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Fundamental Information about the Group

Overview of the Schaeffler Group

The Schaeffler Group (also referred to as “Schaeffler” below) is a global automotive and industrial supplier. Top quality, outstanding technology, and exceptionally innovative spirit form the basis for the continued success of the company. With its approx. 90,000 employees, the Schaeffler Group is one of the leading global technology companies. The Schaeffler Group identifies key trends early on, invests in researching and developing new forward-looking products, and sets new standards in technology. In doing so, it focuses on its key opportunities for the future – E-Mobility, Industry 4.0, and Digitalization. Extensive systems know-how enables the Schaeffler Group to offer comprehensive solutions that are tailored to customer and market requirements. By delivering high-precision components and systems in engine, transmission, and chassis applications, as well as rolling and plain bearing solutions for a large number of industrial applications, the Schaeffler Group is shaping “Mobility for tomorrow” to a significant degree. This includes offering innovative products for hybrid and electric vehicles.

Under its strategy “Mobility for tomorrow”, the Schaeffler Group concentrates on 4 focus areas: eco-friendly drives, urban mobility, interurban mobility, and energy chain. These 4 focus areas are based on four megatrends that will influence the business of the Schaeffler Group in the future: climate change, urbanization, globalization, and digitalization. The 8 strategic pillars developed based on these focus areas define the scope for action under the strategy “Mobility for tomorrow” and constitute the basis for the continuous further development of the Schaeffler Group. The excellence program “Agenda 4 plus One” was developed to ensure implementation of the strategy; it now consists of 20 strategic initiatives (prior year: 16) which have been grouped into five categories. In order to consistently implement its strategy, the Schaeffler Group has set itself Financial Ambitions 2020 that mark the financial corridor for implementing the strategy.

Schaeffler AG’s common nonvoting shares are listed on the Frankfurt Stock Exchange and are included in Deutsche Börse’s MDAX index as well as in the STOXX Europe 600 index. The company’s main shareholder is IHO Holding, a group of holding companies owned indirectly by the Schaeffler family that holds all of Schaeffler AG’s common shares. The free float amounts to approx. 9% of Schaeffler AG’s total common and common nonvoting share capital. Schaeffler AG intends to continue to pay a dividend of 30 to 40% of consolidated net income before special items to its shareholders.

Organizational structure

The Schaeffler Group’s corporate structure is characterized by a three-dimensional organizational and leadership structure which differentiates between divisions, functions, and regions. Thus, the Schaeffler Group’s business is primarily managed based on the divisions, which also represent the reportable segments.

Until December 31, 2017, these divisions consisted of the Automotive and Industrial divisions. While the Automotive division organized its business in the Engine Systems, Transmission Systems, Chassis Systems, and Automotive Aftermarket business divisions, the Industrial division was primarily managed based on the regions Europe, Americas, Greater China, and Asia/Pacific.

In order to shape the company’s future in a fast-changing market and competitive environment and to become even more customer-oriented, the Board of Managing Directors, in cooperation with the Schaeffler AG Supervisory Board, decided, in 2017, to separate the Automotive Aftermarket from the Automotive division of Schaeffler AG and set it up as a third stand-alone division as of January 01, 2018. As a consequence, the Schaeffler Group has been dividing its business into three divisions – Automotive OEM, Automotive Aftermarket, and Industrial – since January 01, 2018. Like the Industrial division, the Automotive Aftermarket division is managed based on four regions. In addition, the company created an independent E-Mobility business division within the Automotive OEM division effective January 01, 2017.

In addition to the divisions, the Schaeffler Group’s organizational model includes five functional areas: (1) CEO functions, (2) Technology, (3) Operations, (4) Finance, and (5) Human Resources. Distribution is embedded directly in each of the divisions. The third dimension are the group’s four regions Europe, Americas, Greater China, and Asia/Pacific.

Leadership structure

The Schaeffler Group is managed by the Board of Managing Directors of Schaeffler AG. Up until December 31, 2017, along with the Chairman of the Board of Managing Directors (Chief Executive Officer - CEO), the Board of Managing Directors comprised the CEOs of the Automotive (CEOs Automotive) and Industrial (CEO Industrial) divisions and the Managing Directors responsible for the Schaeffler Group’s functions (Chief Technology Officer, Chief Operating Officer, Chief Financial Officer, and Chief Human Resources Officer). Since the Automotive Aftermarket was set up as a separate division effective January 01, 2018, the Board of Managing Directors also includes the CEO Automotive Aftermarket.

The Board of Managing Directors is directly responsible for managing the company, setting objectives and strategic direction, and managing the implementation of the growth strategy taking into account the interests of shareholders, employees and other stakeholders of the company in order to add long-term value. The CEO coordinates the management of the company and the Schaeffler Group.

In addition to the divisions and the functions, the group’s matrix organization comprises the regions Europe, Americas, Greater China, and Asia/Pacific, each managed by a Regional CEO. The Regional CEOs report directly to the CEO. Together, the Board of Managing Directors and the Regional CEOs represent the Schaeffler Group’s Executive Board. In this manner, the Schaeffler Group’s organizational structure is reflected in its leadership structure.

The Supervisory Board of Schaeffler AG appoints, advises, and oversees the Board of Managing Directors and is involved in fundamental decisions. The Chairman of the Supervisory Board coordinates the work of the Supervisory Board.

The Board of Managing Directors and the Supervisory Board comply with the recommendations of the German Corporate Governance Code in conducting their affairs and have issued the declaration of conformity pursuant to section 161 German Stock Corporations Act (“Aktiengesetz” – AktG) in December 2017. The corporate governance report including the corporate governance declaration in accordance with section 289f HGB and section 315d HGB incl. the declaration of conformity pursuant to section 161 AktG is publicly available from the company’s website.

Corporate governance report including the corporate governance declaration in accordance with section 289f HGB and section 315d HGB incl. the declaration of conformity pursuant to section 161 AktG at: www.schaeffler.com/ir

Locations and changes in the scope of consolidation

The corporate head office of the Schaeffler Group is located in Herzogenaurach. In addition, the Schaeffler Group’s network of manufacturing locations, research and development facilities, and distribution companies consists of approx. 170 locations in over 50 countries. The production system with currently 74 manufacturing locations in 22 countries is the cornerstone of the Schaeffler Group's operations. The Schaeffler Group is actively helping to shape technological progress for “Mobility for tomorrow” at its 18 R&D centers and at additional R&D locations in a total of 24 countries. As a global development partner and supplier, Schaeffler maintains stable long-term relationships with its customers and suppliers. In addition to Schaeffler AG, which acts as the group’s lead company, the Schaeffler Group included 151 (prior year: 152) domestic and foreign subsidiaries as at December 31, 2017. As at December 31, 2017, 103 (prior year: 104) of these subsidiaries are located in the Europe region, 25 (prior year: 26) in the Americas region, 10 (prior year: 9) in the Greater China region, and 13 (prior year: 13) in the Asia/Pacific region.

In 2017, the Schaeffler Group acquired the remaining 49% stake in Compact Dynamics GmbH. As a result, this company is now wholly-owned by the Schaeffler Group. The scope of consolidation underwent only minor changes overall during the year.

See chapter Notes to the Consolidated Financial Statements. for further detail.

Legal group structure

Schaeffler AG is a publicly listed corporation domiciled in Germany. Schaeffler AG’s share capital consists of a total of 666 million shares. 500 million of these shares are unlisted common bearer shares and 166 million are common nonvoting bearer shares. Each common share and each common nonvoting share represents an interest in total share capital of EUR 1.00 each.

All 500 million of the common bearer shares are held by IHO Verwaltungs GmbH, which is part of IHO Holding. This represents an approx. 75.1% interest in Schaeffler AG. The 166 million common nonvoting bearer shares in Schaeffler AG are widely held. The free float amounted to approx. 24.9% as at December 31, 2017. IHO Holding also holds approx. 46.0% of the shares in Continental AG.

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