Seat: H-9027 Győr, Martin út 1. � Postal address: H- 9002 Győr, POB 50 � Telephone: +36-96-622 600 � Fax: +36-96-624 069

Court of Registration: Győr Court of Justice as Court of Registration � Registration number: Cg.08-10-001532 E-mail: raba@raba.hu � www.raba.hu

ANNUAL FINANCIAL STATEMENTS

based on consolidated, audited figures, according t o IFRS

for the financial year ended December 31, 2015

Győr, April 15, 2016

2

Table of contents Independent Auditors’ Report Consolidated annual financial statements according to IFRS Consolidated management report / Consolidated business report Declaration

RÁBA Járm űipari Holding Nyrt.

CONSOLIDATED MANAGEMENT REPORT / CONSOLIDATED BUSIN ESS REPORT

on the financial year ended December 31, 2015

1. Introduction of the Company

The legal predecessor of RÁBA Automotive Holding Plc. („Holding”) was established in 1896. In the course of its history it became a globally known company, then group of companies manu-facturing road and off-road vehicles, main parts and components. The company's recent history includes the following milestones:

• transformation into a joint-stock company (1. January, 1992),

• listing of the company’s shares on the stock exchange (17. December 1997)

Since the listing of the company’s shares on the Budapest Stock Exchange, investors also moni-tor the operation of the company on an ongoing basis. The holding is a listed company regis-tered in Hungary. The consolidated accounts of the Holding include the holdings of the Holding and its subsidiaries (the “Group”), as well as of the affiliated companies, and of jointly owned companies. The core activity of the Group is the manufacturing of automotive components, pri-marily axles and chassis.

The Group is seated at H-9027 Győr, Martin út 1.

Its branches are located at: H-8060 Mór, Ipartelep

H-9600 Sárvár, Ipartelep 6.

1.1. Subsidiaries of the Group

Rába Axle Ltd. (wholly owned subsidiary) Rába Automotive Components Ltd. (wholly owned subsidiary) Rába Vehicle Ltd. (wholly owned subsidiary)

1.2. Profile, product groups

Rába Axle Ltd.

Main profile: development and manufacturing of fixed and bent front and rear axles and various main axle parts and their components of road and off-road commercial vehicles with a loading capacity between 3 and 16 tons.

The products manufactured by the tool manufacturing and surface finishing production profile are largely used in the end products of the main profile but to the extent the available capacities allow, they are also sold directly.

Rába Automotive Components Ltd.

The company has outstanding results and substantial experience in producing seats, seat com-ponents and automotive components for passenger cars and commercial vehicles. Our pressed, welded and various machined components make us an acknowledged partner of the automotive industry in Central Eastern Europe. The Mór plant boasts pressing and welding technology, as well as the processing of tubular products and surface treatment, tailoring, sew-ing, while the Sárvár plant machines and manufactures commercial vehicle axle and engine compartment components featuring forged and cast products produced using machining and ancillary technologies.

The on-line plant in Esztergom provides logistical services (“just-in-sequence” delivery) to the Hungarian Suzuki Co. Ltd.

Rába Vehicle Ltd.

The activity of the Company includes the manufacturing and the sale of trucks and vehicle sets with a total rolling weight of 14-41 tons, bus chassis, steel structures, as well as the sale of off-road trucks and off-road passenger vehicles of smaller rolling weight.

Supplying the domestic community transport is a key element of our business and the produc-tion of various metal structures for manufacturers of earth movers and trailers is increasingly significant.

2

1.3. Philosophy of the Rába Group

We aim to earn the satisfaction of our customers through the quality of our products and ser-vices and to remain in the leading edge of the automotive industry through the continuous im-provement of our adaptability.

2. Main events and results in the current year

Most significant agreements of 2015

Rába Axle Ltd. manufactures and supplies improved axles to be used in a new trailer model of a European premium category vehicle manufacturer. The parties entered into a long-term agreement (five years) with serial production starting in 2016.

With the help of its business development activities, Rába Axle Ltd. intends to set foot in a new target market in North Africa. The Company supplies bus axles to EAMCO, which is a bus and truck manufacturer seated in Egypt. The deliveries began in 2015.

Within the framework of continued cooperation between Rába and Claas, our Company is extending the range of products delivered to Claas, one of the world’s leading agricultural vehicle manufacturers. The five-year agreement will bring almost EUR 2 million revenues to our company.

In cooperation with DINA, one of the largest manufacturers in Mexico producing heavy goods and special commercial vehicles, buses for urban and long-distance services and armoured mili-tary vehicles, Rába Axle Ltd. adapts its products, which have proved to be successful on differ-ent strategic markets, to the Mexican requirements.

Pursuant to the Master Supply Agreement concluded between Rába Vehicle Ltd. and BM Heros Zrt., Rába Vehicle Ltd. can supply more than 100 mobile chassis to the vehicle body building company for 3 years. Following the signature of the Master Agreement, the Customer drew down 2x10 products, the manufacturing of which began in Q3 2015 and was completed by the end of the year.

Rába Automotive Components Ltd. was awarded a six-year contract for sewing seat covers and headrest covers, for pressing sheets and welding seat frames, as well as for manufacturing hinges and seat wire frames for the new Suzuki Vitara, from March 2015. The supply contract grants manufacturing rights to Rába Automotive Components Ltd. for the entire life cycle of Vitara.

Rába Automotive Components Ltd. was also granted a contract for the supply of Nissan arm rest covers, based on which a new leather sewing technology was introduced in the Mór plant.

Results of the current year

The Group closed the 2015 business year with a slight decrease in turnover. The external mar-ket continues to be full of challenges and very versatile. In North America the heavy goods vehi-cle market has grown since 2014. On the European heavy goods vehicle market, there has also been a strong and stable increase in demand. On the contrary, there was no dynamism on the market of agricultural vehicles in 2015 either and we still have to wait for global market growth: demand continued to shrink on the American market while stagnation dominated in the Europe-an segment. The Russian heavy goods vehicle and bus market was still affected by the weak rouble exchange rate, and therefore both segments declined. Demand has picked up on the European market of passenger vehicles. The lower domestic demand also had a negative im-pact on the sales performance.

Despite 3.7 percent decrease in revenues, the Rába Group achieved HUF 4.5 billion EBITDA and closed 2015 with HUF 1,952 million profit.

2.1. Changes in the group

No changes occurred in the group in 2015.

3

2.2. Analysis of the profit and loss account

Data in th HUF

31 December 2014 31 December 2015 Revenues 47 915 785 46 153 557 Direct cost of sales (38 725 077) (36 476 940) Gross profit 9 190 708 9 676 617 Sales and marketing expenses (718 208) (615 676) General and administrative costs (6 617 671) (6 856 093) Other income 566 519 644 415 Other expenditures (529 926) (655 269) Total other operating expenditures (7 299 286) (7 482 623) Profit from operating activities 1 89 1 422 2 193 994 Finance income 914 794 1 229 157 Finance expenses (1 498 407) (1 061 147) Profit before tax 1 307 809 2 362 004 Income tax (455 685) (410 478) Profit after tax 852 124 1 951 526 Profit on cash flow hedges 22 993 - Tax expenses of cash flow hedges (3 680) - Total comprehensive profit for the year 871 437 1 951 526 Basic earnings per share (HUF) 65 150 Diluted earnings per share (HUF) 65 149

In 2015, the Group earned HUF 46,154 million revenues, 3.7 % less than in the previous year. The consolidated sales figure was the overall result of the 1.9 per cent in the sales revenues of the Axle Business Unit that had to cope with the low activity of the target markets, 5.6 per cent increase in the revenues of the Components Business Unit, and 14.4 per cent decrease in the revenues of the Vehicle Business Unit.

The average 9.6 percent decrease in steel raw material prices in 2015 compared to the base period had a favourable impact on the costs of operation.

On aggregated basis the energy prices were falling throughout the year. The average energy prices in 2015 were 6.2 percent down the figure recorded for the previous year.

In 2015 the average USD exchange rate was significantly higher than in the previous year and the EUR exchange rate practically stagnated over the two periods. The USD exchange rate was 20.2 percent and the EUR exchange rate was 0.4 percent up on the foreign exchange rates rec-orded in 2014.

In 2015 the Company managed to improve the competitiveness of its products. The gross mar-gin of the group exceeded the figure of the base period during the 2015 business year: with 1.8 percent point growth, it reached 21.0 percent.

Despite the market environment that continued to be full of challenges and a decline in turnover, the Rába Group increased its gross profit by 5.3 percent (HUF 486 million) and booked HUF 9.7 billion gross profit in its books in 2015.

The other revenues and expenditures contained the usual items, with a balance of HUF 10 mil-lion loss during the review period, against the profit of HUF 37 million during the same period of the previous year.

4

The events outlined above resulted in HUF 2,194 million operating profit. This reflected a major, 16.0 percent and HUF 303 million increase in the 2015 business year over the base year. The profit increase was the result of an increase in the operating profit in all three business units and subsidiaries of the Group, with which they improved their previous year’s performance: the Axle Business Unit increased its profit by 5.8 percent to HUF 1,337 million, the Components Business Unit increased its profit by an outstanding 110.7 percent to HUF 512 million and the Vehicle Business Unit raised its profit by 4.0 percent to HUF 591 million. Nevertheless, it is also an out-standing achievement that in terms of return on sales, all three business units were able to im-prove their operating profit despite a change in their turnover in the contrary direction.

In 2015 the financial profit amounted to HUF 168 million compared to the HUF 584 million loss realised in the similar period of last year. This difference is explained mainly by the exchange rate gain resulting from the exchange rate fluctuation.

The Group has HUF 410 million tax liability. Of that HUF 94 million is corporate income tax, HUF 332 million is local business tax, and HUF 16 million is deferred tax liability.

In 2015 the total overall profit and the profit of the current year was HUF 1,952 million profit, more than twice as high as the profit of the base period. In terms of the current year’s profit, the increase is 129.0 percent, while in terms of the total overall profit the increase is 123.9 percent.

EBITDA, which reflects the cash generating efficiency, was higher than in the base period both in terms of the return on sales and in volume in 2015. The EBITDA figure grew by HUF 341 mil-lion and reached HUF 4,463 million following a growth rate of 9.7 percent, which was higher than the sectoral average.

The net borrowing continued to decrease with simultaneous cash generation of more than HUF 5 billion, as a result of which by the end of 2015 the Rába Group managed to report the lowest net borrowing figure ever since the introduction of its current structure. The net borrowing was reduced to HUF 3.4 billion, which is by HUF 5.2 billion lower than the HUF 8.6 billion, reported one year ago.

5

2.3. Analysis of the balance sheet Data in th HUF

31 December 2014 31 December 2015

Assets

Property, plant and equipment 14 976 905 14 832 253

Intangible assets 1 070 705 789 131

Investment property 338 217 338 217

Receivables from sales of assets 199 690 128 417

Deferred tax assets 189 007 204 784

Other non-current assets 501 663 430 063

Total non-current assets 17 276 187 16 722 865

Inventories 6 629 453 6 210 830

Trade and other receivables 11 320 828 8 397 055

Cash and cash equivalents 1 025 460 3 199 385

Total current assets 18 975 741 17 807 270

Total assets 36 251 928 34 530 135

Equity and liabilities

Share capital 13 473 446 13 473 446

Treasury share -384 496 -303 244

Share-based payment reserve 97 017 67 455

Retained earnings 1 888 980 3 869 173

Other overall revenue - -

Total shareholders’ equity 15 074 947 17 106 830

Provisions 315 379

261 102

Non-current loans and borrowings 6 423 756 3 005 952

Total non-current liabilities 6 739 135

3 267 054

Current portion of loans and borrowings 3 185 465

3 569 568

Trade and other payables 11 252 381 10 586 683

Total current liabilities 14 437 846

14 156 251

Total equity and liabilities 36 251 928 34 530 135

In 2015, the total assets and liabilities decreased by 4.7 per cent compared to 2014. On the as-sets side, assets were approximately 0.8 percentage point higher than in the previous year (2015: 48.4%, 2014: 47.7%). The expenditure on real properties, machines and equipment in the current year was HUF 186 million lower than the depreciation recorded for the year. The de-crease of the ratio of the current assets is arising from the significant, 6.4 per cent increase of cash and cash equivalents, the 6.9 per cent decrease of account receivable and the 0.3 per cent decrease of inventories.

On the liability side, the liabilities decreases by 8 per cent point compared to the previous year. Within the liabilities, the ratio of accounts payable and other liabilities decreased from 31.04 per cent to 3.66 per cent and the share of loans shrank from 26.5 per cent to 19.0 per cent.

The equity ratio changed from 41.6 per cent to 49.5 per cent due to the profit reported for 2015.

Equity

The shareholders’ equity (HUF 17,107 million) developed as follows since the previous year (HUF 15,075 million):

6

Share capi-tal

Treasury share

Sharebased payment reserve

Retained earnings

Other compre-hensive income

Total share-holders’ equity

Balance as of 1 January 2014 13 469 226 (477 573) 86 354 1 017 390 (19 313) 14 076 084

Profit after tax - - - 852 124 - 852 124

Other comprehensive income - - - - 19 313 19 313

Carry-over of capital 4 220 - - (4 220) - -

Equity-settled share-based payments

- - 35 375 - - 35 375

Income from share-based payment drawdowns

- 93 077 (28 319) 23 686 - 88 444

Deferred tax on income from share-based payment draw-downs

- - 3 607 - - 3 607

Balance as of 31 December 2014 13 473 446 (384 496) 97 017 1 888 980 - 15 074 947

Profit after tax - - - 1 951 526 - 1 951 526

Income from share-based payment drawdowns

- 81 252 (32 193) 27 921 - 76 980

Deferred tax on income from share-based payment draw-downs

- - 2 631 746 - 3 377

Balance as of 31 December 2015 13 473 446 (303 244) 67 455 3 869 173 - 17 106 830

2.4. Analysis of assets and liabilities, financial income and liquidity position

The financial position and liquidity of the Company as at 31 December 2014 and 31 December 2015 are illustrated by the following financial indicators:

Financial status, liquidity indicators:

Indicators 2014 2015

Cash liquidity indicator:

Cash and cash equivalents / Short-term liabilities 7.10% 22.60%

Quick liquidity indicator (Current assets - Inventories) / Short-term liabilities 85.51% 81.92%

Liquidity indicator: Current assets / Short-term liabilities 131.43% 125.79%

Net working capital (M HUF): Current assets / Short-term liabilities 4,538 3,651

Assets and liabilities and the capital structure

Indicators reflecting the assets and liabilities as well as the capital structure:

Indicator 2014 2015

Ratio of long-term invested assets %: Invested assets/Total assets

47,66% 48,43%

Coverage of invested assets %: Equity / Invested assets

87,26% 102,30%

Debt ratio %: Liabilities/Shareholders’ equity

140,48% 101,85%

Solvency ratio %: Equity / Total liabilities

41,58% 49,54%

7

Profitability

Indicators on profit and loss:

Indicator 2014 2015

Return on equity % Profit/loss in the current year/Shareholders’ equity

5,65% 11,41%

Return on assets % Profit of the current year/Total assets

2,35% 5,65%

Return on sales % Profit of the current year/Net sales revenues

1,78% 4,23%

The capital structure and profitability indicators improved significantly, mainly due to an increase in the current year’s profit (HUF 1,099 million increase in 2015 compared to 2014).

3. Strategy, development potentials

3.1. RÁBA Automotive Holding Plc.

The Holding continues to act in the interests of the entire group of companies, represents the subsidiaries through its central organisations in strategic areas and concludes framework agreements. This function is intended to be further strengthened in the future as well.

The management of the Company makes substantial efforts to utilise the real assets of the Company.

A key element of the company’s strategy is the profitable utilisation of the real estate not utilised for the operation of the company. Possible methods of utilisation include increased leasing, as well as the sale of land. To this end, in addition to the sensible utilisation of the areas already leased or currently used by the company, we focus on the management, refurbishment and up-grading of the premises and buildings.

3.2. Rába Axle Ltd.

The aim of the Company is to achieve dynamic growth and to increase customer satisfaction, through the development of existing market segments and through penetration into new mar-kets.

The dynamism is based on the following factors:

• Utilisation of the innovation and development potentials of the company, through the commit-ted reinforcement of the construction and research and development infrastructure.

• Increased role of business development, as part of the operating model. Relying on the de-velopment capabilities, the organisation integrating development and sales can target new market segments

- relying upon the developments of automotive producers, - meeting specific customer demands.

• The efficiency improvement manifest throughout the operation allows us to pursue a cost-based strategy and achieve benefits within the price competition on the international market.

• Utilisation of reserves in terms of quality through the development of the quality management system to meet international requirements and through the application of modern quality as-surance methods.

3.3. Rába Vehicle Ltd.

Rába Vehicle Ltd. continues to focus on its customers.

• Development and production of vehicles for special defense and civilian needs;

• Establishment of strategic partnerships with bus manufacturers and companies building bus superstructures;

• Search for new customers within the fields of chassis and component manufacturing.

8

• Market expansion for welded and assembled iron structures.

• A Continuation of the strategic cooperation with suppliers representing the leading edge of truck manufacturing

• Continuous upkeep of the existing MSZ EN ISO 9001:2008, ISO 14001:2005 and MSZ EN ISO 3834-2:2006, as well as AQAP 2110:2006 quality assurance accreditations and the OHSAS 18001: 2007 MEBIR certificates and preparation for the ISO TS accreditation.

• In addition to product development and the development of the supplier chain and of human resources, there is strong emphasis on customer service activities.

3.4. Rába Automotive Components Ltd.

The Ltd’s most important strategic objective is to maintain the volume of the Suzuki business after obtaining the production of components for the new model (Vitara), including seat frames, as well as headrest and armrest covers. The serial production began in 2015.

Further aims of Rába Automotive Components Ltd include

• expanding relations with the Fehrer group further;

• long-term sustainability of the entire commercial vehicle seat business;

• establishment of new strategic partnerships (Pöttinger, Pacoma), growth together with key customers upon minimal investment

4. Research and Development

Axle Business Unit

The Rába Development Institute (RDI) established in 2010, in line with the 5-year strategy of the company, resulted in the reinforcement of Rába’s research and development capacity. Through the institute, the company wishes to increase the share of complex products representing high added value and to expand the range of products supplied.

The company wishes to achieve its strategic goals primarily through the development and pro-duction of axles, suspension and power transmission systems in the future as well. A significant change, though, is that the establishment of the institute resulted in a shift from what used to be one-off, project-based developments serving current customer demands, to comprehensive R+D activities based on a comprehensive concept integrated into the strategy of the company.

In addition to (experimental) development projects, the Rába Development Institute is also in-volved in applied research, in the following fields:

• applicability of mechatronics and intelligent solutions in state-of-the-art commercial vehi-cles,

• impact of alternative systems on state-of-the-art axle structures and • on the fundamental issues of the repair of axle structures (noise, lubrication, efficiency,

materials).

Ever since its foundation, Rába RDI has been trying to increase and strengthen its research and development capacities. To support the objective, it launched doctorate programmes in certain key areas, such as oil management and cog-wheel mechatronics.

With the modernisation of the RDI Experimental Plant, engineers can use the most state of the art equipment to study a particular design in early phases and thereby model the conditions from which they can gain valuable analyses for reviewing the life cycle. With the help of these steps, not only the useful life but also reliability and safety of the products can be increased. These days the Rába Development Institute (RDI) operates with a staff of 40 (including 20 engineers). Over the last few years, an engineering calculation team was also formed next to the CAD de-sign group. The team concentrates on three main areas in smaller units; oil management-mechatronics, structural analyses and drive train scaling teams, thus assisting improvement in development competence and efficiency.

9

New products – market-leading solutions:

The Development Institute completed numerous outstanding projects in 2015 too.

The additional developments for the Xerion tractor of Claas were major projects. As a result of the innovation, the controllability of the vehicles has increased. Rába completed a joint devel-opment projects with John Deere, the world’s leading agricultural vehicle manufacturer in the highest segment of agricultural vehicles, which produced an axle that can drive and steer one of the largest tractors of the world in size, performance and efficiency. This product was developed continuously in cooperation with the customer within the framework of VAVE development pro-grammes.

The achievements and success of the John Deere and Claas deals so far can be used as good references on new markets and for new customers, as they provide us a high supplier prestige. Rába began delivering two-phased disk bus axles with brakes to the Mexican Dina company in 2015. The development of the products began in 2014. The extended product range with these new axles will further strengthen Rába’s position in the high capacity two-phase drive segment. The fire-fighting vehicle project, developed with the involvement of Rába Vehicle Ltd., also be-longs to the same category as it helped Rába enhance the volume of its supplies. Owing to co-operation with Claas France SA, the “drop box” drive train was developed in 2015. The modifica-tion of Karsan buses to suit customer requirements was also successfully completed.

The oil management programme, supported under GOP (Economic Operational Programme) was completed in 2015 with a direct outcome of an intelligent oiling system for a new drive train type. Owing to that system, the mechanical losses will decrease and the lubrication, adaptable to the state of operation, will help increasing efficiency and the life of the vehicle. The mechatronic systems described herein are applied and tested continuously. The introduction of these units into other, e.g., agricultural drive trains is included in our current targets.

Vehicle Business Unit

Due to the nature of the activity of the Company and because of the fulfilment of the Military Ve-hicle Supply Programme, the business unit conducts substantial research and development ac-tivities. The principal areas of research and development are type variations meeting customer demands of the various military trucks, armoured superstructures and bus chassis, as well as compliance with the prevailing environmental norms. The key development project for the Company was the development, manufacturing and testing of the chassis cab for fire engines. The development of the S91-type midi-bus chassis also continued in accordance with the EURO 6 environmental norms. This enables Rába Vehicle Ltd. to reenter the market together with a car body manufacturing partner.

Components Business Unit

The experimental developments of the Business Unit serve the launch of the production of new businesses acquired in the first place.

Major experimental development projects during the year included:

• Introduction of the production of AUDI engine compartment support parts for Audi Q7 ve-hicles for the VW group;

• Development to YFA frame production, headrest and seat cover production finished in 2015.

• Developments to an additional seat developed by an English partner, preparation for the series production

10

5. Environmental protection

Adequate waste management is a precondition for high-standard environmental performance and positive economic impact. The waste balance of the Rába Group in 2015 was as follows:

• Reusable wastes Volume: 14,750 tons Revenue: HUF 600 million

• Non-reusable wastes Volume: 308 tons Cost: HUF 11 million

• Hazardous wastes Volume: 4,317 tons Cost: HUF 52 million

The review and monitoring period of remediation carried out during previous years is still under-way, with costs in 2015 at nearly HUF 2.2 million at the Rába level. Such remediation efforts are currently taking place in the Győr Airfield site of Rába Automotive Holding Plc. In 2015 the val-ues remained under the limit values. The remained monitoring wells are put in consolidated wa-ter rights permission.

The Group established and operates the Environmental Management System compliant with the MSZ EN ISO 14001:2005. standard, which encompasses all activities and services of the Rába Group.

The impact on the human factor is viewed as the most important means to attain the goals set within our environmental policy.

The management of the company declared that their activities are conducted in accordance with the principles of the environmental policy and the same is expected of all Rába employees.

The environmental status of the Rába Group is adequate, developments are implemented every year to the extent possible, environmental considerations and requirements are always taken into consideration for the proposed developments and interventions.

Environmental investments and projects in 2015: • More efficient energy consumption (Rába Group) • Implementation of the tasks relating to the environmental product fee (Rába Group) • Implementation of the renewal audit under the ISO 14001:2005 Standards (Rába Group) • Accredited measurement of the emission of pollutants of heat treatment and other tech-

nologies (Rába Axle Ltd.) • Purchase of plastic IBC containers for collecting oily graffiti used emulsion at the forging

machines (Rába Axle Ltd.) • Audit of the report on carbon dioxide emission (Rába Axle Ltd.) • Completion of the wastewater measurements defined in the self-audit plan (Rába Auto-

motive Components Ltd. and Rába Axle Ltd.) • Renewal of the air protection authorisation (Rába Vehicle Ltd.) • Establishment of a new point source in relation to the Audi point welding activity (Rába

Automotive Components Ltd.) • 10 percent reduction in the volume of the wastewater sludge generated during industrial

wastewater management (Rába Automotive Components Ltd.) • Use of environmentally friendly materials for wearing processes (Rába Automotive Com-

ponents Ltd.)

Construction of a collection hall with approximately 600 square metres floor area to store haz-ardous waste at the Győr site as a new environmental project. In compliance with the special requirements, the building was erected with double flooring and a special collection shaft. The construction cost of the new hall was supported by a metal processing partner company, which also transports the hazardous materials of Rába.

11

6. Employment policy

Among the processes supporting the operation, human resources management plays a strategic role in supporting the implementation of the business objective through the supply of efficient workforce with up-to-date skills and knowledge.

Rába’s activities are centered in the Western region of Hungary. The region is characterised by steady progress and as a result of industrial developments, the demand of automotive compa-nies for workforce has increased to such extent that there is fierce competition for qualified spe-cialists. Under such circumstances the Group pays special attention to the safeguarding of the existing knowledge and expertise, as well as to the development of engineering capacities, which represent high added value and ensure Rába’s competitiveness, as well as to the training and replacement of the workforce.

Exploiting the opportunities of the social media, Rába used its recently established Facebook and LinkedIn profile to launch recruitment on social media and Rába’s career page was also completely renewed.

Continuing the established method, we expanded our multi-level cooperation with the educa-tional institutions of the region:

With the development of Rába’s career path model, we aimed to assist in the training of excel-lent specialists, from vocational training, through university education to PhD studies, in line with the company’s strategy, and to offer employment to the most outstanding trainees. This allows new entrants to gain practical skills, knowledge, practice and contacts specific to Rába’s special needs and to work, with great confidence and sufficient independence within a short period of time. The career path model introduced in 2012 is expanded each academic year with additional students, many of whom are already employees of Rába.

In the special dual training system model customised to the company, we entered into a cooper-ation agreement with the major secondary level vocational training and higher level educational institutions of the region. Our Company joined the dual training of the Faculty of Material Science of the University of Miskolc and continued our shared practice-oriented training with Széchenyi István University. Promotion of a career in technical activities is an important task for the Com-pany. Cooperation continues to strengthen knowledge transfer between the industry and the schools, and training of students for occupations that are in demand on the labour market.

Apart from the supply of new workforce, professional and skill development of our staff is also important because highly qualified employees, skilled in various professions and trained to pur-sue several work processes will enable us to flexibly adjust to the continuously changing re-quirements of our business environment. In that framework Rába provides opportunities to each employee to take part in the most advanced professional training and development activities. As an example, we held a 120-hour workshop within the framework of an intra-company training exercise in order to form groups who can support the effectiveness of the leaders of the teams working in production. The training course focused on passing on knowledge and information with which the participants were able to expand their professional skills and managerial abilities. This gives them a sound basis for performing their daily tasks and provides an opportunity to make progress and to achieve an even more effective and economic level in production.

Apart from the preservation and transfer of professional knowledge, a lot of attention is also paid to the motivation of experts. Last year the Rába Group introduced a performance evaluation-based wage increase system and also raised the achievement-based flexible wages. Within the framework of the career model, Rába also launched its personalised development programme for intellectual employees as an addition to the life cycle and integration programme. The tasks implemented in the various phases of the long-term programme help enhancing responsibility, competence and independence and prepare the participants to make progress as an expert or in management. The purpose of the group incentive motivation programmes, launched for physical employees is to create financial motivation for the employees and to encourage them to work more effectively, thereby increasing profitability. The results are measured on the basis of specif-ic indicators, the impact on the profit and by looking at the correlations. Apart from financial re-muneration, professional recognition is another major factor in maintaining and developing moti-vation: the Master programme continued last year, within the framework of which employees

12

with exemplary and outstanding performance and outstanding professional knowledge and ex-pertise are awarded the Rába Master title, which also entails moral and financial recognition.

The average headcount figure of the employees of the Group was 1,715 in 2015 and 1,838 in 2014.

7. Risk management

The risk management activities of the Rába Group are an integrated part of a responsible corpo-rate governance structure. The main principle of risk management is to keep risks within the limits that do not yet impede the achievement of the Group’s business objectives. Risk man-agement focuses on finding and maintaining the right balance between risks and opportunities.

The main responsibility of risk management is to protect the economic interests of the share-holders and clients in relation to the Company, to ensure smooth and effective operation, to generate and maintain a return reflecting also the risk exposure and to introduce new products and new services in consideration to the risk exposure.

The main aim of the Rába Group is to identify, sufficiently understand and evaluate risks in time and to respond to them effectively. The assessment of internal controls is also an integrated part of risk management, which in turn contributes to a more effective internal control system.

The assessed risks are managed at levels that reflect their volume and severity.

The Group manages its risks at several levels with several methods.

Risk assessment is applied for labour safety; error, mode and impact analyses are conducted for manufacturing processes and product design. The results of the risk analysis, the corrective measures and implementation of the measures are reviewed by the management.

The management has a consolidated credit policy at group level and regularly monitors credit risks. Rába has elaborated a credit policy, within the framework of which each individual new customer is subjected to individual credit rating. A purchase limit is defined for each customer whose estimated turnover will be higher than HUF 5 million. The limit equals the maximum debt. Those limits are reviewed annually. The customers are rated and approved with the help of an electronic system, with which the Rába Group manages the customer risks consistently.

The interest rate risk, reflected in the interest rate conditions of financing, is managed in a con-solidated manner at the level of the Rába Group, integrated into the financing, based on which the ratio of financing deals with variable and fixed interest rates is in balance.

The Rába group operates a cash pool system to improve the efficiency of its cash management and mitigate its financing risks. The cash pool system is ideal for optimising the available cash amount.

The Group assumes a foreign exchange risk in relation to any loan taken in any currency other than HUF. The currencies entailing a risk include primarily EUR and USD.

The exchange rate risks are hedged according to the currently effective hedge strategy, ap-proved by the Board of Directors of Rába Plc. In 2015, the exchange rate hedge strategy did not change. The Group may enter into futures and options currency exchange deals in order to min-imise the risk of exchange rate fluctuation. At Rába 70% of the net currency exposure, projected for the subsequent 6 months, may be hedged with forward deals and options. The Group did not enter into such deals in 2015.

At the end of 2015, the Group did not have any forward FX deals.

In line with the Group’s risk management strategy, USD and EUR loans could be taken, which are reported among the financial liabilities and function as hedge deals to cover the risks of USD/HUF and EUR/HUF exchange rates inherent in the USD and EUR revenues, projected according to the sales contracts (“Underlying transaction”). The transactions that are hedged effectively are cash flow hedge transactions. The results of those cash flow hedge transactions are recorded in the other overall profit/loss. The group repaid in loans reported among the cash flow hedge transactions in 2014, so the hedge transactions finished, no more hedge transaction were in 2015.

13

The Group manages the liquidity and cash flow risks with its customer and supplier rating sys-tem.

8. Events after the cut-off date

There were no extraordinary events after the cut-off date.

9. Other

RÁBA Plc. has no shares granting special management rights.

The Company’s shareholders have identical voting and ownership rights (one share represents one vote). The Company’s own shares held by the Company grant no voting rights.

The Company’s shares may be transferred without restriction.

Unless otherwise provided by the Companies Act, the General Meeting will have the power to decide on raising the registered capital or authorising the Board of Directors to increase the reg-istered capital, and to decrease the registered capital of the Company.

The General Meeting of the Company has the competence to authorise the Board of Directors to purchase treasury shares, as well as to decide about the acceptance of public purchase offers made for treasury shares, and to decide about the sale of treasury shares amounting to or ex-ceeding HUF 400 million.

The General Meeting will also decide on adopting and amending the Articles of Associations of the Company.

Company executives

The Board of Directors is the Company’s executive body whose members are elected by the General Meeting for a definite period of time not exceeding five years. The Board of Directors has 7 members. Each members of the Board of Directors shall serve until the date specified in the General Meeting resolution stipulating their election. Members of the Board of Directors may be recalled from office and may be re-elected after their term expires.

The Board of Directors elects its chairman with a simple majority vote from among its members.

The Board of Directors shall exercise employer’s rights other than the fundamental employer’s rights that are within the exclusive powers of the General Meeting (performance requirement and associated remunerations, and authorisation of vacations and official trips) over the Chief Execu-tive Officer, who is an employee of the Company).

Corporate Governance statements

The principal market of Rába’s shares is the Budapest Stock Exchange (BSE); accordingly, RÁBA abides by the company management principles developed in Hungary and the related statutory requirements.

RÁBA Plc.. applies the disclosure rules set out in the regulations, the rules of the BSE and the Company’s by-laws. The places of disclosure are the Company’s website (www.raba.hu) and the BSE’s official website, as well as the website of the National Bank of Hungary.

The Company’s corporate governance documents are public.

Such documents include the Report on Responsible Corporate Governance and the Statement on Responsible Corporate Governance, in which the Company states the extent to which it ap-plies the recommendations and suggestions set out in the relevant clauses of the Responsible Corporate Governance Recommendations (RCGR) published by the Budapest Stock Exchange in its own corporate governance practice.

The Company digresses from the RCGR recommendations to the extent that it does not operate a separate nomination committee and a remuneration committee, the tasks of which are per-formed by the Board of Directors and the General Meeting.

14

The Company’s management is supervised by a Supervisory Board consisting of three persons. If all members of the Supervisory Board are independent, then they are automatically elected by the General Meeting to members of the Audit Committee. The Audit Committee comments on the annual report prepared according to the Accounting Act, follows the audit, is involved in the selection of the auditor and in preparing the contract to be executed with the auditor. The audit committee proposes the auditor and monitors the professional requirements and conflict of inter-est regulations for the auditor and performs actions to be taken in connection with cooperation with the auditor, evaluates the operation of the financial reporting system, and helps the work of the Board of Directors in order to properly control the financial reporting system. It monitors the services provided to the Company by the auditor in addition to the audit of the financial state-ments drawn up as per the Act on Accounting and makes proposal to the Board of Directors for measures to be taken if it is necessary. The Audit Committee also monitors the efficient opera-tion of the internal controlling and risk management system.

The Company’s system of internal controls: • internal management and regulation of activities – the management exercises internal

controls at the management fora of various levels, prompt action is taken to address any risks identified during meetings. Processes are governed by written managing director’s, procedural and work instructions;

• independent internal audit, which operates under the supervision of the Supervisory Board, performs its activities based on an annual audit plan, supplemented by ad hoc audits.

Such internal controlling activity of the Holding encompasses the entire Group. Supervisory Board operate at each subsidiary, in accordance with the provisions of the Civil Code.

The remuneration principles applied within the Company are set forth in the Remuneration rules adopted by the General Meeting. Pursuant to the Statutes of the Company, performance re-quirements and the related benefits for managing executives as set forth in 208.§ (1) of the La-bour Code (the top manager of the employer and his deputy) are determined by the Board of Directors. The Board of Directors evaluates the work of the Chairman-CEO and his deputy at least once per year.

Ownership structure, ownership stakes in Rába Plc.

Shareholder descrip-tion

Total registered capital Series introduced

Start of given year (01/01/2015)

End of given year (31/12/2015)

Beginning of term

End of term

% 2 % 3 No. % 2 % 3 No. % No. % No. Domestic institu-tion/company 4,42 4,56 595 475 5,77 5,92 777 267

Foreign institu-tion/company 0,54 0,56 72 635 1,62 1,66 217 667

Foreign private individ-ual 0,24 0,25 32 198 0,03 0,03 4 497

Domestic private indi-vidual 17,82 18,40 2 400 970 15,60 16,00 2 101 847

Employees, executive officers 0,14 0,14 18 738 0,14 0,14 18 738

Own shares 3,16 425 891 2,49 335 891 Shareholder who is a part of public finances 4 73,68 76,09 9 927 539 74,35 76,25 10 017

539

International Develop-ment Institutions 5 0,00 0,00 0 0,00 0,00 0

Other 6 0,00 0,00 0 0,00 0,00 0 TOTAL 100,00 100,00 13 473 446 100,00 100,00 13 473 446

1 Ownership stake 2 Voting right providing participation in the decision making at the general meeting of the issuer.

15

List of shareholders with a stake exceeding 5%

Name National-

ity 1 Activity Quantity

(pcs) Share

(%) Voting

rights (%)

Magyar Nemzeti Vagyonkezelő Zrt. B Á 10 015 829 74,34 76,24 1 Domestic (B). Foreign (K) 2 Voting right providing participation in the decision making at the general meeting of the issuer.

Development of the number of treasury shares during the current year (pcs)

1 January 31 March 30 June 30 September 31 December Corporate level 425 891 425 891 425 891 425 891 335 891

Subsidiaries

Total 425 891 425 891 425 891 425 891 335 891

According to the closing situation as at 31 December, 2015, the number of treasury shares re-deemed declined compared to 31 December, 2014, by 90,000 shares, the number of the share options drawn. On 31 December, 2014, of the treasury shares (2.49%), 215,210 (1.6%) are kept for the second option draw down tranche of the share option programme.