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ANNUAL REPORT 2014

ZF LENKSYSTEME GMBH



SALES

OPERATING PROFIT

NET PROFIT BEFORE TAX

INVESTMENTS

EMPLOYEES

KEY FIGURES 2014 IN MILLION, EXCEPT EMPLOYEES



CONTENTS

01 Group management report for 2014

06

Operations and organisation

07

Business environment and developments in theautomotive industry

07

Business development of ZF Lenksysteme

07

02 The Results

18

Consolidated income statement

19

Consolidated statement of comprehensive income

20

Consolidated balance sheet

21Consolidated cash ow statement

23

Consolidated statement of changes in equity

25

Notes to the consolidated nancial statements

27Audit opinion

67

We have issued the audit opinion presented below in compliance

with legal and professional requirements subject to the conditions

described in the enclosed „Engagement Terms, Liability and Con-

ditions of Use“.

If this document is used in electronic form for the purpose of sa-tisfying disclosure requirements in the Federal Gazette (Bundes-

anzeiger), only the les in the documents relating to the nancial

statements and, where a statutory duty to audit applies, the audit

opinion and the related auditor‘s certicate may be used for this

purpose.

NOTE



O N E

2014

GROUP MANAGEMENT REPORT›




GROUP MANAGEMENT REPORT FOR 2014

Operations and organisation

ZF Lenksysteme GmbH was founded in 1999 as a joint venture

with Robert Bosch GmbH (BOSCH) and ZF Friedrichshafen AG

(ZF). Each company held a fty percent holding. Bosch and ZF sig-

ned an agreement on 14/15 September 2014 to increase the RobertBosch GmbH shareholding to 100 % in order to ensure that the

future requirements of an increasingly dynamic environment could

continue to be met in the future. The acquisition was subject to

the merger control proceedings of the supervisory authorities. The

ZF Friedrichshafen AG share in the company was transferred to

Robert Bosch GmbH on 30 January 2015 following approval by the

responsible competition authority.

ZF Lenksysteme is a worldwide supplier of steering systems to theautomotive industry. The company develops, manufactures and

markets innovative steering technology for passenger cars and

commercial vehicles. In addition to complete steering systems,

steering columns and steering pumps, the product portfolio also

features components such as valves, universal joints, steering

shafts and gear pumps.

The company is domiciled at, and has its biggest plant in, Schwä-

bisch Gmünd, in the German state of Baden-Württemberg. Otherplants in Germany are located in Berlin and Bietigheim; the sub-

sidiary ZF Lenksysteme Nacam GmbH is based in Bremen. With

another 14 locations in Europe, North America, South America,

China, Malaysia and India, ZF Lenksysteme also has a global pre-

sence which allows it to serve its internationally-focused custo-

mers with local development and production services all around

the world. Two other locations in China, as well as new facilities

which will expand the Group’s location in Hungary, are currently

under construction.

Business environment and developmentsin the automotive industry

The world economy grew in 2014 with an increase in global output of

2.7 %, lagging behind the long-term trend of 3.3 %. Reasons for this

were the ongoing impact of the sovereign debt crisis in Europe as

well as political tensions in eastern Europe, disappointing develop-

ments in Japan and structural problems in a number of emerging-

market economies. The situation was exacerbated by the critical

situation in some Middle Eastern countries. European economies

grew by just 1.2 %. In contrast, the North American economic area

developed positively. Although China maintained strong growth of7.3 % it failed to repeat the high pace of growth of previous years.

A total of 90.4 million units of passenger cars and commercial vehic-

les were manufactured worldwide in 2014, around 3 % more than the

year before. Around 4 % more vehicles were produced in the Euro-

pean Union. In North America, vehicle production increased by 5 %,

somewhat more than in the previous year. In contrast, output in

South America dropped by double-digits. At 8 %, vehicle production

grew most strongly in China, although this was only around half therate of growth reported the year before. Production gures in India

declined somewhat owing to the country’s weak performance in the

rst half of the year.

Business development of ZF Lenksysteme

ZF Lenksysteme reported total revenues during the period under

review of €4.4 billion, up 7 % on the previous year. The margin forgrowth of between 5 % and 7 % projected by the ZF Lenksysteme

Group last year was consequently met.

Sales trends

€ million

2014

2013

2012

4,387

4,114

3,997



Group management report for 2014 8

Group sales were spread among its business elds as follows: 76 %

car steering systems, 16 % commercial vehicle steering systems and

8 % car steering columns.

Sales by business fields

Car steering systems

As in previous years, business with car steering systems developed

positively in 2014 and grew by 12 % over last year to reach record

sales of €3.4 billion. Accounting for 76 % of sales, car steering sys-

tems remained the largest business eld.

In line with the technological advance from hydraulic to electric car

steering systems on the global market, ZF Lenksysteme has deve-

loped a complete ZF Servolectric® product range for all passenger

car segments and for light commercial vehicles. ZF Lenksysteme

reported sales of these electric power steering systems in scal

2014 of €3 billion, equal to 18 % more than in the previous year.

With its innovative products, extended worldwide production

network and outstanding overall international position, the com-pany again acquired important large-scale projects which allowed

ZF Lenksysteme to secure and expand its share of the worldwide

market.

Commercial vehicle steering systems

ZF Lenksysteme’s commercial vehicle steering systems business

includes CV steering systems, CV steering columns and shafts as

well as CV and car steering pumps. The business unit ended the

year with reported sales totalling €682 million, 9 % down on theprevious year.

€382 million of this amount originated from commercial vehicle

steering assemblies and columns. The reduction in sales of 6 % was

mainly due to weak South American and European markets.

Sales of steering pumps dropped by 12 % to €300 million. The drop

in sales in the passenger car pumps segment was exacerbated by

the technological advance from hydraulic to electric car steeringsystems, particularly on the European market.

The commercial vehicle steering systems business unit obtained

important orders in 2014. Important product innovations which will

secure long-term business success were brought to series maturity.

Car steering columns

ZF Lenksysteme’s car steering columns business unit reported a 5 %

fall in sales to €341 million. This reduction aected the company’s

European locations in particular. At the same time, however, new

customer projects were acquired in America, Asia and Europe. Pro-

duction capacities continued to be expanded in Asia as planned.

8 %Car steeringcolumns

16 %Steering assembliesand columns forcommercial verhicles

76 %Car steeringassemblies




Regions

With 17 production sites in eight countries, ZF Lenksysteme opera-

tes on a worldwide basis. Proximity to customers and their markets

strengthens the company’s international competitive position as well

as allowing it to compensate for regional uctuations. External sales by European plants rose by 6 %. Sales increased in the Asia-Pacic

Region by 11 % and in NAFTA by 8 %. In contrast, sales in South Ame-

rica fell by 17 %.

Sales according to region

Earnings, assets and financial position

ZF Lenksysteme reported an operating prot of €250 million in

the scal year and increased EBIT by 5.7 % over and above the pre-

vious year. As a result, the prot margin projected for 2014 was

exceeded. At the same time, results were impacted by unforeseen

eects: Property, plant and equipment as well as intangible assets

held by the “pumps” unit of the CV Steering Columns division were

written down by €9 million owing to inadequate earnings pros-

pects. Write-downs of €11 million were also required for the stee-ring column product eld.

Trade receivables rose by €82 million and trade payables by €97

million. This was largely due to expansion of business activities at

locations in China.

Sustained high levels of capital spending on property, plant andequipment of €392 million easily exceeded depreciation. The value

of property, plant and equipment consequently rose by €210 mil-

lion to €1,147 million. ZF Lenksysteme is therefore prepared for

further growth.

The discounting rate on pension provisions followed the market

and fell once again, from 3.8 % last year to 2.25 % at the end of the

scal year. Losses arising from revaluations of dened benet plans

consequently rose again to €257 million by the end of the year.Liabilities rose to €638 million.

Deferred tax assets increased by €61 million. €46 million of this

amount was ascribable to the losses arising from revaluations of

dened benet plans.

Equity development

€ million

2013 2014

44 % Germany

18 % USA

10 % Europe

25 % Asia

3 % South America

Operating Profit

€ million

2014

2013

2012

250

167

160




Equity rose by €138 million to €903 million by the end of the pe-

riod under review. The equity ratio remained unchanged at 31 %.

ZF Lenksysteme regards this ratio as placing it in a good position

vis-à-vis its competitors.

Cash ow from operating activities rose to €512 million; €441 mil-lion owed out of the company in the form of investment activities.

With cash and cash equivalents of €265 million, available-for-sale

securities of €3 million and nancial liabilities of €154 million,

ZF Lenksysteme’s net nancial position at the end of the year 2014

was a positive €114 million. The Group continues to be in a sound

nancial position.

Business development is therefore regarded as positive. Anticipated

sales growth was achieved and the targeted prot margin exceeded.

Capital spending

ZF Lenksysteme invested the high amount of €392 million in

property, plant and equipment during the scal year. This capital

spending ratio of over 9 % of sales provides a good foundation for

further growth.

€87 million, or 22 %, of capital spending was invested in Germany.

The bulk of foreign direct investments were made in China, Hungary

and the USA.

ZF Lenksysteme concentrated its capital spending on new products

and customer projects as well as in necessary streamlining and re-

placement.

Employees

Worldwide, ZF Lenksysteme had an average of 13,732 employees

on its payroll during the scal year. The workforce has consequent-

ly grown by 5 % since the previous year. 6,756 people work in Ger-

many, 2 % more than in the previous year. Outside of Germany

the workforce rose by 8 % to 6,976. Most of this growth took place

at the company’s locations in China, where 2,794, or 20 % of the

total workforce, were employed. The location in Florence (USA)

was expanded further and, with 1,185 employees, is now one of

ZF Lenksysteme’s largest plants. The location in Hungary also ex-

panded and, with 755 employees, grew in importance accordingly.

Around 7 % of the company’s total workforce, 999 employees, now

works in South America.

Employees

2014

2013

2012

13,732

13,118

12,717

The “Keep values in mind” initiative, which was launched at all lo-

cations in 2013, was successfully concluded. Values will continue to

be integrated as part of our corporate culture on an ongoing basis,

e.g. in the form of employee appraisals and executive programmes.

The prot-sharing model for standard pay scale employees working

at German locations was extended to incorporate quality compo-

nents. This will encourage employees to focus more closely on thiskey corporate objective.

80 % of all employees participated in the global ZAS sta survey.

The survey concentrated in particular on communication between

management, executives and employees, as well as issues relating

to corporate strategy and leadership. Special emerging strengths

are the high level of responsibility demonstrated by our employees,

their strong identication with the company and excellent team-

based collaboration.




A network for female employees has been created – WOMEN@

ZFLS. This is a further element in making the company a more

attractive employer for women.WOMEN@ZFLS is designed to im-

prove communication and the exchange of ideas and experience

between female employees. The network will also address topics

such as the work-life balance, ways of engaging in continuingprofessional development and international delegations.

Research and development

Strength in innovation is a critical element in the business success

of ZF Lenksysteme. In order to full market requirements in terms

of product functionality and quality as well as possible, €260 million

was expended during the scal year on research and development;this is 9 % more than in the previous year.

Research and development spending

€ million

2013 2014

The electromechanical steering system (ZF-Servolectric®) minimises

energy consumption while providing drivers a high level of driving

comfort and precision. Car manufacturers benet from zero-main-

tenance and easy installation, while drivers obtain greater electric

steering functionality. ZF-Servolectric® supports this trend byproviding a wide range of assistance and safety features. Its series

applications increasingly include integrated functions to make life

easier, such as parking assistant functions and adjustable steering

characteristics. Safety is also enhanced by other functions (lane

keeping assistant, lane departure warning or oversteering/unders-

teering assistant).

The deployment of the ZF-Servotwin® electric steering system in

the commercial vehicle segment not only permits greater steering

precision and improved steering comfort, it also implements driver

assistance functions in commercial vehicles for the rst time. A

“Lane keeping assistance” project has also been launched to de-

monstrate the potential for improved road safety. This functionality

not only addresses issues of driving comfort, but also driving safety

by helping drivers to stay in lane by superimposing continuous andharmonious additional torque.

The “Innovation Truck” was a crowd puller at the IAA Commercial

Vehicles. This long truck can be easily manoeuvred from outside

the driver’s cabin using a tablet and an app specially developed by

ZF Lenksysteme. The practical value of this development is that it

will help to avoid expensive manoeuvring damage and will leverage

e ciency potential at depots and haulier’s facilities.

Purchasing

Purchases of product material, operating resources and services

increased by 6 % to €2.7 billion year-on-year.

ZF Lenksysteme’s global purchasing organisation, which has been

restructured in recent years, produces rolling global commodity

group strategies. These are coordinated and successfully imple-mented by regional procurement centres. This enabled the company

to achieve signicant improvements in its pool of suppliers, by

expanding sources of supply in emerging markets and by consoli-

dating well-developed existing procurement markets.

Parallel approvals of several suppliers for a single product enhanced

procurement exibility and contributed to a further improvement

in the quality of supplies obtained from third parties.

Important impetus was given by the newly established “Aftermarket”

purchasing unit. The methods and processes developed in this seg-

ment to guarantee customer requirements, i.e. for short lead times

and faster delivery of prototypes, are transferred directly to volume

business.




Production

Numerous processes were optimised during the course of the scal

year by consistently applying the ZF Lenksysteme production

system. New production facilities which comply with production

system requirements were commissioned and more eective usemade of space and buildings.

International meetings of plant managers as well as the Manufac-

turing Days created platforms which enabled managers to learn

about and make practical and planned use of the production system

methods. These meetings also provided an opportunity to address

leadership issues which play a key role in continuous improvement.

Quality

The quality of products and services is a decisive factor inuencing

sales growth and business results. Our aim is to achieve quality leader-

ship in all business elds and in every region. Signicant progress

was made in improving the quality of products even further as part

of the strategy of achieving zero defects. In particular, progress has

been made in reducing internal nonconformity costs by means of

systematic process development and standardisation and by im-proving the in-the-eld quality of products by making consistent

use of quality techniques.

The key focus of quality initiatives in 2014 was the topic of “Quality

in the product creation process”. This was also one of the main issues

addressed at the Quality Days held at all ZFLS locations.

IT

One of the main activities undertaken in the scal year was achieving

ongoing improvements in the technical and organisational protection

of IT systems and data. Substantial improvements were achieved in

this area by means of standardisation, by simplifying IT infrastruc-

tures and processes, and by introducing system redundancies and

high-performance monitoring systems. The technical infrastructure

for using mobile devices was also implemented on this basis.

Sustainability

Mobility and transport are hallmarks of a modern society and eco-

nomy. The climate protection debate has raised public awareness

of this issue considerably and reinforced demands for reductions

in carbon emissions in cars, including steering systems, and for agreater focus on environmental compatibility. ZF Lenksysteme’s

innovative products contribute to reducing the weight and energy

requirements of steering systems and thereby to mitigating the im-

pact on the environment of growing volumes of trac.

Environmental protection is systematically integrated in all the

company’s operations and processes. Appropriate measures are

taken to reduce the environmental impact associated with the ma-

nufacture, use and later disposal of ZFLS products to a minimum.This includes the sparing use of resources. Two block-type thermal

power stations were commissioned at the company’s Schwäbisch

Gmünd location during the scal year as a further component in

the strategy of reducing energy consumption.

Events after the end of the fiscal year

Robert Bosch GmbH acquired the 50 % share held by ZF Friedrichs-hafen AG in the previous joint venture ZF Lenksysteme GmbH on

30 January 2015 following approval by the responsible competition

authority. Bosch now therefore owns all the shares in the former

joint venture. The company will be incorporated into the Bosch

Group as a new independent division with the name Robert Bosch

Automotive Steering GmbH. The shareholders’ resolution on the

change of company name and corresponding entry in the commercial

register is planned for adoption in the rst quarter of 2015.




Mr Holeksa, Dr. Sauer and Dr. Sommer resigned from the Super-

visory Board on 30 January 2015 . Dr. Lindner, Mr Kurz and Dr.

Schirmer were elected to the Supervisory Board of ZF Lenksysteme

GmbH eective 31 January 2015 for the remaining period of oce

of the Supervisory Board.

Dr. Ottenbruch and Dr. Collenberg resigned from their positions

on the Management Board on 31 December 2014. On 1 January 2015,

Mr Sobottka was appointed Chairman of the Management Board and

Dr. Ketteler was appointed as a member of the Management Board

of ZF Lenksysteme GmbH.

No events occurred after the end of the scal year 2014 which were

of material signicance for the consolidated nancial statements of

ZF Lenksysteme.

Risk management

ZF Lenksysteme’s risk prole is regularly reviewed, evaluated and

documented to ensure compliance with KonTraG, the German

Corporate Monitoring and Transparency Act. Risk management

is an operative component of business processes and has proved

eective as an early warning system for the identication, evalu-ation and reporting of risks and opportunities. We are constantly

rening and improving this system to accommodate future require-

ments. Throughout the Group, risks are reported to the management

in accordance with uniform guidelines.

Original and derivative nancial instruments are used to hedge

interest rate and currency risks at market rates. As in previous years,

adequate insurance cover still exists for potential damages and

liability risks where this makes sound economic sense. The companyhas taken out liability and property insurance policies of a type

which are consistent with standard industry practice. The internal

audit department regularly examines workows and processes for

proper operation and eciency in the light of risk considerations.

It also submits proposals to improve the risk management system.

In addition, the risk management system is examined and assessed

by ZF Lenksysteme GmbH’s auditor to ensure that it functions as

required. During the period under review and with a view to the

future, there was no evidence of any risks that might pose a threat

to the continued existence of the company. Worldwide compliance

management ensures proper corporate governance, conformity with rules and information security within the company.

Outlook, opportunities and risk report

ZF Lenksysteme anticipates modest growth for the German and

European economies in the year 2015. North America is likely to

experience stronger growth. In China, growth will continue at its

currently high level and the economy will pick up in India afterseveral years of weak growth. Modest growth is anticipated once

more in South America. ZF Lenksysteme projects growth for 2015

of between 5 % and 7 % and predicts that the prot margin in the

scal year 2014 will be maintained in the current year. At current

exchange rates the weak euro oers opportunities for growing sales;

on the other hand, economies around the world could be vulnerable

to political and economic developments which might pose an ad-

ditional risk. Further risks arise from the sovereign debt and euro

crisis in Europe, political crises in Ukraine and the Middle East, as well as abrupt swings in the price of oil, gas and other commodities.

ZF Lenksysteme is prepared for a potentially volatile market situa-

tion in the coming year. The company aims to exploit opportunities

in countries which are experiencing accelerating economic growth

without neglecting those regions in which growth is weaker.

ZF Lenksysteme also anticipates signicant pressure on sales prices

comparable to that of previous years. ZF Lenksysteme is facing con-

siderable challenges on its procurement markets. The company willcontinue to pursue the goal of achieving protable growth while

ensuring ongoing liquidity to nance investments in all regions of

the world.




The 100 % acquisition of ZF Lenksysteme by Robert Bosch GmbH

will contribute to ensuring the success of the company: Bosch is

a leading global supplier of technology and service which oers

outstanding prospects for a successful future. As a pacesetter in

the eld of power steering systems ZF Lenksysteme contributes

key know-how to Robert Bosch GmbH in areas which will be im-portant for the mobility of the future, such as automated driving,

networking and electromobility for passenger cars and commercial

vehicles. As part of the strong Bosch Group the company is now

also in a superb position to develop its standing as a global market

leader for CV steering systems and to strengthen Bosch Mobility

Solutions.

Schwäbisch Gmünd, 13 February 2015

Christian Sobottka Dr. Hanns Bernd Ketteler

Dr. Marcus Parche Dr. Henning Wagner



THE RESULTS ›

Consolidated Financial Statements

T W O



19 Consolidated Financial Statements for 2014

Consolidated income statement for 2014

ZF LENKSYSTEME GMBH, SCHWÄBISCH GMÜND ›

Annex2014

€ million2013

€ million

Sales revenues (1) 4,387.7 4,114.4

Cost of sales (2) 3,602.8 3,482.7

Gross profit 784.9 631.7

Research and development expenses 259.8 237.9

Selling expenses 102.1 93.9

General administration costs 168.9 141.6

Other income (3) 44.5 38.1

Other expenses (4) 48.7 29.7

Operating profit 249.9 166.7

Net result from participation (5) 1.0 2.1

Interest income (5) 4.6 4.6

Interest expenses (5) 7.3 6.8

Other financial income (5) 12.6 4.9

Other financial expenses (5) 12.3 5.5

Net financial result -1.4 -0.7

Net profit before tax 248.5 166.0

Income taxes (6) 64.3 44.6

Net profit after tax 184.2 121.4

of which attributable to minority interests 51.7 37.8

of which attributable to ZF Lenksysteme GmbH 132.5 83.6



Consolidated Financial Statements for 2014 20

2014€ million

2013€ million


Items which are not reclassified in the income statementRevaluation arising from defined benefit plans ›

Net profit before tax -159.0 -12.8

Deferred taxes 46.1 3.7

-112.9 -9.1

Items which may later be reclassified in the income statement

Unrealised gains (previous year losses) from available-for-sale

financial assets 16.7 -2.2

Unrealised gains (previous year losses) from currency translation 71.9 -23.1

88.6 -25.3

Other net profit or loss after tax -24.3 -34.4

Total result 159.9 87.0

of which attributable to minority interests 69.7 34.8

of which attributable to ZF Lenksysteme GmbH shareholders 90.2 52.2

Consolidated statement of comprehensive income for 2014





Assets Annex31.12.14€ million

31.12.13€ million

Current assets ›

Cash and cash equivalents 264.9 207.9

Financial assets (8) 3.0 0.0

Trade accounts receivable (9) 794.5 712.9

Other current assets (10) 58.7 75.2

Income tax receivables 13.0 17.9

Inventories (11) 340.3 294.2

1,474.4 1,308.1

Non-current assetsFinancial assets (12) 32.5 12.9

Property, plant and equipment (13 / 14) 1,147.1 936.8

Intangible assets (13 / 15) 122.5 116.6

Deferred taxes (6) 176.7 115.8

1,478.8 1,182.1

2,953.2 2,490.2

Consolidated balance sheet at 31 December 2014





Liabilities Annex31.12.14€ million

31.12.13€ million

Current liabilities ›

Financial liabilities (16) 48.8 4.3

Trade accounts payable (17) 638.8 541.5

Other current liabilities (18) 226.5 199.0

Income tax provisions 4.0 8.0

Other current provisions (19) 137.1 136.7

1,055.2 889.5

Non-current liabilities ›

Financial liabilities (20) 105.0 150.0Other non-current liabilities (21) 128.2 112.8

Provisions for pensions (22) 637.9 454.0

Other non-current provisions (23) 122.7 114.5

Deferred taxes (6) 1.5 4.9

995.3 836.2

Equity›

Subscribed capital (24) 127.8 127.8

Capital reserve (24) 195.3 195.3

Retained earnings 407.8 317.6

Equity attributable to ZF Lenksysteme GmbH shareholders 730.9 640.7

Minority interests 171.8 123.8

902.7 764.5

2,953.2 2,490.2




Consolidated cash flow statement for 2014


€ million 2014 2013


Reconciliation of earnings before tax and cash flow from operating activities ›

Depreciation/reversal of impairments for property, plant, equipment and intangible assets 264.0 244.1

Interest result 2.7 2.2

Other non-cash changes -1.1 -1.0

Result from disposal of property, plant, equipment and intangible assets 9.6 21.1

Change in assets and liabilities ›

Change in inventories -46.1 11.0

Change in trade receivables -81.6 -44.0

Change in other assets 13.6 -4.6

Increase in non-current provisions 33.1 20.3

Change in other liabilities 140.1 17.6

Impact of currency translation 6.7 -2.4

Interest received 4.6 4.6

Interest paid -6.2 -5.8

Income taxes paid -76.1 -62.7




€ million 2014 2013

Cash flow from operating activities 511.8 366.4

Investments in property, plant, equipment, intangible assets and participations -451.0 -448.0

Result from disposal of property, plant, equipment and intangible assets 10.3 8.5

Cash flow from investing activities -440.7 -439.5

Dividends paid to ZF Lenksysteme GmbH shareholders 0.0 -40.0

Dividends paid to other shareholders -25.1 -17.2

Payments from transactions with minority shareholders 3.4 3.7

Cash flow from financing activities -21.7 -53.5

Change in cash and cash equivalents 49.4 -126.6

Cash and cash equivalents at the beginning of the fiscal year 207.9 338.9

Exchange rate-related changes in cash and cash equivalents 10.6 -4.4

Cash and cash equivalents at the end of the fiscal year 267.9 207.9




Consolidated statement of changes in equity for 2014


›Retainedearnings

€ millionSubscribed

capitallCapital-

reservesEquity earned by

the Group

1.1.2013 127.8 195.3 326.1

Dividend payments -40.0

Capital increase other shareholders

Other net profit or loss after tax

Net profit after tax 83.6

Comprehensive income 0.0 0.0 83.6

31.12.13 127.8 195.3 369.7

1.1.2014 127.8 195.3 369.7

Dividend payments

Capital increase other shareholders

Other net profit or loss after tax

Net profit after tax 132.5

Comprehensive income 0.0 0.0 132.5

31.12.14 127.8 195.3 502.2




›

Refer to Accounting and Measuring Principles in the Notes to the consolidated financial statements for more details.

Retainedearnings

Equity attributableto ZF Lenksysteme

GmbH shareholdersMinorityinterests Group equity

Other equity components

Items which may later be reclassied inthe income statement

Items which arenot reclassified

in the income

statement

Currencytranslation

Available-for-salenancial

instruments

Revaluation arisingfrom denedbenet plans

32.4 7.2 -60.3 628.5 102.5 731.0

-40.0 -17.2 -57.2

0.0 3.7 3.7

-20.1 -2.2 -9.1 -31.4 -3.0 -34.4

83.6 37.8 121.4

-20.1 -2.2 -9.1 52.2 34.8 87.0

12.3 5.0 -69.4 640.7 123.8 764.5

12.3 5.0 -69.4 640.7 123.8 764.5

0.0 -25.1 -25.1

0.0 3.4 3.4

53.9 16.7 -112.9 -42.3 18.0 -24.3

132.5 51.7 184.2

53.9 16.7 -112.9 90.2 69.7 159.9

66.2 21.7 -182.3 730.9 171.8 902.7




Fundamental principles

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR 2014 ›

General

These notes to the consolidated nancial statements provide se-

parate explanations of the individual items in the consolidated

income statement, the consolidated statement of comprehensive

income, the consolidated balance sheet, consolidated cash owstatement and consolidated statement of changes in equity.

ZFLS prepares its nancial statements in euros. Except where expli-

citly stated otherwise, all amounts are in millions of euros (€ million).

These consolidated nancial statements were approved by the

Management Board on 13 February 2015 for circulation to the

company’s shareholders.

The consolidated nancial statements and the consolidated ma-

nagement report for the scal year to 31 December 2014 will be

submitted to the Bundesanzeiger (German Federal Gazette).

Items on the consolidated balance sheet are categorised by maturity.

Assets or liabilities are classed as current if their value is to be re-

covered or settled within one year. Assets or liabilities are classed

as non-current if their value is to be recovered or settled in more

than one year. Contrary to this fundamental distinction, all tradereceivables and trade payables are carried as current items.

All assets and liabilities are stated at amortised historic cost, with

the exception of derivative nancial instruments and marketable

securities that are available for sale, both of which are stated at

their fair value.

Adoption of IFRS

The consolidated nancial statements of ZF Lenksysteme GmbH

(referred to in the following as “ZFLS”) for the scal year to

31 December 2014 have been prepared in accordance with Interna-

tional Financial Reporting Standards (IFRS) in the form applicable

within the EU, and in compliance with Section 315a Paragraph 1

of the German Commercial Code (HGB). The consolidated nancial

statements comply with the guidelines propagated by the International

Accounting Standards Board (IASB), London, in the version valid at

the balance sheet date. The term IFRS also subsumes those Inter-

national Accounting Standards (IAS) that remain valid. All inter-

pretations declared to be binding for scal 2014 by the IFRS Inter-

pretations Committee (IFRIC) were also applied in the preparation

of these statements.

The IASB and the IFRS Interpretations Committee have amended

or ratied the following standards and interpretations whose adop-

tion became mandatory for the rst time in scal 2014.

› IFRS 10 – Consolidated Financial Statements

IFRS 10 replaces the provisions of the previous IAS 27 Consoli-

dated and Separate Financial Statements and the interpretation

SIC-12 Consolidation – Special Purpose Entities. The provisions

applying to separate nancial statements remain in IAS 27. IFRS10 introduces a single consolidation model for all entities, inclu-

ding special purpose entities, based on control. This has no impact

on the consolidated Group of ZF Lenksysteme.

›IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 Interests in Joint Ventures and the in-

terpretation SIC-13 Jointly Controlled Entities – Non-Monetary

Contributions by Venturers. IFRS 11 revokes the previous option

to apply proportionate consolidation to joint ventures. It is nowmandatory to include these enterprises in the consolidated nan-

cial statements using the equity method. This has no impact on the

consolidated nancial statements of ZF Lenksysteme.

› IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 is a new and comprehensive standard on disclosure re-

quirements for all forms of interests in other entities, including

subsidiaries, joint arrangements, associates and unconsolidated

structured entities. As the new standard requires the disclosure ofadditional new information in addition to the previous disclosure

requirements the disclosures made by the Group on these entities

are more extensive than in the past.

› Amendment to IFRS 10, IFRS 12 and IAS 27 – Investment Entities

The new provision exempts entities which meet the denitional

criteria of an investment entity under IFRS 10 from the requi-

rement to consolidate. Investment entities are instead required

to use the fair value to measure investments in their subsidiaries




recognised in prot or loss. This amendment is not relevant

for the Group as ZF Lenksysteme GmbH does not meet the

denitional criteria of an investment entity under IFRS 10.

› IAS 28 I nvestments in Associates and Joint Ventures

(revised 2011)Requirements relating to the use of the equity method for accoun-

ting for investments in associates and joint ventures. This has no

impact on the consolidated nancial statements of ZF Lenksysteme.

› Amendment to IFRS 36 – Recoverable Amount Disclosures for

Non-Financial Assets

The amendment is intended to eliminate undesirable eects on

the disclosure requirements arising from the introduction of IFRS

13. The amendment also requires disclosures on the recoverableamount for assets or cash-generating units for which an impair-

ment has been recognised or reversed during the reporting period.

The amendment only results in modied or additional disclosu-

res and does not aect the Group’s assets, nancial and earnings

position.

› Amendment to IAS 39 – Novation of Derivatives and

Continuation of Hedge Accounting

In certain circumstances the amendment allows for the continuationof hedge accounting in cases in which derivatives which are desig-

nated as hedging instruments are centrally cleared on the basis of

statutory or oversight regulations (novation). This has no impact

on the consolidated nancial statements of ZF Lenksysteme.

› IFRIC 21 Levies

IFRIC 21 deals with issues relating to the accounting for levies im-

posed by governments which are not income taxes within the scope

of IAS 12 Income Taxes and, in particular, claries when obligatingevents that give rise to a liability to pay such levies must be recog-

nised in the annual nancial statements as liabilities. This has no

impact on the consolidated nancial statements of ZF Lenksysteme.

The IASB has published the following standards and interpreta-

tions which have already been adopted under EU law as part of the

“comitology” procedure but which were not yet mandatory in the 2014

scal year. The ZFLS Group is not adopting these standards and inter-

pretations prematurely.

› Amendment to IAS 19 – Employee Benefits

The amendment of IAS 19 was published in November 2013 and

must be adopted for the rst time in the scal year which begins

on or after 1 July 2014. The amendment allows contributions made

in the period by employees or third parties to dened benet plans

to be recognised as a reduction in the ongoing service costs in theperiod in which the related service is rendered if the amount of

the contributions is independent of the number of years of service.

If employee contributions depend on the number of years of ser-

vice, the project unit credit method is mandatory. This amendment

must be applied retrospectively. The Group is currently evaluating

the extent to which the amendment will impact the consolidated

nancial statements.

› Improvements to IFRS (2010–2012)The improvements to IFRS 2010-2012 concern a collection of

amendments which were published in December 2013 and which

relate to narrow scope changes to IFRS 2, IFRS 3, IFRS 8, IFRS 13,

IAS 16, IAS 24 and IAS 38. These amendments must be applied

for the rst time in scal years beginning on or after 1 July 2014.

No material impact on the consolidated nancial statements of

ZF Lenksysteme is expected.

› Improvements to IFRS (2011-2013)The improvements to IFRS 2011-2013 concern a collection of

amendments which were published in December 2013 and which

relate to narrow scope changes to IFRS 1, IFRS 3, and IAS 40. These

amendments must be applied for the rst time in scal years begin-

ning on or after 1 July 2014. No material impact on the consolidated

nancial statements of ZF Lenksysteme is expected.

The IASB has published the following standards and interpreta-

tions which were not yet mandatory in scal 2014. These standardsand interpretations have not been recognised to date by the EU and

are not applied by the Group.




› IFRS 9 Financial Instruments

With the publication of the nal version of IFRS 9 in July 2014, the

IASB has completed its project of replacing IAS 39. IFRS 9 intro-

duces a comprehensive standard for the classication and measu-

rement of nancial assets based on their cash ow characteristics

and the business model in which they are held. The standard alsoprovides for a new impairment model based on projected losses

from default events. The standard also includes new guidance

for hedge accounting to enable entities to better reect their risk

management activities in their nancial statements, particularly

with regard to the hedging of non-nancial risks. The new provisions

must be applied for the rst time in scal years beginning on or

after 1 January 2018. Earlier application is permitted. No material

impact on the consolidated nancial statements of ZF Lenksysteme

is expected.

› Amendment to IFRS 10, IFRS 12 and IAS 28

– Investment Entities – Applying the Consolidation Exception

The IASB published an amendment standard in December 2014

to address issues that have arisen in relation to the exemption

from consolidation for investment entities. The standard must

be applied as of 1 January 2016 but may also be applied earlier.

The amendments are not relevant for the Group as ZF Lenksysteme

GmbH does not meet the denitional criteria of an investment entityunder IFRS 10.

› Amendment to IFRS 10 and IAS 28 – Sales or contributions of

assets between an investor and its associate/joint ventur

The IASB published amendments to IFRS 10 and IAS 28 in September

2014 to address an inconsistency between the two standards for

the accounting of sales of an investor’s assets or the contribu-

tion of such assets to the investor’s associate or joint venture. If

the transaction concerns a business as dened in IFRS 3 BusinessCombinations, the resulting gain or loss must be recognised in

full by the investor; if, on the contrary, the transaction concerns

the sale of assets which do not constitute a business, only a partial

gain must be recognised. These amendments must be applied for

the rst time in scal years beginning on or after January 1, 2016.

Earlier application is permitted. No impact on the consolidated

nancial statements of ZF Lenksysteme is expected.

› Amendment to IFRS 11 Joint Arrangements – Acquisitions of

Interests in Joint Operations

The amendment to IFRS 11, which was published in May 2014,

claries that purchases and acquisitions of interests in joint

operations which constitute a business, as dened in IFRS 3

Business Combinations, must be accounted for by applying all ofthe principles on business combinations accounting in IFRS 3 and

other applicable IFRSs with the exception of those principles that

conict with the guidance in IFRS 11. The amendments are eective

prospectively for acquisitions of an interest in scal years begin-

ning on or after 1 January 2016, with earlier application being

permitted. ZF Lenksysteme currently does not hold any interests

in joint operations.

› IFRS 15 Revenue from Contracts with CustomersIFRS 15 was published by the IASB in May 2014 with the objective

of removing numerous inconsistencies in revenue recognition in

diverse standards and interpretations and of providing a single,

principles-based model to be applied for all industries and all

categories of revenue transactions. IFRS 15 species the amount

and timing of revenue recognition. The basic principle is that

revenue is recognised for the amount of consideration expected

from the transfer of goods or services. IFRS 15 also includes

additional guidance on multiple-element arrangements andnew rules on the treatment of service contracts and contract

modications. The new standard also requires disclosure of

various qualitative and quantitative information to enable the

users of nancial statements to understand the nature, amount,

timing, and uncertainty of revenue and cash ows arising from

a contract with a customer. IFRS 15 replaces IAS 11 Construc-

tion Contracts, IAS 18 Revenue and related interpretations.




Application of the standard is mandatory for annual reporting

periods starting from 1 January 2017 onwards. Earlier application

is permitted. The transition guidance allows entities the option

of applying IFRS 15 in full to prior periods (with certain limited

practical expedients being available) or of adopting modied retro-

spective application. The latter would allow rst-time applicationof the standard beginning in the current reporting period without

the need to restate comparative periods, although additional infor-

mation must then be provided. The Group is currently evaluating

the extent to which the new standard will impact the consolidated

nancial statements.

› Amendments to IAS 1 Presentation of Financial Statements – Disclosure Initiative

The IASB published amendments to IAS 1 Presentation of FinancialStatements in December 2014 under its Disclosure Initiative. The

amendments aim in particular at clarifying assessments of the

materiality of disclosures; presentation of additional items in the

balance sheet, income statement or statement of comprehensive

income; the presentation of items of other comprehensive income

due to associates and joint ventures accounted for using the equity

method; the structure and content of disclosures in the notes and

disclosure of signicant accounting policies. The amendments are

eective for annual periods beginning on or after 1 January 2016.Earlier application is permitted. No material impact on the consoli-

dated nancial statements of ZF Lenksysteme is expected.

› Amendment to IAS 16 Property, Plant and Equipment and

IAS 38 Intangible Assets – Clarification of Acceptable Methods of

Depreciation and Amortisation

These amendments provide additional guidance on acceptable

methods of depreciation or amortisation. The amendments clarify

that a revenue-based method is not considered appropriate forproperty, plant and equipment and only in limited circumstances

for intangible assets. The amendments are eective for annual

periods beginning on or after 1 January 2016. Earlier application is

permitted. No impact on the consolidated nancial statements of

ZF Lenksysteme is expected.

› Improvements to IFRS (2012-2014)

The improvements to IFRS 2012-2014 concern a collection of

amendments which were published in September 2014 and which

relate to narrow scope changes to IFRS 5, IFRS 7, IAS 19 and IAS 34.

They must be applied for the rst time in scal years beginning on

or after 1 January 2016. No material impact on the consolidatednancial statements of ZF Lenksysteme is expected.




Consolidated Group/list of shareholdings

Besides ZF Lenksysteme GmbH itself, the consolidated Group consists

of one (previous year: one) German subsidiary and fteen (previous

year: fteen) foreign subsidiaries in which ZF Lenksysteme GmbH

controls the majority of the voting rights.

The composition of the consolidated Group on 31 December 2014

is shown in the table below:

Company name and domicile Nominal capital Equity stake in %

Consolidated companies not including the parent company

ZF Lenksysteme Nacam GmbH, Bremen * 2,100,000 EUR 100

ZF-Systèmes de Directions France S.A.S., Marignier/France 7,975,000 EUR 100

ZF Systèmes de Direction Nacam S.A.S., Vendôme/France 21,350,000 EUR 100

ZF Lenksysteme Hungária Kft., Eger/Hungary 5,000,000 EUR 100

ZF Steering Systems LLC., Florence, Kentucky/USA 16,000,000 USD 100

ZF Sistemas de Direçáo Ltda, Sorocaba/Brazil 52,794,868 BRL 100

ZF Steerings (Malaysia) Sdn. Bhd., Penang/Malaysia 26,000,000 MYR 100

ZF Shanghai Steering Systems Co. Ltd., Shanghai/China 69,520,000 USD 51

ZF Shanghai Steering Systems (Yantai) Co. Ltd., Yantai/China 286,000,000 CNY 51

ZF Shanghai Steering Systems (Wuhan) Co. Ltd., Wuhan/China 138,000,000 CNY 51

ZF Steering Jincheng (Nanjing) Co. Ltd., Nanjing/China 11,000,000 USD 70

ZF Commercial Vehicle Steering (Shandong) Co. Ltd., Jinan/China 189,562,492 CNY 100

ZF Lenksysteme (Shanghai) Co., Ltd. Shanghai (Minhang)/China 156,000,000 CNY 100

ZF Lenksysteme (Shanghai) Management Co. Ltd., Shangai/China 2,100,000 USD 100

ZF Lenksysteme (Nanjing) Co. Ltd., Nanjing/China 80,000,000 USD 100ZF Lenksysteme India Private Limited Pune / India 2,945,000,000 INR 74

* Pursuant to Section 264 Para. 3 of the German Commercial Code (HGB),inclusion in these consolidated financial statements exempts this companyfrom the requirement to disclose separate annual financial statements.




Principles of consolidation

Capital is consolidated using the acquisition method in accord-

ance with IFRS 3. The cost of acquired shares is allocated to

the assets, liabilities and contingent liabilities of consolidated

subsidiaries, whose value is restated at the time of acquisition. Any excess of cost over net fair value is capitalised as goodwill.

For all acquisitions eected before 1 January 2004, capital will

continue to be consolidated in accordance with the German

Commercial Code (HGB).Intercompany receivables, payables,

provisions, revenue, expenditure and prots between consolidated

companies are eliminated within the framework of consolidation.

Guarantees and warranties that exist between companies in the

consolidated Group are likewise eliminated.

The principles of consolidation remain unchanged from the previous

year.

Currency translation

Financial statements presented in foreign currencies by consolidated

companies are translated using the concept of the functional

currency (dened in IAS 21) and based on the modied closing rate

method. Since subsidiaries operate independently in terms of theirnancial, economic and organisational activities, the functional

currency is generally the local currency in the country where the

company is domiciled.

Accordingly, expenditure and revenue recorded in the foreign

currency nancial statements of subsidiaries are translated in the

consolidated nancial statements at the average rate, while assets

and liabilities are translated at the closing rate on the balance sheet

date. Discrepancies arising from the translation of equity at historicexchange rates are netted against retained earnings. Discrepancies

due to the use of dierent exchange rates in the income statement

are also included in retained earnings and are not recognised in

prot and loss.

In the stand-alone nancial statements prepared for ZF Lenksysteme

GmbH and for each of its subsidiaries, receivables and payables

denominated in foreign currencies are valued at the closing rate on

the balance sheet date. Realised foreign exchange gains or lossesare recognised in prot and loss.

Those exchange rates that underpin currency translation and have

a material inuence on the consolidated nancial statements changed

as follows (relative to one euro) in the period under review:

Closing rate Average rate

31 Dec. 2014 31 Dec. 2013 2014 2013

US dollars 1.2141 1.3791 1.32825 1.32828

Chinese renminbi (CNY) 7.5358 8.3491 8.18366 8.16620

Brazilian reals (BRL) 3.2207 3.2576 3.12150 2.87012

Malaysian ringgits (MYR) 4.2473 4.5221 4.34468 4.18770

Indian rupies 76.2600 84.964 81.02064 77.9337




ACCOUNTING AND MEASUREMENT PRINCIPLES

Recognition of expenses and income

Revenues from the sale of products are recognised when ownership

or risk is transferred to the customer, when a price has been agreed

or can be identied, and when it is reasonable to assume that the

price will be paid. Revenues are reported net of cash discounts, priceconcessions, customer bonuses and other discounts.

The cost of sales includes the cost of producing sold goods and

the cost of sold merchandise. This gure includes material and

production costs that are directly attributable as well as production

overheads that are indirectly attributable, including depreciation

of production machinery and intangible assets. The cost of goods

sold also includes write-downs on inventories.

Research and non-capitalisable development expenses are

recognised in prot and loss at the time they are incurred.

Financial instruments

A nancial instrument is a contract that simultaneously creates a

nancial asset for one company and a nancial liability or equity

instrument for another company. Such instruments are recognisedat the settlement date. When recognised for the rst time, nancial

assets are stated at cost. Transaction costs are included, except in the

case of nancial assets that are carried at fair value and recognised

in prot and loss.

Financial assets as dened in IAS 39 are classied as nancial as-

sets at fair value through prot or loss, as loans and receivables,

as held-to-maturity investments or as available-for-sale nancial

assets.

After initial recognition, nancial assets that are available for sale

are carried at their fair values. Where market prices are not known,

the fair value of nancial assets that are available for sale is deter-

mined by using appropriate valuation methods (such as discounted

cash ow), subject to due account for market data available at the

balance sheet date. Gains and losses arising from changes in the fair

value of nancial assets that are available for sale are included in

equity. They are not recognised in prot and loss until the nancial

assets are disposed of or an impairment is incurred. In the event of

impairment, the cumulative net loss is subtracted from equity and

posted to earnings.

Receivables are Group loans or receivables that are not held for

trading purposes. These items are stated at amortised cost. Non-interest-bearing or low-interest-bearing receivables with maturities

of over one year are discounted. Impairments are eected to provide

for all perceivable risks.

In accordance with IAS 39, ZFLS regularly assesses whether there

is substantial objective evidence that a nancial asset or a group of -

nancial assets is impaired. If such evidence is found, the impairment

loss is recognised in prot and loss.

The ZFLS Group uses derivative nancial instruments only to

hedge currency risks and raw material price risks arising from

operating business and/or to reduce the nancing requirements

that result from operating business. In accordance with IAS 39, all

derivative nancial instruments (such as currency swaps and for-

ward exchange contracts) are stated at their fair value.

Insofar as the strict criteria specied by IAS 39 for hedge accounting

are met, these instruments are carried as fair value hedges or cashow hedges. Where hedge accounting principles cannot be applied,

changes in the fair value of derivative nancial instruments are

recognised in prot and loss.

Fair value hedges hedge exposure to changes in the value of balance

sheet items. In the case of a fair value hedge, the results of a fair

valuation of derivative nancial instruments and the underlying

transactions are recognised in prot and loss.




Cash ow hedges are used to hedge exposure to variations in the

value of future cash ows. In the event of changes in the fair value

of derivative instruments used within the framework of cash ow

hedges, the portion of unrealised gains or losses on the hedging

instrument that is deemed to be the eective hedge is initially posted

to retained earnings and is not recognised in prot or loss. Saiditem is transferred to the income statement at the time when the

hedged transaction is recognised in prot and loss. The ineective

part of the hedge is immediately recognised in prot and loss.

Inventories

Inventories of raw materials, supplies and goods for resale are sta-

ted at the lower of average cost or net realisable value. Work inprogress and nished products are likewise stated at the lower of

cost or net realisable value. Production costs include all costs that are

directly attributable to the production process, plus an appropriate

portion of production overhead costs. The latter include production

-related depreciation, a share of administrative costs and a share

of social security expenses. Company pension expenses are stated

as part of the cost of production. Financing costs are not included

in this item.

Non-current financial assets

Investments carried under non-current nancial assets are stated

at fair value, mostly on the basis of stock prices.

Property, plant and equipment

All property, plant and equipment is used for operating purposes

and is stated at cost less depreciation. The straight-line method of

depreciation is used over the entire useful life of property, plant

and equipment.

Throughout the Group, property, plant and equipment is depreciated

over the following standard useful lives:

The depreciation of machinery operated for multiple shifts is acce-

lerated by appropriate shift-related surcharges.

The useful lives dened for assets are reviewed once a year and

adjusted where appropriate.

Leasing instalments and rental payments arising from operating leases

are stated as constant expenditure items in the income statement

throughout the term of the leasing or rental agreement. The future

burden arising from operating lease agreements is carried under

other nancial obligations.

Intangible assets

In accordance with IAS 38, purchased and self-constructed intangible

assets are capitalised if it is probable that use of these assets will be

linked to future economic benets and if the cost of the assets can be

measured reliably.

Development expenditure is capitalised at cost where costs can

be attributed unambiguously and where both technical feasibi-

lity and the ability to market the end product are guaranteed.It must also be reasonably certain that the development activity

will lead to future economic benets. Capitalised development

expenditures include all costs that can be attributed directly to

the development process. Capitalised development expenditure

is amortised from the time when production commences and

throughout the anticipated product life cycle (usually ve years).

in years

Land and buildings 10 bis 33

Technical equipment, plant and machinery 2 bis 10

Other equipment, factory and ofce equipment 3 bis 13




Other intangible assets (primarily tool subsidies made available to

suppliers plus patents and software) are stated at cost and depre-

ciated in a straight line over the course of their useful life:

To this end, the recoverable amount – the higher of fair value less

selling costs and the value in use of the asset or smallest cash-

generating unit – is measured. The recoverable amount must be

measured for each individual asset. If an asset does not generate

cash inows which are largely independent of the cash ows ge-

nerated by other assets or groups of assets, the impairment test isnot performed at the level of the individual asset but at the level of

the cash-generating unit to which the asset can be assigned. Value

in use is the present value of future cash ows that are expected

from the ongoing use of the asset and its disposal at the end of its

useful life. An impairment is eected if the recoverable amount is

less than the carrying amount of the asset or of the cash-generating

unit. If the reason for an earlier impairment no longer applies, the

impairment can be reversed at most up to the amount of the amor-

tised cost.

The fair value, less the costs of disposal for a cash-generating unit,

is estimated using the discounted cash ow method. The fair value,

less the costs of disposal, of individual assets, is estimated on the

basis of the cost of similar assets.

Actual tax refund claims and actual tax liabilities

Actual tax refund claims and actual tax liabilities for the current

period and for previous periods are assessed based on the amount

of an expected refund from or payment to the tax authorities. This

amount is calculated on the basis of the tax rates and tax laws valid

at the balance sheet date.

Actual taxes relating to items which are recognised in equity are

themselves also recognised in equity, not in prot and loss.

Cost of debt

The cost of debt is recognised as expense when it is incurred, pro-

vided this is not incurred for qualifying assets.

Government grants

In accordance with IAS 20, government grants are carried only if

there is reasonable assurance that the relevant conditions will be

met and the subsidies will indeed be granted. Investment grants

are stated separately from non-current assets in the reporting period

in which they are acquired.

Impairment tests

Impairment tests are performed once a year (on 31 December) for

intangible assets that are not yet ready for use. For other intangible

assets and property, plant and equipment, corresponding tests are

performed at the balance sheet date to assess whether there is evi-

dence that such assets may be impaired. Should such evidence befound, existing valuations are reviewed in accordance with IAS 36.

in years

Tool subsidi es 1 to 6

Software 3 to 5




Deferred taxes

In accordance with IAS 12, deferred tax assets and liabilities are

formed for temporary dierences between valuations for tax and

nancial reporting purposes. Deferred tax assets also include the

entitlement to tax breaks owing to the expected application of exis-ting loss carryforwards in subsequent years. Deferred taxes are

calculated on the basis of the tax rates that, in light of the current

legal situation, will be or are expected to be valid in the countries

concerned when said deferred taxes are realised.

Deferred tax assets relating to temporary dierences and tax loss

carryforwards are recognised only if it is more likely than not that

the resultant tax breaks will actually be realised in future.

Deferred tax liabilities due to temporary dierences relating to in-

vestments in subsidiaries are not recognised if it is possible to control

the timing at which temporary dierences are reversed, and if it

is likely that the temporary dierences will not be reversed in the

foreseeable future.

The carrying amount of deferred tax assets is assessed every ba-

lance sheet date and reduced to the extent to which it is no longer

probable that sucient taxable earnings will be available to osetat least part of the deferred tax assets. Unrecognised deferred tax

assets are assessed every balance sheet date and are recognised

to the extent to which it has become probable that future taxable

earnings will enable the deferred tax assets to be realised.

Taxes on income which relate to items stated directly under equity

are themselves also recognised in equity, not in prot and loss. De-

ferred tax assets and deferred tax liabilities are netted if the Group

is legally entitled to oset actual tax refund claims against actualtax liabilities, and if both items relate to income taxes payable by

the same tax-paying entity to the same scal authority.

Financial liabilities

Financial liabilities are stated at amortised cost.

Provisions for pensions

Provisions for pensions are formed using the projected unit credit

method in accordance with IAS 19. This method takes account of

pensions and vested rights that are known at the balance sheet

date, as well as of expected future increases in pensions, wages andsalaries. Calculations are based on actuarial appraisals and make

due provision for current biometric statistics. Actuarial gains and

losses are carried under equity in the period in which they occur.

They are not recognised in prot and loss. All expenses arising

from appropriations to pension obligations are attributed to the

costs of the functions concerned.

Other provisions

Other provisions are formed whenever obligations exist in respect

of third parties that are likely to be realised and for which the

probable amount that must be set aside as provisions can be esti-

mated reliably. To value other provisions (especially in the case of

warranties and anticipated losses on incomplete transactions), all

cost components are taken into account that are also capitalised in

inventories. Non-current provisions with maturities of more than

one year are stated at their discounted repayment amount at the balance sheet date.




Discretionary decisions and uncertainties in connection with

estimates

Preparing consolidated nancial statements requires to some extent

the use of assumptions and estimates that aect the reported value

of assets and liabilities, the income and expenses for the reportingperiod and the contingent liabilities shown on the reporting date.

Signicant discretionary decisions which are aected by such

assumptions and estimates include the recoverability of assets,

provisions for anticipated losses on contracts, warranty obligations

and employee benets.

Recoverability of assets

Determining the recoverable amount of a cash-generating unit

involves the use of estimates. The recoverable amount is the higher

of fair value less selling costs and the value in use. The recoverable

amount is the discounted present value of estimated future cash

ows. The discounted value of future cash ows is estimated on

the basis of reasonable and supportable assumptions, including in

particular assumptions regarding future sales prices and volumes,

costs and discount rates. Although the Management is condentthat these assumptions are reasonable, the analysis may need to

be modied if there is a change in assumptions and circumstances.

This could result in future changes in value if the applied assump-

tions and estimates prove to be incorrect.

Likewise, whenever property, plant and equipment and other

intangible assets are tested for impairment, the determination of

the assets’ recoverable amount involves the use of estimates by

management and can have a material impact on the respective valuesand ultimately the amount of any impairment.

The measurement of receivables involves signicant judgement

and reviews of the creditworthiness and nancial solvency of in-

dividual customers. Such judgement and reviews are themselves

highly dependent on current worldwide economic developments

and may consequently change as a result.

The Group examines at each balance sheet date whether it is suf-

ciently probable that future taxable prots will be available in

order to realise deferred tax assets. This entails judgements such as

assessments of the tax benets arising from future taxable income.

The reported deferred tax assets could be reduced if the assumptions

regarding planned taxable income are adjusted downwards or ifchanges in current tax legislation limit the time during which or the

extent to which future tax benets can be realised.

Provisions for anticipated losses on contracts and for warranty

obligations

Provisions for anticipated losses on contracts are recognised when

current estimates of total costs exceed anticipated revenue. Theseestimates may change if new revenue and cost structure information

becomes available. Allowances for warranty risks also involve

signicant estimates of future costs and other assessments which

inuence the amount of potential obligations.

Employee benefits

Pensions and similar obligations are accounted for in accordance with actuarial assessments. These are based on statistical and other

factors that enable future events to be anticipated. The actuarial

assumptions, discount rate and pension trends are assessed as

the key material factors. These actuarial assumptions may dier

from actual developments and consequently result in a signicant

change in pension and other obligations. The resulting dierences

are recognised directly in equity in the period in which they arise

and not in prot and loss.




Disclosures on major subsidiaries in which die ZF Lenksysteme

GmbH holds interests in the framework of a joint venture

The following nancial information relating to subsidiaries with mi-

nority interests has been produced on the basis of non-consolidated

values:

Equity share of other shareholders of ZF Shanghai Steering Systems

Co., Ltd. Group:

These companies are active in the eld of steering technology.

Condensed income statement of the ZF Shanghai Steering Systems

Co., Ltd. Group:

Condensed balance sheet of the ZF Shanghai Steering Systems Co.,

Ltd. Group:

Condensed cash ow statement of the ZF Shanghai Steering Sys-

tems Co., Ltd. Group:

in € millions 2014 2013

Assets

Current assets 397.3 302.5

Non-current assets 316.3 228.3

Liabilities

Current liabilities 387.9 299.3

Non-current liabilities 5.1 3.4

Equity 320.6 228.1

Equity attributable toZF Lenksysteme GmbH 163.6 116.3

Minority interests 157.0 111.8


Cash flow from operating activities 153.3 148.9

Cash flow from investing activities -94.0 -109.7

Cash flow from financing activities -48.8 -40.7

Change in cash and cash equivalents 10.5 -1.5

2014 2013

ZF Shanghai Steering Systems Group ›

ZF Shanghai Steering Systems Co.Ltd., Shanghai / ChinaZF Shanghai Steering Systems(Yantai) Co. Ltd., Yantai / ChinaZF Shanghai Steering Systems(Wuhan) Co. Ltd., Wuhan / China

49 %

49 %

49 %

49 %

49 %

49 %


Revenue 883.5 801.5

Cost of sales -656.0 -643.8

Operating result 124.1 87.0

Net financial resul 0.4 0.2


Income tax -17.2 -13.0


of which attributable to minorityinterests 52.6 36.3

Dividends paid to other shareholders 23.9 15.2




Notes to the consolidated income statement

NOTES ›

(4) Other expenses

(5) Net financial result

(3) Other incomeCost-of-sales method

The consolidated income statement was prepared using the cost-

of-sales method.

(1) Sales

These sales gures consist almost exclusively of revenues from the

sale of goods.

(2) Cost of sales

Depreciation includes impairment write-downs totalling €20.0

million (previous year: €39.5 million). Further details are given

under (7) Other disclosures on the consolidated income statement,

(13) Consolidated statement of xed assets, (14) Property, plant

and equipment and (15) Intangible assets.

€ million 2014 2013

Germany 1,140.8 1,147.0

Other European countries 831.9 791.8

North America 1,006.7 885.8

South America 117.2 154.4

Asia/Pacific 1,270.3 1,130.4Other countries 20.8 5.0

4,387.7 4,114.4

€ million 2014 2013

Material costs 2,705.2 2,558.7

Personnel expenses 559.8 526.8

Depreciation and amortisation 240.1 225.1

Other 97.7 172.1

3,602.8 3,482.7

€ million 2014 2013

Income from exchange rate differences 27.8 22.3

Other income 16.7 15.8

44.5 38.1

€ million 2014 2013

Expenses from exchange ratedifferences 25.9 21.8

Expenses due to impairment ofreceivables 3.3 3.5

Losses on the disposal of property,plant and equipment 4.0 2.1

Other expenses 15.5 2.3

48.7 29.7

€ million 2014 2013

Net result from participations(income from participations) 1.0 2.1

Interest income (interest and similarincome) 4.6 4.6

Interest and similar expenses 6.2 5.8

Other compound interest 1.1 1.0

Interest expenses 7.3 6.8

Other financial income(from financial instruments) 12.6 4.9

Other financial expenses(from financial instruments) 12.3 5.5

Net financial result -1.4 -0.7




(6) Income taxes

Actual tax expenses include taxes for previous years of €2.5 million

(previous year: €1.3 million).

In the period under review, corporate income tax stood at 15 % in

Germany (previous year: 15 %). Allowing for the solidarity charge

of 5.5 % and an average trade tax multiplier of 381 % (previous year:

381 %) the eective rate of income tax for companies domiciled in

Germany is 29 % (previous year: 29 %). This rate is also used to

reconcile the tax and nancial reporting gures.

In the scal year under review, the nominal rate of income tax in

other countries varied between 10 % and 37.55 % (previous year:10 % and 35 %).

Temporary dierences relating to shares held in subsidiaries and

for which no deferred taxes were recognised totalled €20.7 million

(previous year: €15.3 million). Deferred taxes were not calculated

because these temporary dierences will not be reversed in the

foreseeable future. The Group elected not to calculate the potential

impact on the tax burden as the eort involved would have been

inordinate.

Deferred tax assets and liabilities in relation to items on the balance

sheet on 31 December are listed below:

€ million 2014 2013

Actual tax expenses 77.0 51.9

Deferred taxes on temporary

differences -29.4 -23.4Deferred taxes arising from losscarryforwards and tax breaks dueto the appropriation of losses and taxcredit 16.7 16.1

64.3 44.6

€ million 31 Dec. 2014 31 Dec. 2013

Assets Liabilities Assets Liabilities

Receivables and other assets 2.1 3.1 5.9 5.4Inventories 3.5 1.7 1.9 1.4

Property, plant and equipment 8.6 50.8 6.0 46.7

Intangible assets 21.2 0.6 17.3 0.3

Provisions for pensions 91.6 43.6

Other provisions 43.6 34.4

Payables and other liabilities 27.7 0.4 10.6 0.7

Tax loss carryforwards 7.1 39.3

Tax credits 26.4 6.4

231.8 56.6 165.4 54.5

Netting -55.1 -55.1 -49.6 -49.6

Taxes recognised on the balance sheet date 176.7 1.5 115.8 4.9




(7) Other disclosures on the consolidated incomestatement

The cost of materials carried in the consolidated income statement

breaks down into the following items: ›

In the scal year under review, deferred tax assets totalling €46.1

million (previous year: €3.7 million) were carried in relation to

temporary dierences for pension provisions but not recognised in

prot and loss. Currency translation dierences not recognised in

prot and loss arose of €5.5 million (previous year: -€2.1 million).

Adjustments, however, were recognised in prot and loss.

Loss carryforwards for which no deferred tax assets are recognis-

ed on the balance sheet stood at €151.1 million (previous year: €97.1

million). Of this amount, €151.1 million (previous year €76.2 million)

can be carried forward without limit in time. The remainder can be

carried forward over a period of three to 18 years.

The valuation of deferred tax assets was based on expected future

business development over the next three years from the time at

which the consolidated nancial statements were prepared. However,

ZFLS cannot rule out the possibility that actual developments will

be aected by external factors and may deviate from our original

estimates.

Reconciliation of expected to actual income tax expenses:

€ million 2014 2013

Net profit or loss before tax 248.5 166.0

Expected income tax expenses 72.1 48.1

Tax effects due to different national tax rate -4.1 -5.7

Revaluation of deferred taxes due to changes in tax laws -0.1 -1.1

Deviations from the tax assessment basis -0.5 -3.0

Changes in valuation adjustments on deferred taxes arising from temporary differences +1.3 +7.5

Current tax breaks arising from appropriation/ post-capitalisation of hitherto unrecognised losses andunrecognised deferred tax assets on current losses -4.0 +1.2

Deferred taxes on tax credits -1.8 -5.1

Impact of issues in previous periods on tax expenses +1.4 +1.7

Other tax effects 0.0 +1.0

Recognised tax expenses/refunds 64.3 44.6

€ million 2014 2013

Expenses for raw materials, supplies and merchandise 2,689.2 2,526.2

Expenses for purchased services 45.1 46.2

Other cost of materials 5.7 21.8

2,740.0 2,594.2




Personnel expenses break down as follows:

The employer’s statutory contribution to pension insurance is sub-

sumed under social security contributions.

In scal 2014, benets totalling €5.0 million (previous year: €2.2

million) were paid in relation to the termination of employment

contracts (including but not limited to severance payments).

Impairment losses for the Passenger Car Steering Columns Business

Unit of €11.0 million were incurred (previous year: €6.9 million).

This amount is ascribable to property, plant and equipment.

Impairment losses for the “Pumps” function of the Commercial

Vehicle Steering Systems Business Unit of €9.0 million were incurred

(previous year: €32.6 million). €8.5 million of these impairment

losses are ascribable to property, plant and equipment and €0.5

million to intangible assets. The impairment losses are included in

the cost of goods sold.

Depreciation aected the following items on the consolidated

balance sheet:

Write-downs on intangible assets are included in the following

items in the consolidated income statement:

Research and development expenses stated in scal 2014 – inclu-

ding a write-down of €2.5 million (previous year €2.5 million) on

capitalised development costs – stood at €259.8 million (previous

year: €237.9 million).

The companies that make up the ZFLS Group lease or rent land,

buildings, equipment, ttings and xtures. Their leasing arrange-

ments are classed as operating leases. In scal 2014, leasing and rental

payments totalling €15.1 million (previous year: €14.7 million) were

recognised in the consolidated income statement.

€ million 2014 2013

Wages and salaries 614.5 565.0

Social security and benefit expenses 132.9 122.8

Pension expenses 52.6 46.6

800.0 734.4

€ million 2014 2013

Cost of sales 43.4 31.6

Research and development expenses 4.6 4.7

Selling expenses 0.2 0.2

General administration expenses 2.5 1.0

50.7 37.5

€ million 2014 2013

Intangible assets 50.7 37.5

Property, plant and equipment 193.3 167.1

244.0 204.6




NOTES ›

Notes to the Consolidated Balance Sheet

(8) Current financial assets

(9) Trade receivables

The maturity structure for trade receivables is as follows:

At the balance sheet date, there was no indication that debtors

who owe trade receivables which are neither impaired nor overdue

might fail to meet their payment obligations.

(10) Other current assets

Other current assets include tax refund claims in the amount of

€35.1 million (previous year: €32.8 million) relating to other taxes,

derivative nancial instruments in the amount of €0.5 million

(previous year: €5.0 million) and other capitalised refund claims

totalling €1.6 million (previous year: €2.3 million).

Individual allowances were made for other receivables whose value

was impaired. There are no further indications of any threat to

payments due.

Year on year, the level of impairments changed as follows:

On 31 December 2014, trade receivables with a nominal value of

€14.7 million (previous year: €35.7 million) were impaired. Year

on year, the level of impairments changed as follows:

€ million 2014 2013

Impairments at 1 Jan. 1.3 1.6

Currency translation 0.0 -0.3

Additions 0.0 0.0

Appropriations 0.0 0.0

Reversals 0.0 0.0

Impairments at 31 Dec. 1.3 1.3

€ million 31.12.2014 31.12.2013

Current marketablesecurities

3.0 0.0

3.0 0.0

€ million 31.12.2014 31.12.2013

Carrying amount 794.5 712.9

Neither overdue

nor impaired 741.7 622.4Overdue but not impaired ›

1 to 30 days 24.9 32.4

31 to 60 days 11.3 19.8

61 to 360 days 12.7 9.8

More than 360 days 1.3 4.5

€ million 31.12.2014 31.12.2013

Receivables from thirdparties 776.8 696.2

Receivables from

participations 17.7 16.7794.5 712.9

€ million 2014 2013

Impairments at 1. Jan. 11.7 11.3

Currency translation +0.3 -0.2

Additions 4.4 2.4

Appropriations 2.5 1.5

Reversals 1.8 0.3

Impairments at 31 Dec. 12.1 11.7




(11) Inventories

The participations primarily concern a 26 % interest in ZF Steering

Gear (India) Ltd., Pune. The inclusion of this company in the conso-

lidated nancial statements using the equity method was countered

by recurring circumstances which substantially limited the option

of signicantly participating in nancial and business policy deci-

sions in any way.

These available-for-sale nancial investments are recognised at

fair value. Unrealised gains and losses are recognised directly in

equity.

(12) Non-current financial assets

€ million 31.12.2014 31.12.2013

Raw materials and supplies 162.5 142.9

Work in progress 63.4 54.3

Finished goods andmerchandise 114.3 96.9

Payments on account 0.1 0.1

340.3 294.2

€ million 31.12.2014 31.12.2013

Participations 23.8 7.1

Derivative fnancial

instruments 0.9 0.0

Other receivables and loans 7.8 5.8

32.5 12.9




Property, plant and equipment(€ million)

Land andbuildings

Technicalequipment,

plant andmachinery

Other equip-ment, factory

and ofceequipment

Payments onaccount and

assets underconstruction Total

Acquisition and production costs

1 Jan. 2013 285.0 1,405.0 392.3 134.9 2,217.2

Currency translation -1.7 -23.8 -3.2 -3.1 -31.8

Additions 19.0 90.1 48.2 230.3 387.6

Reclassifications 26.2 118.4 16.3 -164.0 -3.1

Disposals 0.4 43.6 26.3 0.2 70.5

31 Dec. 2013 328.1 1,546.1 427.3 197.9 2,499.4

Depreciation and amortisation

1 Jan. 2013 164.9 981.8 271.9 0.0 1,418.6

Currency translation -0.3 -15.5 -2.1 -17.9

Additions 8.1 123.7 35.3 167.1

Impairment (IAS 36) 26.6 12.3 38.9

Disposals 0.4 34.0 9.7 44.1

31 Dec. 2013 172.3 1,082.6 307.7 0.0 1,562.6

Carrying amount at 31 Dec. 2013 155.8 463.5 119.6 197.9 936.8

(13) Consolidated statement of fixed assets




Property, plant and equipment(€ million)

Land andbuildings

Technicalequipment,

plant andmachinery

Other equip-ment, factory

and officeequipment

Payments onaccount and

assets underconstruction Total


1 Jan. 2014 328.1 1,546.1 427.3 197.9 2,499.4

Currency translation 7.7 55.8 7.4 10.2 81.1

Additions 24.9 31.3 45.5 290.3 392.0

Reclassifications 51.4 109.7 32.3 -192.0 1.4

Disposals 4.1 55.6 18.3 2.3 80.3

31 Dec. 2014 408.0 1,687.3 494.2 304.1 2,893.6


1 Jan. 2014 172.3 1,082.6 307.7 0.0 1,562.6

Currency translation 1.4 28.4 4.4 34.2

Additions 10.0 139.5 43.8 193.3

Impairment (IAS 36) 16.8 2.7 19.5

Reclassifications 2.0 -12.1 10.1 0.0

Disposals 0.5 48.2 14.4 63.1

31 Dec. 2014 185.2 1,207.0 354.3 0.0 1,746.5

Carrying amount at 31 Dec. 2014 222.8 480.3 139.9 304.1 1,147.1




Intangible assets (€ million)

Patents, licenses,software and

similar rights andassets

Developmentcosts

Payments onaccount Total


1 Jan. 2013 124.3 12.8 0.3 137.4

Currency translation -0.9 0.0 -0.9

Additions 56.7 0.9 2.8 60.4

Reclassifications 3.1 3.1

Disposals 4.7 0.1 4.8

31 Dec. 2013 178.5 13.6 3.1 195.2


1 Jan. 2013 38.5 4.2 0.0 42.7

Currency translation -0.6 -0.6

Additions 35.0 2.5 37.5

Impairment (IAS 36) 0.6 0.6

Disposals 1.6 1.6

31 Dec. 2013 71.9 6.7 0.0 78.6

Carrying amount at 31 Dec. 2013 106.6 6.9 3.1 116.6




Intangible assets (€ million)

Patents, licenses,software and

similar rights andassets

Developmentcosts

Payments onaccount Total


1 Jan. 2014 178.5 13.6 3.1 195.2

Currency translation 3.7 0.1 3.8

Additions 53.8 2.1 3.1 59.0

Reclassifications 1.6 -3.0 -1.4

Disposals 19.0 19.0

31 Dec. 2014 218.6 15.7 3.3 237.6


1 Jan. 2014 71.9 6.7 0.0 78.6

Currency translation 1.6 1.6

Additions 48.2 2.5 50.7

Impairment (IAS 36) 0.5 0.5

Disposals 16.3 16.3

31 Dec. 2014 105.9 9.2 0.0 115.1

Carrying amount at 31 Dec. 2014 112.7 6.5 3.3 122.5




The technical equipment and machines, as well as factory and oce

equipment of the Steering Columns Business Unit were written down

by €11.0 million (previous year: €6.9 million). The impairment is

based on a fair value less the costs of disposal for this cash-generating

unit based on current business planning and a rate of discount

(after taxes) of 8 % (previous year: 7 %) using the discounted cash

ow method. The devaluation was the result of the investments

made during the scal year in the light of continuing unfavourable

earnings prospects.

(15) Intangible assets

The main items classed as intangible assets are purchased soft-

ware, capitalised development costs and tool subsidies granted to

suppliers.

Assumptions made when capitalising expenditure incurred in the

development phase are based on the best possible estimates at the

time when the consolidated nancial statements were prepared.

The intangible assets of the cash-generating “Pumps” function of

the Commercial Vehicle Steering Systems Business Unit was written

down by a total of €0.5 million (previous year: €0.6 million). The

impairment is based on a fair value less the costs of disposal for this

cash-generating unit based on current business planning and a rate of

discount (after taxes) of 8 % (previous year: 7 %) using the discounted

cash ow method. The essential driver of this impairment was a

revaluation of the strategic business prospects for this product

group and is linked to the accelerated development of the steering

market from hydraulic to electric steering systems. Individual assets

were recognised at their fair values less costs of disposal determined

on a cost basis.

(14) Property, plant and equipment

On 31 December 2014, the ZFLS Group performed impairment

tests in accordance with IAS 36 to determine the recoverability

of its assets. This impairment test was primarily performed in

response to the negative results reported by certain cash-generating

units.

The recoverability of assets is determined by comparing the carrying

amount of the net assets of cash-generating units with the recove-

rable amount. The recoverable amount is the higher of fair value

less selling costs and the value in use.

ZF Lenksysteme determines the fair value of cash-generating units

by means of discounted cash ow measurements. The discounted

cash ows are drawn from ve-year forecasts which are based

on nancial plans. The forecast cash ows are based on market

assumptions as well as assessments of future developments made

by the company management. Cash ows outside the planning period

are extrapolated on the basis of a weighted ve-year forecast.

The technical equipment and machines as well as factory and of-

ce equipment of the cash-generating “Pumps” function of the

Commercial Vehicle Steering Systems Business Unit was written

down by a total of €8.5 million (previous year: €32.0 million). The

impairment is based on a fair value less the costs of disposal for this

cash-generating unit based on current business planning and a rate

of discount (after taxes) of 8 % (previous year: 7 %) using the discoun-

ted cash ow method. The essential driver of this impairment was

a revaluation of the strategic business prospects for this product

group and is linked to the accelerated development of the steering

market from hydraulic to electric steering systems. Individual as-

sets were recognised at their fair values less costs of disposal deter-

mined on a cost basis.




(16) Current financial liabilities

Interest on nancial liabilities to third parties is payable at rates of

between approximately 1.33 % and 15.6 % (previous year: around

6.2 % and 13.8 %). Interest is paid on nancial liabilities to par -

ticipations at rates of between 0.00 % and 0.21 % (previous year

around 0.02 % and 4.80 %). Payable interest is generally aligned

with the EONIA rate.

Financial liabilities due to banks have an average maturity of between

three and six months. As a rule, the other liabilities are due at sight.

(17) Trade payables

No interest is due on trade payables, which normally have maturities

of between 30 and 90 days.

(18) Other current liabilities

Other liabilities include payments received on account of €8.4 million

(previous year: €8.7 million) and liabilities for social security of

€8.2 million (previous year: €6.9 million).No interest is payable on

other liabilities, which normally become payable in the rst half of

the subsequent scal year.

€ million 31.12.2014 31.12.2013

Financial liabilities to thirdparties (due to banks) 47.3 3.0

Financial liabilities toparticipations 1.5 1.3

48.8 4.3

€ million 31.12.2014 31.12.2013

Liabilities to employees 71.4 72.3

Sales liabilities 47.3 58.9Tax liabilities 25.3 12.7

Derivative financialinstruments 8.1 1.6

Deferred income andaccrued income 7.5 6.4

Other liabilities 66.9 47.1

226.5 199.0

€ million 31.12.2014 31.12.2013

Trade payables tothird parties 602.3 514.7

Liabilities to participations 36.5 26.8

638.8 541.5




(20) Non-current financial liabilities

Non-current nancial liabilities include loans against borrower’s

note totalling €105.0 million (previous year: €150.0 million) on

which interest of between 1.6 % and 2.3 % (previous year: between

1.5 % and 2.3 %) is payable. The loan principal (€105.0 million)

will be repaid in the next 3 years. The loans against borrower’s note

include arrangements concerning compliance with a ratio (“Net

indebtedness/EBITDA”). The lender is entitled to terminate for

cause if this ratio is not complied with. The ratio has been con-

sistently complied with.

(21) Other non-current liabilities

Other non-current liabilities include deferred tool subsidies in the

amount €118.7 million (previous year: €108.3 million). No interest

is payable on these subsidies, whose value will be settled within

three years on average.

(22) Provisions for pensions

The company pension program distinguishes between dened contri-

bution and dened benet plans. In the case of dened contri bution

plans, the ZFLS Group assumes no obligations other than to channel

employees’ contributions into special-purpose funds or to private

pension insurance companies. In the period under review, dened

Provisions for obligations from sales consist primarily of provisions

for warranty obligations and for anticipated losses on delivery

commitments.

Provisions for warranty obligations are calculated on the basis of

warranty expenditure incurred in the current scal year, subject

to due provision for warranty periods. Specic provisions are also

formed to cover larger individual risks.

Provisions for anticipated losses on delivery commitments are formed

for commitments for which the unavoidable cost of performance

exceeds the expected economic benet. This calculation is based on

the best possible estimate of the expenditure that will be necessary

to full the commitment at the balance sheet date.

As in the previous year, provisions for obligations primarily consist of

commitments in respect of semiretirement arrangements.

All current provisions are expected to be appropriated in the course

of the next scal year.

Insurance refunds are expected to total €0.0 million (previous

year: €2.3 million). Refunds on insurance are carried as current

assets.

(19) Other current provisions

€ million1 Jan.2014

Translati-on adjust-

ments AdditionsApprop-riations Reversals

Reclassi-fications

31 Dec.

2014

Obligations from

sales 116.6 3.7 67.5 66.4 17.8 13.2 116.8

Obligations from

personnel 13.3 0.0 1.5 11.5 0.5 8.4 11.2

Other obligations 6.8 0.1 6.8 1.2 3.4 0.0 9.1

136.7 3.8 75.8 79.1 21.7 21.6 137.1




contribution pension expenses (including the employer’s contribution

to statutory pension insurance) totalled €64.6 million (previous


Pension provisions are formed to cover vested rights and current

benet payments to existing and former employees of the ZFLS

Group and their surviving dependents. These obligations take the

form of dened benet plans. In this case, it is the responsibility of

the ZFLS Group to disburse the dened benets to existing and former

employees. Pension systems vary according to legal, economic and

tax conditions and constraints in dierent countries. The majority

of these systems are based on pension modules that are calculated

once a year and are in some cases linked to the employee’s period

of service and nal compensation amount.

The primary element of this liability arises from contribution plans

for existing and former employees at the company’s German loca-

tions. Pension commitments based on periods of service and salary

were entered into up to 31 December 1993. These were frozen and

have since been developed in line with the cost of living index.

From 1 January 1997 standard pay scale employees have been

assured “pension components” which are based on the ratio of pen-

sionable income to the assessment ceiling for contributions to the

statutory pension insurance scheme. Executives receive “pension

components” based on their position in the company hierarchy and

their own particular salaries.

The material risks for the Group arise from the actuarial risks, in-

cluding interest rates and pension trends.

The amount of pension obligations (projected unit costs or dened

benet obligation) is calculated using actuarial methods that

necessarily involve estimates. The following factors play an important

role in these calculations.

Actuarial gains and losses arising from dened benet pension

obligations are oset directly against equity in accordance with

IAS 19.93A. All actuarial gains and losses therefore appear on the

balance sheet.

The table below shows a breakdown of reported pension com-

mitments and the composition of expenses arising from pension

commitments:

% 2014 2013

Discount rate 2.25 3.8

Pension adjustment trend 1.30 1.3

€ million

Actual totals at 1 Jan. 2013 420.5

Current service cost 11.1

Past service cost 3.7

Interest expense 16.5

Transfer in/out -0.9

Pension payments -9.6

Currency translation effects -0.1

Expected totals at 31 Dec. 2013 441.2

Revaluations:

Actuarial gains/losses arising fromchanges in financial assumptions 15.5

Actuarial gains/losses arising fromexperience-based adjustments -2.7

Actual totals at 31 Dec. 2013 454.0




The amounts for the current and previous four reporting periods

are as follows:

A one quarter percentage point change in the assumptions made

above, which were used to value the DBO on 31 December 2014,

would lead to an increase/decrease in the DBO as follows:

The method used to calculate the provisions recognised in the

corporate balance sheet was also used to calculate the sensitivity of

the DBO. The increase or decrease in the discount rate and pension

increase do not produce the same absolute gure for the DBO. If

several assumptions are changed at the same time, the overall

impact need not necessarily be equal to the aggregated individual

impacts.

€ million 2014 2013 2012 2011 2010

Present value of defined benefit obligations 637.9 454.0 420.5 324.3 272.4

Plan assets 0.0 0.0 0.0 0.0 51.9

Deficit cover 637.9 454.0 420.5 324.3 220.5

Experience-based adjustments to plan obligations -0.3 % -0.6 % +1.8 % +2.4 % +0.0 %

Experience-based adjustments to plan assets n.a. n. a. n. a. -2.4 % -2.2 %

€ millionReduction

by 0.25 % pointsIncrease

by 0.25 % points

Discount rate 33.2 -30.8

Pensionadjustment trend -20.9 22.0

Actual totals at 1 Jan. 2014 454.0

Current service cost 13.2

Past service cost 5.4

nterest expense 16.9

Transfer in/out -0.1Pension payments -10.5

Currency translation effects 0.0

Expected totals at 31 Dec. 2014 478.9

Revaluations:

Actuarial gains/losses arising fromchanges in financial assumptions 160.8

Actuarial gains/losses arising fromexperience-based adjustments -1.8

Actual totals at 31 Dec. 2014 637.9




(24) Equity

Subscribed capital / Capital reserve

Subscribed capital of €127.8 million (previous year: €127.8 mil-

lion) and the capital reserve of €195.3 million (previous year:

€195.3 million) reect the gures carried on the balance sheet of

ZF Lenksysteme GmbH. On 31 December 2014, ZF Lenksysteme

GmbH’s shareholders were:

The changes in shareholder structure after the balance sheet date

are presented under “Events after the balance sheet date”.

Provisions for obligations from sales consist primarily of provisions

for warranty obligations and for anticipated losses on delivery

commitments. Details are provided under note 19. Most of these

obligations are likely to be appropriated over a period of two to

four years.

Provisions for obligations from personnel consist primarily of commit-

ments in respect of anniversaries and semiretirement arrangements.

About half of the provisions set aside to cover anniversary expenses

will be appropriated within two to ve years. The remaining half

will be appropriated after more than ve years. Commitments in

respect of semiretirement arrangements will probably be realised

within two to ve years.

(23) Other non-current provisions

€million

Sharein %

Robert Bosch GmbH, Stuttgart 63.9 50

ZF Friedrichshafen AG, Friedrichshafen 63.9 50

127.8 100

€ millionValue at 1

Jan. 2014

Currencytrans-lation

Addi-tions

Com-pound

interest

Appro-pria-tions Reversals

Reclassi-fications

Value at 31Dec. 2014

Obligationsfrom sales 86.4 1.4 24.8 0.3 0.7 4.0 -13.2 95.0

Obligationsfrom personnel 27.4 0.0 10.7 0.7 2.7 0.8 -8.4 26.9

Otherobligations 0.7 0.0 0.1 0.0 0.0 0.0 0.0 0.8

114.5 1.4 35.6 1.0 3.4 4.8 -21.6 122.7




Managing capital

The Group manages capital primarily with the objective of ensuring

that a healthy equity ratio is maintained to underpin its business

activities. To this end, the Group aims to maintain a Group equity

ratio (reported equity, including minority interests, as a percentage

of total assets) of at least 30 %. This objective was achieved with an

equity ratio of 30.6 % in the period under review (previous year:

30.7 %).

The Group’s activities in this regard also involve managing the

equity of its consolidated subsidiaries, subject to compliance with

legal provisions (such as “thin capitalization rules”) in the taxation

law of individual countries.

Finally, capital management also includes ongoing monitoring of

nancial covenants.

Notes to the consolidated cash flow statement

The consolidated cash ow statement shows how cash inows and

outows have aected the ZFLS Group’s cash and cash equivalents

in the course of the scal year under review. In accordance with

IAS 7, distinctions are drawn between cash ows generated by ope-

rating activities, investing activities and nancing activities.

The structure of the cash ow statement was extended in scal

2014. The gures for the previous year have been adjusted.

Cash and cash equivalents include all liquid funds recognised on

the consolidated balance sheet, i.e. cash in hand, cheques and

balances in bank accounts as well as current marketable securities.

Cash ows generated by investing and nancing activities are calculated

in relation to payments made. By contrast, cash ows generated

by operating activities are calculated indirectly from consolidated

pre-tax earnings. For the purposes of indirect calculation, changes

taken into account in respect of balance sheet items which relate

to operating activities are adjusted for currency translation eects

and for changes to the consolidated Group.

Equity earned by the Group

Equity earned by the Group contains the cumulative earnings of

all companies included in the consolidated nancial statements,

insofar as said earnings are not distributed as dividends. This item

also contains reserves formed pursuant to rst-time adoption of

IFRS and the cumulative adjustments made for currency translation

which, pursuant to the option granted by IFRS 1.22, were not

recognised in prot and loss at the date of transition to IFRS.

Foreign currency translation differences

The currency translation adjustments item contains dierences

arising from the translation of nancial statements presented in

other currencies by foreign subsidiaries outside the euro zone after

rst-time adoption of IFRS. These adjustments are not recognised

in prot and loss.

Fair value of financial instruments

This item contains the eects of the after-tax valuation of available-

for-sale nancial instruments without recognition in prot and

loss.

In scal 2014, a €16.7 million (previous year: negative market

changes €2.2 million) increase in the fair value of marketable secu-

rities was included in equity and not recognised in prot and loss.

Revaluation arising from defined benefit plans

In scal 2014, actuarial losses totalling €159.0 million (previous

year: €12.8 million) were included in equity and not recognised

in prot and loss. Corresponding deferred taxes in the amount of

€46.1 million (previous year: €3.7 million) were netted against

equity and not recognised in prot and loss.




Other disclosures

Other financial obligations

In addition to liabilities and provisions, the Group also has other

nancial obligations which, in particular, arise from rental and lea-

sing agreements, investment projects in progress and purchasing

agreements.

The sum of minimum future leasing instalments arising from

agreements and operating leases that cannot be terminated are

classied by maturity in the table below:

The leasing agreements primarily concern developed plots of

land and various tools and equipment. These agreements run for

between 1 and 10 years.

Litigation

Neither ZF Lenksysteme GmbH nor any of its Group companies are

involved in current or foreseeable legal or arbitration proceedings

that could have any material impact on the economic situation of

the ZFLS Group in future or, retroactively, over the past two years.

Suitable provisions have been formed to cover the likely nancial

burden of other legal and arbitration proceedings.

Risk management

As a company with a global reach, ZF Lenksysteme GmbH is ex-

posed to many and varied risks which are inseparably intertwined

with the pursuit of its business activities. Eective systems of risk

management and control have been put in place and are constantly

being improved to ensure that risks are detected and assessed

quickly and dealt with systematically. Key risks and corrective

measures are monitored by controlling cycles in the course of each

scal year.

In particular, ZF Lenksysteme GmbH’s assets and liabilities and its

planned transactions are exposed to risks arising from changes in

exchange rates. Financial risk management therefore aims to con-

tain these risks by constantly taking appropriate operational and

nancial action.

Foreign currency risk

The companies in the ZFLS Group hedge their currency risks

at market rates via the agency of the ZFLS Treasury unit at

ZF Lenksysteme GmbH. Both original and derivative nancial ins-

truments are used. Derivative nancial instruments are used only

to hedge existing underlying transactions or planned transactions.

The risk items in the charge of ZFLS Treasury are securitised exter-

nally with banks, subject to due provision for prescribed risk limits.

Hedging transactions are concluded in accordance with uniform

Group-wide guidelines.

Regular reports on the ZFLS Group’s foreign exchange positions

are submitted to the Management Board. Compliance with Group

guidelines is examined within the framework of internal audits.

€ million 31.12.2014 31.12.2013

Rental and leasing payments 45.1 35.6

Property, plant and equipmentpurchasing commitments

49.7 67.2

94.8 102.8

€ million 31.12.2014 31.12.2013

Nominal total future minimum

lease payments ›

due within one year 17.5 13.1

due between one to ve years 22.3 22.5

due after more thanfive years 5.3 0.0

45.1 35.6




All future cash ows that are not eected in the functional currency

valid for the given Group company are exposed to foreign exchange

risks.

Within the ZFLS Group, planned foreign currency sales arising

from volume business are hedged within the connes of prescribed

hedging corridors. Net transaction amounts are hedged.

Risks arising from the translation into the Group’s presentation

currency of assets and liabilities stated by foreign corporate units

are not hedged.

External hedging is eected only by forward exchange contracts

and currency options. On 31 December 2014, the bulk of the

hedged volume was denominated in US dollars.

The table below illustrates the sensitivity of Group earnings before

tax to a reasonable assessment of possible changes in the euro/US

dollar exchange rate (due to changes in the fair value of monetary

assets and liabilities and changes in the fair value of foreign ex-

change contracts and currency options). All other variables remain

constant.

All the monetary assets and liabilities were analysed on the balance

sheet date and sensitivity analyses performed for the respective cur-

rency pairs in relation to the net risk in order to present currency

risks as required by IFRS 7 “Financial Instruments: Disclosures”

for the most important currencies used by the ZFLS Group.

There were no eects on equity.

Interest rate risks

The Group is exposed to the risk of uctuations in market rates of

interest, primarily because of its short-term investment of cash and

cash equivalents.

An increase of 100 basis points in the average rate of interest on the

short-term investment of cash and cash equivalents would increase

earnings before tax by €3 million (previous year: €3.2 million). A

decrease of the same magnitude would reduce earnings before tax

by €3 million (previous year: €3.2 million).

An increase of 100 basis points in the average rate of interest on -

nancial liabilities would reduce earnings before tax by €1.6 million

(previous year: €1.6 million). A corresponding decrease would

cause earnings before tax to increase by €1.6 million (previous


Credit risk

The ZFLS Group only does business with respected, creditworthy

third parties. Creditworthiness checks are performed for all cus-

tomers who wish to engage in credit-based business transactions

with the Group. In addition, outstanding receivables are monitored

on a permanent basis. As a result, the Group is exposed to no

material risk of default.

The Group’s other nancial assets include cash and cash equivalents,

nancial assets which are available for sale and certain derivative

nancial instruments. Should a counterparty default on its obliga-

tions, the risk of default in this context is limited to the carrying

amount of the instruments concerned.

Trend in the euro/US dollarexchange rate

Impact on earningsbefore tax

2014€ million

2013€ million

10 % depreciation 1.1 3.9

10 % appreciation -1.1 -3.9

C lid t d Fi i l St t t f 2014 58




Liquidity risks

ZF Lenksysteme manages liquidity proactively to ensure that it can

meet all its payment obligations at any time. To this end, liquidity

planning covers payment ows arising from operating business for

a rolling 12-month period.

Further liquidity is available from the syndicated loan of €100 million

agreed in scal 2013.

Any surplus liquidity is invested with banks which enjoy rst-class

credit ratings in order to optimise returns.

The nondiscounted cash ows for the original nancial liabilities

are shown in the following table:

Carryingamount Nondiscounted cash flows

€ million 31.12.2014 2015 2016 2017 2018 2019

Original financial liabilities ›

Financial liabilities to thirdparties (due to banks) 152.3 50.2 2.1 107.1 0.0 0.0

Financial liabilitiesto participations 1.5 1.5 0.0 0.0 0.0 0.0

153.8 51.7 2.1 107.1 0.0 0.0

Carryingamount Nondiscounted cash flows

€ million 31.12.2013 2014 2015 2016 2017 2018

Original financial liabilities ›

Financial liabilities to thirdparties (due to banks) 153.0 6.0 47.2 2.2 107.1 0.0

Financial liabilitiesto participations 1.3 1.3 0.0 0.0 0.0 0.0

154.3 7.3 47.2 2.2 107.1 0.0





Nondiscounted cash ows contain interest and principal payments.

The maturity structure of passive derivative nancial instruments is

shown in the following table:

Derivative nancial instruments entail rights and obligations

which both parties must full in full (gross settlement) as well as

obligations which one of the two contracting parties must settle net

on the maturity date.

€ million

Carrying amount

31 Dec. 2014 2015

Passive derivative fnancial instruments with gross settlement › 7.9

Cash inflow 73.1

Cash outflow 81.0

Passive derivative fnancial instruments with net settlement › 0.2

Cash outflow 0,2

€ million

Carrying amount

31 Dec. 2013 2014

Passive derivative fnancial instruments with gross settlement › 0.1

Cash inflow 6.3

Cash outflow 6.4

Passive derivative fnancial instruments with net settlement › 1.5

Cash outflow 1.5





Carrying amounts, valuations, fair values and net results by

measurement category

The fair values of the nancial assets and liabilities carried on the

consolidated balance sheet are determined with reference to market

prices.

The full amount of marketable securities and equity participations

held as current assets and stated on the consolidated balance sheet

is carried at fair value. The fair value of the foreign exchange tran-

sactions and currency options subsumed under derivative nancial

instruments is calculated by referring to current forward exchange

rates.

For those nancial assets and liabilities that are not carried at fair

value, the carrying amounts approximately reect the fair value

owing to the short maturities involved.

Non-current nancial assets and liabilities are recognised at their

settlement amount, which corresponds to their fair value in light of

market rates of interest.

31 Dec. 2014 € million

Measurement

category inline with

IAS 39Carrying

amount CostFair value

in equityFair value in

proft and loss

Assets

Cash and cash equivalents LaR 264.9

Trade receivables LaR 794.5

Other receivables LaR 18.7

Participations AfS 23.8 0.1 23.7

Derivative financial instruments(with no hedging relationships) FAHfT 1.4 1.4

Liabilities

Liabilities due to banks FLAC 152.3

Financial liabilities FLAC 1.5

Trade payables FLAC 638.8

Other liabilities FLAC 44.0

Derivative financial instruments(with no hedging relationships) FLHfT 8.1 8.1





The carrying amounts of items in the LaR and FLAC categories

correspond to amortised cost.

Based on the input parameters used for measurement purposes,

the fair value of disclosed nancial instruments is determined

using the three-level fair value hierarchy introduced by IFRS 7.27A.

Level 1 covers nancial instruments for which quoted prices are

available on an active market for identical instruments. The instru-

ments are assigned to level 2 if they can be measured using direct

(such as prices) or indirect (derived from prices) observable market

input parameters. Level 3 nancial instruments are measured on the

basis of inputs which are not based on observable market data.

31 Dec. 2013 € million

Measurementcategory in

line withIAS 39

Carryingamount Cost

Fair value inequity

Fair value in

proft and loss

Assets

Cash and cash equivalents LaR 207.9

Trade receivables LaR 712.9

Other receivables LaR 25.2

Participations AfS 7.1 0.1 7.0

Derivative financial instruments(with no hedging relationships) FAHfT 5.0 5.0

Liabilities

Liabilities due to banks FLAC 153.0

Financial liabilities FLAC 1.3

Trade payables FLAC 541.5

Other liabilities FLAC 24.7

Derivative financial instruments(with no hedging relationships) FLHfT 1.6 1.6





The following table shows the assignment of nancial instruments

measured at fair value to the three levels of the fair value hierarchy:

31 Dec. 2014 € million Total Level 1 Level 2 Level 3

Assets


Derivative financial instruments (with no hedging relationships) 1.4 1.4

Liabilities


31 Dec. 2013 € million Total Level 1 Level 2 Level 3

Assets



Liabilities


Net results by measurementcategory in 2014

From subsequent measurement

Frominterest

At fairvalue

Translation

adjustment

Impair-ment

Fromdisposals Net result

€ million € million € million € million € million € million

Loans and receivables (LaR) 4.4 13.6 -2.6 15.4

Available-for-sale financialassets (AfS) 16.7 16.7

Financial instruments held fortrading (FAHft and FLHfT) -10.1 -10.1

Financial liabilities measuredat amortised cost (FLAC) -5.6 -5.6

Total -1.2 6.6 13.6 -2.6 16.4




Derivative financial instruments

The face value of a derivative nancial instrument is the buying or

selling price or the contract value of the underlying transaction. The

table below lists the face values and fair values (i.e. the carrying

amounts) of derivative nancial instruments and indicates their

relative maturities:

Net results by measurementcategory in 2013

From subsequent measurement

Frominterest

zumFair Value

Translation

adjustment

Impair-ment

Fromdisposals Net result

€ million € million € million € million € million € million

Loans and receivables (LaR) 4.4 -1.0 -2.1 1.3

Available-for-sale financialassets (AfS) -2.2 0.1 -2.1

Financial instruments held fortrading (FAHft and FLHfT) 1.3 1.3

Financial liabilities measuredat amortised cost (FLAC) -6.4 -6.4

Total 2.0 -0.9 -1.0 -2.1 0.1 5.9

€ million

Nominalamount

Market valuewith a term to settlement of

Totalup to

one year

betweenone and five

years

31 Dec. 2014

Foreign exchange contract assets 30.7 1.4 0.5 0.9

Foreign exchange contract liabilities 73.2 7.9 7.9

Commodity future contract liabilities 3.6 0.2 0.2

31 Dec. 2013

Foreign exchange contract assets 144.9 5.0 5.0

Foreign exchange contract liabilities 6.3 0.1 0.1

Commodity future contract liabilities 15.6 1.4 1.4




The fair values relative to the face values of these derivative

nancial instruments take no account of contrary developments

in the value of underlying transactions. Nor do they necessarily

reect the amounts that will be realised in future at current market

conditions.

Government grants

Government grants totalling €0.3 million (previous year: €0.7 million)

were received from the Federal Employment Agency (Bundesagentur

für Arbeit). In addition, government (investment) grants totalling

€6.1 million were recognised as property, plant and equipment

(previous year: €2.9 million).

Related party transactions

In accordance with IAS 24, parties (individuals or companies) who

control or are controlled by the ZFLS Group must be disclosed

insofar as they are not already identied as a Group company in

the consolidated nancial statements of ZF Lenksysteme GmbH.

Control is deemed to exist where a shareholder possesses over half

of the voting rights or is authorised by the articles of association or

by contractual agreements to control the management’s nancial

and operating policy decisions.

In addition, IAS 24 requires disclosure of transactions with parties,

including close family members and intermediary companies, who

exercise signicant inuence over nancial and operating policy

decisions. Signicant inuence over the nancial and operating

policy decisions of the ZFLS Group can be exercised by a party who

owns 20 % or more of the shares in ZF Lenksysteme GmbH, who

is a member of the Management Board or the Supervisory Board

of ZF Lenksysteme GmbH, or who lls any other key management

position.

Accordingly, Robert Bosch GmbH and its subsidiaries and ZF

Friedrichshafen AG and its subsidiaries are classed as related

parties to ZF Lenksysteme GmbH.

All transactions with related parties can be classed as ordinary opera-

ting activities between the companies concerned and are conducted

at customary market rates. Deliveries and services purchased from

related parties consist primarily of supplies used in production,

and of development, nancial and sales services. Transactions of

sale in respect of related parties consist primarily of product deli-

veries.The following table shows the extent of the relations:

Total emoluments to the Management Board and Supervisory

Board

Emoluments paid to current members of the Management Board

totalled €2,831,000 in scal 2014 (previous year: €1,702,000).

Pension commitments generated expenses of €72,000 (previous

year: €51,000). Compensation paid to former members of the

Management Board totalled €337,000 (previous year: €324,000).

Pension provisions for former members of the Management Board

and their surviving dependants came to €6,592,000 (previous

year: €5,437,000).

Emoluments of €29,000 were paid to the Supervisory Board for

scal 2014 (previous year: €30,000).

In the period under review, companies in the ZFLS Group engaged

in no other transactions requiring disclosure with members of the

Management Board or the Supervisory Board of ZF Lenksysteme

GmbH, or with companies on whose management or supervisory

bodies these individuals are represented. Nor was there any enga-

gement in such transactions with close family members of these

individuals.

€ million2014 / 31

Dec. 20142013 / 31

Dec. 2013

Sales 283.6 228.9

Deliveries and servicesreceived 646.2 648.1

Receivables 36.9 33.4Liabilities 92.2 68.7




Disclosures under Section 313 Para. 2 (No. 1 sentence 2) of the

German Commercial Code (HGB)

Owing to immateriality the following companies have not been

included in the consolidated nancial statements:

Auditor’s fees and services

The fees charged by Ernst & Young GmbH Wirtschaftsprüfungsge-

sellschaft for its audit of the ZF Lenksysteme GmbH (consolidated

and separate) nancial statements and of the nancial statements

of the subsidiary ZF Lenksysteme Nacam GmbH amounted to

€255,000 (previous year: €241,000). Ernst & Young received

€459,000 (previous year: €330,000) for tax consultancy services

for transferred employees.

Personnel

An average of 13,732 people were employed by the ZFLS Group in

scal 2014 (previous year: 13,118). Of these, 6,568 (previous year:

6,373) were employed directly and 7,164 (previous year: 6,745)

were employed indirectly

Corporate headquarters

ZF Lenksysteme GmbH is headquartered at Richard-Bullinger-

Strasse 77 in Schwäbisch Gmünd, Germany.

Supervisory Board

Wolf-Henning Scheider - Chairman -

Managing Director, Robert Bosch GmbH (G40)

Dr. Sebastian Biedenkopf

Director, Corporate Legal Department, Robert Bosch GmbH

Jürgen Holeksa (until 30 January 2015)

Member of the Board of Management for Personnel and Service

Companies, ZF Friedrichshafen AG

Torsten Kurz (from 31 January 2015)

Manager Corporate Controlling,

Planning and Mergers & Acquisitions, Robert Bosch GmbH

Dr. Friederike Lindner (from 31 January 2015)

Head of Main Department, Central Purchasing and Logistics,

Robert Bosch GmbH

Werner Müller

Member of the Diesel Systems Division, Robert Bosch GmbH

Dr. Konstantin Sauer (until 30 January 2015)

Member of the Board of Management for Finance,

Controlling, IT, Process Management, ZF Friedrichshafen AG

Dr. Uwe Schirmer (from 31 January 2015)

Head of Central Department for Human Resources,

Robert Bosch GmbH

Dr. Stefan Sommer (until 30 January 2015)

Chief Executive Ocer, ZF Friedrichshafen AG

Frank Iwer - Vice Chairman -

Secretary of the IG Metall trade union,

Regional Manager Baden-Württemberg

Vincenzo Basile

Chairman of the Works Council, ZF Lenksysteme GmbH,

Bietigheim plant

Company nameand domicile

Nominalcapital

Equitystake in %

Integrated ManagementConsulting GmbH,Schwäbisch Gmünd

100,000EUR 100




Harald Brenner

Chairman of the Works Council, ZF Lenksysteme GmbH,

Schwäbisch Gmünd plant

Werner Kottmann

Business Manager, Passenger Car Steering Systems Business Unit,

ZF Lenksysteme GmbH, Schwäbisch Gmünd plant

Martin Rott

Works Council, ZF Lenksysteme GmbH, Schwäbisch Gmünd plant

Heinz Wellnitz

Works Council, ZF Lenksysteme GmbH, Schwäbisch Gmünd plant

Management Board

Christian Sobottka - Chairman - (from 1 January 2015)

Strategy / Business Development, Sales,

Corporate Communications

Dr. Peter Ottenbruch - Chairman - (until 31 December 2014)

Quality, Market, Corporate Strategy, International Coordination,

Human Resources, Corporate Communications, Aftermarket

Dr. Hanns Bernd Ketteler (from 1 January 2015)

Production, Quality, Commercial Vehicle Steering Systems

Business Unit, Plant

Dr. Hans F. Collenberg (until 31 December 2014)

Research and Development, Commercial Vehicle Steering Systems

Business Unit, Passenger Car Steering Columns

Dr. Marcus Parche

Research and Development, Passenger Car Steering Systems

Business Unit, Passenger Car Steering Columns

Dr. Henning Wagner

Finance, Purchasing, Director of Industrial Relations,

Information Technology, Legal, Compliance

Events after the balance sheet date

Eective 30 January 2015, Robert Bosch GmbH acquired the 50 %

share interest in ZFLS from ZF Friedrichshafen AG. As of this date

Robert Bosch GmbH has been the sole shareholder of ZFLS. This

resulted in the following changes in the membership of the Super-

visory Board and the Management Board:

Mr Holeksa, Dr. Sauer and Dr. Sommer resigned from the Super-

visory Board on 30 January 2015 . Dr. Lindner, Mr Kurz and Dr.

Schirmer were elected to the Supervisory Board of ZF Lenksysteme

GmbH eective 31 January 2015 for the remaining period of o ce

of the Supervisory Board.

Dr. Ottenbruch and Dr. Collenberg resigned from their positions on

the Management Board on 31 December 2014. On 1 January 2015,

Mr Sobottka was appointed Chairman of the Management Board

and Dr. Ketteler was appointed as a member of the Management

Board of ZF Lenksysteme GmbH.

Schwäbisch Gmünd, 13 February 2015

ZF Lenksysteme GmbH

Christian Sobottka Dr. Hanns Bernd Ketteler

Dr. Marcus Parche Dr. Henning Wagner

67



AUDIT OPINION

We have audited the consolidated nancial statements of ZF Lenk-

systeme GmbH, Schwäbisch Gmünd – consisting of the consolida-

ted income statement, consolidated statement of comprehensive

income, consolidated balance sheet, consolidated cash ow state-

ment, consolidated statement of changes in equity and notes to the

consolidated nancial statements – and the consolidated management

report for the scal year from 1 January to 31 December 2014. The

task of preparing the consolidated nancial statements and the

management report in compliance with International Financial

Reporting Standards (IFRS) in the form applicable within the EU

and in compliance with the provisions of Section 315a Paragraph

1 HGB (“Handelsgesetzbuch”: German Commercial Code) is the

responsibility of the legally authorised representatives of the company.

Our responsibility is to express an opinion on the consolidated

nancial statements and management report based on our audit.

Pursuant to Section 317 HGB, we conducted our audit in accordance

with generally accepted auditing standards drawn up by the

Institut der Wirtschaftsprüfer (IDW [Institute of Public Auditors

in Germany]), which require that we plan and perform the audit in

such a way as to obtain reasonable assurance about whether, in line

with the applicable nancial reporting standards, the consolidated

nancial statements and the management report are free of material

misstatement and statutory infringements with regard to the assets,

nancial and earnings position of the Group. When determining

how to conduct the audit, due consideration is given to an under-

standing of the Group’s business activities, of the economic and

legal context in which it operates and of the likelihood of errors

occurring. Such an audit involves assessing the eectiveness of the

internal system of accounting controls and examining documentary

evidence of the amounts disclosed in the consolidated nancial

statements and the management report; these assessments are

made primarily on the basis of spot checks.

Our audit further included an appraisal of the individual sets of

nancial statements for the companies subsumed in the consoli-

dated Group statements, an examination of the delimitation of the

consolidated Group, an assessment of the accounting policies and

principles of consolidation applied, and an evaluation of signicant

estimates made by the Group‘s legal representatives and of the

overall presentation of both the consolidated nancial statements

and the management report. We believe that our audit provides a

reasonable basis for the opinion expressed below.

Our audit has not led to any objections.

On the basis of the insights gained through our audit, it is our

opinion that the consolidated nancial statements comply with

International Financial Reporting Standards (IFRS) in the form

applicable within the EU and with the provisions of the German

Commercial Code (HGB) pursuant to Section 315a Paragraph 1

HGB, and that the consolidated nancial statements give a fair

view of the assets, nancial and earnings position of the consoli-

dated Group in accordance with these standards. The consolidated

management report is consistent with the consolidated nancial

statements and presents a fair view of the position of the Group as

a whole, dealing adequately with potential opportunities and risks

in respect of its future development.

Stuttgart, 13 February 2015

Ernst & Young GmbH

Wirtschaftsprüfungsgesellschaft

Nover PentzAuditor Auditor



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