responsible as central technical compliance divisions who are porting channels as before. The processing including the representative's side nor the employee representative side point of departure and prime objective. It can be achieved only performing this task competently and independently with the closure of the process is documented in the "Tell Us" portal. has objected to the overall fulfillment of the quota if every employee internalises customer satisfaction indivi- support of the Compliance Office. The compliance organisati- The introduction of the whistleblower portal started in Ger- requirement. dually as their own target and takes personal responsibility on is supplemented by a Compliance Board and the local com- many in June 2016, followed gradually by most other coun- for achieving it. Consequently, the Company's guiding strate- pliance officers, who are responsible for compliance measu- tries in Europe and worldwide during the course of the last gic principle is to demand and promote entrepreneurial self- res within the individual companies. Permanent members of fiscal year. 76 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 77

IV. APPLICATION OF THE GERMAN CORPORATE Dr. Rolf Breidenbach (President and CEO), Markus Bannert, its Articles of Association, these recommendations are a Deviating from Section 4.2.2. para. 2, sentence 3, the GOVERNANCE CODE Dr. Werner Benade, Stefan Osterhage, Ulric Bernard Schäfer- deemed to apply to the Shareholder Committee. Shareholder Committee has not considered the relation - The General Partners as well as the Shareholder Committee barthold and Dr. Matthias Schöllmann. Unlike the board of ship between the remuneration of the Management and Supervisory Board of HELLA KGaA Hueck & Co. publish directors of a stock corporation, the Managing Directors of 3. Supervisory Board Board (i.e. Dr. Jürgen Behrend and the Managing an annual declaration in accordance with Section 161 AktG HELLA Geschäftsführungsgesellschaft mbH are appointed Compared to the supervisory board of a stock corporation, Directors of HELLA Geschäftsführungsgellschaft mbH) confirming conformity to the recommendations of the for an indefinite period of time. There is only a chairman or the supervisory board of a KGaA has limited powers. In par- and that of senior management and the staff overall. The "Government Commission for the German Corporate Gover- speaker of the company's Management Board at the level of ticular, it is not responsible for appointments and dismissals responsibilities of the individual members of the nance Code" published by the German Federal Ministry of HELLA Geschäftsführungsgesellschaft mbH but not at the in relation to the Company's management. Nor does it have Management Board, his/her personal performance, the Justice in the official part of Bundesanzeiger and disclose any level of the General Partners. The shares in HELLA Ge- any power to issue rules of procedure for the Company's economic situation and performance of the Group, and recommendations which are or have not been conformed to, schäftsführungsgesellschaft mbH are held by the Company. Management Board or determine which business decisions the remuneration levels at peer companies are conside- stating the reasons for this. On 31 May 2017, the Managing The resultant shareholder rights are exercised by the Share- require its consent. red more appropriate and meaningful benchmarks for General Partners as well as the Shareholder Committee and holder Committee. determining the level of remuneration. the Supervisory Board of KGaA Hueck & Co. published the 4. Annual General Meeting declaration below in accordance with Section 161 AktG on the 2. Shareholder Committee The legal status of the Annual General Meeting is not dissimi- b Deviating from Section 4.2.3 Paragraph 3, the level of Company's website. The legal form of the KGaA , as opposed to that of a stock lar to that of a stock corporation. In particular, it elects the provision aimed for under the pension scheme for the corporation, makes it possible to establish further optional members of the Supervisory Board and the Shareholder Management Board has not been established. The Declaration regarding the German Corporate Gover- corporate bodies. The Company took advantage of this op- Committee. To the extent permitted by law, resolutions of the Company utilises an asset-linked pension plan for the nance Code in accordance with Section 161 Stock portunity. The Shareholder Committee, which has been crea- Annual General Meeting of HELLA KGaA Hueck & Co.are ad- Managing Directors of HELLA Geschäftsführungsgesell- Corporation Act (Aktiengesetz (AktG) ted pursuant to the Articles of Association and is elected by opted by a simple majority. In contrast to a stock corporation, schaft mbH. The benefits provided under this plan depend the Annual General Meeting, supervises and advises the the Annual General Meeting of HELLA KGaA Hueck & Co. materially on such factors as the prevailing interest rate The General Partners as well as the Shareholder Committee General Partners in their conduct of the Company's business adopts legally binding resolutions approving the annual fi- and the appreciation of the value of the plan assets. The and the Supervisory Board of HELLA KGaA Hueck & Co. and can issue rules of procedure for them. In addition, it de - nancial statements. defined-benefit pension plan for Dr. Jürgen Behrend has (“Company”) declare, pursuant to Section 161 AktG that since termines which of the General Partners' transactions require been established already in 1987, and was modified and the last time this declaration was made on 31 May 2016, and its prior consent. It has management powers and power of Under the Stock Corporation Act Aktiengesetz (AktG), certain extended in 2014. Against this background, defining a except for the deviations set out below, the Company has representation for the legal relationship between the Compa- resolutions of the annual general meeting of a KGaA are sub- level of provision is therefore not considered useful or complied, and intends to comply in the future, with the recom- ny and the General Partners, and it represents the Company ject to the approval of the General Partners (see Section 285 practicable mendations of the German Corporate Governance Code in legal disputes with the General Partners. Following a re- (2) and Section 286 (1) AktG). However, this consent require- (Deutscher Corporate Governance Kodex, “DCGK”), as amen- quest by a General Partner, the Shareholder Committee de - ment has been rendered inapplicable by the articles of asso- c On 31 October 2014, the Annual General Meeting had ded on 7 February 2017 and 5 May 2015, taking into account cides on any disagreement between the General Partners ciation of HELLA KGaA Hueck&Co. to the extent legally per - resolved that no individualised disclosure of the remune - the special features of its legal form as set out below. concerning management actions. However, according to the m it te d , i n p a r t i c u l a r w it h r e ga r d to r e s o lu t i o n s o n a m e n d m e nt s ration granted to the Company’s executive management Company's Articles of Association, this does not apply as long of the articles of association, fundamental and extraordinary shall be made pursuant to Sections 285 No. 9a) sentences I. Special features of the legal form as Dr. Jürgen Behrend acts as General Partner; in this case, business decisions, and the appointment and removal of Ge- 5 to 8 and 314 (1) No. 6a) sentences 5 to 8 of the German The German Corporate Governance Code has been develo- he has the casting vote. neral Partners. On the other hand, the annual financial state- Commercial Code (Handelsgesetzbuch – HGB). Therefore, ped with companies organised as stock corporations or as ments cannot be approved by the Annual General Meeting the Company deviates from the recommendations set European companies (SE) in mind and therefore does not The Shareholder Committee exercises all rights attached to without the general partners’ consent. According to the Artic- forth in Section 4.2.5 DCGK. take account of the special factors relating to the KGaA form. the Company's shares in HELLA Geschäftsführungsgesell- les of Association, the General Partners declare their consent Accordingly, many of the recommendations of the German schaft mbH. In particular, it appoints and removes the Mana- when submitting their resolution proposals on the annual d Deviating from Section 5.4.1 para. 2, sentence 2 DCGK, the Corporate Governance Code can only be applied to HELLA ging Directors and is responsible for deciding on their em- unconsolidated financial statements to the Annual General Shareholder Committee and the Supervisory Board have KGaA Hueck & Co. in modified form. Material modifications ployment contracts. However, the Articles of Association Meeting. not specified any regular limit of length of membership. are particularly required as a result of the following special stipulate that Dr. Behrend has the right to make proposals for These bodies believe that any general regular limit is not factors relating to the Company's legal form. such appointments and removals, and can ultimately veto II. DEVIATIONS FROM THE RECOMMENDATIONS OF THE helpful because such limit does not reasonably take into any such decision. GERMAN CORPORATE GOVERNANCE CODE account specific individual aspects that would justify a 1. Management longer length of membership of individual members of In contrast to a stock corporation whose affairs are managed Furthermore, the Shareholder Committee may issue rules of 1. Time period from the last declaration on 31 May 2016 these bodies in the best interests of the company and of by a board of directors, the management of a KGaA is the procedure for the Management Board ofHELLA Geschäftsfüh- until the announcement of the amended DCGK on 24 the voting shareholders. In the opinion of the Shareholder responsibility of the General Partners (partners with unlimi- rungsgesellschaft mbH. The Shareholder Committee is also April 2017 Committee and the Supervisory Board, diversity as ted liability). They are not appointed or dismissed by the Su- responsible for executing shareholders' resolutions. In the time period from the last declaration on 31 May 2016 required by the DCGK may also be reflected in different pervisory Board but by the Annual General Meeting. The until 24 April 2017, the following recommendations of the lengths of membership in the respective body and, thus, company has two General Partners, Dr. Jürgen Behrend and To the extent where the DCGK contains recommendations DCGK, as applicable until that date, were not complied with: in the level of experience of its members HELLA Geschäftsführungsgesellschaft mbH, which has its relating to the tasks and responsibilities of a supervisory registered office in Lippstadt. HELLA Geschäftsführungs- board, which in the case of HELLA KGaA Hueck & Co. are gesellschaft mbH is represented by its Managing Directors performed by the Shareholder Committee under the terms of 76 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 77

IV. APPLICATION OF THE GERMAN CORPORATE Dr. Rolf Breidenbach (President and CEO), Markus Bannert, its Articles of Association, these recommendations are a Deviating from Section 4.2.2. para. 2, sentence 3, the GOVERNANCE CODE Dr. Werner Benade, Stefan Osterhage, Ulric Bernard Schäfer- deemed to apply to the Shareholder Committee. Shareholder Committee has not considered the relation - The General Partners as well as the Shareholder Committee barthold and Dr. Matthias Schöllmann. Unlike the board of ship between the remuneration of the Management and Supervisory Board of HELLA KGaA Hueck & Co. publish directors of a stock corporation, the Managing Directors of 3. Supervisory Board Board (i.e. Dr. Jürgen Behrend and the Managing an annual declaration in accordance with Section 161 AktG HELLA Geschäftsführungsgesellschaft mbH are appointed Compared to the supervisory board of a stock corporation, Directors of HELLA Geschäftsführungsgellschaft mbH) confirming conformity to the recommendations of the for an indefinite period of time. There is only a chairman or the supervisory board of a KGaA has limited powers. In par- and that of senior management and the staff overall. The "Government Commission for the German Corporate Gover- speaker of the company's Management Board at the level of ticular, it is not responsible for appointments and dismissals responsibilities of the individual members of the nance Code" published by the German Federal Ministry of HELLA Geschäftsführungsgesellschaft mbH but not at the in relation to the Company's management. Nor does it have Management Board, his/her personal performance, the Justice in the official part of Bundesanzeiger and disclose any level of the General Partners. The shares in HELLA Ge- any power to issue rules of procedure for the Company's economic situation and performance of the Group, and recommendations which are or have not been conformed to, schäftsführungsgesellschaft mbH are held by the Company. Management Board or determine which business decisions the remuneration levels at peer companies are conside- stating the reasons for this. On 31 May 2017, the Managing The resultant shareholder rights are exercised by the Share- require its consent. red more appropriate and meaningful benchmarks for General Partners as well as the Shareholder Committee and holder Committee. determining the level of remuneration. the Supervisory Board of KGaA Hueck & Co. published the 4. Annual General Meeting declaration below in accordance with Section 161 AktG on the 2. Shareholder Committee The legal status of the Annual General Meeting is not dissimi- b Deviating from Section 4.2.3 Paragraph 3, the level of Company's website. The legal form of the KGaA , as opposed to that of a stock lar to that of a stock corporation. In particular, it elects the provision aimed for under the pension scheme for the corporation, makes it possible to establish further optional members of the Supervisory Board and the Shareholder Management Board has not been established. The Declaration regarding the German Corporate Gover- corporate bodies. The Company took advantage of this op- Committee. To the extent permitted by law, resolutions of the Company utilises an asset-linked pension plan for the nance Code in accordance with Section 161 Stock portunity. The Shareholder Committee, which has been crea- Annual General Meeting of HELLA KGaA Hueck & Co.are ad- Managing Directors of HELLA Geschäftsführungsgesell- Corporation Act (Aktiengesetz (AktG) ted pursuant to the Articles of Association and is elected by opted by a simple majority. In contrast to a stock corporation, schaft mbH. The benefits provided under this plan depend the Annual General Meeting, supervises and advises the the Annual General Meeting of HELLA KGaA Hueck & Co. materially on such factors as the prevailing interest rate The General Partners as well as the Shareholder Committee General Partners in their conduct of the Company's business adopts legally binding resolutions approving the annual fi- and the appreciation of the value of the plan assets. The and the Supervisory Board of HELLA KGaA Hueck & Co. and can issue rules of procedure for them. In addition, it de - nancial statements. defined-benefit pension plan for Dr. Jürgen Behrend has (“Company”) declare, pursuant to Section 161 AktG that since termines which of the General Partners' transactions require been established already in 1987, and was modified and the last time this declaration was made on 31 May 2016, and its prior consent. It has management powers and power of Under the Stock Corporation Act Aktiengesetz (AktG), certain extended in 2014. Against this background, defining a except for the deviations set out below, the Company has representation for the legal relationship between the Compa- resolutions of the annual general meeting of a KGaA are sub- level of provision is therefore not considered useful or complied, and intends to comply in the future, with the recom- ny and the General Partners, and it represents the Company ject to the approval of the General Partners (see Section 285 practicable mendations of the German Corporate Governance Code in legal disputes with the General Partners. Following a re- (2) and Section 286 (1) AktG). However, this consent require- (Deutscher Corporate Governance Kodex, “DCGK”), as amen- quest by a General Partner, the Shareholder Committee de - ment has been rendered inapplicable by the articles of asso- c On 31 October 2014, the Annual General Meeting had ded on 7 February 2017 and 5 May 2015, taking into account cides on any disagreement between the General Partners ciation of HELLA KGaA Hueck&Co. to the extent legally per - resolved that no individualised disclosure of the remune - the special features of its legal form as set out below. concerning management actions. However, according to the m it te d , i n p a r t i c u l a r w it h r e ga r d to r e s o lu t i o n s o n a m e n d m e nt s ration granted to the Company’s executive management Company's Articles of Association, this does not apply as long of the articles of association, fundamental and extraordinary shall be made pursuant to Sections 285 No. 9a) sentences I. Special features of the legal form as Dr. Jürgen Behrend acts as General Partner; in this case, business decisions, and the appointment and removal of Ge- 5 to 8 and 314 (1) No. 6a) sentences 5 to 8 of the German The German Corporate Governance Code has been develo- he has the casting vote. neral Partners. On the other hand, the annual financial state- Commercial Code (Handelsgesetzbuch – HGB). Therefore, ped with companies organised as stock corporations or as ments cannot be approved by the Annual General Meeting the Company deviates from the recommendations set European companies (SE) in mind and therefore does not The Shareholder Committee exercises all rights attached to without the general partners’ consent. According to the Artic- forth in Section 4.2.5 DCGK. take account of the special factors relating to the KGaA form. the Company's shares in HELLA Geschäftsführungsgesell- les of Association, the General Partners declare their consent Accordingly, many of the recommendations of the German schaft mbH. In particular, it appoints and removes the Mana- when submitting their resolution proposals on the annual d Deviating from Section 5.4.1 para. 2, sentence 2 DCGK, the Corporate Governance Code can only be applied to HELLA ging Directors and is responsible for deciding on their em- unconsolidated financial statements to the Annual General Shareholder Committee and the Supervisory Board have KGaA Hueck & Co. in modified form. Material modifications ployment contracts. However, the Articles of Association Meeting. not specified any regular limit of length of membership. are particularly required as a result of the following special stipulate that Dr. Behrend has the right to make proposals for These bodies believe that any general regular limit is not factors relating to the Company's legal form. such appointments and removals, and can ultimately veto II. DEVIATIONS FROM THE RECOMMENDATIONS OF THE helpful because such limit does not reasonably take into any such decision. GERMAN CORPORATE GOVERNANCE CODE account specific individual aspects that would justify a 1. Management longer length of membership of individual members of In contrast to a stock corporation whose affairs are managed Furthermore, the Shareholder Committee may issue rules of 1. Time period from the last declaration on 31 May 2016 these bodies in the best interests of the company and of by a board of directors, the management of a KGaA is the procedure for the Management Board ofHELLA Geschäftsfüh- until the announcement of the amended DCGK on 24 the voting shareholders. In the opinion of the Shareholder responsibility of the General Partners (partners with unlimi- rungsgesellschaft mbH. The Shareholder Committee is also April 2017 Committee and the Supervisory Board, diversity as ted liability). They are not appointed or dismissed by the Su- responsible for executing shareholders' resolutions. In the time period from the last declaration on 31 May 2016 required by the DCGK may also be reflected in different pervisory Board but by the Annual General Meeting. The until 24 April 2017, the following recommendations of the lengths of membership in the respective body and, thus, company has two General Partners, Dr. Jürgen Behrend and To the extent where the DCGK contains recommendations DCGK, as applicable until that date, were not complied with: in the level of experience of its members HELLA Geschäftsführungsgesellschaft mbH, which has its relating to the tasks and responsibilities of a supervisory registered office in Lippstadt. HELLA Geschäftsführungs- board, which in the case of HELLA KGaA Hueck & Co. are gesellschaft mbH is represented by its Managing Directors performed by the Shareholder Committee under the terms of 78 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 79

2. Time period since the announcement of the amended 4.2.3 para. 2, sentences 4 and 7 DCGK, both positive and DCGK on 24 April 2017 negative developments shall be taken into account when In the period from 24 April 2017, the recommendations set determining variable remuneration components, and those forth under II. 1 letters a) through d) – which have thus re- components shall be related to demanding, relevant com- mained unchanged, have not been complied with for the parison parameters. While the Company’s short-term vari- reasons given in each case. The new competence profiles able remuneration (STI) for contracts that exist before the provided for under Section 5.4.1 para. 2, sentence 1 DCGK fiscal year 2016/2017 is calculated as a fixed percentage of were drawn up and adopted by the Shareholder Committee the Group’s consolidated earnings before taxes (EBT) and for at its meeting of 29 May 2017 and by the Supervisory Board contracts concluded thereafter using the performance of the at its meeting of 30 May 2017. An earlier adoption was not free cash flow (FCF), and does not retroactively penalize possible as the dates of the meetings were determined quite deteriorations in this performance measure over a multi- far in advance, leading to a deviation from Section 5.4.1 para. year period, the Company’s LTI is tied to demanding targets 2, sentence 1 DCGK in the period between 24 April 2017 and for the Group’s return on invested capital (RoIC) and is with- the day of the meeting. The planned publication of CVs of all held over a forward-looking period of three financial years, Supervisory Board and Shareholder Committee members during which it may decrease and be reduced to zero or in- on the website in accordance with Section 5.4.1 para. 5, sen- crease, respectively, on account of deteriorations or impro- tence 2 DCGK shall take place at the end of May 2017. The vements in the RoIC and/or the consolidated earnings before necessary preparatory work resulted in a deviation from taxes. The Company considers this sufficient in the light of Section 5.4.1 para. 5, sentence 2 DCGK in the period since Section 4.2.3 para. 2, sentences 3, 4 and 7 DCGK. 24 April 2017. V. DIRECTORS’ DEALINGS / SHAREHOLDINGS OF 3. Forward-looking part MEMBERS OF THE GOVERNING BODIES The General Partners as well as the Shareholder Committee Pursuant to Section 15a WpHG, the Managing General Part- and the Supervisory Board of HELLA KGaA Hueck&Co. in- ners (including the Managing Directors of HELLA Geschäfts- tend to continue to deviate from the recommendations set führungsgesellschaft mbH), the members of the Superviso- forth under II. 1. a) through d) DCGK and for the reasons given ry Board and the Shareholder Committee, as well as related above. However, the recommendations stated under II. 2. persons, are required to disclose notifiable dealings with shall be complied with in future. shares of HELLA KGaA Hueck & Co. or related financial instruments, if the value of the dealings made by the member III. FURTHER INFORMATION of the governing body and related persons in the calendar Section 4.2.3 para. 2, sentence 3 DCGK includes the recom- year reaches or exceeds the sum of € 5,000. The transac- mendation for variable remuneration components determi- tions notified to the Company in the fiscal year under review ned by multi-year assessment, that this assessment basis were duly published and are available on the website under should be mainly forward-looking. According to Section WWW. HELLA .COM / DIRECTORSDEALINGS.

Remuneration report 78 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT CORPORATE GOVERNANCE OF HELLA KGAA HUECK & CO. 79

Remuneration report 80 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 81

annually in line with the changes in the basic salary of a fede- basis of operating earnings before interest and taxes (EBIT) ral civil servant within the B 3 salary group (highest seniority) for the past twelve months at the level of the Group units, less Remuneration report subject to an annual review by the Shareholder Committee. the standard income tax rate applicable in the country in question. Invested capital is the average of the opening and The remuneration in kind and other ancillary benefits prima- closing value of the assets shown on the face of the balance rily consist of the private use of a company car. Furthermore, sheet excluding cash and cash equivalents and current as- Dr. Jürgen Behrend and all the Managing Directors in their sets less liabilities carried on the face of the balance sheet capacity as members of the Company's governing bodies are excluding current and non-current financial liabilities for the covered by the Group's D&O insurance. In the event of any reporting period. claim, they are responsible for a deductible of at least 10 % of the loss capped at 1.5 times their annual fixed salary or (in Dr. The LTI payable is calculated as follows for contracts existing Jürgen Behrend's case) the minimum cash bonus. before the fiscal year 2016/2017: an LTI base amount is initially calculated for the fiscal year in question. It is calculated for 2. PERFORMANCE-RELATED each fiscal year as a key performance indicator-based per- REMUNERATION COMPONENTS centage of the fixed salary of each Managing Director or, in Dr. The remuneration report contains information on the remu- Shareholder Committee also decides on the applicable re- Jürgen Behrend's case, as a percentage of the minimum cash neration systems for the Managing General Partner Dr. Jür- muneration system and the individual remuneration amount. a) Short-term variable remuneration (STI) bonus. This percentage of the LTI base amount depends on gen Behrend and the Managing Directors of HELLA Geschäfts- It is assisted by its Personnel Committee in the performance For contracts already in place before the fiscal year 2016/2017, the ROIC and may range from 0 % (if the ROIC is 14 % or less) führungsgesellschaft, as well as for the members of the of this task. the short-term variable remuneration is calculated as a fixed to 200 % (if the ROIC is 22 % or more). The target is achieved Supervisory Board and of the Shareholder Committee of percentage of the HELLA Group's operating earnings before at a RoIC of 18 %. Payment of the LTI to the Managing Directors HELLA KGaA Hueck & Co. It takes into account the recommen- The individual remuneration of the Managing Directors has taxes (EBT) for the fiscal year in question, adjusted for excep- is made after a period of three fiscal years following the fiscal dations of the German Corporate Governance Code (DCGK) three components: a fixed non-performance-related compo- tional effects (extraordinary expenses and income reportable year for which the LTI base amount was calculated. One half and contains the information and explanations required under nent (plus non-performance-related remuneration in kind in the consolidated financial statements under Section 277 (4) each of the amount paid is determined by changes in the the German Commercial Code (Handelsgesetzbuch, HGB) and ancillary benefits), an annual performance-related com- HGB, old version). In this connection, a minimum bonus HELLA Group's ROIC and EBT respectively. For this purpose, including the principles of the German Accounting Standard ponent (short-term incentive, STI) and a long-term perfor- amount not tied to EBT is granted. The bonus is paid once per the figures for the fiscal year for which the LTI base amount No. 17 (DRS 17) and in accordance with the International Finan- mance-related component (long-term incentive, LTI). Additi- fiscal year. was calculated are compared with those for the year at the cial Reporting Standards (IFRS). The information required by onally, there are pension commitments by the Company to Dr. expiry of which the amount is paid. Every increase by one Section 314 (1) no. 6a sentences 5-8 HGB on the remuneration Jürgen Behrend and comparable long-term obligations to- The Company applies a modified calculation concept to con- percentage point in the applicable criteria results in an incre- paid to the individual members of the Management Board is wards the Managing Directors of HELLA Geschäftsführungs- tracts concluded after the fiscal year 2016/2017. Accordingly, ase of 7.5 % in the LTI base amount, while every decrease by not disclosed. On 31 October 2014, the extraordinary Annual gesellschaft mbH. In view of the intended resignation of Dr. the EBT is included in the calculation with a 70 % weighting, the same amount leads to a corresponding decrease in the General Meeting passed a dispensation resolution within the Behrend as at 30 September 2017, he will not be paid the fixed while the remaining 30 % is based on the performance of the LTI base amount. This does not give rise to any entitlement on meaning of Section 286 (5) sentence 1 HGB in conjunction with non-performance-related component and the STI in the fiscal free cash flow from operating activities (OFCF). The Sharehol- the part of the Company to recover any compensation from a Section 314 (2) sentence 2 HGB. The Company will refrain from year 2017/2018. In addition, an LTI base amount will be alloca- der Committee specifies minimum, target and maximum va- Managing Director in the event of a negative overall LTI. In disclosing the information recommended by Section 4.2.5 pa- ted for the last time on a time-proportionate basis for the lues for the EBT and OFCF. The minimum values define the floor addition, it is not netted against a future positive LTI. ras. 3 and 4 DCGK in its remuneration report for as long as a fiscal year 2017/2018. for the disbursement of an STI. If the target values are reached, corresponding dispensation resolution remains in force. the STI amounts to 120 % of the annual fixed salary and 360 % The calculation concept for the LTI base amount was amen- For new contracts that were concluded with Managing Direc- of the annual fixed salary upon reaching the maximum values. ded for contracts concluded after the fiscal year 2016/2017. tors in the past fiscal year, the Shareholder Committee further In two cases, the target values of 120 % of the annual fixed sa- The Shareholder Committee specifies minimum, target and developed and modified the calculation of the remuneration lary were guaranteed as minimum values for the first 12 maximum values for the RoIC. The minimum value (currently I. Remuneration of the Managing components and various other contractual terms. In future, months employment. a RoIC of 12 %) defines the floor for calculating an LTI base General Partner Dr. Jürgen Behrend the Company will base new appointments on the modified amount. If the target value is reached (currently a RoIC of and of the Managing Directors of HELLA concept described separately below. It also intends to convert b) Long-term variable remuneration 16 %), the LTI amounts to 80 % of the annual fixed salary and Geschäftsführungsgesellschaft mbH existing contracts on the occasion of renewals. (long-term incentive, LTI) 240 % of the annual fixed salary upon reaching the maximum In accordance with the Articles of Association, the legal rela- The long-term variable remuneration (long-term incentive, value (currently a RoIC of 24 %). In two cases, an LTI base tionships between the Company and a Managing General 1. NON-PERFORMANCE-RELATED LTI) for the fiscal year is also paid in cash. It is calculated on amount of 80 % of the annual fixed salary was guaranteed as Partner are governed by agreements between the Managing REMUNERATION COMPONENT the basis of two key performance indicators during a period a minimum value for the first 12 months employment. General Partner and the Shareholder Committee to the extent The non-performance-related remuneration component of a total of four fiscal years, thus creating a long-term and that such relationships do not result from applicable manda- consists of an annual fixed salary and remuneration in kind sustainable incentive. In addition to the EBT margin, it is pri - c) Remuneration cap tory provisions of the Articles or under law. In addition, the as well as other ancillary benefits. The annual fixed salary is marily based on the return on invested capital (ROIC), which The Company has defined a remuneration cap under which Shareholder Committee is responsible for deciding on the paid in monthly intervals. Contrary to this, Dr. Jürgen Behrend the Company uses as a strategic management parameter. the annual STI and LTI together are subject to a maximum employment contracts of the Managing Directors of HELLA does not receive an annual fixed salary but solely an annual ROIC is defined as the ratio of operating return before interest equalling six times the applicable annual fixed salary or, in Dr. Geschäftsführungsgesellschaft mbH. In this connection, the minimum cash bonus. This minimum cash bonus is adjusted and after tax to invested capital. Return is calculated on the Jürgen Behrend's case, six times the minimum bonus. The 80 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 81

annually in line with the changes in the basic salary of a fede- basis of operating earnings before interest and taxes (EBIT) ral civil servant within the B 3 salary group (highest seniority) for the past twelve months at the level of the Group units, less Remuneration report subject to an annual review by the Shareholder Committee. the standard income tax rate applicable in the country in question. Invested capital is the average of the opening and The remuneration in kind and other ancillary benefits prima- closing value of the assets shown on the face of the balance rily consist of the private use of a company car. Furthermore, sheet excluding cash and cash equivalents and current as- Dr. Jürgen Behrend and all the Managing Directors in their sets less liabilities carried on the face of the balance sheet capacity as members of the Company's governing bodies are excluding current and non-current financial liabilities for the covered by the Group's D&O insurance. In the event of any reporting period. claim, they are responsible for a deductible of at least 10 % of the loss capped at 1.5 times their annual fixed salary or (in Dr. The LTI payable is calculated as follows for contracts existing Jürgen Behrend's case) the minimum cash bonus. before the fiscal year 2016/2017: an LTI base amount is initially calculated for the fiscal year in question. It is calculated for 2. PERFORMANCE-RELATED each fiscal year as a key performance indicator-based per- REMUNERATION COMPONENTS centage of the fixed salary of each Managing Director or, in Dr. The remuneration report contains information on the remu- Shareholder Committee also decides on the applicable re- Jürgen Behrend's case, as a percentage of the minimum cash neration systems for the Managing General Partner Dr. Jür- muneration system and the individual remuneration amount. a) Short-term variable remuneration (STI) bonus. This percentage of the LTI base amount depends on gen Behrend and the Managing Directors of HELLA Geschäfts- It is assisted by its Personnel Committee in the performance For contracts already in place before the fiscal year 2016/2017, the ROIC and may range from 0 % (if the ROIC is 14 % or less) führungsgesellschaft, as well as for the members of the of this task. the short-term variable remuneration is calculated as a fixed to 200 % (if the ROIC is 22 % or more). The target is achieved Supervisory Board and of the Shareholder Committee of percentage of the HELLA Group's operating earnings before at a RoIC of 18 %. Payment of the LTI to the Managing Directors HELLA KGaA Hueck & Co. It takes into account the recommen- The individual remuneration of the Managing Directors has taxes (EBT) for the fiscal year in question, adjusted for excep- is made after a period of three fiscal years following the fiscal dations of the German Corporate Governance Code (DCGK) three components: a fixed non-performance-related compo- tional effects (extraordinary expenses and income reportable year for which the LTI base amount was calculated. One half and contains the information and explanations required under nent (plus non-performance-related remuneration in kind in the consolidated financial statements under Section 277 (4) each of the amount paid is determined by changes in the the German Commercial Code (Handelsgesetzbuch, HGB) and ancillary benefits), an annual performance-related com- HGB, old version). In this connection, a minimum bonus HELLA Group's ROIC and EBT respectively. For this purpose, including the principles of the German Accounting Standard ponent (short-term incentive, STI) and a long-term perfor- amount not tied to EBT is granted. The bonus is paid once per the figures for the fiscal year for which the LTI base amount No. 17 (DRS 17) and in accordance with the International Finan- mance-related component (long-term incentive, LTI). Additi- fiscal year. was calculated are compared with those for the year at the cial Reporting Standards (IFRS). The information required by onally, there are pension commitments by the Company to Dr. expiry of which the amount is paid. Every increase by one Section 314 (1) no. 6a sentences 5-8 HGB on the remuneration Jürgen Behrend and comparable long-term obligations to- The Company applies a modified calculation concept to con- percentage point in the applicable criteria results in an incre- paid to the individual members of the Management Board is wards the Managing Directors of HELLA Geschäftsführungs- tracts concluded after the fiscal year 2016/2017. Accordingly, ase of 7.5 % in the LTI base amount, while every decrease by not disclosed. On 31 October 2014, the extraordinary Annual gesellschaft mbH. In view of the intended resignation of Dr. the EBT is included in the calculation with a 70 % weighting, the same amount leads to a corresponding decrease in the General Meeting passed a dispensation resolution within the Behrend as at 30 September 2017, he will not be paid the fixed while the remaining 30 % is based on the performance of the LTI base amount. This does not give rise to any entitlement on meaning of Section 286 (5) sentence 1 HGB in conjunction with non-performance-related component and the STI in the fiscal free cash flow from operating activities (OFCF). The Sharehol- the part of the Company to recover any compensation from a Section 314 (2) sentence 2 HGB. The Company will refrain from year 2017/2018. In addition, an LTI base amount will be alloca- der Committee specifies minimum, target and maximum va- Managing Director in the event of a negative overall LTI. In disclosing the information recommended by Section 4.2.5 pa- ted for the last time on a time-proportionate basis for the lues for the EBT and OFCF. The minimum values define the floor addition, it is not netted against a future positive LTI. ras. 3 and 4 DCGK in its remuneration report for as long as a fiscal year 2017/2018. for the disbursement of an STI. If the target values are reached, corresponding dispensation resolution remains in force. the STI amounts to 120 % of the annual fixed salary and 360 % The calculation concept for the LTI base amount was amen- For new contracts that were concluded with Managing Direc- of the annual fixed salary upon reaching the maximum values. ded for contracts concluded after the fiscal year 2016/2017. tors in the past fiscal year, the Shareholder Committee further In two cases, the target values of 120 % of the annual fixed sa- The Shareholder Committee specifies minimum, target and developed and modified the calculation of the remuneration lary were guaranteed as minimum values for the first 12 maximum values for the RoIC. The minimum value (currently I. Remuneration of the Managing components and various other contractual terms. In future, months employment. a RoIC of 12 %) defines the floor for calculating an LTI base General Partner Dr. Jürgen Behrend the Company will base new appointments on the modified amount. If the target value is reached (currently a RoIC of and of the Managing Directors of HELLA concept described separately below. It also intends to convert b) Long-term variable remuneration 16 %), the LTI amounts to 80 % of the annual fixed salary and Geschäftsführungsgesellschaft mbH existing contracts on the occasion of renewals. (long-term incentive, LTI) 240 % of the annual fixed salary upon reaching the maximum In accordance with the Articles of Association, the legal rela- The long-term variable remuneration (long-term incentive, value (currently a RoIC of 24 %). In two cases, an LTI base tionships between the Company and a Managing General 1. NON-PERFORMANCE-RELATED LTI) for the fiscal year is also paid in cash. It is calculated on amount of 80 % of the annual fixed salary was guaranteed as Partner are governed by agreements between the Managing REMUNERATION COMPONENT the basis of two key performance indicators during a period a minimum value for the first 12 months employment. General Partner and the Shareholder Committee to the extent The non-performance-related remuneration component of a total of four fiscal years, thus creating a long-term and that such relationships do not result from applicable manda- consists of an annual fixed salary and remuneration in kind sustainable incentive. In addition to the EBT margin, it is pri - c) Remuneration cap tory provisions of the Articles or under law. In addition, the as well as other ancillary benefits. The annual fixed salary is marily based on the return on invested capital (ROIC), which The Company has defined a remuneration cap under which Shareholder Committee is responsible for deciding on the paid in monthly intervals. Contrary to this, Dr. Jürgen Behrend the Company uses as a strategic management parameter. the annual STI and LTI together are subject to a maximum employment contracts of the Managing Directors of HELLA does not receive an annual fixed salary but solely an annual ROIC is defined as the ratio of operating return before interest equalling six times the applicable annual fixed salary or, in Dr. Geschäftsführungsgesellschaft mbH. In this connection, the minimum cash bonus. This minimum cash bonus is adjusted and after tax to invested capital. Return is calculated on the Jürgen Behrend's case, six times the minimum bonus. The 82 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 83

Shareholder Committee of HELLA KGaA Hueck&Co. may at lity or similar pension is received. In the event of illness-related (defined benefit obligation) and the comparable long-term II. Remuneration of the its own discretion make a positive or negative adjustment to disability, the fixed salary or the difference over sickness bene- obligations for the active Managing Directors (Dr. Jürgen Supervisory Board all variable remuneration components if it is of the opinion fits is paid for a further 18 months. In the case of death, the Behrend and the Managing Directors of HELLA Geschäftsfüh- Under Article 16 of the Articles of the Association, the Annual that the calculation of the variable remuneration component eligible beneficiaries receive the deceased Managing Director's rungsgesellschaft mbH) came to € 22,081 thousand as at 31 General Meeting determines the remuneration payable to the is not in line with the Company’s business performance be- fixed salary for a period of three months commencing with the May 2017 (previous year: € 19,917 thousand).1 The financing Supervisory Board. In accordance with the still applicable re- cause of extraordinary effects. month of death. If the Company revokes the appointment prior contributions structured in the form of investment fund units solution passed at the Annual General Meeting on 26 Septem- to the date of expiry of the service agreement, the service ag- and pledged to the beneficiaries were valued at € 12,072 ber 2014, all members of the Supervisory Board receive annual d) Pension commitments and reement can be terminated prematurely under exceptional thousand as of the repor ting date (prior year: € 9,941 thousand). remuneration of € 20 thousand. The Chairman of the Supervi- comparable long-term obligations circumstances. In cases in which the service agreement is sory Board receives annual remuneration of € 40 thousand and The Company has also made pension commitments and terminated for material reasons for which the Managing Direc- Pension liabilities towards former members of the Manage- each Deputy Chairman € 30 thousand. Members serving on the comparable long-term obligations to the Managing Directors. tor is not responsible, a settlement of two times his annual ment Board and their surviving dependants came to € 9,165 Supervisory Board for only part of the fiscal year receive a A defined benefit pension plan has been created for Dr. Jürgen remuneration or, if the remaining term of the service agree- thousand (prior year: € 8,990 thousand). This was transferred corresponding time-proportionate amount. Each member of Behrend. Claims under this plan arise when Dr. Jürgen Beh- ment is less than two years, a time-proportionate amount of to Allianz Pensionsfonds AG in the amount of € 3,890 thousand the Audit Committee receives additional annual remuneration rend relinquishes the position of Managing General Partner the settlement is paid. For this purpose, the annual remunera- (prior year: € 4,001 thousand). The net obligation of the share of € 10 thousand. The Chairman of the Audit Committee recei- or passes away (in which case his surviving widow is the tion equals the sum total of the fixed annual salary plus bonu- transferred to Allianz Pensionsfonds AG comes to € 205 ves additional annual remuneration of € 20 thousand. The beneficiary). ses less remuneration in kind and other ancillary benefits for thousand ( prior year: € 261 thousand). Payments under pen- members of the Nomination Committee do not receive any the last full fiscal year prior to the termination of the appoint- sion liabilities towards former members of the Management additional remuneration. All members of the Supervisory With respect to the Managing Directors of HELLA Geschäfts- ment, plus the LTI payable after the expiry of the last full fiscal Board and their surviving dependants came to € 278 thousand Board are reimbursed for all expenses which they incur in the führungsgesellschaft mbH, the Company uses a defined con- year. (prior year: € 348 thousand). performance of their duties plus value added tax. No atten- tribution pension plan to which it allocates a certain amount dance fees are paid. The total remuneration paid to the mem- each year for the respective Managing Director. This financial If the Managing Director's appointment is terminated in the In addition, the Company paid settlement amounts of € 0 bers of the Supervisory Board (fixed remuneration and remu- contribution was increased for contracts concluded after the course of the fiscal year, a time-proportionate amount of the thousand in the fiscal year 2016/2017 (prior year: € 6,720 neration for committee work) came to € 400 thousand in the fiscal year 2016/2017. Upon pension eligibility arising, the ac- bonus is paid. The minimum bonus is likewise calculated on thousand). fiscal year 2016/2017 (prior year: € 400 thousand). Of this, fixed crued capital is paid either in a single lump sum or - subject a time-proportionate basis. The LTI base amount is also cal- remuneration accounted for € 350 thousand (prior year: € 350 to the Company's approval - in instalments over a maximum culated on a time-proportionate basis for the year of termina- Commitments of € 2,200 thousand (prior year: € 0 thousand) thousand) and committee remuneration for € 50 thousand period of eight years. The contributions to the pension plan tion. In certain cases, the LTI base amounts not yet due for for amounts payable from the LTI programme arising from (prior year: € 50 thousand). may be invested externally in one or more investment funds. payment lapse or are reduced on a time-proportionate basis the occurrence or suspension of conditions were made in the The return here is based on the performance of the invest- upon exit. fiscal year 2016/2017.2 As members of the Company's governing bodies, the mem- ment in question. In any case, a minimum interest rate is bers of the Supervisory Board are covered by the Group's guaranteed. As a general rule, the capital account is dissolved There are no special change-of-control arrangements or 4. LIABILITY REMUNERATION FOR HELLA D&O insurance. This cover is subject to a deductible of at least on 31 May of the year following the Managing Director’s 58th particular compensation agreements with the Company in GESCHÄFTSFÜHRUNGSGESELLSCHAFT MBH 10 % per claim, which however is capped at one-and-a-half birthday. This period may be extended at the Managing the event of a takeover bid. Under Article 8 of the Articles of Association, HELLA Ge- times the fixed annual remuneration. Director's request and subject to the Company's approval. schäftsführungsgesellschaft mbH as a General Partner re- Pension eligibility also arises in the event of full or partial loss 3. TOTAL REMUNERATION FOR ceives liability remuneration of 5 % of its paid-in capital paya- The Chairman of the Supervisory Board, Prof. Dr. Michael of earning capacity, protracted disability due to illness or upon THE FISCAL YEAR 2016/2017 ble on the reporting date. The Company paid an amount of € Hoffmann-Becking, is a partner in a law firm which provides death predating the Managing Director's contractual date of The total remuneration (excluding pension commitments and 1 thousand (prior year: € 1 thousand) in this connection. legal advisory services to HELLA KGaA Hueck & Co. and the eligibility. In this case, the capital is paid either in a single lump comparable long-term obligations) paid to the Managing Ge- Group in several different fields of law, including company sum or – subject to the Company's approval – in instalments neral Partner Dr. Jürgen Behrend and the Managing Directors law, securities law, labour law and competition law among over a maximum period of eight years to the beneficiaries of HELLA Geschäftsführungsgesellschaft mbH came to € other things. In the fiscal year 2016/2017, the Group was billed nominated by the Managing Director. In addition to the pensi- 17,881 thousand in the fiscal year 2016/2017 (prior year: € a total of € 297 thousand plus value added tax for these ad- on plan funded by the Company, the Managing Directors of 17,516 thousand). Of this, fixed remuneration accounted for € visory services (prior year: € 456 thousand plus value added HELLA Geschäftsführungsgesellschaft mbH are free to par- 2,881 thousand (prior year: € 2,950 thousand) and variable tax). The advisory services provided in the fiscal year ticipate in a further asset-linked pension plan. In this case, remuneration for € 15,000 thousand (prior year: € 14,566 2016/2017 particularly included the preparation and executi- capital is accumulated in the form of an individually defined thousand). on of the Annual General Meeting of HELLA KGaA Hueck and deferred compensation component and largely follows the Co. Otherwise, no other payments or benefits were granted to rules applicable to the asset-linked pension plan funded by Remuneration in kind and other ancillary benefits came to a members of the Supervisory Board for products and servi- the Company. total of € 328 thousand in the fiscal year 2016/2017 (prior year: ces, in particular for advisory and placement services. € 238 thousand). Remuneration in kind was measured on the e) Termination benefits for Managing Directors basis of actual cost. The ancillary benefits include expenses The employment contract automatically expires at the end of of € 7 thousand (prior year: € 0 thousand) for double budgeting the month in which the Managing Director turns 65 or at the end and of € 118 thousand for remuneration compensation (prior of the month in which the notice granting a retirement, disabi- year: € 0 thousand). The present value of the pension liabilities

1 of which € 7,958 thousand (prior year € 5,447 thousand) employee-financed 2. The commitment includes services rendered within the LTI programme based on 100 % target achievement. Please refer to 1.2b. for a detailed description of the LTI programme. 82 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 83

1 of which € 7,958 thousand (prior year € 5,447 thousand) employee-financed 2. The commitment includes services rendered within the LTI programme based on 100 % target achievement. Please refer to 1.2b. for a detailed description of the LTI programme. 84 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 85

The following table sets out the individual remuneration paid to the members of the Supervisory Board in the fiscal years 2016/2017 The following table sets out the individual remuneration paid to the members of the Shareholder Committee in the fiscal years and 2015/2016. 2016/2017 and 2015/2016. Remuneration Remuneration Fixed remuneration for committee work Total remuneration Fixed remuneration for committee work Total remuneration

€ 2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 2015/2016 € 2016/2017 2015/2016 2016/2017 2015/2016 2016/2017 2015/2016 Prof. Dr. Michael Hoffmann-Becking, Chairman 40,000.00 40,000.00 10,000.00 10,000.00 50,000.00 50,000.00 Manfred Wennemer, Chair 300,000.00 300,000.00 0 0 300,000.00 300,000.00 Alfons Eilers, Deputy Chairman 30,000.00 30,000.00 0 0 30,000.00 30,000.00 Moritz Friesenhausen (up to 29 March 2017) 85,479.45 100,000.00 0 0 85,479.45 100,000.00 Laura Behrend (up to 29 September 2016) 6,630.14 20,000.00 0 0 6,630.14 20,000.00 Roland Hammerstein 100,000.00 100,000.00 0 0 100,000.00 100,000.00 Paul Berger 20,000.00 20,000.00 10,000.00 10,000.00 30,000.00 30,000.00 Dr. Gerd Kleinert 100,000.00 100,000.00 0 0 100,000.00 100,000.00 Michaela Bittner 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Klaus Kühn 100,000.00 100,000.00 0 0 100,000.00 100,000.00 Heinrich-Georg Bölter 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Dr. Matthias Röpke 100,000.00 100,000.00 0 0 100,000.00 100,000.00 Manuel Rodriguez Cameselle 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Konstantin Thomas 100,000.00 100,000.00 0 0 100,000.00 100,000.00 Manuel Frenzel 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Elisabeth Fries 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Stephanie Hueck 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Susanna Hülsbömer 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Klaus Kühn 20,000.00 20,000.00 20,000.00 20,000.00 40,000.00 40,000.00 Manfred Menningen 20,000.00 20,000.00 10,000.00 10,000.00 30,000.00 30,000.00 Claudia Owen (from 29 September 2016) 13,424.66 0 0 0 13,424.66 0 Marco Schweizer 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Dr. Konstanze Thämer 20,000.00 20,000.00 0 0 20,000.00 20,000.00 Christoph Thomas 20,000.00 20,000.00 0 0 20,000.00 20,000.00

III. Remuneration of the Shareholder Committee Under Article 28 of the Articles of the Association, the Annual D&O insurance. This cover is subject to a deductible of at least General Meeting determines the remuneration payable to the 10 % per claim, which however is capped at one-and-a-half Shareholder Committee. Under the still valid resolution times the fixed annual remuneration. passed at the Annual General Meeting on 19 November 2010, the Chairman of the Shareholder Committee receives annual The total remuneration paid to the members of the Sharehol- remuneration of € 300 thousand and all other members € 100 der Committee came to € 885 thousand plus value added tax thousand. Members serving on the Shareholder Committee in the fiscal year 2016/2017 (prior year: € 900 thousand plus for only part of the fiscal year receive a corresponding time- value added tax). Of this, fixed remuneration accounted for € proportionate amount. All members of the Shareholder Com- 885 thousand (prior year: € 900 thousand) and remuneration mittee are reimbursed for all expenses which they incur in the for committee work for € 0 thousand (prior year: € 0 thousand). performance of their duties plus value added tax. No atten- dance fees are paid. No additional remuneration is paid to No payments or benefits other than those mentioned above members of the Personnel Committee. were granted to members of the Shareholder Committee for products and services, in particular for advisory and place- As members of the Company's governing bodies, the mem- ment services, in the fiscal year 2016/2017. bers of the Shareholder Committee are covered by the Group's

Report by the Supervisory Board 84 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REMUNERATION REPORT 85

Report by the Supervisory Board 86 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REPORT BY THE SUPERVISORY BOARD 87

Report by the Supervisory Board

Ladies and Gentlemen,

In the fiscal year 2016/2017, the Supervisory Board closely S upervisory Board approved both financial statements. The WORK OF THE COMMITTEES explained the result of their audit review of the half-year fi- followed the situation and development of HELLA KGaA Supervisory Board further addressed the proposed resolu- The Supervisory Board has established an Audit Committee nancial report. The reports on company auditing and compli- Hueck & Co. The Supervisory Board performed the tasks in- tions for the Annual General Meeting on 29 September 2016 which is responsible for the initial review of the annual finan- ance management were also discussed. cumbent upon it as provided for by applicable law and the and an outlook for current market development. cial statements, of the consolidated financial statements, of articles of association, and advised and supervised the Man- the management reports and of the proposal for the appro- Representatives of the auditor participated at the meeting on agement Board. At the meeting on 27 October 2016, the Management Board priation of profits. The Audit Committee is also responsible for 28 March 2017, during which the nine-month financial state - reported on the current business performance and provided preparing the agreements with the auditor, in particular the ment was discussed and the main points of the 2016/2017 The Management Board provided the Supervisory Board on an overview of the newly defined "guardrails" for HELLA 's instruction of the auditor, defining the main points of the audit year-end audit were defined. The Audit Committee also ex- a regular basis with written and verbal information on the annual strategy process. and the fee agreement. The Audit Committee additionally amined the agreement with the auditor for the review of the business performance of HELLA KGaA Hueck & Co. In par - deals with the supervisory duties prescribed by Section 107 annual financial statements for the fiscal year 2016/2017. ticular, the market and sales situation of the enterprise The main topic of the meeting on 27 January 2017 was the (3) sentence 2 AktG. The members of the Audit Committee are Based on the resolution passed, KPMG AG Wirtschaftsprü- against the background of general economic developments, current financial situation of the Company. Another focal point Klaus Kühn (Chairman), Prof. Dr. Michael Hoffmann-Becking, fungsgesellschaft AG, Bielefeld, was instructed by means of the financial situation of the Company and its subsidiaries as was the current status of HELLA ’s co-operation with external Paul Berger and Manfred Menningen. a written resolution procedure to conduct the audit. An addi- well as earnings trends were presented to the Supervisory service providers in the areas of Facility Management, Logis- tional focal point of the discussion was the project cost calcu- Board. In the context of the quarterly reporting, sales and tics and IT. The AUDIT COMMITTEE convened four times in the fiscal year lation of HELLA ; moreover, the draft of the auditing plan for earnings figures were presented for theHELLA Group as a 2016/2017. At the meeting on 2 August 2016, the Committee the fiscal year 2017/2018 was presented. whole as well as broken down by business segment. The topics of the meeting on 30 May 2017 were in particular examined the initial review of the annual financial statements the Management Board report for the third quarter of the and of the consolidated financial statements as at 31 May The NOMINATION COMMITTEE, which is responsible for pre- Furthermore, during the Supervisory Board meetings, the fiscal year 2016/2017, the year-end forecast for the fiscal year 2016, as well as of the management reports and of the the paring the proposals presented by the Supervisory Board to current business situation, the sales, results and capital ex- 2016/2017, the business plans for fiscal years 2017/2018 to proposal for the appropriation of profits. Representatives of the Annual General Meeting for the election of Supervisory penditure planning, as well as the operative targets were 2019/2020 and the results of the annual HELLA strategy pro- the auditor of the annual financial statements, KPMG AG Board members, did not convene in the fiscal year 2016/2017. discussed. Any deviations in the course of business from the cess. Furthermore, the annual declaration of conformity re - Wirtschaftsprüfungsgesellschaft, Bielefeld, also participated budgeted values were explained by the Management Board garding the German Corporate Governance Code pursuant to in this meeting of the Audit Committee. Furthermore, the AUDIT OF THE ANNUAL FINANCIAL STATEMENTS in detail. Section 161 Stock Corporation Act (Aktiengesetz, "AktG") was annual reports by company auditing, risk management and AND OF THE CONSOLIDATED FINANCIAL adopted and subsequently published on the Company's web- compliance management were presented and discussed. STATEMENTS FOCUS OF DELIBERATIONS OF THE SUPERVISORY site at www. HELLA .de/entsprechenserklaerung. In addition, On 29 September 2016, the Annual General Meeting appointed BOARD the declaration was renewed on the objectives for the com- At the meeting on 23 September 2016, the Audit Committee KPMG AG Wirtschaftsprüfungsgesellschaft, Bielefeld, as au- In the fiscal year 2016/2017, the Supervisory Board held four position of the Supervisory Board and on the competence examined the three-month financial statement for the fiscal ditor both for the annual financial statements and for the con- ordinary meetings, which took place on 10 August 2016, 27 profile for the Supervisory Board in keeping with the recom- year 2016/2017. Representatives of the auditor were present solidated financial statements for the fiscal year 2016/2017. October 2016, 27 January 2017 and 30 May 2017. mendations of the German Corporate Governance Code as of at the meeting and reported on the new accounting The annual financial statements and the management report 7 February 2017. It was also agreed to adjust rules of proce - provisions. of HELLA KGaA Hueck & Co. for the fiscal year 2016/2017 were At the meeting on 10 August 2016, the annual financial state- dure of the Supervisory Board to the new rules in the audit prepared by the General Partners in accordance with the pro- ments of HELLA KGaA Hueck & Co. and of the Group for the directive. At the meeting on 10 January 2017, the half-year financial visions applicable under the German Commercial Code (Han- fiscal year 2015/2016 were presented and discussed in depth. report for the fiscal year 2016/2017 was presented. Repre- delsgesetzbuch, "HGB"); the consolidated financial state- Based on the initial review by the Audit Committee, the sentatives of the auditor were present at the meeting and ments and the group management report were prepared in 86 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REPORT BY THE SUPERVISORY BOARD 87

Report by the Supervisory Board

Ladies and Gentlemen,

In the fiscal year 2016/2017, the Supervisory Board closely S upervisory Board approved both financial statements. The WORK OF THE COMMITTEES explained the result of their audit review of the half-year fi- followed the situation and development of HELLA KGaA Supervisory Board further addressed the proposed resolu- The Supervisory Board has established an Audit Committee nancial report. The reports on company auditing and compli- Hueck & Co. The Supervisory Board performed the tasks in- tions for the Annual General Meeting on 29 September 2016 which is responsible for the initial review of the annual finan- ance management were also discussed. cumbent upon it as provided for by applicable law and the and an outlook for current market development. cial statements, of the consolidated financial statements, of articles of association, and advised and supervised the Man- the management reports and of the proposal for the appro- Representatives of the auditor participated at the meeting on agement Board. At the meeting on 27 October 2016, the Management Board priation of profits. The Audit Committee is also responsible for 28 March 2017, during which the nine-month financial state - reported on the current business performance and provided preparing the agreements with the auditor, in particular the ment was discussed and the main points of the 2016/2017 The Management Board provided the Supervisory Board on an overview of the newly defined "guardrails" for HELLA 's instruction of the auditor, defining the main points of the audit year-end audit were defined. The Audit Committee also ex- a regular basis with written and verbal information on the annual strategy process. and the fee agreement. The Audit Committee additionally amined the agreement with the auditor for the review of the business performance of HELLA KGaA Hueck & Co. In par - deals with the supervisory duties prescribed by Section 107 annual financial statements for the fiscal year 2016/2017. ticular, the market and sales situation of the enterprise The main topic of the meeting on 27 January 2017 was the (3) sentence 2 AktG. The members of the Audit Committee are Based on the resolution passed, KPMG AG Wirtschaftsprü- against the background of general economic developments, current financial situation of the Company. Another focal point Klaus Kühn (Chairman), Prof. Dr. Michael Hoffmann-Becking, fungsgesellschaft AG, Bielefeld, was instructed by means of the financial situation of the Company and its subsidiaries as was the current status of HELLA ’s co-operation with external Paul Berger and Manfred Menningen. a written resolution procedure to conduct the audit. An addi- well as earnings trends were presented to the Supervisory service providers in the areas of Facility Management, Logis- tional focal point of the discussion was the project cost calcu- Board. In the context of the quarterly reporting, sales and tics and IT. The AUDIT COMMITTEE convened four times in the fiscal year lation of HELLA ; moreover, the draft of the auditing plan for earnings figures were presented for theHELLA Group as a 2016/2017. At the meeting on 2 August 2016, the Committee the fiscal year 2017/2018 was presented. whole as well as broken down by business segment. The topics of the meeting on 30 May 2017 were in particular examined the initial review of the annual financial statements the Management Board report for the third quarter of the and of the consolidated financial statements as at 31 May The NOMINATION COMMITTEE, which is responsible for pre- Furthermore, during the Supervisory Board meetings, the fiscal year 2016/2017, the year-end forecast for the fiscal year 2016, as well as of the management reports and of the the paring the proposals presented by the Supervisory Board to current business situation, the sales, results and capital ex- 2016/2017, the business plans for fiscal years 2017/2018 to proposal for the appropriation of profits. Representatives of the Annual General Meeting for the election of Supervisory penditure planning, as well as the operative targets were 2019/2020 and the results of the annual HELLA strategy pro- the auditor of the annual financial statements, KPMG AG Board members, did not convene in the fiscal year 2016/2017. discussed. Any deviations in the course of business from the cess. Furthermore, the annual declaration of conformity re - Wirtschaftsprüfungsgesellschaft, Bielefeld, also participated budgeted values were explained by the Management Board garding the German Corporate Governance Code pursuant to in this meeting of the Audit Committee. Furthermore, the AUDIT OF THE ANNUAL FINANCIAL STATEMENTS in detail. Section 161 Stock Corporation Act (Aktiengesetz, "AktG") was annual reports by company auditing, risk management and AND OF THE CONSOLIDATED FINANCIAL adopted and subsequently published on the Company's web- compliance management were presented and discussed. STATEMENTS FOCUS OF DELIBERATIONS OF THE SUPERVISORY site at www. HELLA .de/entsprechenserklaerung. In addition, On 29 September 2016, the Annual General Meeting appointed BOARD the declaration was renewed on the objectives for the com- At the meeting on 23 September 2016, the Audit Committee KPMG AG Wirtschaftsprüfungsgesellschaft, Bielefeld, as au- In the fiscal year 2016/2017, the Supervisory Board held four position of the Supervisory Board and on the competence examined the three-month financial statement for the fiscal ditor both for the annual financial statements and for the con- ordinary meetings, which took place on 10 August 2016, 27 profile for the Supervisory Board in keeping with the recom- year 2016/2017. Representatives of the auditor were present solidated financial statements for the fiscal year 2016/2017. October 2016, 27 January 2017 and 30 May 2017. mendations of the German Corporate Governance Code as of at the meeting and reported on the new accounting The annual financial statements and the management report 7 February 2017. It was also agreed to adjust rules of proce - provisions. of HELLA KGaA Hueck & Co. for the fiscal year 2016/2017 were At the meeting on 10 August 2016, the annual financial state- dure of the Supervisory Board to the new rules in the audit prepared by the General Partners in accordance with the pro- ments of HELLA KGaA Hueck & Co. and of the Group for the directive. At the meeting on 10 January 2017, the half-year financial visions applicable under the German Commercial Code (Han- fiscal year 2015/2016 were presented and discussed in depth. report for the fiscal year 2016/2017 was presented. Repre- delsgesetzbuch, "HGB"); the consolidated financial state- Based on the initial review by the Audit Committee, the sentatives of the auditor were present at the meeting and ments and the group management report were prepared in 88 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REPORT BY THE SUPERVISORY BOARD 89

accordance with the International Financial Reporting Stand- by the Annual General Meeting as a new member of the Super- ards (IFRS) to be adopted in the European Union, and in ac- visory Board with effect from the end of the Annual General cordance with the additional commercial law provisions un- Meeting of 29 September 2016. der Section 315a HGB to be applied. The two financial statements including the management reports were audited THANKS TO THE MEMBERS OF THE MANAGEMENT by auditor KPMG, which issued an unqualified auditors' certif- BOARD AND TO ALL EMPLOYEES icate for all documents. The Audit Committee of the Supervi- sory Board thoroughly reviewed the annual financial state- The Supervisory Board would also like to express its grati- ments at its meeting on 2 August 2017. The representatives of tude and appreciation to the members of the Management the auditor, present at the meeting of the Audit Committee, Board and to all employees of HELLA worldwide for their reported on the result of their audits and gave additional in - commitment and successful work in the fiscal year 2016/2017. formation. In the course of its audit, the auditor did not find any material shortcomings in respect of the organisation and effectiveness of the internal control and risk management system.

Based on the preparatory initial review by its Audit Commit- tee, the Supervisory Board, for its part, also reviewed the annual financial statements and the management report of HELLA KGaA Hueck & Co. as well as the consolidated finan - cial statements and the Group management report for the fiscal year 2016/2017. Given the final result of the Supervisory Board's review, there are no objections to be raised against the annual financial statements and the consolidated financial statements. At its meeting on 9 August 2017, the Supervisory Board approved the annual financial statements and the consolidated financial statements, and endorsed the proposal of the General Partners for the appropriation of distributable Lippstadt, 9 August 2017 profits. On behalf of the Supervisory Board COMPOSITION OF THE SUPERVISORY BOARD Ms. Laura Behrend resigned from her position as member of the Supervisory Board with effect from the end of the Annual General Meeting of 29 September 2016. On the recommenda- Prof. Dr. Michael Hoffmann-Becking tion of the Supervisory Board, Ms. Claudia Owen was appointed (Chairman) 88 ANNUAL REPORT 2016/2017 GROUP MANAGEMENT REPORT REPORT BY THE SUPERVISORY BOARD 89

Based on the preparatory initial review by its Audit Commit- tee, the Supervisory Board, for its part, also reviewed the annual financial statements and the management report of HELLA KGaA Hueck & Co. as well as the consolidated finan - cial statements and the Group management report for the fiscal year 2016/2017. Given the final result of the Supervisory Board's review, there are no objections to be raised against the annual financial statements and the consolidated financial statements. At its meeting on 9 August 2017, the Supervisory Board approved the annual financial statements and the consolidated financial statements, and endorsed the proposal of the General Partners for the appropriation of distributable Lippstadt, 9 August 2017 profits. On behalf of the Supervisory Board COMPOSITION OF THE SUPERVISORY BOARD Ms. Laura Behrend resigned from her position as member of the Supervisory Board with effect from the end of the Annual General Meeting of 29 September 2016. On the recommenda- Prof. Dr. Michael Hoffmann-Becking tion of the Supervisory Board, Ms. Claudia Owen was appointed (Chairman) 90 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT GENERAL INFORMATION ON THE HELLA GROUP 91

Consolidated annual statement of HELLA KGaA Hueck & Co.

Fiscal year 2016/2017

92 Consolidated income statement 93 Consolidated statement of comprehensive income 94 Consolidated statement of financial position 95 Consolidated cash flow statement 96 Consolidated statement of changes in equity

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

98 01 Basic information 98 02 Scope of consolidation 99 03 Acquisition of subsidiaries 100 04 Principles of consolidation 101 05 Currency translation 102 06 New accounting standards 106 07 Changes in accounting methods 109 08 Basis of preparation and accounting 129 29 Non-current assets held for sale 115 09 Discretionary decisions and management estimates 130 30 Intangible assets 133 31 Property, plant and equipment

32 Investments accounted for using the equity method NOTES TO THE CONSOLIDATED INCOME STATEMENT 135 140 33 Deferred tax assets / liabilities 116 10 Sales 142 34 Other non-current assets 116 11 Cost of sales 142 35 Trade payables 117 12 Research and development expenses 143 36 Other liabilities 117 13 Distribution expenses 143 37 Provisions 117 14 Administrative expenses 150 38 Financial debt 118 15 Other income and expenses 150 39 Equity 118 16 Net financial result 119 17 Income taxes OTHER NOTES 120 18 Personnel 151 40 Notes to the cash flow statement 120 19 Earnings per share 151 41 Adjustment of special effects in cash flow 121 20 Appropriation of earnings 153 42 Information on related party relationships 121 21 Adjustment of special effects in earnings before 155 43 Declaration of Conformity with the Corporate interest and taxes Governance Code 122 22 Segment reporting 155 44 Financial instrument reporting 127 23 Adjustment of special effects in the segment results 164 45 Contractual commitments 164 46 Contingent liabilities NOTES TO THE STATEMENT OF FINANCIAL POSITION 164 47 Information on leases 128 24 Cash and cash equivalents 166 48 Events after the balance sheet date 128 25 Financial assets 166 49 Audit fees 128 26 Trade receivables 128 27 Other receivables and non-financial assets 168 SCOPE OF CONSOLIDATION 129 28 Inventories 181 KEY PERFORMANCE INDICATORS 90 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT GENERAL INFORMATION ON THE HELLA GROUP 91

Consolidated annual statement of HELLA KGaA Hueck & Co.

Fiscal year 2016/2017

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32 Investments accounted for using the equity method NOTES TO THE CONSOLIDATED INCOME STATEMENT 135 140 33 Deferred tax assets / liabilities 116 10 Sales 142 34 Other non-current assets 116 11 Cost of sales 142 35 Trade payables 117 12 Research and development expenses 143 36 Other liabilities 117 13 Distribution expenses 143 37 Provisions 117 14 Administrative expenses 150 38 Financial debt 118 15 Other income and expenses 150 39 Equity 118 16 Net financial result 119 17 Income taxes OTHER NOTES 120 18 Personnel 151 40 Notes to the cash flow statement 120 19 Earnings per share 151 41 Adjustment of special effects in cash flow 121 20 Appropriation of earnings 153 42 Information on related party relationships 121 21 Adjustment of special effects in earnings before 155 43 Declaration of Conformity with the Corporate interest and taxes Governance Code 122 22 Segment reporting 155 44 Financial instrument reporting 127 23 Adjustment of special effects in the segment results 164 45 Contractual commitments 164 46 Contingent liabilities NOTES TO THE STATEMENT OF FINANCIAL POSITION 164 47 Information on leases 128 24 Cash and cash equivalents 166 48 Events after the balance sheet date 128 25 Financial assets 166 49 Audit fees 128 26 Trade receivables 128 27 Other receivables and non-financial assets 168 SCOPE OF CONSOLIDATION 129 28 Inventories 181 KEY PERFORMANCE INDICATORS 92 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED INCOME STATEMENT | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 93

Consolidated income statement Consolidated statement of comprehensive income of HELLA KGaA Hueck & Co. for the period from 1 June to 31 May (after-tax analysis) of HELLA KGaA Hueck & Co.; for the period from 1 June to 31 May

€ thousand Notes 2016/2017 2015/2016 € thousand 2016/2017 2015/2016

Sales 10 6,584,748 6,351,889 Earnings for the period 343,107 271,861

Cost of sales 11 -4,772,735 -4,663,691 Currency translation differences -14,515 -80,215 Changes recognised in equity -14,299 -80,215 Gross profit 1,812,014 1,688,198 Gains reclassified to profit or loss -216 0 Research and development expenses 12 -636,243 -623,459 Financial instruments for cash flow hedging 5,461 24,038 Distribution expenses 13 -506,319 -493,913 Changes recognised in equity 11,155 24,499 Administrative expenses 14 -229,627 -218,239 Gains reclassified to profit or loss -5,693 -461 Other income and expenses 15 14,965 13,918 Earnings from investments accounted for using the equity method 32 51,937 52,979 Change in fair value of financial instruments available for sale 4,259 -7,344 Other income from investments 443 308 Changes recognised in equity 3,937 -10,307 Earnings before interest and taxes (EBIT) 507,170 419,792 Losses reclassified to profit or loss 322 2,963

Financial income 16 15,027 32,515 Share of other comprehensive income attributable to associates and joint ventures -70 -13,583 Financial expenses 16 -59,274 -72,027 Items that were or can be transferred to profit or loss -4,795 -63,521 Net financial result 16 -44,247 -39,512 Remeasurements of defined benefit plans -3,706 5,017 Earnings before income taxes (EBT) 462,923 380,280 Share of other comprehensive income attributable to associates and joint ventures -507 -99

Income taxes 17 -119,816 -108,419 Items never transferred to profit or loss -3,706 5,017

Earnings for the period 343,107 271,861 Other comprehensive income for the period -8,500 -58,504

Comprehensive income for the period 334,607 213,357 of which attributable: to the owners of the parent company 39 341,733 268,500 of which attributable: to non-controlling interests 39 1,374 3,361 to the owners of the parent company 333,526 210,593 Basic earnings per share in € 19 3.08 2.42 to non-controlling interests 1,081 2,764

Diluted earnings per share in € 19 3.08 2.42 92 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED INCOME STATEMENT | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 93

€ thousand Notes 2016/2017 2015/2016 € thousand 2016/2017 2015/2016

Sales 10 6,584,748 6,351,889 Earnings for the period 343,107 271,861

Income taxes 17 -119,816 -108,419 Items never transferred to profit or loss -3,706 5,017

Earnings for the period 343,107 271,861 Other comprehensive income for the period -8,500 -58,504

Diluted earnings per share in € 19 3.08 2.42 94 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED STATEMENT OF FINANCIAL POSITION | CONSOLIDATED CASH FLOW STATEMENT 95

Consolidated cash flow statement of HELLA KGaA Hueck & Co. for the period from 1 June to 31 May

Consolidated statement of financial position € thousand Notes 2016/2017 2015/2016* of HELLA KGaA Hueck & Co. as at 31 May Earnings before income taxes (EBT) 462,923 380,280

+ Depreciation and amortisation 411,970 395,753 € thousand Notes 31 May 2017 31 May 2016 +/- Change in provisions 34,053 -22,233

Cash and cash equivalents 24 783,875 585,134 + Cash receipts for series production 131,503 83,120 Financial assets 25 314,386 328,790 - Non-cash sales transacted in previous periods -116,176 -101,086 - Other non-cash income -81,565 -59,703 Trade receivables 26 1,067,979 937,471 Other receivables and non-financial assets 27 155,738 146,376 + Losses from the sale of property, plant and equipment and intangible assets 6,000 4,168

Inventories 28 663,533 607,584 + Net financial result 44,247 39,512 Current tax assets 25,657 26,783 Increase in trade receivables and other assets not attributable to investing or - -124,535 -115,088 Non-current assets held for sale 29 0 2,924 financing activities - Increase in inventories -54,710 -34,264 Current assets 3,011,167 2,635,062 Increase in trade payables and other liabilities not attributable to investing or + 68,811 121,707 financing activities Intangible assets 30 254,850 225,021 + Tax refunds received 16,227 12,766 Property, plant and equipment 31 1,906,676 1,697,539 - Taxes paid -123,132 -122,049 Financial assets 25 30,094 17,033 + Dividends received 36,905 39,903 Investments accounted for using the equity method 32 273,901 261,448 = Net cash flow from operating activities 712,521 622,786 Deferred tax assets 33 117,488 122,954

Other non-current assets 34 44,021 36,244 + Cash receipts from the sale of property, plant and equipment 11,932 9,048 Non-current assets 2,627,030 2,360,239 + Cash receipts from the sale of intangible assets 4,818 4,940 - Payments for the purchase of property, plant and equipment -592,836 -489,869 Assets 5,638,197 4,995,301 - Payments for the purchase of intangible assets -72,888 -70,735 Financial debt 38 340,481 86,880 + Repayments of loans to investments 250 4,866 Trade payables 35 672,888 633,818 - Payments for loans granted to investments 0 -4,147 Current tax liabilities 60,670 57,923 + Cash receipts from capital decrease in investments 0 2,766 Other liabilities 36 635,935 558,043 - Payments for capital increases in investments 0 0 Cash receipts from the disposal of subsidiaries with loss of control (net of cash Provisions 37 100,481 65,259 + 5,538 103 and cash equivalents transferred) and from liquidation of other investments Current liabilities 1,810,454 1,401,923 Payments for the acquisition of subsidiaries, less cash and cash equivalents - 03 -4,921 0 received Financial debt 38 1,036,205 1,064,789 = Net cash flow from investing activities -648,107 -543,028 Deferred tax liabilities 33 32,371 25,767 Other liabilities 36 182,320 193,284 + Cash receipts from the issuance of a bond 38 298,707 0 Provisions 37 351,103 330,888 - Payments for the repayment of financial liabilities -102,952 -59,427 + Cash proceeds from changes in financial debt 38 34,917 68,556 Non-current liabilities 1,601,999 1,614,728 + Net payments for the purchase and sale of securities 12,491 68,477 Subscribed capital 39 222,222 222,222 - Payments made for acquiring shares of non-controlling interests 0 -57,789 Reserves and unappropriated surplus 39 1,998,533 1,750,563 + Interest received 11,198 12,346

Equity before non-controlling interests 39 2,220,755 1,972,785 - Interest paid -32,593 -32,978 - Dividends paid 39 -86,766 -86,612 Non-controlling interests 39 4,989 5,865 = Net cash flow from financing activities 135,002 -87,427 Equity 2,225,744 1,978,650 = Net change in cash and cash equivalents 199,416 -7,670 Equity and liabilities 5,638,197 4,995,301 + Cash and cash equivalents as at 1 June 585,134 602,744 +/- Effect of exchange rate fluctuations on cash and cash equivalents -675 -9,941

= Cash and cash equivalents as at 31 May 783,875 585,134

*See also Note 07 Notes to the cash flow statement see Note 40 94 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED STATEMENT OF FINANCIAL POSITION | CONSOLIDATED CASH FLOW STATEMENT 95

Consolidated cash flow statement of HELLA KGaA Hueck & Co. for the period from 1 June to 31 May

Consolidated statement of financial position € thousand Notes 2016/2017 2015/2016* of HELLA KGaA Hueck & Co. as at 31 May Earnings before income taxes (EBT) 462,923 380,280

+ Depreciation and amortisation 411,970 395,753 € thousand Notes 31 May 2017 31 May 2016 +/- Change in provisions 34,053 -22,233

= Cash and cash equivalents as at 31 May 783,875 585,134

*See also Note 07 Notes to the cash flow statement see Note 40 96 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 97

Consolidated statement of changes in equity of HELLA KGaA Hueck & Co.

Reserve for financial Reserve for Reserve for cur- instruments available-for-sale Remeasurements Other retained Reserves and Equity before Subscribed rency translation for cash flow financial instru- of defined benefit earnings/profit unappropriated non-controlling Non-controlling € thousand capital Capital reserve differences hedging ments plans carried forward surplus interests interests Equity

As at 1 June 2015 222,222 250,234 81,505 -89,092 10,469 -70,904 1,475,804 1,658,016 1,880,238 29,456 1,909,694 Earnings for the period 0 0 0 0 0 0 268,500 268,500 268,500 3,361 271,861 Other comprehensive income for the period 0 0 -79,631 24,045 -7,344 5,023 0 -57,907 -57,907 -597 -58,504

Comprehensive income for the period 0 0 -79,631 24,045 -7,344 5,023 268,500 210,593 210,593 2,764 213,357

Distributions to shareholders 0 0 0 0 0 0 -85,556 -85,556 -85,556 -1,056 -86,612 Changes in ownership interest in 0 0 -181 0 0 0 -32,309 -32,490 -32,490 -25,299 -57,789 subsidiaries

Transactions with shareholders 0 0 -181 0 0 0 -117,865 -118,046 -118,046 -26,355 -144,401

As at 31 May 2016 222,222 250,234 1,693 -65,047 3,125 -65,881 1,626,439 1,750,563 1,972,785 5,865 1,978,650

Earnings for the period 0 0 0 0 0 0 341,733 341,733 341,733 1,374 343,107 Other comprehensive income for the period 0 0 -14,225 5,462 4,231 -3,675 0 -8,207 -8,207 -294 -8,500

Comprehensive income for the period 0 0 -14,225 5,462 4,231 -3,675 341,733 333,526 333,526 1,081 334,607

Distributions to shareholders 0 0 0 0 0 0 -85,556 -85,556 -85,556 -1,210 -86,766 Disposal of non-controlling interests 0 0 0 0 0 0 0 0 0 -746 -746

Transactions with shareholders 0 0 0 0 0 0 -85,556 -85,556 -85,556 -1,957 -87,513

As at 31 May 2017 222,222 250,234 -12,532 -59,585 7,357 -69,557 1,882,616 1,998,533 2,220,755 4,989 2,225,744

See also Note 39 for notes on equity 96 ANNUAL REPORT 2016/2017 CONSOLIDATED ANNUAL STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 97