Important notice. (1) you consent to delivery of such offering memorandum by electronic transmission, and

Transcription

1 Important notice THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED INSTITUTIONAL BUYERS ( QIBs ) WITHIN THE MEANING OF RULE 144A ( RULE 144A ) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT ), OR (2) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S ( REGULATION S ) UNDER THE U.S. SECURITIES ACT. IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the offering memorandum. In accessing the offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of Your Representation: In order to be eligible to view the offering memorandum or make an investment decision with respect to the securities, investors must be either (1) QIBs or (2) purchasing the securities in an offshore transaction outside the United States in reliance on Regulation S. The offering memorandum is being sent at your request. By accepting the and accessing the offering memorandum, you shall be deemed to have represented to us that: (1) you consent to delivery of such offering memorandum by electronic transmission, and (2) either: (a) you and any customers you represent are QIBs, or (b) the address that you gave us and to which the has been delivered is not located in the United States (as defined in Regulation S). Prospective purchasers that are QIBs are hereby notified that the seller of the securities will be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act pursuant to Rule 144A. You are reminded that this offering memorandum has been delivered to you on the basis that you are a person into whose possession this offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorized to, deliver this offering memorandum to any other person. You may not transmit this offering memorandum (or any copy of it or part thereof) or disclose, whether orally or in writing, any of its contents to any other person except with the explicit consent of the Initial Purchaser. If you receive this document by , you should not reply by to this announcement. Any reply communications, including those you generate by using the Reply function on your software, will be ignored or rejected. If you receive this document by , your use of this is at your own risk and it is your

2 responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. Under no circumstances shall this offering memorandum constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Initial Purchaser or any affiliate thereof is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Initial Purchaser or affiliate on behalf of HP Pelzer Holding GmbH in such jurisdiction. This offering memorandum has been prepared on the basis that any offer of the Notes in any Member State of the European Economic Area (each, a Relevant Member State ) that has implemented the Prospectus Directive will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly, any person making or intending to make an offer in that Relevant member State of the Notes which are the subject of the offering contemplated in this offering memorandum, must only do so in circumstances in which no obligation arises for the Company, any Guarantors or the Initial Purchaser to produce a prospectus pursuant to Article 3 of the Prospectus Directive. None of the Company nor any Guarantor nor the Initial Purchaser has authorized, nor do they authorize, the making of any offer of Notes through any financial intermediary, other than offers made by the Initial Purchaser, which constitute the final placement of Notes contemplated in this offering memorandum. The expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. This document is for distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Financial Promotion Order ), (ii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations etc. ) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 ( FSMA )) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons ). This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. This offering memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Initial Purchaser, nor any person who controls the Initial Purchaser, nor any director, officer, employee or agent of the Initial Purchaser or affiliate of the Initial Purchaser accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from the Initial Purchaser. The information in this offering memorandum is not complete and may be changed. This offering memorandum is not an offer to sell these securities and it is not soliciting offers to buy these securities in any jurisdiction where such offer or sale is not permitted.

3 Offering Memorandum Not For General Circulation in the United States 12JUL HP PELZER HOLDING GMBH h50,000, % Senior Secured Notes due 2021 Guaranteed on a senior basis by certain of its subsidiaries HP Pelzer Holding GmbH, incorporated as a company with limited liability (Gesellschaft mit beschränkter Haftung) under the laws of the Federal Republic of Germany (the Company ) is offering (the Offering ) e50,000,000 aggregate principal amount of its additional 7.500% Senior Secured Notes due 2021 (the Notes ). The Notes will bear interest at a rate of 7.500% per annum. Interest will be payable on the Notes semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, The Notes will mature on July 15, The Notes will be issued as additional notes under the indenture entered into by the Company, among others, dated July 31, 2014 (as supplemented on September 19, 2014, October 15, 2014 and February 4, 2015, the Indenture ) and will be part of the same series as the Company s currently outstanding e230,000,000 aggregate principal amount of 7.500% Senior Secured Notes due 2021 issued thereunder (the Initial Notes ). The Notes will be treated as a single class together with the Initial Notes for all purposes of the Indenture, including with respect to waivers, amendments, redemptions and offers to purchase, except as otherwise specified with respect to the Notes, and will be fully fungible with the Initial Notes. Prior to July 15, 2017, the Company may redeem all or part of the Notes at a make-whole premium. At any time on or after July 15, 2017, the Company may redeem all or a portion of the Notes at the redemption prices specified herein. In addition, on or before July 15, 2017, the Company may also redeem up to 40% of the Notes with the net proceeds from one or more equity offerings. If the Company undergoes a change of control or sells certain of its assets, the Company may be required to make an offer to purchase the Notes. In the event of certain developments affecting taxation, the Company may redeem all, but not less than all, of the Notes. See Description of the Notes for further information. The Notes will be senior obligations of the Company and will rank equal in right of payment with all of the Company s existing and future senior indebtedness, will rank senior to all of the Company s future indebtedness that is subordinated in right of payment to the Notes, will be structurally subordinated to all existing and future indebtedness of the Company s subsidiaries that do not guarantee the Notes and will be effectively subordinated to the Company s existing and future secured indebtedness that is secured by property or assets to the extent of the value of the property or assets securing such indebtedness that does not also secure the Notes. The Notes will be guaranteed (the Note Guarantees ) on a senior basis by certain subsidiaries of the Company (the Guarantors ). The Note Guarantees will rank equal in right of payment with all of each Guarantor s existing and future senior indebtedness and will rank senior to each Guarantor s future indebtedness that is subordinated in right of payment to the Notes. The Notes and the Note Guarantees will be guaranteed on a senior secured basis by security interests granted over: (i) on the Issue Date, all shares of the capital stock of the Company, (ii) on the Issue Date, all shares of the capital stock of each Guarantor held, directly or indirectly, by the Company and the Restricted Subsidiaries, (iii) on the Issue Date, proceeds loans receivables owed to the Company and intercompany receivables owed to the Company and the Guarantors, (iv) on the Issue Date, certain fixed assets and real estate of the Guarantors in the United States, Mexico, Germany and the Czech Republic, under pledges, mortgages and other security documents and (v) within 30 days of the Issue Date, certain real estate of the Guarantors in the United States under mortgages (collectively, the Collateral ). The Collateral will not include security interests over third party receivables. The Note Guarantees and the Collateral will be subject to significant contractual and legal limitations that may limit their enforceability, and the Note Guarantees may be released under certain circumstances. See Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral and Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. This offering memorandum (the Offering Memorandum ) includes information on the terms of the Notes and the Note Guarantees, including redemption and repurchase prices, covenants and transfer restrictions. Application has been made for the listing particulars to be approved by the Irish Stock Exchange and to admit the Notes to the Official List of the Irish Stock Exchange and to trading on the Global Exchange Market of the Irish Stock Exchange. This Offering Memorandum constitutes a Listing Particulars for the purposes of admission to the Official List of the Irish Stock Exchange. The Notes will be represented on the Issue Date by one or more global notes, which will be delivered through Euroclear Bank SA/NV ( Euroclear ) and Clearstream Banking, société anonyme ( Clearstream ) on or about February 12, 2015 (the Issue Date ). See Book-Entry, Delivery and Form. Investing in the Notes involves a high degree of risk. See Risk Factors beginning on page 26. Issue Price: % plus accrued interest from January 15, 2015 to the Issue Date Neither the Notes nor the Note Guarantees have been or will be registered under the U.S. federal securities laws or the securities laws of any other jurisdiction. The Notes are being offered and sold only to qualified institutional buyers in accordance with Rule 144A under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act ), and to non-u.s. persons outside the United States in accordance with Regulation S under the U.S. Securities Act of 1933, as amended. See Notice to Investors and Plan of Distribution for additional information about eligible offerees and transfer restrictions. Sole Bookrunner J.P. Morgan The date of this Offering Memorandum is February 20, 2015.

4 Table of contents Page Important information about this offering memorandum... ii Forward-looking statements... vii Presentation of financial information... ix Currency presentation and definitions... xiii Exchange rate information... xiv Industry and market data... xv Summary... 1 Corporate structure and certain financing arrangements The offering Summary historical consolidated financial information and other data Risk factors Use of proceeds Capitalization Selected historical financial information and other data Management s discussion and analysis of financial condition and results of operations Industry Business Regulation Management Principal shareholder Certain relationships and related-party transactions Description of certain financing arrangements Description of the notes Book-entry, delivery and form Tax considerations Certain ERISA considerations Plan of distribution Notice to investors Legal matters Independent auditors Where you can find additional information Service of process and enforcement of civil liabilities Limitations on validity and enforceability of the Note Guarantees and the Collateral and certain insolvency law considerations Listing and general information Annex A Summary of certain differences between Italian-GAAP as compared to IFRS... A-1 Index to consolidated financial statements... F-1 i

5 Important information about this offering memorandum The Company has prepared this Offering Memorandum solely for use in connection with the proposed offering of the Notes. This Offering Memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire securities. Distribution of this Offering Memorandum to any person other than the offeree and any person retained to advise such offeree with respect to its purchase is unauthorized, and any disclosure of any of its contents, without the Company s prior written consent, is prohibited. By accepting delivery of this Offering Memorandum, you agree to the foregoing and to make no photocopies of this Offering Memorandum or any documents referred to herein. In making an investment decision, prospective investors must rely on their own examination of our company and the terms of this offering, including the merits and risks involved. In addition, neither we nor the Initial Purchaser nor any of our or their respective representatives is making any representation to you regarding the legality of an investment in their Notes, and you should not construe anything in this Offering Memorandum as legal, business or tax advice. You should consult your own advisors as to legal, tax, business, financial and related aspects of an investment in the Notes. You must comply with all laws applicable in any jurisdiction in which you buy, offer or sell the Notes or possess or distribute this Offering Memorandum, and you must obtain all applicable consents and approvals; neither we nor the Initial Purchaser shall have any responsibility for any of the foregoing legal requirements. J.P. Morgan Securities plc (the Initial Purchaser ), the Trustee and the Paying Agent make no representation or warranty, express or implied, as to the accuracy or completeness of the information set forth in this Offering Memorandum. Nothing contained in this Offering Memorandum is or should be relied upon as a promise or representation by the Initial Purchaser as to the past or the future. You agree to the foregoing by accepting this Offering Memorandum. We accept responsibility for the information contained in this Offering Memorandum. We have made all due inquiries and confirm that to the best of our knowledge and belief, the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. The information set out in relation to sections of this Offering Memorandum describing clearing and settlement arrangements, including the section entitled Book-Entry, Delivery and Form, is subject to change in or reinterpretation of the rules, regulations and procedures of Euroclear or Clearstream currently in effect. While each of the Company and the Guarantors accepts responsibility for accurately summarizing the information concerning Euroclear and Clearstream, neither the Company nor any Guarantor accepts further responsibility in respect of such information. In addition, this Offering Memorandum contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to the Company. The information in this Offering Memorandum is current only as of the date on its cover, and may change after that date. For any time after the cover date of this Offering Memorandum, neither the Company nor any Guarantor represents that its affairs are the same as described or that the information in this Offering Memorandum is correct, nor does the Company or any Guarantor imply those things by delivering the Offering Memorandum or selling Notes to you. References to any website contained herein do not form a part of this Offering Memorandum. By receiving this Offering Memorandum, you acknowledge that you have had an opportunity to request from the Company for review, and that you have received, all additional information you deem necessary to verify the accuracy and completeness of the information contained in this Offering Memorandum. You also acknowledge that you have not relied on ii

6 the Initial Purchaser in connection with your investigation of the accuracy of this information or your decision whether to invest in the Notes. You should consult your own legal, tax and business advisors regarding an investment in the Notes. Information in this Offering Memorandum is not legal, tax or business advice. You may not use any information herein for any purpose other than considering an investment in the Notes. The Company reserves the right to withdraw this offering of the Notes at any time. The Company and the Initial Purchaser reserve the right to reject any offer to purchase the Notes in whole or in part for any reason or for no reason and to allot to any prospective purchaser less than the full amount of the Notes sought by such purchaser. Neither the U.S. Securities and Exchange Commission, any U.S. state securities commission nor any non-u.s. securities authority nor other authority has approved or disapproved of the Notes or determined if this Offering Memorandum is truthful or complete. Any representation to the contrary is a criminal offense. This Offering Memorandum is not an offer to sell the Notes and it is not soliciting an offer to buy any Notes in any jurisdiction in which such offer or sale is not permitted. The distribution of this Offering Memorandum and the offer and sale of the Notes may, in certain jurisdictions, be restricted by law. None of the Company, the Guarantors or the Initial Purchaser represents that this Offering Memorandum may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. None of the Company, the Guarantors or the Initial Purchaser shall have any responsibility for any of the foregoing legal requirements. In particular, no action has been taken by any of the Company or the Initial Purchaser which would permit a public offering of any Notes or distribution of this Offering Memorandum in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with all applicable laws and regulations. Each purchaser of the Notes must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells the Notes or possesses or distributes this Offering Memorandum, and must obtain any consent, approval or permission required for the purchase, offer or sale by it of the Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes purchases, offers or sales. Persons into whose possession this Offering Memorandum or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of Offering Memorandum and the offering and sale of Notes. In particular, there are restrictions on the offer and sale of the Notes, and the circulation of documents relating thereto, in certain jurisdictions including the United States and the United Kingdom and to persons connected therewith. See Notice to Investors. We do not make any representation to you that the Notes are a legal investment for you. The Notes have not been approved or disapproved by the U.S. Securities and Exchange Commission or any other securities commission or regulatory authority in the United States, nor have the foregoing authorities approved this Offering Memorandum or confirmed the accuracy or determined the adequacy of the information contained in this Offering Memorandum. Any representation to the contrary is a criminal offense in the United States. The Company has applied to have the Notes listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange Market of the Irish Stock Exchange. iii

7 The Company cannot guarantee that its application for the listing of the Notes on the Official List of the Irish Stock Exchange and admission to trading on the Global Exchange Market of the Irish Stock Exchange will be approved as of the settlement date for the Notes or at any time thereafter, and settlement of the Notes is not conditioned on obtaining this listing. The Notes will be available in book-entry form only. We expect that the Notes sold pursuant to this Offering Memorandum will be issued in the form of one or more global notes. The global notes representing Notes will be deposited with a common depositary and registered in the name of the nominee of the common depositary for the accounts of Euroclear and Clearstream Banking. Beneficial interests in the global notes will be shown on, and transfers of interests in the global notes will be effected only through, records maintained by Euroclear and Clearstream Banking and their direct and indirect participants. After the initial issuance of the global notes, Notes in certificated form will be issued in exchange for the global notes only as set forth in the Indenture. See Book-entry, Delivery and Form. In connection with the offering, the Initial Purchaser is not acting for anyone other than the Company and will not be responsible to anyone other than the Company for providing the protections afforded to their clients nor for providing advice in relation to the offering. Stabilization IN CONNECTION WITH THIS OFFERING, J.P. MORGAN SECURITIES PLC (OR PERSONS ACTING ON BEHALF OF J.P. MORGAN SECURITIES PLC) MAY OVER-ALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT J.P. MORGAN SECURITIES PLC (OR PERSONS ACTING ON BEHALF OF J.P. MORGAN SECURITIES PLC) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 CALENDAR DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 CALENDAR DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. Notice to investors in the United States This Offering Memorandum is being submitted in the United States to a limited number of QIBs for informational use solely in connection with the consideration of the purchase of the Notes. Its use for any other purpose in the United States is not authorized. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted. For this Offering, the Company, the Guarantors and the Initial Purchaser are relying upon exemptions from registration under the U.S. Securities Act for offers and sales of securities which do not involve a public offering, including Rule 144A under the U.S. Securities Act. Prospective investors are hereby notified that sellers of the Notes and Note Guarantees may be relying on the exemption from the provision of Section 5 of the U.S. Securities Act provided by Rule 144A. The Notes are subject to restrictions on transferability and resale. Purchasers of the Notes may not transfer or resell the Notes except as permitted under the U.S. Securities Act and applicable U.S. state securities laws. See Notice to Investors. Notice to New Hampshire residents NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ( RSA 421-B ) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY iv

8 DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. Notice to certain European investors European Economic Area. This Offering Memorandum has been prepared on the basis that any offer of the Notes in any Member State of the European Economic Area (each, a Relevant Member State ) that has implemented the Prospectus Directive will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly, any person making or intending to make an offer in that Relevant member State of the Notes which are the subject of the offering contemplated in this Offering Memorandum, must only do so in circumstances in which no obligation arises for the Company, any Guarantors or the Initial Purchaser to produce a prospectus pursuant to Article 3 of the Prospectus Directive. None of the Company nor any Guarantor nor the Initial Purchaser has authorized, nor do they authorize, the making of any offer of Notes through any financial intermediary, other than offers made by the Initial Purchaser, which constitute the final placement of Notes contemplated in this Offering Memorandum. The expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. Germany. The Offering is not a public offering in the Federal Republic of Germany. The Notes may only be offered, sold and acquired in accordance with the provisions of the Securities Prospectus Act of the Federal Republic of Germany (Wertpapierprospektgesetz) (the Securities Prospectus Act ), as amended, the Commission Regulation (EC) No. 809/2004 of April 29, 2004, as amended, and any other applicable German law. No application will be made under German law to permit a public offer of Notes in the Federal Republic of Germany. This Offering Memorandum has not been approved for purposes of a public offer of the Notes and accordingly the Notes may not be, and are not being, offered or advertised publicly or by public promotion in Germany. Therefore, this Offering Memorandum is strictly for private use and the offer is only being made to recipients to whom the document is personally addressed and does not constitute an offer or advertisement to the public. The Notes will only be available to and this Offering Memorandum and any other offering material in relation to the Notes is directed only at persons who are qualified investors (qualifizierte Anleger) within the meaning of Section 2 No. 6 of the Securities Prospectus Act. Any resale of the Notes in Germany may only be made in accordance with the Securities Prospectus Act and other applicable laws. The Company has not, and does not intend to, file a securities prospectus with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) ( BaFin ) or obtain a notification to the BaFin from another competent authority of a Member State of the European Economic Area, with which a securities prospectus may have been filed, pursuant to Section 17 Para. 3 of the Securities Prospectus Act. United Kingdom. This Offering Memorandum is for distribution only to, and is only directed at, persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Financial Promotion Order ), (ii) are persons falling within v

9 Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Promotion Order or (iii) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any Notes may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This Offering Memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. The Notes are being offered solely to qualified investors as defined in the Prospectus Directive and accordingly the offer of Notes is not subject to the obligation to publish a prospectus within the meaning of Article 5 of Directive 2003/71/EC (the Prospectus Directive ). Poland. The Notes may not be offered or sold in or into Poland except under circumstances that do not constitute a public offering or distribution of securities under Polish laws and regulations. This Offering Memorandum has been not and will be not approved by the Komisja Nadzoru Finansowego, the Polish Financial Supervision Authority. The Notes have not been and will not be registered with the Komisja Nadzoru Finansowego, the Polish Financial Supervision Authority. Switzerland. The Notes are being offered in Switzerland on the basis of a private placement only. This Offering Memorandum does not constitute a prospectus within the meaning of Art. 652A of the Swiss Federal Code of Obligations. THIS OFFERING MEMORANDUM CONTAINS IMPORTANT INFORMATION WHICH YOU SHOULD READ BEFORE YOU MAKE ANY DECISION WITH RESPECT TO AN INVESTMENT IN THE NOTES. vi

10 Forward-looking statements This Offering Memorandum includes forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this Offering Memorandum, including, without limitation, those regarding the future financial position and results of operations, strategies, plans, objectives, goals and targets of the Company and its subsidiaries (collectively, the Group ) and future developments in the markets in which the Group participates or is seeking to participate or anticipated regulatory changes in the markets in which the Group operates or intends to operate. In some cases, you can identify forward-looking statements by terminology such as aim, anticipate, believe, continue, could, estimate, expect, forecast, guidance, intend, may, plan, potential, predict, projected, should, or will or the negative of such terms or other comparable terminology. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. The Group cautions you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that its actual results of operations, including its financial condition and liquidity and the development of the industries in which the Group operates, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Offering Memorandum. In addition, even if the Group s results of operations, including its financial condition and liquidity and the development of the industry in which it operates, are consistent with the forward-looking statements contained in this Offering Memorandum, those results or developments may not be indicative of results or developments in subsequent periods. Important risks, uncertainties and other factors that could cause these differences include, but are not limited to: the performance of the global economy; the cyclical nature of the industry in which we operate; competition in the industry in which we operate; market trends and developments; business, economic, legal and political risks in connection with our expansion strategy; risks related to restructuring in our industry; dependence on a limited number of large OEMs for the sale of our products; dependence on a limited number of key suppliers for certain products; exposure to fluctuations in prices of raw materials and changes in currency exchange notes; risks related to not accurately estimating our costs associated with certain sales contracts; inability to recover all of the sales expected from awarded business and pre-production costs; our Order Book; disruptions in our supply or delivery chain; risks related to our growth strategy of expanding in rapidly growing emerging markets; risks related to the construction and maintenance of our facilities; risks related to our ability to maintain the quality of our products and processes; vii

11 risks related to our technologies and cost structure; risks related to start-up costs and inefficiencies related to new products or programs; risks related to quality and product certifications for certain markets and customers; risks related to funding for our research and development efforts; lack of control certain of our joint ventures; risks related to attracting and retaining qualified executives, key employees and skilled personnel; strikes and other labor disputes; risks related to increasing labor costs in various jurisdictions in which we operate; our reliance on complex IT systems and networks; property loss and unforeseen business interruption; risks related to significant operating lease obligations; risks related to acquisitions; risks related to our global operations; risks related to insurance; risks related to our shareholders interests and related party transactions; legal and arbitration proceedings and antitrust investigations; and risks related to our financial position. We urge you to read the sections of this Offering Memorandum entitled Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, Industry and Business for a more complete discussion of the factors that could affect the Group s future performance and the markets in which it operates. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Offering Memorandum may not occur. These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to update or revise any forward-looking statement or risk factors, whether as a result of new information, future events or developments or otherwise. viii

12 General Presentation of financial information This Offering Memorandum includes the audited consolidated financial statements of the Company as of and for the years ended December 31, 2013, 2012 and 2011 (the Audited Consolidated Financial Statements ) and the unaudited interim condensed consolidated financial statements of the Company as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 (the Unaudited Interim Condensed Consolidated Financial Statements ). The Audited Consolidated Financial Statements do not include the results of Pimsa Adler Otomotiv A.S., Adler PTI S.A., Adler France S.A., Adler do Brasil Ltda, and Adler Polska Sp. z o.o., which were acquired in July, August and September These entities are included in the Unaudited Interim Condensed Consolidated Financial Statements only from August or September 2014 when control was obtained and will be included in future audited consolidated financial statements of the Company. The Audited Consolidated Financial Statements and Unaudited Interim Condensed Consolidated Financial Statements include the results of both the Guarantors and other non-guarantor subsidiaries of the Company. As of and for the year ended December 31, 2013, the Company, the Guarantors and the non-guarantor subsidiaries generated 31.2% (e20.8 million), 17.0% (e11.4 million) and 51.8% (e34.5 million) of our EBITDA, respectively and represented 40.5% (e51.7 million), 9.1% (e11.7 million) and 50.4% (e64.2 million) of our net assets, respectively. The foregoing calculations do not include Adler Polska Sp. z o.o. and Adler PTI S.A., which were acquired after the period end. As of and for the nine months ended September 30, 2014, the Company generated 4.9% of our total sales and 14.1% of our EBITDA and represented 30.5% of our net assets, the Guarantors generated 69.6% of our total sales and 50.3% of our EBITDA and represented 36.1% of our net assets, and the non-guarantor subsidiaries generated the remaining 25.6% of total sales and 35.6% of EBITDA and represented the remaining 33.6% of net assets. See Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral Non-guarantor companies account for more than 25% of our EBITDA and net assets. However, we do not present separate financial statements for each subsidiary guarantor and, as a result, our consolidated financial information may be of limited use in assessing the financial position of the guarantor companies. The Audited Consolidated Financial Statements and the Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with Italian laws governing the preparation of consolidated financial statements, as interpreted and integrated by the accounting principles established by the Organismo Italiano di Contabilità OIC ( Italian-GAAP ). Italian-GAAP differs in certain respects from IFRS. For a discussion of the differences between Italian-GAAP and IFRS see Annex A Summary of certain differences between Italian-GAAP as compared to IFRS. The Audited Consolidated Financial Statements have been audited by PricewaterhouseCoopers S.p.A. The audited consolidated financial statements contained in the F-Pages to this Offering Memorandum should be read in conjunction with the relevant notes thereto. Prospective investors are advised to consult their professional advisors for an understanding of: (i) the differences between Italian-GAAP and IFRS and how those differences might affect the financial information included in this Offering Memorandum and (ii) the impact that future additions to, or amendments of, Italian-GAAP principles may have on our results of operations and/or financial condition, as well as on the comparability of the prior periods. Historically, we have prepared our consolidated financial statements in accordance with Italian-GAAP. We may adopt IFRS for our consolidated financial statements in future years. In the event that we adopt IFRS, the Indenture requires us to report according to such standards, ix

13 and the covenant calculations will be based on the relevant standards. Because there are significant differences between Italian-GAAP and IFRS, if we were to prepare our financial statements on the basis of IFRS instead of Italian-GAAP, there could be substantial differences in our results of operations, cash flows and financial position, including levels of indebtedness. In addition, our covenants may become more or less restrictive from time to time, depending upon the effect of the standards we adopt. See Annex A Summary of certain differences between Italian-GAAP as compared to IFRS and Description of the Notes. Certain numerical figures contained in this Offering Memorandum, including financial information and certain operating data, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row of a table may not conform exactly to the total figure given for that column or row and the sum of certain numbers presented as a percentage may not conform exactly to the total percentage given. Financial information for the twelve months ended September 30, 2014 The unaudited financial information for the twelve months ended September 30, 2014 has been derived by taking our results of operations for the nine months ended September 30, 2014 and adding it to the difference between our results of operations for the full year ended December 31, 2013 and the nine months ended September 30, The financial information for the nine and twelve months ended September 30, 2014 is not necessarily indicative of the results that may be expected for the year ended December 31, 2014, and should not be used as the basis for or prediction of an annualized calculation. Pro forma financial information The pro forma financial information contained in this Offering Memorandum has been derived by applying pro forma adjustments to our historical consolidated financial statements included elsewhere in this Offering Memorandum. The pro forma financial information gives effect to the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds as though they had occurred on October 1, 2013 for the pro forma income statement information and on September 30, 2014 for the pro forma balance sheet information. The unaudited pro forma adjustments and the unaudited pro forma financial information set forth in this Offering Memorandum are based on available information and certain assumptions and estimates that we believe are reasonable and may differ from actual amounts. The pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had the Offering of the Notes and the use of proceeds therefrom occurred on the dates presented or to project our results of operations or financial position for any future period or our financial condition at any future date. Use of non-gaap financial measures Certain parts of this Offering Memorandum contain non-gaap financial measures and ratios, including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted EBIT margin, net debt, capital expenditures, ordinary capital expenditures, trade working capital and adjusted cash flows from operating activities ( Non-GAAP Financial Measures ). We define EBITDA as profit or loss for the period plus income tax expense, share of profit of investments, net finance costs, depreciation, amortization and impairments of receivables. We define EBITDA margin as EBITDA divided by revenues. We define adjusted EBITDA as profit or loss for the period plus income tax expense, share of profit of investments, extraordinary expenses, net finance costs, depreciation, amortization and impairments of receivables. x

14 We define adjusted EBITDA margin as adjusted EBITDA divided by revenues. We define adjusted EBIT as profit or loss for the period plus income tax expense, share of profit of investments, extraordinary expenses, and net finance costs. We define adjusted EBIT margin as adjusted EBIT divided by revenues. We define net debt as total financial liabilities and payables to shareholder, net of cash at banks. We define capital expenditures as the gross additions for the period in property, plant and equipment. We define ordinary capital expenditure as capital expenditures excluding certain items that we consider to be extraordinary in nature. We define trade working capital as the sum of inventories and trade receivables net of trade payables. We define adjusted cash flows from operating activities as adjusted EBITDA less capital expenditures and changes in working capital. EBITDA, EBITDA margin and other non-gaap financial measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing EBITDA, EBITDA margin and other non-gaap financial measures as reported by us to EBITDA, EBITDA margin and other non-gaap financial measures as reported by other companies. EBITDA, EBITDA margin and the other Non-GAAP Financial Measures mentioned in this Offering Memorandum are unaudited and have not been prepared in accordance with Italian-GAAP or any other generally accepted accounting principles. In addition, the presentation of these measures is not intended to and does not comply with the reporting requirements of the SEC and will not be subject to review by the SEC; compliance with its requirements would require us to make changes to the presentation of this information. None of EBITDA, EBITDA margin or any of the other Non-GAAP Financial Measures is a measurement of performance under Italian-GAAP or any other generally accepted accounting principles and you should not consider EBITDA, EBITDA margin or any of the other Non-GAAP Financial Measures as an alternative to net income, operating profit or other financial measures determined in accordance with Italian-GAAP or other generally accepted accounting principles. EBITDA, EBITDA margin and the other Non-GAAP Financial Measures have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations are: they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; they do not reflect changes in, or cash requirements for, our working capital needs; they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debt; although depreciation and amortization are non-monetary charges, the assets being depreciated and amortized will often need to be replaced in the future and EBITDA, EBITDA margin and similar non-gaap financial measures do not reflect any cash requirements that would be required for such replacements; some of the extraordinary expenses we eliminate in calculating adjusted EBITDA, adjusted EBITDA margin and similar non-gaap financial measures reflect cash payments that were made, or will be made in the future; and xi

15 the fact that other companies in our industry may calculate EBITDA, EBITDA margin and similar non-gaap financial measures differently than we do, which limits their usefulness as comparative measures. Accordingly, prospective investors should not place undue reliance on EBITDA, EBITDA margin and the other Non-GAAP Financial Measures mentioned in this Offering Memorandum. The information in this Offering Memorandum relating to revenues generated by product type is based on management estimates. The information has not been derived from the Audited Consolidated Financial Statements, the Unaudited Interim Condensed Consolidated Financial Statements or management accounts or prepared in accordance with Italian-GAAP or any other generally accepted accounting principles. Management believes that the information by product type is useful in understanding underlying trends relating to different product types. Order book In this Offering Memorandum, we present our estimated order book, which relates to booked business (representing the sales we expect to record in the event that we receive firm orders under contracts for vehicle programs that we have been awarded by OEMs, including both those that were in production and those that were not yet in production and including both new model incremental and successor model business) as of the dates specified for the subsequent ten years (the Order Book ). The value of our Order Book as of any given date is based on the estimated production volumes of vehicle programs as well as their estimated lifetime, each as determined by our OEM customers at the award of the respective contract. To account for unforeseen variations in production volumes, our management may adjust the production volumes indicated by our customers based on factors including their knowledge of such customer, our historical relationship with such customer and internal and external industry forecasts. We regularly review, and where necessary adjust, our discounted production volume estimates until the commencement of production of the specific vehicle program in question, taking into account any new information that has become available to us. Once we have agreed the expected prices and investments required for the production of products for an awarded vehicle program with our customers, we value the estimated and discounted production volumes of awarded vehicle programs. Our customers generally do not guarantee purchase volumes and have the right to terminate orders without penalties. Therefore, our actual sales volumes, and thus the ultimate amount of revenue that we derive from such sales, are not committed. If actual production orders from our customers are not consistent with the projections we use in calculating the amount of our Order Book, we could realize substantially less revenue over the life of the projects than the current Order Book estimate. As a result of the above limitations, the amount of our estimated Order Book provided herein does not purport to represent what our actual realized revenues will be over any future period and should not be considered in isolation. The value of our Order Book has not been audited or reviewed and is not required to be included into this Offering Memorandum by, and is not a recognized measure under, Italian-GAAP or any other generally accepted accounting principles. You should not place undue reliance on our Order Book. See also Risk Factors Risks Relating to our Business Operations Our Order Book may not be indicative of our future revenue. xii

16 Currency presentation and definitions In this Offering Memorandum, all references to euro, EUR or g are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time, all references to Pound Sterling, GBP or are to British pound sterling, the lawful currency of the United Kingdom, all references to Brazilian Real or R$ are to the lawful currency of the Federative Republic of Brazil, and all references to U.S. dollars, USD and $ are to the lawful currency of the United States of America. Definitions As used in this Offering Memorandum: Adler Plastic refers to Adler Plastic S.p.A., a joint stock company (società per azioni) incorporated under the laws of the Republic of Italy, our indirect parent company; Adler Pelzer Group refers to Adler Plastic and its subsidiaries; Adler Group or the Parent refers to AdlerGroup S.p.A., a joint stock company (società per azioni) incorporated under the laws of the Republic of Italy, our direct sole shareholder; Agent refers to the Paying Agent, Transfer Agent, Registrar and Irish Listing Agent; Company refers to HP Pelzer Holding GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) incorporated under the laws of the Federal Republic of Germany; EU refers to the European Union; Eurozone refers to the member states of the European Union participating in the European Monetary Union; Existing Facilities refers to the existing financing facilities of the Group against which funds are drawn as of the date of the Offering, certain of which will be repaid with the proceeds of the Offering; GDP refers to gross domestic product; Group, us, we and our refer to the Company and its consolidated subsidiaries, unless the context requires otherwise or is clear from context; Guarantors means HP Pelzer NV, Pelzer Sistemas do Brasil Limitada, HP Pelzer Automotive GmbH, RAT-Spezialmaschinen GmbH, Vegroteppichboden GmbH, Pelzer de Mexico, S.A. de C.V., HPP Systems de Mexico, S.A. de C.V., HP Polska Sp. z o.o., Insonorizantes Pelzer S.A.U., H.P. Chemie Pelzer (U.K.) Limited, HP Pelzer Automotive Systems Inc., HP-Pelzer s.r.o., Adler Polska Sp. z o.o. and Adler PTI S.A.; Indenture refers to the indenture dated July 31, 2014 (as supplemented on September 19, 2014, October 15, 2014 and February 4, 2015), between, inter alios, the Issuer and the Trustee; Initial Issue Date refers to July 31, 2014, the date of the issuance of the Initial Notes; Initial Notes refers to the e230,000,000 aggregate principal amount of 7.500% Senior Secured Notes due 2021, issued on July 31, 2014 pursuant to the Indenture; Irish Listing Agent refers to Deutsche Bank Luxembourg S.A.; Notes refers to the e50,000,000 aggregate principal amount of 7.500% Senior Secured Notes due 2021, offered hereby; OEMs refers to original equipment manufacturers in the automotive industry; Paying Agent refers to Deutsche Bank AG, London Branch; Registrar refers to Deutsche Bank Luxembourg S.A.; Security Agent refers to Crestbridge Corporate Trustees Limited; Transfer Agent refers to Deutsche Bank Luxembourg S.A.; Trustee refers to Deutsche Trustee Company Limited, in its capacity as trustee under the Indenture; and VAT refers to value added tax. xiii

17 Exchange rate information We have set forth in the table below, for the periods and dates indicated, certain information regarding the exchange rates between U.S. Dollars and Euro based on the market rates at 6:00 p.m. London time. We have provided this exchange rate information solely for your convenience. We do not make any representation that any amount of currencies specified in the table below has been, or could be, converted into the applicable currency at the rates indicated or any other rate. U.S.$ per euro Period Period average (1)(2) High Low end (3) Year Month August September October November December January February 2015 (through February 3, 2015) (1) The average rate for a year means the average of the Bloomberg Composite Rates on the last day of each month during a year. (2) The average rate for each month presented is based on the average Bloomberg Composite Rate for each business day of such month. (3) Represents the exchange rate on the last business day of the applicable period. xiv

18 Industry and market data In this Offering Memorandum, we rely on and refer to information regarding our business and the market in which we operate and compete. The market data and certain economic and industry data and forecasts used in this Offering Memorandum were obtained from governmental and other publicly available information, independent industry publications and reports prepared by trade associations and industry consultants (including LMC Automotive Limited). Third party information included in this Offering Memorandum has been accurately reproduced and, to the best of our knowledge, no facts have been omitted which would render the reproduced information inaccurate or misleading. In addition to the foregoing, certain information regarding markets, market size, market share, market position, growth rates and other industry data pertaining to our business contained in this Offering Memorandum was estimated or derived based on assumptions we deem reasonable and from our own research, surveys or studies conducted by third parties, including trade associations, and other industry or general publications. Industry publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we believe that each of these studies and publications is reliable, neither we nor the Initial Purchaser have independently verified such data and cannot guarantee their accuracy or completeness. In many cases, there is no readily available external information (whether from trade associations, government bodies or other organizations) to validate market related analyses and estimates, requiring us to rely on our own internally developed estimates regarding the industry in which we operate, our position in the industry, our market share and the market shares of various industry participants based on our experience, our own investigation of market conditions and our review of industry publications, including information made available to the public by our competitors. In particular, we derive our (and our competitors ) overall market shares in the industry in which we operate by calculating the overall market size and our sales in the market (and that of our competitors). None of the Company, the Group or the Initial Purchaser can assure you of the accuracy and completeness of, or take any responsibility for, such data. Similarly, while we believe our internal estimates to be reasonable, these estimates have not been verified by any independent sources and neither we nor the Initial Purchaser can assure you as to their accuracy or the accuracy of the underlying assumptions used to estimate such data. Unless otherwise indicated, data on our market position and market share are based on revenue for the nine months ended September 30, Our estimates involve risks and uncertainties and are subject to change based on various factors. See Risk Factors, Industry and Business for further discussion. xv

19 Summary This summary highlights selected information about the Company, the Guarantors, the Group and the Offering contained in this Offering Memorandum. This summary is not complete and does not contain all the information you should consider before investing in the Notes. The following summary should be read in conjunction with, and the following summary is qualified in its entirety by, the more detailed information included in this Offering Memorandum, including the financial statements of the Company and the related notes therein. You should read this Offering Memorandum carefully in its entirety, including the sections entitled Risk Factors, Management s Discussion and Analysis of Financial Condition and Results of Operations, Industry and Business, as well as our audited historical financial statements and the notes thereto included elsewhere in this Offering Memorandum. Overview We, the HP Pelzer Group, are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector. We design, develop, manufacture and sell parts and components that have the objective of optimizing acoustic performance, reducing vibrations, and increasing the thermal efficiency of our clients vehicles. Our business is vertically integrated; we carry out key value-added activities in-house, from the sourcing of raw materials to the creation of the end product. Through our investments in research and development, we believe that we have developed the broadest set of technological capabilities as compared to our peers, to create, design and produce products to meet our clients bespoke needs. We classify our products, generally into four product families: Engine Compartment, Passenger Compartment, Luggage Compartment and Exterior parts. We manufacture several base products, including heavy layers, felts, carpets and foams that are used in a wide range of applications across our product families. We have production facilities and R&D facilities in 18 countries and sell our products to our clients in 35 countries across Europe, Asia, the Americas and Africa, and our global footprint allows us to be the supplier of choice of acoustic solutions for all major OEMs internationally. For the twelve months ended September 30, 2014, we recorded revenues, adjusted EBITDA and an adjusted EBITDA margin of e949.0 million, e76.2 million and 8.0%, respectively. Our clients include the majority of the world s OEMs. Our top five clients are the Volkswagen Group, General Motors, Ford, Hyundai and FCA. Our focus is on creating solutions for the premium and highly innovative models of our clients. We are a global supplier with manufacturing plants and research facilities close to the main automotive hubs in each major geographic region where our clients operate, which allows us to better serve our clients in each market in which they operate. We divide our business operations into four regions: Europe, NAFTA, Asia and Mercosur. In addition to our historical presence in Europe (44% of sales in the nine months ended September 30, 2014) and NAFTA (28% of sales in the nine months ended September 30, 2014), our business is expanding significantly in Asia and Mercosur, which accounted for 17% and 11%, respectively, of our sales in the nine months ended September 30, This represents an increase from 11% in Asia and 10% in Mercosur during the year ended December 31, Our group currently has 42 production facilities worldwide, with 20 plants in Europe, 11 in Asia, seven in NAFTA and four in Mercosur. We typically use highly automated production in countries with more costly workforces such as Germany, the United States, and South Korea, and a semi-automated production with a more flexible labor approach in low-cost countries such as Mexico and China. We also have a global research and development footprint, with our seven R&D facilities 1

20 located in Germany, Russia, the United Kingdom, South Korea, Japan, China and Michigan (United States). As of September 30, 2014, we had approximately 8,900 employees globally. Sales by region for the Revenue by client for the nine months ended September 30, 2014 nine months ended September 30, 2014 NAFTA 28.1% Asia 17.1% Daimler-Group 5.0% Others 6.2% Asian OEM 5.6% VW-Group 22.3% BMW-Group 5.3% Chrysler/Fiat-Group 9.0% Mercosur 10.7% Europe 44.1% 9FEB Hyundai-Group 9.0% Ford-Group 16.5% GM-Group 21.2% 9FEB We are an indirect majority-owned subsidiary of Adler Plastic S.p.A. ( Adler Plastic ). Adler Plastic owns our capital stock indirectly through AdlerGroup S.p.A. ( Adler Group ), which holds 100% of our share capital. Adler Plastic is a developer and producer of all acoustic products for automotive vehicles, as well as aeronautics and other transportation industries, the food industry and bedding industry, among other business. HP Pelzer was founded by Helmut Pelzer in Witten, Germany in 1969 and has grown through organic expansion and selected acquisitions. The first step in creating the current Adler Pelzer Group began in 2010, when Adler Plastic acquired indirectly, acting through the Adler Group, 49% of HP Pelzer. In 2011, Adler Group increased its holdings of HP Pelzer to 51% and subsequently acquired all of the remaining shares in our share capital in April In July, August and September 2014, we acquired additional non-italian subsidiaries of Adler Plastic and expect in the near future to also acquire certain Italian subsidiaries of Adler Plastic in order to complete our corporate restructuring. Our strengths Our success in our industry is driven by our: (i) leadership positions in an industry with high barriers to entry; (ii) strong positioning to take advantage of long-term growth trends in the automotive industry; (iii) strong R&D capabilities and track record of innovation; (iv) high diversification by geography, product and client; (v) well-invested global asset base with proximity to our customers; (vi) high revenue visibility with solid backlog and advanced orders; and (vii) experienced management team with proven track record. Leadership position in an industry with high barriers to entry We are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector, and have maintained and consolidated our position for the past 30 years. We are second in market share in Europe and third globally among independent suppliers in our business sector. We have a track record of increasing market share over time. During the period from 2010 to 2013, the global automotive market has grown by approximately 14.2% in volume and during the same period our revenues increased by approximately 38.7% from e638 million in 2010 to e885 million in We have increased our market penetration in all markets, particularly in Asia and Latin America. Based on management estimates as of the date of this Offering Memorandum, we are among the leaders in both the engine compartment and the passenger compartment markets with worldwide market shares of approximately 17% and 15%, respectively, and we are present in the luggage compartment and exterior parts markets with worldwide market shares of approximately 6% and 6%, respectively. 2

21 We believe that our global manufacturing and R&D setup, relative to our competitors and to potential new market entrants, provide us with highly competitive economies of scale and technological advantages in an industry that is characterized by significant initial capital expenditure requirements creating high barriers to entry, despite relatively modest maintenance capital expenditure requirements. Additionally, given our products cannot be economically transported for long distances, our proximity to our customers in the main automotive hubs represents an important barrier for new entrants. Strong positioning to take advantage of long-term growth trends in the automotive industry For the following reasons, we are well-positioned to take advantage of certain automotive market trends and growth opportunities: Globalization of platform: As a global leader, with manufacturing capabilities in 17 countries and seven R&D facilities worldwide, we are able to supply the full range of our products in every region in which we operate with the same level of quality, service and technical support to the customer. We expect regional competitors to be negatively impacted by globalization trends as they typically are only able to provide certain components in limited locations. Localization of production in emerging markets: Premium players are rapidly expanding their production in high growth regions and rely on their global partner suppliers who are able to follow their expansion and supply components locally to their production facilities. For example, BMW and Daimler have established production facilities in China and the United States and we have established new production facilities in Beijing, China and Thomson, Georgia, to be able to serve their global platforms locally. Our continued expansion into Asia, NAFTA (particularly in Mexico) and Mercosur positions us to better serve our customers in such areas. Environmental initiatives: The need to reduce the environmental impact of automobiles is leading to a re-design and re-engineering of the types of products produced across our industry. Such efforts require an economic and technological capacity that only larger, technologically innovative companies, such as our Group, have. Powertrain electrification: The increasing complexity of the powertrain, particularly following the greater penetration of hybrid and full electric technologies in the market, is broadening the scope of products required in the market place. We are well-positioned to create innovative products to manage the particular sound and thermal challenges of hybrid and full electric engines. Move of high-end features to mid-segment cars: The adoption of high performance acoustic and thermal solutions to standard vehicles is increasing the number of models in which our clients want to use our technologies. Given our market leadership in producing high-end acoustic and thermal components, we are well positioned as a supplier to meet the increased demand for parts in these mid-segment cars. Strong R&D capabilities and track record of innovation A key factor of our business success is our technical leadership and expertise in design, development and production of customized acoustic and thermal solutions for our customers in the automotive industry. We believe our innovation capabilities, which are supported by our fully integrated global R&D structure, provides us a competitive advantage in each of the markets in which we operate. We have a proven track record of bringing innovative products to the market, as evidenced by our 21 worldwide registered patents. OEMs are increasingly requesting customized solutions which require design and engineering capabilities with involvement in the early stages of development of a model. This has two positive effects on our business: (i) we are able to secure contracts at early stages of 3

22 development and (ii) OEMs tend to favor industry leaders such as ourselves given our ability to deliver innovative solutions. Our R&D expenses amounted to e8.2 million for the nine months ended September 30, 2014, e10.1 million in the year ended December 31, 2013, e12.4 million in the year ended December 31, 2012 and e13.3 million in the year ended December 31, Our investments have yielded notable revenues. 63% of our revenues during the nine month period ended September 30, 2014, 63% of our revenues in 2013, 51% of our revenues in 2012 and 48% of our revenues in 2011 were derived from new technologies that were developed over the previous three years and implemented or equipped for the first time on cars in each such year. We have strategically located our three primary R&D centers in Witten (Germany), Troy (Michigan, United States), and Taicang (China) to be in proximity to the main automotive industry hubs of such regions. As of September 30, 2014, we employed 142 dedicated R&D personnel across our seven R&D centers. We centralize our teams who focus on advanced acoustics, components and process technologies at our site in Witten, Germany to help minimize costs, while we maintain dedicated R&D teams in other European locations, Asia and the Americas to ensure that our innovations are adapted to local markets and regulations as necessary to meet our customers needs. To encourage know-how exchange, we have implemented policies which foster continuous communication between our R&D centers, ensuring that our products meet the same high standards in each of our plants. For examples of our innovations, see Business Model Research and development. We conduct customer satisfaction surveys regularly to ensure our clients are satisfied with quality, delivery and service. While we have scored consistently high marks in such surveys, our customers noted in particular that we provide outstanding value in innovation. Eight of our facilities have been designated as centers of excellence, which indicates a specialized degree of expertise in the production and development of a particular technology or product. Our centers of excellence can export their knowledge and manufacturing processes to our other facilities to ensure that each of our products from each of our plants is of equally high quality and is standardized in concept. High diversification by geography, product and client We have a balanced business model with strong diversification by geography, client and product. Our diversification by geography and product has increased over the past seven years and we intend to continue that trend. Our sales are diversified across regions. In the nine months ended September 30, 2014, we generated 44% of our sales in Europe, 28% in NAFTA, 17% in Asia and 11% in Mercosur. Our balanced exposure to our markets helps us to absorb any negative trends in a particular region without significant impact to our overall results. We have a full range of acoustic and thermal products and we believe we are able to offer the broadest range of technologies to our customers. Our products are grouped by the Engine Compartment, Passenger Compartment, Luggage Compartment and Exterior parts. In the nine months ended September 30, 2014, approximately 16% (e114 million) of our revenues from our Engine Compartment products, approximately 58% (e413 million) of our revenues were derived from our Passenger Compartment products, approximately 15% (e107 million) of our revenues from our Luggage Compartment products and approximately 11% (e78 million) of our revenues from our Exterior products. Our product families are manufactured using different tax products, including heavy layers, felts, carpets and foams. We supply almost all global OEMs on a worldwide basis. Our clients include many prominent OEMS, such as Volkswagen, General Motors, BMW, Daimler and Ford, among others. We focus on financially strong OEMs that have premium models with content per car significantly higher than middle segment cars. We have been working with four of our key clients (General Motors, Daimler, BMW and Ford) for over 25 years and have long-standing relationships with many 4

23 other prominent automakers. We believe our ability to develop and enhance our strategic ties with all major international car makers is based on our strong reputation and proven quality. As a result of such relationships and collaborations, we are relied on as the sole source supplier for a large number of platforms and are able to enter into long-term supply contracts, ensuring a steady source of income into the medium-term. During the last few years we have further diversified our client base. Our clients increased from 17 to 26 over the period from 2007 to the date hereof. Well-invested global asset base with proximity to our customers We currently operate production facilities in 17 countries with customers across five continents. Our facilities are well invested and we are able to sustain an increase in demand with our existing capacity and no significant additional capital investment. Our ordinary capital expenditures amounted to e21.9 million for the nine months ended September 30, 2014 (representing 3.1% of our revenues), e38.8 million for the year ended December 31, 2011 (representing 5.1% of our revenues), e34.2 million for the year ended December 31, 2012 (representing 4.1% of our revenues) and e 27.2 million for the year ended December 31, 2013 (representing 3.1% of our revenues). As a result of our historical investment program, we believe that our asset base is adequately invested for our capacity requirements and we expect that, in the short to medium-term, our maintenance and growth capital expenditures will range between 3% and 4% per annum of our total revenues (absent any unplanned capital expenditure requirements). Our sites for our plants and R&D facilities are strategically selected to ensure we are in close proximity to the production facilities of our clients. Through our regional sites, we are able to act as a local supplier to the customer, reducing transportation costs and reacting to client needs and concerns efficiently. High revenue visibility with solid backlog and advanced orders Our sole source contracts provide us with visibility on our revenues. We typically enter into sole source contracts covering the full life of the platforms we supply. As of December 31, 2014, we had an estimated total Order Book of e5.2 billion. Our Order Book information relates to booked business (representing the sales that we expect to record in the event we receive firm orders under contracts for vehicle programs that we had been awarded by OEMs, including both those that were in production and those that were not yet in production and including both new model incremental and successor model business). Our current Order Book reflects our focus on growth outside of Europe and is diversified across geographies and customers. We believe the potential revenue realization from these contracts positions us well for growth in the medium-term. Our visibility over our revenues is enhanced by our strong track record of winning repeat orders and being awarded contracts for subsequent generations of a particular vehicle model, as well as by the low likelihood that a customer would switch suppliers once a project has been awarded to us, given the high operational, technical and logistical costs of switching. As a result of the foregoing, while the actual revenues which we derive from a project ultimately depend on our OEM customers production volumes for the respective car models, we believe we have good visibility of mid-term revenues within a relatively small range of sensitivity. Experienced management team with proven track record We believe the experience of our management team gives us a competitive advantage and positions us favorably for future growth and profitability. Our management team has extensive experience in the automotive and industrial sectors and a proven track record of successfully managing global businesses. Our management team has an average of over 25 years of experience at other leading automotive and engineering companies, giving them a full knowledge of all aspects of our and our customer s business. 5

24 Our management team has been the key to the improvement plan and the increasing flexibility in our cost structure that have been implemented under the current ownership. The improvement plan has been based on the following principles: (i) selectivity on new projects by applying a clear cost-benefit analysis based on expected minimum EBITDA margin; and (ii) keeping maintenance capital expenditures at modest levels while maintaining constant oversight of expansion capital expenditures. The increased flexibility has been achieved as a result of policies which (i) increase the percentage of employees in countries with more flexible labor legislation, from 18% in 2007 to 33% in 2014, (ii) increase the percentage of temporary workers as part of our workforce, from 6% in 2007 to 11% in 2014 and (iii) increase the proportion of employees in lower cost countries, from 35% in 2007 to 77% in In addition, we constantly monitor our cash flow, only approving initiatives for which we have available financing. Over the past five years our revenues and EBITDA have grown, primarily due to the combined effect of the international market growth and a strong financial discipline and sustainable improvements in our cost base implemented under the current ownership. Our business model, based on limited working capital requirements and maintenance capital expenditures, allows us to generate cash during periods of growth and reserve cash during periods where markets are more volatile in the medium- to long-term. Our strategy Our general strategic aim is to further extend our leadership position in the market, which we plan to achieve through certain targeted efforts. Continue to be a leader in innovation through focused research and development We believe that our products are at the forefront of innovation. As of September 30, 2014, we employed 142 people in R&D across our facilities. We are focused on designing and manufacturing highly-engineered components, modules and system solutions that address key global trends in the automotive sector, including efficiency, cost reduction and weight minimization. We aim to adapt to these trends by continuously improving our existing technology to continually seek to lower costs and minimize weight while maximizing performance. We seek to meet these goals by, among other methods, strategically developing innovative solutions for materials, products and technologies for our clients globally and working with our unified team who share know-how across all continents. Our unified R&D strategy positions us to be the partner of choice for leading innovations for our internationally operating clients. We continuously seek to increase our cooperation with our OEM clients by leveraging our knowledge of their products and our technical capabilities to create tailored solutions for each client which can be manufactured in all markets. We believe that if we increase our involvement at the early development stage of new vehicles, we can create a maximally beneficial product for the specific new model. Increased presence in our geographic sectors, especially Asia and NAFTA We intend to increase our worldwide presence by bolstering our manufacturing and R&D footprint in countries with high growth prospects, including in countries where we enjoy strong market position as well as new markets. This strategy will allow us to continue to serve our clients globally by having a presence near their key production centers. We intend to continue to expand in rapidly growing emerging markets, particularly in Asia, which has become a significant growth driver for the automotive sector and where our expansion projects have been particularly successful thus far. We seek to increase our revenue from Chinese OEMs in line with market growth, supported by the production capacity from our 6

25 joint venture and other new production facilities in the region. We aim to increase our concentration of sales in Asia from 15% in 2013 to approximately 22% by In Mercosur (particularly Brazil), we intend to consolidate our position and improve our performance to ensure that all our methodologies from our improvement plan are implemented in such plants. We aim to reinforce our presence in NAFTA to follow the growth of automotive production in that market by expanding our footprint in Mexico. In Europe, our goal is to also consolidate our presence as a market leader. Continue to increase exposure to premium OEMs and applications We are focusing on expanding our business with premium OEMs as the need for acoustic and thermal content for premium vehicles is significantly higher than for midrange cars. Over the last five years, we have been able to attract new premium customers such as Tesla and strengthen our existing relationships such as Daimler, Hyundai and BMW. We believe that our ability to deliver technologically and advanced customized solutions to our customers has driven our historical success in expanding our presence in the premium sector, and we aim to follow this same method to continue to gain contracts for new premium models. Maintain and strengthen our cost and quality leadership Our ability to maintain our costs while not diminishing the quality of our products is an important factor for our clients, and we seek to continue to improve our margins with several initiatives, including carefully control our costs of materials purchased from suppliers through selective screening. We also use our global positioning to limit costs. We strategically establish our facilities in close proximity to our customers assembly plants. Over the last five years, we have opened 18 new manufacturing facilities, including eight in China. We have taken such actions in order to be able to sustain the increasing volumes our clients demand, but also minimize transportation and labor costs. We are currently focusing on increasing revenue share generated in our lower cost plants and utilizing unused capacity in our plants, especially in our mature markets. We aim to continue to provide a comprehensive product and service offering to current and new customers globally. We seek to fully globalize our product portfolio and to provide an even broader range of components and systems to each customer while always maintaining our high level of quality. While our customer surveys have reflected that we already have positive customer feedback on the value metrics of our products, where we received the rating of outstanding for the value perception in several of our core capabilities, such as acoustical performance, innovation and delivery flexibility, we seek to continue to improve in all areas to sustain customer satisfaction. Our shareholder and the Adler Plastic Group HP Pelzer Holding GmbH is a wholly owned subsidiary of Adler Group. Adler Plastic owns 60.9% of the share capital of Adler Group and Simest S.p.A. ( Simest ) owns the remaining 39.1%. Adler Plastic is wholly owned by individuals belonging or related to the Scudieri family. Adler Plastic is a developer and producer of acoustic products for automotive vehicles, as well as aeronautics and other transportation industries, the food industry and bedding industry, among other businesses. The Adler Plastic Group (including the Company and its subsidiaries) operates 64 industrial facilities on five continents and has approximately 10,100 total employees worldwide. See Principal Shareholders and Business Our History. Company information The Company was incorporated as a company with limited liability (Gesellschaft mit beschränkter Haftung) under the laws of the Federal Republic of Germany on December 12, 7

26 2006 and is registered in the commercial register of the local court of Bochum under number HRB with registered office at Brauckstraße 51, Witten, Germany. Recent developments Acquisition of subsidiaries In July, August and September 2014, using a portion the proceeds from the issuance of the Initial Notes, we purchased the following four subsidiaries from Adler Plastic: Adler Polska Sp. z o.o., a Polish company in which we acquired a 99.88% stake for the purchase price of e8.6 million. As of and for the year ended December 31, 2013, Adler Polska Sp. z o.o. had e46.2 million of revenues, e(2.1) million of EBITDA and e(1.4) million of net debt; Pimsa Adler Otomotiv A.S., a Turkish joint venture in which we acquired a 50.7% stake for the purchase price of e1.3 million. As of and for the year ended December 31, 2013, Pimsa Adler Otomotiv A.S. had e17.7 million of revenues, e1.8 million of EBITDA and e1.9 million of net debt; Adler do Brasil Ltda, a Brazilian company in which we now hold a 99.86% stake. We acquired a 55.57% stake in Adler do Brasil from Adler Plastic in August 2014 and a 44.29% stake from Simest in December 2014, for a total purchase price of e11.3 million. As of and for the year ended December 31, 2013, Adler do Brasil Ltda had e31.6 million, e0.7 million of EBITDA and e3.4 million of net debt; and Adler France S.A., a French company in which we acquired a 99.99% stake for the purchase price of e1.3 million. As of and for the year ended December 31, 2013, Adler France S.A. had e5.6 million of revenues, e(0.3) million of EBITDA and e0.0 million of net debt. In November 2014 we purchased a 40% stake in Adler Evo S.r.l., from Adler Plastic for e6.1 million. On February 1, 2015, we sold one of our production plants in South Korea for e1.2 million. We will continue to use this plant through a lease arrangement until July Trading update The following discussion has been prepared by, and is the responsibility of, management and is solely based on the preliminary financial information and operating data used by management. There can be no assurance that these estimates will be realized or that actual results will not be higher or lower than estimated. The preliminary financial results presented below are based on unaudited management information and are not intended to be a comprehensive statement of the Company s consolidated financial or operational results for the year ended December 31, Such information has been prepared by management. The independent auditors of the Company have not audited, reviewed, compiled or performed any procedures with respect to the accompanying preliminary financial results for the purpose of its inclusion herein, and accordingly, the independent auditors of the Company do not express an opinion or provide any form of assurance with respect thereto for the purpose of this Offering Memorandum. The preliminary financial results set out below are based on a number of assumptions that are subject to inherent uncertainties and subject to change. In addition, while the Company believes the preliminary financial results to be reasonable, the Company has not yet finalized its consolidated financial statements for the year ended December 31, 2014 which are subject to audit. Accordingly, the Company s actual results for the year ended December 31, 2014 may vary from the preliminary financial results contained below, and such variations could be material. As such, you should not place undue reliance on the inclusion of the preliminary 8

27 financial results in this document, it should not be regarded as an indication that such preliminary financial results will be an accurate prediction of future events, and such information should not be relied on as such. See Forward-Looking Statements and Risk Factors for a more complete discussion of certain of the factors that could affect the Company s future performance and results of operations. Based on our preliminary financial results for the year ended December 31, 2014, we believe our business continues to grow in terms of revenues and adjusted EBITDA. We estimate our revenue for the year ended December 31, 2014 to be between e965 million and e975 million, compared to e885 million for the year ended December 31, 2013, and estimate our adjusted EBITDA for the year ended December 31, 2014 to be between e77 million and e79 million, compared to e64.3 million for the year ended December 31, We estimate our total debt as of December 31, 2014 to be between e265 million and e270 million, compared to e160.6 million as of December 31, 2013, and estimate our cash at banks as of December 31, 2014 to be between e65 million and e68 million, compared to e29.7 million for the year ended December 31, As of December 31, 2014, we had an estimated total Order Book of e5.2 billion, compared to e4.0 billion as of December 31, We believe that this positive development is the result of improving our competitive position by maintaining a consistently high level of quality in our products and customer service, and optimizing our global footprint through the projects and acquisitions we undertook in 2014 to implement our regional strategy. For a reconciliation of historical operating profit to adjusted EBITDA, see Summary Historical Consolidated Financial Information and Other Data Other Financial and Operating Information. 9

28 Corporate structure and certain financing arrangements The following diagram reflects a simplified summary of our corporate structure and our principal indebtedness on an adjusted basis after giving effect to the Offering and the use of the proceeds thereof. The diagram does not include all entities in the Group, nor all of the debt obligations thereof. Certain of our subsidiaries, including certain Guarantors, are not wholly owned by the Group. For further information, see note 2 to the Audited Consolidated Financial Statements, Use of Proceeds, Capitalization, Description of Certain Financing Arrangements and Description of the Notes. Company Guarantors Non-Guarantors Restricted Group Adler Plastic S.p.A. (1) 61% Simest S.p.A. (2) 39% AdlerGroup S.p.A. 100% HP Pelzer Holding GmbH (Germany) (3)(4) 50 million of Notes offered hereby (5) 230 million Initial Notes (6) Guarantor Subsidiaries (7)(8) Non-Guarantor Subsidiaries (9) 9FEB (1) Adler Plastic S.p.A. is wholly owned, directly or indirectly, by members of the Scudieri family. Adler Plastic is a developer and producer of acoustic products for automotive vehicles, as well as aeronautics and other transportation industries, the food industry and bedding industry among other businesses. (2) Simest is a company promoting foreign investments by Italian companies and providing technical and financial support for investment projects. It is controlled by Cassa Depositi e Prestiti S.p.A., an Italian government entity. (3) The Company and the Guarantors collectively represented 66.4% of our net assets as of September 30, 2014 and 74.4% and 64.4% of our aggregated sales and EBITDA, respectively, for the nine months ended September 30, (4) As of September 30, 2014, on a pro forma basis for the Offering of the Notes and the application of the proceeds therefrom, we (including our subsidiaries) would have had outstanding approximately e322.0 million of indebtedness (including the Notes and the Initial Notes). (5) The Notes, will be senior obligations of the Company and will rank equally in right of payment with any existing and future indebtedness of the Company that is not subordinated in right of payment to the Notes, rank senior in right of payment to any existing and future indebtedness of the Company that is subordinated in right of payment to the Notes, be structurally subordinated to all obligations of the subsidiaries of the Company that does not guarantee the Notes and be effectively subordinated to any existing and future indebtedness of the Company that is secured by property or assets to the extent of the value of the property or assets securing such indebtedness that do not secure the Notes. (6) On July 31, 2014, the Company issued e230 million aggregate principal amount of 7.500% Senior Secured Notes due The Notes will be part of the same series as the Initial Notes. 10

29 (7) The Notes will be senior obligations of the Company and will be guaranteed on a senior basis by each of HP Pelzer NV, Pelzer Sistemas do Brasil Limitada, HP Pelzer Automotive GmbH, RAT-Spezialmaschinen GmbH, Vegroteppichboden GmbH, Pelzer de Mexico, S.A. de C.V., HPP Systems de Mexico, S.A. de C.V., HP Polska Sp. z o.o., Insonorizantes Pelzer S.A.U., H.P. Chemie Pelzer (U.K.) Limited, HP Pelzer Automotive Systems Inc., HP-Pelzer s.r.o., Adler Polska Sp. z o.o. and Adler PTI S.A. The Note Guarantees will rank equally in right of payment with all existing and future indebtedness of such Guarantor that is not subordinated in right of payment to its Note Guarantee, rank senior in right of payment to any and all future indebtedness of such Guarantor that is subordinated in right of payment to its Note Guarantee, be structurally subordinated to all obligations of the Guarantors that do not guarantee the Notes and be effectively subordinated to such Guarantor s existing and future secured indebtedness that is secured by property or assets to the extent of the value of the property or assets securing such indebtedness that does not also secure the Notes. The obligations of the Guarantors will be subject to significant contractual limitations under the applicable Note Guarantees to reflect limitations under applicable laws, including but not limited to, with respect to maintenance of share capital, financial assistance, corporate benefit, fraudulent conveyance and other legal restrictions applicable to the Guarantors, and their respective shareholders and directors. See Description of the Notes Note Guarantees Note Guarantee Release, Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral and Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. (8) The Notes and the Guarantees will be secured on a first ranking basis (subject to certain perfection requirements and any Permitted Collateral Liens) by the Collateral, which will comprise (i) on the Issue Date, all shares of the capital stock of the Company, (ii) on the Issue Date, all shares of the capital stock of each Guarantor held, directly or indirectly, by the Company and the Restricted Subsidiaries, (iii) on the Issue Date, proceeds loans receivables owed to the Company and intercompany receivables owed to the Company and the Guarantors, (iv) on the Issue Date, certain fixed assets and real estate of the Guarantors in the United States, Mexico, Germany and the Czech Republic, under pledges, mortgages and other security documents and (v) within 30 days of the Issue Date, certain real estate of the Guarantors in the United States under mortgages (collectively, the Collateral ). The Collateral will not include security interests over third party receivables. The security interest securing the Notes may be limited by applicable laws or subject to certain defenses that may limit their validity and enforceability. See Description of the Notes Note Guarantees Note Guarantee Release, Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral and Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. (9) As of September 30, 2014, our non-guarantor subsidiaries collectively represented 33.6% of our net assets, and 25.6% and 35.6% of our aggregated sales and EBITDA respectively. As of September 30, 2014, our non-guarantor subsidiaries had e32.8 million of outstanding indebtedness on a combined basis, e20.9 million of which was secured. 11

30 The offering The summary below describes the principal terms of the Notes and the Note Guarantees. Certain of the terms and conditions described below are subject to important limitations and exceptions. The Description of the Notes section of this Offering Memorandum contains a more detailed description of the terms and conditions of the Notes, including the definitions of certain terms used in this summary. Company... HP Pelzer Holding GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) organized under the laws of the Federal Republic of Germany and registered in the commercial register of the local court of Bochum under number HRB with registered office at Brauckstrasse 51, Witten, Germany (the Company ). Notes Offered... e50,000,000 aggregate principal amount of 7.500% Senior Secured Notes due The Notes will be issued as additional notes under the indenture entered into by the Company, among others, dated July 31, 2014 (as supplemented on September 19, 2014, October 15, 2014 and February 4, 2015, the Indenture ), pursuant to which the Company s currently outstanding e230,000,000 aggregate principal amount of 7.500% Senior Secured Notes due 2021 (the Initial Notes ) were issued. The Notes will be consolidated and fully fungible with the Initial Notes. The Notes offered hereby will have substantially the same terms as those of the Initial Notes. The Notes will be treated as a single class together with the Initial Notes for all purposes of the Indenture, including with respect to waivers, amendments, redemptions and offers to purchase, except as otherwise specified with respect to the Notes. Maturity Date... The Notes will mature on July 15, Interest... Issue Price... Interest Payment Date... Guarantees... The Notes will bear interest at a rate of 7.500% per annum % plus accrued interest from January 15, 2015 to the Issue Date. Interest on the Notes will be payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, The Notes will be guaranteed (the Note Guarantees ) on a senior basis by the following directly and indirectly held subsidiaries of the Company: HP Pelzer NV, Pelzer Sistemas do Brasil Limitada, HP Pelzer Automotive GmbH, RAT-Spezialmaschinen GmbH, Vegroteppichboden GmbH, Pelzer de Mexico, S.A. de C.V., HPP Systems de Mexico, S.A. de C.V., HP Polska Sp. z o.o., Insonorizantes Pelzer S.A.U., H.P. Chemie Pelzer (U.K.) Limited and HP Pelzer Automotive Systems Inc., HP-Pelzer s.r.o., Adler Polska Sp. z o.o. and Adler PTI S.A. (each a Guarantor, and, collectively, Guarantors ). 12

31 The obligations of the Guarantors will be subject to significant legal and contractual limitations and may be released in certain circumstances. See Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral The Note Guarantees are significantly limited by applicable laws and are subject to certain limitations and defenses, and Description of the Notes The Guarantees. As of September 30, 2014, after giving pro forma effect to the Offering of the Notes and the application of the proceeds therefrom: the Company and its consolidated subsidiaries would have had approximately e322.0 million of indebtedness, of which e280.0 million is represented by the Notes and the Initial Notes; the Company and the Guarantors would have had approximately e289.2 million of financial indebtedness, of which e289.2 million was secured; and the non-guarantor subsidiaries would have had approximately e32.8 million of financial indebtedness. As of and for the nine months ended September 30, 2014, the Company and the Guarantors generated 74.4% of our total sales and 64.4% of our EBITDA and represented 66.4% of our net assets. Ranking... The Notes will be senior obligations of the Company and will: rank equally in right of payment with all existing and future indebtedness of the Company that is not subordinated in right of payment to the Notes; rank senior in right of payment to any and all of the existing and future indebtedness of the Company that is subordinated in right of payment to the Notes; be structurally subordinated to all existing and future indebtedness of the Company s subsidiaries that do not guarantee the Notes; and be effectively subordinated to the Company s and the Guarantors existing and future secured indebtedness that is secured by property or assets to the extent of the value of the property or assets securing such indebtedness that does not also secure the Notes. The Note Guarantees to be provided by the Guarantors will be the general obligation of each Guarantor and, subject to certain limits imposed by local laws, will: rank equally in right of payment with all existing and future indebtedness of such Guarantor that is not subordinated in right of payment to its Note Guarantee; 13

32 rank senior in right of payment to any and all future indebtedness of such Guarantor that is subordinated in right of payment to its Note Guarantee; be structurally subordinated to all existing and future indebtedness of the Guarantor s subsidiaries that do not guarantee the Notes; and be effectively subordinated to such Guarantor s existing and future secured indebtedness that is secured by property or assets to the extent of the value of the property or assets securing such indebtedness that does not also secure the Notes. The obligations of the Guarantors will be subject to significant contractual limitations under the applicable Note Guarantees to reflect limitations under applicable laws, including but not limited to, with respect to maintenance of share capital, financial assistance, corporate benefit, fraudulent conveyance and other legal restrictions applicable to the Guarantors, and their respective shareholders and directors. See Description of the Notes The Note Guarantees. Security... The Notes will be secured, subject to certain perfection requirements, on a first-ranking basis by the Collateral as described below. The Collateral will comprise: on the Issue Date, all shares of the capital stock of the Company; on the Issue Date, all shares of the capital stock of each Guarantor held, directly or indirectly, by the Company and the Restricted Subsidiaries; on the Issue Date, proceeds loans receivables owed to the Company and intercompany receivables owed to the Company and the Guarantors; on the Issue Date, certain fixed assets and real estate of the Guarantors in the United States, Mexico, Germany and the Czech Republic, under pledges, mortgages and other security documents; and within 30 days of the Issue Date, certain real estate of the Guarantors in the United States under mortgages (collectively, the Collateral ). The Collateral will not include security interests over third party receivables. The security interest securing the Notes may be limited by applicable law or subject to certain defenses that may limit their validity and enforceability. See Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral. The Security may be released under certain circumstances. See Description of the Notes Security Release. 14

33 In addition, pursuant to a future Intercreditor Agreement, certain indebtedness, as provided under Description of the Notes, may be secured on a super priority or pari passu basis with respect to proceeds from enforcement of Collateral, meaning that in the event of enforcement of the Collateral securing the Notes, creditors secured on a super senior basis will be entitled to be repaid with the proceeds of the Collateral sold in any enforcement sale in priority to the Notes or that creditors secured on a pari passu basis may share equally on a pari passu basis in the proceeds of the Collateral sold in any enforcement sale, as applicable. See Description of the Notes Certain Covenants Intercreditor Agreements and Risk Factors Risks Related to the Notes, the Note Guarantees and the Collateral If any intercreditor agreement is entered into in the future, the holders of the Notes will be subject to certain limitations on their ability to enforce the Collateral. Optional Redemption... Tax Redemption... The Company may redeem all or part of the Notes on or after July 15, 2017 at the redemption prices listed in the section entitled Description of the Notes Optional redemption. The Company may redeem all or part of the Notes at any time prior to July 15, 2017, by paying a make-whole premium as described in the section entitled Description of the Notes Optional redemption. At any time prior to July 15, 2017, the Company may use the proceeds of specified equity offerings to redeem up to 40% of the original principal amount of the Notes and at a redemption price equal to % of the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest and additional amounts, if any, then due to the redemption date; provided that at least 60% of the aggregate principal amount of the Notes of such series remains outstanding after the redemption and the redemption occurs within 90 days of the date of the closing of such relevant equity offering. See Description of the Notes Optional redemption. The Company may redeem the Notes, in whole but not in part, at a redemption price of 100% of the principal amount, plus accrued and unpaid interest and additional amounts, if any, to the redemption date, if the Company or, in certain circumstances, any Guarantor would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See Description of the Notes Redemption for changes in taxes. 15

34 Additional Amounts... Change of Control... Covenants... All payments made by or on behalf of the Company or any Guarantor under or with respect to the Notes or any Note Guarantee will be made without withholding or deduction for taxes in any relevant taxing jurisdiction unless required by law. If any such withholding or deduction for taxes is required by law to be made with respect to any payment under the Notes or any Note Guarantee, subject to certain exceptions, we will pay the additional amounts necessary so that the net amount received by the holders of the Notes after such withholding (including any withholding or deduction in respect of the additional amounts) is not less than the amount that such holders would have received in the absence of such withholding or deductions. See Description of the Notes Additional amounts. Upon the occurrence of certain events that constitute a change of control of the Company at any time, you will have the right to require the Company to repurchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest and additional amounts, if any, to the date of repurchase. See Description of the Notes Repurchase at the option of holders Change of Control. The Indenture, among other things, restricts the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness and issue certain preferred stock; make certain restricted payments and investments, including dividends or other distributions; create or incur certain liens; enter into agreements that restrict the ability of restricted subsidiaries to pay dividends; transfer or sell certain assets; merge or consolidate with other entities; and enter into certain transactions with affiliates. In addition, the Company will provide to the Trustee and to holders of the Notes annual and quarterly reports of the Company. These covenants are subject to important exceptions and qualifications. See Description of the Notes Certain covenants. 16

35 Use of Proceeds... The gross proceeds from the Offering of the Notes will be e52.0 million. We expect to pay approximately e2.2 million of fees and expenses, including the Initial Purchaser s commission and the estimated expenses in respect of the Offering, with proceeds from the Offering of the Notes. Of the net proceeds, e20.1 million will be used for investments related to the Credit Suisse Credit Note, e20.0 million will be used to fund an intercompany loan to our indirect parent company, Adler Plastic, and e9.7 million will be used for general corporate purposes. See Use of Proceeds. Forms and Denomination... The Company will issue the Notes on the Issue Date in global form in minimum denominations of e100,000 and integral multiples of e1,000 in excess thereof, maintained in book-entry form. Notes in denominations of less than e100,000 will not be available. Transfer Restrictions; Absence of a Public Market for the Notes... The Notes have not been registered under the U.S. Securities Act and thus are subject to restrictions on transferability and resale. The Company cannot assure you that a market for the Notes will develop or that, if a market develops, the market will be a liquid market. The Initial Purchaser has advised the Company that they currently intend to make a market in the Notes. The Initial Purchaser is not obligated, however, to do so and any market making with respect to the Notes may be discontinued without notice. See Plan of Distribution. Listing... Trustee... Paying Agent... Application has been made to list the Notes on the Official List of the Irish Stock Exchange and to admit the Notes to trading on the Global Exchange Market of the Irish Stock Exchange. Deutsche Trustee Company Limited Deutsche Bank AG, London Branch Transfer Agent, Registrar and Irish Listing Agent... Deutsche Bank Luxembourg S.A. Security Agent... Governing Law of the Notes, the Indenture and the Note Guarantees... Crestbridge Corporate Trustees Limited New York Risk factors Investing in the Notes involves substantial risks. Please see the Risk Factors section for a description of certain of the risks you should carefully consider before investing in the Notes. 17

36 Summary historical consolidated financial information and other data The following summary consolidated income statement, balance sheet and cash flow information (i) as of and for the years ended December 31, 2013, 2012 and 2011 has been derived from the Audited Consolidated Financial Statements which have been prepared in accordance with Italian-GAAP and (ii) as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 has been derived from the Unaudited Interim Condensed Consolidated Financial Statements which have been prepared in accordance with Italian-GAAP. The Audited Consolidated Financial Statements do not include the results of Pimsa Adler Otomotiv A.S., Adler PTI S.A., Adler France S.A., Adler do Brasil Ltda, and Adler Polska Sp. z o.o., which were acquired in July, August and September These entities are included in the Unaudited Interim Condensed Consolidated Financial Statements only from August or September 2014 when control was obtained. The summary financial information for the twelve months ended September 30, 2014 has been derived by taking our results of operations for the nine months ended September 30, 2014 and adding to it the difference between our results of operations for the full year ended December 31, 2013 and the nine months ended September 30, The financial information for the nine and twelve months ended September 30, 2014 is not necessarily indicative of the results that may be expected for the year ended December 31, 2014, and should not be used as the basis for or prediction of an annualized calculation. The following pro forma financial information has been derived by applying pro forma adjustments to our historical consolidated financial statements included elsewhere in this Offering Memorandum. The summary pro forma financial information gives effect to the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds as though they had occurred on October 1, 2013 for the pro forma income statement information and on September 30, 2014 for the pro forma balance sheet information. The unaudited pro forma adjustments and the unaudited summary pro forma financial information are based on available information and certain assumptions and estimates that we believe are reasonable and may differ from actual amounts. The summary pro forma financial information is for informational purposes only and does not purport to represent what our results of operations or financial position would actually have been had these transactions occurred on the dates presented or to project our results of operations or financial position for any future period or our financial condition at any future date. See Presentation of Financial Information. This section contains Non-GAAP Financial Measures, including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted EBIT margin, net debt, capital expenditures and trade working capital. The Non-GAAP Financial Measures are not measurements of performance or liquidity under Italian-GAAP or any other generally accepted accounting principles. Investors should not place undue reliance on these Non-GAAP Financial Measures and should not consider these measures as: (a) an alternative to operating income or net income as determined in accordance with generally accepted accounting principles, or as measures of operating performance; (b) an alternative to cash flows from operating, investing or financing activities, as determined in accordance with generally accepted accounting principles, or a measure of our ability to meet cash needs; or (c) an alternative to any other measures of performance under generally accepted accounting principles. These measures are not indicative of our historical operating results, nor are they meant to be predictive of future results. These measures are used by our management to monitor the underlying performance of the business and the operations. Since all companies do not calculate these measures in an identical manner, our presentation may not be consistent with similar measures used by other companies. 18

37 This section should be read in conjunction with the financial statements included elsewhere in this Offering Memorandum and the notes thereto and the information set forth in Summary, Business, Use of Proceeds, Capitalization, Selected Consolidated Financial Information and Management s Discussion and Analysis of Financial Condition and Results of Operations. Summary consolidated income statement information Twelve months Nine months ended ended Year ended December 31, September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) Revenues , , , , , ,041 Other income... 12,787 18,354 11,567 4,877 3,226 9,916 Total revenues and income , , , , , ,957 Cost of materials... (448,874) (500,877) (518,073) (384,259) (407,211) (541,025) Cost of services... (66,594) (70,209) (75,321) (52,382) (61,415) (84,354) Personnel expenses.. (144,830) (159,893) (164,323) (122,685) (133,179) (174,817) Other operating expenses... (57,417) (63,543) (74,184) (50,550) (58,959) (82,593) Depreciation, amortization and impairments... (32,488) (34,698) (35,978) (24,925) (25,185) (36,238) Operating profit... 15,240 21,764 28,278 18,077 29,729 39,930 Net finance costs... (10,529) (11,433) (13,528) (8,145) (15,790) (21,173) Extraordinary expenses, net... (7,996) (5,593) (1,059) (278) (260) (1,041) Share of profit of investments , ,316 4,216 Profit/(loss) before tax... (2,713) 5,373 16,033 10,096 15,995 21,392 Income tax expense. (10,314) (5,169) (3,935) (3,682) (6,045) (6,298) Profit/(loss) for the period... (13,027) ,098 6,414 9,950 15,634 19

38 Summary consolidated balance sheet information As of December 31, As of September 30, In g thousands (unaudited) Property, plant and equipment , , , ,307 Intangible assets... 1,619 1,158 2,791 14,119 Other non-current assets... 2,732 8,583 6,771 18,565 Total non-current assets , , , ,991 Inventories... 95, ,927 99, ,800 Trade receivables... 63,624 93, , ,106 Cash at banks... 21,841 24,672 29,701 74,285 Other current assets... 26,403 34,607 42,580 69,745 Total current assets , , , ,936 Total assets , , , ,927 Total shareholders equity attributable to the Group , , , ,995 Total shareholders equity attributable to minority interests... 20,185 22,334 22,607 30,521 Total shareholders equity , , , ,516 Non-current financial liabilities... 29,751 41,610 40, ,527 Payables to shareholder... 37,969 43,406 26,719 Other non-current liabilities... 32,576 31,542 28,861 31,761 Total non-current liabilities , ,558 95, ,288 Current financial liabilities... 38,918 46,398 68,543 13,310 Payables to shareholder... 17,368 9,262 25,107 2,244 Trade payables , , , ,305 Other current liabilities... 42,705 66,232 67, ,264 Total current liabilities , , , ,123 Total liabilities , , , ,411 Total liabilities and shareholder s equity , , , ,927 20

39 Summary cash flow statement information Twelve months For year ended For the nine months ended December 31, ended September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) Profit/(loss) for the year... (13,027) ,098 6,414 9,950 15,634 Adjustments to reconcile the profit/(loss) for the year to the cash flow from operating activities: Amortization and depreciation... 32,326 34,057 34,639 24,924 24,828 34,543 Change in provisions for risks and charges... (2,880) 7,846 (7,209) (4,952) 8,751 6,494 Change in net working capital. (14,895) (19,653) (14,618) (20,783) (45,741) (39,576) Cash flows from operating activities... 1,524 22,454 24,910 5,603 (2,212) 17,095 Cash flow from investing activities Investments net, in property, plant and equipment and intangibles... (32,271) (39,140) (33,097) (25,991) (30,261) (37,367) Acquisition of investments... (450) (504) (946) (20,099) (21,045) Fixed assets NBV add. acqu new Adler assets... Cash flows (used in) investing activities... (32,721) (39,644) (34,043) (25,991) (50,360) (58,412) Cash flow from financing activities Net change in financial liabilities... (15,841) 19,339 20,747 18, , ,409 Net change in shareholder payables... 55,337 (2,669) (842) (2,343) (49,582) (48,081) Shareholder contributions... 1,500 Dividends paid... (3,155) (2,735) (3,832) (1,824) (1,779) (3,787) Net change in financial assets.. (1,349) 1, ,333 1,327 Cash flows from (used in) financing activities... 36,492 15,262 16,910 15,376 98,334 99,868 Total cash flows... 5,295 (1,928) 7,777 (5,012) 45,762 58,551 Cash at banks at the beginning of the year... 19,341 21,841 24,672 24,672 29,701 29,701 Non cash items due to first time consolidation... Exchange gains/(losses)... (2,795) 4,759 (2,748) (1,330) (1,178) (2,596) Cash at banks at the end of the year... 21,841 24,672 29,701 18,330 74,285 85,656 21

40 Other financial and operating information As of and for As of and for twelve months In g thousands, except As of and for year ended nine months ended ended percentages and unless December 31, September 30, September 30, otherwise specified (unaudited) (unaudited) (unaudited) EBITDA (1)... 39,732 50,869 63,197 42,724 54,654 75,127 EBITDA margin (2) % 6.1% 7.1% 6.6% 7.7% 7.9% Adjusted EBITDA (3)... 47,728 56,462 64,256 43,002 54,914 76,168 Adjusted EBITDA margin (4) % 6.8% 7.3% 6.6% 7.7% 8.0% Adjusted EBIT (5)... 15,240 21,764 28,278 18,077 29,729 39,930 Adjusted EBIT margin (6) 2.0% 2.6% 3.2% 2.8% 4.2% 4.2% Net debt (7) , , ,880 n.a. 197, ,796 Net debt/adjusted EBITDA x 2.1x 2.0x n.a. 3.6x 2.6x Capital expenditures (8). 38,754 39,088 30,870 27,338 21,904 25,436 Capital expenditures as a percentage of revenues % 4.7% 3.5% 4.2% 3.1% 2.7% Ordinary capital expenditures (9)... 38,754 34,243 27,204 24,384 21,905 24,725 Ordinary capital expenditures as a percentage of revenues % 4.1% 3.1% 3.8% 3.1% 2.6% Trade working capital (10)... 38,912 58,334 73,074 n.a. 116, ,601 Trade working capital as a percentage of revenues % 7.0% 8.3% n.a. 16.4% 12.3% Cash flows from operating activities.. 1,524 22,454 24,910 5,603 (2,212) 17,095 Cash flows from operating activities as a percentage of revenues % 2.7% 2.8% 0.9% (0.3%) 1.8% Adjusted cash flows from operating activities (11)... (5,921) (2,279) 18,768 (5,119) (12,731) 11,156 Adjusted cash flows from operating activities as a percentage of revenues... (0.8%) (0.3%) 2.1% (0.8%) (1.8%) 1.2% 22

41 (1) We define EBITDA as profit or loss for the period plus income tax expense, share of profit of investments, net finance costs, depreciation, amortization and impairments of receivables. The following is a calculation of EBITDA: Twelve months Nine months ended ended Year ended December 31, September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) Profit/(loss) for the period... (13,027) ,098 6,414 9,950 15,634 Income tax expense... 10,314 5,169 3,935 3,682 6,045 6,298 Share of profit of investments... (572) (635) (2,342) (442) (2,316) (4,216) Net finance costs... 10,529 11,433 13,528 8,145 15,790 21,173 Depreciation, amortization and impairments... 32,488 34,698 35,978 24,925 25,185 36,238 EBITDA... 39,732 50,869 63,197 42,724 54,654 75,127 (2) We define EBITDA margin as EBITDA divided by revenues. (3) We define adjusted EBITDA as EBITDA plus extraordinary expenses, net. The following is a calculation of adjusted EBITDA: Twelve months Nine months ended ended Year ended December 31, September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) EBITDA... 39,732 50,869 63,197 42,724 54,654 75,127 Extraordinary expenses, net*... 7,996 5,593 1, ,041 Adjusted EBITDA... 47,728 56,462 64,256 43,002 54,914 76,168 * Extraordinary expenses, net include non-recurring expenses of e4.8 million in 2011, e5.0 million in 2012 and e0.8 million in 2013 relating to restructuring costs in connection with the downsizing of a production plant in Bavaria, Germany, and the integration of our headquarter functions with those of Adler Plastic. Other extraordinary items relate to adjustments from prior periods, other non-recurring penalties, income and expenses, all of which, in accordance with Italian-GAAP, are classified as extraordinary items. (4) We define adjusted EBITDA margin as adjusted EBITDA divided by revenues. (5) We define adjusted EBIT as profit or loss for the period plus income tax expense, share of profit of investments, extraordinary expenses, net and net finance costs. The following is a calculation of adjusted EBIT: Twelve months Nine months ended ended Year ended December 31, September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) Profit/(loss) for the period... (13,027) ,098 6,414 9,950 15,634 Income tax expense... 10,314 5,169 3,935 3,682 6,045 6,298 Share of profit of investments... (572) (635) (2,342) (442) (2,316) (4,216) Extraordinary expenses, net... 7,996 5,593 1, ,041 Net finance costs... 10,529 11,433 13,528 8,145 15,790 21,173 Adjusted EBIT... 15,240 21,764 28,278 18,077 29,729 39,930 (6) We define adjusted EBIT margin as adjusted EBIT divided by revenues. (7) We define net debt as total financial liabilities and payables to shareholder, net of cash at banks. The following table sets forth a breakdown of net debt: As of December 31, As of September 30, In g thousands (unaudited) Cash at banks... (21,841) (24,672) (29,701) (74,285) Initial Notes ,000 Bank borrowings... 63,032 74,770 87,620 32,397 Other borrowings... 4,320 9,990 13,560 2,546 Lease liabilities... 1,317 3,248 7,575 4,894 Payables to shareholders... 55,337 52,668 51,826 2,244 Net debt , , , ,796 (8) We define capital expenditure as the gross additions in property, plant and equipment. (9) Ordinary capital expenditure is defined as capital expenditures excluding certain items that we consider to be extraordinary in nature. In 2012, we excluded e4.8 million of asset additions arising from a change in the accounting treatment for machinery used by the Company under lease, related to a change in the nature of the underlying contract from an operating lease to a finance lease. This change had no cash impact. In 2013, we excluded e3.7 million of asset additions related to the replacement of assets damaged in a fire in Plzen. 23

42 (10) We define trade working capital as the sum of inventories and trade receivables net of trade payables. The following table sets forth a breakdown of trade working capital: As of December 31, As of September 30, In g thousands (unaudited) Inventories... 95, ,927 99, ,800 Trade receivables... 63,624 93, , ,106 Trade payables... (120,461) (138,937) (138,472) (175,305) Trade working capital... 38,912 58,334 73, ,601 (11) We define adjusted cash flows from operating activities as adjusted EBITDA less capital expenditures and changes in working capital. The following table sets forth a calculation of adjusted cash flows from operating activities. Nine months Twelve months ended ended Year December 31, September 30, September 30, In g thousands Adjusted EBITDA... 47,728 56,462 64,256 43,002 54,914 76,168 Capital expenditures... (38,754) (39,088) (30,870) (27,338) (21,904) (25,436) Change in working capital... (14,895) (19,653) (14,618) (20,783) (45,741) (39,576) Adjusted cash flows from operating activities... (5,921) (2,279) 18,768 (5,119) (12,731) 11,156 Summary pro forma financial information As of and for the twelve months In g millions ended September 30, 2014 (unaudited) Pro forma cash at banks and pro forma investments relating to the Credit Suisse Credit Note (1) Pro forma total debt (2) Pro forma net debt (3) Pro forma cash interest expense (4) Ratio of pro forma net debt to adjusted EBITDA (3) x Ratio of adjusted EBITDA to pro forma cash interest expense (4) x (1) Pro forma cash at banks of e84.0 million reflects the cash at banks of the Company on a consolidated basis, adjusted for the effects of the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds. Pro forma investments relating to the Credit Suisse Credit Note of e20.1 million includes only those certificates of deposit to be purchased with a portion of the proceeds from the Offering of Notes as described in Use of Proceeds. After deduction of commissions and expenses, we anticipate the net proceeds from the issue of the Notes, to be approximately e49.8 million. We intend to use (i) e20.1 million of the net proceeds for investments related to the Credit Suisse Credit Note, (ii) e20.0 million will be used to fund an intercompany loan to our indirect parent company, Adler Plastic (see Certain relationships and related-party transactions Loan to Adler Plastic ), and (ii) e9.7 million will be used for general corporate purposes. (2) Pro forma total debt reflects the total debt of the Company on a consolidated basis, adjusted for the effects of the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds. Pro forma total debt includes e280.0 million from the Notes offered hereby and the Initial Notes and e42.0 million relating to existing debt which will remain outstanding following the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds. (3) Pro forma net debt reflects the net debt of the Company on a consolidated basis, adjusted for the effects of the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds. Pro forma net debt includes pro forma total debt of e322.0 million less pro forma cash at banks of e84.0 million and less pro forma investments relating to the Credit Suisse Credit Note of e20.1 million. Pro forma net debt (and the component parts of the calculation thereof) as used in this Offering Memorandum is not calculated in the same manner as the same or similar terms are calculated pursuant to the Indenture governing the Notes as described under Description of the Notes or for purposes of any of our other indebtedness. (4) Pro forma cash interest expense is comprised of the cash interest expense in connection with the Notes as if it had occurred on October 1, 2013 and the cash interest expense on other financial liabilities, including the Initial Notes. 24

43 Operating information Sales by geographic region Nine months Twelve months ended ended Year ended December 31, September 30, September 30, In g thousands Europe , , , , , ,388 NAFTA , , , , , ,572 Asia... 80, , ,510 89, , ,042 Mercosur... 70,583 80,087 99,389 75,745 75,126 98,770 Total sales , , , , , ,773 Order book As of As of December 31, December 31, In g millions Order Book (1)... 3,806 4,151 3,993 5,178 (1) The estimated Order Book information relates to booked business (which represents the sales we expect to record in the event that we receive firm orders under contracts for vehicle programs that we have been awarded by OEMs, including both those that were in production and those that were not yet in production and including both new model incremental and successor model business) as of the dates specified for the subsequent ten years. See Presentation of Financial Information Order Book and Risk factors Risks related to our business operations Our Order Book may not be indicative of our future revenue. 25

44 Risk factors An investment in the Notes is subject to a number of risks. Prospective investors should consider carefully the risks described below and the other information contained in this Offering Memorandum prior to making any investment decision with respect to the Notes. The order in which the factors are presented does not reflect the likelihood of their occurrence or the magnitude or significance of the individual risk factor. Each of the risks discussed below could adversely affect our business, financial condition and results of operations, which, in turn, could have a material adverse effect on the payment of interest and repayment of principal amount which investors will receive in relation to the Notes. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect our business, prospects, financial condition and results of operations. In addition, each of the risks discussed below could adversely affect the trading or the trading price of the Notes or the rights of investors under the Notes and, as a result, investors could lose some or all of their investment. This Offering Memorandum also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward looking statements as a result of various factors, including the risks described below and elsewhere in this Offering Memorandum. See Forward-Looking Statements. Risks related to the markets in which we operate We are exposed to substantial risks associated with the performance of the global economy and the Eurozone debt crisis and the performance of the economy in the jurisdictions in which we operate. As a consequence of our global presence, we are exposed to substantial risks associated with the performance of the global economy. In general, demand for automotive products and services are directly related to the strength of the global economy. Therefore, our income and results of operations have been influenced, and will continue to be influenced, to a certain degree, by the general state and the performance of the global economy. Should the political tensions between Russia and the Ukraine continue or should a conflict between the two countries ensue, the strength of the global economy could deteriorate. Our headquarters are located in Witten, Germany, and a significant portion of our business comes from European markets. The deterioration of the sovereign debt of several countries of the Eurozone in recent years, including Cyprus, Greece, Italy, Ireland, Spain and Portugal, together with the risk that these sovereign debt crises cause impacts in other, more stable, countries, particularly France and Germany, have raised uncertainty regarding the stability and overall standing of the European Monetary Union. Concerns that the Eurozone sovereign debt crisis could worsen may lead to the reintroduction of national currencies in one or more Eurozone countries or, in particularly dire circumstances, the abandonment of the Euro. The departure or risk of departure from the Euro by one or more Eurozone countries and/or the abandonment of the Euro as a currency could have major negative effects on both existing contractual relations and the fulfillment of obligations by us and/or our customers, which would have a material adverse effect on our business, financial condition and results of operations. Although the global economy has recovered to a certain extent from the downturn in 2008 and 2009, the slower than expected growth in North and South America and Africa demonstrates that there can be no assurance that such recovery is sustainable or that there will be no recurrence of the global financial and economic crisis or similar adverse market conditions. A renewed downturn in the global and European economies could cause demand in our related market segments to decline which would have a material adverse effect on our 26

45 business, financial condition and results of operations. Any material future deterioration in economic conditions could have a material and adverse effect on our business, financial condition and results of operations, which could in turn (in particular in the event of a significant and sudden decline of our revenues) adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We operate in a cyclical industry. Substantially all of our business is directly related to vehicle sales and production by our customers, who consist primarily of large OEMs, and demand for our products is largely dependent on the industrial output of the automotive industry. Our operations and performance are directly related to levels of global vehicle production, particularly the light vehicle market, and are therefore affected by factors that generally affect the automotive industry. Although we maintain longstanding relationships with our clients and book significant amounts of business in advance (giving us some visibility on revenue streams), given the variety of economic parameters influencing the global automotive demand, the volume of automotive production has historically been, and will continue to be, characterized by a high level of fluctuation, making it difficult for us to accurately predict demand levels for our products aimed at the automotive sector. In addition, OEMs generally do not commit to purchasing minimum quantities from their suppliers. Since our business is characterized by high fixed costs, we risk underutilization of our facilities or having insufficient capacity to meet customer demand if the markets in which we are active either decline or grow faster than we have anticipated. An underutilization of our facilities could result in idle capacity costs, write-offs of inventories and losses on products due to falling average sale prices. Furthermore, falling production volumes cause declines in revenue and earnings. The risks related to the cyclical nature of the industry in which we operate could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We operate in a competitive industry. The acoustic systems solutions for automotive industry is highly competitive and fragmented. We face significant competition within each of our major product categories, including from automobile manufacturers which have interior and exterior components manufacturing capabilities in-house. Some OEMs have begun to substantially reduce the number of vendors in their supply base. We compete in respect of delivery performance, quality, innovation, price, engineering capability and service. Some of our competitors are affiliates of our customers or are subsidiaries (or divisions or units) of companies that are larger and have greater financial and other resources than we do. In addition, our competitors may foresee the course of market development more accurately than we do, develop products that are superior to our products, have the ability to produce similar products at a lower cost than we can or adapt more quickly than we do to new technologies or evolving regulatory, industry or customer requirements. Furthermore, a number of our customers manufacture products that compete with our products, and our customers tend to outsource less when they have idle capacity. The automotive supply industry, in particular, has been characterized by rapid technological change, high capital expenditures (which includes additions of property, plant, equipment and intangible assets), intense pricing pressure from major OEM customers, periods of oversupply and continuous advancements in process technologies and manufacturing facilities. In 27

46 particular, customers have requested, and will continue to request, that we reduce our prices as part of our initial business quotations and over the life of contracts we have been awarded. We cannot ensure that we will be able to generate cost savings and operational improvements sufficient to offset price reductions requested by customers and to make us profitable and position us to win additional business. As consolidation continues in the automotive interior components sector, we are increasingly likely to compete against larger competitors who benefit from economies of scale and who may have greater financial and other resources or a more complete global footprint than we do. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are exposed to risks associated with market trends and developments. Our future success depends on our ability to recognize market trends and technological changes and to develop and bring to the market new and improved products in a timely manner. The industrial market is characterized by megatrends, such as energy efficiency, renewable energies and mechatronic systems and electric mobility. The automotive market, in particular, is characterized by progressive development towards higher performance and simultaneously more fuel-efficient, less polluting and quieter engines, growing demands by customers and stricter regulations with respect to engine efficiency, as well as towards medium range cars and hybrid and electric vehicles. The market segment of cars which cost less than U.S.$10,000/e7,000 has been increasing steadily over the past years, in particular in emerging markets, such as China, India, Brazil and Eastern Europe. Therefore, car manufacturers are increasingly forced to implement environmentally friendly technologies aimed at lower fuel consumption and a reduction of carbon dioxide emissions, as well as cost-effective acoustic technologies for medium range cars previously used only in luxury vehicles. There can be no assurance that (i) we will be successful in developing new products or systems or in bringing them to market in a timely manner, or at all, (ii) products or technologies developed by others will not render our offerings obsolete or non-competitive, (iii) our customers will not substitute our products with competing products or alternate technology, (iv) the market will accept our innovations, (v) our competitors will not be able to produce our non-patented products more inexpensively from other sources and (vi) we will be able to adjust our cost structure in the event of contraction of demand. Should we fail to develop appropriate strategies as a response to these or similar market trends and should we fail to enhance existing products, develop new products or keep pace with developing technology, growth opportunities could be lost or we could lose existing customers. Furthermore, if we devote resources to the pursuit of new technologies and products that fail to be accepted in the marketplace or that fail to be commercially viable, all or part of these R&D expenses may be lost and our business may suffer. Any of such risks could have a material and adverse effect on our revenue and profit margins and, therefore, our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Our efforts to expand in certain markets are subject to a variety of business, economic, legal and political risks. We manufacture our products in 17 countries and market and sell our products worldwide. We have expanded our operations in several countries, with a focus on the rapidly growing and emerging markets in our Asian segment, where we have production plants in China, India and South Korea and plan to open a plant in Thailand. In the future, we expect to generate a 28

47 greater percentage of our revenues from these fast growing markets by expanding our Asian and reorganizing our Mexican production capacities to meet growth expectations. We also have research and development ( R&D ) facilities near the major automotive centers worldwide, in the United States, Germany, Russia, South Korea and China. Potential social, political, legal, and economic instability may pose significant risks to our ability to conduct our business and expand our activities in certain markets. Inherent in our international operations is the risk that any number of the following circumstances could affect our operations: underdeveloped infrastructure; lack of qualified management or adequately trained personnel; currency exchange controls, exchange rate fluctuations and devaluations; changes in local economic conditions; governmental restrictions on foreign investment, transfer or repatriation of funds; protectionist trade measures, such as anti-dumping measures, duties, tariffs or embargoes; prohibitions or restrictions on acquisitions or joint ventures; changes in laws or regulations and unpredictable or unlawful government actions; the difficulty of enforcing agreements and collecting receivables through foreign legal systems; variations in protection of intellectual property and other legal rights; potential nationalization of enterprises or other expropriations without just compensation; and political or social unrest or acts of sabotage or terrorism. As personnel costs are a significant part of our business, we are also exposed to the risks of labor cost inflation and limited employment contract flexibility in the countries in which our production facilities are located and where we have sales personnel. Any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may be forced to restructure, downsize, close or sell some of our operations which could have an adverse effect on our profitability. The automotive industry (most notably Western Europe) continues to experience depressed production volumes and sales levels in certain geographic markets. In response to these conditions, some OEMs continue to explore further restructuring of their operations, which may include plant closures. As a result of such actions, certain of our customers may cut vehicle production or postpone vehicle programs, or in extreme cases take the step of cancelling or scaling back future product plans. Further, as OEMs follow a trend of localization of production in certain lower-cost countries, they have and/or may in the future close plants in certain locations while opening plants in new locations, requiring suppliers to follow this geographic migration. In the event that restructuring efforts by certain of our customers affect vehicle programs for which we supply or are scheduled to supply components, we may need to restructure or downsize our operations in order to align them with the evolving needs of our customers. In such an event, we may incur restructuring, downsizing and/or other significant non-recurring costs in our operations, which could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Additionally, if we are forced to close manufacturing locations because of loss of business or consolidation of manufacturing facilities, the employee severance, asset retirement and other costs, including reimbursement costs relating to public subsidies, to close these facilities may be significant. In certain locations that are subject to leases, we may continue to incur material costs consistent with the initial lease terms. We continually attempt to align production capacity with demand; therefore, we cannot assure you that additional plants will not have to be closed. Any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our 29

48 obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Risks related to our business operations We depend on a limited number of large OEMs for the sale of our products. Historically, the automotive industry has had a limited number of major global OEMs and this has led to a substantial percentage of our sales being made to a small number of customers. For example, for the nine months ended September 30, 2014, the Volkswagen group, the GM group and the Ford group accounted for approximately 22.3%, 21.2% and 16.5% of our revenues, respectively. Such large OEMs have substantial bargaining power with respect to price and other commercial terms. Our customers demand for price reductions drives us to a constant improvement of our production process to reduce cost. If we are not successful in making these improvements, our profit margin may be negatively affected. The timing and amount of sales to our OEM end-customers ultimately depend on factors that are beyond our control, i.e., sales levels and shipping schedules for the OEM products into which our products are incorporated. We cannot be certain that our OEM customers will continue to manufacture products that incorporate our products at current levels or at all. Failure of our OEM customers to achieve significant sales of products incorporating our products and fluctuations in the timing and volume of such product sales could be harmful to our business. Further, failure by these customers to inform us of changes to their production needs in a timely manner could also hinder our ability to effectively manage our business. Furthermore, if any of our OEM customers becomes insolvent, discontinues the business relationship with us or terminates a supply contract prematurely, the original investments made by us to provide such products or outstanding claims against such customer could be wholly or partially lost. Loss of all or a substantial portion of sales to any of our large OEM customers for whatever reason or a continued reduction of prices for products sold to these customers could have a significant adverse effect on our business, financial condition, and results of operations. In the nine months ended September 30, 2014, our top five customers represented approximately 78.0% of revenues. Factors that could cause such a loss of sales include loss of market share by these customers, termination of supply agreements and/or the failure to renegotiate new agreements or new terms, loss of contracts, insolvency, reduced or delayed customer requirements and plant shutdowns, strikes, or other work stoppages affecting production by such OEM customers. There can be no assurance that we will not lose all or a portion of sales to our large OEM customers or that we will be able to offset continued pricing pressure by these customers with reductions in costs. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We depend on a limited number of key suppliers for certain products. We require substantial amounts of raw materials, including oil derivatives and other petroleum-based products, polyurethane and fiber based materials, resins, nylon feedstock and electric power. We are subject to the risk that any or all of these materials may be unavailable or unavailable at affordable costs. Although our general policy is to source materials from multiple suppliers for each raw material, reliance on a single supplier cannot always be avoided and, consequently, we are dependent on certain suppliers. Furthermore, our suppliers or procurement teams may experience supply delays, cancellations, strikes, insufficient quantities or inadequate quality which could result in interruptions in production and, therefore, have a negative impact on our production capacity and lead to under-utilization of our production 30

49 sites, which in turn may cause delays in the delivery of products to our customers in these areas. If any one of our suppliers becomes unable to meet our delivery requirements for any reason (for example, due to insolvency, destruction of production plants or refusal to perform following a change in control), we may be unable to source input products from other suppliers upon short notice and/or at the required volume. Any such delay or failure of delivery by our suppliers could result in delaying our customers production schedule, which could result in loss of business and reputational damage to us. In addition, many of our OEM customers have approval rights with respect to the suppliers (and processes) used by us, limiting our ability to source input products from other suppliers upon short notice if the relevant OEM customer has not already approved such other suppliers. Any of these risks could lead to order cancellations or even claims for damages and could harm our long-term relationships with OEM customers, who may choose to select another supplier. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are exposed to fluctuations in prices of raw materials. Prices of certain raw materials and pre-constructed components we rely on are linked to commodity markets and thus subject to fluctuation. For the nine months ended September 30, 2014, our cost of materials from third party suppliers was e407.2 million. The prices of such raw materials have fluctuated significantly in recent years and such volatility in the prices of these products could increase the costs of manufacturing our products and providing our services. In addition, supply shortages or delays in delivery of raw materials can also result in increased costs. We do not actively hedge against the risk of rising prices of raw materials we purchase by using derivative financial instruments. Therefore, if we are not able to compensate for or pass on our cost increases to customers, such price increases could have a material adverse impact on our financial results. Even to the extent that we are successful in compensating for or passing on our increased costs to our customers by increasing prices, the positive effects of such price increases may not occur in the periods in which the additional expenses have been incurred, but in later periods. In that event, the price increases will not have a compensating effect for the periods in which the costs increased. If costs of raw materials continue to rise, and if we are not able to undertake cost saving measures elsewhere in our operations or increase the selling prices of our products, we may not be able to absorb such cost increases, which could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are exposed to risks associated with changes in currency exchange rates. We operate worldwide and are therefore exposed to financial risks that arise from changes in exchange rates. Currency exchange fluctuations could cause losses if assets denominated in currencies with a falling exchange rate lose value, while at the same time liabilities denominated in currencies with a rising exchange rate appreciate. In addition, fluctuations in foreign exchange rates could enhance or minimize fluctuations in the prices of materials, since we purchase a part of the raw materials which we source with foreign currencies. As a result of these factors, fluctuations in exchange rates could affect our results of operations. External and internal transactions involving the delivery of products and services to and/or by third parties result in cash inflows and outflows which are denominated in currencies other than the Euro or the functional currency of the respective subsidiary dealing with such cash flow. To the extent that cash outflows are not offset by cash inflows resulting from operational business in such currency, the remaining net foreign currency exposure is not hedged. 31

50 In addition, we are exposed to foreign exchange risks arising from external and internal loan agreements, which result from cash inflows and outflows in currencies other than the functional currency of our respective group member. Our net foreign investments are not hedged against exchange rate fluctuations. In addition, a number of our consolidated companies report their results in currencies other than the Euro, which requires us to convert the relevant items into Euro when preparing our consolidated financial statements. We do not currently hedge any of our foreign exchange risks. Although we may enter into certain hedging arrangements in the future, there can be no assurance that hedging will be available or continue to be available on commercially reasonable terms. In addition, if we were to use any hedging transactions in the future in the form of derivative financial instruments, such transactions may result in market-to-market losses. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. If we do not accurately estimate our costs associated with certain sales contracts, our results of operations may be materially and adversely affected. Sales contracts with our customers generally require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the contract and prices generally decline over a vehicle platform s life cycle. Unanticipated cost increases may occur as a result of several factors, including increases in the costs of labor, components or raw materials, and the costs that we incur in fulfilling these contracts may vary substantially from our initial estimates. Under certain sales contracts, we may not be permitted to pass through cost increases associated with specific materials to our customers. Cost overruns that we cannot collect from our customers could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may not realize all of the sales expected from awarded business or fully recover pre-production costs. The sales to be generated from awarded business are inherently subject to a number of risks and uncertainties, including the number of light vehicles produced, the timing of vehicle production and the mix of options our customers and the ultimate consumers may choose. Our typical sales contract permits our customers to unilaterally terminate our contracts with limited or no notice. Our ability to obtain compensation from our customers for such termination is generally limited to the direct out-of-pocket costs we have incurred for raw materials and work-in-progress and, in certain instances, unamortized investment costs. If we do not realize all of the sales expected from awarded business, our profitability and cash flows would be adversely affected. Typically, it takes around two years from the time an OEM awards a vehicle program until the program is launched and production begins. In many cases, we must commit substantial resources in preparation for production under awarded business well in advance of the customer s production start date. If we are unable to recover these types of pre-production costs, this could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. 32

51 Our Order Book may not be indicative of our future revenue. We disclose and discuss in this Offering Memorandum our estimated Order Book as of December 31, Our Order Book represents the sales that we expect to record in the event we receive firm production orders under contracts for vehicle programs that we have been awarded by OEMs including both those that are in production and those that are not yet in production, and is comprised of both new model incremental and successor model business. Order Book is not an accounting measure within the scope of IFRS, is not required to be included in this Offering Memorandum pursuant to IFRS, Italian-GAAP, or accounting standards of any other jurisdiction, and has not been audited or reviewed. Our Order Book as presented herein is an estimate only. Our customers generally do not guarantee purchase volumes (as volumes track market trends) and have the right to terminate orders without penalties, our actual sales volumes, and thus the ultimate amount of revenue that we derive from such sales, are not committed. If actual production orders from our customers are not consistent with the projections we use in calculating the amount of our Order Book, we could realize substantially less revenue over the life of the vehicle programs than our Order Book estimate. As a result of the above limitations, the amount of our estimated Order Book provided herein, does not purport to represent what our actual realized revenues will be over any future period and should not be considered in isolation, such information is based on available information and certain assumptions and estimates that we believe are reasonable but may differ materially from the actual amounts. You should not place undue reliance on our Order Book and our Order Book does not purport to represent our financial position as of September 30, 2014 or any other date, nor does it purport to project our revenue or financial position for any future period or at any future date. If we are unable to meet the levels projected in our Order Book, this could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. A disruption in our supply or delivery chain could cause one or more of our customers to halt production. Increasingly, we ship our products to customer vehicle assembly plants on a just in time basis in order for our customers to maintain low inventory levels. Our suppliers use a similar method in providing raw materials to us. The just in time method makes the logistics supply chain in our industry very vulnerable to disruptions. These disruptions may result from many reasons, including closures of supplier plants or critical manufacturing lines due to strikes, mechanical breakdowns, electrical outages, fire, explosions, as well as logistical complications resulting from weather or other natural disasters, mechanical failures and delayed customs processing. In addition, as we expand our global manufacturing footprint, we will need to rely on suppliers in local markets that have not yet proven their ability to meet our requirements. The lack of even a small single subcomponent necessary to manufacture one of our products, for whatever reason, could force us to cease production, even for a prolonged period. Similarly, a potential quality issue could force us to halt deliveries while we validate our products. Even where products are ready to be shipped, or have been shipped, delays may arise before they reach our customer. When we cease timely deliveries, we have to absorb our own costs for identifying and solving the cause of the problem, as well as expeditiously producing replacement products. If we are unable to deliver our products to our customers in a timely manner, our customers may be forced to cease production and may seek to recoup losses from us, which could be significant. Thus, any supply chain disruption could cause the complete shutdown of an assembly line of one of our customers, which could expose us to material claims for compensation and have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. 33

52 We may not be able to successfully execute our growth strategy of expanding in rapidly growing emerging markets. We have dedicated significant resources to enhance our local presence in emerging markets and intend to continue pursuing this growth strategy, particularly in Asia. However, should we be unable to secure sufficient funding to finance our development and growth activities in the future, we could lose our competitive position in these important and rapidly growing regional markets. Furthermore, if we invest in emerging markets that do not develop as expected, or that deteriorate due to economic, political or other reasons, and our customers do not succeed, all or part of these investments may be lost. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. The construction and maintenance of our facilities entails certain risks. Our development strategy will require us to build additional facilities and maintain them. The construction and maintenance of our facilities entails certain difficulties, both from a technical perspective as well as in terms of the timing of the various construction phases. A number of problems may arise in relation to our facilities, such as interruptions or delays due to failed deliveries by suppliers or manufacturers, problems with connecting to the utilities networks, construction faults, problems linked to the operation of equipment, adverse weather conditions, unexpected delays in obtaining or sourcing permits and authorizations, or longer-than-expected periods for technical adjustments. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Our future business success depends on our ability to maintain the high quality of our products and processes. For customers, one of the determining factors in purchasing our components and systems is the high quality of our products and manufacturing processes. A decrease in the actual or perceived quality of our products and processes could damage our image and reputation and also the image and reputation of one or more of our brands. In addition, defective products could result in loss of sales, loss of customers and loss of market acceptance or could damage our reputation and market perception, which in turn could have an adverse effect on our sales and results of operations. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may be unable to maintain our technological leadership and competitive cost structure. The markets for the products that we offer are characterized by rapidly changing technology, evolving technical standards, changes in customer preferences and the frequent introduction of new products. Our competitiveness in the future will depend, at least in part, on our ability to (i) keep pace with rapid technological developments and maintain technological leadership, (ii) develop and manufacture innovative products in a timely and cost-effective manner, (iii) attract and retain highly capable technical and engineering personnel, (iv) accurately assess the demand for, and perceived market acceptance of, new products that we develop and (v) maintain competitive cost structures with respect to all products that we manufacture. 34

53 Changes in competitive technologies may render certain of our products obsolete or less attractive, and to compete effectively we must be able to develop and produce new products or enhanced versions of existing products to meet our customers demands in a timely manner. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis is a significant factor in our ability to remain competitive. We could also face severe competition for potential future revenue streams if our competitors are able to patent certain innovations before we can do so. We may have to procure a license for the technology, which may not be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities in one or more respects. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense. If we fail to develop sufficient revenue streams covered by adequately robust intellectual property rights, we could lose market share and revenues to competitors. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Start-up costs and inefficiencies related to new products or programs can adversely affect our operating results and such costs may not be fully recoverable if new programs are cancelled. New programs that customers award us often entail material start-up costs with respect to the design, development and testing of the products to match the customer s specifications, as well as establishing additional production lines or new facilities where required. If we are unable to recoup start-up costs, manage our labor and equipment resources effectively in connection with the establishment of new programs and new customer relationships, or to correctly estimate required resources, our gross margins and results of operations could be adversely affected. These factors are particularly evident in the early stages of the life cycle of new products and new programs and in the opening of new facilities. These factors also affect our ability to efficiently use labor and equipment. In addition, if any of these new programs or new customer relationships were terminated or our existing customers shift their base of operations to a location where we do not have a manufacturing facility, our operating results could be adversely affected, particularly in the short term. We may not be able to adequately recover these start-up costs or replace anticipated revenues from any such new products or programs. We are required to obtain and maintain quality and product certifications for certain markets and customers. In some countries, certain certifications for products with regard to specifications and quality standards are necessary or preferred in order for these products to be accepted by customers and markets. As such, we need to be able to obtain and maintain the relevant certifications so that our customers are able to sell products which include components that are manufactured by us in such countries. In addition, some customers also require us to maintain certain standards and conduct inspections at regular intervals to ensure we maintain these standards. Although we are materially compliant with each of these certifications in the relevant jurisdictions and have not had any such certification revoked in the past, any failure to meet or maintain the requirements needed to secure or renew such certifications could result in a material adverse effect on our business, financial conditions and results of operations. We depend on our ability to secure sufficient funding for our research and development efforts. Developing new and improved products is very costly and therefore requires a substantial amount of capital funding. Our R&D costs expensed in our income statement amounted to 35

54 e10.1 million in the year ended December 31, 2013, e12.4 million in the year ended December 31, 2012 and e13.3 million in the year ended December 31, If we devote resources to the pursuit of new technologies and products that fail to be accepted in the marketplace or that fail to become commercially viable, all or part of these R&D expenses may be lost. The general lack of liquidity, caused by the disruptions in the financial markets and our current level of indebtedness, adversely impacts the availability and cost of additional credit for us and could adversely affect the availability of credit already arranged or committed. Should we be unable to secure sufficient funding to finance our development activities, we could lose our competitive position in a number of important and rapidly growing sub-markets. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We do not control certain of our joint ventures. We have a number of strategic partnerships and joint ventures and alliances. There can be no assurance that the arrangements will be successful and/or achieve their planned objectives. The performance of all such operations in which we do not have a controlling interest will depend on the financial and strategic support of the other shareholders. Such other shareholders may make ill-informed or inadequate management decisions, or may fail to supply or be unwilling to supply the required operational, strategic and financial resources, which could materially adversely affect these operations. If any of our strategic partners were to encounter financial difficulties, change their business strategies or no longer be willing to participate in these strategic partnerships, joint ventures and alliances, our business, financial condition and results of operations could be materially adversely affected. Moreover, in some of these businesses, we may not have the power to control the payment of dividends or other distributions, so even if the business is performing well, we may not be able to receive payment of our share of any profits. Finally, there could be circumstances in which we may wish or be required to acquire the ownership interests of our partners, and there can be no assurance that we will have access to the funds necessary to do so, on commercially reasonably terms or at all. Our operations depend on our ability to attract and retain qualified executives, key employees and skilled personnel. Our success depends on attracting and retaining managing directors, executive officers, senior management, key employees and other skilled personnel. The loss of executives, key employees and other skilled personnel could have a material adverse effect on our market position and ability to devise and implement a successful strategy. Due to intense competition within the industry, there is a risk of losing qualified employees to competitors or being unable to find a sufficient number of appropriate new employees. Considerable expertise could be lost or access thereto gained by competitors. There is no assurance that we will be successful in retaining our executives and the employees in key positions or in attracting new employees with corresponding qualifications. Although we try to retain the commitment of our qualified executives and key employees through performance-based remuneration systems, there is a risk that any such individuals will leave us. The success of our operations and growth strategy will also depend on attracting and retaining qualified personnel (including the need to identify, recruit, train and integrate additional employees) maintaining our high quality standards and implementing our standardized process and quality management globally. 36

55 We currently do not have a group chief financial officer. There can be no assurance that we will be successful in hiring an experienced chief financial officer. If we hire a chief financial officer, there is no assurance on our ability to effect a smooth transition into his new role. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Our business could be adversely impacted by strikes and other labor disputes. Over the past several years, our industry and the industries in which our customers operate have experienced strikes, lockouts, refusals to work or plant seizures. Although in the recent past we have not and at present we are not experiencing any labor disputes, our relationships with our employees and our unions at our various locations could deteriorate in the future and we could experience strikes, unionization efforts or other types of conflicts with labor unions or our employees. In connection with our cost savings initiatives, we could experience friction with labor unions or our employees. In addition, many of our customers and our suppliers also have unionized workforces. Refusals to work or work downtime experienced by our customers or our other suppliers could result in delays, decreased productivity or closures of assembly plants where our products are needed for assembly. This could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Increasing labor costs in various jurisdictions in which we operate may adversely affect us. Increasing labor costs in certain lower-cost countries in which we operate such as China, Brazil and Mexico may erode our profit margins and compromise our price competitiveness. Historically, the low cost of labor in China, Brazil and Mexico had increased our margins, but recent wage increases have increased average wage expenses per employee. Although we undertake various incentive programs to improve the productivity of our employees, as well as low-cost automation initiatives designed to reduce labor costs, these measures may be insufficient to offset increases in overhead costs and we may be unable to effectively manage these increases in the future. As a consequence, our business, financial condition and results of operations may be adversely affected. Our operations rely on complex IT systems and networks. We rely heavily on centralized, standardized information technology systems and networks to support business processes, as well as internal and external communications. These systems and networks are potentially vulnerable to damage or interruption from a variety of sources or to security threats. An extended outage in a data center or telecommunications network utilized by our systems, any security or breaches or any similar event could lead to an extended unanticipated interruption of our systems or networks. The realization of any risks related to our IT system and network disruptions could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We could be adversely affected by property loss and unforeseen business interruption. Damage and loss caused by fire, accidents, natural disasters, terrorism, political unrest, enhanced national security measures, conflicts, strained international relations, severe weather or other disruptions of our production process at our facilities or within our supply chain, with respect to customers and with suppliers, can be severe. In 2014, for example, a fire occurred in our Thomson, Georgia plant and a plane crashed into our Saltillo, Mexico plant, each of which caused some property damage. Such risks arising from business interruption and loss of production are insured at levels considered economically reasonable by us, but our insurance 37

56 coverage could prove insufficient in individual cases. Furthermore, such events could injure or kill individuals or damage or destroy third party property or the environment, which could, among other things, lead to considerable financial costs for us. In addition, our manufacturing processes are dependent on critical pieces of manufacturing equipment that may, on occasion, be out of service as a result of unanticipated failures, which may result in production bottlenecks and breakdowns. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. If we are unable to satisfy our significant operating lease obligations, or if our lease agreements do not comply with certain statutory provisions, our business would be materially and adversely impacted. We lease several of our manufacturing facilities (including our headquarters in Witten) and certain capital equipment. Our lease expense under these operating leases was e13.1 million for the twelve months ended September 30, A failure to pay our lease obligations would constitute a default allowing the applicable landlord or lessor to pursue remedies available to it under our leases and applicable law, which could include taking possession of property that we utilize in our business and, in the case of facility leases, evicting us. In addition, the applicable landlord or lessor may terminate the respective lease agreements before the end of the agreed lease term or lease agreements could be declared void if they do not comply with certain statutory provisions. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Any acquisitions we make could disrupt and materially harm our business. We may make investments or acquisitions in the future that we believe present opportunities for growth and strengthening of our business, including by adding technological capabilities, improving our operational efficiencies including through the reorganization of our group or enhancing our geographical presence or customer relationships. Such investments and acquisitions involve a number of risks, including: difficulties in the integration of the acquired businesses; the diversion of our management s attention from other business concerns; uncertainties in assessing the value, strengths and potential profitability of, and identifying the extent of all weaknesses of, acquisition candidates; the assumption of unknown liabilities, including environmental, tax, pension and litigation liabilities, and undisclosed risks impacting the target; adverse effects on existing customer and supplier relationships; incurrence of substantial indebtedness; potentially dilutive issuances of equity securities; integration of internal controls; entry into markets in which we have little or no direct prior experience; the potential loss of key customers, management and employees of an acquired business; potential integration or restructuring costs; 38

57 the ability to achieve operating and financial synergies; and unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition. We cannot ensure that we will be able to successfully integrate acquisitions that we undertake or that such acquisitions will perform as planned or prove to be beneficial to our business and results of operations. The occurrence of any one or more of these factors could cause us not to realize the benefits anticipated to result from an acquisition and could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are subject to risks related to our global operations. Our global operations include manufacturing facilities in Argentina, Belgium, Brazil, China, the Czech Republic, Germany, India, Italy, Mexico, Poland, South Korea, Spain, Romania, Russia, Turkey, the United Kingdom and the United States. We currently market and distribute our products and services principally in each of these areas, as well as a few other countries. Our future revenue growth depends upon the successful operation of our manufacturing facilities, the efficiency of our delivery and distribution system and the successful management of our sales, marketing, support and service teams through direct and indirect channels in various countries around the world where our current or potential OEM customers are located. The expansion of our business has required, and we expect will continue to require, that we establish new offices, manufacturing facilities, hire new personnel and manage businesses in widely disparate locations with different economies, legal systems, languages and cultures. Our global operations are subject to various risks that could have a material adverse effect on those operations and our business as a whole, including: exposure to local economic conditions; exposure to local political conditions, including expropriation and nationalization by a government; compliance with U.S. Department of Commerce export controls or export control provisions of other jurisdictions, including the European Union and China; transport availability and costs; changes in tax law; unexpected changes in regulatory requirements; exposure to liabilities under the U.S. Foreign Corrupt Practices Act, the UK Bribery Act 2010 or similar regulations; government imposed investment and other restrictions or requirements; exposure to local social unrest, including any resultant acts of war, terrorism or similar events; exposure to local public health issues and the resultant impact on economic and political conditions; currency exchange rate and interest rate fluctuations; hyperinflation in certain countries; increased reliance on local suppliers that have not proven their ability to meet our requirements; the risk of government-sponsored competition; 39

58 difficulty enforcing agreements and collecting receivables through certain legal systems; variations in protection of intellectual property and other legal rights; more expansive legal rights of labor unions; social plans that prohibit or make cost-prohibitive certain restructuring actions; controls on the repatriation of cash, including the imposition or increase of withholding and other taxes on remittances and other payments by non-u.s. subsidiaries; and export and import restrictions (such as antidumping duties, tariffs and embargoes). As we intend to continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our global operations. However, any of these factors could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are exposed to risks in relation to compliance with anti-corruption laws and regulations and economic sanction programs. Doing business on a worldwide basis requires us to comply with the laws and regulations of various jurisdictions. Our international operations are subject to applicable anti-corruption laws and regulations and economic sanction programs (collectively, Sanctions ). Economic sanctions programs may restrict our business dealings with certain sanctioned countries. As a result of doing business in foreign countries, we are exposed to a risk of violating anti-corruption laws and Sanctions regulations applicable in those countries where we, our partners or agents operate. Our continued expansion and worldwide operations, including the employment by us of local agents in the countries in which we operate increase the risk of violations of anti-corruption laws or similar laws. Violations of anti-corruption laws and Sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, any major violations could have a significant material adverse impact on our reputation and consequently on our ability to win future business and on our business, financial condition or results of operations. Although we believe that we have adequate systems of control, we seek to continuously improve our systems of internal controls and to remedy any weaknesses we identify through appropriate corrective action depending on the circumstances. There can be no assurance, however, that our policies and procedures will be followed at all times or effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents or partners and, as a result, we could be subject to penalties and material adverse consequences on our business, financial condition or results of operations if we failed to prevent any such violations. We may not be adequately insured. We currently have insurance arrangements in place for products and public liability, property damage, business interruption (including for sudden and unexpected environmental damage). These insurance policies may not, however, cover any losses or damages resulting from the materialization of any of the risks we are subject to. Further, significant increases in insurance premiums could reduce our cash flow. It is also possible in the future that insurance providers may no longer wish to insure businesses in our industry against certain environmental occurrences. Any such event could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill 40

59 our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. The interests of our shareholders may be inconsistent with the interests of holders of the Notes. We are an indirect majority-owned subsidiary of Adler Plastic through Adler Group. Adler Plastic owns 60.9% of the share capital of Adler Group and Simest owns the remaining 39.1%. Adler Plastic is wholly owned by individuals belonging or related to the Scudieri family, which holds 100% of our share capital. The interests of our indirect shareholders, in certain circumstances, may conflict with your interests as holders of the Notes. Under certain arrangements between Adler Group and Simest, Simest has a put right towards Adler Plastic for the sale of their interest in Adler Group which they could exercise at their own discretion. Our indirect shareholders have, and will continue to have, directly or indirectly, the power, among other things, to affect our legal and capital structure and our day-to-day operations, the payment of dividends, asset sales and other significant corporate transactions as well as the ability to elect and change our management and to approve any other changes to our operations. The interests of our indirect shareholders could conflict with your interests as holders of the Notes, particularly if we encounter financial difficulties or are unable to pay our debts when due. Our indirect shareholders could also have an interest in pursuing acquisitions, divestitures, financings, dividend distributions or other transactions that, in their judgment, could enhance their equity investments although such transactions might involve risks to the holders of the Notes. Our indirect shareholders may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. See Principal Shareholder. We have entered into, and will continue to enter into, related party transactions, and there can be no assurance that we could not have achieved more favorable terms had such transactions not been entered into with related parties. We have entered into transactions with several related parties. These agreements include loan agreements entered into with certain of our shareholders and contracts for the provision of components, raw materials and tooling from certain related entities. While we believe that all such transactions have been conducted on an arms-length basis, there can be no assurance that we could not have achieved more favorable terms had such transactions not been entered into with related parties. Furthermore, it is likely that we will enter into related party transactions in the future. The transactions we have entered into and any future transactions with our related parties have involved or could potentially involve conflicts of interest. These related party transactions include sales and purchases of goods, rendering of services, sales and purchases of fixed assets, payments of dividends, the making and borrowing of loans and capital advances. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our business, financial condition and results of operations. See Certain Relationships and Related-Party Transactions. Risks related to our financial position Our high leverage and debt service obligations could have a material adverse effect on our business and may make it difficult for us to service our debt, including the Notes, and operate our business. As of September 30, 2014, on a pro forma basis after giving effect to the Offering and the use of proceeds therefrom, we would have had approximately e322.0 million of total debt on a consolidated basis. Our level of indebtedness could have important consequences for investors in the Notes, which could intensify if we incur additional debt. For example, it could: make it more difficult for us to satisfy our obligations with respect to our indebtedness; increase our vulnerability to adverse economic and industry conditions; 41

60 require us to dedicate a substantial portion of cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund working capital needs, capital expenditures or R&D work according to cash flow, future acquisitions and other general corporate needs; limit our flexibility in planning for, or especially in reacting to, changes in our business and the industry in which we operate; cause customers to develop a negative perception of our solvency; place us at a significant competitive disadvantage compared to our competitors with less debt and/or more equity on their balance sheets; and limit our ability to borrow additional funds. In the past, the Company, under the direction of its prior shareholder and management, defaulted on a loan extended by Goldman Sachs and was ultimately acquired by a syndicate of lenders led by Goldman Sachs and Silver Point. See Business History. The terms of our financing arrangements restrict our current and future operations, particularly our ability to respond to changes or to take certain actions. Certain of our existing financing arrangements, including the Indenture and the Credit Suisse Credit Note, as well as future financing arrangements, contain or will contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to: incur or guarantee additional indebtedness and issue certain preferred stock; make certain payments, including dividends or other distributions, with respect to the shares of such entity; create or incur certain liens; prepay or redeem subordinated debt or equity; make certain investments; sell, lease or transfer certain assets, including stock of Restricted Subsidiaries; create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to, and on the transfer of, assets to such entity; engage in certain transactions with affiliates; enter into arrangements that restrict dividends or other payments to us; create Unrestricted Subsidiaries; enter into transactions with affiliates; consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis; and impair the security interests created for the benefit of the holders of Notes. The covenants in the Indenture are subject to important exceptions and qualifications, which are described under Description of the Notes. If we fail to comply with any of these covenants or representations or if a change of control occurs, and we are unable to obtain a waiver from the respective creditors, a default could 42

61 result under the relevant debt instrument, which then could be declared to be immediately due and payable and/or would become immediately due and payable. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Due to our high level of debt we face potential liquidity risks. Our cash from operating activities, current cash resources, existing sources of external financing and the proceeds from the issue and sale of the Notes could be insufficient to meet our further capital needs, especially if our sales decrease significantly. Furthermore, future disruptions in the financial markets, including the bankruptcy, insolvency or restructuring of a number of financial institutions, and the generally restricted availability of liquidity could adversely impact the availability and cost of additional financing for us and could adversely affect the availability of financing already arranged or committed. Our liquidity could also be adversely impacted if our suppliers tighten terms of payment as the result of any decline in our financial condition or if our customers were to extend their normal payment terms. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are exposed to risks in connection with interest rate changes. We are exposed to risks associated with changes in variable interest rates, as certain of our credit facilities may bear interest at a floating rate. An increase or decrease in interest rates would affect our current interest expenses and our future refinancing costs. We do not currently hedge against interest rate fluctuations. Although we may enter into certain hedging arrangements in the future, there can be no assurance that hedging will be available or continue to be available on commercially reasonable terms. In addition, if we were to use any hedging transactions in the future in the form of derivative financial instruments, such transactions may result in market-to-market losses. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may have to repay investment grants and subsidies, or previously awarded investment grants may not be disbursed in part or at all. A part of our investment requirements for developing and expanding our production capacity is covered by public aid, such as subsidies, loans at favorable conditions or tax reductions or exemptions. The decisions on granting public aid received by us contain various conditions such as the creation of jobs or specific research and development activities. If these conditions are not fulfilled during the commitment period, which generally exceeds the specified investment period, this could result in a repayment claim by the relevant authorities for the public aid received by us. During the commitment period, such conditions may no longer be satisfied and we could be subsequently exposed to considerable repayment claims. This could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. 43

62 Legal, taxation and environmental risks We are exposed to warranty and product liability claims. As a manufacturer, we are subject to product liability lawsuits and other proceedings alleging violations of due care, violation of warranty obligations, treatment errors, safety provisions and claims arising from breaches of contract, recall actions or fines imposed by government or regulatory authorities. In view of the large amounts of products manufactured and distributed to a variety of customers in the automotive sector, we are particularly from time to time faced with liability claims related to actual or potentially deficient charges of our products and may therefore be held liable in cases of damage caused by a defective product manufactured by us. Any such lawsuits, proceedings and other claims could result in increased costs for us. In addition, defective products could result in loss of revenue, loss of customers, and loss of market acceptance, in particular against the background that many of our products are components which often have a major impact on the overall safety, durability and performance of our customers end-product, and could lead to cost of repair and replacement. The risks arising from such warranty and product liability lawsuits, proceedings and other claims are insured up to levels we consider economically reasonable, but the insurance coverage could prove insufficient in individual cases. Additionally, any major defect in one of our products could also have a material adverse effect on our reputation and market perception, which in turn could have a significant adverse effect on our revenue and results of operations. In addition, vehicle manufacturers are increasingly requiring a contribution from, or indemnity by, their suppliers for potential product liability, warranty and recall claims and we have been subject to continuing efforts by our customers to change contract terms and conditions concerning warranty and recall participation. Furthermore, we manufacture many products pursuant to OEM customer specifications and quality requirements. If the products manufactured and delivered by us do not meet the requirements stipulated by our OEM customers at the agreed date of delivery, production of the relevant products is generally discontinued until the cause of the product defect has been identified and remedied. Furthermore, our OEM customers could potentially bring claims for damages on the basis of breach of contract, even if the cause of the defect is remedied at a later point in time. In addition, failure to perform with respect to quality requirements could negatively affect the market acceptance of our other products and our market reputation in various market segments. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We are subject to risks from legal, administrative and arbitration proceedings. Our group companies are involved in legal, administrative and arbitration proceedings and could become involved in additional legal, administrative and arbitration proceedings. These proceedings or potential proceedings could involve, in particular in the United States, substantial claims for damages or other payments. Based on a judgment or a settlement agreement, we could be obligated to pay substantial damages. Our litigation costs and those of third parties could also be significant. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. 44

63 We are being investigated in Germany in relation to anticompetition law matters, the outcome of which could result in fines and related damage claims. We are currently under investigation by the competition authorities in Germany in relation to potential competition law violations. On May 16, 2013, the Bundeskartellamt (the German antitrust authority) commenced an investigation against HP Pelzer Holding GmbH for alleged anticompetitive practices in the automotive market and automotive parts industry before the acquisition of the Company by Adler Plastic S.p.A. At the date of this Offering Memorandum, the procedure is at an early investigatory stage and it is not possible to provide a reliable assessment of risk. Due to the fact-intensive nature of the issues involved and the inherent uncertainty of such investigation, we cannot provide any assurance that there would be no allegation of improper conduct, adverse ruling, formal proceeding or penalty in connection with this investigation. Any future adverse ruling in any potential proceedings could subject us to administrative penalties and could lead to awards for civil damages, which could be substantial depending on the facts and circumstances. A successful antitrust law challenge in Germany could result in the imposition of fines of up to a maximum of 10% of our worldwide annual group revenue. In addition to administrative and civil damages, any adverse outcome of future litigation or proceedings could result in reputational damage for our business, restrict our ability to conduct or expand our operations in certain countries, result in loss of key employees or customer relationships. Furthermore, we cannot provide any assurance that competition authorities in other countries will not initiate similar or other investigations or proceedings against other members of our Group operating in those other countries. Any such adverse development could have material adverse effects on our business, results of operations or financial condition. We could be unsuccessful in adequately protecting our intellectual property and technical expertise. Our products and services are highly dependent upon our technological know-how and the scope and limitations of our proprietary rights therein. We regularly apply for and have been granted intellectual property rights with respect to our innovations, such as our 21 worldwide patents, which are of considerable importance to our business. The process of seeking patent protection can be lengthy and expensive. Furthermore, patents may not be granted on currently pending or future applications or may not be of sufficient scope or strength to provide us with meaningful protection or a commercial advantage. In addition, while there is a presumption that patents are valid, the granting of a patent does not necessarily imply that it is effective or that possible patent claims can be enforced to the degree necessary or desired. Further, our competitors, suppliers, customers and other third parties also submit a large number of intellectual property protection applications. Such other parties could hold effective and enforceable intellectual property rights to certain processes, methods or applications and consequently could assert infringement claims (including illegitimate ones) against us. A part of our know-how and industrial secrets is not patented and cannot be protected through intellectual property rights. Consequently, there is a risk that third parties, in particular competitors, will copy our know-how without incurring any expenses of their own. In addition, we have entered into a number of license, cross-license, cooperation and development agreements with our customers, competitors and other third parties under which we are granted access to intellectual property or know-how of such third parties. It is possible that license agreements could be terminated under circumstances such as a licensing partner s insolvency or bankruptcy or in the event of a change of control in either party, leaving us with reduced access to intellectual property rights to commercialize our own technologies. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. 45

64 There is a risk that we infringe intellectual property rights of third parties. Our competitors, suppliers and customers also submit a large number of inventions for intellectual property protection. It is not always possible to determine with certainty whether there are effective and enforceable third party intellectual property rights to certain processes, methods or applications. In addition, where we incorporate an individual customer s input to create a product that responds to a particular need, we face the risk that such customer will claim ownership rights in the associated intellectual property. Therefore, third parties could assert infringement claims (including illegitimate ones) against us. As a result, we could be required to cease manufacturing, using or marketing the relevant technologies or products in certain countries or be forced to make changes to manufacturing processes or products. In addition, we could be liable to pay compensation for infringements or could be forced to purchase licenses to make use of technology from third parties. This could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may incur additional costs as a result of industry collective bargaining agreements applicable to our employees. If industry collective bargaining agreements which apply to us are amended to the effect that they foresee higher benefits for employees in the future, this may lead to higher employment costs and higher social security contributions for the past and future with regard to our employees being subject to such collective bargaining agreements. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. The international scope of our operations and our corporate and financing structure may expose us to potentially adverse tax consequences. We are subject to taxation in, and to the tax laws and regulations of, multiple jurisdictions as a result of the international scope of our operations and our corporate and financing structure. We are also subject to intercompany pricing laws, including those relating to the flow of funds among our companies pursuant to, for example, purchase agreements, licensing agreements or other arrangements. Adverse developments in these laws or regulations, or any change in position by the relevant authority regarding the application, administration or interpretation of these laws or regulations in any applicable jurisdiction, could adversely affect our business, results of operations and financial condition or on our ability to service or otherwise make payments on the Notes and our other indebtedness. In addition, the tax authorities in any applicable jurisdiction may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions, including the tax treatment or characterization of our indebtedness, including the Notes, payments or other distributions to our shareholder, existing and future intercompany loans and guarantees or the deduction of interest expenses. We could also fail, whether inadvertently or through reasons beyond our control, to comply with tax laws and regulations relating to the tax treatment of various of our financing arrangements, which could result in unfavorable tax treatment for such arrangements. If any applicable tax authorities were to successfully challenge the tax treatment or characterization of any of our intercompany loans or transactions, it could result in the disallowance of deductions, limit our ability to deduct interest expenses, the imposition of withholding taxes, the application of significant penalties and accrued interest on intercompany loans or internal deemed transfers, the application of significant penalties and accrued interest or other consequences that could have a material and adverse effect on our business, financial condition and results of operations, which could in 46

65 turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We could be subject to tax risks attributable to previous tax assessment periods. We could accrue unanticipated tax expenses in relation to previous tax assessment periods which have not yet been subject to a tax audit or are currently subject to a tax audit. We set up certain tax provisions to address identifiable risks in respect of uncertain tax audit risks. Thus, we believe that the current amount of provisions and liabilities shown in our consolidated financial statements properly reflects the potential exposure from tax audits. We have not been made aware by a tax auditor of any significant findings which would not be covered by the tax provisions and liabilities for which we have accounted. Nevertheless, it cannot be ruled out that ongoing and/or future tax audits may lead to an additional tax expense and/or payment, which could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. The Company is affected by the German interest barrier rules. A significant amount of the annual refinancing expenses (interest payments and further expenses which may qualify as interest expenses within the meaning of the interest barrier rules) may not be (immediately) deductible for tax purposes under the German interest barrier rules (Zinsschranke). The interest barrier rules generally provide for a limitation on the deduction of a business net interest expenses in a financial year to an amount equal to 30% of its tax adjusted EBITDA in the respective financial year. This may have an adverse effect on our financial situation and thus on our ability to fulfill our obligations under the Notes and could cause the market price of the Notes to decline. We could be held liable for soil, water or groundwater contamination or for risks related to hazardous materials. Many of the sites at which we operate have been used for industrial purposes for many years, leading to risks of contamination and the resulting site restoration obligations for us. In addition, we could be held responsible for the remediation of offsite areas impacted by our sites. Regulatory authorities could assert claims against us, as the owner, the former owner or tenant of the affected sites or as the party that caused or contributed to the contamination, for the investigation or remediation or containment of such soil or groundwater contamination, or order us to dispose of or treat contaminated soil excavated or water encountered in the course of construction. We could also be liable to the owners of sites leased by us, sites we sell, or other impacted properties. Costs typically incurred in connection with such claims are generally difficult to predict. Also, if any contamination were to become a subject of public discussion, there is a risk that our reputation or relations with our customers could be harmed. Furthermore, at some of the sites at which we operate, hazardous materials were used in the past, such as asbestos-containing building materials used for heat insulation. The health and safety of third parties (such as former employees) may have been affected due to the use of such hazardous materials and we could therefore be exposed to related damage claims in the future. We face similar risks with respect to former sites which we sold in the past. Even if we have contractually excluded or limited our liability in connection with the sale of such properties, we could be held responsible for liabilities outside of the limits or to parties not bound by a contract, such as regulators or the person exposed to hazardous materials. We cannot entirely exclude that several of the chemicals we use may be classified as substances of very high concern ( SVHC ) in the future and will become subject to restrictions on use or 47

66 are prohibited, so that we must replace these substances which may have a financial impact on our business operations. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Our operations are subject to stringent laws and regulations, particularly under applicable environmental laws. The nature of our business subjects us to significant government regulation, including, but not limited to, increasingly stringent environmental laws and regulations in most jurisdictions where we operate. Such laws and regulations also require permits or authorizations to be obtained and reports and forms to be completed and delivered, inter alia, to the competent authorities in connection with the operations of our business. This regulatory framework imposes on us significant day-to-day compliance burdens, costs and risks. In particular, violation of such laws and regulations may give rise to significant liability, including, but not limited to, fines and penalties, monetary and reputational damages, third party liabilities, limitations on our business operations and site closures, and there can be no assurance that we have been and will be in material compliance with all applicable laws and regulations governing the protection of the environment and human health, including but not limited to regulations concerning employee health and safety. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. We may face risks relating to climate change that could have an adverse impact on our business. Greenhouse gas emissions have increasingly become the subject of substantial international, national, regional, state and local attention. Greenhouse gas emission regulations have been promulgated in certain of the jurisdictions in which we operate, and additional greenhouse gas requirements are in various stages of development. For example, the United States Congress has considered legislation that would establish a nationwide limit on greenhouse gases. In addition, the U.S. Environmental Protection Agency has issued regulations limiting greenhouse gas emissions from mobile and stationary sources pursuant to the U.S. Clean Air Act. When effective, such measures could require us to modify existing or obtain new permits, implement additional pollution control technology, curtail operations or increase our operating costs. In addition, our OEM customers may seek price reductions from us to account for their increased costs resulting from greenhouse gas regulations. Further, growing pressure to reduce greenhouse gas emissions from mobile sources could reduce automobile sales, thereby reducing demand for our products and ultimately our revenues. Thus, any additional regulation of greenhouse gas emissions, including through a cap-and-trade system, technology mandate, emissions tax, reporting requirement or other program, could adversely affect our business, results of operations, financial condition, reputation, product demand and liquidity. We could become subject to additional burdensome environmental, safety or other regulations and additional regulation could adversely affect demand for our products and services. We must comply with different regulatory regimes across the world that change frequently and are continuously evolving and becoming more stringent, in particular with respect to environmental regulations, chemicals and hazardous materials, as well as health regulations. This applies also to air, water and soil pollution regulations and to waste legislation, all of which have recently become more stringent through new laws, in particular, but not limited to, in the EU and the United States. In addition, for our sites and operations, we require various 48

67 permits and we have to comply with the requirements specified therein. In the past, adjusting to new requirements has required significant investments and we assume that further significant investments in this regard will be required in the future. We cannot exclude that our European manufacturing sites, and our German site in particular, may fall within the scope of the requirements of Directive 2010/75/EU on industrial emissions (the Industrial Emissions Directive or IED ). Our operations might be continued with technical adaptation of our installations only. Furthermore, any additional regulation restricting or limiting car traffic with an aim at reducing carbon emissions could lead to a material decrease in car sales and consequently adversely affect demand for our products and services. In numerous markets important to us, governments introduced scrappage programs in 2009 (such as the Car Allowance Rebate System in the United States and the Car Scrappage Bonus (Umweltprämie) in Germany) intended to provide economic incentives to car owners to trade in older vehicles and purchase new ones. Most of these programs designed to stimulate the economy by boosting vehicle sales have lapsed. As these scrappage programs may have led to increased sales by bringing forward potential demand from later years rather than adding incremental demand in the relevant markets, vehicle sales may decline in the short term with likely negative consequences for production volumes on which we depend. Increasing taxes reducing the income available for consumption may also weaken the global demand in the automotive markets. Tax increases are a likely reaction of the national governments (especially of the EU member states) to the increase of national debt resulting from the various bailout programs set up for banks or, most recently, the stabilization package for EU member states. The realization of any of these risks could have a material and adverse effect on our business, financial condition and results of operations, which could in turn adversely affect our ability to fulfill our obligations under the Notes and the Note Guarantees or cause the market price of the Notes to decline. Risks related to the Notes, the Note Guarantees and the Collateral We are a holding company and will depend on cash from the operating companies of the Group to be able to meet our obligations under the Notes. We are a holding company and conduct limited operations of our own. Repayment of our indebtedness, including under the Notes, is dependent on the ability of our subsidiaries to make cash available to us, by dividend distributions, debt repayment, loans or otherwise. Our subsidiaries may not be able to, or may be restricted by the terms of their existing or future indebtedness, or by law, in their ability to make distributions or advance upstream loans to enable us to make payments in respect of our indebtedness, including the Notes. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the Indenture will limit the ability of certain of our subsidiaries to incur contractual restrictions on their ability to pay dividends or make other intercompany payments to us, such limitations are subject to certain significant qualifications and exceptions. In addition, our subsidiaries that do not guarantee the Notes have no obligation to make payments with respect to any of the Notes. In the event that we do not receive distributions or other payments from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the Notes. We may not be able to generate sufficient cash flows to meet our debt service obligations. Our ability to make scheduled payments on, or to refinance, our obligations with respect to our indebtedness, including the Notes, will depend on our financial and operating 49

68 performance, which in turn will be affected by general economic conditions and by financial, competitive, regulatory and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of capital will be available to us in an amount sufficient to enable us to service our indebtedness, including the Notes, or to fund our other liquidity needs. If we are unable to generate sufficient cash flow to satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold or, if sold, of the timing of the sales and the amount of proceeds that may be realized from those sales, or that additional financing could be obtained on acceptable terms, if at all. The Indenture will restrict our ability to dispose of assets and use the proceeds from the disposition. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms, would materially and adversely affect our financial condition and results of operations and our ability to satisfy our obligations under the Notes. Despite our high level of indebtedness, we and our subsidiaries may be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness. We may be able to incur significant additional debt in the future. Although our financing agreements and the Indenture contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions, and debt incurred in compliance with these restrictions could be substantial or secured. Under the Indenture, in addition to specified permitted indebtedness, we will be able to incur additional indebtedness so long as on a pro forma basis certain financial ratios are complied with. See Description of the Notes Certain covenants. Incurring such additional debt could further increase the related risks we now face, as described above. Not all of the Company s subsidiaries will guarantee the Notes and the Notes will be structurally subordinated to indebtedness of non-guarantor subsidiaries and, to the extent of the limitations on enforceability of Note Guarantees, also to indebtedness of Guarantors that is not subject to such limitations. Some, but not all, of the subsidiaries of the Company will guarantee the Notes and future subsidiaries of the Company will not guarantee the Notes other than in certain circumstances required by the Indenture. See Description of the Notes Certain covenants Limitation on issuances of Guarantees of Indebtedness. In the event of a liquidation, winding-up or dissolution or a bankruptcy, administration, reorganization, insolvency, receivership or similar proceeding of any subsidiary that does not provide a guarantee in favor of the Notes, such non-guarantor subsidiaries will pay the holders of their own debt (including holders of third party debt which such subsidiaries have guaranteed), their trade creditors and any preferred shareholders before they would be able to distribute any of their assets to the Company or the Guarantors. As a result of the foregoing, the Notes and the Note Guarantees will be structurally subordinated to all claims of creditors (including trade creditors) and preference shareholders (if any) of all of the subsidiaries to all Company that do not guarantee the Notes. The Company and the Guarantors may not have sufficient assets remaining to make payments on the Notes or the Note Guarantees, respectively. As of September 30, 2014, the non- Guarantor subsidiaries had e32.8 million in financial indebtedness on a combined basis. As described under Fraudulent conveyance laws and other limitations on the enforceability and the amount of the Note Guarantees and the Collateral may adversely affect their validity and enforceability the enforcement of the Note Guarantees will be subject to significant contractual limitations and restrictions that are typical for upstream or cross-stream guarantees. To the extent that any debt or other payment obligation of a Guarantor is not also subject to such limitations and restrictions, such debt and other obligations would also be structurally senior to the Notes and the respective Note Guarantee. 50

69 The claims of the holders of the Notes will be effectively subordinated to the rights of our existing and future secured creditors to the extent of the value of the collateral securing the relevant indebtedness. Although the Indenture restricts the Company s and its subsidiaries ability to provide asset security for the benefit of other debt, both the restriction on incurring liens and the requirement to provide equal security to the Notes are subject to a number of significant exceptions and carve-outs. For example, if the Company or its subsidiaries acquire assets subject to security interests securing other indebtedness, such security interests are grandfathered by the Indenture and will not trigger a requirement to secure the Notes or the Note Guarantees equally. To the extent the Company or any of its subsidiaries provides asset security for the benefit of other debt without also securing the Notes and the Note Guarantees, the Notes and the Note Guarantees will be effectively junior to such debt to the extent of the value of such assets. As a result of the foregoing, holders of our (present or future) secured debt may recover disproportionately more on their claims than the holders of the Notes in an insolvency, bankruptcy or similar proceeding. The Company and the Guarantors may not have sufficient assets remaining to make payments on the Notes or the Note Guarantees, respectively. Fraudulent conveyance laws and other limitations on the enforceability and the amount of the Note Guarantees and the Collateral may adversely affect their validity and enforceability. The Note Guarantees and the Collateral may be subject to claims or could be limited or subordinated in favor of the relevant Guarantor s or relevant Collateral grantor s existing and future creditors under applicable laws. In addition, enforcement of each Note Guarantee will be limited to the extent of the amount which can be guaranteed by a particular Guarantor without rendering the guarantee voidable or otherwise ineffective under, or contrary to, applicable law and enforcement of the Collateral will be limited to the extent of the amount which can be secured by a particular security grantor without rendering the security interest voidable or otherwise ineffective under, or contrary to, applicable law and to avoid certain significant costs associated with taking certain security interests. Enforcement of any of the Note Guarantees or the Collateral against any Guarantor and any grantor of Collateral will also be subject to certain defenses available to guarantors and grantors of security interests generally. These laws and defenses include, primarily with respect to Guarantors, those that relate to fraudulent conveyance or transfer, insolvency, voidable preference, financial assistance, corporate purpose or benefit, preservation of share capital, thin capitalization and defenses affecting the rights of creditors generally. Although laws differ among various jurisdictions, in general, under fraudulent conveyance and similar laws, a court could subordinate or void any guarantee or security interest provided by such guarantor or security grantor if it found that: the guarantee was incurred or the security interest granted with actual intent to hinder, delay or defraud creditors or shareholders of the respective guarantor or security grantor; the relevant guarantor or security grantor did not receive fair consideration or reasonably equivalent value for the guarantee or the security interest granted, and the relevant guarantor or security grantor: (i) was insolvent, became insolvent within a certain time frame or was rendered insolvent because of the guarantee or security interest granted; (ii) was undercapitalized or became undercapitalized because of the guarantee or security interest granted; (iii) intended to incur, or believed that it would incur, debt beyond its ability to pay at maturity; or (iv) the guarantee or security interest granted was not in the best interests or for the benefit of the relevant guarantor or security grantor. 51

70 The measure of insolvency for purposes of fraudulent conveyance and similar laws varies depending on the law applied. Generally, however, a guarantor or security grantor would be considered insolvent if it could not pay its debts as they became due. In such circumstances, if a court voided such Note Guarantee or Collateral, or held it unenforceable, the holders of the Notes and the Security Agent would cease to have any claim in respect of the relevant Guarantor or the relevant Collateral, would be creditors solely of the Company and any remaining Guarantors and would benefit only from any remaining Collateral. The holders of the Notes and the Security Agent may also be required to repay any amounts received with respect to such Note Guarantee or such Collateral. Further, the Note Guarantees and the Collateral may be subject to claims that they should be limited or subordinated under German, United States or other applicable law. The enforcement of the Note Guarantees and the Collateral will be limited to the extent that the granting of such Note Guarantees and the Collateral is not in the corporate interest of the relevant guarantor or provider of Collateral, would be in breach of capital maintenance or thin capitalization rules or any other general statutory laws or that the burden of such Note Guarantee or Collateral securing the Notes and the Note Guarantees exceed the benefit to the relevant guarantor or provider of security. A summary description of certain limitations on the validity and enforceability of the Note Guarantees and Collateral in respect of the laws of certain jurisdictions where the Guarantors and grantors of Collateral are organized is set out in Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. The Notes will be secured only to the extent of the value of the Collateral that has been granted as security for the Notes. The Collateral securing the Notes will initially comprise all shares of the capital stock of the Company, all shares of the capital stock of each Guarantor held, directly or indirectly, by the Company and the Restricted Subsidiaries and certain fixed assets of the Guarantors in the United States, Mexico, Germany and the Czech Republic. All or part of the Collateral may be released without the consent of the holders of the Notes under certain circumstances (see Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations ). If an event of default occurs and the Notes are accelerated, the Notes will rank equally with the holders of other unsubordinated and unsecured indebtedness with respect to any excluded assets. To the extent the claims of the holders of the Notes exceed the value of the assets securing the Notes and other liabilities, claims related to any excluded assets will rank equally with the claims of the holders of any other unsecured indebtedness. As a result, if the value of the assets pledged as security for the Notes is less than the value of the claims of the holders of the Notes together with any super senior claims and any claims of the holders of any pari passu additional indebtedness, including the Initial Notes, those claims may not be satisfied in full before the claims of our unsecured creditors are paid. The proceeds from the enforcement of the Note Guarantees and the Collateral may not be sufficient to satisfy the obligations under the Notes. The Notes will, upon issuance, be guaranteed by the Note Guarantees and secured by the Collateral. No appraisal of the value of the Collateral or the Note Guarantees has been made in connection with the issue of the Notes. In addition, the Indenture allows the incurrence of additional permitted indebtedness in the future that is secured by such assets, including on a priority basis of the Notes up to an amount of e50.0 million, plus amounts under related hedgings. The amount to be received upon an enforcement of any Note Guarantees and any Collateral would be dependent on numerous factors affecting the financial situation of the providers of the Note Guarantees and of the value of the assets subject to the Collateral at the time of their enforcement. In the event of a foreclosure, liquidation, bankruptcy or similar 52

71 proceeding, the payments under the Note Guarantees or the proceeds from the enforcement of the Collateral may not be sufficient to repay the obligations under the Notes. If any Intercreditor Agreement is entered into in the future, the holders of the Notes will be subject to certain limitations on their ability to enforce the Collateral. In the event that the Company incurs certain indebtedness permitted by the Indenture to share in the Collateral, it is permitted, without the consent of holders, to enter into an intercreditor agreement (an Intercreditor Agreement ) with the Trustee, the Security Agent and the lenders and/or agents under the new indebtedness within certain specified parameters, see Description of the Notes Certain covenants Intercreditor Agreements. The Intercreditor Agreement will govern, among other things, the ranking of indebtedness and enforcement of Collateral by the lenders under the secured indebtedness (including, for purposes of the Intercreditor Agreement, the holders of the Notes and the Trustee, and any future secured creditors (including under the Notes)) (together with the lenders, the Senior Lenders ) and certain hedge counterparties (together with Senior Lenders, Senior Creditors ). The Intercreditor Agreement will provide that for purposes of the enforcement of the Collateral, the Security Agent shall act on the instructions of the instructing group which, pursuant to the terms of the Intercreditor Agreement, will act upon the instructions of the Senior Creditors whose commitments exceed 50% or more of the aggregate commitments under the secured indebtedness. At the option of the Company, the Intercreditor Agreement may (but need not) also provide that in the event certain of the Senior Creditors under indebtedness incurred under clause (1) of the definition of Permitted Debt in the Description of the Notes and certain hedging obligations, each as provided under Description of the Notes are secured on a super priority basis with respect to proceeds from enforcement of Collateral ( Super Priority Creditors ), certain other arrangements shall apply. In this case, subject to certain limited exceptions customary for capital structures including super senior financings (as determined at the time of entering into the Intercreditor Agreement), creditor representatives must enter into a consultation period with respect to enforcement actions. If at the end of this period there are conflicting enforcement instructions, the instructions of a majority of Senior Creditors excluding any Super Priority Creditors will prevail. Notwithstanding, if the Security Agent has not taken any enforcement action within three months following the end of the consultation period or the Super Priority Creditors have not been fully repaid within six months following the end of the consultation period, then enforcement instructions provided by the Super Priority Creditors shall prevail. These arrangements could be disadvantageous to the holders of the Notes in a number of respects. For example, other creditors not party to the Intercreditor Agreement could commence enforcement action against the Company or its subsidiaries during the consultation period, the Company or one or more of its subsidiaries could seek protection under applicable bankruptcy laws, or the value of certain Collateral could otherwise be impaired or reduced in value. Further, as the Intercreditor Agreement does not exist as of the Issue Date and the parties are not identified in full, we cannot assure you that any Intercreditor Agreement will be entered into on terms which are considered customary as of the Issue Date. While certain Fundamental Intercreditor Rights (as defined in the Description of the Notes ) are specified, there may be other terms of the Intercreditor Agreement which may limit your rights with respect to enforcement of the Collateral or may allow certain other parties to take enforcement action with respect to the Collateral in a manner disadvantageous to holders of the Notes. While these terms will be customary for capital structures which include super senior financings, this is a developing market and we cannot assure you that what become customary terms for such Intercreditor Agreements will be no less advantageous for bondholders as such arrangements are as of the Issue Date. In addition, if we incur substantial additional indebtedness which may be secured on the Collateral, the holders of the Notes may not comprise the majority of the Senior Creditors for the purposes of instructing the Security 53

72 Agent. If the Notes do not make up a majority of the relevant instructing Senior Creditors, the holders of the Notes would be bound by any decisions of the creditors under the other debt instruments, which may result in enforcement action, or absence thereof in respect of the Collateral, whether or not such action is approved by the holders of the Notes or may be adverse to such holders of the Notes. The Senior Creditors may have interests that are different from each other, and in particular, from the interests of holders of the Notes and they may not elect to pursue their remedies under the security documents at a time when it would otherwise be advantageous for the holders of the Notes to do so. In addition, any Super Priority Creditors will be entitled to be repaid with the proceeds of the Collateral sold in any enforcement sale in priority to the Notes and there can be no assurance that there will be sufficient proceeds remaining to repay the Notes and other creditors secured by the Collateral in full or at all. Also, it is possible that disputes may occur between the holders of the Notes and creditors under other secured indebtedness as to the appropriate manner of pursuing enforcement remedies with respect to the Collateral. The security interests in the Collateral will be granted to the Security Agent rather than directly to the holders of the Notes and the ability of the Security Agent to enforce certain of the Collateral may be restricted by local law. The security interests that will secure the obligations of the Company under the Notes and the obligations of the Guarantors will not be granted directly to the holders of the Notes but to the Security Agent and thus the holders of the Notes will not have any independent power to enforce, or have recourse to, any of the security documents or to exercise any rights or powers arising under the security documents except through the Security Agent as provided in the Indenture. By accepting a Note, you will be deemed to have agreed to these restrictions. As a result of these restrictions, holders of the Notes will have limited remedies and recourse against us in the event of a default. See Description of the Notes Security and Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. In addition, the ability of the Security Agent to enforce the security interests is subject to mandatory provisions of the laws of each jurisdiction in which security interests over the Collateral are taken. For example, the laws of certain jurisdictions may not allow for the appropriation of certain pledged assets, but require a sale through a public auction and certain waiting periods may apply. There is some uncertainty under the laws of certain jurisdictions as to whether obligations to beneficial owners of the Notes that are not identified as registered holders in a security document will be validly secured. In certain jurisdictions, including Germany and Poland, due to the laws and other jurisprudence governing the creation and perfection of security interests and the enforceability of such security interests, the Indenture will provide for the creation of parallel debt obligations in favor of the Security Agent ( Parallel Debt ) mirroring the obligations of the Company and the Guarantors towards holders of the Notes under or in connection with the Indenture ( Principal Obligations ). The pledges in such jurisdictions will be granted to the Security Agent as security interests for the Parallel Debt and will not directly secure the Principal Obligations. The Parallel Debt will be at all times in the same amount and payable at the same time as the Principal Obligations. Any payment in respect of the Principal Obligations shall discharge the corresponding Parallel Debt and any payment in respect of the Parallel Debt shall discharge the corresponding Principal Obligations. In respect of the security interests granted to secure the Parallel Debt, the holders of the Notes will not have direct security interests and will not be entitled to take enforcement actions in respect of such security interests except through the Security Agent. The Parallel Debt construct has not been tested in the courts of several of the relevant jurisdictions (including Germany) and it cannot be excluded that a court might not hold up the Parallel Debt construct. 54

73 The ability of the Security Agent to enforce the security is subject to mandatory provisions of the laws of each jurisdiction in which security over the collateral is taken. There is some uncertainty under the laws of certain jurisdictions, including the laws of Belgium, the Czech Republic and Poland, as to whether common law trusts, including the security trust created pursuant to the Indenture, will be recognized and enforceable. As a result, the holders of Notes bear some risks associated with the security trust and parallel debt structure. In case a court would not uphold the parallel debt construct, the relevant Collateral would be void or unenforceable to the extent securing the parallel debt obligations. If the relevant security agreement also secures other obligations like the Principal Obligations, there can be no assurance it that such Collateral would not also be void or unenforceable. In case a court would not uphold the trust construct, the relevant Collateral could be void or unenforceable to the extent affected by the trust construct. Therefore, the ability of the Security Agent to enforce the Collateral may be restricted and the holders of the Notes may not receive proceeds from an enforcement of such security interests in the Collateral. In addition, holders of the Notes bear the risk associated with a potential insolvency or bankruptcy of the Security Agent. See Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. Some Collateral to secure the Notes will under local law not have a first priority ranking pari passu with the Collateral granted for the Initial Notes. The holders of the Notes will have to rely on the provisions of the Indenture and any intercreditor agreement to achieve an effective pari passu ranking for the Collateral. Under local law, some of the liens over the Collateral securing the Notes are subject to legal doctrines that effectively rank them behind the liens in favor of the earlier incurred obligations of the Initial Notes. In addition, in some jurisdictions new liens over the Collateral will be granted to secure the Notes that rank junior to the liens granted for the Initial Notes. The Indenture provides, and any potential intercreditor agreement entered into in future will provide for a turnover of enforcement proceeds from the Collateral or a pari passu distribution of enforcement proceeds effectively resulting in a pari passu ranking of the Collateral among the creditors that shall rank pari passu pursuant to the Indenture or such intercreditor agreement see If any Intercreditor Agreement is entered into in the future, the holders of the Notes will be subject to certain limitations on their ability to enforce the Collateral. Therefore, a first priority status and a pari passu ranking of the Collateral securing the Notes depends on the enforceability of the Indenture and a future intercreditor agreement if such has been entered into. As a result, if the Indenture or such future intercreditor agreement is found to be invalid or unenforceable for any reason, or if an insolvency or similar administrator refuses to give effect to it, the Collateral for the Notes may rank behind the Collateral for the Initial Notes. There are circumstances other than repayment or discharge of the Notes in full under which the Collateral securing the Notes and the Note Guarantees will be released automatically, without your consent or the consent of the Security Agent. Under various circumstances, Collateral securing the Notes will be released automatically, including: in connection with certain sales, assignments, transfers, conveyances or other dispositions of property or assets in compliance with the Indenture; in the case of a Guarantor, upon release of such Guarantor s guarantee of the Notes; upon the designation of a subsidiary as an Unrestricted Subsidiary; upon legal of covenant defeasance; in connection with enforcement sales under an intercreditor agreement; 55

74 as permitted under amendments and waivers of the Indenture; or in the case of liens over the shares of the Company, as necessary to permit the offering of such shares to the public in connection with a public equity offering. Furthermore, under German law a secured party is, upon request by the relevant security grantor, obligated to release security if the realizable value of the security is significantly higher than the value of the obligations secured by such security. See Description of the Notes Security Release. It may be difficult to realize the value of the Collateral. The Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Indenture and the relevant security documents. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral as well as the ability of Security Agent to enforce such Collateral. Furthermore, the security interests can be affected by a variety of factors, including, among others, the timely satisfaction of perfection requirements, statutory liens or re-characterization under the laws of certain jurisdictions. The value of Collateral as well as the ability of the Security Agent to enforce such Collateral could be adversely affected. The enforcement of security interests by the Security Agent will also be subject to practical problems generally associated with the realization of security interests in collateral. For example, the enforcement of security interest by the Security Agent may require the completion of judicial proceedings in the jurisdiction that is relevant for such security interest. There is no assurance that the Security Agent will successfully complete such judicial proceedings in a timely manner or that other practical problems relating to the foreclosure of Collateral will be overcome by the Security Agent at all or without a material delay. Accordingly, the Security Agent may not have the ability to foreclose upon those assets and the value of the Collateral may significantly decrease. The Company and the other security providers will have control over the Collateral, and the sale of particular assets could reduce the pool of assets securing the Notes. The security documents allow the Company and the other security providers to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the Collateral securing the Notes. Except under limited circumstances specified in the relevant security documents, the Company and the other security providers may, among other things, without any release or consent by the Trustee or the Security Agent, conduct ordinary course activities with respect to and dispose of the Collateral and make ordinary course cash payments, including repayments of indebtedness. We have entered into a Memorandum of Understanding with another automotive supplier to enter into a joint venture pursuant to which we may sell up to 30% of the shares of one of our Mexican subsidiaries. These shares will compose part of the Collateral. Any of these activities could reduce the value of the Collateral, which could reduce the amounts payable to you from the proceeds of any sale of the Collateral in the case of an enforcement of the Collateral. The granting of the Note Guarantees and the Collateral in connection with the issuance of the Notes, or the incurrence of permitted debt in the future may create or restart hardening periods and the Note Guarantees and the Collateral might be challenged or voidable. The granting of Note Guarantees and Collateral to secure the Notes and the Note Guarantees may create hardening periods for such Note Guarantees and Collateral in certain jurisdictions. The granting of shared security interests to secure future permitted debt may restart or reopen such hardening periods in particular, as the Indenture for the Notes permits the release and retaking of security granted in favor of the Notes in certain circumstances including in connection with the incurrence of future debt. The applicable hardening period for these new 56

75 security interests can run from the moment each new security interest has been granted or perfected. The Note Guarantees and the Collateral may be voidable by the relevant Guarantors or the relevant grantor of Collateral or by an insolvency trustee, liquidator, receiver or administrator or by other creditors, or may be otherwise set aside by a court, if certain events or circumstances exist or occur, including, among others, if the grantor is deemed to be insolvent at the time of the grant, or if the grant permits the secured parties to receive a greater recovery than if the grant had not been given and an insolvency proceeding in respect of the grantor is commenced within a legally specified hardening period following the grant. At each time, if a Note Guarantee or Collateral granted or recreated were to be enforced before the end of the respective hardening period applicable in the relevant jurisdiction, it may be declared void or ineffective and/or it may not be possible to enforce it. To the extent that the issuance of any Note Guarantee or the creation of the Collateral is voided, the holders of the Notes and the Security Agent would lose the benefit of such Note Guarantee or Collateral and would be creditors solely of the Company and any remaining Guarantors and would therefore benefit only from any remaining Note Guarantee and Collateral. The holders of the Notes and the Security Agent may also be required to repay any amounts received with respect to such Note Guarantee or such Collateral or release such Note Guarantee or such Collateral. In order to effectively secure future indebtedness, including additional Notes such as the Notes offered hereby or other permitted debt, that is permitted by the Indenture to share in the Collateral, it may be necessary in some or all jurisdictions to create additional, junior-ranking security over the Collateral or amend the relevant security documents at the time such indebtedness is incurred. Any such new security or amendments as well as any security interests for future permitted indebtedness arising under the existing security documents over the Collateral will likely be subject to new hardening periods and, consequently, to potential insolvency challenges as described under Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. Since the Indenture and a potential intercreditor agreement will provide that any proceeds from the enforcement of Collateral will be distributed on a pro rata basis among the holders of the Notes, the Initial Notes and the holders of any future indebtedness that shares in the Collateral and becomes subject to the Indenture after the Issue Date, a successful challenge of any new junior-ranking security or any security interest arising for future indebtedness under the existing security documents would reduce the amount of enforcement proceeds available for distribution to the secured creditors under the Indenture or a potential intercreditor agreement, including the holders of the Notes. The same applies to new guarantees and guarantee obligations arising for future indebtedness under the Note Guarantees mutatis mutandis. In addition, in case the Company issues additional Notes such as the Notes offered hereby with the same securities identification numbers as the Initial Notes, an insolvency administrator may seek to challenge the enforceability of Collateral and Note Guarantees securing both the additional Notes and the Initial Notes even if the hardening period with respect to the Collateral and Note Guarantees securing the Initial Notes or the Notes offered hereby has expired, based on the fact that the Initial Notes or the Notes offered hereby, as applicable, and the additional Notes are fungible and not distinguishable. Any such successful challenge would further reduce the proceeds available to the holders of the Notes. A summary description of certain aspects of the insolvency laws of certain jurisdictions where the Guarantors and the providers of Collateral are organized and have their center of main activities are set out in Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. 57

76 Your rights in the Collateral may be adversely affected by the failure to perfect security interests in the Collateral. Applicable law requires that a security interest in certain assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens in the Collateral securing the Notes may not be perfected with respect to the claims of the Notes if the Security Agent is not able to take the actions necessary to perfect any of these liens on or prior to the Issue Date. The Company and the Guarantors have limited obligations to assist the Security Agent in perfecting the holders of the Notes security interest in specified Collateral. There can be no assurance that the trustee of the Notes, the Security Agent for the Notes will monitor, or that the Company will inform such Trustee, the Security Agent of the future acquisition of property and rights that should constitute Collateral, and that the necessary action will be taken to properly create and perfect the security interest in such afteracquired property and rights. The Security Agent for the Notes have no obligation to monitor the acquisition of additional property or rights that should constitute Collateral or the creation or perfection of any security interest. Such failure may result in such security interest being created in such property or rights or in the priority of such security interest in favor of the Notes against third parties being adversely affected. Enforcement of the Note Guarantees across multiple jurisdictions may be difficult. Though the Note Guarantees are governed by New York law, the enforcement of such guarantees against Guarantors organized and having their center of main activities in countries other than the United States would be subject to the laws of multiple jurisdictions. In particular, in the event of bankruptcy, insolvency or a similar event, proceedings could be initiated in any of these jurisdictions. The rights under the Note Guarantees will therefore be subject to the laws of the respective jurisdiction, and it may be difficult to effectively enforce such rights in multiple bankruptcy, insolvency and other similar proceedings. In addition, such multi-jurisdictional proceedings are typically complex and costly for creditors and often result in substantial uncertainty and delay in the enforcement of creditors rights. The application of these various laws in multiple jurisdictions could trigger disputes over which jurisdictions law should apply and could adversely affect the ability of each holder of the Notes to enforce the Note Guarantees and to realize any payment under the Note Guarantees. Therefore, even if a holder of the Notes obtains a favorable judgment from a New York court against a Guarantor organized and having its center of main activities in countries other than the United States, such holder of the Notes will have to enforce such judgment in such foreign jurisdiction which is likely to result in additional costs and a further delay of the enforcement action. Furthermore, because in such case the recognition and enforcement of a New York court judgment by a foreign court will be subject to the laws of such foreign jurisdiction and may be conditional upon a number of factors, it is uncertain whether attempts of a holder of the Notes to enforce such judgments will be successful. A summary description of certain aspects of the insolvency laws of certain jurisdictions where the Guarantors are organized or have their center of main activities are set out in Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. Enforcement of the Collateral across multiple jurisdictions may be difficult. The Collateral will be governed by the laws of multiple jurisdictions. In the event of bankruptcy, insolvency or a similar event, proceedings could be initiated in any of these jurisdictions. The rights under the Collateral will therefore be subject to the laws of the respective jurisdiction, and it may be difficult to effectively enforce such rights in multiple bankruptcy, insolvency and other similar proceedings. In addition, such multi-jurisdictional proceedings are typically complex and costly for creditors and often result in substantial 58

77 uncertainty and delay in the enforcement of creditors rights. The application of these various laws in multiple jurisdictions could trigger disputes over which jurisdictions law should apply and could adversely affect the ability to enforce the collateral and to realize any recovery under the Notes and the Note Guarantees. A summary description of certain aspects of the insolvency laws of certain jurisdictions where the providers of Collateral are organized or have their center of main activities are set out in Limitations on Validity and Enforceability of the Note Guarantees and the Collateral and Certain Insolvency Law Considerations. The insolvency laws of Germany, Belgium, Brazil, Czech Republic, England and Wales, Mexico, Poland and Spain may not be as favorable to holders of Notes as U.S. insolvency laws or those of another jurisdiction with which you may be familiar. The Company and certain of the Guarantors are incorporated and are likely to have their centers of main interests under the laws of Germany, Belgium, Brazil, the Czech Republic, England and Wales, Mexico, Poland and Spain. The insolvency laws of these jurisdictions may not be as favorable to your interests as those of the United States or another jurisdiction with which you may be familiar. Although laws differ among the jurisdictions, in general, applicable fraudulent conveyance, equitable principles, insolvency laws and limitations on the enforceability of judgments obtained in courts in such jurisdictions could limit the enforceability of the Notes against the Company and/or the enforceability of a Note Guarantee against a Guarantor. The court may also in certain circumstances avoid the Note Guarantee in cases in which the relevant Guarantor is close to or near insolvency. See also Limitations on Validity and Enforceability of the Note Guarantees and Security and Certain Insolvency Law Considerations for additional information on the insolvency laws of the European Union, Germany, Belgium, Brazil, the Czech Republic, England and Wales, Mexico, Poland, Spain and the United States of America. Non-guarantor companies account for more than 25% of our EBITDA and net assets. However, we do not present separate financial statements for each subsidiary guarantor and, as a result, our consolidated financial information may be of limited use in assessing the financial position of the guarantor companies. We have not presented in this Offering Memorandum separate financial statements for each subsidiary guarantor and we are not required to do so in the future under the Indenture. Accordingly, our consolidated financial information may be of limited use in assessing the financial position of the guarantor companies. As of and for the nine months ended September 30, 2014, the Company and the Guarantors generated 74.4% of our total sales and 64.4% of our EBITDA and represented 66.4% of our net assets. Furthermore, our non-guarantor subsidiaries generated more than 35.6% of our EBITDA and represented more than 33.6% of net assets as of and for the nine months ended September 30, 2014, our non-guarantor subsidiaries generated 25.6% of total sales and 35.6% of EBITDA and represented 33.6% of net assets. You may have difficulty enforcing your rights against the Company and the Guarantors and their directors and executive officers. The Company and certain of the Guarantors are incorporated in Germany, Belgium, Brazil, England and Wales, Mexico, Poland and Spain. Except for the directors of HP Pelzer Automotive Systems Inc., a substantial majority of the directors and executive officers of the Company and the Guarantors are non-residents of the United States. Although the Company and the Guarantors have submitted to the jurisdiction of certain New York courts in connection with any action under U.S. securities laws, you may be unable to effect service of process within the United States on its directors and executive officers. In addition, as a substantial majority of the assets of the Company, the Guarantors and their directors and executive officers are located outside of the United States you may be unable to enforce against them judgments 59

78 obtained in the U.S. courts predicated upon civil liability provisions of the federal securities laws of the United States. See Service of Process and Enforcement of Civil Liabilities. Transfer of the Notes is restricted, which may adversely affect the value of the Notes. The Notes have not been and will not be registered under the U.S. Securities Act or any U.S. state securities laws. You may not offer the Notes in the United States except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws, or pursuant to an effective registration statement. The Notes and the Indenture contain provisions that restrict the Notes from being offered, sold or otherwise transferred except pursuant to the exemptions available pursuant to Rule 144A and Regulation S, or other exceptions, under the U.S. Securities Act. Furthermore, we have not registered the Notes under any other country s securities laws. It is your obligation to ensure that your offers and resales of the Notes within the United States and other countries comply with applicable securities laws. You may be unable to sell your Notes if a trading market for the Notes does not develop. The Initial Notes are listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange market of the Irish Stock Exchange. We have applied to have the Notes listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange Market of the Irish Stock Exchange. The Notes, however, may not become or remain listed on that exchange or any other securities exchange. The Initial Purchaser has advised us that it intends to make a market in the Notes. The Initial Purchaser, however, is not obligated to do so and may discontinue any market making at any time at their sole discretion and without notice. In addition, the liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for similar yielding securities, interest rates and our financial performance or prospects or in the prospects for companies in our industry generally. As a result, an active trading market for the Notes may not develop or be maintained. Certain covenants may be suspended upon the occurrence of a change in our ratings. The Indenture provides that certain covenants will not be applicable to the Notes during any period of time that the Notes have received a rating of Baa3 (or the equivalent) or better from Moody s and a rating of BBB (or the equivalent) or better from S&P and no default or event of default has occurred and is continuing. See Description of the Notes Certain covenants Suspension of covenants when Notes rated Investment Grade. If these covenants were to cease to be applicable, we would be able to incur additional indebtedness or make payments, including dividends or investments, which may conflict with the interests of holders of the Notes. There can be no assurance that the Notes will ever achieve an investment grade rating or that any such rating will be maintained. The Company may not be able to repurchase the Notes upon a change of control. Upon the occurrence of a change of control of the Company, the Company will be required to offer to repurchase all of the Notes in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. See Description of the Notes Repurchase at the Option of holders Change of Control. The source of funds for any repurchase required as a result of any such event will be available cash or cash generated from operating activities or other sources, including borrowings, sales of assets, sales of equity or funds provided by subsidiaries. Sufficient funds may not be available at the time of any such events to make any required repurchases of the Notes tendered. The term all or substantially all in the context of a change of control has no clearly established meaning under the relevant law and is subject to judicial interpretation such that it may not be certain that a change of control has occurred or will occur. Upon the occurrence of a transaction that constitutes a change of control under the Indenture, we will be required to offer to repurchase all outstanding Notes. One of the ways a change of 60

79 control can occur is upon a sale of all or substantially all of our assets. With respect to the sale of assets referred to in the definition of change of control in the Indenture, the meaning of the phrase all or substantially all as used in that definition varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under the relevant law and is subject to judicial interpretation. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of all or substantially all of the assets of a person and therefore it may be unclear whether a change of control has occurred and whether the Company is required to make a change of control offer, to repurchase the Notes. The change of control provision contained in the Indenture may not necessarily afford you protection in the event of certain important corporate events, including reorganizations, restructurings, mergers or other similar transactions involving us that may adversely affect you, because such corporate events may not involve a shift in voting power or beneficial ownership or, even if they do, may not constitute a change of control as defined in the Indenture. You may face foreign exchange risks by investing in the Notes. The Notes will be denominated and payable in euro. If investors measure their investment returns by reference to a currency other than euro, an investment in the Notes will entail foreign exchange-related risks due to, among other factors, possible significant changes in the value of the euro relative to the currency by reference to which investors measure the return on their investments because of economic, political and other factors over which we have no control. Depreciation of the euro against the currency by reference to which investors measure the return on their investments could cause a decrease in the effective yield of the Notes below their stated coupon rates and could result in a loss to investors when the return on the Notes is translated into the currency by reference to which the investors measure the return on their investments. There may be tax consequences for you as a result of any currency exchange gain or losses resulting from your investment in the Notes. You should consult your tax advisor concerning the tax consequences to you of acquiring, holding and disposing of the Notes. The Notes will initially be held in book entry form, and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies. The Notes will initially only be issued in global certificated form and held through Euroclear Bank SA/NV as operator of Euroclear and Clearstream. Interests in the global notes will trade in book entry form only, and Notes in definitive registered form, or Definitive Registered Notes, will be issued in exchange for Book Entry Interests only in very limited circumstances. Owners of Book Entry Interests will not be considered owners or holders of Notes. The common depositary, or its nominee, for Euroclear and Clearstream is the sole registered holder of the global notes representing the Notes and will be entered as such in the register of holders of the Notes maintained by the Registrar and the Company at its registered office. Payments of principal, interest and other amounts owing on or in respect of the global notes representing the Notes will be made to the Paying Agent, which then will make payments to Euroclear and Clearstream. Thereafter, these payments will be credited to participants accounts that hold Book Entry Interests in the global notes representing the Notes and credited by such participants to indirect participants. After payment to the common depositary for Euroclear and Clearstream, we will have no responsibility or liability for the payment of interest, principal or other amounts to the owners of Book Entry Interests. Accordingly, if you own a Book Entry Interest, you must rely on the procedures of Euroclear and Clearstream, and if you are not a participant in Euroclear and Clearstream, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder of Notes under the Indenture. Unlike the holders of the Notes themselves, owners of Book Entry Interests will not have the direct right to act upon the Company s solicitations for consents, requests for waivers or other actions from holders of the Notes. Instead, if you own a Book Entry Interest, you will be 61

80 permitted to act only to the extent you have received appropriate proxies to do so from Euroclear and Clearstream. The procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on a timely basis. Similarly, upon the occurrence of an event of default under the Indenture, unless and until Definitive Registered Notes are issued in respect of all Book Entry Interests, if you own a Book Entry Interest, you will be restricted to acting through Euroclear and Clearstream. The procedures to be implemented through Euroclear and Clearstream may not be adequate to ensure the timely exercise of rights under the Notes. See Book-Entry, Delivery and Form. Credit ratings may not reflect all risks, are not recommendations to buy or hold securities and may be subject to revision, suspension or withdrawal at any time. One or more rating agencies may assign a credit rating to the Notes. The rating may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed above and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal by the rating agency at any time. No assurance can be given that a credit rating will remain constant for any given period of time or that a credit rating will not be lowered or withdrawn entirely by the credit rating agency if, in its judgment, circumstances in the future so warrant. A suspension, reduction or withdrawal at any time of the credit rating assigned to the Notes by a rating agency may adversely affect the cost and terms and conditions of our financings and could adversely affect the value and trading of the Notes. If you are a non-german tax resident investor, you may be subject to German limited (corporate) income tax liability with respect to interest payments received on the Notes. Investors that are not tax resident in Germany may be subject to German limited (corporate) income tax liability with respect to interest payments received on the Notes given that the Notes are collateralized by German-situs real estate or by rights equivalent to real property (grundstücksgleiche Rechte) unless (i) the Notes are registered in a public register (öffentliches Schuldbuch) considered to be issued either in the form of global certificates (Sammelurkunden) within the meaning of section 9a of the German Securities Custody Act (Depotgesetz) or as one of several fungible notes representing the same issue (Teilschuldverschreibungen), or (ii) the relevant investor benefits from an applicable double taxation treaty entered into between the jurisdiction in which the investor is tax resident and Germany that provides for full exemption from German tax on interest. The same is true for payments made in lieu of interest by a guarantor. No administrative guidance or case law on point is available on whether notes governed by non-german laws (i.e., New York law) qualify as global certificates (Sammelurkunden) or as one of several fungible notes representing the same issue (Teilschuldverschreibungen) for the purposes of German tax law. The tax is generally levied by way of assessment that is the non-resident recipient of the interest has to file a German tax return and pay the tax upon an assessment by the German tax authorities. It is uncertain whether under current law non-residents will be allowed any significant deduction for expenses related to the interest received. In addition, the German tax authorities may require the issuer or the guarantor, respectively, of the Notes to withhold German tax from the interest payments to certain Investors if this is appropriate to secure the relevant tax claims. 62

81 Use of proceeds Use of proceeds The gross proceeds from the Offering of the Notes will be e52.0 million. We expect to pay approximately e2.2 million of fees and expenses, including the Initial Purchaser s commission and the estimated expenses in respect of the Offering, with proceeds from the Offering of the Notes. Of the net proceeds, e20.1 million will be used for investments related to the Credit Suisse Credit Note, e20.0 million will be used to fund an intercompany loan to our indirect parent company, Adler Plastic, and e9.7 million will be used for general corporate purposes. See Capitalization and Description of Certain Financing Arrangements. Sources and uses The following table shows the sources and uses of funds related to the Offering and the use of proceeds therefrom assuming it had been completed on September 30, Amounts set forth below are based on amounts outstanding at September 30, 2014 and do not reflect repayments, accrued interest or cash movements subsequent to September 30, Actual amounts will vary from estimated amounts depending on several factors, including estimated costs, fees and expenses. Sources of Funds (millions of g) Uses of Funds (millions of g) Notes offered hereby (1) Investments related to the 20.1 Credit Suisse Credit Note (2).. Intercompany loan to our indirect parent company Adler Plastic (3) General corporate purposes Transaction costs (4) Total sources Total uses (1) Reflects the proceeds from the issuance of the Notes. (2) The Company intends to manage interest rates on the Credit Suisse Credit Note by investing in certain certificates of deposit with the lender under the facility, which will reduce the average cost of funding under such facility. See Description of certain financing arrangements Credit Suisse Credit Note. (3) For additional information, see Certain relationships and related-party transactions Loan to Adler Plastic. (4) Represents our estimate of fees and expenses in connection with or otherwise related to the Offering and the application of the proceeds therefrom, including underwriting fees and commissions, other financing fees, professional and legal fees and other transaction costs. Actual fees and expenses may differ. 63

82 Capitalization The following table sets forth total consolidated cash at banks and certain cash equivalents and our capitalization as of September 30, 2014 on a historical basis and as adjusted to give effect to the Offering and the application of the proceeds therefrom as if such events had occurred on September 30, The historical consolidated financial information has been derived from our Unaudited Interim Condensed Consolidated Financial Statements as of and for the nine months ended September 30, 2014 prepared in accordance with Italian-GAAP included elsewhere in this Offering Memorandum. This table should be read in conjunction with Use of Proceeds, Management s Discussion and Analysis of Financial Condition and Results of Operations, Description of Certain Financing Arrangements and the consolidated financial statements and the accompanying notes of the Company appearing elsewhere in this Offering Memorandum. Actual amounts may vary from estimated amounts depending on several factors, including differences from our estimate of fees and expenses, fluctuations in cash on hand between September 30, 2014 and the Issue Date and fluctuations in applicable exchange rates. As of September 30, 2014 (in millions of g) Historical As Adjusted Cash at banks (1) Investments related to the Credit Suisse Credit Note (2) Initial Notes Notes offered hereby Bank borrowings (3) Other borrowings (4) Lease liabilities Intragroup loans and shareholder trade payables Total debt (5) Total shareholders equity Total capitalization (6) (1) Includes the remaining e9.7 million net proceeds available for general corporate purposes, assuming the Notes are issued at par. Net proceeds reflect gross proceeds from the Offering of the Notes after the deduction of fees and expenses for the Offering, e20.1 million used for investments related to the Credit Suisse Credit Note and e20.0 million used to fund an intercompany loan to our indirect parent company, Adler Plastic. (2) The Company intends to manage interest rates on the Credit Suisse Credit Note by investing in certain certificates of deposit with the lender under the facility, which will reduce the average cost of funding under such facility. See Description of certain financing arrangements Credit Suisse Credit Note. (3) Borrowings under certain Existing Facilities, other than factoring agreements, including e11.0 million of bank borrowings of our current joint ventures in Turkey and Romania and e2.7 million of bank borrowings of Taicang HP Pelzer Automotive Interior Systems Co. Ltd, one of our joint ventures in China, e14.0 million of bank borrowings of Pelzer da Bahia Ltda. and e4.7 million of other bank borrowings, all of which are unsecured, and the Credit Suisse Credit Note, which is secured by liens on certain inventory, mortgages on certain real property and fixed assets and assignment of certain credit rights. See Description of certain financing arrangements Credit Suisse Credit Note. (4) Other borrowings mainly relate to financial liabilities with customers. (5) Total debt is defined as the sum of current financial liabilities, non-current financial liabilities, current payables to shareholders and non-current payable to shareholders. (6) Total capitalization is the sum of total debt and shareholders equity. 64

83 Selected historical financial information and other data The following selected consolidated income statement, balance sheet and cash flow information (i) as of and for the years ended December 31, 2013, 2012 and 2011 has been derived from the Audited Consolidated Financial Statements which have been prepared in accordance with Italian-GAAP and (ii) as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 has been derived from the Unaudited Interim Condensed Consolidated Financial Statements which have been prepared in accordance with Italian-GAAP. The Audited Consolidated Financial Statements do not include the results of Pimsa Adler Otomotiv A.S., Adler PTI S.A., Adler France S.A., Adler do Brasil Ltda, and Adler Polska Sp. z o.o., which were acquired in July, August and September These entities are included in the Unaudited Interim Condensed Consolidated Financial Statements only from August or September 2014 when control was obtained. The selected consolidated income statement information for the twelve months ended September 30, 2014 has been derived by taking our results of operations for the nine months ended September 30, 2014 and adding to it the difference between our results of operations for the full year ended December 31, 2013 and the nine months ended September 30, The financial information for the nine and twelve months ended September 30, 2014 is not necessarily indicative of the results that may be expected for the year ended December 31, 2014, and should not be used as the basis for or prediction of an annualized calculation. This Selected Consolidated Financial Information should be read in conjunction with the financial statements included elsewhere in this Offering Memorandum and the notes thereto and the information set forth in Summary, Business, Use of Proceeds, Capitalization, Selected Consolidated Financial Information and Management s Discussion and Analysis of Financial Condition and Results of Operations. Selected consolidated income statement information Nine months ended Twelve months ended Year ended December 31, September 30, September 30, In g thousands (unaudited) (unaudited) (unaudited) Revenues , , , , , ,041 Other income... 12,787 18,354 11,567 4,877 3,226 9,916 Total revenues and income , , , , , ,957 Total costs...(750,203)(829,220)(867,879) (634,801) (685,949) (919,027) Operating profit... 15,240 21,764 28,278 18,077 29,729 39,930 Net finance costs... (10,529) (11,433) (13,528) (8,145) (15,790) (21,173) Extraordinary expenses, net... (7,996) (5,593) (1,059) (278) (260) (1,041) Share of profit of investments , ,316 4,216 Profit/(loss) before tax.. (2,713) 5,373 16,033 10,096 15,995 21,932 Income tax expense... (10,314) (5,169) (3,935) (3,682) (6,045) (6,298) Profit/(loss) for the period... (13,027) ,098 6,414 9,950 15,634 65

84 Selected consolidated balance sheet information As of As of December 31, September 30, In g thousands (unaudited) Property, plant and equipment , , , ,307 Intangible assets... 1,619 1,158 2,791 14,119 Other non-current assets... 2,732 8,583 6,771 18,565 Total non-current assets...262, , , ,991 Inventories... 95, ,927 99, ,800 Trade receivables... 63,624 93, , ,106 Cash at banks... 21,841 24,672 29,701 74,285 Other current assets... 26,403 34,607 42,580 69,745 Total current assets...207, , , ,936 Total assets...469, , , ,927 Total shareholders equity attributable to the Group.. 130, , , ,995 Total shareholders equity attributable to minority interests... 20,185 22,334 22,607 30,521 Total shareholders equity...150, , , ,516 Non-current financial liabilities... 29,751 41,610 40, ,527 Payables to shareholder... 37,969 43,406 26,719 Other non-current liabilities... 32,576 31,542 28,861 31,761 Total non-current liabilities...100, ,558 95, ,288 Current financial liabilities... 38,918 46,398 68,543 13,310 Payables to shareholder... 17,368 9,262 25,107 2,244 Trade payables...120, , , ,305 Other current liabilities... 42,705 66,232 67, ,264 Total current liabilities...219, , , ,123 Total liabilities...319, , , ,411 Total liabilities and shareholder s equity...469, , , ,927 66

85 Selected cash flow statement information For year ended For the nine months Twelve months ended December 31, ended September 30, September 30, In g thousands (Unaudited) (Unaudited) (Unaudited) Profit/(loss) for the year... (13,027) ,098 6,414 9,950 15,634 Adjustments to reconcile the profit/(loss) for the year to the cash flow from operating activities: Amortization and depreciation... 32,326 34,057 34,639 24,924 24,828 34,543 Change in provisions for risks and charges... (2,880) 7,846 (7,209) (4,952) 8,751 6,494 Change in net working capital. (14,895) (19,653) (14,618) (20,783) (45,741) (39,576) Cash flows from operating activities... 1,524 22,454 24,910 5,603 (2,212) 17,095 Cash flow from investing activities Investments net, in property, plant and equipment and intangibles... (32,271) (39,140) (33,097) (25,991) (30,261) (37,367) Acquisition of investments... (450) (504) (946) (20,099) (21,045) Fixed assets NBV add. acqu new Adler assets... Cash flows (used in) investing activities... (32,721) (39,644) (34,043) (25,991) (50,360) (58,412) Cash flow from financing activities Net change in financial liabilities... (15,841) 19,339 20,747 18, , ,409 Net change in shareholder payables... 55,337 (2,669) (842) (2,343) (49,582) (48,081) Shareholder contributions... 1,500 Dividends paid... (3,155) (2,735) (3,832) (1,824) (1,779) (3,787) Net change in financial assets.. (1,349) 1, ,333 1,327 Cash flows from (used in) financing activities... 36,492 15,262 16,910 15,376 98,334 99,868 Total cash flows... 5,295 (1,928) 7,777 (5,012) 45,762 58,551 Cash at banks at the beginning of the year... 19,341 21,841 24,672 24,672 29,701 29,701 Non cash items due to first time consolidation... Exchange gains/(losses)... (2,795) 4,759 (2,748) (1,330) (1,178) (2,596) Cash at banks at the end of the year... 21,841 24,672 29,701 18,330 74,285 85,656 67

86 Management s discussion and analysis of financial condition and results of operations The following is a discussion and analysis of our results of operations and financial condition as of and for the years ended December 31, 2013, 2012 and 2011 as derived from our Audited Consolidated Financial Statements, and as of and for the nine month period ended September 30, 2014 and 2013 as derived from our Unaudited Interim Condensed Consolidated Financial Statements, in each case prepared in accordance with Italian GAAP. Our Audited Consolidated Financial Statements and our Unaudited Interim Condensed Consolidated Financial Statements are included elsewhere in this Offering Memorandum. The Audited Consolidated Financial Statements do not include the results of Pimsa Adler Otomotiv A.S., Adler PTI S.A., Adler France S.A., Adler do Brasil Ltda, and Adler Polska Sp. z o.o. You should read this discussion in conjunction with the sections entitled Presentation of Financial and Other Information, Selected Financial Information, Capitalization, and the Audited Consolidated Financial Statements and the Unaudited Interim Condensed Consolidated Financial Statements all of which are included elsewhere in this Offering Memorandum. This discussion includes forward-looking statements, which although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. See Forward-Looking Statements and, for a discussion of the risks and uncertainties which we face, you should also see Risk Factors. Overview We, the HP Pelzer Group, are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector. We design, develop, manufacture and sell parts and components that have the objective of optimizing acoustic performance, reducing vibrations, and increasing the thermal efficiency of our clients vehicles. We manufacture several base products, including heavy layers, felts, carpets and foams that are used in a wide range of applications across our product families. Our clients include the majority of the world s OEMs. Our top five clients are the Volkswagen Group, General Motors, Ford, Hyundai and FCA, while our focus is on creating solutions for the premium and highly innovative models of our clients. For the twelve months ended September 30, 2014, we recorded revenues, adjusted EBITDA and an adjusted EBITDA margin of e949.0 million, e76.2 million and 8.0%, respectively. Key factors affecting results of operations Our results of operations, financial condition and liquidity have been influenced during the periods under review by the following events, facts, developments and market characteristics. We believe these factors are likely to continue to influence our operations in future periods. General trends During the periods under review, we have experienced increases in revenues and adjusted EBITDA. Our revenues increased from e752.7 million for 2011, to e832.6 million for 2012 and to e884.6 million for 2013, a compound annual growth rate of 8.4%. Our revenues increased from e648.0 million for the nine months ended September 30, 2013 to e712.5 million for the nine months ended September 30, 2014, an increase of 9.9%. Our adjusted EBITDA increased from e47.7 million for 2011, to e56.5 million for 2012 and to e64.3 million for 2013, a compound annual growth rate of 16.0%. Our adjusted EBITDA increased from e43.0 million for the nine months ended September 30, 2013 to e54.9 million for the nine months ended September 30, 2014, an increase of 27.7%. 68

87 The key trends and factors that affected the results of our operations in the three years ended December 31, 2013, and the nine months ended September 30, 2014, were positive global automotive industry trends, favorable macro-economic conditions and our global expansion. Revenues Global automotive industry trends We are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector. Our customers include the majority of the world s OEMs and, as a result, our results of operations are affected by the general trends affecting the automotive industry. Our business is dependent on the demand for vehicles. In periods of increased vehicle sales, our OEM customers increase their production volumes and as a result increase their purchases from us. Conversely, during periods of decreased vehicle sales, OEMs decrease their production volumes and in doing so, decrease their purchases of acoustic and thermal components and systems from us, resulting in decreased revenues. Global automotive light vehicle production increased from 77 million units for 2011, to 82 million units for 2012 and to 85 million units for 2013, a compound annual growth rate of 4.9%. These increases in vehicle production have been a major driver of our revenues, which increased from e752.6 million for 2011, to e832.6 million for 2012 and to e884.6 million for 2013, a compound annual growth rate of 8.4%. For a detailed discussion of the global automotive industry, see Industry. Macroeconomic conditions The automotive industry is sensitive to changes in the global economic conditions. The demand for vehicles and production by our OEM customers depend to a large extent on general economic conditions in the countries, regions and localities in which our OEM customers operate, as well as the economic conditions that affect the ultimate consumers of vehicles. For example, during periods of strong economic growth, the ultimate consumers of vehicles may have more disposable income and therefore be more likely to purchase new vehicles, which may lead our OEM customers to produce more vehicles and accordingly purchase more of our products. Fluctuations in interest rates, exchange rates and inflation rates also may have a material effect on the cost of financing for the ultimate consumers of vehicles, as well as on the cost of our raw materials and the costs of borrowing required to fund our operations. Other key macroeconomic drivers that have historically affected the automotive industry and which can therefore impact our results of operations are increasing urbanization and industrialization (particularly in emerging economies), increasing industrial and infrastructure construction, increasing per capita disposable income in emerging economies, growing environmental awareness and demand for alternative energy. Recovery from the economic crisis in Europe, our largest market, has been hampered (in particular in certain countries) by economic and political uncertainty and financial stress. The sovereign credit concerns that engulfed certain European markets during 2011 and 2012 have subsided following fiscal and monetary consolidation efforts by the relevant governments, including austerity measures which have also impacted economic growth. Since 2011, European car production has remained relatively stable amounting to 20 million units for 2011 as compared to 19 million units for 2012 and 20 million units for During the same periods, the growth in our Europe sales has been marginal, increasing from e376.9 million for 2011, to e379.3 million for 2012 and to e386.5 million for 2013, a compound annual growth rate of 1.3%. The U.S. economy has since shown signs of recovery following the financial crisis in 2008 and 2009 and NAFTA vehicle production has increased from 13 million units for 2011, to 15 million units for 2012 and to 16 million units for 2013, a compound annual growth rate of 11.0%. During the same periods, our NAFTA sales increased from e205.0 million for 2011, to e263.5 million for 2012 and subsequently decreased marginally to e254.5 million for 2013, a compound annual growth rate of 11.4%. 69

88 In Asia, the automotive industry has shown strong year-on-year growth in recent periods, with vehicle production increasing from 37 million units for 2011, to 40 million units for 2012 and to 43 million units for 2013 (a compound annual growth rate of 5.1%), which has in turn driven an increase in our Asia sales, from e80.5 million for 2011, to e100.7 million for 2012, and to e130.5 million for 2013 (a compound annual growth rate of 27.3%). The growth in the Asian automotive industry has been supported by a strong economy in China. We have made concerted efforts to increase our presence in Asian markets, opening seven plants in China since The Mercosur region experienced a sustained period of growth which started to slow in Brazil, the largest economy in the Mercosur region, offered tax incentives to buyers of new cars from 2012, resulting in an increase in car sales and car production from that year. Mercosur vehicle production increased from 4 million units for each of 2011 and 2012 to 5 million units for 2013, a compound annual growth rate of 2.9%. During the same periods, our Mercosur sales increased from e70.6 million for 2011, to e80.1 million for 2012 and to e99.4 million for 2013, a compound annual growth rate of 18.7%. Global expansion Our primary objective during the periods under review has been to continue our global expansion, in particular in rapidly growing emerging markets in Asia and Mercosur. Asia has become a significant growth driver for the automotive sector and we believe Asia represents a significant opportunity for us to grow our market share. The growth in sales generated by Asia operations (from e80.5 million for 2011, to e100.7 million for 2012 and to e130.5 million for 2013, a compound annual growth of 27.3%) has been driven by factors including increases in volumes (including both in connection with the establishment of new production lines and the expansion of existing production lines), which have been supported through the opening of seven new plants in China since 2011, as well as the expansion of existing plants in China and South Korea, during the three years ended December 31, The growth in sales generated by our Mercosur operations (from e70.6 million for 2011, to e80.1 million for 2012 and to e99.4 million in 2013, a compound annual growth rate of 18.7%), has been driven by factors including increases in volumes (including both in connection with the establishment of new production lines and the expansion of existing production lines), which have been supported by the opening of one plant in Brazil in 2012, as well as the expansion of existing plants in Brazil. For a discussion of the capital expenditures incurred see Capital expenditures. We intend to continue to pursue growth in Asia and Mercosur and plan to open a new plant in Thailand and an additional plant in Brazil in the short- to medium-term. During the periods under review, the Europe and NAFTA segments have remained the largest contributors to our sales, although the growth in the Asia and Mercosur segments has reduced geographic concentration of our sales to a certain extent. The table below provides a breakdown of our sales by geographic segment for the periods indicated. Twelve months ended In g thousands Year ended December 31, September 30, (except percentages) (unaudited) % of % of % of % of total total total total sales sales sales sales Europe , % 379, % 386, % 412, % NAFTA , % 263, % 254, % 259, % Asia... 80, % 100, % 130, % 161, % Mercosur... 70, % 80, % 99, % 98, % Total sales , % 823, % 870, % 931, % 70

89 Operating expenses Decreases in operating expenses as a percentage of revenues During the periods under review, we have experienced decreases in operating expenses as a percentage of revenues. The table below provides a breakdown of our operating expenses as a percentage of revenues for the periods indicated. Twelve months ended In g thousands Year ended December 31, September 30, (except percentages) (unaudited) % of % of % of % of revenues revenues revenues revenues Cost of materials... (448,874) 59.6% (500,877) 60.2% (518,073) 58.6% (541,025) 57.0% Cost of services... (66,594) 8.8% (70,209) 8.4% (75,321) 8.5% (84,354) 8.9% Personnel expenses.. (144,830) 19.2% (159,893) 19.2% (164,323) 18.6% (174,817) 18.4% Other operating expenses... (57,417) 7.6% (63,543) 7.6% (74,184) 8.4% (82,593) 8.7% Depreciation, amortization and impairments... (32,488) 4.3% (34,698) 4.2% (35,978) 4.1% (36,238) 3.8% Operating expenses. (750,203) 99.7% (829,220) 99.6% (867,879) 98.1% (919,027) 96.8% Cost of materials Purchases of materials for use in the manufacture of our products accounted for the largest portion of our operating expenses. For the years ended December 31, 2011, 2012 and 2013 and the twelve months ended September 30, 2014, our cost of materials represented 59.6%, 60.2%, 58.6% and 57.0%, respectively, of our revenues. Our primary raw materials include polyurethane and thermoplast, both of which are oil based. The prices for these raw materials are influenced by factors including macroeconomic factors and, in particular, the price of crude oil, as well as other factors including supply and demand dynamics and industry cycles. We also purchase semi-finished products, such as carpet and felt, for which the cost of the raw materials represents only a small portion of their overall cost, which mitigates to a certain extent the impact of raw material costs on our cost of materials. The decrease in cost of materials as a percentage of revenues in recent periods has been achieved in part through our scale, which has enabled us to negotiate volume discounts with key suppliers, as well as certain production efficiencies. Personnel expenses For the years ended December 31, 2011, 2012 and 2013 and the twelve months ended September 30, 2014, our personnel expenses represented 19.2%, 19.2%, 18.6% and 18.4%, respectively, of our revenues. Our personnel expenses are influenced by, among other factors, employee headcount and wage inflation. The size of the production workforce required is dependent on sales volumes, and in periods of increased sales volumes, we have used the services of temporary workers. As part of our efforts to harness the growth in the automotive industries in Asia and Mercosur, we have increased our production capabilities in China and Brazil, through the opening of new plants and the upgrade of existing facilities. Capital expenditure We have made significant capital expenditures in property, plant and equipment during the periods under review. Our ordinary capital expenditures amounted to e38.8 million for 2011, e34.2 million for 2012, e27.2 million for 2013 and e21.9 million for the twelve months ended September 30, 2014 and primarily related to our investments in the United States of America, the Czech Republic, Brazil and China to support expansion and the growth in our operations. In particular, in 2011, we opened three plants in China and one in Romania. In 2012, we opened a further three plants in China and one in Brazil. In 2013, we opened a further plant in 71

90 China, and in 2014, we opened our Athens plant in the United States of America. In 2015, we plan to open our Pernambuco, Brazil plant. Through these investments, we have considerably increased our production capacity, which we believe will support our business plan. As a result of these investments, we believe that our manufacturing base will require limited maintenance expenditures in the short- to medium-term. We estimate that maintenance capital expenditure accounted for approximately 18%, 23%, 23% and 22% of our total capital expenditure in the years ended December 31, 2011, 2012, 2013 and the twelve months ended September 30, See Capital expenditures below. Research and development activities We believe that innovation in product development and production technology has been critical to the growth of our business and that our objective of developing oil-free products has differentiated us from our competitors. For the years ended December 31, 2011, 2012 and 2013 our research and development expenses amounted to e13.3 million, e12.4 million and e10.1 million, respectively. We have a worldwide research and development presence though eight centers of excellence which are dedicated production and development sites with state of the art on specific technologies at seven sites located in Germany, Russia, the United Kingdom, South Korea, Japan, China and Michigan (United States). As of September 30, 2014, we employed more than 140 people in research and development activities. Explanation of key line items Revenues Revenues include net sales from products and services, change in inventory and own work capitalized. Sales Sales represent the amounts received or receivable for the goods and services provided in the normal course of business. We primarily generate revenues through the sale of tooling products, serial sales, and other revenues. Tooling revenues relate to the sale of the molds and tools used to manufacture our products for OEM customers. We then use these molds and tools to manufacture our customers orders on our production lines. Serial sales are those generated from our serial production lines. Variances in serial sales are analyzed by revenues generated from items in their first year of production, or start-of-production items, and revenues generated from existing product lines. Net sales from products and services are analyzed by geographic region: Europe includes the net sales from products and services generated by our operations in Germany, Italy, the United Kingdom, Belgium, the Czech Republic, Poland, Romania, Russia and Turkey. Asia includes the net sales from products and services generated by our operations in China, India and South Korea. NAFTA includes the net sales from products and services generated by our operations in the United States and Mexico. Mercosur includes the net sales from products and services generated by our operations in Brazil and Argentina. Change in inventory Change in inventory relates to the period on period variation of finished and semi-finished parts. 72

91 Own work capitalized Own work capitalized comprises capitalization of costs relating to internally constructed or modified technical equipment. Other income Other income primarily includes income from insurance recoveries, income from prior periods, income from the reversal of provisions and accruals recognized in prior periods and other sundry income. Cost of materials Cost of materials includes the cost of raw materials, goods, and other supplies used to manufacture our products. Cost of services Cost of services includes services rendered in relation to the production process, including, amongst others, energy costs, temporary workers and waste disposal. Cost of services also includes costs for legal, consulting and other professional services rendered. Personnel expenses Personnel expenses include the wages and salaries related to our workforce, and to a lesser extent, social security contributions, employee termination pay and other sundry personnel expenses. Other operating expenses Other operating expenses primarily include rental costs, freight costs, maintenance costs, accruals to provisions and other sundry expenses. Depreciation, amortization and impairments Depreciation, amortization and impairments relate to the depreciation of property, plant and equipment, amortization of intangible assets and the impairments of receivables. Depreciation and amortization is charged on a straight line basis over the useful estimated life of the assets. Finance income Finance income relates to interest generated on our cash deposits and, to a lesser extent, interest generated on our financial assets. Finance costs and net foreign exchange effect Finance costs and net foreign exchange effect primarily relate to interest expense on bank borrowings, shareholder loans, finance lease obligations and other borrowings and net foreign exchange effects. Extraordinary expenses, net Extraordinary expenses, net include income and expenditure, which, due to their nature, are considered exceptional. Share of profit of investments Share of profit of investments includes our share of the result of the investments. The investments which have generated the most significant share of profits during the period under review include Alliance Interiors, HPP Carpets, Pimsa Poliuretan Imaòat Sanayi Ve Ticaret AS, and HP Pelzer AG. Income tax expense Income tax expense comprises current income tax expense and deferred tax benefits or expense. 73

92 Results of operations Nine months ended September 30, 2014 and 2013 The following table sets forth our consolidated income statement data for the nine months ended September 30, 2013 and For the nine months ended September 30, In g thousands, except percentages Change % (unaudited) (unaudited) Revenues , ,452 64, % Other income... 4,877 3,226 (1,651) (33.9%) Total revenues and income , ,678 62, % Cost of materials... (384,259) (407,211) (22,952) 6.0% Cost of services... (52,382) (61,415) (9,033) 17.2% Personnel expenses... (122,685) (133,179) (10,494) 8.6% Other operating expenses... (50,550) (58,959) (8,409) 16.6% Depreciation, amortization and impairments (24,925) (25,185) (260) 1.0% Operating profit... 18,077 29,729 11, % Finance income , % Finance costs and net foreign exchange effect... (8,751) (16,918) (8,167) 93.3% Extraordinary expenses, net... (278) (260) 18 (6.5%) Share of profit of investments ,316 1,874 n.a. Profit before tax... 10,096 15,995 5, % Income tax expense... (3,682) (6,045) (2,363) 64.2% Profit for the period... 6,414 9,950 3, % Revenues The following table sets forth an analysis of our revenues by sales, change in inventories and own work capitalized for the periods indicated. For the nine months ended September 30, In g thousands, except percentages Change % (unaudited) (unaudited) Sales , ,376 60, % Change in inventories... (605) n.a. Own work capitalized (1)... 7,039 9,819 2, % Total revenues , ,452 64, % (1) The following table sets forth the effect of own work capitalized on the balance sheet items to which it is allocated. Nine months ended September 30, In g thousands, except percentages Change % Increases in property, plant and equipment * Increases in intangible assets *... 7,039 8,470 1, % Increases in inventories **... 1,349 1,349 n.a Own work capitalized... 7,039 9,819 2, % * The amounts are subsequently depreciated over the asset s estimated useful life on a straight-line basis. ** The amounts include some R&D-related expenses and are subsequently released into the income statement (within change in inventories) over the estimated useful life of the associated project. Historically, the amounts recorded in inventories in a given period have been largely offset by the amounts released into the income statement for that period. 74

93 Revenues increased by e64.5 million, or 9.9%, to e712.5 million for the nine months ended September 30, 2014, from e648.0 million for the nine months ended September 30, 2013, primarily due to increased sales, in particular from our Europe, Asia and NAFTA operations, as well as revenues contributions from the subsidiaries that were acquired from Adler Plastics in July, August and September The following table sets forth an analysis of sales by geographic region for the periods indicated. For the nine months ended September 30, In g thousands, except percentages Change % (unaudited) (unaudited) Europe , ,933 25, % NAFTA , ,114 5, % Asia... 89, ,202 30, % Mercosur... 75,745 75,126 (619) (0.8%) Total , ,376 60, % Europe sales increased by e25.9 million, or 9.1%, to e309.9 million for the nine months ended September 30, 2014, from e284.1 million for the nine months ended September 30, 2013, driven by an increase in serial sales. Of the total increase in serial sales, e13 million was attributable to revenues generated by increases in volumes from existing product lines, e59 million generated by start-of-production items and e22 million was generated by the new assets which were included for the first time in the Group accounts in September In particular, the increase in revenues from existing products was impacted by the decision of one of our customers to move a portion of the production of a vehicle, previously only produced in Mexico, to Europe. NAFTA sales increased by e5.0 million, or 2.6%, to e197.1 million for the nine months ended September 30, 2014, from e192.1 million for the nine months ended September 30, 2013, driven by an increase in production sales to certain customers. Asia sales increased by e30.5 million, or 34.0%, to e120.2 million for the nine months ended September 30, 2014, from e89.7 million for the nine months ended September 30, 2013, driven by an increase in production sales. Mercosur sales were largely unchanged, amounting to e75.1 million for the nine months ended September 30, 2014, as compared to e75.7 million for the nine months ended September 30, Adjusted EBITDA The following table sets forth a calculation of our adjusted EBITDA for the periods indicated. For the nine months ended September 30, In g thousands, except percentages Change % (unaudited) (unaudited) Profit for the period... 6,414 9,950 3, % Income tax expense... 3,682 6,045 2, % Share of profit of investments... (442) (2,316) (1,874) n.a. Net finance costs... 8,145 15,790 7, % Depreciation, amortization and impairments 24,925 25, % Extraordinary expenses, net (18) (6.5%) Adjusted EBITDA... 43,002 54,914 11, % 75

94 Adjusted EBITDA increased by e11.9 million, or 27.7%, to e54.9 million for the nine months ended September 30, 2014, from e43.0 million for the nine months ended September 30, The increase in adjusted EBITDA was primarily driven by an increase in sales volumes and purchasing efficiencies achieved, which were only partially offset by an increase in other operating expenses. Adjusted EBITDA margin increased to 7.7% for the nine months ended September 30, 2014, from 6.6% for the nine months ended September 30, Other income Other income decreased by e1.7 million, or 33.9%, to e3.2 million for the nine months ended September 30, 2014, from e4.9 million for the nine months ended September 30, 2013, primarily attributable to an increase in other sundry income. Cost of materials Cost of materials increased by e23.0 million, or 6.0%, to e407.2 million for the nine months ended September 30, 2014, from e384.3 million for the nine months ended September 30, 2013, primarily attributable to increased sales in part due to the subsidiaries that were acquired from Adler Plastics in July, August and September As a percentage of revenues, cost of materials decreased from 59.3% for the nine months ended September 30, 2013, to 57.2% for the nine months ended September 30, The decrease in cost of materials as a percentage of revenues was attributable to the combined efforts of management strategy to achieve purchasing savings through volume discounts and a decrease in the price of polyurethane and thermoplast due to a decrease in crude oil prices as well as higher levels of vertical integration as a result of expanding the production of basic materials. Cost of services Cost of services increased by e9.0 million, or 17.2%, to e61.4 million for the nine months ended September 30, 2014, from e52.4 million for the nine months ended September 30, As a percentage of revenues, cost of services was largely unchanged, amounting to 8.1% for the nine months ended September 30, 2013, as compared to 8.6% for the nine months ended September 30, Personnel expenses Personnel expenses increased by e10.5 million, or 8.6%, to e133.2 million for the nine months ended September 30, 2014, from e122.7 million for the nine months ended September 30, 2013, primarily attributable to an increase in headcount driven by the growth in production and sales volumes and in part due to the subsidiaries that were acquired from Adler Plastics in July, August and September In particular, our headcount increased by 1,971 from 7,014 as of December 31, 2013, to 8,985 as of September 30, 2014, of which 498 were related to production activities and 1,473 were related to the subsidiaries acquired. As a percentage of revenues, personnel expenses decreased from 18.9% for the nine months ended September 30, 2013, to 18.7% for the nine months ended September 30, 2014, due to the fixed cost portion of personnel expenses, which is less sensitive to increases in sales volumes. Other operating expenses Other operating expenses increased by e8.4 million, or 16.6%, to e59.0 million for the nine months ended September 30, 2014, from e50.6 million for the nine months ended September 30, As a percentage of revenues, other operating expenses increased from 7.8% for the nine months ended September 30, 2013, to 8.3% for the nine months ended September 30, The increase in other operating expenses, both in absolute terms and as a percentage of revenues was attributable in part to a e1.7 million increase in other sundry operating expenses, primarily attributable to increased fees for research and development and management services provided by Adler Plastic and e0.7 million increase in outbound freight costs, driven by the increase in production and sales volumes. 76

95 Depreciation, amortization and impairments Depreciation, amortization and impairments were substantially unchanged, amounting to e25.2 million for the nine months ended September 30, 2014, as compared to e24.9 million for the nine months ended September 30, Operating profit Operating profit increased by e11.6 million, to e29.7 million for the nine months ended September 30, 2014, from e18.1 million for the nine months ended September 30, As a percentage of revenues, operating profit increased from 2.8% for the nine months ended September 30, 2013, to 4.2% for the nine months ended September 30, Finance income Finance income increased by e0.5 million, or 86.1%, to e1.1 million for the nine months ended September 30, 2014, from e0.6 million for the nine months ended September 30, In both periods, finance income primarily related to interest earned on our cash deposits and, to a lesser extent, income generated on our financial assets. Finance costs and net foreign exchange effects Finance costs and net foreign exchange effects increased by e8.1 million, to e16.9 million for the nine months ended September 30, 2014, from e8.8 million for the nine months ended September 30, 2013, primarily attributable to a decrease in bank borrowings from e87.6 million as of December 31, 2013 to e32.4 million as of September 30, 2014, offset by the issuance of the Initial Notes. Extraordinary expenses, net Extraordinary expenses, net were substantially unchanged, amounting to e0.3 million for the nine months ended September 30, 2014, as compared to e0.3 million for the nine months ended September 30, Income tax expense Income tax expense increased by e2.3 million to e6.0 million for the nine months ended September 30, 2014, from e3.7 million for the nine months ended September 30, 2013, due primarily to an increase in profit before tax for the period. 77

96 Years ended December 31, 2013 and 2012 The following table sets forth our consolidated income statement data for the years ended December 31, 2013 and For the year ended December 31, In g thousands, except percentages Change % Revenues , ,590 51, % Other income... 18,354 11,567 (6,787) (37.0%) Total revenues and income , ,157 45, % Cost of materials... (500,877) (518,073) (17,196) 3.4% Cost of services... (70,209) (75,321) (5,112) 7.3% Personnel expenses... (159,893) (164,323) (4,430) 2.8% Other operating expenses... (63,543) (74,184) (10,641) 16.7% Depreciation, amortization and impairments (34,698) (35,978) (1,280) 3.7% Operating profit... 21,764 28,278 6, % Finance income % Finance costs and net foreign exchange effect... (12,009) (14,246) (2,237) 18.6% Extraordinary expenses, net... (5,593) (1,059) 4,534 (81.1%) Share of profit of investments ,342 1,707 n.a. Profit before tax... 5,373 16,033 10,660 n.a. Income tax expense... (5,169) (3,935) 1,234 (23.9%) Profit for the year ,098 11,894 n.a. Revenues The following table sets forth an analysis of our revenues by sales, change in inventories and own work capitalized for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Sales , ,964 47, % Change in inventories (4,734) (5,322) n.a. Own work capitalized (1)... 8,481 18,360 9,879 n.a. Total Revenues , ,590 51, % (1) The following table sets forth the effect of own work capitalized on the balance sheet items to which it is allocated. For the year ended December 31, In g thousands, except percentages Change % Increases in property, plant and equipment * 6,161 11,627 5, % Increases in intangible assets * ,258 2,258 n.a. Increases in inventories **... 2,319 4,475 2, % Own work capitalized... 8,481 18,360 9,879 n.a. * The amounts are subsequently depreciated over the asset s estimated useful life on a straight-line basis. The increases in intangible assets in 2013 primarily related to start-up costs in connection with a new plant opened in Athens (United States). ** The amounts include some R&D-related expenses and are subsequently released into the income statement (within change in inventories) over the estimated useful life of the associated project. Historically, the amounts recorded in inventories in a given period have been largely offset by the amounts released into the income statement for that period. Revenues increased by e52.0 million, or 6.2%, to e884.6 million for 2013, from e832.6 million for 2012, due to increased sales and own work capitalized, which were partially offset by a 78

97 decrease in change in inventories. The increase in sales was primarily driven by our Asia, Mercosur and European operations. The increase in own work capitalized was due to an increase in start-up costs capitalized relating primarily to our Speke, UK and Athens, U.S. plants. The following table sets forth an analysis of sales by geographic region for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Europe , ,518 7, % NAFTA , ,547 (8,979) (3.4%) Asia , ,510 29, % Mercosur... 80,087 99,389 19, % Total , ,964 47, % Europe sales increased by e7.2 million, or 1.9%, to e386.5 million for 2013, from e379.3 million for The total increase was comprised of an e8.7 million increase in tooling and other revenues, which was partially offset by a decrease in serial sales of e1.5 million. The e8.7 million increase in tooling revenues was attributable to an increase in the number of tooling sales performed during 2013 as compared to The e1.5 million decrease in serial sales was driven by a decrease in revenues generated by a decrease in volumes from existing product lines of e21.4 million, which was partially offset by an increase in start-of-production items of e19.9 million. NAFTA sales decreased by e9.0 million, or 3.4%, to e254.5 million for 2013, from e263.5 million for The total decrease was comprised of a e7.8 million decrease in tooling and other revenues, and a e1.2 million decrease in serial sales. In particular, during 2012, we performed a series of significant tooling sales to certain customers. The decrease in serial sales was driven by a decrease in revenues generated by a decrease in volumes from existing product lines of e11.0 million, which was partially offset by an increase of revenues from start-of-production items of e9.8 million. Asia sales increased by e29.8 million, or 29.6%, to e130.5 million for 2013, from e100.7 million for The total increase was attributable to a e34.5 million increase in serial sales, which was partially offset by a e4.7 million decrease in tooling and other revenues. In particular, the increase in serial sales was attributable to an increase in revenues generated by an increase in volumes from existing product lines of e25.3 million, mostly related to the seven new plants opened in China from 2011 to 2013, and an increase in revenues of e9.2 million from start-of-production items. Mercosur sales increased by e19.3 million, or 24.1%, to e99.4 million for 2013, from e80.1 million for The total increase was attributable to an increase in serial sales of e28.0 million, which was partially offset by a decrease in tooling and other revenues of e8.7 million. During 2012, we recognized tooling sales of e8.0 million related to a specific project serviced from our Gravatai plant in Brazil, in which we are manufacturing all of the acoustic components of a specific vehicle. The e28.0 million increase in serial sales, was also attributable to the same project, as the tooling sold in 2012 started to generate serial sales in

98 Adjusted EBITDA The following table sets forth a calculation of our adjusted EBITDA for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Profit for the year ,098 11,894 n.a. Income tax expense... 5,169 3,935 (1,234) (23.9%) Share of profit of investments... (635) (2,342) (1,707) n.a. Extraordinary expenses, net... 5,593 1,059 (4,534) (81.1%) Net finance costs... 11,433 13,528 2, % Depreciation, amortization and impairments 34,698 35,978 1, % Adjusted EBITDA... 56,462 64,256 7, % Adjusted EBITDA increased by e7.8 million, or 13.8%, to e64.3 million for 2013, from e56.5 million for The increase in adjusted EBITDA was primarily driven by an increase in sales volumes and purchasing and personnel efficiencies achieved, which were only partially offset by an increase in other operating expenses. Adjusted EBITDA margin increased to 7.3% for 2013, from 6.8% for Other income Other income decreased by e6.8 million, or 37.0%, to e11.6 million for 2013, from e18.4 million for 2012, primarily due to the recognition in 2012 of e5.2 million relating to insurance recoveries and e4.1 million compensation from a customer, relating to a change in the customer s production strategy, neither of which recurred in The e9.3 million decrease in other income from the items described above was partly offset by an increase in income recognized on the reversal of accruals and an increase in the gains on disposal of fixed assets. Cost of materials Cost of materials increased by e17.2 million, or 3.4%, to e518.1 million for 2013, from e500.9 million for 2012, primarily attributable to increased sales. As a percentage of revenues, cost of materials decreased from 60.2% for 2012, to 58.6% for The decrease in cost of materials as a percentage of revenues was attributable to the combined efforts of management strategy to achieve purchasing savings through volume discounts with our suppliers, and a decrease in the price of polyurethane and thermoplast in response to the decrease in crude oil prices. Cost of services Cost of services increased by e5.1 million, or 7.3%, to e75.3 million for 2013, from e70.2 million for 2012, primarily attributable to the increase in sales volumes. As a percentage of revenues, cost of services was largely unchanged, amounting to 8.4% in 2012 as compared to 8.5% in Personnel expenses Personnel expenses increased by e4.4 million, or 2.8%, to e164.3 million for 2013, from e159.9 million for 2012, primarily due to an increase in headcount driven by the growth of production volumes in order to satisfy the increase in demand for our products. In particular, our headcount increased by 645, from 6,519 as of December 31, 2012 to 7,164 as of December 31, 2013, of which 494 related to production activities, driven by the opening of four plants in 2012 and a further two in As a percentage of revenues, personnel expenses decreased from 19.2% for 2012 to 18.6% for 2013, mainly attributable to the effect of production efficiencies, decreased personnel expenses relating to the downsized plant in Bavaria, Germany, the effects of the synergies achieved in the integration of our group with 80

99 that of Adler Plastic and the fixed cost portion of personnel expenses, which is less sensitive to increases in sales volumes. Other operating expenses Other operating expenses increased by e10.6 million, or 16.7%, to e74.2 million for 2013, from e63.5 million for 2012, attributable to the combined effect of increases in services, research and development and management fees, rental expenses and outbound freight costs. As a percentage of revenues, other operating expenses increased from 7.6% in 2012 to 8.4% in In particular, for 2013, we incurred increased costs of e4.6 million relating to research and development and management fees provided by Adler Plastic. The e2.2 million increase in rental expenses was driven by an increase in operating leases and in particular for machinery to service the increased sales volumes and, to a lesser extent, the costs for a new property rented in Athens, United States from mid The increase in outbound freight costs of e1.4 million was attributable to the increase in sales volumes. Excluding the fees for research and development and management serviced provided by Adler Plastic, other operating expenses as a percentage of revenues would have been substantially unchanged, amounting to 7.9% for 2013 as compared to 7.6% for Depreciation, amortization and impairments Depreciation, amortization and impairments increased by e1.3 million, or 3.7%, to e36.0 million for 2013, from e34.7 million for The increase was primarily attributable to a e0.7 million increase in the impairment of receivables, driven by the increase in our trade receivables as a result of the increase in sales and, to a lesser extent, a e0.3 million increase in the amortization of industrial patent rights driven by the capital expenditures incurred in Operating profit Operating profit increased by e6.5 million, or 29.9%, to e28.3 million 2013, from e21.8 million for As a percentage of revenues, operating profit increased from 2.6% for 2012, to 3.2% for Finance income Finance income increased by e0.1 million, or 24.7%, to e0.7 million for 2013, from e0.6 million for In both periods, finance income primarily relates to interest earned on our cash deposits and, to a lesser extent, income generated on our financial assets. Finance costs and net foreign exchange effect Finance costs increased by e2.2 million, or 18.6%, to e14.2 million for 2013, from e12.0 million for 2012, primarily attributable to an increase in bank borrowings from e74.8 million as of December 31, 2012 to e87.6 million as of December 31, 2013, which resulted in a e2.7 million increase in interest expense from bank and other borrowings and a e0.5 million increase in foreign exchange losses, which were partially offset by a e1.0 million decrease in interest expense on the shareholder loans. Extraordinary expenses, net Extraordinary expenses, net decreased by e4.5 million, or 81.1%, to e1.1 million for 2013, from e5.6 million for Extraordinary expenses, net for 2013, include e0.7 million of restructuring costs and e0.3 million in other extraordinary expenses. Extraordinary expenses, net for 2012, include e5.0 million of restructuring costs and e0.6 million in other extraordinary expenses. In both 2013 and 2012, restructuring costs relate to the downsizing of the production plant in Neutraubling, Bavaria, Germany, and the integration of our head quarter functions with those of Adler Plastic. 81

100 Share of profit of investments Share of profit of investments increased by e1.7 million, to e2.3 million for 2013, from e0.6 million for 2012, primarily attributable to the share of profit of Alliance Interiors, which increased from e0.5 million for 2012, to e1.8 million for 2013, and the share of profit of HPP Carpets, which increased from nil in 2012, to e0.5 million in Income tax expense Income tax expense decreased by e1.2 million, or 23.9%, to e3.9 million for 2013, from e5.2 million for Years ended December 31, 2012 and 2011 For the year ended December 31, In g thousands, except percentages Change % Revenues , ,630 79, % Other income... 12,787 18,354 5, % Total revenues and income , ,984 85, % Cost of materials... (448,874) (500,877) (52,003) 11.6% Cost of services... (66,594) (70,209) (3,615) 5.4% Personnel expenses... (144,830) (159,893) (15,063) 10.4% Other operating expenses... (57,417) (63,543) (6,126) 10.7% Depreciation, amortization and impairments... (32,488) (34,698) (2,210) 6.8% Operating profit... 15,240 21,764 6, % Finance income... 1, (450) (43.9%) Finance costs and net foreign exchange effect... (11,555) (12,009) (454) 3.9% Extraordinary expenses, net... (7,996) (5,593) 2,403 (30.1%) Share of profit of investments % Profit/(loss) before tax... (2,713) 5,373 8,086 n.a. Income tax expense... (10,314) (5,169) 5,145 (49.9%) Profit/(loss) for the year... (13,027) ,231 n.a. Revenues The following table sets forth an analysis of our revenues by sales, change in inventories and own work capitalized for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Sales , ,561 90, % Change in inventories... 7, (6,827) (92.1%) Own Work Capitalized (1)... 12,168 8,481 (3,687) (30.3%) Total revenues , ,630 79, % (1) The following tables sets forth the effect of own work capitalized on the balance sheet items to which it is allocated. For the year ended December 31, In g thousands, except percentages Change % Increases in property, plant and equipment *... 8,292 6,161 (2,131) (25.7%) Increases in intangible assets * n.a. Increases in inventories **... 3,876 2,319 (1,557) (40.2%) Own work capitalized... 12,168 8,481 (3,687) (30.3%) * The amounts are subsequently depreciated over the asset s estimated useful life on a straight-line basis. ** The amounts include some R&D-related expenses and are subsequently released into the income statement (within change in inventories) over the estimated useful life of the associated project. Historically, the amounts recorded in inventories in a given period have been largely offset by the amounts released into the income statement for that period. 82

101 Revenues increased by e80.0 million, or 10.6%, to e832.6 million for 2012, from e752.7 million for 2011, due to increases in sales, which were partially offset by decreases in change in inventories and own work capitalized. The increase in sales was primarily driven by our NAFTA, Asia and, to a lesser extent, Mercosur operations. The following table sets forth an analysis of sales by geographic area for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Europe , ,282 2, % NAFTA , ,526 58, % Asia... 80, ,666 20, % Mercosur... 70,583 80,087 9, % Total , ,561 90, % Europe sales increased by e2.4 million, or 0.6%, to e379.3 million for 2012, from e376.9 million for The increase was attributable to a e3.9 million increase in serial sales, which was partially offset by a e1.5 million decrease in tooling and other revenues. In particular, the increase in serial sales was driven by a e17.8 million increase in revenues from start-of-production items related to a particular customer serviced from our Ostrava plant in the Czech Republic, which was partially offset by a e13.9 million decrease in volumes from our existing product lines. NAFTA sales increased by e58.5 million, or 28.5%, to e263.5 million for 2012, from e205.0 million for 2011, largely driven by the recovery of the automotive market in North America during the period under review. The increase was comprised of a e54.2 million increase in serial sales and a e4.3 million increase in tooling and other revenues. In particular, the increase in serial sales was driven by an increase in revenues from start-of-production items of e29.5 million and an increase in revenues generated by existing product lines of e24.8 million. Asia sales increased by e20.1 million, or 25.0%, to e100.7 million for 2012, from e80.5 million for The increase was comprised of an increase of e16.9 million in serial sales and a e3.2 million increase in tooling and other revenues. In particular, the increase in serial sales was driven by a e12.3 million increase in revenues from start-of-production items for customers serviced from our new Asian plants opened in China during 2011 and 2012, and an increase in revenues of e4.6 million generated by existing product lines. Mercosur sales increased by e9.5 million, or 13.5%, to e80.1 million for 2012, from e70.6 million for The increase was comprised of a e8.0 million increase in tooling and other revenues and a e1.5 million increase in serial sales revenues. In particular, during 2012 we recorded tooling revenues of e8.0 million, related a specific project serviced from the Gravatai plant in Brazil, in which a customer has contracted us to manufacture all of the acoustic components of a specific vehicle model. The increase in serial sales was comprised of an increase in revenues from start-of-production items of e11.2 million, which was partially offset by a decrease in revenues of e9.7 million generated from existing product lines, as a result of the end of production of certain vehicle lines for two customers in the Mercosur region, which were replaced with new lines. 83

102 Adjusted EBITDA The following table sets forth a calculation of our adjusted EBITDA for the periods indicated. For the year ended December 31, In g thousands, except percentages Change % Profit/(loss) for the year... (13,027) ,231 n.a. Income tax expense... 10,314 5,169 (5,145) (49.9%) Share of profit of investments... (572) (635) (63) 11.0% Extraordinary expenses, net... 7,996 5,593 (2,403) (30.1%) Net finance costs... 10,529 11, % Depreciation, amortization and impairments... 32,488 34,698 2, % Adjusted EBITDA... 47,728 56,462 8, % Adjusted EBITDA increased by e8.7 million, or 18.3%, to e56.5 million for 2012, from e47.7 million for The increase in adjusted EBITDA was primarily driven by increases in sales volumes. Adjusted EBITDA margin increased to 6.8% for 2012, from 6.3% for Other income Other income increased by e5.6 million, or 43.5%, to e18.4 million for 2012, from e12.8 million for 2011, mainly attributable to increases of e5.2 million in insurance recoveries, e4.1 million compensation from a customer, relating to a change in the customers production strategy, and a e1.7 million increase in income from prior periods. Such items were partially offset by a decrease of e6.7 million related to the reversal of accruals. The reversal of accruals recorded in 2012 related to the recovery of certain financial assets, including loans provided to Alliance Interiors, which following loss making periods had been written off, and accruals for price adjustments recorded in prior periods which did not materialize. Cost of materials Cost of materials increased by e52.0 million, or 11.6%, to e500.9 million for 2012, from e448.9 million for 2011, primarily attributable to an increase in sales volumes. As a percentage of revenues, cost of materials increased from 59.6% in 2011 to 60.2% in 2012, attributable to the increase in cost of materials related to the start-up phase of new products and an increase in crude oil prices during 2012 as compared to 2011, which resulted in an increase in the price of our oil based raw materials. In particular, during 2012, we expanded our operations in Craiova, Romania, which sources its raw materials from Turkey, thereby incurring additional cost to transport the materials from Turkey to the plant in Romania. Cost of services Cost of services increased by e3.6 million, or 5.4%, to e70.2 million for 2012, from e66.6 million for As a percentage of revenues, cost of services were largely unchanged amounting to 8.8% in 2011 compared to 8.4% in Personnel expenses Personnel expenses increased by e15.1 million, or 10.4%, to e159.9 million for 2012, from e144.8 million for 2011, primarily attributable to an increase in headcount, driven by the increase in production volumes to satisfy an increase in demand for our products. Our headcount increased by 581, from 5,938 as of December 31, 2011 to 6,519 as of December 31, 2012, of which 431 related to production activities, driven by the opening of four new plants in 2011 and a further four in As a percentage of revenues, personnel expenses amounted to 19.2% for both 2011 and

103 Other operating expenses Other operating expenses increased by e6.1 million, or 10.7%, to e63.5 million for 2012, from e57.4 million for 2011, attributable to the combined effect of a e1.6 million increase in outbound freight costs, driven by the increase in sales volumes, e1.3 million increase in accrued price reductions, a e1.0 million increase in other taxes, and a e2.2 million decrease in miscellaneous other operating expenses. The accrued price reductions related to price cuts expected to be requested by our customers in future periods. As a percentage of revenues, other operating expenses amounted to 7.6% for both 2011 and Depreciation, amortization and impairments Depreciation, amortization and impairments increased by e2.2 million, or 6.8%, to e34.7 million for 2012, from e32.5 million for The increase was primarily attributable to a e1.1 million increase in plant and machinery depreciation, and a e0.6 million increase in building depreciation, both of which are largely attributable to the investments in capital expenditures incurred in 2011 and 2012 related to the construction of seven new plants in China, one new plant in Romania and the refurbishment of a plant in Brazil. Impairment of receivables increased by e0.5 million due to an increase in trade receivables driven by an increase in the volumes of the business. Operating profit Operating profit increased by e6.5 million, or 42.8%, to e21.8 million 2012, from e15.2 million for As a percentage of revenues, operating profit increased from 2.0% for 2011, to 2.6% for Finance income Finance income decreased by e0.5 million, or 43.9%, to e0.6 million for 2012, from e1.0 million for In both periods, finance income primarily relates to interest earned on our cash deposits and, to a lesser extent, income from our financial assets. Finance costs and net foreign exchange effect Finance costs increased by e0.4 million, or 3.9%, to e12.0 million for 2012, from e11.6 million for The increase in finance costs was attributable to a e2.1 million increase in finance expense on the shareholder payables, a e0.5 million increase in foreign exchange losses, which were partially offset by a decrease on finance expense on bank and other borrowings. The increase in finance expense on the shareholder payables was primarily attributable to the full year effect of the loans provided by Adler Plastic in late 2011, while the decrease in finance expense on bank and other borrowings was primarily attributable to a restructuring of our borrowings, in particular in NAFTA, during 2011 and 2012 as a result of a decision to change the banks used for financing to banks with more favorable interest rates. Extraordinary expenses, net Extraordinary expenses, net decreased by e2.4 million, or 30.1%, to e5.6 million for 2012, from e8.0 million for Extraordinary expenses, net for 2012, include e5.0 million of restructuring costs and e0.6 million in other extraordinary expenses. In particular, restructuring costs related to the downsizing of the production plant in Bavaria, Germany, and the integration of our head quarter functions with those of Adler Plastic and e0.6 million in other extraordinary expenses. Extraordinary expenses, net for 2011, include e4.8 million of restructuring costs related to the costs incurred in connection with the Adler Plastic acquisition of the HP Pelzer Group in 2011, e1.3 million relating to the loss realized on the conversion of a Chinese subsidiary into a joint venture in 2011, and e2.0 million of other extraordinary expenses. Share of profit of investments Share of profit of investments amounted to e0.6 million for both 2011 and

104 Income tax expense Income tax expense decreased by e5.1 million, or 49.9%, to e5.2 million for 2012, from e10.3 million for Liquidity Our liquidity requirements arise principally from our operating activities and capital expenditures for the expansion of our activities. Our expansion from 2011 primarily relate to our operations in Asia (in particular, China) and Mercosur. Historically, our principal sources of funding have included cash generated from operations, bank borrowings and equity and financing provided by our shareholders. See Description of Certain Financing Arrangements. Following the Offering of the Initial Notes and the use of proceeds therefrom, our primary sources of liquidity are cash generated from operations. We regularly review our liquidity requirements. In particular, on a weekly basis, cash forecasts are prepared on an entity-by-entity basis and reviewed centrally, while consolidated cash forecasts are prepared and reviewed on a monthly basis. Our cash at banks amounted to e21.8 million, e24.7 million, e29.7 million and e74.3 million as of December 31, 2011, 2012, 2013 and September 30, 2014, respectively. Cash at banks as adjusted to give pro forma effect to the Offering of the Notes and the use of proceeds therefrom would have been e84.0 million as of September 30, Such amount does not include e20.1 million of investments relating to the Credit Suisse Credit Note that we plan to make as described in Use of Proceeds. We believe that our available liquidity will be sufficient to meet our cash flow requirements subject to a variety of factors, including (i) our ability to generate cash flows from operating activities, (ii) the level of our outstanding indebtedness and the related debt servicing requirements and (iii) our capital expenditure requirements. Although we believe that our expected cash flows from operating activities will be adequate to meet our anticipated general liquidity needs and debt service obligations, there can be no assurance that our business will generate sufficient cash flows from operating activities to meet these needs or that future debt financing will be available to us in an amount sufficient to enable us to fund our liquidity needs, including making payments on the Notes or other debt when due. If our cash generated from operations are lower than expected or our capital expenditure requirements exceed our projections, we may be required to seek additional financing, which may not be available on commercially reasonable terms, if at all. Our ability to arrange financing generally and our cost of capital depends on numerous factors, including general economic conditions, the availability of credit from banks, other financial institutions and capital markets, restrictions on instruments governing our debt and our general financial performance. 86

105 Analysis of cash flows The following table sets forth a summary of our cash flows from operating, investing and financing activities for the periods indicated. For year ended For the nine months Twelve months ended December 31, ended September 30, September 30, In g thousands (Unaudited) (Unaudited) (Unaudited) Profit/(loss) for the year...(13,027) ,098 6,414 9,950 15,634 Adjustments to reconcile the profit/ (loss) for the year to the cash flow from operating activities: Amortization and depreciation... 32,326 34,057 34,639 24,924 24,828 34,543 Change in provisions for risks and charges... (2,880) 7,846 (7,209) (4,952) 8,751 6,494 Change in net working capital...(14,895)(19,653)(14,618) (20,783) (45,741) (39,576) Cash flows from operating activities.. 1,524 22,454 24,910 5,603 (2,212) 17,095 Cash flow from investing activities Investments net, in property, plant and equipment and intangibles...(32,271)(39,140)(33,097) (25,991) (30,261) (37,367) Acquisition of investments... (450) (504) (946) (20,099) (21,045) Fixed assets NBV add. acqu new Adler assets... Cash flows (used in) investing activities...(32,721)(39,644)(34,043) (25,991) (50,360) (58,412) Cash flow from financing activities Net change in financial liabilities...(15,841) 19,339 20,747 18, , ,409 Net change in shareholder payables.. 55,337 (2,669) (842) (2,343) (49,582) (48,081) Shareholder contributions... 1,500 Dividends paid... (3,155) (2,735) (3,832) (1,824) (1,779) (3,787) Net change in financial assets... (1,349) 1, ,333 1,327 Cash flows from (used in) financing activities... 36,492 15,262 16,910 15,376 98,334 99,868 Total cash flows... 5,295 (1,928) 7,777 (5,012) 45,762 58,551 Cash at banks at the beginning of the year... 19,341 21,841 24,672 24,672 29,701 29,701 Non cash items due to first time consolidation... Exchange gains/(losses)... (2,795) 4,759 (2,748) (1,330) (1,178) (2,596) Cash at banks at the end of the year. 21,841 24,672 29,701 18,330 74,285 85,656 Cash flows from operating activities Net cash used in operating activities for the nine months ended September 30, 2014 was e2.2 million, as compared to net cash generated from operating activities of e5.6 million for the nine months ended September 30, The decrease was mainly attributable to a decrease in change in net working capital, due to (i) the repayment of customer loans and reduction of supplier loans using proceeds of the bond issued in 2014, and (ii) increased trade receivables due to seasonal fluctuation. Net cash generated from operating activities for 2013 was e24.9 million, as compared to e22.5 million for The increase was largely attributable to the e11.9 million increase in profit for the 2013 and a e5.0 million increase in cash generated from movements in working capital, which were partly offset by a e15.1 million increase in cash absorbed from movements in provisions for risks and charges. In particular, during 2012, we recognized provisions which included those in relation to restructuring of the plant in Bavaria, Germany, the integration of the headquarter functions with those of Adler Plastic and provisions for adjustments to sales prices. 87

106 Net cash generated from operating activities for 2012 was e22.5 million, as compared to e1.5 million for The increase was largely attributable to the combined effect of a e13.2 million increase in profit for the year and an increase of e10.7 million in cash generated from the movements in provision for risks and charges, which were partially offset by a e4.8 million increase in cash absorbed from movements in working capital. Cash flows used in investing activities Net cash used in investing activities for the nine months ended September 30, 2014 was e50.4 million, as compared to e26.0 million for the nine months ended September 30, Investing activities for the nine months ended September 30, 2014 mainly included net investments in property, plant and equipment of e21.9 million, e8.3 million of which was in Europe, e4.9 million of which was in NAFTA, e4.5 million of which was in Asia and e4.2 million of which was in Mercosur. Net cash used in investing activities for 2013 was e34.0 million, as compared to e39.6 million for Investing activities for 2013 mainly included: net investments in property, plant and equipment of e29.8 million (primarily in Mercosur, NAFTA and Europe), of which e14.9 million related to assets under construction, payments on account and other assets, e12.0 million related to plant and machinery, e1.5 million related to industrial and commercial equipment and hardware and e1.4 million related to land and buildings; and net investments in intangible assets of e3.3 million, largely related to software licenses acquired in connection with the roll out of the SAP accounting system to the Brazilian entities. Investing activities for 2012 mainly included: net investments in property, plant and equipment of e38.5 million (primarily in Mercosur, NAFTA and Europe), of which e25.2 million related to plant and machinery, e6.4 million related to assets under construction, payments on account and other assets, e3.7 million related to industrial and commercial equipment and hardware and e3.1 million related to land and buildings; and net investments in intangible assets of e0.7 million. Net cash used in investing activities for 2012 was e39.6 million, as compared to e32.7 million for Investing activities for 2011 mainly included: net investments in property, plant and equipment of e31.3 million (primarily in Europe, Asia and NAFTA), of which e15.3 million related to plant and machinery; e11.4 million related to assets under construction, payments on account and other assets, e5.0 million related to industrial and commercial equipment and hardware; and net investments in intangible assets of e1.0 million. Cash flows from/(used in) financing activities Cash flows from financing activities for the nine months ended September 30, 2014, were e98.3 million, as compared to cash flows used in financing activities of e15.4 million for the nine months ended September 30, Cash flows from financing activities for the nine months ended September 30, 2014 were influenced by the issuance of the Initial Notes, repayment of existing bank facilities including factoring agreements and the repayment of our shareholder loan and trade payables. Cash flows from financing activities for 2013 were e16.9 million, as compared to e15.3 million for In both years, cash flows from financing activities mainly related to the net proceeds 88

107 from financial liabilities which amounted to e20.7 million and e19.3 million for 2013 and 2012, respectively, to support the business. Cash flows from financing activities for 2012 mainly related to e19.3 million provided from financial liabilities, e1.3 million of cash generated from movements in financial assets, which were partially offset by cash used on payments of the shareholder payables of e2.7 million and dividends of e2.7 million. Cash flows from financing activities for 2012 were e15.3 million, as compared to e36.5 million for Cash flows from financing activities for 2011, primarily related to proceeds of e56.8 million received from our shareholder Adler Plastic, of which e55.3 million related to the shareholder payables, and e1.5 million related to shareholder contributions. These were partially offset by repayments of financial liabilities, which included bank borrowings, other borrowings and finance lease liabilities of e15.8 million, dividends paid of e3.2 million and cash absorbed from movements in financial assets of e1.3 million. Working capital We define trade working capital as the sum inventories and trade receivables net of trade payables. The following table sets forth a breakdown of trade working capital. As of December 31, As of September 30, In g thousands (unaudited) Inventories... 95, ,927 99, ,800 Trade receivables... 63,624 93, , ,106 Trade payables... (120,461) (138,937) (138,472) (175,305) Trade working capital... 38,912 58,334 73, ,601 Other items... (11,851) (11,620) (11,742) (21,486) Total working capital... 27,061 46,714 61,332 95,115 The increase in working capital from e27.1 million as of December 31, 2011, to e46.7 million as of December 31, 2012 and to e61.3 million as of December 31, 2013, has primarily been driven by growth in sales volumes and in particular an increase in trade receivables. The increase in working capital to e95.1 million as of September 30, 2014 resulted primarily from the repayment of customer loans and reduction of supplier loans, combined with the effects of a first time consolidation of new assets and increased trade receivables due to seasonal fluctuation. The increase in trade receivables from e63.6 million as of December 31, 2011, to e93.3 million as of December 31, 2012 and to e111.7 million as of December 31, 2013, was due in part to the growth of our business operations and an increase in sales volumes, as well as a change of payment terms offered to certain customers in 2012 from seven days to the industry standard of days. The increase in trade receivables to e167.1 million as of September 30, 2014, was primarily driven by seasonal fluctuation. In order to mitigate the impacts of the change in payment terms, we concurrently renegotiated supply contracts in order to receive improved payment terms resulting an increase in trade payables. Indebtedness We have historically financed our working capital and capital expenditure requirements through cash generated by operations, bank borrowings and the shareholder loan provided to us by Adler Plastic in 2011, which was repaid in August 2014 using a portion of the proceeds from the offering of the Initial Notes. 89

108 The following table sets forth the amounts of our net debt as of December 31, 2013 and September 30, As of As of December 31, September 30, In g thousands (unaudited) Cash at banks... (29,701) (74,285) Initial Notes ,000 Bank borrowings... 87,620 32,397 Other borrowings (1)... 13,560 2,546 Lease liabilities... 7,575 4,894 Intra-group loans and shareholder trade payables... 51,826 2,244 Net debt (2) , ,796 (1) Other borrowings mainly relate to financial liabilities with customers. (2) Net debt is a Non-GAAP Financial Measure and is calculated as total financial liabilities and payables to shareholder, net of cash at banks. See Presentation of Financial Information Use of non-gaap financial measures. We also have available up to R$62 million for drawing under the Credit Suisse Credit Note, which is secured on local Brazilian assets, to provide financing for our Brazilian operations. As of the date of this Offering Memorandum, we had R$62 million (e20.1 million) outstanding under this agreement. We intend to use a portion of the net proceeds from the offering for investments related to the Credit Suisse Credit Note. See Description of Certain Financing Arrangements Credit Suisse Credit Note and Use of Proceeds. As of September 30, 2014, on a pro forma basis for the Offering of the Notes and the application of the proceeds therefrom as described in Use of Proceeds, our total debt would have been e322.0 million. See Capitalization. The Company has historically entered into local short-term credit facilities to provide working capital to the Group, many of which facilities were repaid with the proceeds from the offering of the Initial Notes. As of September 30, 2014, we had e32.4 million of bank borrowings, comprised of e11.0 million of bank borrowings of our current joint ventures in Turkey and Romania, e2.7 million of bank borrowings of the Taicang HP Pelzer Automotive Interior Systems Co. Ltd, one of our joint ventures in China, e14.0 million of bank borrowings of Pelzer da Bahia Ltda. and e4.7 million of other bank borrowings. In addition, the Group leases various assets under finance lease agreements. As of September 30, 2014, the Group had liabilities under finance leases in an amount of e2.3 million with respect to long-term finance leases and e2.6 million with respect to short-term finance liabilities. Capital expenditures Our capital expenditures comprise investments for new plants and expansion of existing plant capacity for new production lines, as well as certain maintenance capital expenditures. For the years ended December 31, 2011, 2012 and 2013 and the nine months ended September 30, 2014, our total capital expenditure for property, plant and equipment amounted to e38.8 million, e39.1 million, e30.9 million and e21.9 million, respectively. Historically, our capital expenditures have been primarily related to investments in the United States of America, the Czech Republic, Brazil and China to support expansion and growth in the existing business, through the construction of new plants, and the upgrade of existing facilities. In particular, during the three years ended December 31, 2013, we opened 10 new plants, of which seven are in China. 90

109 A small portion of our capital expenditures are related to maintenance activities. We estimate that our maintenance capital expenditures amounted to e7 million, e8 million and e4 million for the years ended December 31, 2011, 2012 and 2013, respectively, and e7 million for the twelve months ended September 30, The following table sets forth our total capital expenditures for the periods indicated as derived from our cash flow statement. We define capital expenditure as gross additions to property, plant and equipment during the relevant period. For year ended For the nine months December 31, ended September 30, In g thousands (unaudited) (unaudited) Plant and machinery... 17,680 25,214 12,042 8,827 4,912 Assets under construction and payments on account and other assets... 12,389 6,769 15,614 16,298 13,826 Industrial and commercial equipment and hardware... 7,342 4,001 1,853 1,151 2,696 Land and buildings... 1,343 3,104 1,361 1, Total property plant and equipment... 38,754 39,088 30,870 27,338 21,904 Of which ordinary capital expenditure (1).. 38,754 34,243 27,204 24,384 21,905 (1) Ordinary capital expenditure is defined as capital expenditures excluding certain items that we consider to be extraordinary in nature. In 2012, we excluded e4.8 million of asset additions arising from a change in the accounting treatment for machinery used by the Company under lease, related to a change in the nature of the underlying contract from an operating lease to a finance lease. This change had no cash impact. In 2013, we excluded e3.7 million of asset additions related to the replacement of assets damaged in a fire in Plzen. Since 2011, the largest items of capital expenditure have related to the purchase of plant and machinery to support our expansion (in particular, related to specific client projects). Total capital expenditures for property, plant and equipment for the nine months ended September 30, 2014 amounted to e21.9 million and primarily related to the upgrade of existing facilities in NAFTA and to a lesser extent in the Czech Republic and China. Total capital expenditures for property, plant and equipment for 2013 amounted to e30.9 million and primarily related to investments made to upgrade our Gravatai plant in Brazil for a specific client project serviced from that plant, investments made to in order to prepare our plant in Athens, United States of America, and other plant upgrades in Europe, the most significant of which in Germany. Total capital expenditures for property, plant and equipment for 2012 amounted to e39.1 million and primarily related to investments made in plant and machinery to upgrade our Gravatai plant in Brazil for a specific client project serviced from that plant, investments made in order to prepare our plant in Athens, United States of America, and other plant upgrades in Europe, the most significant of which in the Czech Republic. Total capital expenditures for property, plant and equipment for 2011 amounted to e38.8 million and primarily related to investments made in plant and machinery for the new plants opened in China, and the upgrade of the existing plant in the Czech Republic. We expect our capital expenditure in 2015 to be approximately e33 million, which largely relates to plant and machinery for use in specific client projects, and the most significant portion of which related to our plants in Puebla, Mexico, Pernambuco, Brazil and Congquing, China. We expect to finance such capital expenditure mainly from the cash generated by our operating activities, and to a small extent, where applicable, from external borrowings. 91

110 The current plant upgrades and plants under construction or in progress are expected to be completed by July 2015, with the exception of the plants in Congquing, China. The upgrade to the Puebla plant is expected to be completed during 2015, and the Pernambuco plant is expected to be fully operational by July The plant being constructed in Congquing is expected to be part operational in late 2015 and fully operational by March 31, Contractual obligations and contingent liabilities The following table sets forth our remaining contractual maturity for our liabilities as of September 30, 2014, as adjusted to give effect to the Offering of the Notes and the use of proceeds therefrom as described in Use of Proceeds. The table reflects the undiscounted cash flows of financial liabilities based on the earliest date on which we could be required to pay. Payments by due period Less than More than In g thousands 1 year 1-5 years 5 years Total Finance lease obligations... 2,571 2,323 4,894 Factoring Operating lease obligations... 7,176 16,730 8,847 32,753 Credit Suisse Credit Note... 13,940 6,099 20,039 Initial Notes , ,000 Notes offered hereby... 50,000 50,000 Total... 9,898 32, , ,837 Our ability to make scheduled payments of principal of, or to pay the interest on our indebtedness, or to refinance our indebtedness will depend on our future performance and our ability to generate cash, which, to a certain extent, is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors which are beyond our control, as well as the other factors discussed under Risk Factors. Off-balance sheet arrangements The following table sets forth our off balance sheet arrangements as of December 31, 2013 and September 30, As of September 30, December 31, In g thousands Guarantees provided... 21,287 87,293 Total off balance sheet arrangements... 21,287 87,293 The guarantees provided above relate to loans and mortgages. The guarantees provided are guarantees and liens given by us and certain of our subsidiaries in connection with several loans with local banks. Many of the loans to which the guarantees and loans related as of December 31, 2013 were repaid in August 2014 using a portion of the proceeds from the offering of the Initial Notes, resulting in a significantly lower amount of off balance sheet arrangements as of September 30, Other than the arrangements described above, we do not have any off-balance sheet arrangements that have or are reasonably likely to have an effect on our operating results, financial position or cash flows. 92

111 Qualitative and quantitative disclosures about market risk In the ordinary course of business, we are exposed to a variety of market risks, including credit risk, liquidity risk and interest rate risk. We monitor and manage these risks as part of our overall risk management strategy, which recognizes the unpredictability of the financial markets and seeks to reduce the potential adverse effects on our results of operations and financial position. The following section sets forth a discussion of the significant financial risks to which we are exposed. This discussion does not address other risks to which we are exposed, such as operational risks. For a discussion of such risks, see Risk Factors. Interest rate risk Historically, we have had significant levels of variable rate borrowings and as such have been subject to interest rate risk related to the fluctuations of the interest rates of these borrowings. With the exception of 2011, we have not entered into derivative transactions to hedge such exposure. We do not expect to have a significant exposure to fluctuations in interest rates following the issuance of the Notes and the application of the proceeds therefrom. Liquidity risk Liquidity risk is the risk of not being able to fulfill present or future obligations if we do not have sufficient funds available to meet such obligations. Liquidity risk arises mostly in relation to cash flows generated by and used in working capital, and from financing activities and in particular in relation to the servicing of our debt. We manage liquidity risk through various management policies, including through monitoring the timing of receivables and minimizing any delays in collections. We also prepare and review weekly cash forecasts at the individual entity level and monthly cash forecast on a consolidated level. Credit risk Credit risk is the risk that our customers and counterparties will not meet their obligations under various finance and trading agreements. We are subject to credit risk, mainly in relation to trading transactions. We have adopted risk management procedures in order to monitor credit risk. Our customers are generally of high credit quality and as such, our bad debt exposure has been very limited in the past. In particular, our impairment of receivables amounted to e1.3 million, e1.1 million and e1.3 million for 2013, 2012 and 2011 respectively. When entering into transactions with new customers, or less established customers, we generally require upfront payment for our sales, while for our established customers we have standard payment terms, of approximately 45 days. We are therefore subject to minimal credit risk. As of September 30, 2014, our total trade receivables were e167.1 million, and our provision for bad and doubtful debt was e2.3 million, or 1.4% of the trade receivables balance. Foreign exchange risk We are subject to foreign exchange risk through translation of foreign currency financial statements into Euro for consolidation and also through transactions by entities in the Group in currencies other than their own. We prepare our consolidated financial statements in Euro, while the financial statements of each of our subsidiaries are prepared in the functional currency of that entity. In preparing consolidated financial statements, we translate assets and liabilities measured in the functional currency of the subsidiaries into Euro using the exchange rate prevailing at the balance sheet date, while we translate income and expenses using the average exchange rates for the period covered. Accordingly, fluctuations in the exchange rate of the functional currencies of our entities against the Euro can impact our financial statements. 93

112 We are also subject to foreign exchange risk when Group entities enter into transactions in which the revenue and income streams are denominated in currencies other than the currency in which the related costs are incurred. In order to mitigate this impact, our income and revenue streams are generally denominated in the same currencies as the costs we incur, providing a natural hedge against foreign currency exchange risk. Critical accounting estimates and judgments Our significant accounting policies, which we have applied consistently for all periods included in this Offering Memorandum, are fully described in Note 3 to the Audited Consolidated Financial Statements. The preparation of our consolidated financial statements requires that management apply accounting standards and methods which, under certain circumstances, are based on difficult subjective measurements and estimates based on past experience and on assumptions considered, at various times, to be reasonable and realistic in terms of the respective circumstances. The use of such estimates and assumptions affects the amounts reported in the Audited Consolidated Financial Statements and the Unaudited Interim Condensed Consolidated Financial Statements, as well as the information disclosed. Actual results for those areas requiring management judgment or estimates may differ from those recorded in the financial statements due to the occurrence of events and the uncertainties which characterize the assumptions and conditions on which the estimates are based. The primary areas applicable to our Group that involve greater subjectivity in making estimates and where a change in the conditions underlying the assumptions could have a significant impact on our Audited Consolidated Financial Statements and the Unaudited Interim Condensed Consolidated Financial Statements include the items discussed below. Depreciation of property, plant and equipment and amortization of intangible assets Property, plant and equipment and intangible assets are shown at original historical cost less accumulated depreciation and any accumulated impairment losses (if applicable). The cost of property, plant and equipment and intangible assets is depreciated or amortized on a straight line basis over the estimated useful life of the asset. The economic useful life of the asset is determined at the time of purchase, based on historical experience for similar assets, market conditions and expected future events which may affect them, such as technological changes. The effective economic useful life may, therefore, be different from the estimated useful life. Provisions for risks and charges Provisions for risks and charges are provided in respect of known or probable losses or liabilities whose timing and extent cannot be reliably determined at the year-end but an estimation of cost can be provided by the management. No provisions are accrued when the obligation is possible but not probable or when the cost of a probable loss or liability cannot be reliably estimated in these cases a contingent liability is disclosed in the notes to the financial statements. The quantification of the provision and the classification of an obligation as probable are based on assumptions and estimates using information and knowledge which may vary over time. Therefore, the final outcome of such litigations and obligations may be significantly different from those considered during the preparation of the financial statements. The amount recorded in the Audited Consolidated Financial Statements and the Unaudited Interim Condensed Consolidated Financial Statements represent management s best estimate at the relevant reporting date. Tooling projects A portion of our revenues are derived from tooling projects which are performed under shortand medium-term contracts. Contract revenues and contract costs associated with these contracts are recognized as revenue and expenses by reference to the percentage-of-completion method. 94

113 The profit margin recognized in the income statement is a function of both the percentage of works completed as well as the overall margin expected to be realized upon completion of the entire project. The extent of margin recognized depends on the distribution of the expected or estimated cost over the full life of the project. 95

114 Industry Unless otherwise indicated, information regarding our industry, including historical and forecast production information, provided herein has been sourced from data published by LMC Automotive as of June 30, Neither the Company nor the Initial Purchaser has independently verified the information set forth herein. See Industry and Market Data. Automotive industry landscape The global automotive industry designs, develops, manufactures, sells and services light and heavy commercial vehicles. The light vehicle segment is generally defined as the market for passenger cars, vans and light trucks weighing less than six tons, while the heavy vehicle segment is generally defined as the market for vehicles weighing in excess of six tons. According to LMC Automotive, in 2013, approximately 84.6 million light vehicles were produced, of which 19.6 million were produced in Europe (including Russia), 20.7 million were produced in the Americas and 42.9 million were produced in Asia. The automotive production value chain is composed of two principal participant groups: OEMs (such as Daimler, Ford and Volkswagen) and automotive part suppliers (such as us Schaeffler, Faurecia, Stabilus, Continental, Motherson Automotive, and Gestamp). The automotive part supplier industry can be further segmented into three tiers. Tier 1 automotive suppliers sell their products directly to OEMs. Typically, these products are larger modules or systems that integrate components, sometimes sourced from Tier 2 suppliers. Tier 2 suppliers sell individual components or component groups to Tier 1 suppliers, these components or component groups typically integrate individual parts produced by and purchased from Tier 3 suppliers. In general, suppliers work with OEMs to develop components and systems to meet their technological, economic and regulatory requirements. Replacement parts are sold through a separate channel (i.e. the original equipment service or OES channel) and directly to end users in the independent aftermarket. We sell all of our products to OEMs and do not sell any of our volumes to the aftermarket. Automotive suppliers are typically further divided into the following sub-segments based on their product or systems function in the car: powertrain, body and structural, exterior, interior, transmission and suspension. Given the fragmented nature of the industry, there are different market leaders in the respective sub-segments. Light vehicle market development The primary driver of revenue for automotive suppliers is global light vehicle production volume and the content per vehicle for the components and systems produced by such suppliers. A contract for a supplier typically covers the full life of a vehicle platform or model range, which usually has an average life of five to seven years. Some parts and components, such as certain interior and exterior components, may be updated during the life of a vehicle model ( mid-cycle refresh action). The actual production volume of a vehicle program is rarely fixed and may differ significantly from OEM projections as a result of consumer demand. The main factors affecting consumer demand are general economic conditions and consumer confidence levels. Changes in regulations and government policies (such as temporary scrappage schemes introduced in the United States and Europe in 2009) also affect consumer demand. Other factors that influence automotive production include changing demographics (e.g. population growth, aging and urbanization), levels of consumer disposable income, evolving consumer preferences and replacement requirements of old vehicles. The following table shows historical and forecast light vehicle production, as well as production compound annual growth rates ( CAGR ), in key regions and select countries in which we 96

115 operate. Both historical and forecast data is based on data as of June 30, 2014 published by LMC Automotive. Production of light vehicles (units in millions) CAGR CAGR Western Europe (1.7%) 2.9% Eastern Europe % 4.7% Europe % 3.5% North America % 3.2% South America % 1.8% Japan/Korea % (1.9%) Greater China % 8.4% Asia % 5.6% Middle East / Africa (11.1%) 12.8% Global % 4.6% Germany % 1.1% USA % 2.8% Mexico % 9.4% Brazil % 2.1% India % 12.8% Russia % 2.4% Greater China % 8.4% BRIC % 7.9% Source: LMC Automotive According to LMC Automotive, global light vehicle production is expected to grow from 84.6 million units in 2013 to million units in 2017, representing a CAGR of 4.6%. Europe (including Russia) In Europe, the financial crisis of had a negative impact on light vehicle production volumes. After a recovery in production volumes in 2010 and 2011 (with annual production of 19.1 million and 20.5 million, respectively), volumes declined again by 5.3% in 2012 as economic conditions in the Eurozone deteriorated. Production volumes remained at relatively low levels in the first and second quarter of 2013, hitting 20-year lows. Thereafter production began to recover on the back of an improved economic outlook in Southern European economies, resulting in a positive volume growth of 0.7% to 19.6 million units for According to LCM Automotive, the positive trend is expected to continue through 2017, with annual production volumes in Europe expected to grow at a CAGR of 3.5% during the period from 2013 to 2017 to a new peak level of 22.5 million units. According to LMC Automotive, production in Western Europe is expected to grow at a CAGR of 2.9% during the period from 2013 through 2017, driven by recovery of volumes in Italy, France and Spain, whose production are expected to grow at CAGRs of 7.3%, 4.1% and 5.4%, respectively, during the period from 2013 through Germany is expected to experience moderate growth at a CAGR of 1.1% over the same period, due to the on-going localization of production by German OEMs in emerging markets such as China, Brazil and Mexico. Production volumes in Eastern Europe are expected to experience strong growth, at a CAGR of 4.7% during the same period. North America (including Mexico) The automotive industry in North America emerged strongly from the financial crisis. Light vehicle production volume in North America reached 11.8 million units in 2010, with the majority of the growth coming from the United States where production volume was 7.6 million for the period. In the three years ended December 31, 2013, production in North American grew at a CAGR of 10.9%, reaching a new peak level of 16.2 million units for

116 Production in the United States grew over the same period at a CAGR of 12.8% reaching 10.9 million units in The trend toward local production by German and Asian OEMs, which have established several new production sites in the southern United States and Mexico, has been an important new development in the region. LMC Automotive expects the related positive trend to continue through 2017, with a projected CAGR for North America during the period from 2013 through 2017 of 3.2%, driven by continued recovery in light vehicle sales in the region. Several plant openings by non-u.s. OEMs in Mexico over the next few years and strong outlook for the Mexican economy are expected to fuel the highest growth in the region, with a CAGR for Mexico of 9.4% for the period. The restructuring of the North American automotive industry and subsequent volume recovery has resulted in a fundamental improvement in OEM and supplier economics in the region. South America Light vehicle production in South America grew from 4.2 million units to 4.5 million vehicles from 2010 to 2013, representing a CAGR of 2.9%. Brazil is the largest production country in the region representing over 77% of total South American production volume in Brazil outperformed the rest of the region with a CAGR of 3.4% during the period from 2010 to 2013, despite significant developments in government policies affecting the national automotive industry. At the end of 2013, the Brazilian government introduced tariffs and raised the tax on imported cars, with further measures including tax breaks for OEMs that increased their Brazilian content (engineering work performed in Brazil and use of Brazilian automotive suppliers). These policies have led a growing number of global OEMs to locate production in Brazil in order to maintain competitive pricing in Brazil. On the demand side, Brazil introduced tax breaks on vehicles in 2012 which remained in place through 2013 in order to stimulate both sales and production and to offset the effect of a slowing economy. In addition to developments in governmental policies, automotive suppliers have been negatively impacted by the country s high inflation. According to LMC Automotive, by the end of 2017, light vehicle production in South America is projected to reach 4.9 million units, representing a CAGR of 1.8% during the period from 2013 through Brazil is expected to continue to outperform the rest of the region with projected CAGR of 2.1% over the same period. Asia China has recently become the largest light vehicle production country in the world, representing approximately 25% of global production in With the end of the government s economic stimulus program, production growth slowed down in 2011 to 2.4%. Since then, growth has recovered on the back of stronger momentum in the economy, with volume growth of 6.3% in 2012 and 14.5% in China is expected to remain the key driver of global light vehicle production growth, with projected CAGR of 8.4% during the period from 2013 through 2017 is expected to account for approximately 49% of total global production volume increase during the same period. Other key growth markets in Asia include India and ASEAN (Indonesia, Malaysia, Philippines and Thailand) countries, in particular Indonesia and Thailand which have emerged as major automotive production hubs. India is expected to experience the highest growth among the major production countries globally, with projected CAGR of 12.8% for the period from 2013 through Production in ASEAN countries is expected to grow at a CAGR of 6.5% over the same period. 98

117 Market and industry trends Key trends in the automotive industry Globalization of platforms In an effort to reduce the time and resources spent in the development of new platforms, OEMs are increasing the number of vehicles built on a single platform. Vehicle platform-sharing allows OEMs to build a greater variety of vehicles from one basic set of engineered components, thus optimizing development costs and, by implementing platform-sharing globally, enabling them to realize economies of scale. To support this strategy, OEMs require suppliers to match the scale and global footprint of these platforms. We believe we and other suppliers like us with a global footprint and manufacturing and technological expertise are well positioned to benefit from such platform-sharing and to respond efficiently to our customers local needs. Localization of production in emerging markets A number of factors, including the increase in disposable income, low existing vehicle production levels and the development of road infrastructure, are driving the demand for light vehicles in emerging markets. As a result of increasing local demand, relatively low local manufacturing costs and the lack of import duties for locally manufactured products, OEMs are expanding their presence in emerging markets. As sales in these markets are projected to continue to grow, more global premium car makers have announced plans to expand their local production footprint. We believe that we are well positioned to benefit from this trend as our OEM customers tend to favor global suppliers that can produce high quality components locally. Increased outsourcing In an effort to focus their resources on automobile final assembly, OEMs are increasingly looking to outsource a large part of their components production, previously manufactured internally, to external suppliers. The outsourcing trend has led to an increasing dependence of OEMs on suppliers that are capable of managing complex projects across multiple geographies while maintaining high quality standards. While know-how is still being developed by suppliers and the production process is still largely controlled by OEMs, there is an increasing collaboration between OEMs and Tier 1 suppliers. Consolidation of supplier base In order to take advantage of operational economies of scale and to simplify the value chain, OEMs are encouraging the consolidation of their supplier base and relying increasingly on large, technically and financially strong global suppliers. Key factors to choosing preferred suppliers include product quality, service, R&D capability, technological capability, global supply capability, financial strength, quality assurance and price competitiveness. Powertrain electrification Due to the focus on producing environmentally friendly vehicles and highly standardized technological components, the electrification of the vehicle powertrain, the main components that deliver power to vehicles, has become of increasing importance and poses new challenges that require new solutions to be developed. In particular, thermal performance, acoustic optimization, reliability, weight and performance of electric vehicles are becoming of increasing importance. We believe that the development of a new generation of electric vehicles will require suppliers to leverage their experience and to be able to cooperate with OEMs in the development of new power and vehicle functions. Higher consumer expectations of interior quality, aesthetics and comfort Interior design is generally customized for each individual model program, and represents one of the main distinctive features of the vehicle. Interior quality and comfort represent important 99

118 factors that can greatly influence a consumer s vehicle selection, and are evaluated through a number of criteria such as visual ambiance, functionality, acoustics, aesthetics, new styling solutions and quality of finish. The trend towards higher consumer expectations for interior content is increasingly evident in OEMs demands for improved fit, finish and craftsmanship in interiors across all vehicle segments, including the mid-market segment. We believe that OEMs are dedicating a larger portion of total cost per vehicle to interior components as they upscale vehicle interiors across their entire portfolio of platforms. We believe that suppliers with advanced design, materials science and manufacturing capabilities, with the ability to deliver a broad suite of interior component products at the quality levels OEMs demand, should benefit from these trends. Environmental initiatives Recent regulatory changes and an increasing customer focus on environmental issues have driven suppliers and OEMs to make advances in the development of environmentally friendly vehicles with a particular focus on fuel efficiency, reduced emissions and the use of sustainable materials. The increasing need for components that are lightweight and environmentally friendly will continue to provide an opportunity for differentiation as OEMs strive to reduce the ecological footprint of their vehicles. Suppliers, like ourselves, who have invested and continue to invest in research of recycled and renewable materials with higher performance and lower weight will be well-positioned to capitalize on this growing demand. Acoustic market and competitive landscape According to a study conducted by PricewaterhouseCoopers on our behalf, the size of our target market is approximately e7.5 billion with an expected CAGR of approximately 5% during the period from 2013 to This growth is being driven by the growth in light vehicles production and the increasing content per car, in particular aimed at noise reduction, thermal efficiency, aerodynamic efficiency and weight reduction. The acoustic market is highly fragmented with a large number of relatively small players. Market participants expect consolidation in the medium term resulting in two or three strong players in terms of size, technological capabilities, financial strength and global footprint. Key players We assess our competitive landscape based on integration competence and innovation competence and classify our competitors into four groups: Interior system integrators with high integration competence and low innovation including Magna, Faurecia and IAC; Supplier of acoustic components with low integration competence and low innovation including Hanil E-HWA, Ideal, Hayashi Telempu and Trèves; Acoustic System Specialist with low integration competence and high innovation including Toyota B and Borgers; and Acoustic integrators with high integration competence and high innovation including ourselves and our direct competitor Autoneum. We believe we are amongst the leaders in the Tier 1 suppliers to global OEMs in our segment with the ability to supply high quality and innovative products with an international footprint and cost efficiency. 100

119 Market shares by geography and by products We hold a leading position on a global scale across our product families, with higher market share especially in the engine and passenger compartments. Product Global market share Engine Compartment... 17% Passenger Compartment... 15% Luggage Compartment... 6% Exteriors (highly fragmented market)... 6% We have a solid presence in Europe, South America and NAFTA where the markets are already more consolidated. Product Region Regional market share Engine Compartment... Europe 14% NAFTA 30% South America 17% Asia 11% Passenger Compartment... Europe 14% NAFTA 18% South America 41% Asia 11% Luggage Compartment... Europe 5% NAFTA 8% South America 15% Asia 3% Exteriors... Europe 4% NAFTA 8% South America 43% Asia 1% Competitive dynamics The key challenges of the market in which we operate are volatile raw material prices, development of strategic partnerships and alliances, increasing demand for a global production footprint and the consequent extensive investment requirements. The key value drivers and fundamental areas of differentiation for us to maintain our leading position in our market include environmental regulation requiring constant innovation of technologies, especially in the area of weight and cost reduction, the increasing demand for comfort and safety, rising production volumes and the shortened manufacturing cycle. 101

120 Business overview Business We, the HP Pelzer Group, are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector. We design, develop, manufacture and sell parts and components that have the objective of optimizing acoustic performance, reducing vibrations, and increasing the thermal efficiency of our clients vehicles. Our business is vertically integrated; we carry out key value-added activities in-house, from the sourcing of raw materials to the creation of the end product. Through our investments in research and development, we believe that we have developed the broadest set of technological capabilities as compared to our peers, to create, design and produce products to meet our clients bespoke needs. We classify our products, generally into four product families: Engine Compartment, Passenger Compartment, Luggage Compartment, and Exterior parts. We manufacture several base products, including heavy layers, felts, carpets and foams that are used in a wide range of applications across our product families. We have production facilities and R&D facilities in 18 countries and sell our products to our clients in 35 countries across Europe, Asia, the Americas and Africa, and our global footprint allows us to be the supplier of choice of acoustic solutions for all major OEMs internationally. For the twelve months ended September 30, 2014, we recorded revenues, adjusted EBITDA and an adjusted EBITDA margin of e949.0 million, e76.2 million and 8.0%, respectively. Our clients include the majority of the world s OEMs. Our top five clients are the Volkswagen Group, General Motors, Ford, Hyundai and FCA. Our focus is on creating solutions for the premium and highly innovative models of our clients. We are a global supplier with manufacturing plants and research facilities close to the main automotive hubs in each major geographic region where our clients operate, which allows us to better serve our clients in each market in which they operate. We divide our business operations into four regions: Europe, NAFTA, Asia and Mercosur. In addition to our historical presence in Europe (44% of sales in the nine months ended September 30, 2014) and NAFTA (28% of sales in the nine months ended September 30, 2014), our business is expanding significantly in Asia and Mercosur, which accounted for 17% and 11%, respectively, of our sales in the nine months ended September 30, This represents an increase from 11% in Asia and 10% in Mercosur during the year ended December 31, Our group currently has 42 production facilities worldwide, with 20 plants in Europe, 11 in Asia, seven in NAFTA and four in Mercosur. We typically use highly automated production in countries with more costly workforces such as Germany, the United States, and South Korea, and a semi-automated production with a more flexible labor approach in low-cost countries such as Mexico and China. We also have a global research and development footprint, with our seven R&D facilities located in Germany, Russia, the United Kingdom, South Korea, Japan, China and Michigan (United States). As of September 30, 2014, we had approximately 8,900 employees globally. Sales by region for the Revenue by client for the nine months ended September 30, 2014 nine months ended September 30, 2014 NAFTA 28.1% Asia 17.1% Daimler-Group 5.0% Others 6.2% Asian OEM 5.6% VW-Group 22.3% BMW-Group 5.3% Chrysler/Fiat-Group 9.0% Mercosur 10.7% Europe 44.1% 9FEB Hyundai-Group 9.0% Ford-Group 16.5% GM-Group 21.2% 9FEB

121 We are an indirect majority-owned subsidiary of Adler Plastic. Adler Plastic owns our capital stock indirectly through Adler Group, which holds 100% of our share capital. Adler Plastic is a developer and producer of all acoustic products for automotive vehicles, as well as aeronautics and other transportation industries, the food industry and bedding industry, among other business. HP Pelzer was founded by Helmut Pelzer in Witten, Germany in 1969 and has grown through organic expansion and selected acquisitions. The first step in creating the current Adler Pelzer Group began in 2010, when Adler Plastic acquired indirectly, acting through the Adler Group, 49% of HP Pelzer. In 2011, Adler Group increased its holdings of HP Pelzer to 51% and subsequently acquired all of the remaining shares in our share capital in April In July, August and September 2014, we acquired additional non-italian subsidiaries of Adler Plastic and expect in the near future to also acquire certain Italian subsidiaries of Adler Plastic in order to complete our corporate restructuring. Competitive strengths Our success in our industry is driven by our: (i) leadership positions in an industry with high barriers to entry; (ii) strong positioning to take advantage of long-term growth trends in the automotive industry; (iii) strong R&D capabilities and track record of innovation; (iv) high diversification by geography, product and client; (v) well-invested global asset base with proximity to our customers; (vi) high revenue visibility with solid backlog and advanced orders; and (vii) experienced management team with proven track record. Leadership position in an industry with high barriers to entry We are a worldwide leader in the design, engineering and manufacturing of acoustic and thermal components and systems for the automotive sector, and have maintained and consolidated our position for the past 30 years. We are second in market share in Europe and third globally among independent suppliers in our business sector. We have a track record of increasing market share over time. During the period from 2010 to 2013, the global automotive market has grown by approximately 14.2% in volume and during the same period our revenues increased by approximately 38.7% from e638 million in 2010 to e885 million in We have increased our market penetration in all markets, particularly in Asia and Latin America. Based on management estimates as of the date of this Offering Memorandum, we are among the leaders in both the engine compartment and the passenger compartment markets with worldwide market shares of approximately 17% and 15%, respectively, and we are present in the luggage compartment and exterior parts markets with worldwide market shares of approximately 6% and 6%, respectively. We believe that our global manufacturing and R&D setup, relative to our competitors and to potential new market entrants, provide us with highly competitive economies of scale and technological advantages in an industry that is characterized by significant initial capital expenditure requirements creating high barriers to entry, despite relatively modest maintenance capital expenditure requirements. Additionally, given our products cannot be economically transported for long distances, our proximity to our customers in the main automotive hubs represents an important barrier for new entrants. Strong positioning to take advantage of long-term growth trends in the automotive industry For the following reasons, we are well-positioned to take advantage of certain automotive market trends and growth opportunities: Globalization of platform: As a global leader, with manufacturing capabilities in 17 countries and seven R&D facilities worldwide, we are able to supply the full range of our products in every region in which we operate with the same level of quality, service and technical support to the customer. We expect regional competitors to be negatively impacted by globalization trends as they typically are only able to provide certain components in limited locations. 103

122 Localization of production in emerging markets: Premium players are rapidly expanding their production in high growth regions and rely on their global partner suppliers who are able to follow their expansion and supply components locally to their production facilities. For example, BMW and Daimler have established production facilities in China and the United States and we have established new production facilities in Beijing, China and Thomson, Georgia, to be able to serve their global platforms locally. Our continued expansion into Asia, NAFTA (particularly in Mexico) and Mercosur positions us to better serve our customers in such areas. Environmental initiatives: The need to reduce the environmental impact of automobiles is leading to a re-design and re-engineering of the types of products produced across our industry. Such efforts require an economic and technological capacity that only larger, technologically innovative companies, such as our Group, have. Powertrain electrification: The increasing complexity of the powertrain, particularly following the greater penetration of hybrid and full electric technologies in the market, is broadening the scope of products required in the market place. We are well-positioned to create innovative products to manage the particular sound and thermal challenges of hybrid and full electric engines. Move of high-end features to mid-segment cars: The adoption of high performance acoustic and thermal solutions to standard vehicles is increasing the number of models in which our clients want to use our technologies. Given our market leadership in producing high-end acoustic and thermal components, we are well positioned as a supplier to meet the increased demand for parts in these mid-segment cars. Strong R&D capabilities and track record of innovation A key factor of our business success is our technical leadership and expertise in design, development and production of customized acoustic and thermal solutions for our customers in the automotive industry. We believe our innovation capabilities, which are supported by our fully integrated global R&D structure, provides us a competitive advantage in each of the markets in which we operate. We have a proven track record of bringing innovative products to the market, as evidenced by our 21 worldwide registered patents. OEMs are increasingly requesting customized solutions which require design and engineering capabilities with involvement in the early stages of development of a model. This has two positive effects on our business: (i) we are able to secure contracts at early stages of development and (ii) OEMs tend to favor industry leaders such as ourselves given our ability to deliver innovative solutions. Our R&D expenses amounted to e8.2 million in the nine months ended September 30, 2014, e10.1 million in the year ended December 31, 2013, e12.4 million in the year ended December 31, 2012 and e13.3 million in the year ended December 31, Our investments have yielded notable revenues. 63% of our revenues in the nine months ended September 30, 2014, 63% of our revenues in 2013, 51% of our revenues in 2012 and 48% of our revenues in 2011 were derived from new technologies that were developed over the previous three years and implemented or equipped for the first time on cars in each such year. We have strategically located our three primary R&D centers in Witten (Germany), Troy (Michigan, United States), and Taicang (China) to be in proximity to the main automotive industry hubs of such regions. As of September 30, 2014, we employed 142 dedicated R&D personnel across our seven R&D centers. We centralize our teams who focus on advanced acoustics, components and process technologies at our site in Witten, Germany to help minimize costs, while we maintain dedicated R&D teams in other European locations, Asia and the Americas to ensure that our innovations are adapted to local markets and regulations as necessary to meet our customers needs. To encourage know-how exchange, we have implemented policies which foster continuous communication between our R&D centers, 104

123 ensuring that our products meet the same high standards in each of our plants. For examples of our innovations, see Business Model Research and development. We conduct customer satisfaction surveys regularly to ensure our clients are satisfied with quality, delivery and service. While we have scored consistently high marks in such surveys, our customers noted in particular that we provide outstanding value in innovation. Eight of our facilities have been designated as centers of excellence, which indicates a specialized degree of expertise in the production and development of a particular technology or product. Our centers of excellence can export their knowledge and manufacturing processes to our other facilities to ensure that each of our products from each of our plants is of equally high quality and is standardized in concept. High diversification by geography, product and client We have a balanced business model with strong diversification by geography, client and product. Our diversification by geography and product has increased over the past seven years and we intend to continue that trend. Our sales are diversified across regions. In the nine months ended September 30, 2014, we generated 44% of our sales in Europe, 28% in NAFTA, 17% in Asia and 11% in Mercosur. Our balanced exposure to our markets helps us to absorb any negative trends in a particular region without significant impact to our overall results. We have a full range of acoustic and thermal products and we believe we are able to offer the broadest range of technologies to our customers. Our products are grouped by the Engine Compartment, Passenger Compartment, Luggage Compartment and Exterior parts. In the nine months ended September 30, 2014, approximately 16% (e114 million) of our revenues from our Engine Compartment products, approximately 58% (e413 million) of our revenues were derived from our Passenger Compartment products, approximately 15% (e107 million) of our revenues from our Luggage Compartment products and approximately 11% (e78 million) of our revenues from our Exterior products. Our product families are manufactured using different tax products, including heavy layers, felts, carpets and foams. We supply almost all global OEMs on a worldwide basis. Our clients include many prominent OEMS, such as Volkswagen, General Motors, BMW, Daimler and Ford, among others. We focus on financially strong OEMs that have premium models with content per car significantly higher than middle segment cars. We have been working with four of our key clients (General Motors, Daimler, BMW and Ford) for over 25 years and have long-standing relationships with many other prominent automakers. We believe our ability to develop and enhance our strategic ties with all major international car makers is based on our strong reputation and proven quality. As a result of such relationships and collaborations, we are relied on as the sole source supplier for a large number of platforms and are able to enter into long-term supply contracts, ensuring a steady source of income into the medium-term. During the last few years we have further diversified our client base. Our clients increased from 17 to 26 over the period from 2007 to the date hereof. Well-invested global asset base with proximity to our customers We currently operate production facilities in 17 countries with customers across five continents. Our facilities are well invested and we are able to sustain an increase in demand with our existing capacity and no significant additional capital investment. Our ordinary capital expenditures amounted to e21.9 million for the nine months ended September 30, 2014 (representing 2.3% of our revenues), e38.8 million for the year ended December 31, 2011 (representing 5.1% of our revenues), e34.2 million for the year ended December 31, 2012 (representing 4.1% of our revenues) and e27.2 million for the year ended December 31, 2013 (representing 3.1% of our revenues). As a result of our historical investment program, we believe that our asset base is adequately invested for our capacity requirements and we expect that, in the short to medium-term, our maintenance and growth capital expenditures will 105

124 range between 3% and 4% per annum of our total revenues (absent any unplanned capital expenditure requirements). Our sites for our plants and R&D facilities are strategically selected to ensure we are in close proximity to the production facilities of our clients. Through our regional sites, we are able to act as a local supplier to the customer, reducing transportation costs and reacting to client needs and concerns efficiently. High revenue visibility with solid backlog and advanced orders Our sole source contracts provide us with visibility on our revenues. We typically enter into sole source contracts covering the full life of the platforms we supply. As of December 31, 2014, we had an estimated total Order Book of e5.2 billion. Our Order Book information relates to booked business (representing the sales that we expect to record in the event we receive firm orders under contracts for vehicle programs that we have been awarded by OEMs, including both those that were in production and those that were not yet in production and including both new model incremental and successor model business). Our current Order Book reflects our focus on growth outside of Europe and is diversified across geographies and customers. We believe the potential revenue realization from these contracts positions us well for growth in the medium-term. Our visibility over our revenues is enhanced by our strong track record of winning repeat orders and being awarded contracts for subsequent generations of a particular vehicle model, as well as by the low likelihood that a customer would switch suppliers once a project has been awarded to us, given the high operational, technical and logistical costs of switching. As a result of the foregoing, while the actual revenues which we derive from a project ultimately depend on our OEM customers production volumes for the respective car models, we believe we have good visibility of mid-term revenues within a relatively small range of sensitivity. Experienced management team with proven track record We believe the experience of our management team gives us a competitive advantage and positions us favorably for future growth and profitability. Our management team has extensive experience in the automotive and industrial sectors and a proven track record of successfully managing global businesses. Our management team has an average of over 25 years of experience at other leading automotive and engineering companies, giving them a full knowledge of all aspects of our and our customer s business. Our management team has been the key to the improvement plan and the increasing flexibility in our cost structure that have been implemented under the current ownership. The improvement plan has been based on the following principles: (i) selectivity on new projects by applying a clear cost-benefit analysis based on expected minimum EBITDA margin; and (ii) keeping maintenance capital expenditures at modest levels while maintaining constant oversight of expansion capital expenditures. The increased flexibility has been achieved as a result of policies which (i) increased the percentage of employees in countries with more flexible labor legislation, from 18% in 2007 to 33% in 2014 (ii) increased the percentage of temporary workers as part of our workforce, from 6% in 2007 to 11% in 2014 and (iii) increased the proportion of employees in lower cost countries, from 35% in 2007 to 77% in In addition, we constantly monitor our cash flow, only approving initiatives for which we have available financing. Over the past five years our revenues and EBITDA have grown, primarily due to the combined effect of the international market growth and a strong financial discipline and sustainable improvements in our cost base implemented under the current ownership. Our business model, based on limited working capital requirements and maintenance capital expenditures, allows us to generate cash during periods of growth and reserve cash during periods where markets are more volatile in the medium- to long-term. 106

125 Strategy Our general strategic aim is to further extend our leadership position in the market, which we plan to achieve through certain targeted efforts. Continue to be a leader in innovation through focused research and development We believe that our products are at the forefront of innovation. As of September 30, 2014, we employed 142 people in R&D across our facilities. We are focused on designing and manufacturing highly-engineered components, modules and system solutions that address key global trends in the automotive sector, including efficiency, cost reduction and weight minimization. We aim to adapt to these trends by continuously improving our existing technology to continually seek to lower costs and minimize weight while maximizing performance. We seek to meet these goals by, among other methods, strategically developing innovative solutions for materials, products and technologies for our clients globally and working with our unified team who share know-how across all continents. Our unified R&D strategy positions us to be the partner of choice for leading innovations for our internationally operating clients. We continuously seek to increase our cooperation with our OEM clients by leveraging our knowledge of their products and our technical capabilities to create tailored solutions for each client which can be manufactured in all markets. We believe that if we increase our involvement at the early development stage of new vehicles, we can create a maximally beneficial product for the specific new model. Increased presence in our geographic sectors, especially Asia and NAFTA We intend to increase our worldwide presence by bolstering our manufacturing and R&D footprint in countries with high growth prospects, including in countries where we enjoy strong market position as well as new markets. This strategy will allow us to continue to serve our clients globally by having a presence near their key production centers. We intend to continue to expand in rapidly growing emerging markets, particularly in Asia, which has become a significant growth driver for the automotive sector and where our expansion projects have been particularly successful thus far. We seek to increase our revenue from Chinese OEMs in line with market growth, supported by the production capacity from our joint venture and other new production facilities in the region. We aim to increase our concentration of sales in Asia from 15% in 2013 to approximately 22% by In Mercosur (particularly Brazil), we intend to consolidate our position and improve our performance to ensure that all our methodologies from our improvement plan are implemented in such plants. We aim to reinforce our presence in NAFTA to follow the growth of automotive production in that market by expanding our footprint in Mexico. In Europe, our goal is to also consolidate our presence as a market leader. Continue to increase exposure to premium OEMs and applications We are focusing on expanding our business with premium OEMs as the need for acoustic and thermal content for premium vehicles is significantly higher than for midrange cars. Over the last five years, we have been able to attract new premium customers such as Tesla and strengthen our existing relationships such as Daimler, Hyundai and BMW. We believe that our ability to deliver technologically and advanced customized solutions to our customers has driven our historical success in expanding our presence in the premium sector, and we aim to follow this same method to continue to gain contracts for new premium models. Maintain and strengthen our cost and quality leadership Our ability to maintain our costs while not diminishing the quality of our products is an important factor for our clients, and we seek to continue to improve our margins with several 107

126 initiatives, including carefully control our costs of materials purchased from suppliers through selective screening. We also use our global positioning to limit costs. We strategically establish our facilities in close proximity to our customers assembly plants. Over the last five years, we have opened 18 new manufacturing facilities, including eight in China. We have taken such actions in order to be able to sustain the increasing volumes our clients demand, but also minimize transportation and labor costs. We are currently focusing on increasing revenue share generated in our lower cost plants and utilizing unused capacity in our plants, especially in our mature markets. We aim to continue to provide a comprehensive product and service offering to current and new customers globally. We seek to fully globalize our product portfolio and to provide an even broader range of components and systems to each customer while always maintaining our high level of quality. While our customer surveys have reflected that we already have positive customer feedback on the value metrics of our products, where we received the rating of outstanding for the value perception in several of our core capabilities, such as acoustical performance, innovation and delivery flexibility, we seek to continue to improve in all areas to sustain customer satisfaction. Company history We are an indirect majority-owned subsidiary of Adler Plastic. Adler Plastic owns our capital stock indirectly through Adler Group, which holds 100% of our share capital. Adler Plastic is a developer and producer of all acoustic products for automotive vehicles, as well as aeronautics and other transportation industries, the food industry and bedding industry, among other business. HP Pelzer was founded by Helmut Pelzer in Witten, Germany in We engaged in a number of organic expansion projects over the last four decades, including opening our first R&D facility outside Germany in Incheon, South Korea in 1986, a manufacturing plant in Puebla in 1990 to serve the American market, and our start-up Chongqing HP Pelzer Automotive Interior Systems Co. in China in We also increased our presence in the so-called BRIC countries during 2008 and In 2007, the Company, under the direction of its prior shareholder and management, defaulted on a loan extended by Goldman Sachs and was ultimately acquired by a syndicate of lenders led by Goldman Sachs and Silver Point. The syndicate replaced the management team with a new management team. In 2010, that same new management team, pursuant to a management buy-out, and Adler Group acquired 51% and 49%, respectively, of the Company. In the following year, Adler Group acquired an additional 3% of the Company, taking control of it. Adler Group subsequently acquired all of the remaining shares in April We have begun fully integrating our business with that of Adler Plastic to achieve greater benefits from our combined corporate structure. In connection with such integration efforts, in July, August and September, we purchased from Adler Plastic their interests in the following entities: Adler Polska Sp. z o.o., a Polish company in which we now hold a 99.88% stake, Pimsa Adler Otomotiv A.S., a Turkish joint venture in which we now hold a 50.7% stake, Adler do Brasil Ltda, a Brazilian company in which we now hold a 99.86% stake (and its owned subsidiary Adler PTI S.A.), and Adler France S.A., a French company in which we now hold a % stake. In connection with our acquisition of Adler do Brasil. Products Our product portfolio includes a wide variety of individual products produced and developed specifically for particular makes and models of our clients automotives. 108

127 Product families Our products can be grouped generally into four product families: Engine Compartment, Passenger Compartment, Luggage Compartment and Exterior. The diagrams below reflect the areas where our products are applied: Engine Compartment Passenger Luggage Exterior Compartment Compartment 9FEB FEB FEB FEB Engine Compartment Our Engine Compartment products are mainly implemented under the hood area of the vehicles and, as the name implies, are related primarily to resolving problems related to the engine itself. We have a broad array of products in our Engine Compartment portfolio, including, among others, hood liner, outer dash panels, engine encapsulation, outer tunel insulator and other insulators. Our Engine Compartment products represented approximately 16% of our revenues (e114 million) in the nine months ended September 30, According to our management s estimates, we currently have a 17% market share in the Engine Compartment product family. Our Engine Compartment products provide various benefits to our clients including noise reduction (from the viewpoint of both passengers in the car and persons outside the car), thermal efficiency and insulation. In particular, we have had an innovation breakthrough with our engine encapsulation, which increases acoustic performance by limiting pass-by noise, interior noise, idle noise under cold start conditions and decreasing noise at the sound source. Our engine encapsulation also influences heat management of the combustion engine by slowing down the cooling period for the engine and gear box and shortening the warm-up. In addition, our engine encapsulation also reduces emissions and fuel requirements. Passenger Compartment Our Passenger Compartment products encompass our solutions that are used in the interior of the car, but not part of the other product families listed below. Among the many products in our Passenger Compartment portfolio are inner dash panels, floor trim and carpeting, door water shields, headline, seals and gaskets, felt and foam insulation parts and IFF-deadeners. Our Passenger Compartment products represented approximately 58% of our revenues (e413 million) in the nine months ended September 30, According to our management s estimates, we currently have a 15% market share in the Passenger Compartment product family. Our Passenger Compartment products provide various benefits to our clients including noise reduction, insulation, and aesthetic benefits. In particular, we have had an innovation breakthrough with our Hot Mould Processing ( HMP ). HMP is an in-mold fiber technology for thermo bonded car interior insulations. The unique suction process and tool technology provides parts with a much wider range of thickness distribution and tailored material densities. Importantly for our business, fiber distribution can be altered to meet a customer s needs. The key advantages to HMP include weight reduction, improved absorption, waste reduction and recyclability and improved insulation. 109

128 Luggage Compartment Luggage Compartment products are applied mainly in the trunk of our clients products. Our Luggage Compartment product portfolio includes a variety of products, including complete trunk trim and carpets, felt and foam insulation parts, honeycomb load floor, spare wheel panels, rear seat backs and parcel shelves. Our Luggage Compartment products represented 15% of our revenues (e107 million) in the nine months ended September 30, According to our management s estimates, we currently have a 6% market share in the Luggage Compartment product family. Our Luggage Compartment products provide various benefits to our clients including improved acoustic performance from the trunk, functionality and aesthetics. In particular, we have had good success with our Load Floor solution. The Load Floor solution integrates acoustic, aesthetic and structural functions inside the trunk using our honeycomb materials to reinforce the structure, but minimizing the weight of our components. Exterior We classify those products we produce that do not get utilized in the internal compartments listed within our Exterior product family. Our Exterior product portfolio includes fiber-based wheel-arches, aerodynamic under shields and under engine shields, along with other innovations. Our Exterior products represented approximately 11% of our revenues (e78 million) in the nine months ended September 30, According to our management s estimates, we currently have a 6% market share in the Exterior Compartment product family. Our Exterior products provide various benefits to our clients including noise reduction, improved aerodynamics, and temperature insulation. In particular, we have had an innovation breakthrough in our development of Levetex. Levetex gives additional absorption in the exterior area and helps reduce overall weight. It is 30-60% lighter in comparison to conventional solutions like LFT (long fiber thermoplastic) and GMT (glass map thermoplastic) and injection molded parts are possible with the technology. We are also able to provide solutions with less package than systems with an additional absorber. As with most of our products, there is also an acoustic performance benefit to using Levetex. Base products We primarily use four base products to create our components: Heavy Layers, Felts, Carpets and Foams in 18 different technologies. We have the broadest set of technological skills with our base products as compared to our competitors. We use our Heavy Layer product in our Blank Moulding, CIM, RIM and Spray RIM technologies. Our Felt base product is used in our Blank Moulding (Airlay), Blank Moulding (Airlay) Dual Impedance, Fiber Injection (HMP), Fiber Injection (HMP) Dual Impedance and Needled Felt Moulding processes. Our Multi Layer Systems, Turbo Moulding, Hot Pressing, Tuft Production and Dilour Production technologies use our Carpet base product. Our foam base product is used in our PUR Foam Moulding, Spray in Place, Levecell (Light Weight Foam) and Levesoft (Light Weight Foam) processes. Business model Our business model is based on four steps: Research and Development, Sales and Customers, Suppliers and Production. R&D Sales Suppliers Production 9FEB Research and development We consider research and development to be the backbone of our business. Our R&D efforts are always aimed at developing profitable products with capital effective investments. We 110

129 conduct R&D activities with a focus on implementing key growth technologies in each of our products, such as noise reduction, insulation, thermal management and aerodynamics. We believe that our R&D and engineering competencies, especially for innovation, such as our capabilities to develop oil-free materials, thereby limiting sensitivity on oil price fluctuation, differentiate us from our competition. We are an industry leader in using Statistical Energy Analysis (SEA), a method for predicting the transmission of sound and vibration through structural acoustic systems, to assist in the virtual acoustic prediction of materials, components, subsystems and ultimately entire vehicles. We develop our technology in-house and also engage in our manufacturing in-house, which guarantees continuous process improvement, rising efficiency and worldwide support with the same high standards in all our plants. It also creates barriers to entering the market for potential new market participants. As of September 30, 2014, we employed 142 employees in our global R&D network comprising seven locations, five of which are dedicated solely to R&D efforts. Among our key locations for our R&D activities are Witten (Germany), Troy (Michigan, United States), and Taicang (China). We have strategically positioned our R&D facilities in proximity to the major world automotive centers to be as close as possible to our customers. As of September 30, 2014, 54 of our R&D employees were based at our headquarters in Witten, Germany to centralize the development of our advanced acoustics, components and process technologies and minimize costs. This central team is supported by dedicated R&D teams in other European locations, Asia and the Americas to ensure that our innovations are adapted to local markets and regulations close to our customers. Our policies support continuous knowledge sharing across our R&D centers and know-how exchange is fostered, ensuring that our output is of the same high quality in each of our plants. Our R&D engineers also work to a limited extent with external contracted engineering and consulting services, primarily to help reduce the burden of customer demand for our innovative products. Our R&D expenses amounted to e8.2 million in the nine months ended September 30, 2014, e10.1 million in the year ended December 31, 2013, e12.4 million in the year ended December 31, 2012 and e13.3 million in the year ended December 31, Our investments have yielded notable revenues. 48% of our revenues in 2011, 51% of our revenues in 2012, 63% of our revenues in 2013 and 63% of our revenues in the nine months ended September 30, 2014 were derived from new technologies that were developed over the previous years and implemented or equipped for the first time on cars. Our R&D team works in close cooperation with customers in all key areas of product development. We carry out all necessary tests in order to ensure the operating safety of our products and to gain valuable insights for developing and improving our products further. Our R&D efforts also follow the major trends towards enhanced safety and comfort and the reduction of fuel consumption through weight reduction. In particular, we believe that we are well-positioned at the forefront of innovation with our engine encapsulation system, which isolates the engine in order to provide better heat management, reduce pollution and fuel consumption, and improve acoustic performance. We are also a development partner for many of our automotive customers, working with them to develop new products that meet the needs of their own R&D. For example, we recently entered into a strategic partnership with Tesla. We worked with them on DNA analysis (vehicle drive cycle analysis, which provides data summaries and visualization of vehicles) related to their car production to build optimized acoustic solutions for high performance electronic cars, and several specific projects, including a substitute for other synthetic fiber thermal insulation materials on the market, for reduced costs and engine capsulation solutions. The positive results obtained helped create a long-term relationship with Tesla. Another of our key longstanding relationship clients, Daimler, has engaged us to develop a specialized material used in a glass solution for partition walls (second outer dash), as well as customized part development with high acoustic performance structure parts to replace standard technology. 111

130 Our work led Daimler to nominate us to develop and produce the partition walls for their productions worldwide. Sales and customers Sales Our Sales division is composed of 127 employees overall. We maintain a Vice President Sales in each of our five regions who oversees our sales operations from a geographical standpoint and one Global Customer Directors for each relevant customer whose teams liaise directly with clients for the global business. Each of them reports to our global Chief Marketing Officer. Our matrix approach allows us to meet two important goals: we can maintain our relationships with clients on a global scale through our Global Customer Directors, who can ensure that customer specific know-how is shared globally such that the same quality of product will be provided to the customer no matter in which region we are providing products, while our Vice President Sales in each region can ensure that the region on the whole is meeting production and sales goals commensurate with the capacity available locally. Global Customer Directors have teams of Key Account Managers in various regions, each of whom has the power to manage and negotiate agreements with customers in line with proper company policy, and are further supported by marketing, strategic planning and market intelligence professionals. We actively collaborate with in-house engineers at our OEM customers, and have direct access to the purchasing and engineering departments of all OEMs. Once our Key Account Managers finalize an agreement with a customer, they work hand-in-hand for approximately three months with the regional plants to ensure the solution which has been negotiated is feasible. After the transition period ends, the plant carries out the finalization of the end-product with the client. Our results are tracked using five Key Performance Indicators (KPIs): Acquisition Performance, which is the ratio of projects successfully acquired over the target for the year; Hit Rate, which is the ratio of projects tracked over the year against those that lead to orders; Profit Contribution, which reflects the project earnings quality in the form of projected EBITDA margins; Capital Expenditure, which is the sum of investments needed to successfully booked business; and, Sales Efficiency, which is the ratio of selling costs to sales revenue for each customer or region. Our contracts are individually negotiated with each OEM, but generally follow one of four general formats. Our broadest agreements are our development partnerships, where we agree to undertake efforts to work consistently with our clients to develop many products for use in their vehicles. We have a development with a few key clients, including Tesla. We also have development contracts, which relate to particular products the client believes they need. Under one form of this type of contract, we agree to develop a specific product together with the client, while under other development contracts, our clients ask us to take leadership over the development process on their behalf. We also have some build to print contracts, where our clients bring us set plans for a component and ask us to manufacture it according to their specifications. We conduct customer satisfaction surveys regularly to ensure our clients are satisfied with quality, delivery and service. Customers have given us high marks on many parameters, noting in particular that we provide outstanding value in innovation, acoustical performance and delivery flexibility, each of which we consider a core metric for our business. We have recently begun a new round of surveys with our clients to ensure we continue to meet the high standards for which we are appreciated. 112

131 Customers Our clients include the majority of the world s OEMs (including the largest in each geographic market). Our customers include major global automobile manufacturers in both the premium and economy vehicle sectors. As of December 31, 2014, we supplied our products to approximately 223 carlines for over 46 different car brands, supporting their operations in over 20 countries, and generated 78% of revenue from sales to our top five OEM customers: Volkswagen Group, General Motors, Ford, Hyundai and FCA. Client retention is a key part of our business. We have long-term relationships with our customers, several of which date back more than 20 years and in one case over 40 years. We believe that these longstanding relationships with our customers give us a strong competitive advantage. In the nine months ended September 30, 2014, our top three customers (i.e. Volkswagen, GM and Ford), each of whom we have been working with for decades, represented approximately 60% of our sales. Our relationships with our customers also span the globe. For example, we assist VW with the production of parts for the Polo model in Europe, Brazil, India, Russia and China and use our regional presence in Asia to assist with their production in Malaysia. With Ford, we produce products for their Focus model in Europe, the United States, China, Argentina and Russia, and with GM, we create solutions for their G-SUVs in Europe, South Korea, China, the United States and Mexico. Although we are working to expand our client portfolio by 2018 and further increase our diversification, we believe we have taken three significant steps in order to ensure that our long-standing clients continue to choose us as a supplier. First, by partnering with our clients to develop solutions, we have intimate knowledge of their products and systems which allows us to develop complete product packages at limited cost and time to the client. Second, we have set up our plants and R&D centers in locations close to where our clients have their production facilities, which allows us to be local partners to our clients and available for efficient communication and product delivery. Third, we have developed a reputation for innovation in the market, and our clients have given us positive feedback regarding our innovation breakthroughs being of excellent value. The size of our Order Book is evidence, we believe, that our clients have intentions to continue relationships with us in the foreseeable future. Suppliers and purchasing of raw and prefabricated materials and components We purchase our materials through our global purchasing network with whom we work closely to assure quality control. Our purchasing organization is based on a matrix, multi-regional footprint. Purchasing is split into three core sub-departments: commodity management, project purchasing, indirect materials and capital expenditures; each of the three units is led by a global team leader. Our supplier procurement strategy is based on four key concepts: (i) reduce costs, (ii) develop a core supplier base, (iii) support service to plants and (iv) focus on highly strategic projects. In order to reduce costs, we use a multi-source strategy for all materials, with at least one supplier from a low-cost country for each commodity. We also set cross-regional benchmarking and engage in technical cost analysis to ensure our costs are appropriate. We monitor our supplier base carefully to develop a core of suppliers. Through our global footprint and regional expertise, we have been able to regularly scout and access new suppliers, including locally, and procure pre-fabricated materials at favorable prices. We also engage in global negotiations with global suppliers to develop long-term relationships. Our suppliers are selected in order to ensure they can provide adequate support to our plants. We purchase high-volume materials from local sources and develop local maintenance and assistance units to deal with any material and supply concerns. Finally, we involve suppliers early in our new developments to ensure they can provide the materials necessary to allow us to realize our and our clients visions for our strategic projects, developing close cooperation for key suppliers for such projects. Through such efforts, we foster teamwork with suppliers. 113

132 Oil derivatives (including plastomers for injection), polyurethane, and fiber based products are the materials on which we spend the greatest amount of our materials budget. Oil derivatives comprised 10% of our total production material expenses in the nine months ended September 30, Polyurethane and fiber-based materials represented 15% and 36%, respectively, of our total production material expenses in that same period. Although these are our primary purchased materials, we also purchase aluminum, carpet, felt, cotton, resin among other materials. In the case of semi-finished products, such as carpet and felt, the cost of the raw materials represents only a small portion of their overall cost. Our top five and top 10 suppliers accounted for approximately 10% and approximately 18%, respectively, of total purchases in the nine months ended September 30, Our top five suppliers in the nine months ended September 30, 2014 were: Dow Chemical, who supply us primarily with polyurethane and plastomers; Fibertex, who supply us primarily with scrims and technical non-woven materials; Styron, who supply us primarily with plastomers for injection; Huntsman, who supply us primarily with polyurethane; and Tenowo, who supply us primarily with scrims and technical non-woven materials. Prices for prefabricated materials can be volatile. Prices of prefabricated materials are subject to curtailment or change due to, among other things, new laws or regulations, changes in demand levels, suppliers allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Despite a significant utilization of oil-derived raw materials, it is not possible to determine a clear link between oil price evolution and the price evolution of the materials needed for our business. We develop with our supplier base different price strategies depending on the specific raw material and relative market. For main commodities, we set quarterly prices which fit within an approved safety band to protect both parties from massive price fluctuations during the quarter. With suppliers producing materials with more added-value, we usually agree on longer term six-month prices or, at times, yearly prices. In selective cases, we are even able to obtain multi-year prices, which provides us more long-term visibility on our costs. Part of our purchasing strategy is to become more vertically integrated and act as a producer of plastomers, polyurethane and fiber-based products. Our group is now producing internally heavy layer material, has capabilities for polyurethane self-formulation and can process fibers into semi-finished products in many of our locations worldwide. Production We believe that we are among the leaders in our industry in terms of production technology and quality. All our quality check functions are carried out in-house. All quality checks are carried out within the process. We have a reputation in the market for our track record of innovation in the efficient production of products. We operate 42 production plants in 17 countries. Our largest European plant, located in Žatec (Czech Republic), is largely automated and operated by 172 people per shift and has an output of up to approximately 170,000 units per day, with the capacity to produce further in busy periods. Lower labor cost locations such as China, Brazil and Mexico utilize less automated lines. We aim to expand our production facilities across regions and products as increased sales make this a viable proposition. Our global footprint and technological know-how gives us an advantage over competitors who have less integrated manufacturing operations and less experience in developing foreign plants. Eight of our facilities have been designated as centers of excellence, which indicates a specialized degree of expertise in the production and development of a particular technology, product or product family. Our centers of excellence are: Tafalla, Spain (Hot Mould Processing); Witten, Germany (Compound Injection Moulding); Žatec, Czech Republic (Light Weight Foam); Port Huron, Michigan (Engine Compartment); Plzeň, Czech Republic (Carpet); Gebze, Turkey (Heavy Layer Foil Production); Speke, United Kingdom (Headliner); and Marano Vicentino, Italy 114

133 (Carpet Manufacturing). Our centers of excellence have been given the task of exporting their knowledge and manufacturing processes to our other facilities (including new facilities) to ensure that each of our products from each of our plants is of equally high quality and standardization. In addition, we are targeting improvements of certain production lines in connection with our ongoing general efficiency improvement initiatives, which we believe will help offset labor cost inflation. Our aim is to maintain the highest quality standards in the industry. All of our plants operate according to our global manufacturing standards, designed to guarantee continuous process improvement, emphasize Overall Equipment Efficiency (OEE) and allow for worldwide technological support with the same standards. We have developed the HPPS (Adler Pelzer Group Production System), which envisages lean, efficient, highly flexible, zero-defect production implemented in a culture based on continuous improvements. The HPPS provides a guideline for full control of the entire supply chain from receiving materials from our suppliers until the end product reaches the customer. The HPPS-System allows us to have an improved control over key performance indicators thus allowing us to protect our margin as well as reducing costs for our clients. The diagram below shows the supply chain under the HPPS. Production and logistics (supply chain) Recycling Supplier Goodsreceiving Raw material production Forming (e.g. moulding) Processing foaming cutting, etc.) Finishing (e.g. assembly) Dispatch Customer Logistic/PP QM Maintenance IE Purchasing/ planing HR Kaizen Further admin. functions Supporting functions 9FEB Our control over the supply chain allows us to have better control over margins, allowing us to control costs for our clients. We implement the HPPS for the production of all our products. The following diagrams show the production processes for our lightweight foam and CIM products, respectively. Production process of light weight foam Light Weight Foam consists of two main components, called Polyol mixture and Isocyanate and, if necessary, other additional components like colour or catalysts. Several different types of Polyol mixtures and additives are used to produce foam with different performances. All components are stored in tanks or IBC s. To produce a Light Weight Foam block the metering unit with its several material pumps sucks the correct portion of the components (according to the chosen recipe) into a separate ring line for each component. From there the components are transported under pressure to the mixing head where they are mixed and injected into the open foam box. After mixing and injecting the components into the foam box, the chemical reaction of Polyol and Isocyanate starts and the liquid components turn into a solid foam block. The block is stored for 24 hours to make sure that the chemical reaction is completely finished before it is cut into thin blanks by vertical saw and slice cutter. After that the blanks will be used in thermoforming processes as basis, sandwich or cover material, e.g. for hood insulation. 115

134 Light weight foam production 9FEB Production process of CIM (Compound Injection Moulding) The Compounding Injection Moulding process consists of two main steps. First the compounding unit where the material components are metered and mixed in a heated extruder and second the injection moulding machine where the material is injected into the forming tool. According to the chosen recipe the compounding unit sucks the right portion of each component by vacuum out of the storage containers and tanks and inserts it into the extruder. There the components are continuously mixed by long heated kneading elements. At the end of the extruder unit the plasticized material is buffered in a small pressure container (shot pot) that feeds the material to the discontinuous working injection moulding machine. The injection moulding machine consists basically of an injection piston and the forming tool. After the piston is filled with plasticized material from the buffer it shoots the hot material under high pressure into the closed forming tool. The tool itself is cooled down to a low temperature to make sure that the plasticized material will cool down immediately and solidifies in the shape of the tooling contours. After the cooling time the tool opens and the finished part is removed by a robot which puts it on a conveyor belt. From there the part is either ready for packing or it will be supplied to following production steps like back foaming or welding etc. 116

135 CIM 9FEB Quality control and management system We maintain an internal corporate Quality Management System ( QMS ) in accordance ISO TS that covers all of our facilities. Upon the opening of a new plant, we target the receipt of formal certification within one year from first production (according ISO TS rules). The goal of our QMS is to control all business process flows needed to provide our products and services and keep them at the required quality level. The life cycle of the product is tracked by our QMS from development concept phase till end of production and service phase. At the plant level, our operators are the primary people responsible for controlling the quality level of their tasks. Regular and routine checks are done by the operators themselves and we train them to hold themselves to clear standards. Random checks by quality assurance inspectors are also implemented to ensure a degree of oversight and verify the system itself is being implemented and keep it effective and robust. We also reevaluate our products at least on an annual basis in accordance to the customer requirements to ensure we not only maintain quality, but incorporate improvements where necessary. These evaluations are mainly carried out by tests in our own labs. Property, plant and equipment Our headquarters are situated in Witten, Germany. We lease the area and the building with a surface area of 12,600 square meters. As of September 30, 2014, we owned 27 of our plants and leased 15. In the years ended December 31, 2011, December 31, 2012, and December 31, 2013, and the nine months ended September 30, 2014, we had e32 million, e26 million, e23 million and e12 million, respectively, in expansion capital expenditures for new plants and upgrades to our existing plants and e7 million, e8 million, e4 million and e3 million, respectively, in maintenance capital expenditures for our existing plants. 117