OTHER PROVISIONS

The main components of other provisions and their development are illustrated in the following table:

Product warranties

A provision is recognized for expected warranty claims on products sold during past periods. It is based on past experience, taking circumstances at the reporting date into account. The product warranty includes free repairs or, at the Group’s discretion, free replacement of components by an authorized partner workshop.

kEUR 2013 2014 2015–2018 2019–2023 2024 ff. Total Germany 441 1,855 2,354 18,696 23,346 USA 3,055 13,352 18,388 54,133 88,928 Canada 384 2,154 4,312 22,586 29,436 Total 3,880 17,361 25,054 95,415 141,710

Germany USA Canada

Weighted Average Duration as at 12/31/2014 18 12 18

Weighted Average Duration as at 12/31/2013 17 11 15

kEUR Product warranty Partial retirement Environ- mental issues Workers‘ compensation and health insurance benefits Restructuring Share based payment

transactions Other Total

As of 01/01/2014 5,794 678 775 1,484 1,281 1,423 1,155 12,590

Additions 8,480 – 105 513 602 3,721 803 14,224

Utilized 7,820 41 104 573 820 750 254 10,362

Release 259 – 15 – 66 – – 340

Interest effect from

measurement 16 – 20 – – – – 36 Foreign currency translation 190 – 84 192 4 – 315 785 As of 12/31/2014 6,401 637 865 1,616 1,001 4,394 2,019 16,933 Thereof in 2014 Current 4,009 604 244 411 1,001 2,626 1,239 10,134 Non-current 2,392 33 621 1,205 – 1,768 780 6,799 Thereof in 2013 Current 3,298 426 330 362 1,281 – 753 6,450 Non-current 2,496 252 445 1,122 – 1,423 402 6,140 Partial retirement

In Germany, the Group offers phased retirement plans to employees taking early retirement. The Group uses the block model in Germany, which divides partial retirement into two phases. Under such an arrangement, employees generally work full time during the first half of the transition period and leave the company at the start of the second half. The provision is discounted and treated as a deferred item at its present value. Partial retirement commit- ments are insured against possible insolvency.

Environmental issues

The provision for environmental issues is recognized in connection with environment-related obligations based on past events, in particular those that are probable and can be reliably estimated.

Workers’ compensation and health insurance benefits for employees

Occupational disability and health insurance benefits are recognized on the basis of claims made. In addition, the overall liabilities for claims of this kind are estimated on the basis of past experience, taking into account stop-loss insurance coverage.

Restructuring provisions

On October 1, 2013, it was decided to integrate the Wörth am Main plant into the existing Keilberg and Frauengrund plants in Bessenbach. The plant consolidation is part of a package of measures to increase profitability of the Trailer Systems Business Unit. The transfer of pro- duction is to take place gradually from December 2013 to December 2015. This involved the conclusion of a reconciliation of interests including a redundancy plan with job security in October 2013. In addition, further measures in connection with the plant consolidation were decided upon in 2014.

Share-based payment transactions

__ Phantom share plan

On July 9 and on December 1, 2010, a phantom share plan for members of the Management Board and certain other executives in the Group was approved by the Company. The goal of this plan, which has a term of five years, is to sustainably link the interests of management and executives with the interests of the shareholders of SAF-HOLLAND S.A. in a long-term increase in enterprise value. The plan includes variable remuneration in the form of phantom shares, which are based on the value of shares of SAF-HOLLAND S.A. At the beginning of the plan, each plan participant receives a certain number of phantom shares that give rise to a payment claim if certain conditions are met at the end of the term of the plan. There is no entitlement to shares of SAF-HOLLAND S.A.

002 Company 060 Management Report 116 Financial Statements

Notes to the Consolidated Balance Sheet

169 168

The total of 640,000 phantom shares issued in 2010 has decreased in financial year 2014 by 40,000 phantom shares to 600,000 phantom shares and breaks down as follows:

In the reporting period, 40,000 phantom shares expired as a result of two employees leaving the company. The contractual term of the phantom shares as of December 31, 2014 is a maximum of 0.5 years. The phantom shares may only be exercised after a waiting period of four years and must be redeemed after five years at the latest. The participant is free to determine the exercise date within this one-year settlement period. Phantom shares that are not exercised within this one-year settlement period expire without compensation.

At the time of redemption, the participant receives the difference between the settlement price and the strike price multiplied by the number of the participant’s phantom shares. The settle- ment price is the average price of SAF-HOLLAND S.A. shares in the three months preceding the redemption of the phantom shares, but not more than the price applicable on the day after the exercise. The uniform strike price is EUR 5.00.

An amount equal to double the respective strike price will be paid out at a maximum. Precondition for the exercisability of the appreciation rights is the achievement of a defined performance target. The performance target is fulfilled if the Group, in the period from July 1, 2010 to June 30, 2014, has achieved on the average a minimum operating performance with regard to the two performance indicators “Earnings before taxes after cost of total equity (EBTaCE)“ and “Average earnings before taxes after cost of total equity (average EBTaCE)”. In addition, exercisability is only given when the participant maintains an active employment relationship with the Group for at least three years from issue of the phantom shares. The provisionally allotted phantom shares are forfeited without replacement if, before expiration of three years from issue of the phantom shares, the participant is removed from the board of the Group or is rightfully released from the participant’s service obligation or the employment relationship between the participant and the Group ends before expiration of three years as a result of a notice of termination, termination by mutual agreement or for age reasons. This does not apply if the participant is protected by the German Statute protecting employees against dismissal (Kündigungsschutzgesetz) and notice of termination is given by the Group due to compelling operational reasons.

The phantom shares granted are classified and accounted for as cash-settled share-based payment transactions. The fair value of the phantom shares is remeasured on each balance sheet date using a Monte-Carlo simulation and under consideration of the conditions at which the phantom shares were granted. The measurement of the options granted in the current reporting period is based on the following parameters:

Measurement date 12/31/2014 12/31/2013

Expected remaining contractual life (years) 0.50 1.50

Share price on measurement date (EUR) 11.18 10.81

Exercise price (EUR) 5.00 5.00

Expected volatility 25.15% 21.35%

Risk free interest rate 0.00% 0.12%

The weighted average of the fair value of phantom shares amounts to EUR 5.00 per phantom share as of December 31, 2014 (previous year: EUR 4.61).

In the reporting year, the vesting conditions for the phantom share program were updated by the Board of Directors. Reason for updating the vesting conditions was that long-term capital measures as well as the amount of restructuring expenses during the term of the phantom share program were not yet forseeable when the phantom share program was introduced in June 2010. If these circumstances had been kown at the time the phantom share program was introduced, the vesting conditions would have been determined accordingly under consideration of the upfront payment of kEUR 750 from the interim-PSU plan. A provision in the amount of EUR 2.3 million was recognized in the reporting year based on the updated vesting conditions and the expected level of target achievement. The expenses for the period are allocated to the relevant functional areas in the consolidated statement of comprehensive income.

__ Performance share unit plan

As part of the PSU plan, members of the Management Board and selected managers can receive cash awards depending on the achievement of certain performance targets. Since 2013, a PSU plan with a term of four years has been offered to each participant in the scheme. As a result of the new plan structures implemented in 2013, another “interim“ PSU plan with a term of two years was offered to participants in 2013 and in 2014 in addition to the regular four-year PSU plan.

The goal of this plan is to sustainably link the interests of management and executives with the interests of the shareholders of SAF-HOLLAND S.A. in a long-term increase in enterprise value. The performance share unit plan takes into account both the performance of the com- pany and the share price development and provides for a performance period of four/two years. Participants receive virtual share units at the beginning of the performance period. The number of share units at the beginning of the performance period results from the division of the allowance value annually determined by the Board of Directors by the average market price in the last two months of the year preceding the allowance. Upon expiration of the performance period, the allowed number of share units is adjusted through multiplication with a target-achievement factor. The target-achievement factor is the ratio of average realized company performance (adjusted EBIT margin) during the performance period to average target value previously determined for the performance period.

The amount of the participants‘ payment claim is determined by multiplying the share units with the average market price during the last two months of the performance period and the target-achievement factor. There is no entitlement to shares of SAF-HOLLAND S.A.

Payment under the performance share unit plan is limited to 200% of the participant‘s gross annual salary at the time of payment.

Phantom shares outstanding at the beginning of the period 640,000

Phantom shares granted during the period –

Phantom shares forfeited during the period 40,000

Phantom shares exercised during the period –

Phantom shares expired during the period –

Phantom shares outstanding at the end of the period 600,000

Phantom shares exercisable at the end of the period 600,000

002 Company 060 Management Report 116 Financial Statements

Notes to the Consolidated Balance Sheet

171 170

The precondition for the exercisability of the appreciation rights is the achievement of a defi- ned performance target. The performance target is fulfilled if the Group, in the period of entit- lement, has achieved on the average a minimum operating performance with regard to the performance indicator “Adjusted EBIT“.

Early payments in the total amount of kEUR 750 were made to participants in the scheme from the “interim“ PSU plan granted in 2013. The amount paid out under this PSU plan is offset against the payment claim from the phantom share plan.

On the balance sheet date the total of share units granted amounts to 490,039 and breaks down as follows:

The share units granted are classified and accounted for as cash-settled share-based payment transactions. The fair value of the share units is remeasured on each balance sheet date using a Monte-Carlo simulation and under consideration of the conditions at which the phantom shares were granted. The measurement of the options granted in the current reporting period is based on the following parameters:

The fair value is expensed over the contract term with recognition of a corresponding liability. As of December 31, 2014, provisions for these performance plans amount to EUR 2.1 million (previous year: EUR 1.4 million). Expenses for the period in the amount of EUR 1.5 million (previous year: EUR 1.4 million) have been allocated to the relevant functional areas in the Consolidated Statement of Comprehensive Income.

Performance share unit plan 2013–2016

Performance share unit plan 2014–2017

Performance share unit plan 2014–2015

Expected remaining contractual life (years) 2.00 3.00 1.00

Average share price on measurement date (EUR) 11.18 11.18 11.18

Expected volatility 26.16% 32.52% 25.12%

Risk free interest rate -0.04% 0.00% -0.03%

6.12