KTM AG

ANNUAL REPORT 2016

KTM AT A GLANCE
EURk 2012 2013 2014 2015 2016 Change

EARNINGS RATIOS
Revenue 612,008 716,390 864,636 1,022,487 1,141,819 11.7%
EBITDA 67,838 87,694 112,599 141,524 160,012 13.1%
EBIT 36,716 54,886 75,377 95,105 102,796 8.1%
EBT 25,145 46,923 70,636 85,421 94,378 10.5%
Net result after tax 25,317 36,509 57,162 63,924 72,109 12.8%
EBITDA margin 11.1% 12.2% 13.0% 13.8% 14.0% –
EBIT margin 6.0% 7.7% 8.7% 9.3% 9.0% –

BALANCE SHEET RATIOS

Balance sheet total 521,351 571,435 694,799 848,933 1,056,524 24.5%
Working capital1 81,269 86,074 106,836 122,051 103,700 (15.0%)
Equity 254,522 282,843 327,575 379,814 427,979 12.7%
Equity in % of total assets 48.8% 49.5% 47.1% 44.7% 40.5% –
Net financial debt2 99,315 82,365 87,475 97,164 80,850 (16.8%)
Gearing3 39.0% 29.1% 26.7% 25.6% 18.9% –

CASH FLOW
Cash flow from operating activities 71,673 83,240 79,649 118,104 165,590 40.2%
Free cash flow 15,572 25,187 9,914 23,802 18,838 (20.9%)

EMPLOYEES
Employees as at December 314 1,702 1,849 2,143 2,515 2,931 16.5%

1
Working capital = Trade and other receivables + inventories – trade and other payables
2
Net financial debt = Financial liabilities (current, non-current) – cash and cash equivalents – financing receivables
3
Gearing = Net financial debt / equity including non-controlling interests
4
Employees including temporary staff and external employees

+16.5%
+11.7%

+8.1%

EMPLOYEES
REVENUE

EBIT
2016
ANNUAL
REPORT
FINANCIAL YEAR FROM
JANUARY 1 TO DECEMBER 31, 2016
KTM AG, MATTIGHOFEN, AUSTRIA
KTM GROUP
Every day is a chance to perform; every year is an opportunity challenge the industry, assert themselves proudly in competition
for success. Each day, each year is the time to step up to and provide an exhilarating and rewarding experience for the
the plate and assert yourself in the marketplace, moving boldly end consumer.
ahead into the future.
With strong roots in the offroad motorcycle and competition
The following annual report gives a broad overview of the disciplines, over the past decade, the KTM GROUP has success-
KTM GROUP’s activities and overall performance over the past fully expanded beyond the dirt and into the realm of street-legal
year. It is a brief pause to evaluate its efforts, and allow a motorcycles, with industry-leading models in the travel-enduro
moment to prepare for and face the year ahead with renewed and naked segments. The KTM GROUP has also recently
focus and a shared vision. introduced smaller capacity models for entry-level riders that
cater to a wider range of global motorcyclists.
KTM Sportmotorcycle GmbH and Husqvarna Motorcycles GmbH,
two direct subsidiaries of the group parent company KTM AG, The current range of smart and versatile engine and chassis
deliver and market the respective brands to consumers. platforms empowers the KTM GROUP to better adapt to future
market trends and to offer a desirable and relevant range of
The KTM GROUP brands produce a range of trend-setting and modern powersport vehicle products.
innovative powersports vehicles, sold through a solid and
expanding global network of dealers, partners, joint ventures, The only certainty in the modern world is change, a change
subsidiaries and regional importers. that seems to be happening at sometimes breakneck speeds in
multiple fields and areas of expertise. The KTM GROUP’s focus
The development center in Mattighofen, Austria, is a hub of inno- on innovation, technology and progress leaves the company
vation, where market-leading powersports vehicles are designed, excited about tackling the future challenges and deliver the
developed and produced. It is here that the KTM GROUP is next generation of industry-leading, smart, disruptive, exciting
constantly driven to set new benchmarks and introduce and rewarding powersports solutions to a fast-evolving and
new technologies, designs and approaches to the market that ever-changing world.

004 KTM GROUP

 CONTENT

018
049
History

Investor Relations

053
Consolidated Management Report

040
Quality

007 Foreword 049 Investor Relations

009 Report of the Supervisory Board
018 History 053 Consolidated Management Report
022 Sales Markets 073 Consolidated Income Statement
024 KTM GROUP Vision 074 Consolidated Statement of
026 Group Structure Comprehensive Income
075 Consolidated Statement of Financial Position
028 The KTM GROUP as a Sales Organization 076 Consolidated Statement of Cash Flows
030 KTM: Goals and Strategy 078 Consolidated Statement of Changes in Equity
032 Husqvarna Motorcycles: 079 Notes
Goals and Strategy 140 Annex
034 Employees 143 Auditor’s Report
036 KTM Motorsport 149 Statement of all Legal Representatives
038 Husqvarna Motorsport
040 Quality 150 Other Information
042 Research & Development
046 KTM Technologies

0 05
“416 new employees”
“EBIT significantly
increased”

“Highest sales and revenue

levels in the company’s history”
“High level
of innovation”
“Record investment
at the austrian sites”

006
 FOREWORD BY THE CHAIRMAN
OF THE EXECUTIVE BOARD
LADIES AND GENTLEMEN, OUTLOOK
The general economic climate remains tough in the individual
markets. For 2017 we expect to see slight growth in the global motor-
THE 2016 FINANCIAL YEAR JUST ENDED WAS THE cycle market. With our new products, consistent implementation
BEST YEAR IN THE HISTORY OF THE KTM GROUP. KTM HAS of our strategy and by focusing on commercial business development
BEEN THE FASTEST GROWING MOTORCYCLE BRAND IN to expand the quantity and quality of our sales partners, we expect
THE WORLD FOR YEARS NOW. to continue to gain market shares.

HIGHEST SALES AND REVENUE LEVELS With the Husqvarna Motorcycles brand, we expect further growth
IN THE COMPANY’S HISTORY in 2017 as the range of products is being expanded to include street
KTM again increased both its sales and revenues and in 2016 motorcycles.
achieved a new record high for the sixth time in a row.
2017 will also see the commercial launch of new KTM models. The
With 203,423 motorcycles sold worldwide by the two group KTM Street models in the ADVENTURE series, which have already
brands KTM and Husqvarna Motorcycles in the 2016 financial year, been presented at international motorcycle shows, and the new
sales were up 11% on the previous year. Revenue was up in the “DUKE” naked bike models will be launched on the market in 2017.
same period by 12% to EUR 1.14 billion.
KTM has set itself the medium-term goal of increasing annual sales
EBIT SIGNIFICANTLY INCREASED to 300,000.
KTM saw a sharp rise in earnings in addition to revenue and sales.
With EBIT of EUR 102.8 million, KTM achieved record earnings The level of investment planned for 2017 remains at a high level.
in the 2016 financial year. The main areas of focus for investment cover in particular new series
development projects as well as investments in infrastructure and
INVESTMENTS expansion in the area of development.
In 2016, KTM continued to maintain investments at a high level
amounting to around EUR 106 million. In 2017 we expect to see a further increase both in sales and in
revenues.
RECORD EMPLOYMENT AT THE MATTIGHOFEN SITE
At the end of the year, KTM employed 2,931 people around the
world, which represents a new record level of employment. Mattighofen, March 2017
In the 2016 financial year, headcount increased by 416, of whom
391 were new employees in Austria.

The Executive Board would like to thank all employees for the
great dedication and commitment with which they have contributed Stefan Pierer
to this successful development. Chairman of the Executive Board

FOREWORD BY THE CHAIRMAN OF THE EXECUTIVE BOARD 0 07

(F.L.T.R.) VIKTOR SIGL, FRIEDRICH ROITHNER, STEFAN PIERER, HUBERT TRUNKENPOLZ, HARALD PLÖCKINGER

EXECUTIVE BOARD SUPERVISORY BOARD

Stefan Pierer Friedrich Roithner Friedrich Lackerbauer

Chairman of the Executive Board Chairman of the Supervisory Board Employee Representative
(from July 21, 2016)
Harald Plöckinger Horst Resch
Josef Blazicek Employee Representative
Friedrich Roithner Chairman of the Supervisory Board
(until July 20, 2016) (until July 20, 2016)

Viktor Sigl Rajiv Bajaj

Deputy Chairman of the Supervisory Board
Hubert Trunkenpolz
Ernst Chalupsky

Srinivasan Ravikumar

008 KTM GROUP

 REPORT OF THE
SUPERVISORY BOARD
FRIEDRICH ROITHNER

IN THE 2016 FINANCIAL YEAR THE SUPERVISORY BOARD The Audit Committee agreed with the appropriation of net profit
OF KTM AG HELD FOUR MEETINGS ON MARCH 2, ON JUNE 21, proposed by the Executive Board and recommended to the Super-
ON SEPTEMBER 20 AND ON DECEMBER 7, EACH TIME visory Board that KPMG Austria GmbH Wirtschaftsprüfungs-
IN MATTIGHOFEN, THUS FULFILLING ITS DUTIES REQUIRED und Steuerberatungsgesellschaft, Linz, be proposed for appointment
BY LAW AND UNDER THE ARTICLES OF INCORPORATION. as independent auditors for the financial year from January 1, 2017
to December 31, 2017 at the Annual General Meeting. In addition,
The Executive Board of KTM AG regularly reported to the Super- the Audit Committee also reviewed the corporate governance report
visory Board on business development and the economic state for the 2016 financial year and informed the Supervisory Board
of the corporation, including its associated companies. The annual that it did not reveal any reasons for objection.
financial statements and the management report for the 2016
financial year as well as the consolidated financial statements and The Supervisory Board concurs with the Audit Committee’s report
group management report for the 2016 financial year were and consequently also with the results of the final audit. After
audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuer- obtaining the final results of its review of the management report and
beratungsgesellschaft, Linz, and did not give any reasons for group management report, the annual financial statements, including
objections. The auditors certified that the accounting and annual the proposed appropriation of net profit and consolidated financial
financial statements as of December 31, 2016 are consistent statements, and its management review, the Supervisory Board also
with the applicable laws, that the annual financial statements give, raised no objections. The Supervisory Board also concurs with the
in all material respects, a true and fair view as possible of the Executive Board’s proposed distribution of net profit.
company’s net assets, financial position and results of operations
in accordance with generally accepted accounting principles, and Having been accepted by the Supervisory Board, the annual financial
that the management report is consistent with the annual financial statements can be deemed approved pursuant to Article 96 (4)
statements. Further, the auditors certified that the consolidated Stock Corporation Law (AktG). The Supervisory Board acknowledged
financial statements give a true and fair view in all material respects the consolidated financial statements and the group management
of the group’s net assets and financial position as of December 31, report for the 2016 financial year.
2016, as well as of the results of operations and cash flows
for the past financial year in accordance with the International The Supervisory Board recommends that KPMG Austria GmbH
Financial Reporting Standards (IFRS), and that the other details Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Linz,
in the group management report do not misrepresent the group’s be appointed as independent auditors for the financial year from
situation. January 1, 2017 to December 31, 2017.

In its report to the Supervisory Board, the Audit Committee of

KTM AG concurred with the results of the final audit. After review- Mattighofen, March 2017
ing the management report and the annual statements for the
financial year including the proposed appropriation of net profit, the
group management report and the consolidated financial state-
ments for the 2016 financial year, and reviewing the management,
the Committee did not raise any objections. Friedrich Roithner
Chairman of the Supervisory Board

REPORT OF THE SUPERVISORY BOARD 009

KTM 1290 SUPER ADVENTURE R, PHOTO: CHYTKA M.
HUSQVARNA VITPILEN 401 AERO, PHOTO: SCHEDL R.
KTM 1290 SUPER DUKE R, PHOTO: SCHEDL R.
HUSQVARNA TC 65, PHOTO: REDEYE MEDIA LTD.
83
1992 NEW BEGINNINGS
STEFAN PIERER
TAKES OVER
YEARS HISTORY KTM

1934b
EARLY BEGINNINGS 25 year old Hans Trunkenpolz
opens a fitter’s and car workshop in the Upper
Austrian town Mattighofen. A first approach to the founding of what
is later known as KTM.

1953b
KTM – KRONREIF TRUNKENPOLZ MATTIGHOFEN
In 1953 the three letters “KTM” appeared for the
first time to represent Kraftfahrzeuge Trunkenpolz Mattighofen.
Since the mid-1950s, when the associate Ernst Kronreif joined the
company, the meaning of the initials is clearly defined as “Kronreif
Trunkenpolz Mattighofen”.

1954b
KTM NONSTOP – PARIS TO VIENNA In autumn
1954, a KTM attracted attention because a board

1953
with the magic number “1000” was pinned at the handlebars
of the R125 Tourist. To make the performance and reliability of
a motorcycle known to the public, long distance races were pretty
popular in the 1950s. Therefore, on September 30, 1954, three
125 ccm Tourist and three riders, among them KTM boss Hans
Trunkenpolz, stood at the outskirts of Paris. The destination
was Vienna, a distance of 1,300 kilometers. Not only the distance,
the timing was also pretty ambitious by the standards of the time.
The group at least wanted to keep pace with the “Arlberg-Express”,
a train that needed 24 hours for the same distance. And it worked
out – the train’s time was even beaten by more than two hours.
A KTM Tourist that was faster than the express train from Paris to
Vienna should be the right motorcycle for normal tourists.

1984b
AUSTRIA SETS A SIGNAL – KINI AND KTM ARE

1984
CHAMPIONS! Heinz Kinigadner becomes a national
sports hero as the Tyrolean wins for the first time a world champion-
ship title in Motocross for Austria – on an Austrian manufactured
KTM race bike. Repeating the win in 1985 finally left a first massive
footprint in the international offroad world.

018 KTM GROUP

 2001 FIRST DAKAR VICTORY –
SINCE THAT TIME,
KTM DRIVERS ACHIEVED
16 VICTORIES IN A ROW

1998b
LC8 – A NEW DIRECTION OF POWER It was 1998
when KTM began researching into its first
multi-cylinder engine and, after many different configuration types,
they decided on a 75 degree V-twin. This engine was announced
at the 2000 INTERMOT Show in Cologne, Germany, shown in a
prototype called the “LC8 ADVENTURE”.

1999b
NEW FACTORY With a rapidly increasing model
range with diverse engine types requiring
more replacement parts, a new KTM factory was opened on the

1992
outskirts of the small Austrian town of Mattighofen. The main
factory building houses the four main production lines, assembling
all the offroad machines and street bikes from 690 ccm and above.
A cordoned off production line is where special prototype bikes
and customer race machines, such as the KTM 450 RALLY and
KTM RC 250 R, are produced.

1992b
NEW BEGINNINGS In the beginning of 1992,

1999
Stefan Pierer and his CROSS Industries Company
took over KTM and set about not only resurrecting the Austrian
brand that began in 1953, but taking it to new levels of success.
Just 24 years later they are consistently the biggest European motor-
cycle brand, are the dominant figure in two-wheel offroad machines
and have over 270 World Championships in the trophy room –
including 16 consecutive Dakar victories – and are now selling more
of its street motorcycles than offroad.

EXC – READY TO RACE FOR EVERYONE Although the KTM trophy

cabinets are already bursting with Motocross and Supercross

2001b
silverware, Enduro is the heart of KTM; responsible for the majority FIRST DAKAR VICTORY The Dakar Rally is unique
of its world championships and always at the top of the global in its difficulty for both rider and machine.
Enduro sales chart. Why? Because, since 1992, KTM has always True endurance; the event is long in terms of duration and riding
provided customers with its EXC machine – either two-stroke distance an often features terrain as varied as the landscape. For
or four-stroke – that is ready to fight for victories straight from the the biggest offroad brand, the Dakar acts a great test of its
showroom. Upgraded each year, this is READY TO RACE and this machines. KTM first won the Dakar Rally with Italian Fabrizio Meoni
mentality will never change. in 2001. Since that first victory, only KTM-mounted riders have
won this event – 16 consecutive wins is a feat no other manufacturer

1994b
TAKING TO THE STREET Take an LC4-powered has accomplished.
620 Enduro, chopped it up with an angle grinder
and fit some 17-inch wheels in it. This is the origins of how, in
1994, KTM took to the asphalt for the first time in its rebirth and
the 620 DUKE was unleashed; bringing Supermoto on the street
to the world’s riding masses. That mono-wheeling, tire-squealing bike
quickly set an attitude for KTM and, as most of us know, reputations
can last a lifetime – 23 years and counting, to be precise.

HISTORY 019
2003

2003b
A NEW ADVENTURE Although not the first KTM
to carry the ’Adventure’ banner (that was
the LC4-powered 640, back in the mid-nineties), in 2003 the brand
established itself as a serious player in the Travel Enduro market
with the arrival of its first multi-cylinder contender. The LC8-powered
950 ADVENTURE changed perceptions that bikes in this sector
didn’t have to be big and cumbersome. Almost 90% the same
machine that won the 2002 Dakar Rally, the 950 – later becoming
the 990 – was pivotal for the future of KTM and introduced many

2008
more riders to the brand.

2008b
A UNIQUE SUPERBIKE ARRIVES Never one to
follow the crowd, the arrival of KTM’s first true
Superbike, the KTM RC8, tore-up the rulebook in terms of design
and handling performance. Distinctive looks matched with an equally
individual riding experience has seen the KTM RC8 remain a firm
favorite with two-wheel purists. The capabilities of the KTM RC8 R
were demonstrated when it clinched the IDM Superbike Champion-
ship in 2011 in the hands of Martin Bauer, a class where engine
tuning is very minimal.

UNBELIEVABLE – A KTM CAR After an energy loaded develop-

ment ended with another big scoop: The presentation of the
KTM X-BOW underlined KTM’s philosophy – translating the brand’s
core values even onto four wheels. This unique supersport car

2011b
showed straight away its READY TO RACE approach and demon- SMALLER CAPACITIES, BIGGER OPPORTUNITIES
strated the impressive learning curve in all development disciplines. Since 2007, KTM has been cooperating with
the Indian Bajaj Group to focus on the joint development of entry-
level, 125 to 390 ccm street motorcycles. Produced in India
and distributed under the KTM brand by both companies, the first
model released from this partnership was the KTM 125 DUKE
in 2011, which quickly became the biggest selling machine in its
class in Europe. The KTM 200 DUKE followed in 2012, allowing
KTM to enter the Indian market and is the first KTM model ever to
be offered worldwide. Since then, the KTM 390 DUKE was released
and, in 2014, the Supersports KTM RC 125, KTM RC 200 and
KTM RC 390 began production.

020 KTM GROUP

 2014 THE RESTART OF
HUSQVARNA. REUNION OF
HUSABERG AND HUSQVARNA

2013b
SETTING NEW STANDARDS IN SAFETY In coopera-
tion with BOSCH, KTM developed the MSC
(Motorcycle Stability Control) and therewith is the first brand world-
wide to present an ABS that works even while cornering at deep
lean angles. MSC supports the rider together with the combined
antilock braking system C-ABS (Combined ABS) and the lean angle
dependently working motorcycle traction control MTC (Motorcycle

2015
Traction Control) in a multitude of ways – of course just within
the limits of physics. Fitted to the KTM 1190 ADVENTURE and
later the KTM 1290 SUPER ADVENTURE, these models are not only
the most versatile of all Travel Enduros, but also the safest motor-
cycles in the world.

2015b
KTM GOES ELECTRIC Although a long-running

2014b
THE BIG PICTURE – THE RESTART OF HUSQVARNA project and partially developed in public at i
Following the acquisition of Husqvarna Motor- ts E-Cross Center, as the leader of offroad motorcycling KTM has also
cycles in early 2013, and the subsequent reunion of the Husaberg set a new bar for electric bikes in its typical manner with the release
brand into the newly established Husqvarna Motorcycles GmbH of the innovative KTM FREERIDE E-SX, E-XC and E-SM available
company, 2014 was the first complete financial year for the “new” in 2015. Despite lacking petrol power, these bikes are still built to
Husqvarna Motorcycles. the company’s READY TO RACE mantra boasting high-specification
components and incredible performance.

2016b
AT THE BEGINNING of the year KTM celebrated
its 15th consecutive Dakar victory. Championships
in Supercross, Motocross and Moto3 round off another successful
motorsport year. The first outing of KTM’s MotoGP bike at the
Red Bull Ring offered a foretaste of what is to come in 2017.
With an extended ADVENTURE family and a reworked DUKE range
KTM strengthens its position on asphalt.

2014 Only two years after the presentation of the concept-bikes VITPILEN
401 and SVARTPILEN 401 at the EICMA, Husqvarna unveiled
the serial models at the same place in 2016, representing a bold
first step in an exciting new direction for Husqvarna Motorcycles.
With a full line-up of Motocross and Enduro models and a continued,
strong commitment to offroad competition, Husqvarna immediately
set a record year with 16,377 bikes sold and a revenue of more than
100 million euros. These were the best ever results in the 114-year
history of Husqvarna Motorcycles.

In late 2014, with the unveiling of the VITPILEN 401 and

SVARTPILEN 401 concept-bikes at the international motorcycles

2016
exhibition EICMA, Husqvarna confirmed its decision to re-enter
the street segment, giving a glimpse of what the future will hold for
the iconic Swedish brand.

HISTORY 0 21
 11.4%
MARKET SHARE IN EUROPE1

€ 603.6 M
7.0%
REVENUE IN EUROPE

MARKET SHARE IN NORTH AMERICA1

€ 327.7 M
REVENUE IN NORTH AMERICA

€ 210.5 M
REVENUE IN OTHER COUNTRIES

KTM SALES COMPANIES

SALES MARKETS
1
TOTAL MARKET SHARE OF KTM AND HUSQVARNA CKD PRODUCTION

022 KTM GROUP

SALES MARKETS
KTM SALES COMPANIES
AND SALES MARKETS
WORLDWIDE
SALES MARKETS 0 23
 KTM GROUP VISION

KTM 1290 SUPER DUKE R, PHOTO: SCHEDL R.

KTM GROUP IS A PREMIUM MANUFAC- Today, driven by the passion of its employ-
TURER OF HIGH-PERFORMANCE VEHICLES ees, KTM GROUP has already become
FOR BOTH OFFROAD AND STREET USE. the largest European manufacturer, with
THANKS TO CONTINUOUS INNOVATION a 11.4% market share in Europe and a
AND DIFFERENTIATED PRODUCT 7.0% share in the US, as well as achieving an
DESIGN, EVERY VEHICLE BUILT IS OF annual revenue in excess of EUR 1.1 billion.
THE HIGHEST QUALITY. The current trajectory sets a KTM GROUP
goal of reaching 300,000 units of annual
production by 2020. The strategy to achieve
this is by maximizing the synergies and
resources of the constituent brands, stake-
holders and infrastructure within the group.

0 24 KTM GROUP
The KTM GROUP’s corporate success is
grounded in strengthening the core values
of its two primary brands and communi-
cating them appropriately. The ongoing
objective is to ensure that every product
always delivers on the promise implicit in
the “READY TO RACE” philosophy for
KTM and “PIONEERING SINCE 1903” for
Husqvarna Motorcycles. Despite a marked HUSQVARNA VITPILEN 401, PHOTO: SCHEDL R.

contrast between the group’s two main

brands, they share strong histories of success
and innovation, while using very different Geared for the future, KTM GROUP success- the global market. The imminent introduc-
approaches. This new sibling rivalry within fully markets products that were developed tion of a new parallel twin engine platform,
the KTM GROUP has benefitted both brands with a great deal of craftsmanship. With which will initially appear in new naked
tremendously. The clearly differentiated a long history and strong interest in motor- models, provides better access to the popular
profiles of the brands and their continuity sport, the KTM GROUP constantly strives to and fast expanding mid-sized segments.
are mainstays of the group’s success. develop the overall product range and to
increase its competitiveness and penetration The unveiling of KTM’s latest sports car,
The KTM GROUP cultivates a close into global markets; this is done by identify- the KTM X-BOW GT4 model, follows on
relationship with its customers through a ing developing trends and defining new ones. from having sold over 1,000 of the original
well-trained network of dealers passing on Innovation and the highest development X-BOW model. It is an ongoing project that
customer feedback and potential market standards are crucial to achieving this vision. proves KTM GROUP is capable of developing
trends directly to the factory. Their profes- A major step towards growing mainstream and evolving new product ranges outside
sionalism and customer focus are vital market awareness is the entry into MotoGP of its traditional core motorcycle business.
to the overall success. The KTM GROUP in 2017. The experience gained in terms of light-
strives to further advance its creation of a weight vehicle construction is invaluable in
sustainable partnership with its dealers, The KTM GROUP offering is a diverse and developing new vehicle concepts. Additionally,
which is grounded in fairness and trust. ever-expanding model range that now covers KTM GROUP has taken a leading develop-
Due to the constant qualitative growth in all essential engine capacity categories mental role in electric powertrain innovation.
product range and specially-developed store and performance classes (50 to 1,300 ccm). The experience gained from the research
concepts, KTM GROUP dealers can run The small-engine street motorcycles – project to develop an innovative high-power
a profitable business solely by selling developed in cooperation with Indian partner electric motorcycle in the form of the
KTM GROUP’s wide range of products and Bajaj – open up a new global segment. KTM FREERIDE-E proved the potential of
accessories, along with the highest quality Due to this, the KTM GROUP product port- electric powertrains. Building on this research,
components and some of the most folio now comprises a more diverse and the KTM GROUP is developing technology
unique and impressive motorcycles both ever-expanding range that is more appropriate that supports alternative forms of mobility in
onroad and offroad. and better geared for a growing portion of urban settings for multiple applications.

KTM GROUP VISION 0 25

GROUP STRUCTURE
KTM AG AS
PARENT COMPANY

SINCE THE HUSQVARNA MOTORCYCLES The sales companies KTM Sportmotorcycle The KTM GROUP’s land and buildings
BRAND WAS INTEGRATED INTO THE GmbH and Husqvarna Motorcycles GmbH are bundled in KTM Immobilien GmbH.
KTM GROUP, KTM AG HAS FOLLOWED distribute the respective brands’ motor-
A CONSISTENT TWO-BRAND STRATEGY FOR cycles and spare parts directly to European The WP Group is one of the leading
KTM AND HUSQVARNA MOTORCYCLES. dealers and global importers. Markets European system suppliers of performance-
in the United States, Mexico, South Africa, defining components for the motorcycle
The main equity holdings of KTM AG Japan and Greece are served via local and powersport industries.
are KTM Sportmotorcycle GmbH, Husqvarna stock-carrying sales subsidiaries. The two
Motorcycles GmbH, KTM Sportcar GmbH, companies thus hold participations in a KISKA GmbH is a design company that
KTM Technologies GmbH, KTM Immobilien total of 30 domestic and foreign sales com- provides development and design services
GmbH and the minority stakes in WP AG panies that provide sales and marketing- for the KTM GROUP.
and KISKA GmbH. related services in the local markets for
KTM Sportmotorcycle GmbH and Husqvarna
KTM AG develops and manufactures Motorcycles GmbH.
motorcycles under the brands KTM and
Husqvarna Motorcycles as well as the KTM Sportcar GmbH distributes the X-BOW
X-BOW super sports car and comprises super sports car.
all central group functions.
KTM Technologies GmbH provides services
in vehicle and product development
along with consultancy, particularly in light-
weight construction and fiber composites
for group companies and third parties.

0 26 KTM GROUP
GROUP STRUCTURE (SIMPLIFIED)

KTM AG

KTM KTM KTM KTM KTM Husqvarna WP KISKA

Racing AG Technologies Immobilien Sportmotor- Sportcar Motorcycles AG GmbH
GmbH GmbH cycle GmbH GmbH GmbH
CHE 100% AUT 74% AUT 99.61% AUT 100% AUT 100% AUT 100% AUT 24% AUT 26%

KTM Husqvarna
Sales companies Sales companies

GROUP STRUCTURE 0 27
 THE KTM GROUP
AS A SALES ORGANIZATION

KTM & HUSQVARNA FLAGSHIPSTORE VIENNA

BUILDING PREMIUM VEHICLES IS first point of contact with the KTM and
ONLY HALF THE TASK. IT IS JUST AS Husqvarna Motorcycles brands and thus
IMPORTANT TO BRING THE BRAND have the direct opportunity to immerse the
TO LIFE FOR THE CUSTOMER IN THE customers in the particular brand world.
BEST WAY POSSIBLE, WIN THEM Having close links to customers and offering
OVER WITH EXTENSIVE ADVICE AND a varied range of services are crucial
EXPERT KNOWLEDGE OF THE PRODUCT, factors for the success of the organization.
AND THUS ESTABLISH A LASTING This is why every year the KTM GROUP
LOYALTY TO THE BRAND. makes huge investments in developing,
training and improving its dealers, its sites
The KTM GROUP demands top levels of and its services.
performance in all areas of business for the
KTM and Husqvarna Motorcycles brands. Every area of the business and customer
This applies in particular to the authorized touch point shows that the organization
dealers that are frequently the customer’s truly embraces its brand values: Whether
it is the sale of vehicles, clothing and

028 KTM GROUP

 30 INTERNATIONAL SALES SUBSIDIARIES

HUSQVARNA MOTORCYCLES STORE, PHOTO: SCHEDL R.

accessories, premium performance parts allowing the appropriate products and independent dealers and importers for the
or original spare parts. For the KTM GROUP, customer experience to be provided by the two brands around the world.
the focus is always on providing the best KTM and Husqvarna Motorcycles dealers.
support to the customers of the two brands This ensures that all KTM and Husqvarna
and the customer satisfaction that results Through 30 sales subsidiaries and three Motorcycles dealers have one valuable
from this – both in the workshops and joint ventures in New Zealand, Dubai and thing in common: Each and every one of
showrooms and with the dealers that offer the Philippines the employees of the them embraces the spirit of these brands –
advice and information in response to KTM GROUP look after more than 2,500 at all times.
the many questions about “experiencing
motorcycling”. An in-depth understanding
of the sales and marketing process
is absolutely key here – the KTM GROUP
provides continuous further training to give
its staff an “inside-out” perspective.

Commercial business development places

the point of sale at the center of the brand
experience. The KTM GROUP remains
in close contact with all dealers via the
KTM and Husqvarna subsidiaries. This keeps
the KTM GROUP close to the action and
KTM STORE
developments in the market while always

THE K TM GROUP AS A SALES ORGANIZATION 029

6 YEARS EXPERIENCE

KTM
GOALS AND
STRATEGY
KTM HAS GAINED MORE THAN 60 YEARS With a strong presence as an offroad
OF EXPERTISE IN THE TWO-WHEELED motorcycle producer, KTM has progressed
WORLD SINCE THE FOUNDATION IN to become one of the world’s most inno-
1953 AND IS CONVINCED TO MAINTAIN vative manufacturers of street motorcycles
ITS MARKET LEADERSHIP SITUATION and also premium sports cars. Today,
IN EUROPE. GROWING AND DEVELOPING driven by the passion of its employees,
ITS DEALER NETWORK WHILST ENHANC- KTM’s goal is to become the biggest manu-
ING THE RETAIL EXPERIENCE FOR facturer of sport motorcycles worldwide.
CUSTOMERS AND BUILDING A LOYAL
COMMUNITY REMAIN HIGH PRIORITIES In March 2011, KTM began with its launch
FOR THE BRAND. of a complete naked range, which was After the launch of the travel enduro
implemented successfully between 2011 KTM 1190 ADVENTURE and R models in
KTM is “READY TO RACE” in all they do, and 2013, and which will be further 2013, and the further expansion in 2015
with a distinct brand personality and bold strengthened by the upcoming addition of the ADVENTURE range to include
presence in global motorcycle competition. of the future parallel twin KTM 790 DUKE the KTM 1290 SUPER ADVENTURE and
The core values of ADVENTURE, PURITY, model. In 2015, the introduction of the
PERFORMANCE and EXTREME, guide KTM 1290 SUPER DUKE GT at EICMA
all activities and allow for an authentic inter- signaled a decisive move into the sports-
pretation of READY TO RACE across all tourer segment.
segments, markets and areas of business.
The KTM 200 and 390 DUKE models
are important steps towards capitalizing
on the brand and maximizing business
opportunities. With these and the KTM RC
models, which were launched in 2014
and produced in collaboration with Bajaj,
the street product range now offers a wide
KTM 790 DUKE PROTOTYPE
variety to young buyers.

030 KTM GROUP

 KTM 1290 SUPER ADVENTURE R, PHOTO: CHYTKA M.

KTM 1050 ADVENTURE models, a element of the corporate strategy involves the performance edge, while developing
striking new look adorned the revised range taking the successful technology that its distribution network through new strategic
models unveiled in 2016 for the 2017 originates from racing and directly incor- regional partnerships, and optimizing –
model year. The ADVENTURE range porating it into serial products. With racing all while investing heavily in the global brand
brings a new higher-performing dynamic as the promise, KTM has established many and continuing to build it up.
to the segment, with a wide array of racing programs that identify talent and
options to suit any customer’s needs with offer a path to the highest echelon of KTM is a leader in various segments
the KTM 1090 ADVENTURE and R motorsport racing. This signals a long-term within the world of READY TO RACE, so
to KTM 1290 SUPER ADVENTURE R, S commitment to establish a solid foothold if you race to win, then there’s no other
and T, ensuring every bike in KTM’s arsenal in all the areas of motorsport that the choice – it has to be KTM.
is 100% READY TO RACE. KTM brand competes in. Winning is
the culture of the company and flows into
The successful involvement in racing all the products and everything else they do.
over the world further strengthens the An essential element of KTM’s long-term
KTM brand and consolidates its leading growth-planning strategy is to further extend
market position. By winning, market visibility the product range, opening up new niches
and credibility are created and stays true and markets. Accordingly, the strategy
to the company’s racing DNA. A central focuses on research & development to keep

K TM: GOALS AND STR ATEGY 0 31

11 YEARS EXPERIENCE

HUSQVARNA MOTORCYCLES
GOALS AND
STRATEGY
HUSQVARNA MOTORCYCLES’ VISION year within the long-term company’s history,
IS TO STAY TRUE TO ITS BRAND PROMISE improving on further record-breaking years
OF “PIONEERING SINCE 1903” AND in 2015 and 2016 after introducing new
THROUGH THIS BRAND PROMISE, DEVELOP street-legal models. The few short years of
A FULL RANGE MOTORCYCLE BRAND THAT the new brand that re-unites Husaberg
ELEVATES HUSQVARNA TO THE THIRD and Husqvarna Motorcycles once more, has
LARGEST EUROPEAN MANUFACTURER reinforced the proven past heritage of the
OVER THE NEXT FEW YEARS. PIONEERING brand value. This revealed a
new PIONEERING focus that is less nostalgic
Since Husqvarna Motorcycles joined the and retrospective than before, but instead
KTM GROUP in 2013, it has achieved focuses on innovation and progression.
exceptional success in a very short time,
with impressive annual growth each The brand promise of “PIONEERING SINCE
subsequent year and is well on track to 1903” means that Husqvarna Motorcycles
realizing this vision. Boldly returning is committed to leading, innovating and
HUSQVARNA VITPILEN 401 AERO CONCEPT BIKE, PHOTO: SCHEDL R.
Husqvarna Motorcycles to the international pioneering. Never resting or blending into
spotlight and improving rider awareness the crowd, Husqvarna Motorcycles constantly
for the brand is a goal that will be achieved has its sights set on the distant horizon, make enjoyable riding experiences more
through broadening the dealer network seeking newer, better and more sensible accessible to existing motorcycle enthu-
and consequent improved global sales. ways to create authentic motorcycles that siasts, as well as exposing new users to the
deliver real and rewarding riding experi- exhilaration and liberation of discovering
After just one year in the KTM GROUP, ences. With the brand values of PREMIUM, the motorcycle lifestyle.
Husqvarna Motorcycles achieved record PIONEERING and SWEDISH ROOTS
offroad model sales numbers for their as the brand’s guiding compass, Husqvarna A strong focus on an ongoing commitment
114-year long history in 2014, as the best is proud to keep blazing new trails and to innovation and progression has led

0 32 KTM GROUP
 HUSQVARNA 701 ENDURO, PHOTO: BARBANTI A.

to a resurgence of Husqvarna Motorcycles’ The brand’s renewed competitive success VITPILEN 701 in 2015 and the first
presence in street motorcycling. The reflects its victorious heritage, as Husqvarna production bikes in this range in 2016,
credibility of being a pioneering brand, com- Motorcycles now sets its sights on alongside a new concept bike – the
bined with a very accessible, understated ambitious new goals far beyond the tradi- VITPILEN 401 AERO. The response and
and approachable brand personality, tional boundaries of competition. interest shown in this new range to date
allows Husqvarna Motorcycles to open up has been substantial.
and tap into a much wider and more main- FUTURE VISION:
stream target audience. The upcoming A BOLD RETURN TO THE STREET! A strong commitment to continuing the
VITPILEN and SVARTPILEN “Real Street” In line with Husqvarna Motorcycle’s long tradition of progressive thinking and
range is a bold first step in this entirely “PIONEERING SINCE 1903” claim, the pioneering actions will be reflected
new direction. future-focussed vision keeps the brand’s as much in the creation of leading motor-
sights set firmly ahead. A bold re-entry cycles as it will in outstanding ways of
To meet the growing demand for the brand into the street motorcycling segment identifying, satisfying and engaging with
globally, Husqvarna Motorcycles has will continue the tradition of progressive and the rapidly-expanding customer base. As a
a strong focus on the development of its pioneering motorcycle development. first step, the upcoming segment-redefining
dealer network. Despite a strong initial VITPILEN and SVARTPILEN production
surge for Husqvarna Motorcycles in the At the annual EICMA bike show in models will set Husqvarna Motorcycles
offroad market globally, there are still many Milan, Husqvarna Motorcycles revealed the on a trajectory to becoming Europe’s third-
untapped markets, areas and customer VITPILEN 401 and SVARTPILEN 401 largest motorcycle producer.
segments that will be accessed through concept bikes in 2014, followed up by the
this ever-expanding global network.

HUSQVARNA: GOALS AND STR ATEGY 033

 EMPLOYEES
WORLD CHAMPION
SEEKS NEW TALENT

AS OF DECEMBER 31, 2016, THE THE REGION’S LARGEST

GLOBAL NUMBER OF EMPLOYEES STOOD TRAINING CENTER
AT 2,931, UP 416 ON THE PREVIOUS Training apprentices is an important aspect
YEAR. THIS REPRESENTS AN INCREASE of our employment strategy. KTM AG now
OF 17%. AS OF DECEMBER 31, 2016, has more vocational training places than
THERE WERE 440 EMPLOYEES WORKING any other employer in the Braunau region.
OVERSEAS. THE PROPORTION OF WOMEN As of December 31, 2016, we employed
WAS ALMOST UNCHANGED RELATIVE 110 apprentices (previous year: 94), who were
TO THE PREVIOUS YEAR AT 22%. training in 11 vocational training programs.
Training to become an “operations
logistician” has been newly added in 2016.

034 KTM GROUP

 2,931
It is a central aim of the company to
EMPLOYEES WORLDWIDE
AS OF DECEMBER 31, 2016

Our own training workshop forms a corner-

continue to employ apprentices when they stone of apprentice workshop. This is
have completed their training. In 2016 where the appropriate basic training for all
all 21 employees who had completed training technical professions and specialist training
were given permanent jobs in one of our is delivered. In addition, the apprentices
departments. This satisfies the company’s rotate through different departments
requirement for specialized staff and at where they receive training. Great store is
the same time helps enable young people to placed on ensuring that staff training
have a good start to their professional life. the apprentices have the right technical and
teaching qualifications and social skills.
In 2016, KTM AG successfully passed the
recertification for the INEO award of As well as their technical training,
the Upper Austrian Economic Chamber for the personal development of apprentices
another three years. In addition, the company is important to the company. Social skills
came 3rd in offering the best apprentices training/workshops therefore take place,
for the “Place to Perform” certificate. as well as feedback sessions.

SOCIAL COMMITMENT
To help our employees return to the work-
place after starting a family, children aged
between one and three receive educational
care in the KTM crèche in groups of
NEEDS-BASED FURTHER TRAINING Our managers make use of “pit stops” not more than nine children. In this way
FOR QUALITATIVE GROWTH in module form to reflect on issues such the company makes an important contribu-
Our performance is assisted by further as leadership, employee and team tion to reconciling work and family.
training based on needs and specific target development, to acquire new inputs and
groups. For this purpose, training courses tools for expanding their scope of action. As a voluntary additional social benefit,
have been offered in the categories of the company has taken out an endow-
languages, personal development, specialist Annual employee reviews are conducted ment and whole life insurance policy with
training, management and team develop- to form the basis for performance-oriented a term of 15 years for all employees.
ment in different learning formats. cooperation.

EMPLOYEES 0 35
 270
MORE THAN

WORLD CHAMPIONCHIP TITLES

271 
 
   

SUPERCROSS 450




  
 
MOTOCROSS MX2
 

  21
DAKAR RALLY
   

MOTO3




 
 21
ENDURO WOMEN MOTOCROSS 85 SUPERENDURO JUNIOR MOTOCROSS 125
  
 
  
 
  

036 KTM GROUP

KTM MOTORSPORT RED BULL KTM AJO TEAM BRAD BINDER

READY TO RACE
KTM RC 250 GP PARC FERMÉ ARAGÓN 2016

2016 WORLD CHAMPION TITLES

MOTOGP
WHEN KTM WAS RELAUNCHED factory accelerated its commitment to Moto3: Brad Binder (RSA)

IN THE EARLY 1990S, THE MOTTO the prestigious Supercross in the USA in the
“READY TO RACE” EMBODIED THE 2015 season, the American Ryan Dungey ENDURO
NEW SELF-CONFIDENCE OF THE BRAND. won the Supercross World Championship SuperEnduro Junior: Manuel Lettenbichler (GER)

CLEAR OBJECTIVE: EVERY MOTORCYCLE title for the Austrian manufacturer on his Enduro Woman: Laia Sanz (ESP)

ROLLING OFF THE PRODUCTION KTM 450 SX-F, secured double victory
LINE OF THE MATTIGHOFEN WORKS by winning the US Pro Motocross Champion- MOTOCROSS
MUST BE READY FOR THE RACETRACK ship and thus marked another milestone 85 ccm: Rene Hofer (AUT)

RIGHT FROM THE START. in the company’s history. In 2016 the 125 ccm: Jago Geerts (BEL)

Red Bull KTM Factory Racing Team in the MX2: Jeffrey Herlings (NED)

The READY TO RACE philosophy is still USA successfully defended its title in the 450 Supercross: Ryan Dungey (USA)

the creed that drives the KTM Motorsport Supercross Series. These incredible victories
division which, with its many factory were an ideal platform for both the brand 2016 MANUFACTURER TITLES
teams, works all over the world on the very and its bikes, catapulting KTM into the
highest level, racking up World Champion- international limelight. But that was not all. Moto3, Supercross, MX2, SuperEnduro,

ship titles non-stop. Every employee Jeffrey Herlings claimed another MX2 title Cross-Country Rallies

working in the KTM Motorsport division is for KTM with his impressive performances.
fully committed to racing. They are 100% But KTM has also managed to firmly 2016 OTHER VICTORIES
committed to the task of achieving wins establish itself in road racing too. In October
for KTM and, as a team, work together just 2016, Brad Binder became Moto3 world RALLY
as well as the smoothly running racing champion with four races to spare. And it Rallye Dakar: Toby Price (AUS)

motorcycles they build and service. The will not be long before the next stage: Finke Desert Race: Toby Price (AUS)

KTM factory riders likewise give their best In 2017 KTM will be entering the Moto2
on the racetrack, not just for themselves with a chassis developed in cooperation EXTREME ENDURO
and their team but for everyone at KTM. with WP, and will be entering the MotoGP Alès Trêm: Jonny Walker (GBR)

with its own factory team and a motorcycle Red Bull Minas Riders: Alfredo Gomez (ESP)

With more than 270 world championship developed entirely in Mattighofen – the Extreme XL Lagares: Alfredo Gomez (ESP)

titles, KTM is the world’s most success- KTM RC16. The successfully tested The Wall: Alfredo Gomez (ESP)

ful motorsport brand. At the beginning of KTM MotoGP bike will be ridden in its first Red Bull 111 Megawatt: Jonny Walker (GBR)

the year, Toby Price managed to secure season by the Briton Bradley Smith and Hixpania Hard Enduro: Alfredo Gomez (ESP)

KTM’s 15th Dakar victory in a row. After the the Spaniard Pol Espargaró.

KTM MOTORSPORT 0 37
 PABLO QUINTANILLA, MOROCCO 2016

HUSQVARNA MOTORCYCLES REMAIN Establishing the global Rockstar Energy

COMMITTED TO COMPETITION. EVEN WITH Husqvarna Factory Racing team at the start
THE BOLD MOVE INTO THE STREET of 2016, Husqvarna Motorcycles further
MOTORCYCLING SECTOR, THE LAST TWO strengthened their presence in all offroad
SEASONS WERE STILL ENORMOUSLY disciplines worldwide.
SUCCESSFUL FOR HUSQVARNA MOTORCY-
CLES IN OFFROAD RACING. SPEARHEADING Making a strong start to the year Colton
THE BRAND’S RETURN TO AMA RACING, Haaker earned Husqvarna their first title
JASON ANDERSON CLAIMED A STUNNING of 2016 by claiming the FIM SuperEnduro
SECOND IN HUSQVARNA MOTORCYCLES’ World Championship. Returning to home
FIRST SUPERCROSS EVENT IN 2015, soil, Haaker went on to wrap up an incredible
BEFORE GIVING THE BRAND THEIR FIRST season by securing the AMA EnduroCross
SUPERCROSS VICTORIES IN 2016. Championship at the end of the eight-round
2016 series.

038 KTM GROUP

 COLTON HAAKER, MADRID 2016

HUSQVARNA MOTORSPORT
2016 WORLD CHAMPIONS

SUCCESSFUL
FIM CROSS-COUNTRY RALLIES
WORLD CHAMPIONSHIP
Pablo Quintanilla (CHL)

OFFROAD SEASON FIM SUPERENDURO

WORLD CHAMPIONSHIP
Colton Haaker (USA)

Leading Husqvarna Motorcycles’ five-rider Jarvis was on winning form at some of the AMA ENDUROCROSS CHAMPIONSHIP
US offroad team in GNCC series, season’s most prestigious events, including Colton Haaker (USA)

Josh Strang claimed second in the 2016 Erzberg, Romaniacs, GetzenRodeo,

championship standings. Battling at the top Ukupacha Extreme and the Roof of Africa. 2016 MOTORSPORT RESULTS
of the ultra-competitive FIM Motocross
World Championship Max Nagl once again Dakar Rally 2016 signaled the start of an EXTREME ENDURO
led Husqvarna’s assault of the coveted exciting chapter in the new era of Husqvarna Graham Jarvis (GBR), winner at:

MXGP series finishing third overall in the Motorcycles, with Pablo Quintanilla ending The Tough One, Red Bull Romaniacs, Red Bull

premiere class for 2016. the grueling 13-day event third overall. Hare Scramble, Battle of Vikings, GetzenRodeo,

Leading the rally team’s assault on the 2016 Ukupacha Extreme, Roof of Africa

Husqvarna’s success in the Enduro World FIM Cross-Country Rallies World Champion-
Championship continued throughout 2016, ship, the Chilean gave Husqvarna their first RALLYE DAKAR
with FE 450 mounted Mathias Bellino rally world title. Pablo Quintanilla (CHL), third place

wrapping up his season as runner-up in the

Enduro 2 World Championship standings. Motorsport is an integral part of Husqvarna’s FIM ENDURO WORLD CHAMPIONSHIP
Further strong results came in the Enduro 114 year history, and will continue to be Enduro 1 – Daniel McCanney (GBR), third place

Junior category, where Josep Garcia finished one of the driving factors in the development Enduro 1 – Pascal Rauchenecker (AUT), fifth place

the season in third place. Meanwhile, of class-leading production motorcycles. Enduro 2 – Mathias Bellino (FRA), second place

Danny McCanney finished third overall Husqvarna Motorcycles remains resolute Enduro Junioren – Josep Garcia (ESP), third place

in the Enduro 1 class, with rookie Pascal about achieving success at the highest levels
Rauchenecker claimed fifth. of two-wheeled motorsport. FIM MOTOCROSS
WORLD CHAMPIONSHIP
Establishing Husqvarna as a dominant Max Nagl (GER), third place

force in extreme enduro racing, Rockstar

Energy Husqvarna Factory Racing’s Graham US OFF-ROAD GNCC CHAMPIONSHIP
Josh Strang (AUS), second place

HUSQVARNA MOTORSPORT 0 39
KTM 250 DUKE, PHOTO: SCHEDL R.
» AS A MANUFACTURER OF PREMIUM PRODUCTS, » THE GLOBAL ASSEMBLY LOCATIONS are
we at KTM GROUP have set ourselves the goal professionally served by a team of high-quality
of manufacturing products that are innovative, QM staff. They make sure that the know-how
in line with market requirements, safe, and, most for manufacturing in these locations is passed on
importantly, of high quality. The entire process and ensure the quality of the vehicles produced
of producing a vehicle – from product idea there by implementing a KTM-compliant quality
to market analysis to design studies, design and management system.
development, cooperation with suppliers, the
procurement of components for series production, » AS KEY COMPONENTS OF THE MOTORCYCLES,
parts production, the assembly of engine and the engines are developed and manufactured by
vehicle, right to packing and dispatch – is mapped KTM GROUP and guarantee the identity of motor-
by a process-oriented quality management cycles with the KTM and Husqvarna Motorcycles
system and controlled using the KTM process brands.
management system.
» THE IMPRESSIVE TRACK RECORD IN RACING is the
» WE ACHIEVE HIGH PRODUCT QUALITY due to best evidence of KTM’s and Husqvarna Motorcycles’
production-oriented design, the use of analytical high product quality and high level of engineering
and statistical calculation methods, comprehen- competence.
sive checking and testing, compliance with
relevant approval rules, by a focus on process
quality and by targeted communication as well as
by implementing training measures at KTM and
at the suppliers.
 RESEARCH & DEVELOPMENT

KTM DEVELOPMENT DEPARTMENT

AS A PREMIUM MANUFACTURER IN The KTM GROUP places a high value

A NICHE SEGMENT, WE PUT A SPECIAL on the early recognition of motorcycle trends,
FOCUS ON THE AREA OF RESEARCH on research and development regarding
AND DEVELOPMENT. INNOVATIVE engineering and functionality and on imple-
PRODUCTS AND CONSISTENT IMPLEMEN- menting customer wishes so as to achieve
TATION OF TECHNICAL INNOVATIONS innovative product development close to
ENABLE US TO MEET THE HIGH the market. In this context, the KTM GROUP
EXPECTATIONS OF OUR CUSTOMERS not only operates in its original core markets
AND OPEN UP NEW MARKETS IN A but is also developing new products in
SUSTAINABLE WAY. previously unexplored segments and niches

0 42 KTM GROUP
 487 EMPLOYEES (ANNUAL AVERAGE)
IN RESEARCH & DEVELOPMENT

of the market as soon as it identifies them touring segment. The model, which is In the 2016 financial year we employed
and they become usable for the KTM and equipped with a series of innovative safety an average of 487 people (28% more than
Husqvarna Motorcycles brands. systems and new kinds of comfort the previous year and 18% of the total
features, managed to secure top marks in workforce) in our Research and Develop-
The technologies, design methods and highly regarded comparative tests. ment department. In operating terms,
development processes we use undergo disregarding the effects of capitalizing and
constant development, and our products’ Another key project was the further develop- amortizing development expenses, 8.1%
technical and functional standards are con- ment of the KTM ADVENTURE range of of total revenue was invested in research
tinuously improved. As a rule, new develop- models: As well as revising numerous details, and development.
ments in the offroad segment are first these models are noted in particular for
trialled in motorsport, with the experience their completely redeveloped full LED head-
gained forming a basis for the subsequent lamp unit and the new TFT dashboard,
transition to serial production. which enables the rider to be linked up to
the motorcycle for the first time. Alongside
Following this development policy, the this, the development of new Husqvarna
first vehicles in the newly developed KTM Motorcycles models in the road segment
and Husqvarna Enduro-generations under- continued apace. The vehicles, which were
went their final endurance tests in our presented during the EICMA fair in November
global motorsport activities. The fact that 2016, polarize opinion in particular due
our vehicles are “READY TO RACE” to their clear design approaches focusing
in every way is confirmed by many of our on the bare essentials.
customers deploying their motorcycles in
extreme conditions all around the globe – The development of the KTM mid-size
whether on the road or off the beaten track. models, which are equipped with an inline
2-cylinder engine for the first time, was
The financial year just ended saw a multi- consistently pushed forward during the last
tude of different projects in the offroad year of research. Following the completion
and street segments. Above all there was of the fundamental research and develop-
the transfer to series production of the ment work on the engine and chassis,
KTM 1290 SUPERDUKE GT, with which a first ridable prototype was then presented
KTM has succeeded in redefining the sports to the international trade audience.

RESEARCH & DEVELOPMENT 043

PHOTO: CAMPELLI M.
RESEARCH & DEVELOPMENT
DURING THE 2016 FINANCIAL YEAR, NUMEROUS R&D PROJECTS WERE TAKEN
FORWARD AT VARIOUS STAGES FROM CONCEPT DEVELOPMENT TO THE START OF
SERIES PRODUCTION AND SUCCESSFULLY COMPLETED:

» Start of series production of the new has been further improved by integrating in the naked and touring segments. A
KTM and Husqvarna Motorcycles Enduro- the latest technologies, such as the prototype of the KTM 790 DUKE naked bike
generations, which are again setting the 6.5” TFT display including Bluetooth and was unveiled at the EICMA International
standard in their class thanks to their equip- USB interfaces and the full LED headlight Motorcycle Show in Milan in November 2016.
ment, the low weight that derives from the as well as a series of safety systems and
use of the latest development technologies a semi-active chassis. » Concept development for new drive
and the handling benefit under extreme systems in the area of electrical mobility
conditions that accrues as a result. » Series development of new KTM DUKE- and consistent evolution of energy storage
models in the entry-level segment. The and battery management systems for
» Start of series production of the new agile naked bikes in the 125 to 390 ccm motorcycle applications. Development of
KTM 1290 SUPERDUKE GT in the sports range have been fundamentally recon- a model equipped with an alternative
touring segment. Thanks to a multitude figured. Emission levels have been further drivetrain system to meet the requirements
of innovative safety features, such as the reduced in accordance with the EU IV of modern mobility scenarios.
semi-active chassis or the inclination-depen- standard – and the ridability of the single-
dent motorcycle stability control “MSC” cylinder engine has been further enhanced » Concept development for new connec-
and the LED cornering light, along with the with Ride-by-Wire. Just like other KTM tivity systems for the digital networking
KTM 1290 SUPER ADVENTURE it models, they now also offer a wealth of of the rider and motorcycle. In addition to
represents the pinnacle of technology in connectivity functions. safety-related equipment such as auto-
the KTM range of models. mated emergency call systems or interlinked
» Series development of the new Husqvarna vehicles for a sustainable reduction
» Start of series production of the VITPILEN and SVARTPILEN models. As in accidents, this also comprises enhanced
KTM 690 DUKE R. In addition to the com- well as the high-volume 701 ENDURO comfort and infotainment functions for
prehensively revised 690 ccm single- and 701 SUPERMOTO, the VITPILEN and the rider.
cylinder unit, whose smoothness has been SVARTPILEN models open the next chapter
improved still further by using a second in the Husqvarna brand strategy. With » Development of concepts for new
balancer shaft, the model now also features their progressive, clear design, they reinter- approaches in relation to EMS systems and
advanced safety features and infotain- pret the retro trend and appeal to a wider exhaust gas purification to ensure
ment functions on a newly developed TFT range of customers. that the KTM and Husqvarna model ranges
instrument panel. comply with current (EU IV) and future
» Development of a new motorcycle plat- emissions regulations (EU V). These include
» Series development of the fundamentally form based on a revolutionary 2-cylinder both a reduction in fuel consumption and
revised KTM ADVENTURE model range. engine design, which will make a substantial a reduction in exhaust emissions.
The successful ADVENTURE touring concept contribution to opening up new markets

RESEARCH & DEVELOPMENT 0 45

 HIGHLY QUALIFIED ENGINEERS
7
KTM TECHNOLOGIES

KTM TECHNOLOGIES IS AN INNOVATIVE KTM AG’s concept, series and motorsport

ENGINEERING COMPANY AND A STRONG developments. The main areas of focus in
PARTNER FOR DEVELOPMENT AND the working relationship are developing
TECHNICAL CONSULTANCY SERVICES plastic components, developing electrics/
WITH REGISTERED OFFICE IN ANIF NEAR electronics and developing product concepts.
SALZBURG. IT IS OWNED BY KTM AG
(74% STAKE) AND KISKA HOLDING GMBH Right from the outset, the working relation-
(26% STAKE). THE COMPANY’S MAIN ship has also extended to further develop-
AREAS OF FOCUS ARE ON DEVELOPING ment of the X-BOW CFRP super sports car, A major strength offering great promise
CONCEPTS, PRODUCTS AND TECH- recently in particular the GT4 racing car. for the future of KTM Technologies is the
NOLOGY, AND TECHNICAL CONSULTANCY. highly efficient simulation department,
The company is frequently consulted as a which enables products to be designed and
Since the company was founded in 2008, creative driver of innovation and technology. assessed at an early stage. This allows
it has developed very dynamically and This is based on its extensive automotive
with great commercial success. The key to knowledge and expertise in lightweight con-
this are the highly skilled engineers, who struction, as well as utilizing the very latest
now number almost 70 and have a broad development methods and processes.
range of expertise. In addition to KTM AG, Solutions for the mobility of the future have
the company’s customers today include been a key focal point since the company
prestigious vehicle manufacturers and was founded. These include developing
well-known companies from various sectors creative product concepts: from the highly
such as sport, mechanical engineering, integrated e-bike and city vehicles of
medical technology, along with smart con- the future, through to sports cars made from
sumer electronics. multiple materials. KTM Technologies com-
bines the momentum and experience gained
With its broad knowledge of different from different industries to create new
specialist areas, KTM Technologies is a products, and generates great added value
closely integrated development partner for through the transfer of technology.

046 KTM GROUP

 KTM X-BOW RR FACELIFT RACETRACK, PHOTO: KERNASENKO J.

development times to be reduced, risks to is on developing and qualifying methods oped very effectively from one single
be minimized and product characteristics and process solutions for the industrial use source at the Anif site. The combination
to be enhanced. This has major advantages of carbon-composite and hybrid material of brand, customer, market, design and
particularly for the virtual design and solutions. technology guarantees exceptional products
development of new and innovative concepts. with great potential to be successful.
In addition to static structural design and In March 2016, KTM Technologies was
optimization, the most important areas presented with the JEC Group 2016 KTM Technologies is a highly capable
of expertise include crash simulation as well Innovation Award in the RTM category for development partner, ideas powerhouse
as fluid dynamics simulation (aerodynamics/ “THE CAVUS PROJECT”. As part of CAVUS, and technology driver, delivering solutions
thermodynamics). In addition, there are KTM Technologies teamed up with project with a real benefit. It is also a catalyst
various possible process simulation options partners to present an innovative core for future-oriented products and solutions!
for different manufacturing processes as technology for the industrial manufacture
part of industrialization. of complex CFRP hollow components
at the world’s most important event for
In lightweight technology development, composites.
KTM Technologies guarantees a close link
between product conception and a design It worked with its affiliated company KISKA
that suits the material or manufacturing to establish an integrated design/develop-
process in its own technical facility. ment process which enables functional
The main focus in technology development and innovative product concepts to be devel-

KTM TECHNOLOGIES 0 47
KTM 1090 ADVENTURE, PHOTO: SCHEDL R.
INVESTOR
RELATIONS
KTM GROUP endeavors to practice a policy of transparent,
swift and comprehensive information to and communication
with capital market participants as well as the general
public. At regular intervals information is therefore provided
on the economic position as well as on the future develop-
ment of KTM GROUP.
INVESTOR RELATIONS
IT IS THE FIRM BELIEF OF THE INVESTOR RELATIONS TEAM AT KTM AG THAT CONFIDENCE
IN THE COMPANY AND IN THE PRODUCTS CAN ONLY BE ENSURED BY A POLICY OF TRANSPARENT,
SWIFT AND COMPREHENSIVE INFORMATION AND COMMUNICATION. ACCORDINGLY, WE
ENDEAVOR TO PROVIDE INVESTORS, ANALYSTS AND THE GENERAL PUBLIC WITH COMPREHENSIVE
INSIGHTS INTO THE CURRENT ECONOMIC POSITION AS WELL AS THE FUTURE DEVELOPMENT.

On our website www.ktmgroup.com a comprehensive pool of

information on the company and on our products is offered to all
THE KTM SHARE
who are interested. Up to June 2016, 10,845,000 shares of stock, and thus the
entire share capital of KTM AG, were admitted to trading on the
Vienna Stock Exchange. The KTM share (ISIN: AT0000645403)

THE KTM BOND was listed until June 2016 in the Third Market (MTF) of the
Vienna Stock Exchange.
In April 2012, the EUR 85 million bond (2012 to 2017) of KTM AG
was successfully placed. The initial offering price was 101.389%. DELISTING IN THE 2016 FINANCIAL YEAR
The bond is listed on the Second Regulated Market of the Vienna On March 29, 2016, K KraftFahrZeug Holding GmbH (previously:
Stock Exchange and was issued with a fixed coupon paying interest CROSS KraftFahrZeug Holding GmbH) announced that it was
at 4.375%. Interest is payable semi-annually as of October 24 issuing a public acquisition offer to all free float shareholders of
and April 24; the first payment of interest was made on October 24, KTM AG as an accompanying measure for withdrawing the shares
2012. On the last trading day (12/30/2016), the closing price was of KTM AG from the Third Market (MTF) of the Vienna Stock
EUR 102.20 (previous year: EUR 104.25). Exchange. The offer price was EUR 122.50 per share. At the end
of June 24, 2016, the share was withdrawn from the Third Market
of the Vienna Stock Exchange.
INFORMATION ON THE KTM BOND IN SUMMARY
On July 20, 2016, the extraordinary general meeting of KTM AG
ISIN AT0000A0UJP7
resolved to convert the previous bearer shares into registered
Market Vienna Stock Exchange,
Second Regulated Market shares. This amendment to the articles of association was recorded
Issue volume EUR 85,000,000 in the commercial register in September.
Denomination EUR 500
Maturity 2012 to 2017 The Executive Board of KTM AG is proposing to the Annual
Coupon 4.375%
General Meeting to pay out a dividend of EUR 2.00 per share
Initial offering price 101.389%
for the 2016 financial year.

Further information can be found

on the company’s website at
www.ktmgroup.com/en/investor-relations.

05 0 KTM GROUP
 KTM HEADQUARTER

OWNERSHIP STRUCTURE SHAREHOLDER STRUCTURE OF KTM AG

By voting rights (share capital) as at December 31, 2016
With KTM Industries AG (previously: CROSS Industries AG),
which directly and indirectly via K KraftFahrZeug Holding GmbH 0.34%
(previously: CROSS KraftFahrZeug Holding GmbH) holds 51.67% Others

of the voting rights, and with Bajaj Auto Ltd. (via Bajaj Auto
International Holdings Ltd.), which holds 47.99% of the voting 10,845,000 51.67%
rights, KTM AG has two stable core shareholders. The share of 47.99% shares KTM Industries AG
other small shareholders is below one percent. Bajaj Auto
International
Holdings B.V.

INVESTOR REL ATIONS 051

HUSQVARNA TC 250, PHOTO: SCHEDL R.
CONSOLIDATED
MANAGEMENT REPORT
054 Course of business and NON-FINANCIAL PERFORMANCE
financial position INDICATORS 061
061 Employees
SIGNIFICANT EVENTS DURING THE 062 Research and development
FINANCIAL YEAR 054 063 Racing
056 Market development 064 Financial instruments
057 Development of revenue by region 064 Quality
057 Sales by region 065 Risk report
057 Development of revenue 065 Sustainability
by product group 067 Disclosures pursuant
058 Sales by product group to section 243a UGB
058 Production by product group 068 Outlook

FINANCIAL PERFORMANCE
INDICATORS 059
059 Performance analysis
059 Analysis of the
statement of financial position
061 Liquidity analysis
061 Investments
CONSOLIDATED
MANAGEMENT REPORT
AS AT DECEMBER 31, 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

1. COURSE OF BUSINESS AND FINANCIAL POSITION

According to the January 2017 assessment of the International Monetary Fund (IMF), the global economy is set to experience a slight recovery.
The IMF expects a 3.4% rise in global economic output in 2017, with growth of 1.9% in 2017 and 2.0% in 2018 being forecast for advanced
economies.

Expansion of only 1.6% is forecast for the Eurozone in 2017 and 2018. Growth of 2.3% is anticipated in the U.S. The IMF forecasts global
growth of 3.6% in 2018.

Economic output for emerging markets and developing economies is forecast to grow by 4.5% in 2017 and 4.8% in 2018. The biggest
growth is expected in India, which is forecast to grow by 7.2% in 2017 and by 7.7% in 2018. Growth of 4.9% is expected in the ASEAN
countries in 2017.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The financial year 2016 goes down as another record year in KTM’s history.

By consistently implementing the global product strategy and expanding into all continents, KTM yet again successfully increased both
revenue and sales figures, thereby also achieving new record levels in 2016. KTM has been among the world’s fastest growing motorcycle
brands for a number of years.

In 2016, KTM increased revenue to EUR 1,141.8 million (up 11.7% compared to the prior year) and sales to 167,550 vehicles (up 10.1%
compared to the prior year).

Once sales of the KTM DUKE 200, KTM DUKE 390, KTM RC 200 and KTM RC 390, sold in India by our partner Bajaj, are included,
203,423 KTM and Husqvarna vehicles were sold worldwide in 2016.

As a result, revenues in 2016 again broke the EUR 1 billion barrier.

Investments
Work on the new EUR 12 million motorsport building in Munderfing began in 2015. The new building was completed and occupied during
the second quarter of 2016. The official opening was held with promoters, sponsors and team managers in early October.

Summer 2016 also saw the implementation of the new SAP ERP system at the Austrian sites.

05 4 CONSOLIDATED MANAGEMENT REPORT K TM AG

Total capital expenditure in 2016 was EUR 106 million. Of this, EUR 58 million related to development projects, EUR 10 million to other
intangible assets and EUR 39 million to property, plant and equipment.

Motorsport successes
Racing chalked up yet another victory in January, when Red Bull KTM factory rider Toby Price celebrated his first victory in the Dakar Rally.
Pablo Quintanilla took third place for the Husqvarna team with his Husqvarna FR 450.

After a successful 2015, Ryan Dungey had another successful season in 2016, producing impressive performances on his KTM 450 SX-F
FACTORY EDITION. He secured first place in the 450 Supercross World Championship for himself and KTM.

The official team presentation took place in August 2016 at our home Grand Prix in the Red Bull Ring in Spielberg, and included the new
RC16 for our debut in the MotoGP series.

Brad Binder won the World Championship in the Moto3 series in autumn 2016.

New models
With unsurpassed performance and a first-class range of innovative rider assistance systems, KTM’s new KTM 1290 SUPER DUKE GT,
available from the first dealers since the end of March, sets new standards in the world of sports touring.

In May, KTM exhibited its new Sportminicycles for 2017. The new variants – KTM 50 SX, KTM 65 SX and KTM 85 SX – are aimed at up-and-
coming young racing talent. KTM also presented the new, fully redesigned Enduro generation for 2017.

In early October, KTM’s appearance at the INTERMOT international motorcycle show in Cologne featured the unveiling of four new models
for the KTM ADVENTURE range.

At the EICMA motorcycle show in Milan in November, it was all about KTM’s new Street models: the new DUKE models for 2017 are even
feistier than before. A glimpse of the future was also on show, in the form of the KTM 790 DUKE PROTOTYP. Husqvarna Motorcycles also
unveiled its new VITPILEN 401 and SVARTPILEN 401 models, as well as the new VITPILEN 401 AERO design study, setting out a vision for
the future of Husqvarna’s street models.

Finance
In June 2016, a EUR 120 million promissory note loan issue was succesfully placed, with maturities of between five to ten years.

Capital markets
On March 29, 2016, K KraftFahrZeug Holding GmbH (formerly: CROSS KraftFahrZeug Holding GmbH) announced its intention to make a
public takeover bid for all free-floating shares in KTM AG to accompany the withdrawal of KTM AG shares from the Third Market (MTF) of the
Vienna Stock Exchange. The offer price was EUR 122.50 per share. At the end of June 24, 2016, the shares were withdrawn from the Third
Market of the Vienna Stock Exchange.

On July 20, 2016, the Extraordinary General Meeting of KTM AG resolved to convert the previous bearer shares into registered shares. This
amendment to the articles of association was recorded in the Austrian commercial register in September.

COURSE OF BUSINESS AND FINANCIAL POSITION 055

Sales network
KTM and Bajaj have agreed to extend their joint sales network to Indonesia. This mainly affects the KTM DUKE and RC model families,
up to 400 ccm, which are developed and assembled under the alliance between KTM and Bajaj. Bajaj will sell the motorcycles through a chain
of dealers with the aim of achieving further growth in this growing, price-sensitive market.

New companies
In March, 26% of the Barcelona-based Cero Design Studio S.L. in Spain were acquired.

In addition, KTM acquired a 24% stake in July in WP AG, Munderfing, its main supplier of frames, exhausts, suspension struts and radiators.

In September, a further 84% of KTM Logistikzentrum GmbH (formerly Oberbank Mattigtal Immobilienleasing GmbH) were acquired.
The KTM Group now holds 94% of the company.

KTM Asia Motorcycle Manufacturing Inc., Philippines, was established as a joint venture with our Philippine partner Ayala Corporation.
KTM holds 34% of the company. A CKD (completely knocked down) assembly plant is being built in the Philippines in collaboration with KTM’s
partner and importer Ayala Corporation.

In the fourth quarter of 2016, KTM established KTM Sportmotorcycle MEA DMCC, a new 100%-owned sales subsidiary in Dubai.

In addition, WP Performance Sports GmbH was founded in November in Munderfing together with WP Performance Systems GmbH.
KTM owns 74% of the shares in this company.

2. MARKET DEVELOPMENT

The overall European market¹ was up 14.3% on the preceding year, with 565,655 vehicles registered. The increase was due mainly to the
growth in the largest European markets such as Germany (14.5%), Italy (21.6%), Spain (25.2%) and Sweden (41.8%).

Amid a difficult market environment, KTM brand vehicles succeeded in gaining additional market share in key markets such as Austria (up
by 7.0 percentage points from the prior year) and Sweden (up by 3.5 percentage points). KTM has a share of 9.8% of the total European market
(prior year: 8.4%).

Husqvarna Motorcycles’ market share grew in Sweden (up by 3.8 percentage points from the prior year), Italy (up 0.4 percentage points)
and Germany (up 0.4 percentage points). Husqvarna has a share of 1.6% of the total European market (prior year: 1.1%).

New registrations in the overall U.S. market² fell slightly to 406,826 vehicles in 2016 (prior year: 419,864 vehicles).

Despite this, KTM succeeded in increasing its share of the overall U.S. market to 5.5%, a rise of 0.3 percentage points compared to the
prior year.

Husqvarna increased its market share in the U.S. by 0.7 percentage points to 1.5%.

1
Motorcycles ≥ 120 ccm excluding Motocross, scooters and ATVs, including electric motorcycles
2
Motorcycles ≥ 120 ccm including Motocross, excluding scooters and ATVs, including electric motorcycles

05 6 CONSOLIDATED MANAGEMENT REPORT K TM AG

3. DEVELOPMENT OF REVENUE BY REGION

Group revenue increased by 11.7% from EUR 1,022.5 million in the prior year to EUR 1,141.8 million. Revenue in North America rose 8.6%
from the prior year to EUR 327.7 million; this corresponds to 28.7% of total revenue. In Europe, revenue was up 17.8% on the preceding
year, rising to EUR 603.6 million; Europe thus accounted for 52.9% of total revenue. Revenue in other countries rose by 1.0% compared to the
prior year, to EUR 210.5 million. The percentage of total revenue earned in the other countries was 18.4%.

Group revenue by region 2016 2015 Change

EURk % EURk %

Europe 603,562 52.9% 512,160 17.8%

North America 327,704 28.7% 301,767 8.6%
Other countries 210,553 18.4% 208,560 1.0%
Total 1,141,819 100.0% 1,022,487 11.7%

4. SALES BY REGION

Accounting for 22.2% of sales in the financial year 2016, the U.S. remained the largest single market for KTM. Europe accounted for 49.9%
of sales, with the strongest sales markets for the group as a whole being Germany (11.1%), France (6.3%), Australia (5.9%), the UK (5.7%),
Italy (5.2%) and Spain (4.2%). Overall, 69.6% of total sales were generated in the ten most important countries worldwide.

5. DEVELOPMENT OF REVENUE BY PRODUCT GROUP

Motorcycles including Sportminicycles and X-Bows represent 83.9% of total revenue, this percentage remaining essentially constant relative
to the prior year (83.8%). Revenue in the Offroad division increased 23.7% from the prior year, to EUR 526.1 million. Revenue in the Street
division, at EUR 381.9 million, showed little movement relative to the prior year (–2.2%). Revenue from Parts, Garments and Accessories
(KTM PowerWear and KTM PowerParts) and others rose by 11.3% relative to the prior year to EUR 184.0 million.

Group revenue by product group 2016 2015 Change

EURk % EURk %

Offroad sport motorcycles 526,082 46.1% 425,359 23.7%

Street sport motorcycles 381,983 33.5% 390,616 (2.2%)
Total full size 908,064 79.5% 815,975 11.3%

Sportminicycles 44,749 3.9% 37,951 17.9%

X-Bow 5,000 0.4% 3,214 55.5%
Parts, garments and accessories and others 184,006 16.1 % 165,346 11.3%
Total 1,141,819 100.0% 1,022,487 11.7%

COURSE OF BUSINESS AND FINANCIAL POSITION 057

6. SALES BY PRODUCT GROUP

In 2016 KTM sold 167,550 vehicles, comprising 167,467 motorcycles and Sportminicycles (up 10.1% on the preceding year) and
83 X-Bows (up 23.9%).

In the Offroad division, 86,769 motorcycles were sold (up 20.8% on the preceding year). Sales in the Enduro division (including Freeride)
rose by 16.4% to 57,249 motorcycles.

In the Street division, 66,201 motorcycles were sold (down 2.5% on the preceding year).

In the Sportminicycle division, sales went up 17.5% from the prior year, to 14,497 motorcycles.

Sales by product group 2016 2015 Change

Units % Units %

Offroad sport motorcycles 86,769 51.8% 71,854 20.8%

Street sport motorcycles 66,201 39.5% 67,917 (2.5%)
Total full size 152,970 91.3% 139,771 9.4%

Sportminicycles 14,497 8.7% 12,343 17.5%

Total motorcycles 167,467 100.0% 152,114 10.1%

X-Bow 83 0.0% 67 23.9%

Total 167,550 100.0% 152,181 10.1%

7. PRODUCTION BY PRODUCT GROUP

In the financial year 2016, 134,584 motorcycles were manufactured at the Mattighofen production site. Compared to the prior year, this
constitutes an increase of 19,212 units, or 16.7%. Taking into account the small-engined KTM models produced by our partner Bajaj Auto Ltd.
in India, 163,250 KTM vehicles (up 4.2%) were manufactured worldwide.

Production by product group 2016 2015 Change

Units % Units %

Offroad sport motorcycles 86,080 63.9% 72,519 18.7%

Street sport motorcycles 33,444 24.8% 30,877 8.3%
Total full size 119,524 88.8% 103,396 15.6%

Sportminicycles 15,060 11.2% 11,976 25.8%

Total motorcycles 134,584 100.0% 115,372 16.7%

X-Bow 55 0.0% 47 17.0%

Total 134,639 100.0% 115,419 16.7%

05 8 CONSOLIDATED MANAGEMENT REPORT K TM AG

FINANCIAL PERFORMANCE INDICATORS
8. PERFORMANCE ANALYSIS

Net revenues rose in 2016 by 11.7% to EUR 1,141.8 million (prior year: EUR 1,022.5 million). This was attributable to the increase in volumes.
Approximately 95% of revenues were earned outside Austria.

Production costs increased from the prior year, rising 10.0% to EUR 792.3 million; the gross margin increased by 1.1 percentage points
compared to the prior year and is now at 30.6%.

Overheads went up EUR 42.2 million from the prior year to EUR 249.2 million (+20.4%).

Expenses for selling and marketing rose EUR 18.1 million from the prior year (+17.6%). Net expenses on motorsport increased EUR 1.7 million
compared to the prior year, to EUR 31.4 million (+5.7%). This is attributable to the rise in sales volume as well as to wide-ranging motorsport
activities.

Expenses for infrastructure and administration went up EUR 6.8 million to EUR 43.6 million (+18.6%). The increase is the result of
substantial capital investment, especially in IT.

Operating development expenses in the financial year 2016 rose EUR 27.9 million from the prior year, to EUR 92.6 million (+43.1%). Taking
account of the capitalization of a higher amount of development costs totaling to EUR 32.0 million (a rise of 53.1% compared to the prior year)
as well as research subsidies of EUR 8.7 million (up 24.3% compared to the prior year) brought net development expenses to EUR 51.9 million
(prior year: EUR 40.9 million).

Other operating expenses of EUR 27.5 million chiefly comprise warranty costs, which increased to EUR 27.3 million, a rise of EUR 5.8 million
(+27.2%) from the prior year.

EBIT rose to EUR 102.8 million (prior year: EUR 95.1 million) owing to the increase in sales volume and revenues, a rise of EUR 7.7 million.

The effective tax rate dropped from 25.2% in 2015 to 23.6% at December 31, 2016.

The financial result dropped by EUR 1.2 million in 2016 compared to the prior year, to EUR –8.4 million. This was due mainly to the
translation of foreign currency bank deposits. Interest expenses were EUR 9.6 million (prior year: EUR 8.8 million). Interest income was
EUR 1.9 million (prior year: EUR 1.3 million).

9. BALANCE SHEET ANALYSIS

Balance sheet total rose by 24.4% compared to the prior year, to EUR 1,056.5 million.

Non-current assets went up EUR 66.6 million (+14.8%) to EUR 515.9 million (48.8% of total assets). Property, plant and equipment rose
by EUR 12.0 million due to capital expenditure on the motorsport building and on tooling. The EUR 35.8 million rise in intangible assets results
mainly from the capitalization of development costs with a net total of EUR 32.0 million and from investments in IT infrastructure, essentially
the implementation during the year of a new ERP system.

FINANCIAL PERFORMANCE INDICATORS 059

Trade receivables, including receivables from affiliated and associated companies, went up EUR 11.0 million to EUR 99.2 million (+12.5%)
due to the rise in sales volume. Taking into account the receivables sold last year and this year under the ABS program, there was a rise in
receivables by about EUR 10.0 million (+7.0%).

In the past financial year 2016, inventories rose EUR 3.3 million to EUR 164.5 million (+2.0%) due to the increase in sales volume.

Other current assets increased by EUR 8.0 million to EUR 30.0 million. They essentially comprise prepayments made on inventories, research
grants receivables and valuations of derivative financial instruments.

The balance sheet total was made up of the following items on the liabilities side:

The bond issued in 2012 with a nominal value of EUR 85.0 million is due in April 2017. The transaction costs incurred in connection with
the bond issue are offset against the nominal value. The change in the carrying amount by EUR 116k compared to the prior year is due
to the transaction costs being amortized through profit or loss over the remaining term to maturity. The liability on the bond also reduced by
EUR 83.1 million due to the early repayment of a part of the bond.

Long-term financial liabilities of EUR 212.6 million comprise long-term capital expenditure loans, research and promotional loans and
a promissory note loan. The EUR 87.0 million increase resulted mainly from taking out a promissory note loan of EUR 120.0 million.
The EUR 20.9 million of liabilities from finance leases that were disclosed in the prior year were dissolved owing to the initial consolidation
of KTM Logistikzentrum GmbH.

Employee benefit liabilities of EUR 17.3 million comprise claims for severance and anniversary bonus payments. Actuarial losses, current
service costs and interest expenses led to a EUR 2.4 million increase in the total liability.

Deferred tax liabilities went up EUR 6.6 million, to EUR 44.3 million. The increase is essentially due to the recognition of EUR 8.0 million
in deferred tax on capitalized development costs.

Other non-current liabilities amounting to EUR 7.4 million are mainly made up of deposits received; the total amount rose only slightly by
EUR 0.7 million relative to the prior year.

Short-term financial liabilities went up EUR 16.7 million, to EUR 22.8 million.

Trade payables, including payables to affiliated and associated companies, went up EUR 127.5 million to EUR 160.1 million as at the
reporting date.

Provisions (EUR 10.2 million; prior year: EUR 8.9 million) essentially comprise provisions relating to guarantees and warranties. Compared
to the prior year, provisions relating to guarantees and warranties showed an increase of EUR 1.3 million on account of the increase in sales
volume.

The other current liabilities essentially comprise of employee benefits, discounts and dealer bonuses as well as of liabilities arising due to
derivative financial instruments being measured as of the reporting date. Other current liabilities rose by EUR 11.7 million to EUR 65.0 million.

Net financial debt fell to EUR 80.9 million (prior year: EUR 97.2 million). Gearing¹ consequently stood at 18.9% (prior year: 25.6%).

1
Gearing = Net financial debt divided by equity

060 CONSOLIDATED MANAGEMENT REPORT K TM AG

Equity rose by EUR 48.2 million from the prior year. The movement resulted from the 2016 profit (EUR 72.1 million), payment of the
dividend for 2015 (EUR 21.7 million) and the movement in the cash flow hedge reserve (EUR 3.1 million). The equity ratio as of December 31,
2016 was thus 40.5% (prior year: 44.7%).

10. LIQUIDITY ANALYSIS

Consolidated cash flow from operating activities rose to EUR 165.6 million, an increase of EUR 47.5 million relative to the prior year. There was
an increase of EUR 15.6 million on the preceding year in cash flow from profit and loss items, while working capital fell by EUR 31.9 million.

Net of disposals, capital expenditure increased from EUR –94.3 million to EUR –146.8 million. Free cash flow therefore fell from
EUR 23.8 million to EUR 18.8 million in net terms.

The consolidated cash flow from financing activities was EUR 99.3 million (prior year: EUR 27.4 million), which resulted mainly from the
dividend of EUR 21.7 million paid out in 2016 and the taking out of a promissory note loan of EUR 120.0 million.

Cash rose by EUR 118.3 million to EUR 236.8 million and was thus substantially higher than at the end of the prior year (prior year:
EUR 118.4 million).

11. CAPITAL EXPENDITURE

Considerable capacity and expansion investments were undertaken in the period under review in addition to the usual high investments
in series development projects and buying tools. Construction of the new motorsport building in Munderfing was completed.

In total, EUR 106.4 million (prior year: EUR 110.9 million) was invested in property, plant and equipment and intangible assets during 2016.
Of this, EUR 57.8 million relates to capitalized development costs and EUR 9.0 million to investments in IT infrastructure.

NON-FINANCIAL PERFORMANCE INDICATORS

12. EMPLOYEES

During 2016, KTM employed an average of 2,737 employees (prior year: 2,380), of whom 425 (prior year: 401) worked outside Austria.
Revenue per employee was EUR 417.2k (prior year: EUR 429.6k).

2016 2015

Revenue EURk 1,141,819 1,022,487

Employees (average) 2,737 2,380
Revenue per employee EURk 417.2 429.6

NON-FINANCIAL PERFORMANCE INDICATORS 0 61

13. RESEARCH AND DEVELOPMENT

In the Research and Development department, KTM employed an average of 487 staff in 2016 (prior year: 382), representing 17.8% of
total headcount. Around EUR 92.6 million (formerly: EUR 68.8 million) was invested in research and development in 2016, which translates
to 8.1% of total revenue (+1.4 percentage points compared to the prior year).

The financial year just ended saw a multitude of different projects in the offroad and street divisions. Above all there was the transfer to
series production of the KTM 1290 Superduke GT, with which KTM has succeeded in redefining the sports touring division. The model, which
is equipped with a series of innovative safety systems and new kinds of comfort features, managed to consistently secure top marks in highly
regarded comparative tests.

Another key project was the further development of the KTM Adventure range of models: As well as revising numerous details, these models
are noted in particular for their completely redeveloped full LED headlamp unit and the new TFT dashboard, which enables the rider to
be linked up to the motorcycle for the first time. Alongside this, the development of new HUSQVARNA models in the street division continued
apace. The vehicles, which were presented during the EICMA fair in November 2016, polarize opinion in particular due to their clear design
approaches focusing on the bare essentials.

The development of the KTM mid-size models, which are equipped with an inline two-cylinder engine for the first time, was consistently
pushed forward during the last year of research. Following the completion of the fundamental research and development work on the engine
and chassis, a first ridable prototype was then presented to the international trade audience.

During 2016, numerous R&D projects were taken forward at various stages from concept development to the start of series production and
successfully completed:

p Start of series production of the new KTM and HUSQVARNA Enduro generations, which are again setting the standard in their class thanks
to their equipment, the low weight that derives from the use of the latest development technologies and the handling benefit under extreme
conditions that accrues as a result.

p Start of series production of the new KTM 1290 Superduke GT in the sports touring division. Thanks to a multitude of innovative safety
features, such as the semi-active chassis or the inclination-dependent motorcycle stability control “MSC” and the LED cornering light, along
with the KTM 1290 Super Adventure it represents the pinnacle of technology in the KTM range of models.

p Start of series production of the KTM 690 Duke/R. In addition to the comprehensively revised 690 ccm single-cylinder unit, whose
smoothness has been improved still further by using a second balancer shaft, the model now also features advanced safety features and
infotainment functions on a newly developed TFT instrument panel.

p Series development of the fundamentally revised KTM Adventure model range. The successful adventure touring concept has been further
improved by integrating the latest technologies, such as the 6.5“ TFT display including Bluetooth and USB interfaces and the full LED
headlight as well as a series of safety systems and a semi-active chassis.

p Series development of new KTM Duke models in the entry-level division. The agile naked bikes in the 125 ccm to 390 ccm range have
been fundamentally reconfigured. Emission levels have been further reduced in accordance with the EU IV standard and the ridability of the
single-cylinder engine has been further enhanced with ride-by-wire. Just like other KTM models, they now also offer a wealth of connectivity
functions.

0 62 CONSOLIDATED MANAGEMENT REPORT K TM AG

p Series development of the new HUSQVARNA Vitpilen/Svartpilen models. As well as the high-volume 701 Enduro and 701 Supermoto,
the Vitpilen and Svartpilen models open the next chapter in the HUSQVARNA brand strategy. With their progressive, clear design, they
reinterpret the retro trend and appeal to a wider range of customers.

p Development of a new motorcycle platform based on a revolutionary two-cylinder engine design, which will make a substantial contribution
to opening up new markets in the naked and touring divisions. A prototype of the KTM 790 Duke naked bike was unveiled at the EICMA
International Motorcycle Show in Milan in November 2016.

p Concept development of new drivetrain systems for electric vehicles and the ongoing development of energy storage and battery
management systems for motorcycle applications. Development of a model equipped with an alternative drivetrain system to meet the
requirements of modern mobility scenarios.

p Concept development for new connectivity systems for the digital networking of rider and motorcycle. In addition to safety-related equipment
such as automated emergency call systems or interlinked vehicles for a sustainable reduction in accidents, this also comprises enhanced
comfort and infotainment functions for the rider.

p Development of concepts for new approaches in relation to EMS systems and exhaust gas purification to ensure that the KTM and
HUSQVARNA model ranges comply with current (EU IV) and future emissions regulations (EU V). These include both a reduction in fuel
consumption and a reduction in exhaust emissions.

14. RACING

When KTM was relaunched in the early 1990s, the motto READY TO RACE embodied the new self-confidence of the brand. Clear objective:
Every motorcycle rolling off the production line of the Mattighofen works must be ready for the racetrack right from the start.

The READY TO RACE philosophy is still the creed that drives the KTM motorsport division which, with its many factory teams, works all over
the world on the very highest level, racking up World Championship titles non-stop. Every employee working in the KTM motorsport division
is fully committed to racing. They are 100% committed to the task of achieving wins for KTM and, as a team, work together just as well
as the smoothly running racing motorcycles they build and service. The KTM factory riders likewise give their best on the racetrack, not just
for themselves and their team but for everyone at KTM.

With more than 270 world championship titles, KTM is the world’s most successful motorsport brand. At the beginning of the year,
Toby Price managed to secure KTM’s 15th Dakar victory in a row. After the factory accelerated its commitment to the prestigious Supercross
in the USA in the 2015 season, the American Ryan Dungey won the Supercross World Championship title for the Austrian manufacturer on
his KTM 450 SX-F, secured double victory by winning the US Pro Motocross Championship and thus marked another milestone in the
company’s history. In 2016 the Red Bull KTM Factory Racing Team in the USA successfully defended its title in the Supercross Series. These
incredible victories were an ideal platform for both the brand and its bikes, catapulting KTM into the international limelight. But that was
not all. Jeffrey Herlings claimed another MX2 title for KTM with his impressive performances. But KTM has also managed to firmly establish
itself in road racing too. In October 2016, Brad Binder became Moto3 world champion with four races to spare.

And it will not be long before the next stage: in 2017 KTM will be entering Moto2 with a chassis developed in cooperation with WP, and will
be entering the MotoGP series with its own factory team and a motorcycle developed entirely in Mattighofen: the KTM RC16. The successfully
tested KTM MotoGP bike will be ridden in its first season by the Briton Bradley Smith and the Spaniard Pol Espargaró.

NON-FINANCIAL PERFORMANCE INDICATORS 063

The Husqvarna Motorcycles brand also celebrated another impressive year in international racing in the 2016 season. Even with the bold
move into the street motorcycling sector, the last two seasons were still enormously successful for Husqvarna Motorcycles in offroad racing.
Spearheading the return to AMA racing, Jason Anderson achieved an excellent second-place finish in Husqvarna Motorcycles’ first-ever
Supercross World Championship in 2015, before the brand clocked up its first Supercross victories in 2016. Establishing the global Rockstar
Energy Husqvarna Factory Racing team at the start of 2016, Husqvarna Motorcycles further strengthened their presence in all offroad
disciplines worldwide. Motorsport has been a constant feature of Husqvarna’s 113-year history and will continue to be the driving force behind
the development of top-class series motorcycles. Husqvarna Motorcycles remains resolute about achieving success at the highest levels of
two-wheeled motorsport.

Overall, we won twelve world titles in 2016 across a very wide range of racing series, bringing our total number of world title successes to
over 270.

Both brands’ commitment to motorsport also benefits KTM AG from a technological viewpoint, as motorsport know-how has a direct influence
on the development of series production models. KTM AG’s motorsport expenses in 2016 were EUR 31.4 million (prior year: EUR 29.7 million),
thus accounting for 2.7% (prior year: 2.9%) of total revenue.

15. FINANCIAL INSTRUMENTS

Regarding the use of financial instruments and the related risk management goals, please refer to the related explanations in the notes to
the consolidated financial statements.

16. QUALITY

KTM uses a process-oriented quality management system for all activities, from product idea to market analyses to design studies, design
and development, cooperation with suppliers, the procurement of components for series production, parts production, the assembly of engine
and vehicle, right to packing and dispatch.

Product quality
The high quality of the products is accomplished due to production-oriented design, the use of analytical and statistical methods of
calculation, comprehensive checking and testing, compliance with relevant approval rules, a focus on process quality, communication and
training measures at KTM and at the suppliers.

Process quality
KTM was given certification by the auditors of TÜV Süd LG Österreich, that it more than meets the requirements of EN ISO 9001:2008 and
of the Kraftfahrbundesamt (KBA), the German federal authority for motor vehicles and transport.

064 CONSOLIDATED MANAGEMENT REPORT K TM AG

17. RISK REPORT

Regarding the risk report, please refer to the explanations in the notes to the consolidated financial statements.

18. SUSTAINABILITY

Commitment to sustainability
Strategic leadership, focusing on the development of key competencies, continuously improving the work processes, working in partnership
with employees and suppliers and maintaining a process-oriented quality management system allow KTM to create added value both
for the company and for the shareholders. With an average workforce of 2,737 (prior year: 2,380) in Austria, KTM is one of the region’s
biggest employers.

KTM uses every opportunity to respond to the demands regarding sustainability that any modern company endeavors to comply with. For
instance, the factory and administrative buildings are constructed in a resource-conserving and energy-efficient manner, the cooling of test
chambers and toolshop is controlled using groundwater, and for the manufacturing of fabricated materials and finished products various
materials are sorted by type and reusable containers are used.

Suppliers
The production company in Mattighofen largely sources its requirements from the local procurement market (about 29% within a radius
of 100 km, about 35% within a radius of 200 km, about 44% within a radius of 300 km, and about 51% within a radius of 400 km);
KTM therefore plays an active role in adding and maintaining value at the regional level.

Recycling and packaging

As a manufacturing company, KTM is aware of the responsibility for the environment. The motorcycle logistics system on reusable metal
plates, which was specially developed by KTM and obviates the need for additional packing material, is regarded as an innovative example
for the entire industry.

Employees
KTM aims to offer its employees a path towards personal development. It is the experience and expertise, creativity, passion for innovation,
and productivity of our employees that really allows KTM to achieve its corporate goals.

With a view to continuously enhancing the qualifications and competence of its staff, KTM constantly invests in their education and training.
Total spending on these areas was EUR 1,216.5k in 2016 (prior year: EUR 993.4k). In Mattighofen, apprentices are being educated in
the fields of mechanical engineering, automotive and production engineering and mechatronics, and as commercial employees, with the goal
of integrating them in the respective areas of responsibility and offering them employment with KTM in the long term after their final exam.
As of the reporting date, KTM employed 110 apprentices, and we persist in our clear commitment to sustainable in-house apprentice training.

In addition, KTM offers employees the possibility of in-service training for passing their final apprenticeship exam. In this way, KTM makes
it possible for employees who have no formal training to be integrated into the world of work and continue their personal development.

By establishing an in-house toddler group in February 2012, KTM demonstrated its social commitment. This is also intended to facilitate
reentry into the world of work.

NON-FINANCIAL PERFORMANCE INDICATORS 065

Health and safety
To achieve constant improvement in the area of health and safety, KTM, among other things, implements preventive measures regarding
general workplace safety, fire protection and safety of machinery and organizes various seminars on health- and safety-related topics, health
promotion in the workplace as well as measures for ensuring suitable workplaces (including lighting, height requirements, positioning of
work equipment, use of tools or aids).

Production safety
In designing and constantly improving its work processes, KTM takes care to offer its employees a safe work environment. This includes
constant training and instruction measures, the regular maintenance of production facilities, and high-tech methods and equipment.

Quality management
The challenge of manufacturing products that are innovative, high-quality, in line with market requirements and, most importantly, safe, is
mastered by KTM using a comprehensive and process-oriented quality management system certified to ISO 9001:2008. This system controls
each and every process, from product idea to market analysis to design studies, development, design, cooperation with suppliers, procure-
ment of components, parts production, assembly of engine and vehicle, dispatch, right to sales and customer service. Particular focus is placed
on the continuous improvement process, which ensures consistent and sustainable improvement of the quality of products and services.

Product safety
On average 593 motorcycles per day are assembled in Mattighofen, Austria. Each and every vehicle component is checked by experienced
KTM staff according to an inspection plan.

Moreover, every KTM motorcycle undergoes a complete functional check at a testing station after assembly. Intensive in-production product
audits of engines and vehicles ensure a high quality standard during the production process. Only then are KTM products ready to be shipped
all over the world.

The development work performed by our KTM staff is put to the test on the racetrack by our factory teams as early as during the prototype
phase. Additionally, a testing and endurance testing program spanning all phases of prototype and series production ensures that the series-
manufactured product meets the highest standards of quality and safety. Only proven innovative designs make the transition to series
production, and they deservedly bear the motto “READY TO RACE”.

Environmental indicators
All new KTM offroad carburetors (EXC models) comply with the Euro IV standard, the European emissions standard for motorcycles. The
standard applies not only to new, but also to existing vehicle types. Compliance with the new standard is made possible primarily by the use
of fuel injection systems.

066 CONSOLIDATED MANAGEMENT REPORT K TM AG

Wings for Life
KTM supports the spinal cord research foundation “Wings for Life” set up by Heinz Kinigadner in all marketing matters. “Wings for Life” is a
nonprofit organization aiming to promote and speed up research and medical-scientific progress towards finding a cure for paraplegia induced
by spinal cord injuries.

19. DISCLOSURES PURSUANT TO SECTION 243A OF THE AUSTRIAN COMMERCIAL CODE (UGB)

As of December 31, 2016, the share capital amounts to EUR 10,845k and is subdivided into 10,845k registered shares with a par value
of EUR 1.00 each. The shares grant the rights that are usually due to stockholders under the Austrian Stock Corporation Act. These include
the right to payout of the dividend resolved upon at the General Meeting as well as the right to vote at the General Meeting.

KTM AG shares were admitted for trading on the Vienna Stock Exchange until June 24, 2016, latterly forming part of the Third Market,
which is operated as an MTF (Multi Trading Facility).

On March 29, 2016, K KraftFahrZeug Holding GmbH (formerly CROSS KraftFahrZeug Holding GmbH) announced its intention to make a
public takeover bid for all free-floating shares in KTM AG to accompany the withdrawal of KTM AG shares from the Third Market (MTF) of the
Vienna Stock Exchange. The offer price was EUR 122.50 per share.

At the end of June 24, 2016, the shares were withdrawn from the Third Market of the Vienna Stock Exchange.

On July 20, 2016, the Extraordinary General Meeting of KTM AG resolved to convert the previous bearer shares into registered shares. This
amendment to the articles of association was recorded in the Austrian commercial register in September.

Each of the following shareholders held more than 10% of the share capital on the reporting date and at the time of drawing up the financial
statements:

p KTM Industries AG (formerly CROSS Industries AG), directly and indirectly through
K KraftFahrZeug Holding GmbH (formerly: CROSS KraftFahrZeug Holding GmbH): 51.67%
p Bajaj Auto Ltd. (through Bajaj Auto International Holdings B.V.): 47.99%
p Other small shareholders: < 1%

In the event of a change of control, Executive Board members Harald Plöckinger, Viktor Sigl and Hubert Trunkenpolz are entitled unilaterally
to terminate their appointments under retention of all claims. These appointments expire on February 29, 2020. A change of control is deemed
to exist for the purposes of these agreements if KTM Industries AG (formerly: CROSS Industries AG), Wels, no longer holds either directly
or indirectly at least 50% of the voting rights in KTM AG, within the meaning of section 22 (2) of the Austrian Takeovers Act. No agreements
are in place between the company and any Supervisory Board members or employees providing for compensation to be due in case of a change
of control.

There are no other important agreements which would be affected by a change of control or public takeover bid.

NON-FINANCIAL PERFORMANCE INDICATORS 0 67

20. OUTLOOK

Economic position
The general economic climate remains tough in the individual markets. For 2017 we expect to see slight growth in the global motorcycle
market. With our new products, consistent implementation of our strategy and by focusing on commercial business development to expand
the quantity and quality of our sales partners, we expect to continue to gain market shares.

Growth in the North American motorcycle market was flat in 2016. This trend will continue in 2017. However, KTM expects to achieve
continued growth in market share in North America.

The situation in the emerging markets in South America and Asia remains tense due to the economic environment and domestic political
crises. However, we see significant growth opportunities over the medium term in both South America and Asia, especially for smaller-engined
models. We will substantially increase our focus and efforts in these regions accordingly.

Cooperation with our Philippine partner Ayala Corporation, the KTM and Husqvarna importer in the Philippines, is progressing in a very
positive way, such that the planned assembly of models from the KTM DUKE and RC families up to 400 ccm will start as scheduled in the
first quarter of 2017 and open up new distribution opportunities in the ASEAN region.

Development of business
In 2017, KTM expects to see a further increase in both revenues and volumes.

With the Husqvarna Motorcycles brand, we expect further growth in 2017 as the range of products is being expanded to include a broad range
of street motorcycles.

2017 will also see the commercial launch of new KTM models. The KTM Street models in the ADVENTURE series, which have already been
presented at international motorcycle shows, and the new “DUKE” naked bike models will be launched on the market in 2017.

KTM has set itself the medium-term goal of increasing annual sales to 300,000.

Motorsport
In 2017, KTM will join the MotoGP series with the riders Pol Espargaró and Bradley Smith. KTM is also starting the Moto2 race series in the
coming year. KTM is already involved in Moto3, so will therefore be represented in all three series.

Investments
The level of investment planned for 2017 remains high. The main areas of focus for investment cover in particular new series development
projects as well as investments in infrastructure and expansion in the area of development.

KTM is investing some EUR 25 million at its Mattighofen site on expanding and extending its research and development center. The overall
investment should be completed by the end of 2017. Investing in this expansion will create around 100 new jobs at Mattighofen for highly
qualified employees.

During 2017, work will also begin on extending the logistics center and expanding the quality assurance section at the main site in Mattighofen.

068 CONSOLIDATED MANAGEMENT REPORT K TM AG

Adequate financial position
Over the last year, KTM further enhanced its treasury and financial position. Working capital management was further improved and will
remain an area of focus during the coming year.

In April 2017, the EUR 85 million bond listed on the Vienna Stock Exchange will be repaid as planned.

Sufficient liquidity is available for planned growth, owing in particular to the placement of the promissory note loan in 2016.

Mattighofen, February 15, 2017

The Executive Board

Stefan Pierer Harald Plöckinger

Viktor Sigl Hubert Trunkenpolz

OUTLOOK 0 69
TEST WP KTM MOTO2 ARAGON 2016, PHOTO: SEBAS R.
CONSOLIDATED
FINANCIAL STATEMENTS
CONSOLIDATED NOTES TO THE CONSOLIDATED
INCOME STATEMENT 073 FINANCIAL STATEMENTS 079
079 The company
CONSOLIDATED STATEMENT 079 Principles of financial reporting
OF COMPREHENSIVE INCOME 074 and accounting policies
094 Notes to the consolidated
CONSOLIDATED STATEMENT income statement
OF FINANCIAL POSITION 075 100 Notes to the consolidated
statement of financial position
CONSOLIDATED STATEMENT 116 Other notes
OF CASH FLOWS 076
ANNEX TO THE NOTES TO THE
CONSOLIDATED STATEMENT CONSOLIDATED FINANCIAL STATEMENTS 140
OF CHANGES IN EQUITY 078 140 Schedule of equity holdings

AUDITOR’S REPORT 143

STATEMENT OF ALL
LEGAL REPRESENTATIVES 149
072 CONSOLIDATED FINANCIAL STATEMENTS K TM AG
CONSOLIDATED
INCOME STATEMENT
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Note 2016 2015

Revenue 5 1,141,819 1,022,487

Cost of sales 6 (792,281) (720,477)
Gross profit 349,538 302,010

Selling and racing expenses 6 (152,096) (132,345)

Research and development expenses 6 (26,017) (16,385)
Infrastructure and administration expenses 6 (43,566) (36,747)
Other operating expenses 7 (27,526) (21,637)
Other operating income 8 107 210
Share of the profit of associates
accounted for using the equity method 9 2,357 0
Result from operating activities 102,796 95,105

Interest income 1,865 1,304

Interest expenses (9,597) (8,759)
Other financial result 10 (686) (2,363)
Share of the profit of associates
accounted for using the equity method 9 0 133
Profit before tax 94,378 85,421

Tax expense 11 (22,269) (21,497)

PROFIT FOR THE FINANCIAL YEAR 72,109 63,924
Of which attributable to the owners of the parent company 72,012 63,856
Of which attributable to non-controlling interests 97 68

EARNINGS PER SHARE (EUR)

Basic (= diluted) 12 6.64 5.89

CONSOLIDATED INCOME STATEMENT 073

CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Note 2016 2015

Profit for the financial year 72,109 63,924

Currency translation of foreign subsidiaries 992 425

Currency translation of associates accounted
for using the equity method 15 11 (5)
Currency translation of net investments in foreign operations 20 116 366
Deferred tax on currency translation
of net investments in foreign operations (29) (91)
Valuation of cash flow hedges 20 (4,152) 5,795
Of which associates accounted for using the equity method: EUR 25k (prior year: EUR 0k)
Deferred taxes on the valuation of cash flow hedges 20 1,038 (1,449)
Other comprehensive income –
Possible reclassification into the income statement (2,024) 5,042

Recognized actuarial losses 24 (759) (280)

Of which associates accounted for using the equity method: EUR 1k (prior year: EUR 0k)
Deferred taxes on the recognized actuarial losses 24 190 70
Other comprehensive income –
No reclassification into the income statement (569) (210)

Other comprehensive income (2,593) 4,832

TOTAL COMPREHENSIVE INCOME 69,516 68,756
Of which attributable to the owners of the parent company 69,419 68,687
Of which attributable to non-controlling interests 97 68

The following notes to the consolidated financial statements form an integral part of the consolidated statement of comprehensive income.

074 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
AS OF DECEMBER 31, 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Note Dec. 31, 2016 Dec. 31, 2015

ASSETS
Non-current assets
Tangible assets 13 173,288 161,239
Intangible assets 14 315,653 279,780
Investments accounted for using the equity method 15 22,702 3,064
Deferred tax assets 11 3,317 3,595
Other non-current assets 16 927 1,575
515,888 449,254
Current assets
Cash and cash equivalents 28 236,752 118,406
Inventories 17 164,544 161,295
Trade receivables 18 99,239 88,202
Prepayments 2,365 3,100
Current tax assets 7,718 6,704
Other current assets 19 30,018 21,974
540,637 399,680
ASSETS 1,056,524 848,933

LIABILITIES
Consolidated equity
Share capital 20 10,845 10,845
Reserves including retained earnings 20 416,417 368,688
Equity of the owners of the parent company 427,261 379,532
Non-controlling interests 20 718 281
427,979 379,814
Non-current liabilities
Bonds 21 0 84,845
Financial liabilities 21 212,554 125,480
Employee benefits 24 17,310 14,935
Deferred tax liabilities 11 44,305 37,742
Other non-current liabilities 22 7,426 6,764
281,595 269,766
Current liabilities
Bonds 21 83,061 0
Financial liabilities 21 22,760 6,107
Trade payables 23 160,084 127,445
Provisions 25 10,207 8,863
Tax liabilities 424 1,389
Prepayments 5,431 2,234
Other current liabilities 22 64,983 53,315
346,950 199,353
EQUITY AND LIABILITIES 1,056,524 848,933

The following notes to the consolidated financial statements form an integral part of the consolidated statement of financial position.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 075

CONSOLIDATED
STATEMENT
OF CASH FLOWS
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Note 2016 2015

Consolidated cash flow from operating activities

+(–) Profit (loss) for the financial year 72,012 63,856
+(–) Profit (loss) allocated to non-controlling interests 97 68
+(–) Interest expenses (interest income) 7,732 7,455
– Interest paid (8,832) (8,759)
+ Interest received 1,865 1,304
+(–) Current income tax 14,128 6,636
– Income taxes paid (14,839) (8,324)
+(–) Deferred taxes 8,141 14,861
+ Depreciation/Amortization of fixed assets 57,458 46,419
– Non-cash results from investments accounted
for using the equity method (2,241) (60)
–(+) Other non-cash income (expenses) 26 (94) (3,589)
135,428 119,866

–(+) Change of inventories 16,436 (14,632)

–(+) Change of trade receivables, prepayments,
current tax assets, other current and non-current asset (24,605) (14,207)
+(–) Change of trade payables, prepayments
and other current and non-current liabilities 4 38,694 26,522
+(–) Change of tax liabilities,
deferred taxes and other provisions (363) 556
30,162 (1,762)

Consolidated cash flow from operating activities 165,590 118,104

076 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Note 2016 2015

Consolidated cash flow from investing activities

– Investments in tangible and intangible assets
(payments-out) 13, 14 (131,855) (94,761)
– Investments in financial assets (payments-out) (15,072) (312)
+(–) Changes in the scope of consolidation 164 0
+ Disposals of fixed assets (payments-in) 11 771
Consolidated cash flow from investing activities (146,752) (94,302)

Consolidated cash flow from financing activities

– Dividends to owners of the parent company 20 (21,690) (16,268)
– Dividends to non-controlling interests 0 (150)
– Acquisition of non-controlling interests 0 (100)
– Repurchase of own bonds (1,966) 0
+ Taking out of promissory note loan (less transaction costs) 119,540 0
+ Taking out of research loans 0 45,000
+ Taking out of investment loans 9,500 0
+ Taking out of promotional loans 0 6,495
– Repayment of investment loans (3,403) (2,370)
– Repayment of promotional loans (2,161) 0
– Repayment of liabilities from finance leases (645) (388)
– Taking out of other current loans 0 (5,000)
+(–) Other financing activities 86 148
Consolidated cash flow from financing activities 99,261 27,367

Consolidated cash flow

+(–) Consolidated cash flow from operating activities 165,590 118,104
+(–) Consolidated cash flow from investing activities (146,752) (94,302)
+(–) Consolidated cash flow from financing activities 99,261 27,367
Change in liquid funds within the group 118,099 51,169

+(–) Effect of exchange rate fluctuations 247 (1,513)

+(–) Consolidation-related changes in funds 0 (62)
+ Opening balance of liquid funds within the group 118,406 68,812
CLOSING BALANCE OF LIQUID FUNDS WITHIN THE GROUP 236,752 118,406
Comprising: cash on hand, checks, cash in banks and time deposits 236,752 118,406

The following notes to the consolidated financial statements form an integral part of the consolidated statement of cash flows.

CONSOLIDATED STATEMENT OF CASH FLOWS 077

CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Attributable to the owners of the parent company Non- Total

Share Reserves Revaluation Cash flow Foreign Total controlling consoli-
capital including reserve hedge currency interests dated
retained reserve translation equity
earnings reserve

As of January 1, 2015 10,845 302,180 17,235 (3,582) 379 327,058 517 327,575
Currency translation 0 0 0 0 695 695 0 695
Financial instruments 0 0 0 4,346 0 4,346 0 4,346
Actuarial losses 0 (210) 0 0 0 (210) 0 (210)
Other comprehensive income 0 (210) 0 4,346 695 4,832 0 4,832

Profit for the financial year 0 63,856 0 0 0 63,856 68 63,924

Total comprehensive income 0 63,645 0 4,346 695 68,687 68 68,756

Purchase of shares
in subsidiaries 0 55 0 0 0 55 (155) (100)
Dividends to
non-controlling interests 0 0 0 0 0 0 (150) (150)
Dividends to owners
of the parent company 0 (16,268) 0 0 0 (16,268) 0 (16,268)
As of December 31, 2015
(= January 1, 2016) 10,845 349,614 17,235 764 1,075 379,532 281 379,814

Currency translation 0 0 0 0 1,090 1,090 0 1,090

Financial instruments 0 0 0 (3,114) 0 (3,114) 0 (3,114)
Actuarial losses 0 (569) 0 0 0 (569) 0 (569)
Other comprehensive income 0 (569) 0 (3,114) 1,090 (2,593) 0 (2,593)

Profit for the financial year 0 72,012 0 0 0 72,012 97 72,109

Total comprehensive income 0 71,443 0 (3,114) 1,090 69,419 97 69,516

Transactions with
non-controlling interests 0 0 0 0 0 0 340 340
Dividends to owners
of the parent company 0 (21,690) 0 0 0 (21,690) 0 (21,690)
As of December 31, 2016 10,845 399,368 17,235 (2,350) 2,165 427,261 718 427,979

078 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

I. THE COMPANY
KTM AG has its registered office in Mattighofen, Stallhofnerstrasse 3, Austria, and has been recorded in the commercial register at
the Provincial Court as Commercial Court of Ried im Innkreis under file number FN 107673 v.

KTM AG engages in the development, production and distribution of motorized vehicles for leisure purposes (power sports), in particular under
the KTM and Husqvarna brands, and holds equity interests in other entities engaging in the development, production and distribution of such
equipment. As of December 31, 2016, the KTM Group includes 42 subsidiaries, located in Austria, the United States, Japan, South Africa,
Mexico and India and in various other countries of Europe and Asia, which are included within the consolidated financial statements.
Furthermore, the KTM Group has equity holdings inter alia in general importers that are based in important distribution markets (New Zealand
and Dubai) as well as in various flagship stores in Austria and Germany.

Major sales markets include the USA, Germany, France, Australia, the UK, Italy, Spain, Canada, Austria, Sweden and other European countries.

The company is part of the same group as Pierer Konzerngesellschaft mbH, Wels (ultimate parent company) and its affiliates, and is included
within the consolidated financial statements of that group. These consolidated financial statements are filed with the Provincial Court of
Wels in its capacity as Commercial Court under file number FN 134766 k and are the consolidated financial statements for the largest scope
of consolidation.

The consolidated financial statements for the smallest scope of consolidation are drawn up by KTM Industries AG, Wels (formerly: CROSS
Industries AG, Wels) and are filed with the Provincial Court of Wels in its capacity as Commercial Court under file number FN 78112 x.

II. PRINCIPLES OF FINANCIAL REPORTING

AND ACCOUNTING POLICIES

1. PRINCIPLES OF FINANCIAL REPORTING

The consolidated financial statements as of December 31, 2015 and December 31, 2016 were prepared in accordance with the International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and in accordance with the inter-
pretations of the International Financial Reporting Interpretations Committee (IFRIC), insofar as they are applied in the European Union. The
additional requirements stipulated by section 245a para 1 of the Austrian Commercial Code (UGB) were also met in this context.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 079

The figures in the consolidated financial statements are reported in the functional currency of the group parent, the euro. Unless specifically
indicated, all amounts are rounded to the nearest 1,000 euros (EURk), which may give rise to rounding differences.

The consolidated financial statements were approved by the Executive Board on February 15, 2017 (prior year: February 16, 2016) for
review by the supervisory board, for submission to the Annual General Meeting and for subsequent publication. Within the scope of the review
it is required to perform, the Supervisory Board may require changes to be made to the consolidated financial statements.

The IASB has passed the following amendments to existing IFRSs and several new IFRSs and IFRICs that have already been endorsed by
the European Commission and are therefore to be mandatorily applied as from January 1, 2016:

p IFRS 10, IFRS 12 and IAS 28 (Amendment): Investment Entities: Applying the Consolidation Exception
p IFRS 11 (Amendment): Accounting for Acquisitions of Interests in Joint Operations
p IAS 1 (Amendment): Disclosure Initiative
p IAS 16 and IAS 38 (Amendment): Clarification of Acceptable Methods of Depreciation and Amortisation
p IAS 16 and IAS 41 (Amendment): Agriculture: Bearer Plants
p IAS 19 (Amendment): Defined Benefit Plans: Employee Contributions
p IAS 27 (Amendment): Equity Method in Separate Financial Statements
p Annual Improvements to IFRS 2010–2012: Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38
p Annual Improvements to IFRS 2012–2014: Amendments to IFRS 5, IFRS 7, IAS 19, IAS 34

The first-time adoption of the above IFRSs did not lead to any material changes compared to the prior year. They did not result in any changes
to the accounting policies.

Future amendments to financial reporting provisions

The IASB and the IFRIC have passed further standards and interpretations, application of which was not mandatory during the 2016 financial
year and/or which have not yet been adopted by the European Commission. These are the following standards and interpretations:

Standard / amendment IASB date Endorsed EU date

of application by EU? of application

New standards and interpretations

IFRS 15: Revenue from Contracts with Customers Jan. 1, 2018 Yes Jan. 1, 2018
IFRS 9: Financial Instruments Jan. 1, 2018 Yes Jan. 1, 2018
IFRS 16: Leases Jan. 1, 2019 No –

Amended standards and interpretations

IFRS 14: Regulatory Deferral Accounts Jan. 1, 2016 No –
IFRS 2: Classification and Measurement of
Share-based Payment Transactions (Amendment) Jan. 1, 2018 No –
IFRS 4: Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts (Amendment) Jan. 1, 2018 No –
IFRS 10 and IAS 28: Sale or Contribution of Assets between Postponed
an Investor and its Associate or Joint Venture (Amendment) indefinitely No –

080 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Standard / amendment IASB date Endorsed EU date
of application by EU? of application

IFRS 15: Clarifications to IFRS 15 (Amendment) Jan. 1, 2018 No –

IAS 7: Disclosure Initiative (Amendment) Jan. 1, 2017 No –
IAS 12: Recognition of Deferred Tax Assets
for Unrealised Losses (Amendment) Jan. 1, 2017 No –
IAS 40: Transfers of Investment Property (Amendment) Jan. 1, 2018 No –
IFRIC 22: Foreign Currency Transactions and Advance Consideration Jan. 1, 2018 No –
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12 Jan. 1, 2017 No –
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 1 and IAS 28 Jan. 1, 2018 No –

The standards with material effects on the KTM Group are explained briefly below.

p IFRS 15 defines when and at what amount revenues should be recognized. In addition, preparers of financial statements must provide
recipients of financial statements with more informative and more relevant details than before. The standard provides a single, principles-based,
five-stage model to be applied to all contracts with customers. First-time application will lead to adjustments in internal processes and
documentation, as well as to additional disclosures in the notes. However, no material effects on the net assets, financial position or earnings
position of KTM AG are expected.

p IFRS 16 governs the accounting treatment of leases. IFRS 16 governs the recognition, measurement and disclosure of leases in the
financial statements and notes. The standard specifies a single accounting treatment for lessees. This model requires the lessee to record all
assets and liabilities under lease arrangements in the statement of financial position except where the lease is for a term of 12 months or
less or the asset is of low value (in which cases application is optional). Lessors must continue to discriminate between finance leases and
operating leases in their financial statements. The effects on the KTM Group consolidated financial statements are being examined. It is
expected that the recognition of leases in the balance sheet will lead to an increase in the carrying amounts of property, plant and equipment
and of financial liabilities.

p In June 2014 the IASB published IFRS 9 Financial Instruments, which amends the provisions governing the recognition and measurement
of financial assets, the impairment provisions, and the provisions on hedge accounting. The effects of IFRS 9 on KTM are still being
investigated. KTM will be affected in particular by the new impairment provisions, the recognition of expected losses and the simplifications
of hedge accounting. No material changes are expected as regards classification and measurement of financial instruments.

p Other amended standards and interpretations are either irrelevant to the KTM Group or have no material impact.

The financial reporting of the entities included within the consolidated financial statements is based on uniform financial reporting rules.
These rules were applied by all consolidated entities. All subsidiaries prepare their financial statements as at the same reporting date as the
consolidated financial statements.

The financial statements of all major domestic and foreign entities included in the Company’s financial statements by full consolidation
for which an audit is required by national regulations or was performed voluntarily were audited by independent certified public accountants,
and unqualified audit opinions were issued on them.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 81

2. SCOPE OF CONSOLIDATION

The scope of consolidation is based on the application of IFRS 10 and IFRS 11. KTM AG and all material subsidiaries are fully consolidated
in the consolidated financial statements. Subsidiaries are companies controlled by the group. The group controls a company if it is exposed to,
or has rights to, variable returns from its involvement in the entity and has the ability to influence these returns by means of its power over
the company. The financial statements of subsidiaries are included in the consolidated financial statements from the moment control begins
until the moment control ends.

A materiality threshold is set in the group to determine the scope of consolidation. Companies whose business is dormant or of low volume
and that are insignificant for the presentation of a true and fair view of the net assets, financial position and earnings position are not consoli-
dated but are reported as other non-current assets and measured at amortized cost or written down for impairment. The total balance sheet
assets, total net assets and total profit/loss of these companies comes to less than 0.1% of the consolidated total.

Accordingly, 42 companies are fully consolidated in the KTM Group, in addition to the group parent. The entities included in the consoli-
dated financial statements are specified in the schedule of equity holdings as of December 31, 2016 (see Annex to the notes to the financial
statements).

An associate is an entity over which the group has significant influence. Significant influence is the power to participate in the financial
and operating policy decisions of the investee entity but is not control or joint control of the policy-making processes. The results, assets, and
liabilities of material associates are consolidated in these financial statements using the equity method. Under the equity method, invest-
ments in associates are included in the consolidated statement of financial position at cost, adjusted for changes in the group’s share of the
profit or loss and other income of the associate after the acquisition date. Five associates are measured under the equity method in the
KTM Group.

The reporting date for all companies included in the KTM AG consolidated financial statements is December 31, 2016. Where an associate
accounted for using the equity method prepares its financial statements to a different date, an interim set of financial statements is prepared
for consolidation purposes.

Changes in the scope of consolidation in 2016 were as follows:

Full consolidation At equity valuation

2016 2015 2016 2015

As of January 1 39 39 3 3
Additions 3 2 3 0
Disposals 0 2 0 0
As of December 31 42 39 6 3
Of which in Austria 8 6 3 1
Of which abroad 34 33 3 2

Under a sale-and-purchase agreement dated September 16, 2016, KTM Immobilien GmbH acquired an additional 83.63% of the shares
of Oberbank Mattigtal Immobilienleasing GmbH, Linz. The holding thus rose from 10% to 93.63%. Oberbank Mattigtal Immobilien-
leasing GmbH was the owner of the KTM logistics center in Munderfing, which it leased to the KTM Group under a finance lease. As a result
of the company’s acquisition, the finance lease was cancelled ahead of term (see note 29). At the Extraordinary General Meeting held on
September 16, 2016, Oberbank Mattigtal Immobilienleasing GmbH, Linz, resolved to change its name to KTM Logistikzentrum GmbH and
to transfer its registered office to Mattighofen. KTM Logistikzentrum GmbH has been consolidated as from September 16, 2016.

082 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The following assets and liabilities were absorbed into the group:

EURk

Non-current assets 26,068

Cash and other current assets 4,884
Liabilities owed to credit institutions (21,147)
Other current liabilities (161)
Other current liabilities (financial) (4,854)
Non-controlling interest (287)
Difference (debit item) 242
Purchase price 4,745

Cash taken over 4,883

Net cash inflow on acquisition 138

The carrying amount of equity represents the fair value on the acquisition date. The non-controlling interest was recognized on the basis
of the proportionate carrying amount of the assets and liabilities.

The difference (debit item) of EUR 242k arising on initial consolidation was recognized as an expense.

After the initial consolidation, liabilities owed by KTM Logistikzentrum GmbH to credit institutions were repaid by KTM AG on its behalf and
converted into an intercompany loan for the same amount.

Further information as per IFRS 3.B64q is not provided on grounds of immateriality, as the business combination has no effect on the
statement of comprehensive income. Expenses in connection with the logistics center were already incorporated into KTM’s results before
initial consolidation, on account of the pre-existing finance lease relationship.

The KTM Group holds 100% of the shares of the newly established sales subsidiary KTM Sportmotorcycle MEA DMCC, Dubai. The company
has been fully consolidated as from December 1, 2016.

WP Performance Sports GmbH was founded in Munderfing in November 2016 and has been fully consolidated as from December 1, 2016.
The KTM Group holds 74% of the shares.

In March 2016, a 26% holding was acquired in Cero Design Studio S.L., the registered office of which is in Barcelona, Spain. The shares
are recognized at cost of acquisition.

In July 2016, KTM AG acquired 24% of the shares of WP AG, Munderfing. In the consolidated financial statements, the company is recognized
as an investment accounted for using the equity method.

KTM Group also acquired a 34% holding in KTM Asia Motorcycle Manufacturing Inc., Philippines. In the consolidated financial statements,
the company is recognized as an investment accounted for using the equity method.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 083

Changes in the scope of consolidation during 2015 are described below:

Husqvarna Motorsports, Inc., Murrieta, USA, and Husqvarna Motorcycles SA Pty Ltd, Northriding, South Africa, were established during the
first half of 2015 and were thus included in the scope of consolidation for the first time.

KTM Events & Travel Services AG (in liquidation) was deconsolidated in 2015 and is thus no longer included in the consolidated financial
statements of KTM AG. Liquidation had not yet been completed as of December 31, 2016.

Due to the loss of control, a loss on deconsolidation of EUR 146k was recognized in the income statement for 2015 under other operating
expenses. Control of cash totaling EUR 62k was also lost. KTM AG received no remuneration in relation to the deconsolidation of
KTM Events & Travel Services AG during 2016.

The table below shows the main groups of assets and liabilities disposed of:

EURk

Cash and cash equivalents 62

Intercompany trade receivables 684
Other current assets 8
Intercompany trade payables 40
Other current liabilities 8
Equity 706

The number of fully consolidated entities also reduced by one company in 2015 due to the transfer of the operating business of KTM AG
to KTM AG and the subsequent merger of KTM Immobilien GmbH into KTM AG. KTM AG was subsequently transformed into a GmbH and
renamed KTM Immobilien GmbH.

An abridged representation of the KTM Group structure looks as follows:

KTM AG

KTM Technologies KTM Immobilien KTM Sport- KTM Sportcar Husqvarna

GmbH GmbH motorcycle GmbH GmbH Motorcycles GmbH

Sales Sales
Organizational chart (abridged) companies companies

KTM AG is the ultimate group parent of the KTM Group. Following the transfer to KTM AG of the operating business of KTM Motorrad AG
during 2015, the corporate object of KTM AG now covers the development and production of motorcycles under the KTM and Husqvarna
brands and of the X-Bow supercar. All group head office functions such as purchasing, quality management, logistics, motorsport, finance and
accounting and human resources are contained within KTM AG. It holds direct equity interests in the material group companies located in
Austria and controls most of the KTM Group’s financing arrangements.

084 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The sales companies KTM Sportmotorcycle GmbH and Husqvarna Motorcycles GmbH distribute the two brands’ motorcycles and spare
parts directly to European dealers and global importers. Markets in the United States, Mexico, South Africa, Japan and Greece are served via
local sales subsidiaries which carry their own inventories. The two companies also hold equity interests in a total of 23 domestic and foreign
sales companies that provide sales and marketing-related services in local markets on their behalf.

KTM Sportcar GmbH markets the X-Bow super sports car.

KTM Technologies GmbH provides vehicle and product development services along with consultancy, particularly in lightweight construction
and fiber composites, for group companies and third parties.

The KTM Group’s land and buildings are vested in KTM Immobilien GmbH.

3. CONSOLIDATION METHODS

Equity consolidation: The initial consolidation of new acquisitions is performed using the acquisition method in accordance with IFRS 3.
This means that at the acquisition date, i. e. the date when the power to exercise control is obtained, the remeasured identifiable assets and
liabilities of the acquired business entity are compared with the consideration paid and, if applicable, with the amount reported for the
non-controlling interests and the fair value of the interests already held at the acquisition date. Any positive balance is capitalized as goodwill;
any negative balance is recognized as an income item (“Gain on a bargain purchase”) in the consolidated income statement after reassessing
the values reported. Any acquisition related costs are recognized as an expense.

Transactions with owners of non-controlling interests that do not result in a loss of control are recognized directly, and exclusively, in equity
without any restatements of the assets and liabilities of the company or its goodwill.

With the equity method, the interests in associates are recognized in the consolidated statement of financial position at their cost of acquisi-
tion plus any changes in the group’s portion of the net assets of the associate after the acquisition. The goodwill related to an entity measured
by the equity method is contained within the carrying amount of the investment and is not amortized separately.

IFRS 3 does not apply to common control transactions. In such cases, the KTM Group follows the acquisition method in the same way as
under IFRS 3.

All receivables, payables, expenses and income resulting from the settlement of accounts between consolidated entities, along with all profits
and losses from intragroup sales of inventories, have been eliminated. During the financial year just ended, no material results arose from
intragroup sales of property, plant and equipment or intangible assets.

Deferred taxes from consolidation are recognized in the consolidation procedures that impact profit or loss.

Currency translation: In the separate financial statements of the consolidated entities, any transactions made in foreign currency are posted
at the exchange rate valid on the transaction date. Foreign currency items on the reporting date are translated at the closing rate. All foreign
exchange differences are recognized in the separate financial statements as expenses or income in the period in which they arise.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 085

The group currency is the euro. Subsidiaries located outside the eurozone are regarded as entities that are economically independent.
In line with the concept of the functional currency, the assets and liabilities shown in the separate financial statements of these entities,
including any reported goodwill and any valuation adjustments resulting from initial consolidation, are translated at the mid rate valid on the
reporting date and items in the consolidated income statement are translated using the weighted average exchange rate for the financial
year. Any foreign exchange gains or losses resulting from such currency translation are recognized in other comprehensive income.
Foreign exchange differences arising on non-current financial receivables that represent net investments in foreign operations are recognized
in other comprehensive income.

Movements in the exchange rates used for translating currencies material to the consolidated financial statements were as follows:

Closing rate Average rate

Dec. 31, 2016 Dec. 31, 2015 2016 2015

CHF 1.0739 1.0835 1.0909 1.0646

JPY 123.4000 131.0700 120.4408 133.6310
USD 1.0541 1.0887 1.1032 1.1046
ZAR 14.4570 16.9530 16.1289 14.2805
MXN 21.7719 18.9145 20.6817 17.6706

Source: Exchange rates as of December 31, 2016 according to ECB

4. ACCOUNTING POLICIES

The financial reporting of the entities included in the consolidated financial statements is based on uniform accounting policies. These
policies are identical to those of the financial year 2015, except for the standards applied for the first time.

The consolidated statement of financial position is divided between non-current and current assets. The consolidated income statement
is subdivided according to the cost of sales method. The consolidated statement of cash flows is drawn up according to the indirect method.

All current assets and liabilities will in principle be realized or discharged within a period of twelve months of the reporting date or within
one operating cycle, as the case may be. All other assets and liabilities will in principle be realized or discharged outside this period of time.

To increase the utility of the consolidated financial statements, some individual items and presentations have been reclassified as of
December 31, 2016. Additionally, the notes have been partly reordered and disclosures in the notes have been adapted and/or enhanced.

p A new balance sheet item, “Tax refunds receivable”, has been added. Prior year figures have been adjusted accordingly.

p In the income statement, the share of the profit of associates accounted for using the equity method has been disclosed for the first time
in the result from operating activities, as it relates to holdings that are integrated into the operating activities of the KTM Group as material
suppliers or customers. No adjustment has been made to the prior year figures on grounds of immateriality (EUR 133k).

086 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Consolidated income statement

Revenues, minus cash discounts, customer bonuses, and rebates, are recognized upon the passing of the risk as per the terms of the
transaction (Incoterms) or, as the case may be, at the time when performance was rendered. The rules under IAS 11 regarding make-to-order
production (percentage-of-completion method) are not applicable due to the nature of the products made.

Other operating income is realized when the economic benefit arising from the underlying contract becomes probable and a reliable deter-
mination of the income can be made.

In the income statement, the share of the profi t or loss of associates accounted for using the equity method has been disclosed as a separate
line item in the result from operating activities. All of the associates accounted for using the equity method are holdings that are integrated
into the operating activities of the KTM Group as material suppliers or customers.

Interest income is realized pro rata temporis taking into account the effective yield. Dividend income is recognized when the right to
dividend payment arises.

Consolidated statement of financial position

Property, plant and equipment are recognized at cost less depreciation. Depreciation is determined by the straight line method and is based
on the following expected useful lives:

Useful life

Buildings 10 to 50 years
Machinery/tools 2 to 10 years
Fixtures and fittings, tools and equipment 3 to 8 years

The construction costs of self-built property, plant and equipment represent the specific actual costs, including an allocation of production
overheads (indirect materials and indirect labor). Financing costs resulting from the direct attribution of borrowings and/or from the application
of an average interest rate to the expenses incurred, are not capitalized due to the absence of qualifying assets as defined in IAS 23.

Property, plant and equipment held under leasing contracts in which the material opportunities and risks devolve to the lessee (finance leases)
is recognized as an asset. Such assets are recognized at the lower of the fair value and the present value of the future expected minimum
lease payments. They are reported under property, plant and equipment; the corresponding payment obligations are reported under financial
liabilities. Depreciation is charged on a straight-line basis over the useful economic life, or over the term of the lease if shorter. Lease payments
are divided into interest and redemption components. The interest component of lease obligations is recognized directly in the consolidated
income statement.

Goodwill is not amortized but subjected to an annual impairment test. The two brands “KTM” and “Husqvarna” are identified as cash-
generating units in KTM. The corporate assets of the cash-generating unit are compared with the value in use. Where the latter is lower, an
impairment charge is made accordingly, unless the fair value (net of costs to sell) is higher. The value in use is calculated using the discounted
cash flow method assuming a pre-tax WACC of 10.4% (prior year: 10.1%).

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 87

The cash flows used in the impairment test are based on the most recent medium-term planning figures approved by the Supervisory Board.
Medium-term planning usually entails a planning horizon of five years. Beyond the detailed planning horizon, cash flows for the fifth financial
period planned in detail are used as the basis for calculating a perpetuity value. The assumption is made that the business will be a going
concern and no growth discount is applied. Medium-term planning is based on internal assumptions concerning the future development
of sales, prices, and costs, the future opening up of new markets and the composition of the product mix. The assumptions are based mainly
on the wealth of experience gained over many years and management assessments.

Scenarios are calculated regarding the discount rate and budgeted future EBIT. Management has determined, as in the prior year, that
no plausible change in the material assumptions could cause the carrying amount to exceed the recoverable amount.

Intangible assets, if acquired for valuable consideration, are capitalized at cost and are measured less amortization.

Unless stated separately, the amortization period for software and licenses is three to five years.

For intangible assets generated internally, the production period is subdivided into research, development and model update phases. Costs
incurred during the research and model update phases are immediately recognized in profit or loss. Expenditure incurred during the
development phase is capitalized as an intangible asset if the developed product or process meets certain requirements confirming the future
benefit of such expenditure, i.e. primarily if technical feasibility and marketability have been achieved. Intangible assets generated internally
are measured at cost less amortization and impairments. Amortization is charged using the straight line method over a useful life of five
years. Capitalized development costs that can be clearly attributed to specific products or procedures are amortized from the commencement
of series production.

Intangible assets of indeterminate useful life, such as the “KTM” brand (recognized at a value of EUR 61,103k in the course of the initial
purchase price allocation), are not amortized but are instead subjected to an annual impairment test. Any necessary impairment is charged to
profit or loss. The Executive Board assumes an indeterminate useful life for the “KTM” brand because the rights are not subject to any
restrictions as to time, in law or by contract in the relevant markets and because the sustained public awareness of the brand indicates that
there has been no loss of economic value. The KTM brand is attributed to the KTM cash-generating unit.

Brand measurement is based on fair value less costs of disposal. Measurement is performed in accordance with the relief from royalty
method. The royalty rate of 1.5% of revenue which forms the basis for measurement has been derived from comparable publicly available
license agreements. The impairment test as at December 31, 2016 was performed analogously to the goodwill impairment test on the
basis of the current five-year planning figures. An asset-specific cost of capital of 12.5% (prior year: 12.1%) was taken as the discounting
rate. This was made up of the Group pre-tax WACC of 9.5% (prior year: 9.1%) plus a risk premium for the brand of 3.0% (prior year: 3.0%).
The risk premium was derived on the basis of the WACC-to-WARA concept.

The parameters that are material to the measurement of the “KTM” brand are the discount rate, royalty and budgeted revenues. Sensitivity
analysis for these parameters indicates, as in the prior year, that no plausible change in the material assumptions could cause the carrying
amount to exceed the recoverable amount.

088 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Deferred tax items are included to account for future tax effects expected to result from business transactions that have already been recorded
either in the consolidated financial statements or in the tax accounts of the KTM Group (temporary differences). Deferred taxes relating to
tax loss carry-forwards are calculated taking into account their timely realizability. Deferred tax assets and deferred tax liabilities are reported
on a net basis if they are subject to the same tax jurisdiction and are of a similar duration. Deferred tax items for differences between
the tax base of fully consolidated interests or interests measured at equity and the corresponding consolidated equity are recognized only if
realization is probable within the foreseeable future. The calculation is based on the income tax rate customary in the relevant country at the
time when the difference in value is expected to reverse.

Financial instruments

Purchases and sales of all financial instruments are recognized as at the settlement date.

Primary financial instruments

p Securities (held for trading) are measured at their fair value as at the reporting date. Generally, the stock-exchange prices as at the
reporting date are taken as fair values. Changes in measurement are recognized in profit or loss.

p Other financial assets (financial assets available for sale) are measured at their fair value on the reporting date. As a matter of principle,
the stock-exchange prices valid as of the reporting date are recognized as the fair value; changes in the measurement are recognized in other
comprehensive income, provided such changes are material. Other non-current financial assets include equity instruments that are not
quoted in an active market and whose fair value cannot be reliably measured. These are accounted for at cost less impairment. There are
currently no plans to dispose of these holdings.

Impairment losses are recognized for financial assets if there is objective evidence. Such objective evidence includes, for instance, financial
difficulties, insolvency, breach of contract or considerable delay in payment by the obligor or issuer. In the case of an investment in an
equity instrument, a significant or prolonged decline in the fair value below its cost is objective evidence of impairment. The group regards a
decline of 20% as significant and a period of nine months as prolonged.

p Cash and cash equivalents include cash on hand and in banks, checks and time deposits with a fixed term of not more than three months
(calculated from date of acquisition) and are measured at the fair value they have as of the reporting date.

p Receivables and other assets upon initial recognition are measured at fair value and in subsequent periods are measured at amortized
cost. Foreign currency receivables are recognized in the amount translated at the closing rate at the end of the respective reporting period, less
necessary impairment losses to be recorded on account of identifiable risks. Financial receivables are classified as “Loans and receivables”
and measured at amortized cost.

Individual allowances are only made against financial assets if they are regarded as uncollectable or partly uncollectable. Signs that an
individual allowance is required are financial difficulties, insolvency, breach of contract or considerable delay in payment on the part of the
customer. The individual allowances consist of numerous separate items, none of which is material if considered on its own. Financial assets
are only derecognized directly if the contractual rights to receive payment cease to exist (in particular in the case of insolvency). If, in a
subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognized, the previously recognized impairment loss is reversed either directly or by adjusting the allowance account.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 089

p Financial liabilities are measured at amortized cost. Financial liabilities are classified as “Other financial liabilities”. Any difference
between the amount received and the amount repayable is apportioned over the period to maturity using the effective interest method and
recognized in the financial result. Issuing costs incurred in connection with bonds are recognized as an expense over the time to maturity.

p Liabilities are measured at amortized cost. Liabilities denominated in foreign currencies are translated at the closing rate.

Derivative financial instruments and hedges

The group enters into derivative financial instruments (forward currency transactions and interest rate swaps) to hedge foreign currency
and interest rate risk. The aim of using derivative financial instruments is to offset fluctuations in cash flows from future transactions.
Expected revenues in foreign currencies serve as the basis for planning future cash flows.

In accordance with IAS 39, derivatives are generally measured at market value. The KTM Group applies the rules for cash flow hedge
accounting defined by IAS 39 to these derivative financial instruments. Fair value hedge accounting is not applied within the KTM Group.

A cash flow hedge is present if variable cash flows from recognized assets and/or liabilities or forecast business transactions that are subject
to a market price risk are being hedged. If the requirements for a cash flow hedge are met, the effective portion of the change in the
market value of hedging instruments must be recognized directly in consolidated equity. However, it is not recognized in profit or loss until
the hedged transaction takes place. Where foreign currency hedges are used, subsequent changes in the market value of the derivatives are
recognized in profit or loss. Thereafter the change in the market value is compared with the value of the foreign currency trade payables
or receivables as translated at the period-end exchange rate. Any changes in earnings that are caused by the ineffectiveness of the hedge
are recognized in the consolidated income statement.

The application of hedge accounting requires certain conditions to be met. The hedging relationship must be documented and the effective-
ness of the hedge, as determined by regular periodic measurements, must lie between 80% and 125%. Effectiveness tests are conducted
in order to demonstrate that unrealized losses and unrealized gains are effectively offset.

To measure the effectiveness of a currency hedge, the hedged items and the hedging transactions are grouped together in so-called maturity
bands according to the hedged risk. The maturity bands should not cover more than one quarter-year. The hedging relationship is tested
prospectively by comparing the material conditions (maturity, etc.) of the hedged item and the hedging transaction. Hedge effectiveness is
measured retrospectively using the dollar offset approach. This involves comparing and assessing the changes in the fair value of the hedged
item and the changes in the fair value of the hedging transaction.

In the case of interest rate hedges, prospective effectiveness is measured using a sensitivity analysis and retrospective effectiveness testing
is performed using the dollar offset method.

Hedging transactions that do not meet the criteria for hedging instruments within the meaning of IAS 39 qualify as trading transactions
and are classified as “at fair value through profit or loss” (held for trading). Changes in the market value are recognized in their full amount
in profit or loss in the current period and shown in the financial result.

090 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Derivatives are measured at fair value. The fair value is the market value and is determined using accepted methods of financial mathematics.
This determination is based on the market data (interest rate, exchange rate, etc.) prevailing on the reporting date. The forward rate applicable
on the reporting date is used for measuring forward currency transactions. In the case of positive market values, the credit standing of the
counterparty is included in the measurement by means of a credit value adjustment (CVA). In the case of negative market values, a debit value
adjustment (DVA) is deducted in order to account for the own risk of default. Special models are used to estimate the measurement. They
are checked for plausibility by means of bank valuations.

Inventories are measured at the lower of cost or net realizable value on the reporting date. Net realizable value is the estimated proceeds
less estimated selling costs. Inventories are measured using the average cost method based on an analysis of coverage, with write-downs being
made for limited usability. The economic value of existing inventories is also reviewed on a case-by-case basis and additional allowances are
made as required for slow-moving items or items with limited possibilities of sale.

Costs of acquisition include all costs that were incurred in order to bring the object to its required condition and to the relevant location.
Costs of conversion comprise direct material and production costs based on normal capacity usage, plus appropriate portions of materials and
production over-heads. Administrative overheads and selling costs on the other hand do not form part of the costs of conversion. Interest on
borrowings is not capitalized as the inventories do not constitute qualifying assets as defined in IAS 23.

The obligations relating to social capital consist of obligations relating to severance pay and anniversary bonuses. KTM AG is obligated by
law to make severance pay upon termination by the employer or upon retirement to all employees in Austria whose employment relationship
commenced before January 1, 2003. This defined benefit obligation depends on the number of years of service and on the employee’s
relevant remuneration at the time of the event giving rise to the severance pay, and it amounts to between two and twelve monthly remunera-
tion payments. For all employees in Austria who joined after December 31, 2002, KTM AG pays a monthly 1.53% of remuneration into
a staff severance pay fund that invests the contributions in an account maintained for the employee; at the end of the employment relationship,
the amount thus accumulated is paid out or the claim thereto is passed on. KTM AG’s obligation extends only to the making of the contribu-
tions, which are recognized as expenses in the financial year for which they were paid (defined contribution obligation).

Defined benefit obligations in respect of severance pay and anniversary bonuses are measured according to the projected unit credit method
prescribed by IAS 19 (Employee Benefits), based on actuarial reports. The projected unit credit method (also known as the years of service
method) takes account of both the benefits vested as at the reporting date and future expected increases in salaries. This method is used
to determine the present value of the defined benefit obligation (DBO), which is compared where required to the fair value of the plan assets
as at the reporting date.

KTM AG is obligated under collective-bargaining agreements to pay its employees in Austria anniversary bonuses upon attaining a certain
number of years of service (from 25 years of service upwards) (defined benefit obligation). In accordance with IAS 19, the actuarial result is
directly recognized in the consolidated income statement. The interest result is recognized under “Other financial result”.

Any differences (actuarial gains or losses) resulting at year-end between the projected severance payment obligations and the actual value
of the benefits are taken directly to other comprehensive income, net of any deferred taxation.

Provisions are made if a liability is owed to third parties as a result of a past event, a claim is likely to be asserted, and a reliable estimate of
the amount expected to become payable is possible.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 91

Provisions relating to warranties are established and charged through profit or loss at the time when the products are sold.

Government grants are taken into account as soon as there is assurance that they will be received by the KTM Group and that the group
can comply with the requirements that are imposed. In principle, subsidies are accounted for in the consolidated income statement by way
of direct offset against the costs they are intended to cover.

Investment grants from public funds which cannot yet be allocated to expenses incurred and/or which must be repaid are disclosed in
the consolidated financial statements under non-current liabilities.

KTM AG has entered into a supplier finance program (a revolving facility for the financing of trade payables) with an Austrian credit institution.
Under this program, the bank offers suppliers the option to have accounts receivable from KTM AG discounted at the bank and paid out
in advance of the due date. As the financing costs are based on the good credit standing of the KTM Group, the program offers participating
suppliers a low-cost way to obtain early settlement of their KTM AG receivables and thus optimize their working capital. KTM AG settles the
liability on the due date by paying the invoiced amount to the bank.

The program has been reviewed for compliance with civil law and with the stipulations of IAS 39. KTM AG remains legally bound by
the original obligation, as from its point of view only the identity of the creditor changes while the content of the obligation remains unaltered.
Furthermore, the program does not cause any new (additional) obligation to arise on the part of KTM AG to the bank. As the program leads
to no substantial quantitative or qualitative changes in the contractual terms (as per the criteria set out in IAS 39.40 and IAS 39 AG 62),
the liabilities concerned (EUR 64,949k; prior year: EUR 34,338k) are disclosed under trade payables and the cash flows under cash flow
from operating activities.

Estimates and uncertainties in judgments and assumptions

In the consolidated financial statements, certain estimates and assumptions have to be made that affect the recognized assets and
liabilities, the disclosure of contingent liabilities as at the reporting date and the presentation of income and expenses for the financial year.
Estimates and assumptions are based on empirical values that the Executive Board deems appropriate. The amounts actually arising may
differ from the estimates if assumed parameters develop contrary to expectations. If new conditions become known, they are duly taken into
account and the assumptions are revised accordingly.

p Assumptions are made in particular to assess the recoverability of goodwill and intangible assets of indeterminate useful life. Goodwill
of EUR 78,614k (prior year: EUR 78,566k) was recognized at the reporting date, along with the KTM brand, which is valued at EUR 61,103k
(prior year: EUR 61,103k). The annual impairment tests and sensitivity analysis performed are described in the note on accounting policies.

p In cash flow hedge accounting, assessments are made regarding the occurrence of future cash flows. The planning of future cash flows
is derived from sales planning and order volume planning, reviewed against actual figures on a monthly basis and checked for plausibility
based on past experience. In line with the internal guideline on currency hedges, foreign currency hedges are generally entered into on
a rolling basis and cover a period of up to twelve months. The hedge ratio of the individual currencies is determined based on uncertainty in
the planning for the relevant market, on the volatility of the currency and on the hedging costs. Currencies are aggregated by type based on
their significance (volume, relevance to results) and different methods are applied accordingly. However, the hedge ratio per currency must not
exceed 80% of the foreign currency exposure. For details on sensitivities to currency and interest rate risks, please refer to the explanations
provided in note 28.2. “Financial risk management”.

092 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

p Furthermore, estimation uncertainty exists with the recognition and measurement of obligations relating to social capital. Assumptions
are made concerning the following factors: empirical values and demographic assumptions such as the retirement age of women/men
and staff fluctuation, as well as financial assumptions such as the discount rate and future wage and salary trends. Liabilities for severance
pay entitlements of EUR 14,396k (prior year: EUR 12,627k) were recorded. For further explanations, see note 24. “Employee benefits”.

p Regarding provisions, estimates have been made in order to assess probabilities and determine the expected amount for measuring the
obligation. These assumptions essentially concern provisions relating to guarantees and warranties. Based on past experience, a direct
relationship has been established for each product group between revenues and the guarantee and warranty expenses incurred. The Executive
Board, on the basis of longstanding experience, expects this relationship to remain stable. The average percentage value of guarantee and
warranty expenses in terms of revenue is checked several times a year and adjusted if necessary. The amount recognized as a provision
is calculated from the average percentage of revenue accounted for by guarantee and warranty expenses over a three-year observation period.
As of December 31, 2016 provisions for guarantees and warranties of EUR 9,388k (prior year: EUR 8,088k) were recorded. An average
increase in the guarantee cost percentage of 10% would lead to an increase in the provision of EUR 769k (prior year: EUR 685k). For move-
ments in the provisions relating to guarantees and warranties, see note 25. “Provisions”.

The following judgments were made in respect of the application of accounting policies in the KTM Group.

p Inclusion of group companies in the scope of consolidation:

Evaluation of whether a controlling influence exists within the meaning of IFRS 10.
Further details are provided under note 16. “Other non-current assets”.

p Finance leases:
Evaluations were made with respect to the criteria for classification as a finance lease.
Further details are provided under note 13. “Property, plant and equipment” and note 29. “Finance leases”.

p Derecognition of receivables in connection with ABS agreements:

Evaluations were made with respect to the conditions for derecognition under IAS 39.
Further details are provided under note 28. “Other financial instruments”.

p Investment property:
The KTM logistics center is predominantly used by the KTM Group itself. A small portion is let to third parties outside the group.
These subleases to non-group tenants concern companies which have long-term relationships with the KTM Group for the supply of goods
or services, and represent an outsourced part of the KTM value chain. As the subleasing does not serve the purpose of earning rental
income, but is instead carried out in the interests of the operating business, the section that is let to non-group third parties is disclosed
under property, plant and equipment and is not regarded as investment property.

p Supplier finance:
Assessments were made regarding the disclosure of liabilities in relation to the supplier finance program.
Further details are provided under note 4. “Accounting policies”.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 93

III. NOTES TO THE CONSOLIDATED INCOME STATEMENT
5. REVENUE

Revenue by region

EURk 2016 2015

Austria 55,038 43,986

Other Europe 548,524 468,174
North America 327,704 301,767
Other countries 210,553 208,560
1,141,819 1,022,487

Revenue by product group

EURk 2016 2015

Offroad sport motorcycles 526,082 425,359

Street sport motorcycles 381,983 390,616
Sportminicycles 44,749 37,951
X-Bows 5,000 3,214
Total – vehicles 957,814 857,141

Parts, garments and accessories as well as other revenues

less revenue reductions 184,005 165,346
1,141,819 1,022,487

6. PRESENTATION OF EXPENSES BY FUNCTION

The expense items shown in the consolidated income statement according to the cost of sales method can be classified by their function
as follows:

Cost of sales

EURk 2016 2015

Cost of materials and cost of purchased services 684,965 640,895

Personnel expenses 57,465 42,415
Depreciation and amortization relating to property, plant and equipment
and to intangible assets 16,090 12,925
Amortization of capitalized development costs 25,851 24,514
Other operating expenses 7,910 (273)
792,281 720,477

094 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Cost of sales includes income from foreign currency translation differences of EUR 2,720k (prior year: EUR 13,968k), measured at fair value
through profit or loss. These exclude differences arising on the measurement of financial instruments.

Selling and racing expenses

EURk 2016 2015

Cost of materials and cost of purchased services 18,184 12,059

Personnel expenses 53,819 48,029
Depreciation and amortization relating to property, plant and equipment
and to intangible assets 4,501 3,432
Other operating expenses 88,045 76,351
Sponsorship income and contributions (12,451) (7,527)
152,096 132,345

Research and development expenses

EURk 2016 2015

Cost of materials and cost of purchased services 5,751 4,884

Personnel expenses 13,846 10,394
Depreciation and amortization relating to property, plant and equipment
and to intangible assets 3,678 1,401
Other operating expenses 11,465 6,693
Subsidies (8,722) (6,987)
26,017 16,385

Expenses disclosed under research and development expenses comprise research costs and non-capitalizable development costs.

Personnel expenses before the effects of capitalizing development costs were EUR 38,197k (prior year: EUR 30,064k).

Infrastructure and administration expenses

EURk 2016 2015

Cost of materials and cost of purchased services 491 282

Personnel expenses 17,377 14,539
Depreciation and amortization relating to property, plant and equipment
and to intangible assets 6,583 3,747
Rental and leasing expenses 3,958 5,459
Insurance expenses 2,577 2,087
Other operating expenses 12,581 10,634
43,566 36,747

NOTES / NOTES TO THE CONSOLIDATED INCOME STATEMENT 0 95

Sponsorship income and contributions are deducted from the corresponding expenses, as are subsidies.

Total personnel expenses for 2016 before the effects of capitalizing development costs were EUR 122,627k (prior year: EUR 119,162k).

Expenses for the auditor of the financial statements

The expenses attributable to the financial year 2016 for the auditor of the financial statements, KPMG Austria GmbH Wirtschaftsprüfungs-
und Steuerberatungsgesellschaft, amount to EUR 208k (prior year: EUR 200k). Expenses in relation to other assurance services were
EUR 10k (prior year: EUR 14k). Expenses in relation to miscellaneous auditrelated advisory services were EUR 47k (prior year: EUR 24k).

Employees

2016 2015

Employees (annual average)

Manual workers 1,156 1,009
Clerical staff 1,581 1,371
2,737 2,380
Employees as of December 31
Manual workers 1,250 1,062
Clerical staff 1,681 1,453
2,931 2,515
Of which In Austria 2,491 2,100
Of which abroad 440 415

Employee numbers as stated include agency and external staff.

7. OTHER OPERATING EXPENSES

Other operating expenses of EUR 27,526k (prior year: EUR 21,637k) comprise customer service, guarantee and warranty expenses
of EUR 27,329k (prior year: EUR 21,491k) and miscellaneous expenses of EUR 197k (prior year: EUR 146k).

8. OTHER OPERATING INCOME

Other operating income of EUR 107k (prior year: EUR 210k) includes income from the derecognition of a finance lease (prior year: income
of EUR 185k from the disposal of fixed assets and other operating income of EUR 25k).

096 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

9. SHARE OF THE PROFIT OF ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD

EURk 2016 2015

Kiska GmbH, Anif 357 102

KTM New Zealand Ltd., Auckland, New Zealand 36 31
WP AG, Munderfing 1,964 0
2,357 133

10. OTHER FINANCIAL RESULT

The other financial result is made up as follows:

EURk 2016 2015

Foreign exchange valuation of bank deposits 69 (1,617)

Valuation of securities 178 157
Impairment of non-current financial assets (718) (710)
Interest expenses for employee benefits (284) (258)
Income from other investments 68 64
(686) (2,363)

11. TAX EXPENSE

The group’s tax expense and tax income are attributable to current taxes and deferred taxes as follows:

EURk 2016 2015

Current tax
Austria 9,985 3,416
Abroad 4,143 3,220
14,128 6,636
Deferred tax
Austria 7,385 16,534
Abroad (58) 340
Consolidation level 814 (2,013)
8,141 14,861
22,269 21,497

Income taxes comprise taxes on income payable in each country as well as deferred taxes. The Austrian companies of the KTM Group are
subject to a corporate income tax rate of 25%. The calculation of foreign taxes is based on the laws and regulations that are in force or have
been adopted in the individual countries. The tax rates applicable to foreign entities vary from 8.7% to 38.0%.

NOTES / NOTES TO THE CONSOLIDATED INCOME STATEMENT 0 97

The expected tax expense (derived from applying the Group tax rate of 25% to the profit before tax of EUR 94,378k (prior year:
EUR 85,421k)) and the actual tax expense disclosed are reconciled as follows:

EURk 2016 2015

Expected tax expense (23,595) (21,359)

Effects of foreign tax rates (968) (714)
Non-temporary differences (601) (1,328)
Investment allowances 2,090 1,467
Utilization of loss carry-forwards not recognized (331) (208)
Withholding tax 400 222
Taxes in relation to prior periods 152 281
Equity accounting 606 17
Other (22) 125
(22,269) (21,497)

Total deferred tax assets and liabilities were calculated from the following balance sheet items:

EURk Dec. 31, 2016 Dec. 31, 2015

Deferred tax assets

Inventories 6,161 6,676
Financial investments 506 446
Employee benefits 3,063 2,221
Provisions 2,381 2,044
Liabilities 1,910 1,454
14,021 12,841
Deferred tax liabilities
Receivables and other current assets (1,101) (1,134)
Intangible assets (51,519) (43,614)
Property, plant and equipment (2,298) (2,140)
Other (90) (100)
(55,008) (46,988)
(40,987) (34,147)
Of which deferred tax assets 3,317 3,595
Of which deferred tax liabilities (44,305) (37,742)

Deferred tax assets in relation to financial assets include EUR 2,025k (prior year: EUR 1,787k) in relation to the remaining sevenths of
write-downs of equity holdings to going concern value pursuant to section 12 para 3 no 2 of the Austrian Corporate Tax Act (KStG). During the
year under review, sevenths of EUR 480k (prior year: EUR 391k) were released. Deferred tax assets were recognized for all remaining sevenths
in accordance with section 12 of the KStG, as the requirements set out in IAS 12.34 ff. were met.

098 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Temporary differences in relation to intangible assets result mainly from development costs that cannot be capitalized for tax purposes and
the quasi-permanent differences that result from the recognition as an asset of the “KTM” brand.

As of December 31, 2016 (as also at the previous year end), it was to be assumed either that under current tax regulations the differences
between the value for tax purposes of equity interests in consolidated subsidiaries and the proportion of equity recognized in the consolidated
IFRS financial statements (outside-basis differences), which arise largely from retained profits/uncovered losses, will remain untaxed in the
foreseeable future, or that their reversal can be controlled by the Group.

It was also to be assumed either that the differences between the value for tax purposes of equity interests in holdings accounted for using
the equity method and the carrying amount of those holdings (outside-basis differences) will remain untaxed in the foreseeable future, since
there are no plans to dispose of the holdings.

In accordance with IAS 12.39, no deferred tax was recognized in connection with the temporary differences of EUR 46.690k (prior year:
EUR 34,556k) arising in connection with holdings in subsidiaries and financial investments accounted for using the equity method.

Movements in deferred taxes are as follows:

EURk 2016 2015

Deferred tax (net) as of January 1 (34,147) (18,012)

Deferred taxes recognized in the income statement (8,141) (14,861)
Deferred taxes recognized in other comprehensive income 1,199 (1,471)
Currency translation differences 101 197
Deferred tax (net) as of December 31 (40,987) (34,147)

12. EARNINGS PER SHARE

In accordance with IAS 33, earnings per share were calculated based on the consolidated profit after taxes attributable to the owners of the
group parent and the average number of shares outstanding during the year. As of December 31, 2015 and December 31, 2016, the number
of shares outstanding was 10,845,000.

The undiluted (= diluted) earnings per share are calculated as follows:

2016 2015

Share of the profit of owners of the parent company EURk 72,012 63,856
Annual average of stock outstanding Units 10,845,000 10,845,000
Undiluted (= diluted) earnings per share EUR 6.64 5.89

NOTES / NOTES TO THE CONSOLIDATED INCOME STATEMENT 099

IV. NOTES TO THE CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
13. PROPERTY, PLANT AND EQUIPMENT

The tables below provide a breakdown of property, plant and equipment along with movements during 2016 and 2015:

EURk Land Buildings Machinery Fixtures Advance pay- Total

and fittings ments made
tools and and assets
equipment under
construction
COST OF ACQUISITION
AND PRODUCTION
As of January 1, 2015 10,501 76,626 12,945 168,750 19,343 288,165
Additions 543 18,089 10,650 10,183 18,228 57,692
Transfers (23) 12,421 117,343 (106,832) (22,909) 0
Disposals (332) (78) (9,471) (16,779) (173) (26,834)
Currency translation 12 817 7 991 25 1,853
As of December 31, 2015 10,700 107,874 131,475 56,313 14,514 320,876

As of January 1, 2016 10,700 107,874 131,475 56,313 14,514 320,876

Additions 442 1,020 11,169 9,422 16,909 38,962
Additions due to
consolidation scope 4,066 22,800 0 0 0 26,866
Transfers 0 13,663 6,081 2,280 (21,985) 39
Disposals (1,031) (27,059) (635) (2,997) 0 (31,722)
Currency translation 4 128 0 368 6 506
As of December 31, 2016 14,181 118,426 148,090 65,386 9,444 355,527

ACCUMULATED DEPRECIATION
As of January 1, 2015 21 22,371 11,010 130,625 0 164,027
Additions 0 3,006 11,430 6,175 0 20,611
Transfers (21) 21 83,203 (83,203) 0 0
Disposals 0 (30) (9,452) (16,529) 0 (26,010)
Currency translation 0 247 6 756 0 1,009
As of December 31, 2015 0 25,615 96,197 37,825 0 159,637

As of January 1, 2016 0 25,615 96,197 37,825 0 159,637

Additions 0 3,915 14,581 7,378 0 25,874
Additions due to
consolidation scope 0 798 0 0 0 798
Transfers 0 0 69 (69) 0 0
Disposals 0 (1,016) (629) (2,783) 0 (4,428)
Currency translation 0 38 1 319 0 358
As of December 31, 2016 0 29,350 110,219 42,670 0 182,239

Carrying amounts
December 31, 2015 10,700 82,259 35,278 18,488 14,514 161,239
Carrying amounts
December 31, 2016 14,181 89,076 37,871 22,716 9,444 173,288

10 0 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

During 2015, certain assets were reclassified between machinery and fixtures and fittings, tools and equipment. Machinery used for
production purposes is now disclosed under machinery in line with uniform group rules.

The disposals of EUR 26,043k under buildings relate to the cancellation of the finance lease relating to the KTM logistics center.
This is offset by net additions of EUR 26,068k from changes in the scope of consolidation, which are due to the initial consolidation of
KTM Logistikzentrum GmbH.

Additions to buildings in 2016 include an amount of EUR 1,291k (prior year: EUR 14,588k) in relation to assets held under finance leases,
which had no cash flow effect. For more details, please refer to note 29. “Finance leases”.

In the consolidated statement of cash flows, an adjustment of EUR 4,887k (prior year: EUR 7,657k) has been made to additions to
property, plant and equipment to reflect transactions that had no cash flow effect.

The application of IAS 36 did not result in any impairment losses or reversals of impairment losses in respect of property, plant and equip-
ment during the year.

14. INTANGIBLE ASSETS

The tables below provide a breakdown of intangible assets along with movements during 2016 and 2015:

EURk Goodwill Development Concessions, Advance Total

costs industrial payments
property rights made and
and similar assets under
rights and construction
benefits as well
as licenses
derived
thereform

COST OF ACQUISITION AND PRODUCTION

As of January 1, 2015 95,985 145,271 91,989 5,343 338,589
Additions 0 43,469 3,368 6,364 53,201
Transfers 0 0 114 (114) 0
Disposals (121) (31,368) (4,172) 0 (35,661)
Currency translation (43) 0 17 0 (26)
As of December 31, 2015 95,821 157,372 91,316 11,593 356,102

As of January 1, 2016 95,821 157,372 91,316 11,593 356,102

Additions 242 57,841 9,038 310 67,431
Transfers 0 0 11,551 (11,590) (39)
Disposals 0 (37,743) (5,766) 0 (43,509)
Currency translation 22 0 87 0 109
As of December 31, 2016 96,085 177,470 106,226 313 380,094

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 101

EURk Goodwill Development Concessions, Advance Total
costs industrial payments
property rights made and
and similar assets under
rights and construction
benefits as well
as licenses
derived
thereform

ACCUMULATED AMORTIZATION
As of January 1, 2015 17,262 52,928 15,643 0 85,833
Additions 0 22,548 3,260 0 25,808
Transfers 0 0 0 0 0
Disposals 0 (31,400) (3,876) 0 (35,275)
Currency translation (7) 0 (36) 0 (43)
As of December 31, 2015 17,255 44,076 14,992 0 76,323

As of January 1, 2016 17,255 44,076 14,992 0 76,323

Additions 242 25,851 5,490 0 31,583
Transfers 0 0 0 0 0
Disposals 0 (37,743) (5,766) 0 (43,509)
Currency translation (26) 0 71 0 45
As of December 31, 2016 17,471 32,184 14,787 0 64,442

Carrying amounts December 31, 2015 78,566 113,296 76,324 11,593 279,780
Carrying amounts December 31, 2016 78,614 145,286 91,439 313 315,653

In the consolidated statement of cash flows, an adjustment of EUR 901k (prior year: EUR 1,153k) has been made to additions to intangible
assets to reflect transactions that had no cash flow effect.

In 2016, an impairment charge of EUR 214k (prior year: EUR 715k) was recorded against the development costs of assets that were
not available for use, due to the termination of projects. In addition, one project available for use was subjected to an impairment charge of
EUR 2,663k (prior year: EUR 912k) owing to changes in the assumptions made regarding future sales and the resultant impairment
to value.

Capitalized goodwill results from equity consolidation and breaks down as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

Goodwill assigned to the cash-generating unit “KTM” 78,614 78,566

In accordance with IAS 36 Impairment, the goodwill disclosed is not amortized but is tested for impairment on an annual basis. Testing
in 2016 did not reveal a need to record an impairment loss. For the method of calculation, see the Accounting policies section.

By an assignment agreement dated September 17, 2013, KTM AG acquired the license right for the use of the Husqvarna brand from Pierer
Industrie AG for EUR 10,000k. The license right is being amortized over its remaining useful life of 11 years.

10 2 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Another intangible asset is the value of the “KTM” brand. This was recognized at EUR 60,000k in the consolidated financial statements
of KTM AG following the capital increase effected in December 2004 and the ensuing full consolidation of the KTM Group, and subsequently
increased by EUR 1,103k in 2010 due to a payment on account made to KTM Kühler GmbH, Mattighofen; the brand value is subjected
to an annual impairment test in accordance with IAS 36. As of December 31, 2016, this test did not reveal a need to record an impairment
loss. For the method of calculation, see the Accounting policies section.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Associates comprise strategic minority interests in KTM New Zealand Ltd., Auckland, New Zealand, KTM MIDDLE EAST AL SHAFAR LLC,
Dubai, United Arab Emirates, and KTM Asia Motorcycle Manufacturing Inc., Philippines, as well as holdings in Kiska GmbH, Anif, and
WP AG, Munderfing (both Austria).

By way of a sale and purchase agreement dated July 6, 2016, KTM AG 1,200,000 of the 5,000,000 registered shares of no par value
in WP AG, Munderfing, from KTM Industries AG (formerly: CROSS Industries AG), Wels, at a purchase price of EUR 14,400k. This represents
a holding of 24%. Due to the significant influence held by KTM AG, the WP Group is included in the consolidated financial statements of
KTM AG as an associate and accounted for using the equity method.

The acquisition is a “common control” transaction, as WP AG, Munderfing, was controlled by KTM Industries AG (the immediate parent
company of the KTM Group) both before and after it took place. The acquisition method was applied in the same way as under IFRS 3.

The WP Group is one of the leading European suppliers of suspension components for motorcycles and powersport products.
Relations between this company and the KTM Group are set out in note 32.

Summary IFRS financial information for WP AG for the financial year from January 1 to December 31, 2016 is presented in the table below.
The full amounts are disclosed, i.e. they have not been adjusted to reflect KTM AG’s proportionate holding and no consolidation adjustments
have been made.

EURk Dec. 31, 2016

Non-current assets 63,303

Current assets 43,211
Equity 53,460
Non-current liabilities 29,490
Current liabilities 23,564

EURk 2016

Revenue 166,106
Earnings before taxes (EBT) 11,374
Total comprehensive income 14,091
Of which profit for the year 14,228
Of which other comprehensive income (137)

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 10 3

The table below provides a reconciliation from WP AG’s net equity to the carrying amount of the holding:

EURk Dec. 31, 2016

Equity of the owners of the parent company 52,794

Of which amount of the above relating to KTM AG’s holding (24%) 12,671
Goodwill 3,785
Consolidation effects (65)
Carrying amount 16,390

Other holdings in associates are not considered to be material on an individual basis.

KTM New Zealand Ltd. and KTM MIDDLE EAST AL SHAFAR LLC act as general importers for KTM and Husqvarna branded products in
their respective markets.

Kiska GmbH is a design business that provides development and design services for KTM.

The reporting dates of Kiska GmbH and KTM New Zealand Ltd. are March 31 and June 30 respectively. These reporting dates were set
when the companies were founded, before KTM acquired its holdings. A change in the reporting date is not sought on account of materiality
considerations. For the purposes of accounting under the equity method, unaudited interim financial statements as at December 31
were used.

During 2015, the holding in Kiska GmbH increased by 1.1% to 26%.

KTM Asia Motorcycle Manufacturing Inc., Philippines, was founded in June 2016 in partnership with Ayala Corp. The KTM Group holds
26% of the company. The company will begin assembling KTM motorcycles in the Philippines from CKD (completely knocked down) kits in
mid-2017. The company was not yet operationally active as at December 31, 2016. Only immaterial expenses had been incurred, in relation
to the establishment of the company, and no revenue had been earned. On these grounds, the company has not been accounted for using
the equity method as at December 31, 2016.

Investments accounting for using the equity method also include the holding of EUR 2,349k (prior year: EUR 49k) in Mattighofen Museums-
Immobilien GmbH, Mattighofen, which functions purely as a project company (for the construction of KTM World) and makes no operating
profit or loss.

10 4 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Movements in the carrying amounts of holdings accounted for using the equity method were as follows in 2016:

EURk WP AG Other Total

associates

As of January 1, 2016 0 3,064 3,064

Acquisition of holdings in entities accounted for using the equity method 14,400 2,959 17,359
Share of net profit for the year 1,964 393 2,357
Other comprehensive income – cash flow hedge reserve 25 0 25
Other comprehensive income – IAS 19 reserve 1 0 1
Other comprehensive income – foreign currency translation 0 11 11
Dividends 0 (116) (116)
As of December 31, 2016 16,390 6,311 22,702

Movements in the carrying amounts of holdings accounted for using the equity method were as follows in 2015:

EURk Other
associates

As of January 1, 2015 2,920

Share of net profit for the year 133
Other comprehensive income – foreign currency translation (5)
Dividend (78)
Acquisition of holdings in entities accounted for using the equity method 94
As of December 31, 2015 3,064

16. OTHER NON-CURRENT ASSETS

EURk Dec. 31, 2016 Dec. 31, 2015

Non-consolidated subsidiaries 507 941

Investments not accounted for using the equity method 420 634
927 1,575

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 105

17. INVENTORIES

EURk Dec. 31, 2016 Dec. 31, 2015

Raw materials and supplies 29,569 18,098

Work in progress 16,763 13,105
Finished goods and merchandise 118,213 130,091
164,544 161,295

Inventories (gross) 190,667 187,220

Write-down (26,123) (25,925)
Inventories (net) 164,544 161,295

Inventories of EUR 93,041k (prior year: EUR 110,683k), excluding raw materials and supplies, were recognized at their net realizable value.

18. TRADE RECEIVABLES

Trade receivables are made up as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

From third parties 93,694 82,291

From affiliated companies 0 43
From associates 4,660 3,581
From non-consolidated associates and non-consolidated subsidiaries 885 2,287
99,239 88,202

The gross value of third-party trade receivables is stated net of individual allowances of EUR 3,418k (prior year: EUR 1,908k). No general
allowances were made.

Movements in allowances on receivables were as follows:

EURk

As as January 1, 2015 1,696

Exchange rate differences 44
Additions 540
Utilization (267)
Reversals (105)
As of December 31, 2015 = January 1, 2016 1,908

Exchange rate differences (18)

Additions 2,222
Utilization (507)
Reversals (187)
As of December 31, 2015 3,418

10 6 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Expenses for the complete derecognition of trade receivables amounted to EUR 172k (prior year: EUR 300k).

19. OTHER CURRENT ASSETS

Other current assets are made up as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

Receivables arising from derivative financial instruments 3,169 3,553

Receivables arising from financing activities 774 862
Subsidies 6,864 4,575
Deduction of receivables of ABS financing 2,722 2,842
Securities 2,047 1,636
Other 7,459 5,028
Other current financial assets 23,035 18,497

Advance payments for inventories 6,983 3,477

Other current non-financial assets 6,983 3,4774

Other current assets 30,018 21,974

20. CONSOLIDATED EQUITY

Movements in consolidated equity are shown in the consolidated statement of changes in equity (see Annex I/7).

As of December 31, 2016, the share capital amounts to EUR 10,845,000 and is subdivided into 10,845,000 registered shares having
a par value of EUR 1.00 each. The shares grant the customary rights due to stockholders under the Austrian Stock Corporations Act. These
include the right to payout of the dividend resolved upon at the Annual General Meeting as well as the right to vote at the General Meeting.

Following the delisting from the Vienna Stock Exchange in June 2016, the shares were changed from bearer shares to registered shares
in September 2016.

The figure of stock outstanding remained unchanged during 2016 at 10,845,000.

All shares have been paid up in full. The nominal capital shown in the consolidated financial statements is equal to the figure reported in
the separate financial statements of KTM AG.

A dividend of EUR 2.00 per share (prior year: EUR 1.50) was paid during 2016. The total amount paid was EUR 21,690k (prior year:
EUR 16,268k).

The revaluation reserve was generated in 2005 in the course of the gradual acquisition of the former KTM Group GmbH. The amount derived
from the increase in the after-tax value of the KTM brand attributable to the portion of the shares already owned by the group parent company
(formerly: CROSS Holding AG, now KTM AG) before control was obtained.

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 107

The cash flow hedge reserve (after taxes) developed as follows:

EURk

As of January 1, 2015 (3,582)

Realization of hedged item (recognition in operating income) 1,904
Realization of hedged item (recognition in the financial result) 1,132
Addition 1,310
As of December 31, 2015 = January 1, 2016 764

Realization of hedged item (recognition in operating income) (1,619)

Realization of hedged item (recognition in the financial result) 751
Addition (2,271)
Cash flow hedge reserve in relation to entities accounted for using the equity method 25
As of December 31, 2016 (2,350)

As of December 31, 2016, ineffective components of the derivative financial instruments classified as cash flow hedges yielded a net result
(after tax) of EUR 0k (prior year: EUR 0k).

The foreign currency translation reserve comprises all exchange rate differences arising as a consequence of the currency translation of
the annual financial statements of consolidated subsidiaries that had been drawn up in foreign currency.

Net investments in foreign subsidiaries of KTM AG include a loan of USD 3,863k to KTM North America, Inc., USA, with no fixed date
for repayment. As repayment is neither planned nor likely in the foreseeable future, foreign currency translation effects are recognized in other
comprehensive income.

Movements in the foreign currency translation reserve item were as follows:

EURk

As of January 1, 2015 379

Foreign currency translation foreign subsidiaries 425
Foreign currency translation investments accounted for using the equity method (5)
Net investments foreign operations 275
As of December 31, 2015 1,075

Foreign currency translation foreign subsidiaries 1,014

Foreign currency translation investments accounted for using the equity method (11)
Net investments foreign operations 87
Foreign currency translation foreign subsidiaries 2,165

Reserves, including retained earnings, include actuarial losses of EUR 1k (prior year: EUR 0k) in relation to entities accounted for using the
equity method.

10 8 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The following subsidiaries are included in non-controlling investments:

Group company Co-shareholders Share of equity 2016 Share of equity 2015

% EURk % EURk

KTM Technologies GmbH, Kiska Holding GmbH 26.00 26.00 26.00 26.00
Anif
KTM Immobilien GmbH, K KraftFahrZeug Holding GmbH 0.39 62.40 0.39 62.40
Mattighofen (formerly: CROSS
KraftFahrZeug Holding GmbH)
WP Performance Sports GmbH, WP Performance 26.00 26.00 0 0
Munderfing Systems GmbH
KTM Logistikzentrum GmbH, P Immobilienverwaltung GmbH 6.00 6.00 0 0
Mattighofen

Transactions with owners of non-controlling interests

By way of a sale and purchase agreement dated October 7, 2015, KTM AG acquired a 23.9% shareholding with a nominal value of
EUR 23,900k in KTM Technologies GmbH, Anif, from KTM Industries AG (formerly: CROSS Industries AG), Wels for a purchase price of
EUR 100k. The effects of this transaction and the change in the proportion of the equity attributable to the shareholders during the year
under review were as follows:

EURk Dec. 31, 2015

Carrying amount of non-controlling interest acquired 155

Purchase price paid 100
Difference recorded in equity 55

Capital management

Capital management is aimed at maintaining an adequate capital base in order to remain able to achieve a return for the shareholders that
is in line with the company’s risk situation, to further develop the future of the company and to generate benefits for other stakeholders,
too. Only the consolidated equity as reported under IFRS is regarded as capital by Management. As of the reporting date, the consolidated
equity ratio was 40.5% (prior year: 44.7%).

The principal key figures used for capital management purposes are net financial debt, gearing, free cash flow and working capital.

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 10 9

Net financial debt is made up of the following:

EURk Dec. 31, 2016 Dec. 31, 2015

Bonds 83,061 84,845

Promissory note loan 119,572 0
Non-current financial liabilities 92,982 125,480
Current financial liabilities 22,760 6,107
318,375 216,432

Cash and cash equivalents (236,752) (118,406)

Receivables from financing activities (774) (862)
Net financial debt 80,850 97,164

The other key figures are as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

Gearing 19% 26%

Free cash flow 18,838 23,802
Working capital 103,700 122,051

21. BONDS AND FINANCIAL LIABILITIES

A five-year bond (ISIN AT0000A0UJP7) with an issue volume of EUR 85,000k was successfully placed on April 24, 2012. The bond is
listed on the Second Regulated Market of the Vienna Stock Exchange with a denomination of EUR 500.00 and was issued with a fixed coupon
paying interest at 4.375%. In 2016, bonds with a value of EUR 1,966k (nominal value: EUR 1,900k) were repurchased and eliminated from
the financial liability.

Group companies’ liabilities to banks are secured by pledges recorded in the land register and duly filed with a value of EUR 29,052k (prior
year: EUR 29,052k).

110 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Composition of financial liabilities

EURk Dec. 31, 2016 Dec. 31, 2015

Nominal Carrying Nominal Carrying
amount amount amount amount

Non-current financial liabilities

Bonds 0 0 85,000 84,845
Promissory note loan 120,000 119,572 0 0
Research loans 61,875 61,875 75,000 75,000
Promotional loans 12,610 12,610 17,154 17,154
Investment loans 17,485 17,485 12,417 12,417
Finance lease liabilities 1,013 1,013 20,908 20,908
212,983 212,554 125,480 125,480
Current financial liabilities
Bonds 83,100 83,061 0 0
Research loans 13,125 13,125 0 0
Promotional loans 4,544 4,544 0 0
Investment loans 3,415 3,415 2,386 2,386
Finance lease liabilities 278 278 862 862
Other 1,398 1,398 698 698
105,860 105,822 6,107 6,107
318,843 318,376 216,587 216,432

22. OTHER NON-CURRENT AND CURRENT LIABILITIES

Other non-current liabilities essentially comprise the following:

EURk Dec. 31, 2016 Dec. 31, 2015

Security deposits = other non-current financial liabilities 6,923 6,248

Sundry other non-current non-financial liabilities 504 516
Other non-current liabilities 7,426 6,764

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 111

Other current liabilities essentially comprise the following:

EURk Dec. 31, 2016 Dec. 31, 2015

Current employee benefits 24,720 22,040

Tax liabilities 1,257 1,363
Other current non-financial liabilities 25,977 23,403

Liabilities from derivative financial instruments 7,051 2,604

Of which derivatives held for trading 0 144
Of which derivatives held as cash flow hedges 7,051 2,460
Sales bonuses 17,004 13,398
Price discounts 3,757 8,818
Sundry other current financial liabilities 11,194 5,092
Other current financial liabilities 39,006 29,912

Other current liabilities 64,983 53,315

Current employee benefits mainly include liabilities for unconsumed vacations, liabilities for employee bonuses, liabilities to district health
insurance funds, and wage and salary liabilities.

23. TRADE PAYABLES

Trade payables are made up as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

To third parties 153,684 121,468

To affiliated companies 2,844 2,293
To associates 3,556 3,684
160,084 127,445

24. EMPLOYEE BENEFITS

Social capital obligations comprise employee entitlements that become due upon retirement at the age fixed by law or on completion of a
certain number of years of service in the company and thus constitute benefits of a nature similar to pensions. These benefits were calculated
in accordance with the provisions of IAS 19.

The obligations relating to social capital consist of obligations relating to severance pay of EUR 14,396k (prior year: EUR 12,627k)
and obligations to pay anniversary bonuses of EUR 2,914k (prior year: EUR 2,308k). The present value of the defined benefit obligations is
reported in the consolidated statement of financial position. Liabilities relating to social capital are not financed through a fund.

112 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Net liability under defined benefit plans in respect of severance pay developed as follows:

EURk 2016 2015

As of January 1 12,627 11,645

Current service cost 709 713
Interest expenses 242 226
Severance payments (216) (95)
Additions (disposals) 258 (142)
Actuarial loss 759 280
Other 19 0
As of December 31 14,369 12,627

The actuarial loss is made up of the following factors:

EURk 2016 2015

Change in expected values 261 1,151

Change in demographic assumptions 27 37
Change in financial assumptions 470 (908)
Actuarial loss 759 280

The measurement of the obligation is based on the following assumptions:

2016 2015

Discount rate 1.50% 2.00%

Trend in wages and salaries 2.25% 2.50%
Retirement age women/men (with transitional provisions) 62 years 62 years

The discount rate was determined taking into account the very long average terms and the long average remaining lifespans. The discount
rate is the market yield on high quality fixed-interest corporate bonds on the reporting date.

Employee fluctuation is determined on a company-specific basis and takes account of age and length of service. The actuarial measurements
are based on country-specific mortality tables. The chosen retirement age is the statutory retirement age in each country.

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 113

A sensitivity analysis of the claims to severance pay calculated on the basis of actuarial principles showed a change in actuarial parameters
to have the following effects in 2016:

Change in Change in DBO

assumption when parameter when parameter
decreases increases

Discount rate 0.5%-points 7.1% (6.5%)

Trend in wages and salaries 0.5%-points (6.5%) 7.0%

A sensitivity analysis of the claims to severance pay calculated on the basis of actuarial principles showed a change in actuarial parameters
to have the following effects in 2015:

Change in Change in DBO

assumption when parameter when parameter
decreases increases

Discount rate 0.5%-points 7.3% (6.6%)

Trend in wages and salaries 0.5%-points (6.6%) 7.2%

The following table shows the expected amounts for the defined benefit plans over the next several years:

EURk Dec. 31, 2016 Dec. 31, 2015

Within the next 12 months 707 696

Between 2 to 5 years 2,998 2,501
Between 6 to 10 years 3,144 2,907
More than 10 years 15,862 16,451
Total expected payments 22,712 22,555

The obligations relating to claims to anniversary bonuses developed as follows:

EURk 2016 2015

As of January 1 2,308 1,871

Current service cost 235 195
Interest expenses 46 37
Anniversary bonus payments 0 0
Additions 69 0
Actuarial loss 259 198
Other (3) 7
As of December 31 2,914 2,308

The weighted average durations of the obligations for severance pay and anniversary bonuses at December 31, 2016 were 14 and 16 years
respectively (prior year: 14 and 16 years).

114 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

For employees of Austrian group companies whose employment commenced on or after January 1, 2003, contributions amounting to 1.53%
of wages or salary were paid into a statutory staff severance pay fund. Total contributions of EUR 1,168k were paid during the year (prior year:
EUR 920k).

25. PROVISIONS

Movements in short-term provisions are shown in the table below:

EURk Provisions Provisions Total

relating to for litigation current
guarantees provisions
and
warranties

As of January 1, 2015 6,360 400 6,760

Utilization (6,360) (50) (6,410)
Reversals 0 (220) (220)
Additions 8,088 645 8,733
As of December 31, 2015 8,088 775 8,863

As of January 1, 2016 8,088 775 8,863

Utilization (8,088) (337) (8,425)
Reversals 0 (334) (334)
Additions 9,388 715 10,103
As of December 31, 2016 9,388 819 10,207

The KTM Group makes provisions relating to guarantees and warranties. The amounts of expected expenses are primarily based on earlier
experience. For more details, see the note on estimates and uncertainties in judgments and assumptions.

26. STATEMENT OF CASH FLOWS

Changes in balance sheet items as presented in the statement of cash flows cannot be derived directly from the statement of financial position,
since non-cash effects due to currency translation and other non-cash items are eliminated.

Other non-cash income and expenses are made up as follows:

EURk 2016 2015

– Profits/+ losses on disposal of intangible assets and property, plant and equipment 1,251 341
+ Addition/– reversal of employee benefits 1,806 1,209
– Remaining other non-cash income/+ expenses (3,151) (5,139)
(94) (3,589)

Other non-cash income/expenses mainly comprise changes in the measurement of foreign currency receivables and payables and movements
in allowances on receivables and inventories.

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 115

V. OTHER NOTES
27. RISK REPORT

Risk principles

As a group of companies doing business on a global scale, the KTM Group faces a multitude of possible risks that are monitored by means
of a comprehensive risk management system. The Executive Board and Supervisory Board are periodically informed about risks that may have
a major impact on the group’s business operations. Management takes timely action to avoid, minimize and hedge risks.

An internal control system adapted to the company’s needs and incorporating basic principles such as segregation of duties and dual control
has been integrated into the financial reporting process. Internal and external audits ensure that the processes are continually improved
and optimized. Furthermore, a uniform reporting system is in place throughout the group, for the ongoing management and control of the risk
management process.

Continuous growth depends on a variety of factors, such as demand behavior, product development, changes in foreign exchange rates,
the general economic setting in the individual markets, prices of goods purchased from others, or employee development.

Annual model planning: The assessment of the market situation as well as annual model planning have a major impact on the development
of the group’s revenue and income. Increased market research activities and a model policy reflecting the resulting findings are means
of responding to a market environment characterized by rapidly changing situations. Group reporting processes continued to be refined in the
financial year 2016 so that the Executive Board is informed even sooner, and more comprehensively, about the degree of target achievement
and about changes concerning markets and competition.

Industry-specific and operational risks

Restrictions relating to motorcycling: The revenue of the KTM Group depends, inter alia, on the possible offroad uses of its motorcycles
and is therefore considerably influenced by the national legal framework regulating offroad motorsport, motorcycle registration and rider’s
licenses in the countries where the vehicles are sold.

Technical innovation, racing: Technical innovation and the introduction of new products make a significant contribution to KTM’s competitive
positioning. To this end, new trends must be identified promptly. To counteract the risk, our own products’ innovative capacity must be
ensured. KTM therefore places a high value on the early recognition of motorcycle trends, on research and development regarding engineering
and functionality and on researching customer wishes so as to achieve innovative product development close to the market. Racing achieve-
ments are not only an important marketing instrument for the company but also form the basis for product development and set standards
for series development. Valuable experience is gathered whenever products can be tested in racing conditions at racing events. Before being
introduced into series production, all technical innovations are moreover subjected to comprehensive testing by the quality management
system so as to eliminate, to the greatest extent possible, any technical defects that could have a negative effect on earnings development.

116 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Product liability risk: In its business environment, the KTM Group is also exposed to claims for damages raised because of accidents and
injuries. This applies especially to the US, where claims asserted in product liability cases involve higher amounts of liability. Corresponding
insurance has been taken out to hedge these risks.

Procurement risk: In view of the current developments on the national and international markets, the procurement risk faced by the
KTM Group mainly involves the timely introduction of suitable measures to ensure the supply of parts if suppliers become insolvent or supply
bottlenecks materialize. KTM is therefore exposed to this risk only indirectly. To minimize risk and ensure the availability of materials, KTM
places great emphasis on using predetermined criteria to carefully select new suppliers and on sustainably collaborating with existing suppliers
and/or further developing such cooperations in stable supplier relationships with a long-term approach.

As the quality of KTM’s products is strongly determined by the quality and characteristics of the subcomponents to be sourced, particular
attention is paid to the creditworthiness, operating facilities and production processes of suppliers. The continuous availability of parts is
ensured by appropriate monitoring.

Market related risks

Cyclical risk: The focus of activities of the KTM Group is on the motorcycle industry. The sales opportunities for motorcycles are determined
by the general economic trend prevailing in the countries and regions where motorcycle manufacturers do business. As these last years
have shown, the motorcycle industry is generally a cyclical industry and is moreover subject to strong fluctuations regarding demand. This risk
is counteracted by relevant market research and market forecasts, which are then taken into account in the planning process.

Competition and pricing pressure: The market for motorcycles in the industrialized countries is characterized by intense competition; KTM’s
strongest competitors are four Japanese, three European and, to a lesser extent, one US manufacturer, some of which possess greater
financial resources and have higher sales figures and market shares. The street motorcycle market is, in addition, characterized by high pricing
pressure, and new competitors are trying to enter the market by relying on a low-price strategy. Due to KTM’s successful market strategy,
market leadership has been achieved in Europe.

Sales risk: The largest individual sales markets of the KTM Group are the European market and the US. A slump in these markets could
have a negative impact on the business activities of the KTM Group. Entering new markets essentially involves a cost risk for the KTM Group
as, in some of these markets, the trend of sales as well as the political framework conditions are difficult to assess. By collaborating with its
strategic partner Bajaj Auto Ltd., Pune, India, KTM continues to work steadily towards the implementation of a global product strategy.

Financial risks

With regard to financial risks (currency risks, interest rate risks, default risks as well as liquidity risks), please refer to the comments under
note 28.

NOTES / OTHER NOTES 117

Other risk factors

Risks due to the legal framework: As the KTM Group markets its motorcycles in a large number of countries, it is exposed to the risk of
changes in national regulations, terms of licenses, taxes, trade restrictions, prices, income and exchange restrictions as well as to the risk of
political, social and economic instability, inflation and interest rate fluctuations.

Motorcycles registered for road use must comply with relevant provisions concerning noise and exhaust gas emissions in order to be approved
for sale in each country. In addition, the possible offroad uses of motorcycles are considerably influenced by the national legal framework
in the countries where the vehicles are sold. To counteract the risk, the regulations in each country are analyzed in detail prior to market entry
and subsequently monitored on an ongoing basis so that timely responses can be made to any changes.

Business and environmental risk: Although risk cannot be fully excluded as regards forces of nature, KTM tries to minimize the risk of
production processes being affected, by providing appropriate contingency plans and insurance.

Personnel-related risks: Especially with regard to the growth course, risks may arise if key staff leave the company. Efficient personnel
management as well as the constant pursuit of personnel development programs are designed to counteract the risk of managerial staff leaving
the company.

The risk of a shortage of skilled staff is minimized by a comprehensive apprentice training program in our own apprentice workshop. The aim
is to recruit employees from the region and to retain them in the long term.

28. FINANCIAL INSTRUMENTS

28.1. Classification and fair value

The fair value of a financial instrument is determined by means of quoted market prices for identical instruments in active markets (Level 1).
If no quoted market prices in active markets are available for the instrument, the fair value is determined by means of measurement techniques
for which the material inputs are based exclusively on observable market data (Level 2). In all other cases, the fair value is determined on the
basis of measurement techniques for which at least one material input is not based on observable market data (Level 3).

Reclassifications from one level to another are taken into account at the end of the reporting period. There were no transfers between levels
in the financial year.

The table below shows the carrying amounts and fair values of financial assets by class and IAS 39 measurement category. Nevertheless,
it does not provide information on the fair value or measurement level of financial assets not measured at fair value, where the carrying amount
is a reasonable approximation of fair value or where the asset is an equity instrument measured at acquisition cost.

118 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Carrying Fair value Fair value
amount Level 1 Level 2 Level 3 Total

DECEMBER 31, 2016

LOANS AND RECEIVABLES
Cash and cash equivalents 236,752 – – – – –
Trade receivables 99,239 – – – – –
Other financial assets 17,819 – – – – –
353,810 –
AVAILABLE FOR SALE
Other non-current
financial assets 927 – – – – –
927 –
HELD FOR TRADING
Other current assets –
securities 2,047 2,047 2,047 – – 2,047
2,047 –
FAIR VALUE –
HEDGING INSTRUMENTS
Other current assets –
Derivatives with positive
market value (cash flow hedge) 3,169 3,169 – 3,169 – 3,169
3,169 –
Total 359,953 –

DECEMBER 31, 2015

LOANS AND RECEIVABLES
Cash and cash equivalents 118,406 – – – – –
Trade receivables 88,202 – – – – –
Other financial assets 13,307 – – – – –
219,915 –
AVAILABLE FOR SALE
Other non-current
financial assets 1,575 – – – – –
1,575 –
HELD FOR TRADING
Other current assets –
securities 1,636 1,636 1,636 – – 1,636
1,636 –
FAIR VALUE –
HEDGING INSTRUMENTS
Other current assets –
Derivatives with positive
market value (cash flow hedge) 3,553 3,553 – 3,553 – 3,553
3,553 –
Total 226,680 –

NOTES / OTHER NOTES 119

Receivables sold in connection with the current ABS program are derecognized in accordance with the rules under IAS 39. Under the
ABS program, receivables insured on a revolving monthly basis are sold up to a maximum volume of EUR 75,000k (prior year: EUR 75,000k).
As at the reporting date, trade receivables of EUR 54,071k (prior year: EUR 55,067k) had been sold to third parties. The agreement was
entered into in 2012 and amended in 2014 and 2015. It runs until 2022. KTM continues to bear a risk from credit risk related defaults
up to a contractually stipulated amount. As at December 31, 2016, the maximum ensuing risk of loss was EUR 391k (prior year: EUR 385k).
The expected loss is recorded as a liability and expensed at the time of sale. The carrying amount of the ongoing commitment was EUR 391k
(prior year: EUR 385k) as at December 31, 2016. It is disclosed under other current liabilities. The carrying amount represents the fair
value of the ongoing commitment. Expenses of EUR 6k (prior year: EUR 43k) were recognized through profit or loss in the period under
review; the cumulative total since the start of the agreement is EUR 391k (prior year: EUR 385k). The volume is not subject to any material
fluctuations.

The table below shows the carrying amounts and fair values of financial liabilities, broken down by class and IAS 39 measurement category.
However, it does not provide information on the fair value or measurement level of financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.

EURk Carrying Fair value Fair value

amount Level 1 Level 2 Level 3 Total

DECEMBER 31, 2016

AT AMORTIZED COST
Financial liabilities 114,452 116,254 – – 116,254 116,254
Finance lease liabilities 1,291 – – – – –
Trade payables 160,084 – – – – –
Bond 83,061 84,928 84,928 – – 84,928
Promissory note loan 119,572 123,112 – – 123,112 123,112
Other current and non-current
financial liabilities 38,878 – – – – –
517,337 –
HELD FOR TRADING
Other financial liabilities –
Derivatives with
negative market value – – – – – –
– –
FAIR VALUE –
HEDGING INSTRUMENTS
Other financial liabilities –
Derivatives with negative
market value (cash flow hedge) 7,051 7,051 – 7,051 – 7,051
7,051 –
Total 524,388 –

12 0 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Carrying Fair value Fair value
amount Level 1 Level 2 Level 3 Total

DECEMBER 31, 2015

AT AMORTIZED COST
Financial liabilities 109,817 111,651 – – 111,651 111,651
Finance lease liabilities 21,770 – – – – –
Trade payables 127,445 – – – – –
Bond 84,845 88,613 88,613 – – 88,613
Other current and non-current
financial liabilities 33,556 – – – – –
377,435 –
HELD FOR TRADING
Other financial liabilities –
Derivatives with
negative market value 144 144 – 144 – 144
144 –
FAIR VALUE –
HEDGING INSTRUMENTS
Other financial liabilities –
Derivatives with negative
market value (cash flow hedge) 2,460 2,460 – 2,460 – 2,460
2,460 –
Total 380,038 –

Fair value determination

The table below shows the measurement techniques used to determine fair value as well as the significant unobservable input factors used.

Type Measurement Significant Connection between

technique unobservable significant unobservable
input factors input factors and
measurement at fair value

Financial instruments measured at fair value

Forward currency transactions Market comparison method: Not applicable Not applicable
and interest rate swaps Fair values are based
on the market values
determined using recog-
nized valuation models.
They are regularly checked
for plausibility
Securities Securities are measured Not applicable Not applicable
at the current quoted price
on the reporting date

NOTES / OTHER NOTES 121

Type Measurement Significant unobservable input factors
technique

Financial instruments not measured at fair value

Bonds The listed bond Not applicable
is measured at
the closing price on
the reporting date
Promissory note loan, Discounted cash flows Risk premium for own credit risk
financial liabilities

Set-off of financial assets and liabilities

The group enters into set-off agreements with banks in connection with derivatives. Generally, the amounts owed under such agreements
by each counterparty on a given day for all outstanding transactions in the same currency are aggregated into a single net amount payable by
one party to the other. In certain cases – e. g. when a credit event such as a default occurs – all outstanding transactions under the agreement
are terminated, their value as of termination is determined and only a single net amount is payable for settling all transactions. These items
are not set off in the statement of financial position, since the net set-off of multiple transactions under the same framework agreements does
not generally occur.

KTM paid a one-off security deposit of EUR 4,707k in relation to the Munderfing logistics center (disclosed as a finance lease in the prior
year) and made ongoing monthly deposit payments totaling EUR 53k to the lessor. According to the terms of the lease contract, these deposits
were to be returned to the lessee on termination of the lease. In accordance with IAS 32.42, the deposit was therefore set off against the
liability under the finance lease. As stated in note 29, the finance lease was cancelled ahead of term during 2016.

The tables below show financial assets and liabilities that have been offset along with amounts that are subject to a set-off agreement but
which have not been set off as they do not fulfill the criteria for set-off prescribed under IFRS.

12 2 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Financial Offset Recognized Effect Net
assets on-balance- financial of master amounts
(gross) sheet assets set-off
amounts (net) agreements
(gross)

FINANCIAL ASSETS 2016

Other financial assets –
Derivatives with positive market value
Foreign currency forwards 3,169 0 3,169 (2,043) 1,126
Total 3,169 0 3,169 (2,043) 1,126

EURk Financial Offset Recognized Effect Net

liabilities on-balance- financial of master amounts
(gross) sheet liabilities set-off
amounts (net) agreements
(gross)

FINANCIAL LIABILITIES 2016

Other financial liabilities –
Derivatives with negative market value
Foreign currency forwards 6,503 0 6,503 (2,043) 4,460
Interest rate swaps 548 0 548 0 548
7,051 0 7,051 (2,043) 5,008
Total 7,051 0 7,051 (2,043) 5,008

EURk Financial Offset Recognized Effect Net

assets on-balance- financial of master amounts
(gross) sheet assets set-off
amounts (net) agreements
(gross)

FINANCIAL ASSETS 2015

Other receivables 4,760 (4,760) 0 0 0
Other financial assets –
Derivatives with positive market value
Foreign currency forwards 3,553 0 3,553 (1,143) 2,410
Total 8,313 (4,760) 3,553 (1,143) 2,410

EURk Financial Offset Recognized Effect Net

liabilities on-balance- financial of master amounts
(gross) sheet liabilities set-off
amounts (net) agreements
(gross)

FINANCIAL LIABILITIES 2015

Finance lease liabilities 26,530 (4,760) 21,770 0 21,770
Other financial liabilities –
Derivatives with negative market value
Foreign currency forwards 1,317 0 1,317 (1,143) 174
Interest rate swaps 1,287 0 1,287 0 1,287
2,603 0 2,603 (1,143) 1,460
Total 29,134 (4,760) 24,374 (1,143) 23,231

NOTES / OTHER NOTES 123

The table below shows the net profit or loss from the financial instruments by IAS 39 measurement category. The results shown include net
gains/losses, total interest income/expenses and impairment losses:

EURk From From From value From Net result

interest subsequent adjustment/ gain (loss) (total)
fair value allowance of disposal
measurement

2016
Loans and receivables 1,865 0 (2,035) (172) (342)
Available for sale 68 0 (718) 0 (650)
Fair value – Held for trading 0 178 0 0 178
At amortized cost (8,776) 0 0 0 (8,776)
Total (6,843) 178 (2,753) (172) (9,589)

2015
Loans and receivables 1,304 0 (435) (300) 569
Available for sale 64 0 (710) 0 (646)
Fair value – Held for trading (144) 356 0 0 212
At amortized cost (7,393) 0 0 0 (7,393)
Total (6,169) 356 (1,145) (300) (7,258)

Changes in allowances and the derecognition of loans and receivables are disclosed in other operating expenses for the relevant overhead
areas. The remaining components of the net result are included in financial income and expenses.

28.2. Financial risk management

Principles of financial risk management

The KTM Group is subject to credit, market and liquidity risks regarding its assets, liabilities and planned transactions. Financial risk
management is aimed at controlling and limiting those risks. The Executive Board and the Supervisory Board are informed on a regular basis
about risks that can have a major impact on the group’s business operations.

The principles of financial risk management are laid down and monitored by the Supervisory Board as well as by the Executive Board. Group
Treasury is responsible for their implementation. To protect itself against the financial risks described below, the KTM Group uses derivative
financial instruments in order to safely hedge cash flows from operating activities against fluctuations in exchange rates and/or interest
rates. With foreign currency hedges, the timescale for hedging generally covers current open items and any transactions planned for the next
twelve months. In exceptional cases, strategic hedge positions involving longer time periods may be entered into in consultation with the
Supervisory Board.

124 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Currency risks

As an enterprise doing business on a global scale, the KTM Group is influenced by general global economic data such as changes in
currency rates or developments in the financial markets. As the US dollar represents the highest individual foreign currency risk faced by the
KTM Group, movements in the US dollar exchange rate are of particular importance to the development of the group’s revenue and income.
Approximately 24% of revenues were earned in US dollars in 2016 (prior year: 25%). Such currency shifts can for the most part be offset
over at least one model year by taking currency hedging measures and employing hedging strategies; for the financial year 2017, the US dollar
business was hedged by means of positions involving EUR/USD rates ranging from 1.0735 to 1.1495.

The group is exposed to further currency risks where financial assets and liabilities are settled in a currency other than the local currency
of the relevant company. The companies of the group predominantly do their invoicing in local currency and largely take out financing in local
currency. Financial investments are primarily made in the local currency of the investing group company. For these reasons, most resulting
currency positions will be closed out naturally.

Sensitivity analyses have been performed on currency risks in relation to financial instruments in order to show the effects that hypothetical
changes in the exchange rates have on profit or loss (after taxes) and on the consolidated equity. The relevant balances as of the reporting
date and foreign currency purchases and sales budgeted for 2016 were used as a basis. It was assumed that the risk faced on the reporting
date essentially represents the risk present during the financial year. The group tax rate of 25% was used as the tax rate. Furthermore
it was assumed in the analysis that all other variables, in particular the interest rates, remained constant. Currency risks relating to financial
instruments of a monetary nature that are denominated in a currency other than the functional currency were included in the analysis.

Currency risks relating to euro items in subsidiaries whose functional currency is not the euro were attributed to the currency risk of
the subsidiary’s functional currency. Risks from foreign currency positions apart from the euro were aggregated on group level. Exchange rate
related differences due to the translation of financial statements into the group currency were disregarded.

A sensitivity analysis is conducted for currency risk. In this respect effects of changes in the exchange rate of ±10% are shown on profit or
loss, other income, and equity.

The KTM Group bases the analysis on the following assumptions:

p For the sensitivity of profit or loss, the Group’s bank balances, receivables and payables are considered, as are future receipts and pay-
ments in foreign currency that are not accounted for in the functional currency of the group company. Account is also taken of open derivatives
on cash flow hedges where the hedged item has already been realized on the reporting date (recognized as income). Exposure, taking account
of derivative currency hedges, is indicated in the table below.

p For the sensitivity of other income, account is taken of open derivatives from cash flow hedges where the hedged item has not yet been
realized on the reporting date (movements are not recognized in profit or loss). The exposure corresponds to the notional amount of the open
derivatives.

NOTES / OTHER NOTES 125

EURk Exposures Sensitivity Exposures Sensitivity
Dec. 31, 2016 Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2015
Devaluation Revaluation Devaluation Revaluation
of EUR of EUR of EUR of EUR
by 10% by 10% by 10% by 10%

EUR – USD 48,403 (4,053) 3,316 31,063 (2,603) 2,130

EUR – GBP 27,024 (2,253) 1,843 6,158 (514) 421
EUR – CAD 24,775 (2,065) 1,689 15,351 (1,279) 1,047
EUR – JPY (53,208) 4,434 (3,628) (31,963) 2,664 (2,179)
EUR – CHF 15,040 (1,253) 1,025 3,534 (294) 240
Other 46,952 (3,524) 2,883 23,662 (2,009) 1,644
Sensitivity of profit or loss
(receivables and liabilities) (8,713) 7,129 (4,036) 3,302
Sensitivity of other
comprehensive income
(by cash flow hedge derivatives) 14,305 (11,704) 8,930 (7,307)
Sensitivity of equity 5,592 (4,575) 4,895 (4,005)

+ Expenses / – Income

Interest rate risks

Certain financial instruments on both the assets side and the liabilities side bear interest at variable rates. Thus the risk consists in rising
interest expenses or falling interest income resulting from an adverse change in market interest rates.

The KTM Group has refinanced part of its debt at variable rates and is thus exposed to the risk of interest rate fluctuations on the market.
Regular monitoring of the money and capital markets and the use of interest rate swaps (fixed interest rate payer swaps) serve to respond to
this risk. Under the interest rate swaps entered into, the entity receives variable interest payments and, in return, pays fixed interest on the
notional amounts of the contracts entered into.

Interest rate risks thus result mainly from primary financial instruments carrying interest at variable rates (cash flow risk). Sensitivity analyses
were performed on the interest rate risks of these financial instruments in order to show the effects that hypothetical changes in the market
interest rate level have on profit or loss (after tax) and on the consolidated equity. The relevant balances as of the reporting date were used
as a basis. It was assumed that the risk faced on the reporting date essentially represents the risk present during the financial year. The group
tax rate of 25% was used as the tax rate. Furthermore it was assumed in the analysis that all other variables, in particular the exchange rates,
remained constant.

For interest rate risk, exposures at the reporting date in the form of carrying amounts were as below:

EURk Fixed Variable Not interest Total

interest interest bearing

DECEMBER 31, 2016

Cash and cash equivalents1 81,783 154,969 0 236,752
Financing volume ABS program 0 (54,071) 0 (54,071)
Financial liabilities and finance lease liabilities (143,347) (91,968) 0 (235,314)
Bond (83,061) 0 0 (83,061)
Total (144,625) 8,931 0 (135,695)

1
Variable interest subject to zero per cent floor for reference interest rate

126 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Fixed Variable Not interest Total
interest interest bearing

DECEMBER 31, 2015

Cash and cash equivalents 1,620 88,146 28,640 118,406
Financing volume ABS program 0 (55,067) 0 (55,067)
Financial liabilities and finance lease liabilities (62,963) (68,623) 0 (131,586)
Bond (84,845) 0 0 (84,845)
Total (146,189) (35,544) 28,640 (153,093)

A sensitivity analysis was performed on interest rate risk. This showed the effects of changes in the interest rate of ±50 basis points on profit or
loss, other comprehensive income and equity.

EURk Sensitivity Sensitivity

Dec. 31, 2016 Dec. 31, 2015
Decrease of Increase of Decrease of Increase of
interest level interest level interest level interest level
by 50 basis by 50 basis by 50 basis by 50 basis
points points points points

Sensitivity of profit or loss (receivables and liabilities) 0 146 (144) 144

Sensitivity of other comprehensive income
(by cash flow hedge derivatives) (245) 240 (406) 398
Sensitivity of equity (245) 386 {551) 542

+ Expenses / – Income

Default risks (credit risks)

The risk of default on receivables from customers may be rated as low, as ongoing checks of the creditworthiness of new and existing customers
are performed and collateral is requested. Like-wise, the default risk for other financial assets is to be regarded as low, as the counterparties
are debtors of optimum creditworthiness. The default risk on derivative financial instruments with positive market value is limited to their
replacement cost; as all the counterparties are banks of good creditworthiness the default risk can be classified as low.

Default risks are largely hedged in the KTM Group by means of credit insurance and bankable security (guarantees, letters of credit). The
default risks and related controls are defined in internal guidelines.

On the assets side, the amounts reported also represent the maximum default risk. In addition, there are no general set-off agreements, with the
exception of the set-off agreement described under note 28.1. to the consolidated financial statements.

NOTES / OTHER NOTES 127

The carrying amounts of the receivables comprise the following:

EURk Carrying Of which: Of which: not impaired as of the closing date and Of which:
amount neither overdue within the following time bands impaired
impaired nor Up to 30 to 60 to More than
overdue 30 days 60 days 90 days 90 days
as of the
closing date

DECEMBER 31, 2016

Trade receivables 99,239 83,114 11,228 901 700 2,480 816
Other financial receivables 17,819 17,819 0 0 0 0 0
Total 117,058 100,933 11,228 901 700 2,480 816

DECEMBER 31, 2015

Trade receivables 88,202 73,951 8,210 722 271 3,352 1,696
Other financial receivables 13,307 13,307 0 0 0 0 0
Total 101,509 87,258 8,210 722 271 3,352 1,696

As regards the current portfolio of trade and other receivables that are neither impaired nor past due, there are no indications as of the
reporting date that the debtors will not meet their payment obligations. There are no concentration risks. For a reconciliation of the allowance
to the portfolio of trade receivables, see note 18.

Liquidity risks

It is a material objective of financial risk management in the KTM Group to ensure solvency and financial flexibility at all times. Factors con-
tributing to liquidity risks include, in particular, proceeds from revenues being below the planning assumptions due to weaker demand. For
this purpose, the group maintains a liquidity reserve in the form of unused credit lines (cash credits and guarantee credits) and, if needed, in
the form of cash in banks of a high creditworthiness. Top priority is given to ensuring liquidity over the short and medium term. Another
major control parameter is the maximization of free cash flow by cost-cutting measures, proactive working capital management and reduced
investment expenditure. From today’s perspective, sufficient commitments have been given concerning the creditworthiness of our strategic
financing partners and thus the security of short-term liquidity reserves.

Non-current liquidity requirements are met by the issuance of shares and bonds and by taking out bank loans.

The contractually agreed (undiscounted) cash flows (payments of interest and principal) and the remaining terms to maturity of the financial
liabilities comprise the following:

128 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Carrying Cash flows 2017 Cash flows 2018 to 2021 Cash flows as from 2022
amount Interest Interest Re- Interest Interest Re- Interest Interest Re-
Dec. 31, fixed variable demption fixed variable demption fixed variable demption
2016

AT AMORTIZED COST
Financial liabilities 114,452 1,173 494 21,084 2,207 687 88,207 129 – 3,763
Finance lease liabilities 1,291 – 13 278 – 22 1,013 – – –
Trade payables 160,084 – – 160,084 – – – – – –
Bonds 83,061 1,178 – 83,100 – – – – – –
Promissory note loan 119,572 1,272 562 – 5,062 2,232 8,000 5,166 1,363 112,000
Other current and
non-current financial liabilities 38,878 – – 38,878 – – – – – –
517,337 3,623 1,069 303,424 7,270 2,942 97,220 5,295 1,363 115,763
HELD FOR TRADING
Other financial liabilities –
Derivatives with
negative market value – – – – – – – – – –
– – – – – – – – – –
FAIR VALUE –
HEDGING INSTRUMENTS
Other financial liabilities –
Derivatives with negative
market value (cash flow hedge) 7,051 273 – 6,249 818 – 255 – – –
7,051 273 – 6,249 818 – 255 – – –
Total 524,388 3,895 1,069 309,673 8,088 2,942 97,474 5,295 1,363 115,763

EURk Carrying Cash flows 2016 Cash flows 2017 to 2020 Cash flows as from 2021
amount Interest Interest Re- Interest Interest Re- Interest Interest Re-
Dec. 31, fixed variable demption fixed variable demption fixed variable demption
2015

AT AMORTIZED COST
Financial liabilities 109,817 1,055 626 5,245 2,538 1,499 96,173 – 71 8,399
Finance lease liabilities 21,770 – 393 862 – 1,410 3,610 – 2,230 17,298
Trade payables 127,445 – – 127,445 – – – – – –
Bonds 84,845 3,719 – – 1,178 – 85,000 – – –
Other current and
non-current financial liabilities 33,556 – – 27,309 – – 921 – – 5,327
377,435 4,774 1,019 160,861 3,716 2,909 185,704 – 2,301 31,024
HELD FOR TRADING
Other financial liabilities –
Derivatives with
negative market value 144 141 – – – – – – – –
144 141 – – – – – – – –
FAIR VALUE –
HEDGING INSTRUMENTS
Other financial liabilities –
Derivatives with negative
market value (cash flow hedge) 2,460 786 – 1,317 863 – – – – –
2,460 786 – 1,317 863 – – – – –
Total 380,038 5,701 1,019 162,178 4,579 2,909 185,704 – 2,301 31,024

NOTES / OTHER NOTES 12 9

28.3. Derivatives and hedges

The following derivative financial instruments used as hedging instruments are employed as of December 31, 2016:

EURk Nominal Fair value Exposures Maturity of

amount EURk EURk Up to 1 year 1 to 5 years
in 1,000
local
currency

DECEMBER 31, 2016

Foreign currency forwards
USD 135,800 (4,625) 183,020 118,800 17,000
JPY 2,410,000 (525) 39,564 2,410,000 0
CAD 50,700 (634) 56,570 49,700 1,000
GBP 40,250 2,637 69,359 39,250 1,000
CHF 18,900 (198) 23,848 18,900 0
SEK 111,600 72 19,941 111,600 0
MXN 0 0 0 0 0
DKK 10,250 0 2,694 10,250 0
PLN 19,250 61 10,428 19,250 0
NOK 48,200 (72) 8,160 48,200 0
CZK 83,450 9 9,123 83,450 0
ZAR 50,000 (60) 19,585 50,000 0
Interest rate swaps (payer) 30,000 (548) 0 0 30,000

DECEMBER 31, 2015

Foreign currency forwards
USD 67,000 (817) 81,199 67,000 0
JPY 2,160,000 403 25,728 2,160,000 0
CAD 37,470 1,505 34,263 37,470 0
GBP 32,860 700 48,520 32,860 0
CHF 18,590 236 20,843 18,590 0
SEK 117,000 (117) 19,842 117,000 0
MXN 56,500 181 8,884 56,500 0
DKK 6,030 2 2,661 6,030 0
PLN 11,350 57 6,710 11,350 0
NOK 16,480 87 6,931 16,480 0
CZK 132,000 (7) 7,848 132,000 0
ZAR 0 0 0 0 0
Interest rate swaps (payer) 74,000 (1,143) 0 44,000 30,000

In cash flow hedge accounting, both variable future cash flows arising from non-current liabilities with maturity dates up to 2020 and future
operating cash flows (receipts as well as payments) planned for the next fifteen months are hedged.

13 0 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The following derivative financial instruments have not been hedged:

EURk Nominal Fair value Maturity of

amount EURk Up to 1 year 1 to 5 years
in 1,000
local
currency

DECEMBER 31, 2016

Interest rate swaps (payer) 0 0 0 0

DECEMBER 31, 2015

Interest rate swaps (payer) 11,000 (144) 11,000 0

Forward currency transactions

The KTM Group enters into forward currency transactions essentially to hedge intended future revenue and cost of materials denominated
in foreign currency against the risk of exchange rate fluctuations.

Interest rate swaps

At December 31, 2016, payer interest rate swaps of EUR 30,000k (prior year: EUR 85,000k) were held to reduce the volatility of variable
interest payments on loans. Interest rate swaps of EUR 55,000k expired during 2016 in accordance with the terms of the transactions.
As at December 31, 2016, interest rate swaps with a nominal value of EUR 0 (prior year: EUR 11,000k) and a negative market value of EUR 0
(prior year: EUR 144k) were classified as “held for trading”.

29. LEASES

Finance leases

In the prior year, buildings included one asset held by the KTM Group under a finance lease. The asset in question was the logistics center
at the Munderfing site, which was completed in 2015. A preemptive tender right existed to acquire the building at its residual value after
expiry of the contractual term of 15 years. Outstanding lease liabilities in relation to the logistics center at Munderfing were settled with the
lessor in full ahead of term in connection with the acquisition of KTM logistics center. Disclosure of the logistics center in the Group’s property,
plant and equipment remains unchanged, following the initial consolidation of KTM Logistikzentrum GmbH on September 16, 2016.

In December 2016, finance leases with a term of 3 to 5 years were entered into for tooling (“special leasing”). No interest payments were
made on these leases in 2016.

NOTES / OTHER NOTES 131

The carrying amount of assets held under finance leases is as follows:

EURk Machinery

2016
Acquisition and construction costs 1,316
– Accumulated depreciation 25
Carrying amount as of December 31, 2016 1,291

EURk Buildings

2015
Acquisition and construction costs 27,050
– Accumulated depreciation 360
Carrying amount as of December 31, 2015 26,690

The present value of the minimum lease payments is as follows:

EURk 2016 2015

Minimum Present Minimum Present
lease value of lease value of
payments minimum payments minimum
lease lease
payments payments

Up to 1 year 291 290 1,129 1,118

1 to 5 years 1,035 1,000 4,516 4,272
Over 5 years 0 0 24,918 19,815
1,327 1,291 30,563 25,204

Less interest payments (36) (4,034)

Less deposits 0 (4,760)
Carrying amount of lease obligations 1,291 21,770

Payment obligations under finance leases are disclosed in the consolidated statement of financial position under financial liabilities
(see note 21).

Interest on finance leases of EUR 293k was recorded during the year (prior year: EUR 135k). This relates entirely to the finance lease for the
logistics center, which was paid off ahead of term in September 2016.

Operating leases

The KTM Group makes use of operating leases, which are not recognized in the consolidated statement of financial position, mainly for the
use of property, machinery, IT equipment and the vehicle fleet. The leases provide for payments mainly based on variable rental amounts.

132 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Lease payments of EUR 12,221k (prior year: EUR 10,962k) were expensed during 2016. The operating lease expenses disclosed do not
include any payments under subleases recognized as expense items or any material conditional rent payments.

Future obligations under operating leases are as follows:

EURk Dec. 31, 2016 Dec. 31, 2015

Up to 1 year 12,328 9,097

2 to 5 years 36,943 32,075
Over 5 years 10,214 11,914
59,485 53,086

The definition of operating lease expenses is set on a group-wide basis. This item includes long-term rents for land and buildings.

Material operating leases are as follows:

p Land and buildings: The rental agreements/leases have remaining terms of up to 42 years.
p IT infrastructure, licenses and equipment: The rental agreements/leases have terms of up to 5 years.
p Vehicles and machinery: The rental agreements/leases have terms of up to 6 years.

In some cases, the contracts may optionally be terminated after expiry of a minimum term. There are no price adjustment clauses.

30. SEGMENT REPORTING

Information by operating segment

The KTM Group is divided by brand into two business segments, KTM and Husqvarna. The marketing activities of both brands now take
place via two different marketing entities that are separated in both corporate and staffing terms. The two operating segments are defined
as follows:

p KTM segment
The KTM segment comprises KTM AG along with the KTM subsidiaries specializing in the sale of KTM street and offroad motorcycles,
in the X-Bow supercar and in motorsport.

Upstream processes such as R&D, production and purchasing, along with Group administrative functions, continue to provide services
for both brands and therefore also continue to be centered in corporate terms in one company which is allocated to the KTM operating
segment. A division of property, plant and equipment between the two brands is not possible because of the single production location and
near-identical production processes. No such division is therefore reported internally to the chief operating decision-maker.

p Husqvarna segment
The Husqvarna segment comprises Husqvarna Motorcycles GmbH and the Husqvarna subsidiaries. Husqvarna sells Husqvarna motorcycles
and is involved in motorsport.

NOTES / OTHER NOTES 13 3

The accounting policies for both reporting segments are the same as the group-wide accounting policies. No difference therefore exists
between the measurement of the profit/loss or of the assets and liabilities of the segments and the equivalent figures for the Group.

Inter-segmental revenues are recorded at arm’s-length transfer prices.

The table below shows segment information for 2016:

EURk KTM Husqvarna Consoli- Group

dation

External revenues 933,017 208,802 0 1,141,819

Revenues between segments 168,416 2,303 (168,719) 0
Total revenues 1,099,433 211,105 (168,719) 1,141,819

EBIT 76,195 23,451 3,150 102,796

Amortization and depreciation 57,140 318 0 57,458
Share in result of companies accounted
for under the equity method 2,357 0 0 2,357

The table below shows segment information for 2015:

EURk KTM Husqvarna Consoli- Group

dation

External revenues 878,382 144,105 0 1,022,487

Revenues between segments 116,077 1,499 (117,576) 0
Total revenues 994,459 145,603 (117,576) 1,022,487

EBIT 84,034 12,139 (1,068) 95,105

Amortization and depreciation 46,179 240 0 46,419
Share in result of companies accounted
for under the equity method 147 0 0 147

13 4 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The operating results as per the total column agree to the operating results disclosed in the income statement. They can therefore be
reconciled to the profit before tax by referring to the income statement.

The tables below show overall consolidated data for 2015 and 2016:

EURk 2016 2015

EURk % EURk %

Revenue by region
Europe 603,562 53% 512,160 50%
North America 327,704 29% 301,767 30%
Rest 210,553 18% 208,560 20%
1,141,819 100% 1,022,487 100%

Revenue by product group

Offroad sport motorcycles 526,082 46% 425,359 42%
Street sport motorcycles 381,983 33% 390,616 38%
Sportminicycles 44,749 4% 37,951 4%
X-Bows 5,000 0% 3,214 0%
PG&A 184,006 16% 165,346 16%
1,141,819 100% 1,022,487 100%

During 2016, non-current assets of EUR 496,585k (prior year EUR 426,602k) were attributable to the home country of the business, while
EUR 19,303k (prior year: EUR 14,416k) related to other countries.

Neither the KTM segment nor Husqvarna report reliance on external customers within the meaning of IFRS 8.34.

31. EVENTS AFTER THE REPORTING DATE

Events that occurred after December 31, 2016 and are material for the measurement of the assets and liabilities have either been reflected
in these financial statements or are not known.

32. RELATED PARTY DISCLOSURES

KTM Industries AG (formerly: CROSS Industries AG), Wels, which is controlled by Stefan Pierer, holds 51.67% of the voting rights in KTM AG,
Mattighofen, directly and indirectly through K KraftFahrZeug Holding GmbH (formerly: CROSS KraftFahrZeug Holding GmbH), Wels, and is
defacto the controlling shareholder of KTM AG, Mattighofen.

Stefan Pierer serves as Chairman of the Executive Board of KTM AG, Mattighofen.

NOTES / OTHER NOTES 135

Changes in the Executive Board and Supervisory Board

At the meeting of the Supervisory Board in June 2016, a resolution was passed approving the departure by mutual consent of Friedrich
Roithner from the Executive Board of KTM AG as from July 20, 2016.

On July 20 2016, an Extraordinary General Meeting of KTM AG was held in Mattighofen. At this meeting, a resolution was passed electing
Friedrich Roithner to the Supervisory Board with effect from July 21, 2016 (for the remainder of the term of office of the Supervisory Board
elected at the 28th Annual General Meeting on April 21, 2016).

In the financial year 2016, the fixed total compensation paid by group companies to the Executive Board members of KTM AG in
consideration of their services as managing directors and Executive Board members in the KTM Group amounted to EUR 1,323k (prior year:
EUR 1,328k). Liabilities of EUR 4,900k (prior year: EUR 4,605) have been recognized in relation to variable remuneration. Furthermore,
no pension expenses, in the form of contributions to pension funds and provisions for pensions, were posted in the financial year 2016.
Following the expiration of the agreed contractual term, the members of the Executive Board receive a one-off payment (severance pay).
During 2016, severance payments of EUR 41k (prior year: EUR 2,090k) were paid to members of the Executive Board. As of December 31,
2016, liabilities of EUR 2,076k exist for Executive Board severance payments (prior year: EUR 1,017k).

At the Annual General Meeting in April 2017, it will be proposed that the remuneration to be paid to the Supervisory Board for the
financial year 2016 (payout in the financial year 2017) shall amount to a total of EUR 24k (prior year: EUR 24k).

There are no stock option plans.

KTM AG has entered into a long-term posting agreement with KTM Industries AG (formerly: CROSS Industries AG) concerning the Chairman
of the Executive Board, Stefan Pierer. A further posting agreement with KTM Industries AG existed for Mr. Friedrich Roithner until July 20,
2016.

By an assignment agreement dated September 17, 2013, KTM AG acquired the license right for the use of the Husqvarna brand from
Pierer Industrie AG for EUR 10,000k. The license right is being amortized over its remaining useful life of 11 years and is periodically tested
for impairment. Pierer Industrie AG is a subsidiary of Pierer Konzerngesellschaft mbH (ultimate group parent company). Stefan Pierer is the
owner of Pierer Konzerngesellschaft mbH and also Chairman of the Executive Board of KTM AG. A valuation was performed in order to
verify the measurement of the license right and the acquisition was approved by the Supervisory Board of KTM AG. The transaction was thus
carried out at arm’s length.

Furthermore, there was an offset of a group allocation from KTM Industries AG (formerly: CROSS Industries AG) to KTM AG of EUR 1,722k
(prior year: EUR 1,000k).

Rajiv Bajaj, Deputy Chairman of the Supervisory Board, is the General Manager of Bajaj Auto Ltd., Pune, India. Srinivasan Ravikumar,
member of the Supervisory Board, is a director of Bajaj Auto International Holdings B.V., Amsterdam, Netherlands, and President of Business
Development and Assurance, Bajaj Auto Ltd., Pune, India. Bajaj Auto International Holdings B.V., Amsterdam, Netherlands, a subsidiary
of Bajaj Auto Ltd., Pune, India, held 47.99% of KTM AG at December 31, 2016. As at December 31, 2016, accounts receivable from Bajaj
Auto Ltd., Pune, India (including receivables from payments made in advance) stood at EUR 4,255k, while accounts payable to the same
company stood at EUR 2k (prior year: receivables of EUR 227k and payables of EUR 2,735k). Bajaj Auto International Holdings B.V.,
Amsterdam, Netherlands, granted KTM AG a short-term arm’s-length, interest-bearing loan of EUR 5,000k due on March 31, 2015, which
was repaid as agreed during 2015. Bajaj Auto International Holdings B.V., Amsterdam, Netherlands, granted KTM AG a short-term arm’s-
length, interest-bearing loan of EUR 10,000k from October 24, 2016 to December 22, 2016.

13 6 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

Cooperation with the Indian Bajaj group has been in place since 2007. The Bajaj group is India’s second largest manufacturer of motorcycles
and three wheelers, selling approximately 3.89 million units in the last financial year (reporting date: March 31, 2016). The cooperation
focuses on the joint development of entry level street motorcycles, which are produced in India and distributed under the “KTM” brand by
both companies in their respective core markets.

The WP Group and Pankl Group are subsidiaries of KTM Industries AG (formerly: CROSS Industries AG) and act as suppliers of automotive
parts to the KTM Group. WP is also charged rent at arm’s length rates for use of the KTM logistics center.

In July 2016, KTM AG acquired 24% of the shares in WP AG, from KTM Industries AG (formerly: CROSS Industries AG), Wels, at a purchase
price of EUR 14,400k. The transaction was approved at the Supervisory Board meeting of June 21, 2016.

Arm’s-length deliveries of motorcycles and spare parts are made to KTM New Zealand Ltd. and KTM MIDDLE EAST AL SHAFAR LLC,
two general importers in the KTM Group accounted for under the equity method. Arm’s-length deliveries of motorcycles and spare parts are
made to authorized KTM dealers in which the KTM Group holds minority investments and which are accounted for as other non-current
financial assets.

KTM Asia Motorcycle Manufacturing Inc., Philippines, was jointly founded in June 2016 in partnership with Ayala Corp. The KTM Group
holds 26% of the company. The company will begin assembling KTM motorcycles in the Philippines from CKD (completely knocked down) kits
in mid-2017. The company was not yet operationally active as of December 31, 2016.

In 2015, Wohnbau-west Bauträger Gesellschaft m.b.H., a direct subsidiary of Pierer Konzerngesellschaft mbH, provided services as general
contractor in relation to the planning and construction of the KTM logistics center in Munderfing on behalf of Oberbank Mattigtal Immobilien-
leasing GmbH (now KTM Logistikzentrum GmbH), with which KTM Immobilen GmbH concluded a finance lease agreement on arm’s-length
terms. Construction services supplied by Wohnbau-west Bauträger Gesellschaft m.b.H. amounted to EUR 14,730k in 2015.

Mattighofen Museums-Immobilien GmbH, established in 2015, is owned by Pierer Konzerngesellschaft GmbH (51%) and KTM Immobilien
GmbH (49%). Receivables of EUR 17k existed as at December 31, 2016 (prior year: EUR 17k). During 2016, KTM Immobilien GmbH
paid a shareholder grant of EUR 2,300k to Mattighofen Museums-Immobilien GmbH. The amount was proportionate to the size of its share-
holding.

KTM AG has granted TRUE Management & Investment GmbH, which falls within the sphere of influence of Executive Board member
Hubert Trunkenpolz, an arm’s length loan due December 31, 2017 with the option of extension until February 28, 2018. Loan receivables
of EUR 100k (prior year: EUR 120k) were recognized as at the reporting date.

No other loans or advances have been granted to members of the Executive Board or the Supervisory Board of KTM AG as of the
reporting date.

Gerald Kiska serves on the Supervisory Board of KTM Industries AG (formerly: CROSS Industries AG), Wels, and acts as managing share-
holder of Kiska GmbH, Anif, in which KTM AG, Mattighofen, holds an interest of 26.0%. Mr. Kiska is also employed by KTM Technologies
GmbH, Anif, as general manager. Expenses of EUR 13,679k were incurred in relation to services provided by Kiska GmbH, Anif,
during the year (prior year: EUR 12,064k). As of December 31, 2016, accounts payable to Kiska GmbH stood at EUR 3,473k (prior year:
EUR 3,681k).

NOTES / OTHER NOTES 137

By way of a sale and purchase agreement dated October 7, 2015, KTM AG acquired a 23.9% shareholding with a nominal value
of EUR 23,900 in KTM Technologies GmbH, Anif, from KTM Industries AG (formerly: CROSS Industries AG), Wels for a purchase price of
EUR 100k.

Other material business transactions with related parties and the amount of the outstanding balances with related parties (summarized
at Group level) were as follows:

EURk Revenue Expenses Receivables Liabilities

2016
Investments accounted for using the equity method 6,829 14,634 2,961 3,473
Other non-current financial assets 3,183 2,507 1,201 123
Other subsidiaries not included in the scope of consolidation 2,055 218 105 11
KTM Industries AG (formerly: CROSS Industries AG), Wels 27 5,325 112 2,267
WP Group, Munderfing 3,495 139,328 57 180
Wethje Carbon Composites GmbH, Hengersberg, Germany 108 903 43 90
Pankl Group, Kapfenberg 0 5,565 0 426
Bajaj Auto Ltd., Pune, India 0 65,452 4,255 2
TRUE Management GmbH, Thalheim bei Wels 2 25 2 0
Pierer Konzerngesellschaft mbH, Wels 412 516 0 0
Other entities 800 761 862 29
16,911 235,235 9,598 6,601

Material business transactions with related parties and the amount of the outstanding balances with related parties (summarized at Group
level) were as follows in the preceding year:

EURk Revenue Expenses Receivables Liabilities

2015
Investments accounted for using the equity method 11,788 12,064 3,591 3,669
Other non-current financial assets 7,791 941 1,788 102
Other subsidiaries not included in the scope of consolidation 54 115 0 8
KTM Industries AG (formerly: CROSS Industries AG), Wels 4 6,024 0 2,418
WP Group, Munderfing 1,456 121,334 126 621
Wethje Carbon Composites GmbH, Hengersberg, Germany 0 672 0 86
Pankl Group, Kapfenberg 0 7,482 0 1,054
Bajaj Auto Ltd., Pune, India 0 74,493 227 2,735
TRUE Management GmbH, Thalheim bei Wels 18 4 0 0
Pierer Konzerngesellschaft mbH, Wels 647 725 0 0
Other entities 0 122 0 3
21,759 223,975 5,733 10,695

All supplies and services were and are agreed at arm’s-length prices.

13 8 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

33. CORPORATE BODIES OF KTM AG

The following individuals were members of the Supervisory Board in 2016:

p Friedrich Roithner, Chairman (from July 21, 2016)

p Josef Blazicek, Chairman (until July 20, 2016)
p Rajiv Bajaj, Deputy Chairman
p Ernst Chalupsky
p Srinivasan Ravikumar
p Friedrich Lackerbauer (employee representative)
p Horst Resch (employee representative)

The following individuals were members of the Executive Board with collective power of representation in 2016:

p Stefan Pierer, Chairman

p Harald Plöckinger
p Friedrich Roithner (until July 20, 2016)
p Viktor Sigl
p Hubert Trunkenpolz

Mattighofen, February 15, 2017

The Executive Board

Stefan Pierer Harald Plöckinger

Viktor Sigl Hubert Trunkenpolz

NOTES / OTHER NOTES 139

SCHEDULE OF
EQUITY HOLDINGS
ANNEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF KTM AG, MATTIGHOFEN, AUSTRIA

EURk Initial Dec. 31, 2016 Dec. 31, 2015

Company consolidation Interest Consolidation Interest Consolidation
date in % type in % type

Affiliated companies
KTM Immobilien GmbH, Mattighofen Sep. 1, 1999 99.61 FC 99.61 FC
KTM North America, Inc., Amherst, Ohio, USA Sep. 1, 1993 100.00 FC 100.00 FC
KTM-Motorsports, Inc., Amherst, Ohio, USA Sep. 1, 2000 100.00 FC 100.00 FC
KTM-Sportmotorcycle Japan K.K., Tokyo, Japan Sep. 1, 2002 100.00 FC 100.00 FC
KTM-Racing AG, Frauenfeld, Switzerland Jan. 28, 2003 100.00 FC 100.00 FC
KTM Sportcar GmbH, Mattighofen Mar. 1, 2005 100.00 FC 100.00 FC
KTM Motorcycles S.A. Pty. Ltd.,
Northriding, South Africa Mar. 1, 2009 100.00 FC 100.00 FC
KTM Sportmotorcycle Mexico C.V. de S.A.,
Lerma, Mexico Jun. 1, 2009 100.00 FC 100.00 FC
KTM South East Europe S.A.,
Elefsina, Greece Nov. 1, 2010 100.00 FC 100.00 FC
KTM Technologies GmbH, Anif Dec. 1, 2009 74.00 FC 74.00 FC
KTM Sportmotorcycle GmbH, Mattighofen May 1, 2011 100.00 FC 100.00 FC
KTM-Sportmotorcycle India Private Limited,
Pune, India Jun. 1, 2012 100.00 FC 100.00 FC
Husqvarna Motorcycles GmbH, Mattighofen Jan. 1, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle Deutschland GmbH
(formerly: KTM-Sportmotorcycle GmbH),
Ursensollen, Germany Dec. 31, 2013 100.00 FC 100.00 FC
KTM Switzerland Ltd., Frauenfeld, Switzerland Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle UK Limited,
Brackley, United Kingdom Dec. 31, 2013 100.00 FC 100.00 FC
KTM-Sportmotorcycle Espana S.L.,
Terrassa, Spain Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle France SAS,
Saint Priest, France Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle Italia s.r.l., Gorle, Italy Dec. 31, 2013 100.00 FC 100.00 FC
KTM-Sportmotorcycle Nederland B.V.,
Malden, Netherlands Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle Scandinavia AB,
Örebro, Sweden Dec. 31, 2013 100.00 FC 100.00 FC
KTM-Sportmotorcycle Belgium S.A.,
Wavre, Belgium Dec. 31, 2013 100.00 FC 100.00 FC
KTM Canada Inc., St-Bruno, Canada Dec. 31, 2013 100.00 FC 100.00 FC
KTM Hungária Kft., Törökbálint, Hungary Dec. 31, 2013 100.00 FC 100.00 FC
KTM Central East Europe s.r.o.,
Bratislava, Slovakia Dec. 31, 2013 100.00 FC 100.00 FC
KTM Österreich GmbH, Mattighofen Dec. 31, 2013 100.00 FC 100.00 FC
KTM Nordic Oy, Vantaa, Finland Dec. 31, 2013 100.00 FC 100.00 FC

14 0 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

EURk Initial Dec. 31, 2016 Dec. 31, 2015
Company consolidation Interest Consolidation Interest Consolidation
date in % type in % type

KTM Sportmotorcycle d.o.o., Marburg, Slovenia Dec. 31, 2013 100.00 FC 100.00 FC
KTM Czech Republic s.r.o., Pilsen, Czech Republic Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle SEA PTE. Ltd.,
Singapore, Singapore Jan. 1, 2014 100.00 FC 100.00 FC
Husqvarna Motorcycles Italia S.r.l.,
Albano Sant’Alessandro, Italy Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles Deutschland GmbH,
Ursensollen, Germany Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles Espana S.L.,
Terrassa, Spain Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles UK Ltd.,
Brackley, United Kingdom Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles France SAS,
Saint Priest, France Dec. 31, 2013 100.00 FC 100.00 FC
HQV Motorcycles Scandinavia AB, Örebro, Sweden Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles North America, Inc.,
Murrieta, CA, USA Dec. 1, 2013 100.00 FC 100.00 FC
Husqvarna Motorsports, Inc., Murrieta, CA, USA Apr. 1, 2015 100.00 FC 100.00 FC
Husqvarna Motorcycles S.A. Pty. Ltd.,
Northriding, South Africa Apr. 1, 2015 100.00 FC 100.00 FC
KTM Events & Travel Service AG,
Frauenfeld, Switzerland1 – 100.00 – 100.00 –
KTM Logistikzentrum GmbH, Mattighofen
(formerly: Oberbank Mattigtal Immobilienleasing
GmbH, Linz) Sep. 16, 2016 93.63 FC 10.00 AC
WP Performance Sports GmbH, Munderfing Nov. 30, 2016 74.00 FC – –
KTM Sportmotorcycle MEA DMCC,
Dubai, United Arab Emirates Nov. 30, 2016 100.00 FC – –

Associated companies
KTM New Zealand Ltd., Auckland, New Zealand – 26.00 AE 26.00 AE
Kiska GmbH, Anif – 26.00 AE 26.00 AE
KTM MIDDLE EAST AL SHAFAR LLC,
Dubai, United Arab Emirates – 25.00 AE 25.00 AE
WP AG, Munderfing – 24.00 AE – –
KTM Asia Motorcycle Manufacturing Inc.,
Binan, Laguna, Philippines – 34.00 AE – –
Mattighofen Museums-Immobilien GmbH, Mattighofen2 – 49.00 AE 49.00 AC

1
In liquidation FC: Full consolidation
2
Not included at-equity in prior year due to minor significance AE: At equity
AC: At cost

SCHEDULE OF EQUITY HOLDINGS 141

EURk Initial Dec. 31, 2016 Dec. 31, 2015
Company consolidation Interest Consolidation Interest Consolidation
date in % type in % type

Other non-current financial assets

KTM Australia Pty Ltd., Perth, Australia1 – 100.00 AC 100.00 AC
KTM Finance GmbH, Frauenfeld, Switzerland1 – 100.00 AC 100.00 AC
KTM Wien GmbH, Vösendorf1 – 76.00 AC 76.00 AC
KTM do Brasil Ltda., Sao Paulo, Brazil1 – 100.00 AC 100.00 AC
KTM Braumandl GmbH, Wels2 – 26.00 AC 26.00 AC
Project Moto Rütter & Holte GmbH,
Oberhausen, Germany2 – 26.00 AC 26.00 AC
MX – KTM Kini GmbH, Wiesing2 – 26.00 AC 26.00 AC
KTM Regensburg GmbH, Regensburg, Germany2 – 26.00 AC 26.00 AC
KISKA, Inc., Murrieta, USA1 – 51.00 AC 51.00 AC
Cero Design Studio S.L., Barcelona, Spain2 – 26.00 AC - –

1
Not fully consolidated because immaterial FC: Full consolidation
2
Not included at-equity due to minor significance AE: At equity
AC: At cost

EURk Equity Net result

Company Dec. 31, 2016 Dec. 31, 2015 2016 2015

Other non-current financial assets

KTM Australia Pty Ltd., Perth, Australia1 6 (6) 0 0
KTM Finance GmbH, Frauenfeld, Switzerland 2
17 2
0
KTM Wien GmbH, Mattighofen 2
97 2
(6)
KTM do Brasil Ltda., Sao Paulo, Brazil 746 787 (268) (289)
KTM Braumandl GmbH, Wels 2
138 2
20
Project Moto Rütter & Holte GmbH,
Oberhausen, Germany 2
268 2
106
MX – KTM Kini GmbH, Wiesing 2
98 2
14
KTM Regensburg GmbH, Regensburg, Germany 2
(23) 2
(46)
KISKA, Inc., Murrieta, USA 557 203 308 111
Cero Design Studio S.L., Barcelona, Spain 2
297 2
151

1
Latest annual financial statements available are of August 31, 2016
2
Not yet available

142 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

AUDITOR’S
REPORT

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

AUDIT OPINION

We have audited the consolidated financial statements of KTM AG, Mattighofen, Austria, and its subsidiaries (the Group), which
comprise the consolidated balance sheet/consolidated statement of financial position as at 31 December 2016, the consolidated income
statement/ consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated state-
ment of cash flows for the year then ended, and the notes to the consolidated financial statements, including a summary of significant
accounting policies.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the
Group as at 31 December 2016, and its consolidated financial performance and consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and the additional requirements pursuant
to Section 245a UGB (Austrian Commercial Code).

BASIS FOR OUR OPINION

We conducted our audit in accordance with Austrian Standards on Auditing. These standards require the audit to be conducted in
accordance with International Standards on Auditing (ISA). Our responsibilities pursuant to these rules and standards are described in
the “Auditors’ Responsibility” section of our report. We are independent of the audited entity within the meaning of Austrian commercial
law and professional regulations, and have fulfilled our other responsibilities under those relevant ethical requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements. Our audit procedures relating to these matters were designed in the context of our audit of the consolidated financial
statements as a whole. Our opinion on the consolidated financial statements is not modified with respect to any of the key audit matters
described below, and we do not express an opinion on these individual matters.

IMPAIRMENT OF GOODWILL

We refer to section II.4. Accounting policies and VI.14. Intangible assets, of the notes to the consolidated financial statements.

AUDITOR’S REPORT 14 3
Risk for the Financial Statements
In its consolidated financial statements, KTM AG has recognized goodwill with a carrying value of MEUR 78.6.

Goodwill is tested for impairment at least annually and whenever there is an indication that goodwill may be impaired. For this purpose,
KTM AG estimates the recoverable amount, which represents the relevant measure of value for the impairment test, using the discounted cash
flow method. Goodwill is allocated to the cash-generating unit ”KTM” for testing purposes. The outcome of the valuation is highly dependent
on the assessment of future cash flows (taking into account future revenue growth, profit margins and long-term growth rates) and the
discount rate used, and is therefore subject to significant uncertainty. A review of the impairment test is complex and based on a number of
judgmental factors. The risk for the consolidated financial statements is an overstatement of goodwill.

Our Response
We compared the cash flows on which the impairment test is based with the current five-year-planning as approved by the supervisory board.
We analyzed adherence to budget on the basis of historical information.

We evaluated the appropriateness of the significant assumptions and management judgment on which the five-year-planning is based
as well as the calculation of the impairment test.

We compared the cost of capital used by KTM AG to the discount rates used by a peer-group of comparable companies.

We assessed the appropriateness of assumptions used to determine the discount rate by comparing them to reference values specific to
the relevant market and sector; furthermore we re-performed the calculation used to determine the discount rate.

We carried out a sensitivity analysis to determine whether the carrying value tested insufficiently covered by the recoverable amount taking
into account realistic changes in the underlying assumptions. We assessed whether the long-term development of the level of profitability
in the terminal value period is consistent and plausible.

In performing these audit procedures we made use of our valuation specialists.

We also evaluated whether the disclosures on the impairment of goodwill made by KTM AG in the consolidated notes are complete and
appropriate.

IMPAIRMENT OF THE BRAND KTM

We refer to section II.4. Accounting policies and VI.14. Intangible assets, of the notes to the consolidated financial statements.

Risk for the Financial Statements

In its consolidated financial statements, KTM AG has recognized an intangible asset with an indefinite useful life and a carrying value of
MEUR 61 for the brand KTM.

14 4 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

The brand is tested for impairment at least annually and whenever there is an indication that it may be impaired. For this purpose KTM AG
estimates the recoverable amount of the brand, which is the relevant measure of value for the impairment test, using the relief-from-royalty-
method. The outcome of the valuation is highly dependent on the assessment of future revenue, the underlying license fee and discount
rate and is therefore subject to significant uncertainty. A review of the impairment test is complex and based on a number of judgmental
factors. The risk for the consolidated financial statements is an overstatement of the value of the brand.

Our Response
We compared the revenues (cash flows) on which the impairment test is based to the current five-year-planning as approved by the supervisory
board. We analyzed the adherence to budget on the basis of historical information.

We evaluated the appropriateness of the significant assumptions and management judgment on which the five-year-planning is based as
well as the calculation of the impairment test.

We compared the cost of capital, discount rates and the underlying license rates used by KTM AG to those used by a peer-group of comparable
companies.

We assessed the appropriateness of assumptions used to determine the discount rate by comparing them to reference values specific to
the relevant market and sector; furthermore we re-performed the calculation used to determine the discount rate.

We carried out a sensitivity analysis to determine whether the carrying value tested is sufficiently covered by the recoverable amount taking
into account realistic changes in the underlying assumptions. We assessed whether the long-term development of the level of profitability
in the terminal value period is consistent and plausible.

In performing these audit procedures we made use of our valuation specialists.

We also evaluated whether the disclosures on the brand with an indefinite useful life made by KTM AG in the notes are complete and
appropriate.

MANAGEMENT’S RESPONSIBILITY AND RESPONSIBILITY OF THE AUDIT COMMITTEE

FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the EU, and the additional requirements pursuant to Section 245a UGB
(Austrian Commercial Code) and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.

Management is also responsible for assessing the Group’s ability to continue as a going concern, and, where appropriate, to disclose matters
that are relevant to the Group’s ability to continue as a going concern and to apply the going concern assumption in its financial reporting, except in
circumstances in which liquidation of the Group or closure of operations is planned or cases in which such measures appear unavoidable.

The audit committee is responsible for overseeing the Group’s financial reporting process.

AUDITOR’S REPORT 145

AUDITORS’ RESPONSIBILITY

Our aim is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free of material misstatements,
whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance represents a high degree of
assurance, but provides no guarantee that an audit conducted in accordance with Austrian Standards on Auditing, which require the audit to
be performed in accordance with ISA, will always detect a material misstatement when it exists. Misstatements may result from fraud or
error and are considered material if they could, individually or in the aggregate, reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Austrian Standards on Auditing, which require the audit to be performed in accordance with ISA,
we exercise professional judgment and retain professional skepticism throughout the audit.

Moreover:

p We identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, we plan
and perform procedures to address such risks and obtain sufficient and appropriate audit evidence to serve as a basis for our audit opinion.
The risk that material misstatements due to fraud remain undetected is higher than that of material misstatements due to error, since fraud may
include collusion, forgery, intentional omissions, misleading representation or override of internal control.

p We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum-
stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

p We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates as well as related disclosures
made by management.

p We conclude on the appropriateness of management’s use of the going concern assumption and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a
going concern. In case we conclude that there is a material uncertainty about the entity’s ability to continue as a going concern, we are
required to draw attention to the respective note in the financial statements in our audit report or, in case such disclosures are not appropriate,
to modify our audit opinion. We conclude based on the audit evidence obtained until the date of our audit report. Future events or conditions
however may result in the Company departing from the going concern assumption.

p We evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

p We obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.

14 6 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

p We communicate with the audit committee regarding, among other matters, the planned scope and timing of our audit as well as
significant findings including any significant deficiencies in internal control that we identify in the course of our audit.

p We report to the audit committee that we have complied with the relevant professional requirements in respect of our independence
and that we will report any relationships and other events that could reasonably affect our independence and, where appropriate, related
measures taken to ensure our independence.

p From the matters communicated with the audit committee we determine those matters that required significant auditor attention
in performing the audit and which are therefore key audit matters. We describe these key audit matters in our audit report except in the
circumstances where laws or other legal regulations forbid publication of such matter or in very rare cases, we determine that a matter
should not be included in our audit report because the negative effects of such communication are reasonably expected to outweigh its
benefits for the public interest.

REPORT ON OTHER LEGAL REQUIREMENTS

GROUP MANAGEMENT REPORT

In accordance with Austrian Generally Accepted Accounting Principles the group management report is to be audited as to whether
it is consistent with the consolidated financial statements and as to whether it has been prepared in accordance with legal requirements.

The legal representatives of the Company are responsible for the preparation of the group management report in accordance with Austrian
Generally Accepted Accounting Principles.

We have conducted our audit in accordance with generally accepted standards on the audit of group management reports as applied
in Austria.

Opinion
In our opinion, the group management report has been prepared in accordance with legal requirements and is consistent with the consolidated
financial statements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.

Statement
Based on our knowledge gained in the course of the audit of the consolidated financial statements and the understanding of the Group
and its environment, we did not note any material misstatements in the group management report.

AUDITOR’S REPORT 147

OTHER INFORMATION

The legal representatives of the Company are responsible for other information. Other information comprises all information provided in
the annual report, with the exception of the consolidated financial statements, the group management report, and the auditor’s report thereon.
We expect the annual report to be provided to us after the date of the opinion.

Our opinion on the consolidated financial statements does not cover other information, and we will not provide any kind of assurance on it.

In conjunction with our audit, it is our responsibility to read this other information as soon as it becomes available, and to assess whether
it contains any material inconsistencies with the consolidated financial statements and our knowledge gained during our audit, or any apparent
material misstatement of fact.

AUDITOR IN CHARGE

The auditor in charge is Mister Mag. Ernst Pichler.

Linz, 15 February 2017

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

signed by:
Mag. Ernst Pichler
Wirtschaftsprüfer

(Austrian Chartered Accountant)

This report is a translation of the original report in German, which is solely valid. The consolidated financial statements together with our auditor’s opinion
may only be published if the consolidated financial statements and the group management report are identical with the audited version attached to this report.
Section 281 Paragraph 2 UGB (Austrian Commercial Code) applies.

14 8 CONSOLIDATED FINANCIAL STATEMENTS K TM AG

STATEMENT OF ALL
LEGAL REPRESENTATIVES
FOR THE FINANCIAL YEAR 2016 OF KTM AG, MATTIGHOFEN, AUSTRIA

We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, liabilities,
financial position and profit or loss of the group as required by the applicable accounting standards and that the consolidated management
report gives a true and fair view of the development and performance of the business and the position of the group, together with a
description of the principal risks and uncertainties the group faces.

We confirm to the best of our knowledge that the separate financial statements give a true and fair view of the assets, liabilities, financial
position and profit or loss of the parent company as required by the applicable accounting standards and that the management report gives a
true and fair view of the development and performance of the business and the position of the company, together with a description of the
principal risks and uncertainties the company faces.

Mattighofen, March 2017

The Executive Board

Stefan Pierer Harald Plöckinger

Viktor Sigl Hubert Trunkenpolz

STATEMENT OF ALL LEGAL REPRESENTATIVES 149

CONTACT

INVESTOR RELATIONS
VIKTOR SIGL
Stallhofnerstrasse 3
5230 Mattighofen, Austria
Phone: +43 7742 6000-144
E-Mail: ir@ktm.com

15 0 KTM GROUP
IMPRINT
Owner and publisher:
KTM AG, Stallhofnerstrasse 3, 5230 Mattighofen, Austria
Registered at the Regional Court Ried im Innkreis:
FN 107673 v

Concept and design: KTM, marchesani_kreativstudio

Photos: KTM archives, Husqvarna archives

While every care was taken in compiling this annual report

and checking that the data it contains is correct, slight differences
in totals from adding up rounded amounts and percentages,
typographical errors and misprints cannot be excluded.

This report and the forward-looking statements it contains were

prepared on the basis of all the data and information available
at the time of going to press. We wish to point out, however,
that various factors may cause the actual results deviate from the
forward-looking statements given in the report.

Printed in accordance with the printing products directive of the

Austrian ecolabel “Das Österreichische Umweltzeichen” (UW-No 922).

151
KTM AG
Stallhofnerstrasse 3 M: ir@ktm.com
5230 Mattighofen, Austria W: www.ktmgroup.com