Financial Overview

(in million euros)

	FY ended Dec. 31, 2013*	FY ended Dec. 31, 2012*	Rate of change (%)	Factors
Overall
Sales	16,837	15,526	8.4	-
EBITDA	1,703	1,531	11.2	-

* Excluding ZF Lenksysteme

Acquisition

-In September 2014, the Company announced it will acquire TRW Automotive Holdings Corporation, which produces passive and active safety systems, for approximately USD 12.4 billion. The Company expects the transaction to close in the first half of 2015. The combined company will be the second largest automotive parts supplier in the world.

Business Overview

<Sales by major divisions>
Powertrain Technology
-In the year ended December 31, 2013, sales in the Powertrain Technology division increased by 15% to 5,704 million euros mainly due to high demand for transmissions, axle drives and drive components, especially torque converers.

Chassis Technology
-In the year ended December 31, 2013, sales in the Chassis Technology division increased by 11% to 5,509 million euros. A drop in sales as a result of the weak order situation in Western Europe was compensated for by the positive market development particularly in Asia. The division profited from increased demand for vehicles in Asia, especially in the premium segment. The North American market also continued to grow.

Commercial Vehicle Technology
-In the year ended December 31, 2013, sales in the Commercial Vehicle division increased by 7% to 3,249 million euros, supported in particular by the pre-buy effect caused by the Euro 6 changeover.

<Sales by region>
Europe
-In the year ended December 31, 2013, sales in Western Europe grew by 7.6% to 8,907 million euros. Sales in Eastern Europe surged by 14.1% to 920 million euros..

North America/South America
-In the year ended December 31, 2013, sales in North America increased by 5.5% to 3,095 million euros. Sales in South America increased by 1.7% to 704 million euros.

Asia-Pacific
-In the year ended December 31, 2013, sales in the Asia-Pacific region surged by 15.1% to 2,998 million euros. Within this region, the Chinese market experienced the greatest growth momentum, especially in the automobile sector.

Business Plan

-In February 2013, the Company is seeking to triple its sales to Japanese automakers in the global market from the current 360 million euros (approximately 44.6 billion yen) to 1 billion euros (approximately 124 billion yen) by 2018. With an aim of increasing orders from Japanese automakers, the company will step up marketing efforts by underlining its advanced fuel-saving and weight-reduction technologies in the areas of automatic transmissions and chassis systems such as suspension products. ZF's Japanese customers include passenger car makers such as Toyota, Nissan, and Honda, as well as four commercial vehicle manufacturers. The company is currently supplying shock absorbers and stabilizer links to these customers' global facilities. After starting delivery of shock absorbers for the Toyota Lexus IS-F in 2011, the company also began supplying these components for the Nissan Altima and the NV350 Caravan in 2012. ZF will propose other products, including fuel-efficient 8-speed automatic transmissions to be paired with longitudinal engines, new 9-speed automatic transmissions to be paired with transverse engines, suspension technologies such as continuous damping control systems, and plastic pedal boxes. Mass production of the 9-speed automatic transmission will commence this year. (From an article in the Nikkan Jidosha Shimbun on Feb. 22, 2013)

Contracts

<Hungary>
-In December 2013, the Company announced that Hungarian urban public transport authorities have ordered a total of 172 new buses equipped with ZF's driveline and chassis technology and steering systems made by ZF Lenksysteme GmbH. These buses will run in the cities of Budapest and Pecs. All city buses – 106 MAN Lion's City as well as 66 Volvo 7900 – will be equipped with the ZF-EcoLife 6-speed automatic transmission. The AV 132 low-floor driven axle will also be used in all 172 buses. In addition, the AVN 132 portal axle and the Servocom ball-and-nut power steering system from ZF Lenksysteme will be installed in the articulated buses made by Volvo. (From a press release on December 19, 2013)

<Netherlands>
-In October 2013, the Company announced that a total of 405 new buses to be used for public passenger transport in the Netherlands will be equipped with transmissions together with front and rear axle systems from ZF and steering systems from ZF Lenksysteme GmbH. The ZF-EcoLife 6-speed automatic transmission will be featured on a total of 135 new buses for use in the city of Utrecht. Moreover, all of the 405 buses for use in the cities of Utrecht and Arnhem, as well as in the regions of South Holland and Friesland, are equipped with the AV 132 low-floor driven axle. Several vehicles will also have the RL 75 A front axles. These are also some of the features of the compact Servocom ball-and-nut power steering system by ZF Lenksysteme. (From a press release on October 14, 2013)

<Russia>
-In September 2013, the Company announced that 282 new city buses for Saint Petersburg, Russia will be equipped with ZF's driveline and chassis technology, as well as steering systems from ZF Lenksysteme GmbH. All 282 new vehicles, 183 solobuses from LiAZ and 99 articulated buses from Volgabus, will be equipped with the ZF-EcoLife 6-speed automatic transmission. In addition, the new buses will also have ZF chassis technology: the AV 132 low-floor driven axle, the ZF RL 85 front axle system, and the Servocom ball and nut power steering system from ZF Lenksysteme GmbH. Furthermore, the non-driven AVN 132 portal axle will be used in the articulated buses made by Volgabus. (From a press release on September 9, 2013)

<China>
-In April 2013, the Company will sign an agreement covering the delivery of ZF-Ecosplit manual commercial vehicle transmissions to the manufacturer Sinotruck. ZF already supplies 16-speed Ecosplit transmissions from the Hangzhou location for current tractor trucks of the model range Sitrak C7H 6x4. The new ZF plant in Beijing will start production of passenger car axle systems in 2013. After production ramp-up, ZF is planning annual production of several thousand axle sets with 350 employees. The main customer is Beijing Benz Automotive Co., Ltd. (BBAC). In addition, ZF Beiben Drivetech (Chongqing) Co. Ltd., a joint venture between ZF and the commercial vehicle manufacturer Beiben, starts production of commercial vehicle transmissions in 2013. The joint venture, with ZF holding 51 percent, will produce 9-speed manual transmissions for medium-duty trucks as well as 5- or 6-speed manual transmissions for buses in addition to the 16-speed manual transmissions for heavy trucks. (From a press release on April 20, 2013)

-In January 2013, the Company announced it has been awarded a new contract to supply axles for 2,200 low-floor buses of Beijing’s Public Transport Corporation (BPTC). Based on the agreement, more than 5,000 axles will be supplied by ZF Lenksysteme, a 50-50 joint venture between ZF and Bosch, starting in 2013. The axle products will include the RL85EC front axles, the AV132 drive axles, and the AVN132 tag axles, which can be used on non-step buses whose floor is only 350mm from ground level. ZF Lenksysteme will also manufacture the ZF-Servocom ball-nut type steering systems for BPTC buses. In addition to being chosen for BPTC’s low-floor buses, ZF’s axles have also been selected for use in BPTC’s 800 city buses. Of all 28,000 BPTC buses operating in Beijing, 15,000 buses are equipped with ZF’s axles systems and 800 employ ZF’s automatic transmission systems. ZF Lenksysteme’s ZF-Servocom steering systems are used on 18,000 BPTC buses. (From news releases issued by multiple sources on January 28, 2013)

<France/Japan>
-In March 2013, the Company announced that it has won a contract to supply plastic engine mounts for Renault-Nissan passenger cars. The German supplier has already begun delivering six model-specific versions of engine mounts for small cars as well as engine mounts for newly developed electric cars developed on an EV project. The product is 100 % recyclable and achieves the same performance as that of metal-based engine mounts in terms of stability and durability to withstand vibration. With use of modular parts, the ZF plastic engine mount can be combined with various types of engines and vehicle models, offering high design flexibility to automakers. (From an article in the Nikkan Jidosha Shimbun on Mar. 27, 2013)

<USA>
-In February 2013, the Company has been awarded a contract to supply its 9-speed automatic transmissions for Land Rover's new Range Rover Evoque. The 9-speed automatic, which was developed jointly with the British automaker, is designed to offer superior driving performance and a high level of fuel efficiency for both on-road and off-road driving. The Evoque will be the world's first production vehicle to be equipped with a 9-speed automatic. ZF will produce the transmission system at its new manufacturing facility in Gray Court, South Carolina, U.S.A. (From an article in the Nikkan Jidosha Shimbun on Feb. 28, 2013)

<Italy>
-In February, the Company announced that it supplies its 8-speed automatic transmission (8HP) for the 3.8-liter V8 Biturbo engine of the Maserati Quattroporte. This model is also equipped with the Continuous Damping Control (CDC) electronic damping systems from ZF. (From a press release on February 21, 2013)

Restructuring

<China>
-In December 2013, the Company announced that it has signed an agreement to sell its Rubber & Plastics Business Unit to Shanghai-listed Zhuzhou Times New Material Technology Co., Ltd. (TMT). TMT is a provider of Noise, Vibration and Harshness (NVH) components and polymer composite materials for the railway, automotive, construction and wind power industry. The transaction is expected to close in the first half of 2014. The Rubber & Plastics Business Unit is currently part of ZF's Car Chassis Technology Division. The Business Unit Rubber & Plastics will generate sales of about EUR 700 million in 2013 with approximately 3,300 employees in nine locations across Europe, North and South America, Asia and Australia. (From a press release on December 11, 2013)

<South Africa>
-In November 2013, the Company is selling Auto Industrial Brake & Chassis Holding Johannesburg (AIBC), its South African subsidiary. Investor Trinitas will acquire the plants. The subsidiary AIBC contains a forge and a foundry, among other things, and produces components for the automotive industry, including brake disks. At the four plants with roughly 900 employees at the Johannesburg location, AIBC generates a sales figure of EUR 71 million (in 2012). The sale shall take effect as of December 31, 2013. ZF signed a joint venture contract for the AIBC company in 1999, thus entering the South African components market. In 2006, ZF had taken over the entire company which operated as a local supplier to ZF's Car Chassis Technology division. (From a press release on November 21, 2013)

Accumulated Production Units of Commercial Vehicle Manual Transmissions

-In December 2013, the Company  announced that it has produced around 750,000 units of ZF-Ecomid, the manual commercial vehicle transmission system, worldwide. The ZF plant in Boutheon, France has mainly contributed to this success – at the beginning of December 2013, the 500,000th unit of the 9-speed transmission came off the French line. ZF produces the Ecomid transmission at locations in Sorocaba (Brazil), Pune (India), and Naberezhnye Chelny (Russia). (From a press release on December 4, 2013)

-In June 4, the Company announced that the production of its Intarder transmission brake for use in commercial vehicles reached a new record high of 800,000 units in May 2013. (From a press release on June 4, 2013)

Awards

-In February 2013, the Company announced that the Dingley location (Melbourne, Australia), which is part of the Chassis Technology division, received GM's "Quality Excellence Award". The Australian ZF location in Dingley exclusively produces rubber-metal components. Besides GM, Ford is one of the most important customers of ZF in Australia. The ZF location supplies the GM Holden brand in several different ways: Engine mounts for the Holden VE Commodore are delivered directly to the GM Holden V6 engine production location in nearby Melbourne as well as for V8 engines to the Vehicle Assembly Plant in Adelaide. Dingley also supplies a ZF axle assembly plant in Adelaide, where the front and rear axles are assembled for the Commodore and sent just in time to the nearby GM Holden assembly line. (From a press release on February 1, 2013)

R&D Expenditure

(in million euros)

	FY ended Dec. 31, 2013*	FY ended Dec. 31, 2012*	FY ended Dec. 31, 2011
Total	836	770	754

* Excluding ZF Lenksysteme

R&D Structure

-Approximately 6,244 employees work for ZF Research and Development worldwide. Of these, about 960 engineers and technicians work at the ZF Group's Corporate Research and Development departments in Friedrichshafen (Germany), and an additional 290 in Pilsen (Czech Republic), Shanghai (China), and Tokyo (Japan).

-In December 2013, ZF Shanghai Steering Co., Ltd. announced that its R&D center has obtained the ISO17025 certification from the China National Accreditation Service for Conformity Assessment. The company became the first Chinese steering supplier and the first ZF group company to acquire the certification. (From news releases issued by multiple sources on December 30, 2013)

-In July 2013, the Company inaugurated the ZF Composites Tech Center at its location in Schweinfurt, Germany. This is where ZF will develop manufacturing processes for the volume production of fiber-reinforced plastics (FRP) products. In Schweinfurt, ZF will also be able to produce minor quantities of complex FRP parts that are suitable for prototypes. Since the beginning of 2012, ZF has invested a total of EUR 3.1 million in machines and buildings for the ZF Composites Tech Center. (From a press release on July 30, 2013)

R&D Facilities

<Major R&D Facilities>

Location	Main theme
Friedrichshafen, Germany	-Corporate research -Advanced development -Transmission
Dielingen, Germany	-Chassis system -Chassis component -Shifter
Schweinfurt, Germany	-Powertrain module -Suspension
Passau, Germany	-Differential -Axle -Test system
Schwaebisch-Gmuend, Germany	-Steering for passenger cars and commercial vehicles
Northville, USA	-Transmission -Chassis clutch -Suspension
Pilsen, Czech Republic	-
Shanghai, China	-
Tokyo, Japan	-

Product Development

Fully Active Suspension System with Energy Recovery Function
-In August 2013, the Company announced that it has entered into partnership with Levant Power Corp., based in Massachusetts, USA, to build a fully active suspension system with energy recovery function. ZF and Levant Power are now developing GenShock-technology, a fully active system for passenger cars, making it ready for volume production, and introduce it to the market. The new regenerative suspension will feature a new valve technology which will be fitted to the exterior of the damper. The valve system automatically uses the swaying motion of the damper piston to recover energy. (From a press release on August 27, 2013)

"EMiLE" Research Project
-In July 2013, the Company announced that its "EMiLE" research project is supported with around EUR 10 million by the German Federal Ministry of Education and Research (BMBF). The aim is to integrate an electric vehicle's power electronics directly into the driving machine. Efficiency and power-to-weight ratio increase as a consequence, faults are easier to identify, and volume production can be realized at significantly lower cost. Currently, the power electronics for the electric driveline in electric vehicles is located in a separate housing which is connected to the electric driving machine by cable. The technologies will be researched in collaboration with its partners, including Robert Bosch GmbH and Volkswagen AG. (From a press release on July 17, 2013)

Patents

-In April 2013, the Company announced that it filed 740 patents in Germany in 2012. This is an increase of roughly ten percent compared to 2011. ZF invested a total of 861 million euros into research and development worldwide in 2012. (From a press release on April 29, 2013)

Capital Expenditure

(in million euros)

	FY ended Dec. 31, 2013*	FY ended Dec. 31, 2012*
Powertrain Technology	541	596
Chassis Technology	158	188
Commercial Vehicle Technology	113	100
Industrial Technology	50	77
Electronic Systems	32	14
ZF Services	14	11
Corporate R&D, Corporate Headquarters, and Service Companies	46	39
Consolidated ZF Group	954	1,025

* Excluding ZF Lenksysteme

Investment Outside Germany

<China>
-In December 2013, the Company announced that it invested more than EUR 1 billion in its Asia-Pacific business in 2013. With the new production location for passenger car axle systems in Beijing and the expansion of passenger car axle assembly in Shenyang, Liaoning Province, it has also increased its presence in China. (From a press release on December 13, 2013)

-In September 2013, ZF Transmission Shanghai Co., Ltd. held an opening ceremony for its new plant built on 60,000 square meters of land. Since the ZF subsidiary was established on June 9, 2004, it has produced and sold more than 510,000 automatic transmissions by the end of August 2013. The company is planning to manufacture and sell 400,000 automatic transmissions over the next three years. The new factory was completed in the first phase of the company’s expansion project. (From news releases issued by multiple sources on October 14, 2013)

-In September 2013, the Company has invested approximately EUR 15 million in setting up the new production location for passenger car axle systems production in Beijing (China). At the new plant, ZF assembles several ten thousand passenger car axle sets a year for its customer Beijing Benz Automotive (BBAC). The new plant, which covers 32,000 square meters, supplies complete front and rear axle systems just in sequence for the current model ranges of the Mercedes C- and E-Class produced in China. As a result of this project, ZF has increased the number of production locations in China to 21. (From a press release on September 25, 2013)

-In June 2013, ZF announced that it will establish a new facility in Shanghai to produce rebuilt transmissions, since it gained approval from the National Development and Reform Commission to start a model business for transmission recycling. By 2016, the plant on 2,500 square meters of land will be able to produce yearly 4,600 units of 8- and 9-speed transmissions for passenger vehicles, becoming the first of its kind in China. (From news releases issued by multiple sources on June 24, 2013)

<Malaysia>
-In November 2013, the Company announced that it has opened an additional production location for passenger car axle sets in the Malaysian city of Kulim. 74 employees will initially produce axle sets in the new plant for supply to the nearby BMW plant. In Kulim, ZF will start with the production of CKD axles (Completely Knocked Down). The ZF customer on site is the BMW Group; the front and rear axles will be installed in several BMW and Mini model ranges. (From a press release on November 27, 2013)

<USA>
-In July 2013, the Company has opened a new plant in South Carolina, in the U.S. The new plant will produce 1.2 million automatic passenger car transmissions annually: 400,000 8-speed and 800,000 9-speed transmissions. The total investment is EUR 470 million (approximately JPY 61.2 billion), which is the largest single investment ever in the company's history. (From an article in the Nikkan Jidosha Shimbun on July 30, 2013)