EVENTS AFTER THE BALANCE SHEET DATE

No events of relevance for this report occurred after the balance sheet date.

OUTLOOK

ECONOMIC ENVIRONMENT

Global economy accelerates

The Institute for the World Economy (IfW) expects a further improvement in the global eco- nomy. Higher growth rates are expected, particularly in advanced economies, a develop- ment that will also benefit emerging markets through stronger external demand. The IfW expects global output to increase by 3.7% in 2015. In the subsequent year, growth could reach 3.9%. Global trade should show even stronger growth, with an increase of 4.5% this year and 5.5% next year. The institute‘s forecast is based on the assumptions that geopolitical crises will not intensify, that financial market tensions will either be of short duration or limited to individual countries, and that the existence of the euro zone will not again be cast in doubt.

__ Europe: economic recovery continues

In the crisis countries in Europe, economic adaptation processes have continued to take effect, which should spur positive economic impulses. However, in the view of the IfW, structural problems in some euro-zone countries continue to stand in the way of a robust economic recovery. Thus, only moderate growth rates are expected in 2015 and 2016 for both the European Union and the euro zone.

__ North America: recovery in the USA

In the United States economic conditions have seen sustained improvement. Accordingly, a significant increase in economic growth is forecast for this economic region. With economic growth at 3.2% this year and 3.5% next year, the USA could become an engine of growth in the global economy. Against this backdrop, the IfW sees strengthening corporate investment, and companies could benefit from very favorable financing conditions.

__ BRIC countries: generally rising economies

Economic growth in the BRIC states will likely continue to be uneven. Russia is expected to dip into a slight recession in 2015 before the economy bounces back into positive territory in 2016. In Brazil, GDP is expected to grow in both of the next two years according to estimates from the IfW. Overall, however, there are contradictory estimates and sources on Brazilian

economic development. Positive development is also expected to continue in India, where annual growth rates over the forecast period should exceed 6%. In China, the IfW sees gross domestic product growing by 7.0% in 2015 and 6.7% in 2016. Thus the trend toward weaker economic growth in China will continue but with growth rates continuing to be significantly higher than those of the global economy.

Industry trend: outlook remains positive

For the global commercial vehicle market all signs point to continued future growth. The industry experts at A.T. Kearney expect the global market for medium and heavy trucks to grow by 4.8% annually to 2020. At the same time, increasing volumes of goods and improved road networks worldwide are expected to support the trend. The high number of freight forwarders needing to catch up on new purchases to modernize their fleets in established markets will strengthen demand.

__ Commercial vehicle market in Europe picks up steam

Forecasts project continued positive development in the European market. This view is supported in particular by the high average age of fleets, which makes new purchases increasingly inevitable. In Western Europe the number of new trailer registrations this year is expected to reach 4.4% and climb to 9.0% next year. In Eastern Europe, new registrations in 2015 are likely to be on par with last year‘s figure. For 2016, new vehicle registrations are expected to rise to 11.0%. Significant increases are also expected in the truck segment. For vehicles exceeding 15 tons in the region encompassing Western, Central and Eastern Europe an increase of 13.3% in 2015 and 7.5% in 2016 is anticipated.

__ Double-digit growth rates in North America

For North America, ACT Research projects strong growth in the sector. In the trailer segment, shipment figures for 2015 are anticipated to rise by 11.7% and the class 8 trucks that are key for SAF-HOLLAND are expected to see a 14.0% production increase. In 2016, market growth may level off again, with a continued high annual production of more than 300,000 units in each segment. Volume in class 7 vehicles could fall slightly. In this segment, ACT Research sees a slight plus of 0.6% this year and 5.6% next year. Once again, the North American market’s pent-up demand will be a significant driver of growth. The strong economy and the increase in construc- tion activity will give the market additional buoyancy.

__ BRIC countries continue to be important markets

In emerging nations, transport volumes are increasing rapidly, creating growing demand for trucks and trailers. Commercial vehicle markets are thus still on track for growth. This also applies to the BRIC countries, which already purchase 55% of the world’s truck production. As high demand continues, industry development in Russia depends for now primarily on the

PREDICTED ECONOMIC DEVELOPMENT IN IMPORTANT MARKETS

2015 2016 European Union 1.6% 1.8% Euro zone 1.2% 1.5% Germany 1.7% 1.9% United States 3.2% 3.5% Brazil 1.5% 2.5% Russia -0.5% 0.5% India 6.5% 6.5% China 7.0% 6.7%

Source: Institute for the World Economy IfW, (December 2014)

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Opportunities and Risk Report Events after the Balance Sheet Date Outlook

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outcome of political events. In Brazil the market is not expected to grow. An improved econo- mic outlook, as well as stronger construction and mining activities will bolster demand in India. The country’s industry association SIAM expects growth of between 5% and 9% for trucks of the higher weight classes. In China, A.T. Kearney projects that sales of medium and heavy trucks will increase to 1.4 million units by 2020. That corresponds to an annual growth rate of 4.0%.

FUTURE DEVELOPMENT OF SAF-HOLLAND

SAF-HOLLAND is well prepared for continued positive business development. Among the significant strengths of our company are a high level of technological expertise, our modular range of high-quality products, close contact with fleet customers, and our comprehensive network of spare parts and service stations. We also have a solid financial base and long-term financial security for our continued growth.

Growth strategy with three focal points

SAF-HOLLAND works according to medium-term strategies, each covering a period of five years. In the current financial year we will continue to pursue our growth strategy with a focus on: expansion of the trailer business in North America, strengthening international Aftermarket activities and further exploration of markets in BRIC countries.

Future products: focus remains on weight reduction

The focus of our product development efforts remains on innovations which support the reduction of weight, as well as solutions for extending service life and safety. This orientation corresponds precisely to the requirements of fleet operators, as bigger payloads, lower fuel consumption and high vehicle availability are essential prerequisites for profitable fleet operation. Furthermore, we will develop adaptations to local markets and exploit sales potential through technology transfer.

Market launches in 2015 will include the INTRA S and INTRA R air spring systems presented at IAA Commercial Vehicles 2014. These innovative variants of the proven INTRA series are tailored to different price points and markets, which makes them highly attractive on the market. Further information about INTRA S and INTRA R can be found on page 50. Additional infor- mation about new SAF-HOLLAND products is available on the pages 48, 53 and 56.

Investment in optimization of the production plant network

Optimizing our production plant network is a primary focus of investment and an initiative of our package of measures to increase the profitability of the Trailer Systems Business Unit. In the course of the current plant consolidation in Europe, we will complete the consolidation of the German plant in Wörth into the two plants at our main location in Bessenbach by the end of 2015. In IT, we are continuing to invest in projects aimed at networking our global locations, particularly in the fields of planning and consolidation, as well as product data management.

Dividend policy

At the Annual General Meeting on April 23, 2015, the Board of Directors will recommend the distribution of a dividend of EUR 0.32 per share (previous year: 0.27 EUR) for financial year 2014. This would result in a total distribution amount of EUR 14.5 million, which corresponds to around 44% of net earnings.

SAF-HOLLAND’s stated target is to continue with its dividend policy of paying out 40% to 50% of its net income to shareholders, depending on the success of the company. The prere- quisite for the dividend payment is an equity ratio of about 40% reported in the consolidated annual financial statements.

GENERAL STATEMENT ON FUTURE BUSINESS DEVELOPMENT

We intend to continue expanding our market share both in established core markets and in emerging markets. The rising global commercial vehicle market offers promising prospects for such expansion. In Europe, we expect demand in the trailer segment in 2015 to be on par with last year‘s demand. We therefore expect the good utilization of our plants to continue, spurred on in part by our innovative product range. From today’s perspective, we also expect positive business development in North America. The North American truck and trailer markets are currently characterized by strong demand from which the company stands to profit due to the high market share of its products. Through our investments last year in China, Malaysia and Dubai, we created the conditions in emerging regions to take greater advantage of growth opportunities. The resulting effects have strengthened our business, particularly in Asia and the Middle East, as well as in North and Central Africa.

Assuming that political, overall economic and industry-specific conditions do not deteriorate, we confirm the forecast presented in December 2013. For financial year 2015, we will therefore continue to strive for sales between EUR 980 million and EUR 1.035 billion. On the earnings side, our target remains unchanged at an adjusted EBIT margin of 9% to 10%. The package of measures to increase the profitability of the Trailer Systems Business Unit will contribute to meeting this target.

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Outlook

117 116

116

Consolidated Financial Statements

120 Consolidated Statement of Changes in Equity 121 Consolidated Cash Flow Statement

122

186 SAF-HOLLAND S.A. Annual Financial Statements 188 Mandates of Board of Directors/

Management Board

190 Independent Auditor’s Report 192 Responsibility Statement

122 1 Corporate Information

122 2 Accounting and Valuation Principles

2.1 Basis of Preparation 122 2.2 Significant Accounting Judgments,

_{Estimates, and Assumptions 122} 2.3 Summary of Significant

_{Accounting Policies 125} 2.4 Changes in Accounting Policies 139 2.5 Standards Issued But

Not Yet Effective 140 142 3 Scope of Consolidation

144 4 Segment Information

147 5 Notes to the Consolidated Statement of Comprehensive Income

5.1 Cost of Sales 147 5.2 Other Income and Expenses 147 5.2.1 Other Income 147 5.2.2 Selling Expenses 148 5.2.3 Administrative Expenses 148 5.2.4 Research and Development Costs 148 5.2.5 Finance Result 149

5.2.6 Employee Benefit Expenses 150 5.2.7 Depreciation and Amortization 150

5.2.8 Reversals and Impairments

_{on Intangible Assets 150} 5.3 Income Taxes 151

153 6 Notes to the Consolidated Balance Sheet

6.1 Goodwill and Intangible Assets 153 6.2 Property, Plant, and Equipment 156 6.3 Investments Accounted for Using

the Equity Method 157 6.4 Other Non-current Assets 158 6.5 Inventories ₁₅₈ 6.6 Trade Receivables 159 6.7 Other Current Assets 160

6.8 Cash and Cash Equivalents 160

6.9 Equity 160

6.10 Pensions and Other Similar Benefits 162 6.11 Other Provisions 166 6.12 Interest Bearing Loans and Bonds 171 6.13 Trade Payables 172 6.14 Other Liabilities 172 173 7 Other Disclosures

7.1 Financial Instruments and Financial

Risk Management 173 7.2 Earnings per Share 179 7.3 Statement of Cash Flows 180 7.4 Other Financial Obligations 181 7.5 _{Contingent Liabilities 181} 7.6 Related Party Disclosures 182 7.7 Capital Management 184 7.8 Auditor’s Fees 185 7.9 Events after the Balance Sheet Date 185 Notes to the Consolidated Financial Statements:

002 Company 060 Management Report 116 Financial Statements

119 118