KTM AG

ANNUAL REPORT 2017

KTM AT A GLANCE
EURk 2013 2014 2015 2016 2017 Change

EARNINGS RATIOS
Revenue 716,390 864,636 1,022,487 1,141,819 1,331,717 16.6 %
EBITDA 87,694 112,599 141,524 160,012 178,816 11.8 %
EBIT 54,886 75,377 95,105 102,796 113,059 10.0 %
EBT 46,923 70,636 85,421 94,378 107,012 13.4 %
Net result after tax 36,509 57,162 63,924 72,109 78,963 9.5 %
EBITDA margin 12.2 % 13.0 % 13.8 % 14.0 % 13.4 % -
EBIT margin 7.7 % 8.7 % 9.3 % 9.0 % 8.5 % -

BALANCE SHEET RATIOS

Balance sheet total 571,435 694,799 848,933 1,056,524 1,091,928 3.4 %
Working capital1 86,074 106,836 122,051 103,700 92,470 -10.8 %
Equity 282,843 327,575 379,814 427,979 487,965 14.1 %
Equity in % of total assets 49.5 % 47.1 % 44.7 % 40.5 % 44.7 % -
Net financal debt2 82,365 87,475 97,164 80,850 69,329 -14.2 %
Gearing3 29.1 % 26.7 % 25.6 % 18.9 % 14.2 % -

CASHFLOW
Cash flow from operating activities 83,240 79,649 118,104 165,590 166,388 0.5 %
Free cash flow 25,187 9,914 23,802 18,838 39,262 108.4 %

EMPLOYEES
Employees as at December 314 1,849 2,143 2,515 2,931 3,245 10.7 %

Working capital = Trade and other receivables + inventories – trade and other payables
1

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
+10.0 %

+10.7 %
+16.6%

EMPLOYEES
REVENUE

EBIT
2017
ANNUAL
REPORT
FINANCIAL YEAR FROM
JANUARY 1 TO DECEMBER 31, 2017
KTM AG, MATTIGHOFEN, AUSTRIA
KTM AG
Every day is a chance to perform; every year is an opportunity for
success. Each day, each year is the time to step up to the plate and
assert yourself in the marketplace, moving boldly ahead into the future.
The following annual report gives a broad overview of the KTM AG’s
activities and overall performance over the past year. It is a brief
pause to evaluate its efforts, and allow a moment to prepare for
and face the year ahead with renewed focus and a shared vision.
The KTM AG brands produce a range of trend-setting and innovative
powersports vehicles, sold through a solid and expanding global
network of dealers, partners, joint ventures, subsidiaries and regional
importers.
The research and development center in Mattighofen, Austria, is a hub
of innovation, where market-leading powersports vehicles are designed,
developed and produced. It is here that the KTM AG is constantly
driven to set new benchmarks and introduce new technologies,
designs and approaches to the market that challenge the industry,
assert themselves proudly in competition and provide an exhilarating
and rewarding experience for the end consumer.
004 KTM AG
With strong roots in the offroad motorcycle and competition disci-
plines, over the past year, the KTM AG has successfully expanded
beyond the dirt and into the realm of street-legal motorcycles, with
industry-leading models in the travel-enduro and naked segments.
The KTM AG has also recently introduced smaller capacity models for
entry-level riders that cater to a wider range of global motorcyclists.
The current range of smart and versatile engine and chassis platforms
empowers the KTM AG to better adapt to future market trends and to
offer a desirable and relevant range of modern powersport vehicle
products.
The only certainty in the modern world is change, a change that seems
to be happening at sometimes breakneck speeds in multiple fields and
areas of expertise. The KTM AG focus on innovation, technology and
progress leaves the company excited about tackling the future
challenges and deliver the next generation of industry-leading,
smart, disruptive, exciting and rewarding powersports solutions to
a fast-evolving and ever-changing world.
CONTENT

018
048
History
Investor Relations

052
Consolidated Management Report

042
Quality

007 Foreword 052 Consolidated Management Report

009 Report of the Supervisory Board 071 Consolidated Income Statement
018 History 072 Consolidated Statement of Comprehensive Income
022 Sales Markets 073 Consolidated Statement of Financial Position
024 KTM AG Vision 074 Consolidated Statement of Cash Flows
026 Group Structure 076 Consolidated Statement of Changes in Equity
028 KTM as a Sales Organization 077 Notes to the Consolidated Financial Statements
030 KTM Vision, Goals and Strategy 138 Schedule of Equity Holdings
032 Husqvarna Motorcycles Vision, Goals and Strategy 140 Auditor’s Report
034 WP Motorcycles Vision, Goals and Strategy 143 Statement of all Legal Representatives
036 Employees
038 KTM Motorsport
040 Husqvarna Motorsport
042 Quality
044 Research & Development
048 Investor Relations

0 05
„314 new employees“
„MOTO GP TM successes
in the first season“

„Highest sales and revenue

levels in the company‘s history“ „High level
of innovation“

„Husqvarna goes STREET“

006
 FOREWORD BY THE
CHAIRMAN OF THE BOARD
OF DIRECTORS
LADIES AND GENTLEMEN
THE 2017 FINANCIAL YEAR JUST ENDED WAS THE SEVENTH
RECORD YEAR IN A ROW AND THEREFORE WAS THE BEST YEAR
IN THE HISTORY OF THE KTM. KTM HAS BEEN THE FASTEST
GROWING MOTORCYCLE BRAND IN THE WORLD FOR YEARS NOW.
HIGHEST SALES AND REVENUE LEVELS IN THE COMPANY‘S HISTORY
KTM again increased both its sales and revenues and in 2017
achieved a new record high for the seventh time in a row.
With 238,408 motorcycles sold worldwide by the two group brands
KTM and Husqvarna in the 2017 financial year, sales were up 17.2 %
on the previous year. Revenue was up in the same period by 16.6 % to
EUR 1.33 billion.
EBIT SIGNIFICANTLY INCREASED
KTM saw a sharp rise in earnings in addition to revenue and sales.
With EBIT of EUR 113.1 million, KTM achieved a further all-time-high
in the 2017 financial year.
INVESTMENTS
In 2017, KTM continued to maintain investments at a high level
amounting to around EUR 138 million, thereof EUR 65 million for
product development.
RECORD EMPLOYMENT AT THE MATTIGHOFEN SITE
At the end of the year, KTM employed 3,245 people around the world,
which represents a new record level of employment. In the 2017
financial year, headcount increased by 314, of whom 285 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 to this
successful development.
FOREWORD BY THE CHAIRMAN OF THE EXECUTIVE BOARD
OUTLOOK
For the financial year 2018 we expect to see a further increase both in
sales and in revenues.
By region, we expect the highest growth in absolute figures in the
regions Europe and North America. The highest relative growth rates
are expected in the ASEAN region and in India.
The planned growth is essentially expected from KTM and Husqvarna
street motorcycles. For the Husqvarna Motorcycles brand, the focus
for 2018 is on the return to the street segment and the introduction
of the models Vitpilen 401, Svartpilen 401 and Vitpilen 701. KTM will
extend its product range by the introduction of the new two-cylinder
engine DUKE 790.
KTM has set itself the medium-term goal of increasing annual sales to
400,000 units and to develop Husqvarna Motorcycles to the third
biggest European motorcycle manufacturer.
After the complete acquisition of WP group by KTM AG in January
2018, the full integration should be completed in 2018 and therefore
efficiency improvements and synergy potentials should be realized.
The level of investment planned for 2018 remains at a high level.
The main areas of focus for investment cover in particular new series
development projects as well as investments in infrastructure and
expansion.
Mattighofen, March 2018
Stefan Pierer
Chairman of the Executive Board
0 07
(F.L.T.R.) HARALD PLÖCKINGER, STEFAN PIERER, VIKTOR SIGL, HUBERT TRUNKENPOLZ

EXECUTIVE BOARD SUPERVISORY BOARD

Stefan Pierer Friedrich Roithner Friedrich Lackerbauer

Chairman of the Executive Board Chairman of the Supervisory Board Employee Representative

Harald Plöckinger Rajiv Bajaj Franz Hattinger (from June 2017)

Deputy Chairman of the Supervisory Board Employee Representative
Viktor Sigl
Ernst Chalupsky Horst Resch (until June 2017)
Hubert Trunkenpolz Employee Representative
Srinivasan Ravikumar

008 KTM AG
 REPORT OF THE
SUPERVISORY BOARD
FRIEDRICH ROITHNER
REPORT OF THE SUPERVISORY BOARD OF KTM AG
FOR THE BUSINESS YEAR 2017
In the business year 2017, the Supervisory Board of KTM AG held
four meetings on March 7, on June 20, on September 20 and on
December 14, in Mattighofen and in Vienna, thus fulfilling its duties
required by law and under the articles of incorporation.
The Executive Board of KTM AG regularly reported to the Supervi-
sory Board on business development and the economic state of the
corporation, including its associated companies. The annual financial
statements and the management report for the business year 2017
as well as the consolidated financial statements and group manage-
ment report for the business year 2017 were audited by KPMG Austria
GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Linz,
and did not give any reasons for objections. The auditors certified that
the accounting and annual financial statements as of December 31,
2017 are consistent with the applicable laws, that the annual financial
statements give, in all material respects, a true and fair view as
possible of the company’s net assets, financial position and results
of operations in accordance with generally accepted accounting
principles, and that the management report is consistent with the
annual financial statements. Further, the auditors certified that the
consolidated financial statements give a true and fair view in all
material respects of the group’s net assets and financial position as of
December 31, 2017, as well as of the results of operations and cash
flows for the past business year in accordance with the International
Financial Reporting Standards (IFRS), and that the other details in the
group management report do not misrepresent the group‘s situation.
All documents concerning the financial statements (including the
„Additional report of the Audit Committee concerning the audit of the
annual financial statements concerning art. 11 of the EU regulation
no. 537/2014 as of December 31, 2017”) were discussed in detail
with the Audit Committee and the auditors, and have been presented
to the Supervisory Board.
In its report to the Supervisory Board, the Audit Committee of
KTM AG concurred with the results of the final audit. After reviewing
REPORT OF THE SUPERVISORY BOARD
the management report and the annual statements for the business
year including the proposed appropriation of net profit, the group
management report and the consolidated financial statements for the
business year 2017, and reviewing the management, the Committee
did not raise any objections. The Audit Committee agreed with the
appropriation of net profit proposed by the Executive Board and
recommended to the Supervisory Board that KPMG Austria GmbH
Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Linz, be
proposed for appointment as independent auditors for the business
year from January 1, 2018 to December 31, 2018 at the Annual
General Meeting.
The Supervisory Board concurs with the Audit Committee’s report and
consequently also with the results of the final audit. After obtaining
the final results of its review of the management report and group
management report, the annual financial statements, including the
proposed appropriation of net profit and consolidated financial state-
ments, and its management review, the Supervisory Board also raised
no objections. The Supervisory Board also concurs with the Executive
Board’s proposed distribution of net profit.
Having been accepted by the Supervisory Board, the annual financial
statements can be deemed approved pursuant to Article 96 (4) Stock
Corporation Law (AktG). The Supervisory Board acknowledged the
consolidated financial statements and the group management report
for the business year 2017.
The Supervisory Board recommends that KPMG Austria GmbH
Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Linz, be ap-
pointed as independent auditors for the business year from
January 1, 2018 to December 31, 2018.
Mattighofen, March 2018
Friedrich Roithner
Chairman of the Supervisory Board
009
POL ESPARGARO, KTM RC16 CIRCUIT DE BARCELONA-CATALUNYA 2017, PHOTO: SEBAS ROMERO
SVARTPILEN 401 2018, PHOTO: SCHEDL R.
KTM 790 DUKE MY 2018, PHOTO: SCHEDL R.
FC 450 2018, PHOTO: SCHEDL R
84 YEARS HISTORY
1992 NEW BEGINNINGS
STEFAN PIERER
TAKES OVER
KTM
1934
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.

1953
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”.

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

1953
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.

1984
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 AG
 2001 FIRST DAKAR VICTORY –
SINCE THAT TIME,
KTM DRIVERS ACHIEVED
16 VICTORIES IN A ROW
1998
LC8 – A NEW DIRECTION OF POWER It was 1998 when
KTM began researching into its first multi-cylinder
engine and, after many different confi guration 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”.

1999
NEW FACTORY With a rapidly increasing model range
with diverse engine types requiring more replace-
ment parts, a new KTM factory was opened on the outskirts of the

1992
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.

1992
NEW BEGINNINGS In the beginning of 1992, Stefan

1999
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 motorcycle brand,
are the dominant fi gure 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

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

1994
TAKING TO THE STREET Take an LC4-powered 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
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 more riders
to the brand.
2008
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
Championship in 2011 in the hands of Martin Bauer, a class where
engine tuning is very minimal.
UNBELIEVABLE – A KTM CAR After an energy loaded development
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 showed straight
away its READY TO RACE approach and demonstrated the impressive
learning curve in all development disciplines.
020 KTM AG
2008
2011
SMALLER CAPACITIES, BIGGER OPPORTUNITIES Since
2007, KTM has been cooperating with the Indian
Bajaj Group to focus on the joint development of entrylevel, 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 fi rst 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.
2013
SETTING NEW STANDARDS IN SAFETY In cooperation
with BOSCH, KTM developed the MSC (Motorcycle
Stability Control) and therewith is the first brand worldwide 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 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 motorcycles in the world.

2014
2014
THE BIG PICTURE – THE RESTART OF HUSQVARNA
Following the acquisition of Husqvarna Motorcycles
in early 2013, and the subsequent reunion of the Husaberg brand into
the newly established Husqvarna Motorcycles GmbH company, 2014
was the first complete financial year for the “new” 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
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.
2015
2015
KTM GOES ELECTRIC Although a long-running project
and partially developed in public at its E-Cross
Center, as the leader of offroad motorcycling KTM has also set a new
bar for electric bikes in its typical manner with the release of the
innovative KTM FREERIDE E-SX, E-XC and E-SM available in 2015.
Despite lacking petrol power, these bikes are still built to the
company’s READY TO RACE mantra boasting high-specification
components and incredible performance.
2016
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 MotoGPTM 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. Only two years after the presenta-
tion 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..
2017
SUSTAINED GROWTH AND NEW CHALLENGES The
KTM AG again records record sales and revenue
figures. As well as strengthening existing partnerships, the integration
of WP and the equity holding in the company PEXCO, which specializ-
es in e-mobility, provides the company with new prospects.
Besides the KTM FREERIDE E-XC electric bike, it is primarily the
revolutionary 2-stroke Enduros with electronic fuel injection and the
announcement of the series version of the KTM 790 DUKE that are
attracting attention at KTM. In addition, with the prototype of the KTM
790 ADVENTURE R, the brand is daring to look to the future.
In 2017, Husqvarna Motorcycles took great pride in making great
strides forward in meeting its vision of progressive street motorcycling.
As part of the new, innovative street model range, the Husqvarna
VITPILEN 401, Husqvarna VITPILEN 701 and the Husqvarna
SVARTPILEN 401 will pave the way to an extremely successful future
for the brand in this sector. The introduction of these models is
planned for 2018. Meticulous and tireless work on making a dynamic
return to the street segment enabled the Husqvarna SVARPILEN 701
concept bike to be developed and presented to the public –
a progressive, iconic example of the timeless motorcycling culture
with cult character.
In addition to numerous victories, driver and manufacturer titles in a
wide range of different motorsport disciplines, in 2017 it has primarily
been the involvement in the MotoGPTM that has attracted attention
and interest internationally.
2017
HISTORY 0 21
 10.1 %
MARKET SHARE IN EUROPE1

€ 700.2 M

8.0 %
REVENUE IN EUROPE

MARKET SHARE IN NORTH AMERICA1

€ 381.3 M
REVENUE IN NORTH AMERICA

€ 250.2 M
REVENUE IN OTHER COUNTRIES

  TOTAL MARKET SHARE OF KTM AND HUSQVARNA

1

EUROPE: REGISTERED MOTORCYCLES ≥ 120 CCM

EXCLUDING MOTOCROSS, SCOOTERS AND ATVS,
INCLUDING ELECTRIC MOTORCYCLES   KTM SALES COMPANIES
  SALES MARKETS
NORTHE AMERICA: REGISTERED MOTORCYCLES ≥ 120 CCM
INCLUDING MOTOCROSS, EXCLUDING SCOOTERS AND ATVS,   CKD PRODUCTION
INCLUDING ELECTRIC MOTORCYCLES

022 KTM AG
SALES MARKETS
KTM SALES COMPANIES
AND SALES MARKETS
WORLDWIDE
SALES MARKETS 0 23
 KTM AG
VISION
KTM AG IS A PREMIUM MANUFACTURER
OF HIGH-PERFORMANCE MOTORCYCLES
FOR BOTH OFFROAD AND STREET USE,
WITH A SMALLER PERFORMANCE MOTOR-
CAR SEGMENT. THANKS TO CONTINUOUS
INNOVATION AND DIFFERENTIATED PROD-
UCT DESIGN, EVERY VEHICLE BUILT IS OF
THE HIGHEST QUALITY.
Today, driven by the passion of its employ-
ees, KTM AG has already become the largest
European motorcycle manufacturer, with a
10.1% market share in Europe and a 8.0%
share in the US, as well as achieving an
annual turnover well in excess of 1.3 billion
Euro. The current trajectory of KTM AG as
a whole bodes well for reaching a goal of
400,000 units of annual production by 2022.
0 24 KTM AG
POL ESPARGARO KTM RC16 2017, PHOTO: SEBAS ROMERO
To achieve this, the strategy is to maximize
the synergies and resources of the constituent
brands, stakeholders and infrastructure within
the group.
KTM AG’s corporate success is grounded in
strengthening the core brand values of the
primary brands and communicating them
appropriately. The ongoing objective is to
ensure that every product always delivers
on the brand promise implicit in each of the
individual KTM AG brands. For KTM, it is the
“READY TO RACE” philosophy that guides all
brand behavior, while for Husqvarna Motorcy-
cles, the “PIONEERING SINCE 1903” claim
is the clear benchmark that all decisions and
actions are measured against.

With WP, “GET IN FRONT” is a brand claim
that highlights a commitment to performance
and innovation.
Despite a marked contrast between the main
brands of KTM AG, they share strong histories
of success and innovation, using very different
approaches. This competitive environment
within KTM AG has benefitted the brands
tremendously. Clear differentiation of the
brands and their consistent adherence to
their own corporate personas are mainstays
of KTM AG’s success.
The shared vision of KTM AG and its constitu-
ent brands is to be a world-leading independ-
ent international motorcycle and component
manufacturer, with a portfolio of diverse
brands and outstanding products.
KTM AG cultivates a close relationship with
its customers through a well-trained network
of dealers and importers, with a focus on pro-
fessionalism and authentic customer intimacy
seen as being critical to overall success. KTM
AG strives to further advance its creation of a
sustainable partnership with its dealers and
importers, which is grounded in fairness and
trust. Due to the constant qualitative growth
in product range and specially developed
store concepts, KTM AG dealers can run a
profitable business solely by selling KTM
AG’s wide range of products and accessories,
along with the highest quality components
VITPILEN 701 2018, PHOTO: SCHEDL R.
and some of the most unique and impressive The unveiling of KTM’s latest supersports car,
motorcycles, both on the road and off it. the KTM X-BOW GT4 model, follows on from
having sold over 1,000 of the original X-BOW
Geared for the future, KTM AG successfully model. It is an ongoing project that proves
markets products that were developed with KTM AG is capable of developing and evolving
a great deal of craftsmanship. With a long new product ranges outside of its traditional
history and strong interest in motorsport, core motorcycle business. The experience
KTM AG constantly strives to develop the gained in terms of lightweight vehicle
overall product range and to increase its construction is invaluable in developing new
competitiveness and penetration into global vehicle concepts.
markets; this is done by identifying developing
trends and defining new ones. Innovation and KTM AG has taken a leading developmental
the highest development standards are crucial role in electric powertrain innovation.
to achieving this vision. A major step towards The experience gained from the research
growing the group’s reach and profile globally project to develop an innovative high-power
and expanding mainstream market awareness electric motorcycle in the form of the
of the group’s brands has been the entry into KTM FREERIDE-E proved the potential
MotoGP TM
in 2017. of electric powertrains. Building on this re-
search, KTM AG is developing technology that
The KTM AG offering is a diverse and supports alternative forms of mobility in urban
ever-expanding model range that now covers settings for multiple applications.
all essential engine capacity categories and
performance classes (50–1300 cc). The
small-engine street motorcycles - developed
in cooperation with Indian partner Bajaj -
open up a new global segment. Due to this,
the KTM AG product portfolio now comprises
a more diverse and ever-expanding range that
is more appropriate and better geared towards
a growing portion of the global market. The
introduction of the new parallel twin engine
platform provides better access to the popular
and fast-expanding mid-sized street segment.
KTM AG VISION 0 25
GROUP STRUCTURE
KTM AG AS
PARENT COMPANY
OF KTM GROUP
SINCE THE HUSQVARNA MOTORCYCLES
BRAND WAS INTEGRATED INTO THE KTM
GROUP, KTM AG HAS FOLLOWED A
CONSISTENT TWO-BRAND STRATEGY FOR
“KTM” AND “HUSQVARNA MOTORCYCLES”.
THE SALES ORGANIZATION HAS BEEN
STRUCTURED ACCORDINGLY.
The main equity holdings of KTM AG are
KTM Sportmotorcycle GmbH, Husqvarna Mo-
torcycles GmbH, KTM Sportcar GmbH, KTM
Technologies GmbH, KTM Immobilien GmbH
and the minority stakes in W Verwaltungs AG
(former: WP AG).
KTM AG develops and manufactures
motorcycles under the brands “KTM” and
“Husqvarna” as well as the X-BOW super
sports car and comprises all central group
functions.
The sales companies
KTM Sportmotorcycle GmbH and
Husqvarna Motorcycles GmbH distribute the
respective 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 stock-carrying sales
subsidiaries. The two companies thus hold
participations in a total of 35 domestic and
foreign sales companies that provide sales
and marketing-related services in the local
markets for KTM Sportmotorcycle GmbH and
Husqvarna Motorcycles GmbH.
WP Performance Sports GmbH operates the
after sales business of WP products.
KTM Sportcar GmbH distributes the X-BOW
super sports car.
The land and buildings of KTM group are
bundled in KTM Immobilien GmbH.
W Verwaltungs AG (former: WP AG) forms the
ultimate group parent of WP group –
constituting one of the leading European
system suppliers of performance-defining
components for the motorcycle and power-
sport industries.

0 26 KTM AG
GROUP STRUCTURE
SIMPLIFIED PRESENTATION
AS OF DECEMBER 31, 2017
POL ESPARGARO, KTM RC16 CIRCUITO DE JEREZ 2017, PHOTO: JESÚS ROBLEDO

KTM AG

KTM KTM KTM KTM Husqvarna WP WP

Racing AG Immobilien Sportcar Sportmotor- Motorcycles group 1 Performance
GmbH GmbH cycle GmbH GmbH Sports
GmbH
CH 100 % AT 99.61 % AT 100 % AT 100 % AT 100 % AT 24 % AT 100 %

KTM Husqvarna
Subsidiaries Subsidiaries

FROM JANUARY 2018 ON, KTM AG HOLDS 99,86% OF SHARES IN W VERWALTUNGS AG

1

 (FORMER: WP AG)

GROUP STRUCTURE 0 27
 KTM AS
A SALES ORGANIZATION
KTM & HUSQVARNA FLAGSHIPSTORE VIENNA
BUILDING PREMIUM VEHICLES REQUIRES
A HIGH LEVEL OF TECHNICAL KNOW-HOW
AND MANY YEARS OF EXPERIENCE.
WITHOUT A STRONG SALES SUBSIDIARY
WITH IN-DEPTH MARKET KNOWLEDGE,
EVEN A PREMIUM VEHICLE IS NOT UP TO
THE REQUIRED LEVEL FOR CUSTOMERS
WHO WANT TO EXPERIENCE A BRAND THAT
LIVES UP TO ITS PROMISE. THIS IS THE
ONLY WAY CUSTOMERS CAN BE TIED TO
THE BRAND OVER THE LONG TERM.
0 28 KTM AG
As parent company of the KTM and
Husqvarna Motorcycles brands, KTM AG
demands top levels of performance in all
areas of business. Every area of the business
and customer touch point shows that the
organization truly embraces its brand values,
whether it is the sale of vehicles, clothing and
accessories, premium performance parts or
original spare parts. An in-depth understand-
ing of the sales and marketing process is
absolutely key here - KTM provides con-
tinuous further training to give its staff an
“inside-out” perspective. For KTM AG, the
focus is always on providing the best support
to the customers of the two brands and the
customer satisfaction that results from this.
Through its Network Development division,
Commercial Business Development puts trade
and brand promise at the forefront. The focus
is on the authorized network of dealers, which
is usually the customer’s first point of contact
 35 SALES SUBSIDIARIES

HUSQVARNA MOTORCYCLES STORE, PHOTO: SCHEDL R.

with the KTM and Husqvarna Motorcycles Through 35 sales subsidiaries and joint This ensures that all KTM and Husqvarna Mo-
brands. The network of dealers is responsible ventures in Australia and the Philippines the torcycles dealers have one thing in common:
for bringing the brands to life, and contribut- employees of KTM AG look after more than Each and every one of them embraces the
ing decisively to the organization’s success 2,350 independent dealers and also further spirit of these brands – at all times.
with its competence, customer proximity and importers for the two brands around the
corresponding service. KTM AG therefore world.
invests every year massively not only in sites
and services, but also more intensively in
measures for further developing and strength-
ening the network of dealers.
KTM AG remains in close contact with
all dealers via the KTM and Husqvarna
Motorcycles subsidiaries. This keeps KTM AG
close to market developments and allows it to
develop appropriate products and services to
fulfill its brand promise.

KTM STORE

K TM SALES ORGANIZATION 029

6 YEARS EXPERIENCE
KTM
VISION, GOALS AND
STRATEGY
SINCE ITS FOUNDATION IN 1953, KTM
HAS AMASSED OVER 6 DECADES OF EXPER-
TISE IN THE TWO-WHEELED WORLD AND
MAINTAINS ITS POSITION AS EUROPE’S
LARGEST MOTORCYCLE MANUFACTURER.
KTM IS A BRAND GUIDED BY A STRONG AND
UNMISTAKABLE VISION - READY TO RACE.
This goes beyond a brand claim and forms
the foundation for everything the KTM brand
does.
It’s a mantra for our employees and custom-
ers alike, serving as motivation to always be
ready to hit the ground running. It is an atti-
tude that defines how one looks at challenges
and differentiates whether one sees the
difficulty in an opportunity, or the opportunity
in a difficulty.
KTM has a distinct brand personality and
bold presence in global competition. We don’t
just claim to be READY TO RACE, but lead by
030 KTM AG
that example in all we do. This flows through
our four core values of ADVENTURE, PURITY,
PERFORMANCE and EXTREME, guiding all
activities and allows an authentic interpreta-
tion of READY TO RACE across all segments,
markets and areas of business. It is also this
competitive vision which keeps us searching
for global expansion opportunities to assert
ourselves through - both through actions and
through inspiring products that deliver on the
implicit brand claim.
With a strong presence in offroad, KTM
has recently progressed to become one of
the world’s most innovative manufacturers
of street motorcycles. Today, driven by the
passion of its employees, KTM’s goal is to
become the biggest manufacturer of sport
motorcycles worldwide. To achieve this goal,
an important strategic focus is on attack-
ing the street motorcycle market in KTM
brand-relevant segments.
In March 2011, KTM launched a complete
naked bike range, implemented successfully
by 2013, and which will be further strength-
ened by the upcoming addition of the
new parallel twin KTM 790 DUKE model.
In 2015, the introduction of the
KTM 1290 SUPER DUKE GT signaled a
decisive move into the sports-tourer segment.
The KTM 200 and 390 DUKE models are
important steps towards capitalizing on the
global brand reach and maximizing business
opportunities. Produced in collaboration with
Bajaj, these models illustrate how the street
product range now offers a wider variety to
young buyers, thereby solidifying our global
portfolio of products and maximizing the
regional hubs, to enhance the singular global
brand presence.

After the launch of the travel enduro
KTM 1190 ADVENTURE and R models in
2013, and the further expansion in 2015 of
the ADVENTURE range to include the
1290 SUPER ADVENTURE and
1050 ADVENTURE models, a striking new
look adorned the revised range models
unveiled in 2016 for the 2017 model year.
The ADVENTURE range brings a new
higher-performing dynamic to the segment,
with a wide array of options to suit any
customer’s needs, ensuring every bike in
KTM’s arsenal is 100% READY TO RACE.
With the recent reveal of the
KTM 790 ADVENTURE R prototype, the
first shot was fired in the brand’s upcoming
assault on the mid-sized travel enduro market.
Many opportunities exist for KTM to enhance
the customer experience. Creating successful
programs to encourage riders to ride more,
and to keep them riding for longer, is one
important element of enhancing the user
experience. Growing and establishing a global
range of supporting products, known as
‘PG&A’ (parts, garments and accessories), will
allow users to intensify their riding experience,
and to fit their bike better to their personal
style, riding circumstances and conditions.
The growing global KTM brand presence,
along with the brand’s continued focus on
racing and their impressive gains in the street,
are all part of the brand’s steady world-wide
expansion. The recent push into the premier
motorcycle competition series of MotoGP , TM
supported by a strong first season showing in
Moto2, highlight these global street ambitions.
From this, top-level success in MotoGPTM
is the next ambitious goal in KTM’s sights,
which will greatly influence the global busi-
ness and brand expansion objectives.
K TM: VISION, GOALS AND STR ATEGY
KTM 790 DUKE MY 2018, PHOTO: SCHEDL R.
True to the company’s racing DNA, suc-
cessful involvement in racing all over the
world further strengthens the KTM brand
and consolidates its leading market posi-
tion, visibility and credibility. Central to the
corporate strategy is taking successful racing
technology and directly incorporating it into
serial products. The brand’s winning culture
flows into the products and everything else
they do. An essential element of KTM’s long-
term growth-planning strategy is to further
extend the product range, opening up new
niches and markets. Accordingly, the strategy
focuses on research & development to keep
the performance edge, at the same time,
developing distribution networks through
new strategic regional partnerships, investing
heavily in the global brand growth.
READY TO RACE means that if you race to
win, then there’s no other choice - it has to
be KTM.
0 31
11 YEARS EXPERIENCE
HUSQVARNA MOTORCYCLES
VISION, GOALS AND
STRATEGY
HUSQVARNA MOTORCYCLES’ ONGOING
VISION IS TO BE PIONEERS IN THE MOTORCY-
CLE WORLD. A VISION BORN OUT OF THE
BRAND PROMISE “PIONEERING SINCE 1903”.
To deliver on the brand promise, the future
goal is to build a complete motorcycle brand,
elevating Husqvarna to the third largest
European manufacturer by 2022. Every year
since Husqvarna Motorcycles joined the
KTM AG in 2013, it has achieved impressive
annual growth and with it, exceptional
success in a very short time. After just
one year as part of KTM AG, Husqvarna
Motorcycles achieved record offroad unit
sales for their 111-year-long history in 2014,
further improving on this with another record-
breaking year following after introducing
new street-legal models.
The few short years of the reunited brand,
which brings Husaberg and Husqvarna
Motorcycles together once more, have
0 32 KTM AG
reinforced the proven heritage of the
PIONEERING brand value. With a
PIONEERING focus, the brand is focused
forward, centered on innovation and
progression. The past four production model
years have boldly returned Husqvarna
Motorcycles to the international spotlight
and improved awareness of the brand. This
awareness is a central part of the ongoing
strategy, which will continue to be supported
through expansion of the dealer network and
consequent improved global sales. The
continuous development of the dealer network
is aligned to serve the growing awareness of
and demand for the brand globally. With many
untapped markets, areas and customer
groups beyond the traditional offroad
motorcycle user-base, this ever-expanding
global network will open up access for the
brand.
Husqvarna Motorcycles’ mission is to inspire
our customers to look at the motorcycle world
from a different angle and through that, to
have the courage to explore new routes, new
ways and new possibilities.
The brand’s promise brings with it a commit-
ment to leading, innovating and pioneering.
This disciplined approach of never resting or
blending into the crowd means Husqvarna
Motorcycles constantly sets its sights on the
distant horizon; seeking newer, better and
more sensible ways to create authentic
motorcycles that deliver real and rewarding
riding experiences.
SVARTPILEN 401 2018, PHOTO: SCHEDL R.

With the brand values of PREMIUM,
PIONEERING and SWEDISH ROOTS as a
guiding compass, Husqvarna is committed
to making enjoyable riding experiences more
accessible. More importantly, these values let
Husqvarna Motorcycles look beyond, and
expose new users to the exhilaration and
liberation of discovering the motorcycle
lifestyle.
A strong focus on innovation and progression
has brought about Husqvarna Motorcycles’
deliberate return to the street - which is the
second important aspect of the current brand
strategy. Being a pioneer combines well with
the accessible, understated and approachable
brand personality, allowing Husqvarna
Motorcycles to open up and tap into a much
broader target audience beyond traditional
street motorcyclists. The first bold step in
this entirely new direction is evident in the
VITPILEN and SVARTPILEN ‘real street’
range of production motorcycles. Important
in the brand’s strategy is to balance the street
focus, and to consolidate and strengthen the
brand’s involvement and presence in the
offroad world.
Despite the brand’s renewed competitive
success in recent years, far beyond the
traditional boundaries of competition,
Husqvarna Motorcycles now sets its sights
towards ambitious new goals. A pioneer’s
work is never done, so this bold re-entry into
the street motorcycling segment is merely the
next concrete step, further proving and
building the tradition of progressive and
pioneering motorcycle development.
Husqvarna Motorcycles’ future vision is to
progress and expand the brand’s bold return
to the street. From the first showing of the
VITPILEN 401 and SVARTPILEN 401
concept bikes in 2014 to the subsequent
unveiling of further concepts and production
models in the years since, the response and
interest shown in this new range is significant.
With the first three production models arriving
HUSQVARNA: VISION, GOALS AND STR ATEGY
TE 250I 2018, PHOTO: SCHEDL R.
at dealers in early 2018, the next chapter in
the brand’s story is about to begin. It is a
strong commitment to continuing the long
tradition of progressive thinking and
pioneering actions.
An approach reflected as much in the
creation of leading motorcycles as it is
through outstanding ways of identifying,
satisfying and engaging with the rapidly
expanding global customer base. These new
street production models will set Husqvarna
Motorcycles on a trajectory to becoming
Europe’s third-largest motorcycle producer
by 2022.
033
 WP AER CONE VALVE, PHOTO: SCHEDL R.

034 KTM AG
WP
VISION, GOALS AND
STRATEGY
WP is an established high-performance motorcycle component and
suspension brand, with a brand promise of GET IN FRONT.
INNOVATION and PERFORMANCE are at the center of WP, with the
latter being the primary objective in everything the brand does, with
high-quality components designed to meet the demands of both racers
and riders alike.
In order to achieve these results, and to stay ahead of a very compet-
itive market, WP calls on intensive INNOVATION and R&D efforts to
ensure its edge is never lost.
Testing and development, not only on the racetrack but also in the real
world, allows WP to meld race-inspired input into on-road perfor-
mance, with smarter and more surprising technologies.
This investment in innovation has also proven to be successful by
resulting in numerous championships across many racing disciplines.
Jointly, a big progression for WP was the development of an Authorized
Centers network to focus on customer service and accessibility.
WP: VISION, GOALS AND STR ATEGY
70 NEW AUTHORIZED CENTER
WP has endeavored to establish 70 Authorized Centers globally in
2018, with 55 centers in Europe alone. This marks a deliberate shift
in our business focus, going beyond a chain of distribution and more
towards an enhanced service offering, allowing customers to get the
maximum benefit out of their WP products.
This is made possible through intensive headquarter training that aims
to expand the know-how and expertise of Authorized Centers per-
sonnel, with further expansion expected in 2018 as a result of newly
established importers in Brazil, Israel, South Korea and Australia.
WP has set this high level of customer focus as a vital goal for 2018,
followed closely by strengthening the brand’s market awareness and
credibility by building the demand for WP PRO COMPONENTS as an
attainable high-performance aftermarket solution for motorcyclists.
This is central to the objective of better segmentation of the overall
product offering and creating a complete and comprehensive product
portfolio. As such, our business target for 2018 is to expand the
Authorized Center network to provide greater access to WP products
and expertise, and to double aftermarket revenue in the next 5 years.
0 35
3.245
SUCCESS FACTOR
EMPLOYEES
AS OF DECEMBER 31, 2017, THE GLOBAL NUMBER OF EMPLOYEES
STOOD AT 3,245, UP 314 ON THE PREVIOUS YEAR. THIS REPRE-
SENTS AN INCREASE OF 11%. AS OF DECEMBER 31, 2017, THERE
WERE 469 EMPLOYEES WORKING OVERSEAS. THE PROPORTION
OF WOMEN WAS ALMOST UNCHANGED RELATIVE TO THE
PREVIOUS YEAR AT 20%.
EXCELLENT RECRUITMENT QUALITY
For KTM AG, the topic of recruitment,
together with company growth, forms an
important component of the employment
strategy. In order to meet the quality
demands of the company in this area also,
KTM AG competes every year in the excellent recruitment quality
competition: the CAREER’S BEST RECRUITERS study.
This year, KTM AG achieved first place in the motor vehicle/automotive
field and 13th place among all 412 TOP companies tested in Austria,
so can therefore display Best Recruiter’s golden seal for excellent
recruitment quality once again.
NEEDS-BASED FURTHER TRAINING FOR QUALITATIVE
GROWTH – TALENT MANAGEMENT
Our performance is assisted by continuous training and further training
based on needs and specific target groups. On the one hand, knowl-
edge is kept up to date and, on the other hand, strengths are further
reinforced.
This is ensured by way of visits from external trainers and the
possibility of participating in in-house training sessions that are
specifically tailored to the needs of KTM AG.
036 KTM AG
EMPLOYEES WORLDWIDE
AS OF DECEMBER 31, 2017
In-house training sessions are division- or department-specific on the
one hand and are designed and organized with the whole company in
mind on the other. In addition to the content, employee networking
and mutual exchange are also areas of focus.
KTM’s in-house training catalog is expanded and updated on an
ongoing basis. Training sessions are currently conducted in the
following categories and in various learning formats: specialist training,
IT training, languages, personal development and management
training.
Effective management is an important factor for success in achieving
the corporate objectives. Experienced managers can take “pit stops”
in a management training session, in which they refine or expand their
scope of action and/or develop additional skills. New managers are
provided with support to help them assume their role successfully.
Various management training sessions were developed specifically
for KTM AG and have a high degree of practical relevance. In addition,
participants networking with each other makes a significant
contribution to strengthening everyday teamwork.
Overall, approximately 33,000 training hours were invested in the
Austrian companies in 2017. This corresponds to approximately 1,800
participants.
KTM ENGINE TEST BENCH, AUSTRIA

APPRENTICES– MORE VOCATIONAL TRAINING PLACES THAN ANY
OTHER EMPLOYER IN THE REGION
Training apprentices is an important aspect of our employment
strategy. KTM AG now has more vocational training places than any
other employer in the region. As of December 31, 2017, we employed
123 apprentices, who were training in 9 vocational training programs.
» CAD design
» Process engineering
» Automotive engineering (motorcycle engineering)
» Metal engineering (with a focus on mechanical engineering)
» Industrial purchasers
» Office administrators
» Mechatronics (production engineering)
» Operational logistics administrators
» IT engineering
It is a central aim of the company to continue to employ apprentices
when they have completed their training. In 2017 all 22 employees
who had completed training were given permanent jobs in one of our
departments. This satisfies the company’s requirement for specialized
staff and at the same time helps enable young people to have a good
start to their professional life.
Our own training workshop forms a cornerstone of apprentice
workshop. This is where the appropriate basic training for all
technical professions and specialist training is delivered.
In addition, the apprentices rotate through different departments,
gaining a comprehensive insight into how they operate. Great store is
placed on ensuring that staff training the apprentices have the right
technical and teaching qualifications and social skills. For instance, in
2017, 22 employees participated in the “training the trainers” course
and five employees successfully completed a consolidation course on
training apprentices.
SOCIAL COMMITMENT
To help our employees return to the workplace after starting a family,
children aged between one and three receive educational care in the
KTM crèche in groups of not more than nine children. In this way the
company makes an important contribution to reconciling work and
family.
As a voluntary additional social benefit, the company has taken out an
endowment and whole life insurance policy with a term of 15 years for
all employees.
EMPLOYEES 0 37
 KTM MOTORSPORT
READY TO RACE – MORE
THAN JUST A SLOGAN

7 TOP 10 FINISHES
5TH PLACE IN MOTOGP
MANUFACTURER’S MIKA KALLIO
CHAMPIONSHIP

MOTOGP FIRST SEASON IN

MOTOGP
POL ESPARGARO MOTOGP
BRADLEY SMITH

SUPERCROSS 450 MOTOCROSS MXGP

RYAN DUNGEY TONY CAIROLI

IN TOTAL MORE THAN

280 WORLD
CHAMPIONSHIP TITLES

WORLD CHAMPIONSHIP
TITLES 2017 MORE
CHAMPIONS 2017
DAKAR ENDURO WOMEN
SAM SUNDERLAND MARIA FRANKE

ENDURO E2
JOSEP GARCIA

MOTOCROSS MX2
PAULS JONASS

AFTER THE KTM BRAND WAS RELAUNCHED
IN THE EARLY 1990S, THE READY TO RACE
SLOGAN EMBODIED A NEW SELF-CONFI-
DENCE. AS IN THE PAST, THE COMPANY
TODAY STILL PURSUES A CLEAR OBJECTIVE
WITH THIS PHILOSOPHY, WITH FINDINGS
MADE IN MOTORSPORT FLOWING DIRECT-
LY INTO SERIES PRODUCTION, BECAUSE
EVERY MOTORCYCLE COMING OFF THE
PRODUCTION LINE IN MATTIGHOFEN MUST
BE READY TO RACE FROM THE START.
READY TO RACE is still the creed that drives
the KTM motorsport division which, with
many factory teams, works internationally at
the very highest level, racking up champion-
ship titles non-stop. Every employee working
in the KTM motorsport division is 100
percent committed to racing and to winning
victories and titles for KTM. In addition to the
smoothly running racing machines they build
and maintain, perfectly functioning teamwork
is also a crucial factor for success.
The KTM factory riders, who give their best
every weekend on the circuit to achieve the
best possible result for themselves, the team
and for all at KTM, are no exception.
Having won over 280 World Championship
titles, KTM is one of the world’s most
successful motorsport brands.

038 KTM AG
280
MORE THAN
WORLD CHAMPIONCHIP TITLES
KTM celebrated its overall sixteenth
consecutive Dakar win with British rider
Sam Sunderland mid-January. It is the first
time a British rider has won the world’s
hardest off-road race.
The intensified participation in the prestig-
ious U.S. Supercross series has also paid
off in 2017: Following wins in 2015 and
2016, American Ryan Dungey has for the
third consecutive time won the AMA 450
Supercross World Championship title for the
Austrian manufacturer on his KTM 450 SX-F,
announcing his retirement from active racing
soon afterward. These incredible victories
were an ideal platform for both the brand and
its bikes, catapulting KTM into the interna-
tional limelight.
The orange motocross team also got people
sitting up and taking notice in Europe. After
two difficult years, Tony Cairoli is stronger
than ever, dominating the hard-fought MXGP
class and again winning the world champi-
onship the racing season before last. The
competition comes from his own ranks:
Jeffrey Herlings’ first MXGP season started
with problems, but the Dutchman is picking
up the pace as the season progresses,
ultimately becoming a World Championship
runner-up. But that was not all.
KTM’s systematic work to nurture new talent
has paid off in the MX2 class, as
Pauls Jonass gives KTM another MX2 title
with fantastic performances.
In the Enduro World Championship, it is the
young Spaniard Josep Garcia who immediate-
ly takes the World Championship title in his
first season in the Enduro2 class.
KTM has established itself firmly in road
racing, expanding its commitment in the
2017 season. After numerous successes in
Moto3, KTM is joining Moto2 with a chassis
developed in collaboration with the firm WP –
part of KTM Industries AG since 2017 – and
is aiming for an immediate place on the po-
dium. Spurred on by this success, the Moto2
project will be continued and expanded in the
coming season.
Joining MotoGPTM, the king of motorcycle
racing sport, probably marks the greatest
milestone of recent years. With its own
factory team and a motorcycle developed
entirely in Mattighofen, KTM now ranks
among the world’s best manufacturers. After
comprehensive testing and development work,
the new KTM RC16 was officially introduced
in August 2016 at the Heim Grand Prix on
the Red Bull Ring and the official team
presentation took place in February 2017.
In March 2017, both factory riders Pol
Espargaró and Bradley Smith started com-
peting for points for the first time in Qatar
at the beginning of the season. Both riders
have since achieved point rankings and made
remarkable progress. Another crucial factor
for the steep learning curve in the hard
competition of the premier class is the com-
prehensive testing work of Finn Mika Kallio,
who has again and again proved his potential
with a total of four wild card entries in the
2017 season.
KTM MOTORSPORT
RYAN DUNGEY, KTM 450 SX-F LAS VEGAS 2017, PHOTO: SIMON
2017 WORLD CHAMPION TITLES
RIDER TITLES
ENDURO
E2: Josep Garcia (ESP)
MOTOCROSS
65 cm3 Motocross: Ivano Van Erp (NED)
MX2: Pauls Jonass (LAT)
MXGP: Tony Cairoli (ITA)
450 Supercross: Ryan Dungey (USA)
MANUFACTURERS TITLES 2017
SuperEnduro
Supercross
MX2
MXGP
E2
Cross-Country Rallies
OTHER WINS OF 2017
RALLY
Dakar: Sam Sunderland (GBR)
Abu Dhabi Desert Challenge: Sam Sunderland (GBR)
Sealine Cross-Country Rally: Sam Sunderland (GBR)
OiLibya Rally: Matthias Walkner (AUT)
EXTREME ENDURO
ErzbergRodeo: Alfredo Gomez (ESP)
Kenda AMA Tennessee Knockout Extreme Enduro:
Cody Webb (USA)
Red Bull 111 Megawatt: Jonny Walker (GBR)
SUPERCROSS
Monster Energy Cup: Marvin Musquin (FRA)
Red Bull Straight Rhythm: Marvin Musquin (FRA)
Paris Supercross: Marvin Musquin (FRA)
Geneva Supercross: Marvin Musquin (FRA)
MOTO3
Mugello: Andrea Migno (ITA)
MOTO2
Phillip Island: Miguel Oliveira (POR)
Sepang: Miguel Oliveira (POR)
Valencia: Miguel Oliveira (POR)
0 39

HUSQVARNA MOTORCYCLES REMAIN
COMMITTED TO COMPETITION. EVEN WITH
THE BOLD MOVE INTO THE STREET
MOTORCYCLING SECTOR, THE LAST THREE
SEASONS WERE STILL ENORMOUSLY
SUCCESSFUL FOR HUSQVARNA
MOTORCYCLES IN OFFROAD, MOTOCROSS
AND SUPERCROSS RACING. ESTABLISHING
THE GLOBAL ROCKSTAR ENERGY HUSQVAR-
NA FACTORY RACING TEAM TWO YEARS
AGO, HUSQVARNA MOTORCYCLES HAVE
ENJOYED A WEALTH OF SUCCESS IN ALL
OFFROAD DISCIPLINES WORLDWIDE
THROUGHOUT THE 2017 SEASON.
040 KTM AG
PABLO QUINTANILLA HUSQVARNA FR 450 , PHOTO: MARCIN KIN
Colton Haaker earned Husqvarna Motorcycles’
first title of 2017. Securing the
FIM SuperEnduro World Championship the
American then focused his attention on
battling for a second AMA EnduroCross
Championship title. Winning the season
opener in Las Vegas, Colton has been forced
to sit out the last three rounds of the series
to properly recover from recent surgery.
HUSQVARNA MOTORSPORT 2017 WORLD & US CHAMPIONS

SUCCESSFUL FIM SUPERENDURO

WORLD CHAMPIONSHIP

OFFROAD SEASON
Colton Haaker

FIM CROSS-COUNTRY RALLIES

WORLD CHAMPIONSHIP
Pablo Quintanilla

AMA 250SX EAST

Establishing Husqvarna Motorcycles as a Leading Husqvarna Motorcycles’ US offroad SUPERCROSS CHAMPIONSHIP
dominant force in the 250cc class, Zach team in the AMA GNCC series, Thad Duvall Zach Osborne

Osborne claimed the 2017 AMA 250SX East has claimed second in the 2017 champion-
Championship before wrapping up a ship standings. Continuing Husqvarna’s 2017 MOTORSPORT RESULTS
memorable year by also clinching the 2017 presence in extreme enduro racing, Rockstar FIM MOTOCROSS WORLD CHAMPIONSHIP
AMA 250MX Championship. Battling at the Energy Husqvarna Factory Racing’s Graham Gautier Paulin – MXGP (3.)

top of the ultra-competitive AMA Supercross Jarvis was on winning form at some of the Max Nagl – MXGP (8.)

Championship Jason Anderson rounded out season’s most prestigious events, including Max Anstie – MXGP (9.)

the season with a win at the Las Vegas final Hell’s Gate, Minas Riders, Romaniacs, Sea to Thomas Kjer-Olsen – MX2 (3.)

and a strong fourth place result in the 450SX Sky and Hixpania Hard Enduro. Thomas Covington – MX2 (4.)

class’ final standings. FIM MOTOCROSS OF NATIONS

Following a DNF while running second in the Gautier Paulin & Christophe Charlier –

Leaving their mark on the FIM Motocross 2017 Dakar Rally, Pablo Quintanilla ended Team Frankreich (1.)

World Championship, Husqvarna riders the five-round-long FIM Cross-Country Rallies FIM ENDUROGP WORLD CHAMPIONSHIP
battled for victory in each of the 19 rounds World Championship in the best possible way. EnduroGP – Christophe Charlier (9.)

of the 2017 series. Leading Husqvarna Becoming the 2017 World Champion, Pablo E2 – Pascal Rauchenecker (4.)

Motorcycles’ assault Gautier Paulin and has secured a second consecutive rally E2 – Danny McCanney (5.)

Thomas Kjer-Olsen both finished third overall championship for the Rockstar Energy FIM INTERNATIONAL SIX DAYS ENDURO
in the MXGP and MX2 classes respectively. Husqvarna Factory Racing team. Christophe Charlier – Team Frankreich (1.)

Rockstar Energy Husqvarna Factory Racing EXTREME ENDURO

team partners Gautier Paulin and Christophe Motorsport is an integral part of Husqvarna’s Graham Jarvis (1.) – Hell’s Gate, Italien

Charlier were also members of France’s 114-year history, and will continue to be one Graham Jarvis (1.) – Minas Riders, Brasilien

winning team at the 2017 FIM Motocross of the driving factors in the development of Graham Jarvis (2.) – Hare Scramble, Österreich

of Nations. class-leading production motorcycles. Graham Jarvis (1.) – Romaniacs, Rumänien

Husqvarna Motorcycles remains resolute Graham Jarvis (1.) – Sea to Sky, Türkei

Husqvarna’s success in the FIM EnduroGP about achieving success at the highest levels Graham Jarvis (1.) – Hixpania Hard Enduro, Spanien

World Championship continued throughout of two-wheeled motorsport. Graham Jarvis (3.) – Roof of Africa, Südafrika

2017, with FE 350 powered Christophe AMA 450SX SUPERCROSS

Charlier securing three EnduroGP class CHAMPIONSHIP
podiums during the season. Christophe’s Jason Anderson (4.)

teammates Pascal Rauchenecker and Danny AMA 450MX PRO MOTOCROSS

McCanney finished fourth and fifth respec- CHAMPIONSHIP
tively in the Enduro 2 World Championship. Dean Wilson (4.)

Completing an incredible feat Charlier won AMA GNCC CHAMPIONSHIP

the 2017 FIM Motocross of Nations and the Thad Duvall (2.)

2017 FIM International Six Days Enduro with

Team France.

HUSQVARNA MOTORSPORT 0 41
» SUCCESSFUL OFFROAD SEASON,
we at KTM have set ourselves the goal of manufacturing
products that are innovative, in line with market requirements,
safe, and, most importantly, of high quality. The entire process
of producing a vehicle – from product idea to market analysis 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 – is mapped by a process-oriented quality
management system and controlled using the KTM process
management system.
» WE ACHIEVE HIGH PRODUCT QUALITY
due to production-oriented design, the use of analytical and statistical
calculation methods, comprehensive 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.
» THE GLOBAL ASSEMBLY LOCATIONS
are professionally served by a team of high-quality QM staff. They
make sure that the know-how for manufacturing in these locations is
passed on and ensure the quality of the vehicles produced there by
implementing a KTM-compliant quality management system.
» AS KEY COMPONENTS OF THE MOTORCYCLES,
the engines are developed and manufactured by KTM and guarantee
the identity of motorcycles with the KTM and Husqvarna Motorcycles
brands.
» THE IMPRESSIVE TRACK RECORD
in racing is the best evidence of KTM‘s and Husqvarna‘s high product
quality and high level of engineering competence.
KTM 1290 SUPER DUKE GT MY 2018, PHOTO: SCHEDL R .
 RESEARCH & DEVELOPMENT
KTM DEVELOPMENT DEPARTMENT
AS A PREMIUM MANUFACTURER IN THE
NICHE SEGMENT OF READY-TO-RACE STREET
AND OFFROAD MOTORCYCLES, WE PLACE
PARTICULAR EMPHASIS ON THE AREA OF
RESEARCH AND DEVELOPMENT. INNOVATIVE
PRODUCTS AND THE CONSISTENT DEVELOP-
MENT OF NEW TECHNOLOGIES ENABLE US
TO MEET THE HIGH EXPECTATIONS OF OUR
CUSTOMERS AND OPEN UP NEW MARKETS
IN A SUSTAINABLE WAY.
044 KTM AG
KTM AG places a high value on the early
recognition of motorcycle trends, on research
and development regarding engineering and
functionality and on pursuing and imple-
menting customer wishes so as to achieve
innovative product development close to the
market. In this context, KTM AG not only
operates in its original core markets but is
also developing new products in previously
unexplored segments and niches of the
market as soon as it identifies them and they
become usable for the KTM and Husqvarna
Motorcycles brands.
The technologies, design methods and
development processes we use undergo
constant development, and our products‘
technical and functional standards are
continuously improved. The experience and
knowledge that we have obtained from racing
 540 EMPLOYEES (ANNUAL AVERAGE)
IN RESEARCH & DEVELOPMENT

are incorporated directly into series
production and the development of new
models – it is not without reason that the
corporate philosophy is READY TO RACE.
In the past financial year, we were able to
take numerous different research and
development projects forward successfully.
A particular highlight is the introduction of
the world’s first series-produced 2-stroke
offroad motorcycles with fuel injection. In
addition to the large number of benefits for
the customer, this also enabled us to ensure
compliance with current emission standards.
A further milestone in the history of the
Husqvarna Motorcycles group brand, which
dates back over 100 years, was reached
with the simultaneous transition to series
production of three new models in the
Naked Bike segment. In addition to the
two entry-level models VITPILEN 401 and
SVARTPILEN 401, we were also able to
present the VITPILEN 701 to the international
trade audience.
safety features, such as the semi-active
chassis, LED headlight or KTM MY RIDE and
a smartphone interface, for example, and
offer these features to the customer.
In the area of fundamental development, we
were able to celebrate major successes in the
development of new drive technologies –
both in the area of conventional internal
combustion engines and in the area of
zero-emission electrical mobility.
In parallel to the development of new technol-
ogies for engine and vehicle projects, inten-
sive work was carried out on the expansion of
the R&D infrastructure. The expansion of the
research and development center of KTM AG
at the headquarters in Mattighofen with an
investment of approx. EUR 30 million marks
a milestone in the corporate history.
In addition to the expansion of the test infra-
structure for engine and vehicle test stand
facilities, an important priority area of the
construction project is the expansion of the
operational durability test stand facilities and
the extension of the office facilities.
In the 2017 financial year we employed an
average of 540 people (+44% more than the
previous year and 17% of the total workforce)
in our Research and Development department.
In operating terms, disregarding the effects
of capitalizing and amortizing development
expenses, 8% of total revenue was invested
in research and development.

Both model derivatives of the KTM premium

platform, the KTM 1290 SUPER DUKE R as
well as the KTM 1090 ADVENTURE/R and
KTM 1290 SUPER ADVENTURE R/S, were
subjected to extensive revision and success-
fully transferred to series production.
In addition to consistent refinement of the V2
drive unit, which achieved an improvement in
ridability and performance, we were able to
integrate a large number of comfort and
LEHMMODELL DER KTM 1290 SUPER DUKE GT IN EINER FRÜHEN DESIGNPHASE, PHOTO: MARCO CAMPELLI

RESEARCH & DEVELOPMENT 0 45

PHOTO: CAMPELLI M.
RESEARCH & DEVELOPMENT
DURING THE 2017 FINANCIAL YEAR, NUMEROUS R&D PROJECTS WERE TAKEN
FORWARD AT VARIOUS STAGES FROM CONCEPT DEVELOPMENT TO THE START
OF SERIES PRODUCTION AND SUCCESSFULLY COMPLETED:
» Series development of the first KTM and
Husqvarna Enduro models equipped with
the newly developed 2-stroke direct injection
engine. The fully automatic fuel preparation
system offers the customer a number of bene-
fits and also ensures compliance with modern
emission standards by reducing harmful
emissions.
» Series development of new Husqvarna
models in the entry-level segment.
The aforementioned VITPILEN 401 and
SVARTPILEN 401 vehicles are the first Naked
Bikes of the Husqvarna Motorcycles brand,
which has now made it possible for the dealer
range to be expanded by two fully fledged
road models. The vehicles are characterized
in particular by their clear, progressive design
language.
» Series development of the newly developed » Series development of a new motorcycle
KTM DUKE motorcycle generation in the
entry-level segment. Since its initial market
launch in 2011, the Naked Bike platform,
with cubic capacities from 125cc to 390cc,
has held a significant share in the area of the
KTM street model range. In addition to an
extensively revised chassis, particular high-
lights were the integration of KTM MY RIDE,
which contains many electronic features, and
the reduction of harmful emissions.
» Series development of the revised
KTM 1290 SUPER DUKE R and
KTM 1090 ADVENTURE R and the
KTM 1290 SUPER ADVENTURE R/S.
The consistent refinement of the V2 drive
unit made it possible to improve ridability,
increase performance and significantly reduce
harmful emissions. Furthermore, the revised
models are characterized by the integration
of a large number of comfort and safety
features, such as the semi-active chassis,
LED headlight or KTM MY RIDE and a smart-
phone interface, for example.
» Series development of new Husqvarna
models in the mid-class segment. In addition
to the refinement of the 701 ENDURO and
701 SUPERMOTO variants, the VITPILEN
701 presented in November 2017 supple-
ments the street motorcycle portfolio in the
Naked Bike segment and therefore contrib-
utes toward opening up further markets.
As is the case with the VITPILEN 401 and
SVARTPILEN 401 models, this model also
visualizes the purist design language
“modern retro”.
platform in the mid-class segment. In addi-
tion to a comprehensively in-line 2-cylinder
engine design, a large number of new design
and development approaches have been
implemented in series production in the area
of chassis development as well. In November
2017, in addition to a series version of the
KTM 790 DUKE, we were able to present the
prototype for a model derivative in the travel
segment with the KTM 790 ADVENTURE R.
» Development of a new KTM and Husqvar-
na Motocross generation. Based on the
knowledge acquired from the international
motorsport environment, a large number of
innovation approaches are being incorporated
into the refinement of assembly groups in the
engine and chassis domain. A particular focus
RESEARCH & DEVELOPMENT
of the development work is reducing vehicle
weight and further improving handling proper-
ties.
» Development of new drivetrain, energy
accumulator and battery management
systems for motorcycle applications. Refine-
ment of the 100% electrically operated
KTM FREERIDE E-XC model. Intensive devel-
opment work on the electric energy accumula-
tor at cell level and refinement of the battery
management system has made it possible to
increase the range by approximately 50%.
» 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 sustaina-
ble reduction in accidents, this also comprises
enhanced comfort and infotainment functions
for the rider.
» Development of concepts for new ap-
proaches in relation to engine management
systems and exhaust gas purification to
ensure that the KTM and Husqvarna model
ranges comply with current (EU V) and future
homologation and emission regulations.
These include both a reduction in fuel
consumption and a reduction in exhaust
emissions.
0 47
 INVESTOR
RELATIONS

KTM 1090 ADVENTURE, FOTO: SCHEDL R.

VITPILEN 401, PHOTO: SCHEDL R.
INVESTOR RELATIONS
DUE TO THE DELISTING OF KTM AG FROM THE VIENNA STOCK EXCHANGE IN JUNE 2016 AND THE
PLANNED REPAYMENT OF THE KTM AG BOND IN APRIL 2017, KTM AG IS NO LONGER A CAPITAL
MARKET-ORIENTED COMPANY. FROM NOW ON, THE HOLDING COMPANY KTM INDUSTRIES AG
CONCENTRATES ON THE CAPITAL MARKET ACTIVITIES. FURTHER INFORMATION CONCERNING
INVESTOR RELATION ACTIVITIES OF KTM INDUSTRIES AG ARE AVAILABLE AT THE FOLLOWING
WEBSITE: HYPERLINK „HTTP://WWW.KTM-INDUSTRIES.AT“ WWW.KTM-INDUSTRIES.AT.

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

information on the company and on our products is offered to all
who are interested.

THE KTM SHARE THE KTM BOND

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: AT 0000645403) was listed
until June 2016 in the Third Market (MTF) of the Vienna Stock
Exchange.
DELISTING IN THE 2016 FINANCIAL YEAR
In April 2012, the EUR 85 million bond (2012-2017) of KTM AG
was successfully placed. The initial offering price was 101.389%.
The bond has been listed on the Second Regulated Market of the
Vienna Stock Exchange and was issued with a fixed coupon paying
interest at 4.375%. Interest is payable semi-annually as of October 24
and April 24; the first payment of interest was made on October 24,
2012. In April 2017, the bond was repaid as planned.

On March 29, 2016, K KraftFahrZeug Holding GmbH (previously: OVERVIEW OF INFORMATION ABOUT THE KTM BOND
CROSS KraftFahrZeug Holding GmbH) announced that it was issuing
ISIN AT0000A0UJP7
a public acquisition offer to all free float shareholders of KTM AG as
Market Second Regulated Market
an accompanying measure for withdrawing the shares of KTM AG from Issue volume 85,000,000.00
the Third Market (MTF) of the Vienna Stock Exchange. The offer price Denomination 500.00
was EUR 122.50 per share. At the end of June 24, 2016, the share Maturity 2012-2017
Coupon 4.375%
was withdrawn from the Third Market of the Vienna Stock Exchange.
Initial offering price 101.389%

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
commercial register in September.

The Executive Board of KTM AG plans to propose to the General

Meeting to pay out a dividend of €2.00 per share for the 2017
financial year.

05 0 KTM AG
 KTM-HAUPTQUARTIER

OWNERSHIP STRUCTURE
0.33 %
With KTM Industries AG, which directly and indirectly via Others
K KraftFahrZeug Holding GmbH holds 51.68 % of the voting rights,
and with Bajaj Auto Ltd. (via Bajaj Auto International Holdings BV),
10,845,000 51.68 %
which holds 47.99 % of the voting rights, KTM AG has two stable 47.99 % shares KTM Industries AG
core shareholders. The share of other small shareholders is below Bajaj Auto
International
one percent.
Holdings BV

INVESTOR REL ATIONS 051

CONSOLIDATED
MANAGEMENT REPORT
I54 Course of business and financial position 61 NON-FINANCIAL PERFORMANCE INDICATORS
61 Employees
54 SIGNIFICANT EVENTS DURING THE 61 Research and development
FINANCIAL YEAR 63 Racing
56 Market development 64 Financial instruments
57 Development of revenue by region 64 Quality
57 Sales by region 64 Risk report
57 Development of revenue by product group 65 Sustainability
58 Sales by product group 66 Outlook
58 Production by product group

59 FFINANCIAL PERFORMANCE INDICATORS

59 Performance analysis
59 Statement of financial position analysis
60 Liquidity analysis
61 Investments
 COURSE OF BUSINESS AND FINANCIAL POSITION

KTM 1290 SUPER DUKE R MY 2017 , PHOTO: SCHEDL R.

CONSOLIDATED
MANAGEMENT REPORT
AS OF DECEMBER 31, 2017 OF KTM AG, MATTIGHOFEN

1. COURSE OF BUSINESS AND FINANCIAL POSITION

According to the January 2018 assessment of the International Monetary Fund (IMF), the global economy is set to experience a slight recovery.
The IMF expects to see a 3.9 % rise in global economic output in 2018, with growth of 2.3 % in 2018 and 2.2 % in 2019 being forecast for
industrial nations.

Expansion of 2.2 % is forecast for the Eurozone in 2018 and 2.0 % in 2019. Growth of 2.7 % is anticipated in the U.S. for 2018. The IMF also
forecasts global growth of 3.9 % in 2019.

Economic output for emerging and developing nations is forecast to grow by 4.9 % in 2018 and 5.0 % in 2019. The biggest growth is expected
in India, which is forecast to grow by 7.4 % in 2018 and by 7.8 % in 2019. Growth of 5.3 % is expected in the ASEAN countries in 2018.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

The 2017 financial year will go 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 2017. KTM has been among the world’s fastest growing motorcycle brands for a
number of years.

During the 2017 financial year, KTM increased revenue to EUR 1,331.7 million (+ 16.6 % compared to the prior year) and sales to
191,270 vehicles (+ 14.2 % 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 commercial partner Bajaj, are
included, 238,408 KTM and Husqvarna vehicles were sold worldwide during the 2017 financial year.

Investments

The construction of the “House of Brands” for sales and marketing was commenced at the Munderfing site. The expansion of the development
center and the KTM Motohall in Mattighofen are also in progress.

In addition, the extension to the logistics center in Munderfing was completed in 2017.

At the beginning of July, KTM AG opened a new development center in Rosenheim, Germany. The specialized staff at the site will concentrate
primarily on the development of electronics for the motorcycle sector.

Total capital expenditure in 2017 amounted approximately to of EUR 140 million. Of this, EUR 65 million related to development projects, EUR
70 million to property, plant, and equipment and intangible assets and EUR 5 million to financial assets.

05 4 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

Motorsport successes

Racing chalked up yet another victory in January 2017, when KTM factory rider, Sam Sunderland, celebrated a win in the Dakar Rally thanks to
his KTM 450 RALLY. He stood atop the triple KTM podium, alongside his Austrian teammate, Matthias Walkner, who took second place, and
Gerard Farres Guell, who finished in third.

Following on from its wildcard entry in the 2016 season finale in Valencia, the KTM MotoGPTM factory team has now competed in its first full sea-
son. With the RC16 racing bike, the two KTM riders, Spaniard Pol Espargaro and Brit Bradley Smith, successfully completed the 2017 season,
bringing home the first World Championship points for KTM.

2017 was the first year in which KTM was represented in all three categories: Alongside its many years of success in Moto3, KTM also lined up
on the starting grid of the Moto2 competition for the 2017 season. In August 2017, MotoGPTM fans were once again given the opportunity to
experience the pinnacle of motorcycle sport first hand at the KTM stand at the Spielbergring in Austria.

U.S. motorsport also saw an exciting year. Red Bull KTM factory rider, Ryan Dungey, secured his third consecutive AMA 450 Supercross
World Championship win on his KTM 450 SX-F Factory Edition. Shortly afterwards, Ryan Dungey announced his retirement from competitive
motorsport.

New models

During the first half of 2017, the new generation of KTM DUKE models was launched on the market. Husqvarna presented the new
2018 Enduro range and the 2018 Motocross range.

In October, KTM unveiled the second generation of its FREERIDE E-XC for the model year 2018.

At the EICMA Motorcycle Show in Milan, which took place in November, KTM presented a completely new series motorcycle: the
KTM 790 DUKE, together with the prototype version of the KTM 790 ADVENTURE R. In doing so, the Austrian company gave an indication
as to how it is planning to expand its product range with the help of its new 799 cm³ in-line 2-cylinder engine, the LC8c. In addition, KTM
introduced the completely new Generation of the KTM 450 RALLY. At the infamous Dakar Rally, which took place in January 2018, Red Bull
KTM factory rider, Matthias Walkner, secured KTM’s 17th consecutive victory on his new KTM 450 RALLY.

In addition, Husqvarna Motorcycles introduced the Naked Bikes Vitpilen 401 and Svartpilen 401, together with their big sister, the Vitpilen 701,
and the Svartpilen 701 concept bike.

Sales network

As part of the cooperation with the Philippine Ayala Corporation, the KTM and Husqvarna partner and importer in the Philippines, the assembly
of models from the KTM DUKE and RC families up to 400 cm³ started as scheduled during the first half of 2017. This opened up new distribu-
tion opportunities in the ASEAN region.

Bajaj Auto and KTM celebrated the ten-year anniversary of their strategic partnership in 2017. The KTM DUKE 125 – 390 and
RC 125 – 390 product lines, which are produced in Bajaj’s Indian production facilities, are distributed worldwide by both partners. In addition, it
was announced that a global roll-out of Husqvarna Street Motorcycles will take place in 2018. Extending the cooperation to the Husqvarna
Motorcycles brand will raise the partnership between Bajaj and KTM to the next level.

The “Husqvarna Motorcycles” brand will be rolled out across the globe with a view to generating a significant increase in sales. The first models,
the Vitpilen 401, Svartpilen 401, and Vitpilen 701, are being produced in Mattighofen and were launched on the market at the beginning of
2018. The production of the Vitpilen 401 and Svartpilen 401 models to be sold worldwide will be transferred to Bajaj in Chakan, India in late
2018/early 2019.

COURSE OF BUSINESS AND FINANCIAL POSITION 055

With a view to increasing its presence on the Chinese market, KTM AG is pursuing a joint venture with its long-standing partner, CF Moto.
KTM will hold a 49% share in this joint venture (“CFMOTO-KTMR2R”). It is scheduled for launch during Q1 2018. Not only is this joint venture
expected to increase the presence of KTM on the Chinese market, the intention is also to work together to develop and manufacture products in
order to further drive forward global expansion.

Significant changes to group companies

In June 2017, the equity holding in KTM Technologies GmbH (previously a fully consolidated subsidiary) and the holding in Kiska GmbH
(previously consolidated at equity) was divested to KTM Industries AG.

In July 2017, KTM acquired an equity holding of 26 % in the Australian company Motorcycle Distributors Australia Pty. Ltd. The associate is
included in the scope of consolidation at equity.

KTM New Zealand Ltd. was previously included as an associate at equity. In July 2017, this company was merged with a subsidiary of Motorcycle
Distributors Australia Pty. Ltd.

In addition, a 100 % equity holding in WP Suspension North America Inc. was acquired. The subsidiary is included in the consolidated financial
statements as a full consolidation.

2. MARKET DEVELOPMENT

The overall European market1 recorded a fall of 5.7 % when compared with the preceding year, with around 539,000 vehicles registered.
That fall can be explained by a surge in EURO3 vehicle registrations at the end of 2016 and can, for the most part, be traced back to changes in
large European markets, such as Germany (- 19.3 %), the United Kingdom (- 14.3 %), and Sweden (- 24.6 %). The French (+ 3.4 %) and Italian
(+ 8.0 %) markets recorded a positive development with regard to vehicles registered.

KTM and Husqvarna still hold a double-digit share of the market for motorcycles registered for road use in Europe. One particularly noteworthy
positive is the United Kingdom, which showed a significant growth in market share (+ 10.7 %) in spite of the extremely difficult market
environment.

Amid a difficult market environment, KTM brand vehicles succeeded in gaining additional market share in key markets such as the United
Kingdom (+ 0.6 percentage point compared to the prior year) and the Netherlands (+ 1.4 percentage points compared to the prior year).
However, a fall was recorded in the principal markets in Germany, France, and Italy. KTM has a share of 8.7 % of the total European market
(prior year: 9.7 %).

Husqvarna Motorcycles’ market share grew in Germany (+ 0.3 percentage points compared to the prior year), the United Kingdom
(+ 0.2 percentage points compared to the prior year), and Switzerland (+ 0.2 percentage points compared to the prior year). However, a slight
fall in market share was seen in France (- 0.2 percentage points compared to the prior year), Italy (- 0.5 percentage points compared to the prior
year), and Sweden (- 2.6 percentage points compared to the prior year). Husqvarna has a share of 1.4 % of the total European market
(prior year: 1.6 %).

New registrations in the overall U.S. market2 fell slightly to around 391,000 vehicles in 2017 (prior year: 407,000 vehicles). In spite of the
shrinking overall market, KTM and Husqvarna managed to significantly build upon their market share in the USA and Canada; this was largely
driven by the slump experienced by Harley-Davidson.

KTM succeeded in increasing its share of the overall U.S. market to 6.1 %, a rise of 0.6 percentage points compared to the prior year.

1
Motorcycles >= 120cm3 excluding Motocross, scooters and ATVs, including electric motorcycles
2
Motorcycles >= 120 cm3 including Motocross, excluding scooters and ATVs, including electric motorcycles

05 6 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

Husqvarna increased its market in the U.S. by 0.4 percentage points to 1.9 %.

Strong growth was also recorded in Australia and South Africa. In Australia, KTM and Husqvarna achieved a market share of 13.6 %
(+ 0.6 percentage points compared to the prior year). On the South African market, a 14.4 % share (+ 3.1 percentage points compared to the
prior year) was achieved.

3. DEVELOPMENT OF REVENUE BY REGION

Group revenue increased by 16.6 % from EUR 1,141.8 million in the prior year to EUR 1,331.7 million. Revenue in North America rose 16.3 %
from the prior year to EUR 381.3 million; this corresponds to 28.6 % of total revenue. In Europe, revenue was up 16.0 % on the preceding year,
rising to EUR 700.2 million; Europe thus accounted for 52.6 % of total revenue. Revenue in other countries rose by 18.8 % compared to the
previous year, to EUR 250.2 million. The percentage of total revenue earned in the other countries was 18.8 %.

Group revenue by region 2017 2016 Change

EURk % EURk %

Europe 700,235 52.6 % 603,562 16.0 %

North America 381,263 28.6 % 327,704 16.3 %
Other countries 250,219 18.8 % 210,553 18.8 %
Total 1.331,717 100.0 % 1,141,819 16.6 %

4. SALES BY REGION

Accounting for 22.1 % of sales in the financial year 2017, the U.S. remained the largest single market for KTM. Europe accounted for 49.0 % of
sales, with the strongest sales markets for the group as a whole being Germany (10.9 %), France (6.4 %), Australia (6.0 %), the UK (5.6 %),
Italy (5.3 %), and Spain (4.2 %). Overall, 69.3 % 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 84.3 % of total revenue, this percentage increased slightly in relation to the prior
year (83.9 %). Revenue in the Offroad segment increased by 3.9 % compared to the prior year, to EUR 546.7 million. Revenue in the Street
segment, at EUR 515.1 million, increased relative to the prior year (+ 34.8 %). Revenue from Spares, Clothing, and Accessories
(KTM PowerWear and KTM PowerParts) and Other rose by 13.4 % relative to the prior year to EUR 208.7 million.

Group revenue by product group 2017 2016 Change

EURk % EURk %

Offroad sport motorcycles 546,743 41.1 % 526,082 3.9 %

Street sport motorcycles 515,087 38.7 % 381,983 34.8 %
Total Full Size 1,061,830 79.7 % 908,064 16.9 %

Sportminicycles 55,461 4.2 % 44,749 23.9 %

X-Bow 5,712 0.4 % 5,000 14.2 %
Parts, garments and accessories and others 208,714 15.7 % 184,006 13.4 %
Total 1,331,717 100.0 % 1,141,819 16.6 %

COURSE OF BUSINESS AND FINANCIAL POSITION 057

6. SALES BY PRODUCT GROUP

In 2017 KTM sold 191,270 vehicles, comprising 191,196 motorcycles and Sportminicycles (+ 14.2 % compared to the prior year) and
74 X-Bows (- 10.8 % compared to the prior year).

In the offroad segment, 88,238 motorcycles were sold (+ 1.7 % compared to the prior year).

In the street segment, 85,314 motorcycles were sold (+ 28.9 % compared to the prior year). Sales in the Adventure models segment rose by
109.6 % to 16,541 motorcycles.

In the Sportminicycle segment, sales went up 21.7 % from the prior year, to 17,644 motorcycles.

Sales by product group 2017 2016 Change

Units in % Units %

Offroad sport motorcycles 88,238 46.1 % 86,769 1.7 %

Street sport motorcycles 85,314 44.6 % 66,201 28.9 %
Total Full Size 173,552 90.7 % 152,970 13.5 %

Sportminicycles 17,644 9.2 % 14,497 21.7 %

Total motorcycles 191,196 100.0 % 167,467 14.2 %

X-Bow 74 0.0 % 83 -10.8 %

Total 191,270 100.0 % 167,550 14.2 %

7. PRODUCTION BY PRODUCT GROUP

During the 2017 financial year, 151,732 motorcycles were manufactured at the Mattighofen production site. Compared to the prior year, this
constitutes an increase of 17,093 units, or 12.7 %. Taking into account the small-engined KTM models produced by our partner Bajaj Auto Ltd.
in India, 197,612 KTM vehicles (+ 21.0 %) were manufactured worldwide.

Production by product group 2017 2016 Change

Units % Units %

Offroad sport motorcycles 91,705 60.4 % 86,080 6.5 %

Street sport motorcycles 41,969 27.7 % 33,444 25.5 %
Total Full Size 133,674 88.1 % 119,524 11.8 %

Sportminicycles 17,971 11.8 % 15,060 19.3 %

Total motorcycles 151,645 99.9 % 134,584 12.7 %

X-Bow 87 0.1 % 55 58.2 %

Total 151,732 100.0 % 134,639 12.7 %

05 8 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

FINANCIAL PERFORMANCE INDICATORS

8. PERFORMANCE ANALYSIS

Net revenue rose in 2017 by 16.6 % to EUR 1,331.7 million (prior year: EUR 1,141.8 million). This was attributable to the increase in sales.
Approximately 96 % of revenues were earned outside Austria.

Production costs increased from the prior year, rising 20.8 % to EUR 957.1 million; the gross margin decreased by 2.5 percentage points
compared to the prior year and is now at 28.1 %.

Overheads went up EUR 16.9 million from the prior year to EUR 266.1 million (+ 6.8 %).

Expenses for selling and marketing rose by EUR 1.1 million from the prior year (+ 0.9 %). Net expenses for motorsport increased EUR 4.8
million compared to the prior year, to EUR 36.1 million (+ 15.1 %). 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 4.3 million to EUR 47.8 million (+ 9.8 %). The increase is the result of substantial
capital investment, especially in IT.

Operating development expenses during the 2017 financial year rose EUR 14.6 million from the prior year, to EUR 107.2 million (+ 15.8 %).
Taking account of the capitalization of a higher amount of development costs (EUR 7.1 million, a rise of 12.3 % compared to the prior year) as
well as research subsidies of EUR 13.3 million (+ 52.2 % compared to the prior year) brought net development expenses to EUR 29.0 million
(prior year: EUR 26.0 million).

Other operating expenses in the amount of EUR 31.3 million are chiefly comprised of customer service and warranty costs, which increased by
EUR 4.0 million from the prior year, to EUR 31.3 million (+14.5 %).

Other operating income in the amount of EUR 2.6 million is primarily comprised of income arising as a result of deconsolidation, which
amounted to EUR 1.4 million, and negative difference amounting to EUR 0.9 million.

Thanks to the growth in revenues and sales, EBIT rose to EUR 113.0 million, an increase of EUR 10.3 million over the previous year’s result
of EUR 102.8 million.

The effective tax rate increased from 23.6 % in 2015 to 26.2 % as at December 31st 2017.

The financial result improved by EUR 2.4 million in 2017 compared to the prior year, to EUR -6.0 million. Interest expenses were
EUR 6.5 million (prior year: EUR 9.6 million) and interest income was EUR 1.9 million (prior year: EUR 1.9 million).

9. STATEMENT OF FINANCIAL POSITION ANALYSIS

The balance sheet total rose by 3.4 % compared to the prior year, to EUR 1,091.9 million.

Non-current assets went up EUR 74.1 million (+ 14.4 %) to EUR 590.0 million (54.0 % of the balance sheet total). Property, plant, and
equipment increased by EUR 32.1 million due to the extension to the logistics center and the expansion of the development center, coupled with
investments in tools. The EUR 37.6 million rise in intangible assets results mainly from the capitalization of development costs with a net total of
EUR 36.4 million and from investments in IT infrastructure, which essentially relates to the continued implementation of a new ERP system
during this financial year.

FINANCIAL PERFORMANCE INDICATORS 059

Trade receivables, including receivables due from affiliated and associated companies, fell by EUR 3.0 million to EUR 96.3 million
(- 3.0 %). Taking into account the receivables sold last year and this year under ABS arrangements, there was a rise in receivables of around
EUR 50.3 million (+ 32.8 %).

In the past financial year 2017, inventories rose EUR 40.8 million to EUR 205.3 million (+ 24.8 %) due to the increase in sales volume.

Other current assets increased by EUR 19.1 million to EUR 49.1 million. They essentially comprise advance payments made on inventories,
research grants receivable, 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 was repaid in April 2017, according to schedule.

» Long-term financial liabilities of EUR 186.9 million comprise long-term capital expenditure loans, research and promotional loans, and a
promissory note loans.

» Employee benefit liabilities of EUR 17.7 million comprise claims for severance and anniversary bonus payments. Actuarial losses, current
service costs, and interest expenses led to a EUR 0.4 million increase in the total liability.

» Deferred tax liabilities went up EUR 10.8 million, to EUR 55.1 million. The increase is essentially due to the recognition of EUR 9.1 million in
deferred tax on capitalized development costs.

» Other non-current liabilities of EUR 8.2 million are mainly made up of sureties received; the total amount rose only slightly by EUR 0.8 million
relative to the prior year.

» Short-term financial liabilities went up EUR 5.7 million, to EUR 28.5 million.

» Trade payables, including payables to affiliated and associated companies, went up EUR 160.1 million to EUR 209.1 million on account of
the reporting date.

» The statement of financial position item “Provisions”, which amounts to EUR 11.0 million (prior year: EUR 10.2 million), essentially comprises
provisions relating to guarantees and warranties. Compared to the prior year, provisions relating to guarantees and warranties showed an
increase of EUR 1.1 million on account of the increase in sales volume.

» The other current liabilities essentially comprise employee benefits, liabilities comprised of discounts and dealer bonuses, liabilities arising
due to derivative financial instruments being measured as of the reporting date and tax compensation for Pierer Konzerngesellschaft mbH.
Other current liabilities rose by EUR 17.2 million to EUR 82.2 million from the prior year.

» Net debt fell to EUR 69.3 million (prior year: EUR 80.9 million). Gearing 3)
consequently stood at 14.2 % (prior year: 18.9 %).

» Equity rose by EUR 60.0 million from the prior year. Alongside the profit for the 2017 financial year, which amounted to EUR 79.0 million,
and the payment of the dividend for 2016, which amounted to EUR 21.7 million, the movement in the cash flow hedge reserve of EUR 6.5
million, also contributed to this result. The equity ratio as of December 31st 2017 was therefore 44.7 % (prior year: 40.5 %).

3)
Gearing = net financial debt divided by equity

060 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

10. LIQUIDITY ANALYSIS

Consolidated cash flow from operating activities rose to EUR 166.4 million, an increase of EUR 0.8 million relative to the prior year. There was
an increase of EUR 23.1 million on the preceding year in cash flow from profit and loss items, while working capital fell by EUR 22.3 million.

Allowing for disinvestments, investments decreased from EUR -146.8 million to EUR -127.1 million, and the free cash flow therefore increased
from EUR 18.8 million to EUR 39.3 million in net terms.

The consolidated cash flow from financing activities amounts to EUR -129.4 million (EUR 99.3 million in the prior year) and results mainly from
the repayment of the bond issued in 2017 in the amount of EUR 83.1 million, the dividend of EUR 21.7 million paid out in 2017 and the
repayment of a research loan in the amount of EUR 13.1 million.

Cash fell by EUR 94.4 million to EUR 142.4 million and was therefore substantially lower than at the end of the prior year (prior year: EUR
236.8 million).

11. INVESTMENTS

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. The extension of the logistics center in Munderfing was completed and the expansion of the development
center and the KTM Motohall in Mattighofen are currently in progress.

In total, EUR 137.7 million (prior year: EUR 106.4 million) was invested in property, plant, and equipment and intangible assets during 2017.
Of this, EUR 65.0 million relates to capitalized development costs and EUR 8.9 million to investments in IT infrastructure.

NON-FINANCIAL PERFORMANCE INDICATORS

12. EMPLOYEES

During the 2017 financial year, KTM employed an average of 3,204 employees (prior year: 2,737 employees), of whom 468 (prior year: 425)
worked outside Austria. Revenue per employee was EUR 415.6k (prior year: EUR 417.2k).

EURk 2017 2016

Revenue 1,331,717 1,141,819

Empoyees (average) 3,204 2,737
Revenue per employee 415.6 417.2

13. RESEARCH AND DEVELOPMENT

In the Research and Development department, KTM employed an average of 540 employees in 2017 (prior year: 487), representing 16.9 % of
total headcount. Around EUR 107.2 million (prior year: EUR 92.6 million) was invested in research and development in 2017, which translates to
8.1 % of total revenue (no change when compared with the prior year).

NON-FINANCIAL PERFORMANCE INDICATORS 0 61

In the past financial year, we were able to take numerous different research and development projects forward successfully. A particular highlight
is the introduction of the world’s first series-produced 2-stroke offroad motorcycles with electronic fuel injection. In addition to the large number
of benefits for the customer, this also enabled us to ensure compliance with current emission standards.

A further milestone in the history of the Husqvarna Motorcycles group brand, which dates back over 100 years, was reached with the simultane-
ous transition to series production of three new models in the Naked Bike segment. In addition to the two entry-level models VITPILEN 401 and
SVARTPILEN 401, we were also able to present the VITPILEN 701 to the international trade audience.

Both model derivatives of the KTM premium platform, the KTM 1290 SUPER DUKE R as well as the KTM 1090 ADVENTURE/R and
KTM 1290 SUPER ADVENTURE R/S, were subjected to extensive revision and successfully transferred to series production. In addition to
consistent refinement of the V2 drive unit, which achieved an improvement in ridability and performance, we were able to integrate a large
number of comfort and safety features, such as the semi-active chassis, LED headlight or KTM MY RIDE and a smartphone interface, for
example, and offer these features to the customer.

In the area of fundamental development, we were able to celebrate major successes in the development of new drive technologies, both in the
area of conventional internal combustion engines and in the area of zero-emission electrical mobility.

In parallel to the development of new technologies for engine and vehicle projects, intensive work was carried out on the expansion of the R&D
infrastructure. The expansion of the research and development center of KTM AG at the headquarters in Mattighofen marks a mile-stone in the
corporate history. In addition to the expansion of the test infrastructure for engine and vehicle test stand facilities, an important priority area of
the construction project is the expansion of the operational durability test stand facilities and the extension of the office facilities.

During the 2017 financial year, numerous R&D projects were taken forward at various stages from concept development to the start of series
production and successfully completed:

» Series development of the first KTM and Husqvarna Enduro models equipped with the newly developed 2-stroke direct injection engine.
The fully automatic fuel preparation system offers the customer a number of benefits and also ensures compliance with modern emission
standards by reducing harmful emissions.

» Series development of new Husqvarna models in the entry-level segment. The aforementioned VITPILEN 401 and SVARTPILEN 401 vehicles
are the first Naked Bikes of the Husqvarna Motorcycles brand, which has now made it possible for the dealer range to be expanded by two
fully fledged road models. The vehicles are characterized in particular by their clear, progressive design language.

» Series development of the newly developed KTM DUKE motorcycle generation in the entry-level segment. Since its initial market launch in
2011, the Naked Bike platform, with cubic capacities from 125 cm³ to 390 cm³, has held a significant share in the area of the KTM street
model range. In addition to an extensively revised chassis, particular highlights were the integration of KTM MY RIDE, which includes many
electronic features, and the reduction of harmful emissions.

» Series development of the revised KTM 1290 SUPER DUKE R, KTM 1090 ADVENTURE R, and KTM 1290 SUPER ADVENTURE R/S. The
consistent refinement of the V2 drive unit made it possible to improve ridability, increase performance, and significantly reduce harmful
emissions. Furthermore, the revised models are characterized by the integration of a large number of comfort and safety features, such as the
semi-active chassis, LED headlight or KTM MY RIDE and a smartphone interface, for example.

» Series development of new Husqvarna models in the mid-class segment. In addition to the refinement of the 701 ENDURO and
701 SUPERMOTO variants, the VITPILEN 701 presented in November 2017 supplements the street motorcycle portfolio in the Naked Bike
segment and therefore contributes toward opening up further markets. As is the case with the VITPILEN 401 and SVARTPILEN 401 models,
this model also visualizes the purist design language “modern retro”.

» Series development of a new motorcycle platform in the mid-class segment. In addition to a comprehensively in-line 2-cylinder engine design,
a large number of new design and development approaches have been implemented in series production in the area of chassis development
as well. In November 2017, in addition to a series version of the KTM 790 DUKE, we were able to present the prototype for a model derivative
in the travel segment with the KTM 790 ADVENTURE R.

0 62 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

» Development of a new KTM and Husqvarna Motocross generation. Based on the knowledge acquired from the international motorsport
environment, a large number of innovative approaches are being incorporated into the refinement of assembly groups in the engine and
chassis domain. A particular focus of the development work is reducing vehicle weight and further improving handling properties.

» Development of new drivetrain, energy accumulator and battery management systems for motorcycle applications. Refinement of the 100 %
electrically operated KTM FREERIDE E-XC model. Intensive development work on the electric energy accumulator at cell level and refinement
of the battery management system has made it possible to increase the range by approximately 50 %.

» 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.

» Development of concepts for new approaches in relation to engine management systems and exhaust gas purification to ensure that the KTM
and Husqvarna model ranges comply with current (EU V) and future homologation and emission regulations. These include both a reduction in
fuel consumption and a reduction in exhaust emissions.

14. RACING

After the KTM brand was relaunched in the early 1990s, the READY TO RACE slogan embodied a new self-confidence. As in the past, the
company today still pursues a clear objective with this philosophy, with findings made in motorsport flowing directly into series production,
because every motorcycle coming off the production line in Mattighofen must be ready to race from the start.

READY TO RACE is still the creed that drives the KTM motorsport division which, with many factory teams, works internationally at the very
highest level, racking up championship titles nonstop. Every employee working in the KTM motorsport division is 100 percent committed to
racing and to winning victories and titles for KTM. In addition to the smoothly running racing machines they build and maintain, perfectly
functioning teamwork is also a crucial factor for success. The KTM factory riders, who give their best every weekend on the circuit to achieve
the best possible result for themselves, the team and for all at KTM, are no exception.

Having won over 280 World Championship titles, KTM is one of the world’s most successful motorsport brands. In mid-January, KTM celebrated
its sixteenth Dakar win with British rider Sam Sunderland. It is the first time a British rider has won the world’s hardest off-road race.

The intensified participation in the prestigious U.S. Supercross series has also paid off in 2017: Following wins in 2015 and 2016, American
Ryan Dungey has, for the third consecutive time, won the AMA 450 Supercross World Championship title for the Austrian manufacturer on his
KTM 450 SX-F, announcing his retirement from active racing soon afterward. These incredible victories were an ideal platform for both the
brand and its bikes, catapulting KTM into the international limelight.

The orange motocross team also got people sitting up and taking notice in Europe. After two difficult years, Tony Cairoli is stronger than ever,
dominating the hard-fought MXGP class and again winning the world championship the racing season before last. The competition comes from
his own ranks: Jeffrey Herlings’ first MXGP season started with problems, but the Dutchman is picking up the pace as the season progresses,
ultimately becoming a World Championship runner-up. But that was not all. KTM’s systematic work to nurture new talent has paid off in the
MX2 class, as Pauls Jonass gives KTM another MX2 title with fantastic performances.

In the Enduro World Championship, it is the young Spaniard Josep Garcia who immediately takes the World Championship title in his first season
in the Enduro2 class.

KTM has established itself firmly in road racing, expanding its commitment in the 2017 season. After numerous successes in Moto3, KTM
joined Moto2 with a chassis developed in collaboration with the firm WP, immediately achieving podium positions and victories. Spurred on by
this success, the Moto2 project will be continued and expanded in the coming season.

NON-FINANCIAL PERFORMANCE INDICATORS 063

Joining MotoGPTM, the pinnacle of motorcycle sport, probably marks the greatest milestone of recent years. With its own factory team and a
motorcycle developed entirely in Mattighofen, KTM now ranks among the world’s best manufacturers. After comprehensive testing and develop-
ment work, the new KTM RC16 was officially introduced in August 2016 at the Heim Grand Prix on the Red Bull Ring and the official team
presentation took place in February 2017. In March 2017, both factory riders Pol Espargaró and Bradley Smith started competing for points for
the first time in Qatar at the beginning of the season. Both riders have since achieved point rankings and made remarkable progress. Another
crucial factor for the steep learning curve among the fierce competition of the premier class is the comprehensive testing work of Finn Mika
Kallio, who has time and again proved his potential with a total of four wild card entries in the 2017 season.

Both brands’ commitment to racing also benefits KTM AG from a technological viewpoint, as racing know-how has a direct influence
on the development of series production models. KTM AG’s racing expenses in the 2017 financial year were EUR 36.1 million (prior year:
EUR 32.4 million), which therefore accounts for 2.7 % (prior year: 2.7 %) 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 through 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 homologation rules, a focus on process quality, communi-
cation and training measures at KTM and at the suppliers.

PROCESS QUALITY: KTM was certified by the auditors of TÜV Süd LG Österreich as more than meeting the requirements of EN ISO 9001:2008
and of the Kraftfahrbundesamt (KBA), the German federal authority for motor vehicles and transport.

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 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 2,380 in Austria, KTM is one of the region’s biggest employers.

KTM takes every opportunity to respond to the sustainability demands 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 the
toolshop is controlled using groundwater, and various materials used in the manufacturing of intermediate and finished products are sorted by

064 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

type and shipped in reusable containers.

Suppliers

The production companies in Mattighofen and Munderfing largely cover their 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 it has vis-à-vis 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 employees, KTM constantly invests in their education and
training. KTM incurred expenses of EUR 1,797.5k in this regard in 2017 (prior year: EUR 1,216.5k). 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 123 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.

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

KTM rises to the challenge of manufacturing products that are innovative, high-quality, in line with market requirements and, most importantly,
safe, with 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, procurement of components,

NON-FINANCIAL PERFORMANCE INDICATORS 0 65

parts production, assembly of engine and vehicle, and dispatch, right through 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 651 motorcycles per working day are assembled in Mattighofen/Austria. Each and every vehicle component is checked by experi-
enced KTM employees 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 employees 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 produc-
tion, 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.

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
non-profit organization aiming to promote and speed up research and medical-scientific progress towards finding a cure for paraplegia induced
by spinal cord injuries.

19. OUTLOOK

Business development

KTM expects to see a further increase in both revenues and sales during the 2018 financial year.

From a regional point of view, we are expecting to see significant growth in absolute terms in the Europe and North America regions.
We are expecting to see the greatest relative growth rates in the ASEAN region and in India.

The planned growth is primarily expected from KTM and Husqvarna road bikes. At Husqvarna Motorcycles, the focus for 2018 is on its return
to the road segment with the launch of the Vitpilen 401, Svartpilen 401 and Vitpilen 701. KTM is breaking into a new segment with the
introduction of the new inline two-cylinder DUKE 790.

In the medium term, KTM has set itself the goal of increasing global sales to 400,000 units per year and developing Husqvarna Motorcycles into
the third largest motorcycle manufacturer in Europe.

066 CONSOLIDATED MANAGEMENT REPORT OF K TM AG

With a view to increasing its presence on the Chinese market, KTM AG is pursuing a joint venture with its long-standing partner, CF Moto.
The joint venture (“CFMOTO-KTMR2R”), in which KTM holds a 49 % share, is still subject to the approval of the competent authorities
governing CF Moto. Not only is this joint venture expected to increase the presence of KTM on the Chinese market, the intention is also to work
together to develop and manufacture products in order to further drive forward global expansion.

Following the complete takeover of the WP group by KTM AG in January 2018, it is expected that the former will be fully integrated during the
2018 financial year, resulting in increases in efficiency and greater potential for synergies.

Motorsport

2018 will also see KTM invest heavily in motorsport once again. Alongside the well-known racing series in the offroad segment and the Dakar
Rally, the emphasis will lie on the second MotoGPTM series. In 2018, KTM will once again line up on the grid of the MotoGPTM series with the
riders Pol Espargaró and Bradley Smith. With the Moto2 and Moto3 series, KTM is therefore represented in all three racing categories. KTM is
also continuing its unbelievable success story in the Dakar Rally. In January 2018, Red Bull KTM factory rider, Matthias Walkner, secured a
seventeenth consecutive victory in this infamous race for the Austrian manufacturer on his new KTM 450 RALLY.

Investments

The main areas of focus for investment in 2018 cover, in particular, new series development projects and investments in infrastructure and
expansion.

At around 8 % of revenue, investment in research & development remained at the high levels seen during the prior year.

The 2018 financial year will see the completion of the expansion of the research and development center in Mattighofen, in which a total of
around EUR 30 million has been invested. Investing in this expansion will create around 100 new jobs at the Mattighofen site for highly qualified
employees.

The completion of the “House of Brands” for the sales and marketing of the KTM, Husqvarna Motorcycles and WP brands at the Munderfing site
is scheduled for the end of 2018.

In 2018, all KTM subsidiaries will be fully integrated into the new SAP ERP system. As a result, further investments are planned in the expan-
sion, integration, and automation of our system landscape, as well as in improving its efficiency.

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.

Mattighofen, February 13th 2018

The Executive Board

Stefan Pierer Harald Plöckinger Hubert Trunkenpolz Viktor Sigl

NON-FINANCIAL PERFORMANCE INDICATORS 0 67

 KTM 390 DUKE MY 2017, PHOTO: SCHEDL R.
CONSOLIDATED
FINANCIAL
STATEMENTS
071 CONSOLIDATED INCOME STATEMENT
072 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
073 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
074 CONSOLIDATED STATEMENT OF CASH FLOWS
076 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
077 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
138 ANNEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS – SCHEDULE OF EQUITY HOLDINGS
140 AUDITOR’S REPORT
143 STATEMENT OF ALL LEGAL REPRESENTATIVES

GESCHÄFTSVERLAUF UND WIRTSCHAFTLICHE LAGE

070 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG
CONSOLIDATED INCOME
STATEMENT
FOR THE FINANCIAL YEAR 2017

EURk Note nr. 2017 2016

Revenue 5 1,331,717 1,141,819

Cost of sales 6 -957,119 -792,281
Gross profit 374,598 349,538

Selling and racing expenses 6 -157,976 -152,096

Research and development expenses 6 -28,955 -26,017
Infrastructure and administration expenses 6 -47,825 -43,566
Other operating expeness 7 -31,318 -27,526
Other operating income 8 2,574 107
Share of the profit of associates 9 1,961 2,357
accounted for using the equity method
Result from operating activities 113,059 102,796

Interest income 1,882 1,865

Interest expenses -6,486 -9,597
Other financial result 10 -1,443 -686
Profit before tax 107,012 94,378

Tax expense 11 -28,049 -22,269

Profit for the financial year 78,963 72,109
of which attributable to the owners of the parent company 78,844 72,012
of which attributable to non-controlling interests 119 97

C O NS O LIDATED IN C O ME S TATEMENT 071

CONSOLIDATED STATEMENT OF
COMPREHENSIVE
INCOME
FOR THE FINANCIAL YEAR 2017

EURk Note nr. 2017 2016

Profit for the financial year 78,963 72,109

Currency translation of foreign subsidiaries -2,880 992

Currency translation of accociates accounted for using the equity method 14, 19 -141 11
Currency translation of net investments in foreign operations 19 -803 116
Deferred tax on currency translation of net investments in foreign operations 201 -29
Valuation of cash flow hedges (of which associates accounted for 19 8,691 -4,152
using the equity method: EUR -5k, prior year: EUR 33k)

Deferred taxes on the valuation of cash flow hedges 19 -2,173 1,038

Other comprehensive income - Possible reclassification into the income statement 2,895 -2,024

Recognized actuarial gains/losses (of which associates accounted for 14, 23 223 -759
using the equity method: EUR 44k, prior year: EUR -1k)
Deferred taxes on the recognized actuarial losses 23 -56 190
Other comprehensive income - No reclassification into the income statement 167 -569
Other comprehensive income 3,062 -2,593
Total comprehensive income 82,025 69,516
ot which attributable to the owners of the parent company 81,906 69,419
of which attributable to non-controlling interests 119 97

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

072 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS OF DECEMBER 31, 2017

EURk Note nr. 31/12/2017 31/12/2016

ASSETS
Non-current assets:
Tangible assets 12 205,416 173,288
Intangible assets 13 353,269 315,653
Investments accounted for using the equity method 14 24,817 22,702
Deferred tax assets 11 2,964 3,317
Other non-current assets 15 3,524 927
589,990 515,888
Current assets:
Cash and cash equivalents 142,366 236,752
Inventories 16 205,298 164,544
Trade receivables 17 96,261 99,239
Prepayments 4,571 2,365
Current tax assets 4,313 7,718
Other current assets 18 49,128 30,018
501,937 540,636
ASSETS 1,091,928 1,056,524

LIABILITIES
Consolidated equity:
Share capital 19 10,845 10,845
Reserves including retained earnings 19 476,652 416,417
Equity of the owners of the parent company 487,496 427,262
Non-controlling interests 19 469 718
487,965 427,979
Non-current liabilities:
Financial liabilities 20 186,921 212,554
Employee benefits 23 17,697 17,310
Deferred tax liabilities 11 55,072 44,305
Other non-current liabilities 21 8,244 7,426
267,935 281,595
Current liabilities:
Bonds 20 0 83,061
Financial liabilities 20 28,448 22,760
Trade payables 22 209,089 160,084
Provisions 24 11,063 10,207
Tax liabilities 520 424
Prepayments 4,690 5,431
Other current liabilities 21 82,218 64,983
336,028 346,950
EQUITY AND LIABILITIES 1,091,928 1,056,524

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

C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E / C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N
073
CONSOLIDATED STATEMENT OF
W

CASH FLOWS
FOR THE FINANCIAL YEAR 2017

EURk Note nr. 2017 2016

Consolidated cash flow from operating activities:

+ (-) Profit (Loss) for the financial year 78,844 72,012
+ (-) Profit (Loss) allocated to non-controlling interests 119 97
+ (-) Interest expenses (interest income) 4,604 7,732
- Interest paid -7,088 -8,832
+ Interest received 1,882 1,865
+ (-) Current income tax 11 18,993 14,128
- Income taxes paid -7,175 -14,839
+ (-) Deferred taxes 11 9,056 8,141
+ Depreciation/amortization of fixed assets 12, 13 65,757 57,458
- Non-cash results from investments accounted for using the equity method 9, 14 -1,961 -2,357
+ Dividends received from associated companies 876 116
+ (-) Results from consolidation 8 -2,106 0
- (+) Other non-cash income (expense) 25 -3,239 -94
158,561 135,428

- (+) Change of inventories -33,559 16,436

- (+) Change of trade receivables, prepayments, current tax assets, -23,700 -24,605
other current and non-current assets

(+) - Change of trade payables, prepayments, 73,876 38,694

and other current and non-current liabilities

(+) - Change of tax liabilities, deferred taxes and provisions -8,790 -363
7,827 30,162
Consolidated cash flow from operating activities 166,388 165,590

Consolidated cash flow from investing activities:

- Investments in tangible and intangible assets (payments-out) 12, 13 -129,762 -131,855
- Investments in financial assets (payments-out) 14 -3,766 -15,072
(+) - Acquisition of subsidiaries less acquired liquid funds 2 451 138
(+) - Disposal of subsidiaries less disposed liquid funds 2 -363 0
(+) - Acquisition of investments accounted for using the equity mehtod 31 0 26
(+) - Disposal of investments accounted for using the equity mehtod 31 3,701 0
+ Disposal of fixed assets (payments-in) 12 308 11
+ Disposal of financial assets (payments-in) 2,305 0
Consolidated cash flow from investing activities -127,126 -146,752

CONSOLIDATED FREE CASH FLOW 39,262 18,838

074 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

EURk Note nr. 2017 2016

Consolidated cash flow from financing activities:

- Dividends to owners of the parent company 19 -21,671 -21,690
- Repayment of bond 20 -85,000 0
- Repurchase of own bonds 0 -1,966
+ Payment-in of repayment of own bonds 20 1,900 0
+ Taking out of promissory note loan (less transaction costs) 20, 25 0 119,540
+ Taking out investment loan 20, 25 0 9,500
- Repayment research loan 20, 25 -13,125 0
- Repayment investment loan 20, 25 -3,417 -3,403
- Repayment promotional loan 20, 25 -4,544 -2,161
- Repayment of liabilities from finance lease 20, 25 -545 -645
- Payments for receivables from other non-current financing 15 -3,514 0
+ (-) Other financing activities 561 86
Consolidated cash flow from financing activities -129,355 99,261

Consolidated cash flow:

+ (-) Consolidated cash flow from operating activities 166,388 165,590
+ (-) Consolidated cash flow from investing activities -127,126 -146,752
+ (-) Consolidated cash flow from financing activities -129,355 99,261
Change in liquid funds within the group -90,092 118,099

+ (-) Change due to exchange rate fluctuations -4,294 247

+ Opening balance of liquid funds within the group 236,752 118,406
Closing balance of liquid funds within the group comprising: 142,366 236,752
Cash on hand, checks, cash in banks and time deposits 142,366 236,752

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

C O NS O LIDATED S TATEMENT O F C A SH F LOWS 075

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE FINANCIAL YEAR 2017

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

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

as of December 31, 2015 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 0 0 0 0 0 0 340 340

interests

Dividends to owners of the 0 -21,690 0 0 0 -21,690 0 -21,690

parent company

as of December 31, 2016 = 10,845 399,368 17,235 -2,350 2,165 427,261 718 427,979
January 1, 2017
Currency translation 0 0 0 0 -3,623 -3,623 0 -3,623
Financial instruments 0 0 0 6,518 0 6,518 0 6,518
Actuarial gains 0 167 0 0 0 167 0 167
Other comprehensive income 0 167 0 6,518 -3,623 3,062 0 3,062

Profit for the financial year 0 78,844 0 0 0 78,844 119 78,963

Total comprehensive income 0 79,011 0 6,518 -3,623 81,906 119 82,025

Transactions with non-controlling 0 0 0 0 0 0 -212 -212

interests

Dividends to non-controlling 0 0 0 0 0 0 -156 -156

interests

Dividends to owners of the 0 -21,671 0 0 0 -21,671 0 -21,671

parent company

as of December 31, 2017 10,845 456,709 17,235 4,168 -1,459 487,496 469 487,965

076 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
OF KTM AG FOR THE 2017 FINANCIAL YEAR MATTIGHOFEN

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 of Ried im Innkreis in its capacity as Commercial Court under file number FN 107673 v.

KTM AG engages in the development, production, and distribution of motorized vehicles for recreational 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 31st 2017, the KTM group includes in its consolidated financial statements 43 subsidiaries, located in
Austria, the United States, Japan, South Africa, Mexico, India, and Brazil, as well as in various other European and Asian countries. Furthermore,
the KTM group has equity holdings in suppliers (WP group) and in general importers based in important distribution markets (Australia and the
Philippines), 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, Argentina, 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, 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 31st 2016 and December 31st 2017 were prepared in accordance with the International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and in accordance with the interpretations
of the International Financial Reporting Interpretations Committee (IFRIC), insofar as they are applied within the European Union. The additional
requirements stipulated by sec. 245a para. 1 of the Austrian Commercial Code (UGB) were also met in this context.

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 13th 2018 (prior year: February 15th 2017) 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.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 077

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 1st 2017:

» Amendment to IAS 7: Disclosure Initiative

» Amendment to IAS 12: Recognition of deferred tax assets for unrealized losses
»Annual Improvements to IFRS 2014-2016 Cycle: Amendments to IFRS 12

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, the application of which was not mandatory during the 2017
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 of Endorsed by EU? EU date of

application application

New standards and interpretations

IFRS 15 Revenue from Contracts with Customers January 1st 2018 Yes January 1st 2018
IFRS 9 Financial Instruments January 1st 2018 Yes January 1st 2018
IFRS 16 Leases January 1st 2019 Yes January 1st 2019
Amended standards and interpretations
IFRS 2: Classification and Measurement of Share-based Payment Transactions
January 1st 2018 No
(Amendment)
IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
January 1st 2018 Yes January 1st 2018
(Amendment)
IFRS 15: Clarifications to IFRS 15 (Amendment) January 1st 2018 Yes January 1st 2018
IAS 40: Transfers of Investment Property (Amendment) January 1st 2018 No
IFRIC 22: Foreign Currency Transactions and Advance Consideration January 1st 2018 No
Annual Improvements to IFRS Standards 2015-2017 Cycle:
January 1st 2019 No
Amendments to IFRS 3, IFRS 11, IAS 12, and IAS 23
Annual Improvements to IFRS Standards 2014-2016 Cycle:
January 1st 2018 Yes January 1st 2018
Amendments to IFRS 1 and IAS 28
IFRS 9: Prepayment Features with Negative Compensation (Amendment) January 1st 2019 No
IAS 28: Long-term Interests in Associates and Joint Ventures (Amendment) January 1st 2019 No
IFRIC 23 Uncertainty over Income Tax Treatments January 1st 2019 No
IFRS 17 Insurance Contracts January 1st 2021 No

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

» IFRS 15 Revenue

IFRS 15 Revenue from Contracts with Customers 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. It replaces
the previous standards IAS 18 Revenue and IAS 11 Construction Contracts.

The standard provides a single, principles-based, five-stage model to be applied to all contracts with customers.

1. In preparation for the introduction of IFRS 15, all contracts with customers were determined and analyzed.
2. Individual performance obligations were identified in the contracts with customers.
3. The transaction price and variable considerations were determined.
4. The transaction price was allocated to individual performance obligations.
5. The revenue is recorded upon the fulfilment of the performance obligation and the transfer of control.

078 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

 Contracts for all key product groups (revenue streams) were analyzed with a view to identifying any need for adjustment: Offroad sport
motorcycles, street sport motorcycles, and spare parts, garments, and accessories in all key regions. Other, non-standard customer contracts
of lower importance were not investigated.

Variable considerations, such as price rebates, sales bonuses, and cash discounts were identified within the aforementioned product groups.
These are now being accounted for as revenue reductions. As a result, no material effects on the net assets, financial position or earnings
position in the consolidated financial statements are expected.

As warranties are not sold separately, these only provide assurance that the products being sold meet the agreed specifications. As these
warranties do not depart from the statutory warranty obligations or those that are typical of the industry in terms of their duration or their
content, they are deemed to be assurance-type warranties, which do not constitute a separate performance obligation. Accordingly, the
warranties will continue to be established in accordance with IAS 37, which is in line with current accounting.

The intention is that the standard will be applied on January 1st 2018, with full retroactive effect. Aside from the requirement to provide
more comprehensive information concerning revenue from contracts with customers, based on current knowledge and facts, the application of
IFRS 15 is not expected to have any impact on the consolidated statement of comprehensive income.

With regard to the consolidated statement of financial position, it is expected that obligations relating to variable considerations will need to be
disclosed as contractual obligations for the purposes of IFRS 15. These will be shown, unchanged, on the statement of financial position
under other current financial liabilities and explained in the notes.

» IFRS 9 Financial Instruments

IFRS 9 Financial Instruments was published in June 2014 and includes requirements for the recognition, measurement, derecognition, and
classification of financial assets and financial liabilities; impairment requirements, and requirements relating to hedge accounting. It has now
fully replaced the standard IAS 39.

IFRS 9 brings with it a comprehensive range of disclosure requirements for the transfer and for the ongoing application. When compared with
the previous regulations under IFRS 7, new declarations will need to be made with regard to impairment losses in particular.

On the basis of an analysis of the financial assets and financial liabilities of the group as at December 31st 2017, together with the facts and
circumstances existing at that time, the anticipated effects on the consolidated financial statements of KTM AG are described below.

1. Application and declarations:

IFRS 9 will be applied with retroactive effect to January 1st 2018. The effects of first-time application will be recorded at the beginning of
the 2018 financial year in the opening balance of retained earnings.

First-time application will lead to adjustments in internal processes and documentation.

Furthermore, it is expected that additional notes will need to be provided, which will primarily concern the transition of categorization and
impairment losses for financial assets during the first year of application, together with annual declarations concerning impairment losses.

2. Classification and measurement:

When compared with IAS 39, the regulations included under IFRS 9 provide for a new classification model for financial assets, which will
impact upon the measurement of those assets. Categorization will take place in connection with the contractual cash flows and the
business models on which they are based. In this regard, the following measurement categories are provided by IFRS 9:

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 079

 » AC category: At amortized cost using the effective interest method
» FVOCI category: At fair value, changes to the fair value are recorded under other comprehensive income
» FVPL category: At fair value, changes to the fair value are recorded in the income statement

For the most part, the existing provisions will be adopted for the recognition and measurement of financial liabilities.

Effects on KTM:

Investigations have been carried out with regard to the assignment of debt instruments to business models. Financial assets have been
analyzed with regard to compliance with the SPPI criterion. Subsequently, the new measurement categories were established.

In the case of equity instruments (such as shares in companies not listed on the stock exchange) that are classified under IAS 39 as
financial assets available for sale, the FVOCI option can be exercised in the future. This will lead to changes in the fair value being recorded
under other comprehensive income, meaning that it will no longer be possible to regroup the changes to fair value accumulated under other
comprehensive income in the income statement. Insofar as this option is not exercised, these will be assigned to the FVPL category, under
which all changes to the fair value will be recorded in the income statement. KTM currently plans to take advantage of its right to choose
the FVOCI option for carrying amounts of EUR 10k (other non-current financial assets).

Otherwise, no significant changes are expected with regard to the measurement categories in connection with the new classification
provisions; likewise, no equity effects are expected.

3. Impairment loss:

IFRS 9 replaces the previous “Incurred Loss” model from IAS 39 with the “Expected Credit Loss” model. In this regard, IFRS 9 defines
different levels for the purposes of establishing the amount of the losses and interest receipts that are to be recorded.

» Level 1: Recording of the expected losses in the amount of the cash value of an expected 12-month loss on acquisition
» Level 2: Recording of the expected losses over the entire term to maturity by means of an increase to the default risk since acquisition
» Level 3: All receivables with objective evidence of impairment losses are assigned to this level and expected losses are taken into
account over the entire term to maturity

Effects on KTM:

Trade receivables do not exhibit any significant financing components. For that reason, the simplified process for establishing the expected
credit loss is used; this involves accounting for all instruments with a risk provision, which is independent of their credit quality, in the
amount of the expected losses over the term to maturity. In the case of trade receivables, this amounts to fewer than twelve months and
therefore corresponds to the 12-month loss.

In order to determine the expected credit loss, historic default data are collected for receivables over the last eight to ten years and split into
geographic regions. Current economic factors and forecasts are also taken into account. In that regard, an expected credit loss of 0.06 % of
trade receivables was determined for 2017.

The application of the new impairment loss model will therefore lead to the earlier recording of expected losses and, as a result, to higher
impairment loss figures. For the 2017 financial year, an additional impairment loss of less than EUR 100k was expected for trade receiva-
bles. This led to a corresponding reduction in the retained earnings as at January 1st 2018.

Cash and cash equivalents are mainly comprised of cash on hand and cash balances at credit institutions that have received good credit-
worthiness ratings from external rating agencies. For that reason, the credit risk is classified as low. According to the 12-month loss model,
only insignificant impairment losses are expected.

There are no indications of any additional impairment loss requirements for financial assets.

080 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

4. Hedge accounting:

The most significant changes to hedge accounting are the expanded range of possible hedged items and hedging transactions, as well as
the new requirements concerning the effectiveness of hedge accounting, particularly the removal of the previous 80-125 % corridor.

Effects on KTM:

The requirements set out in IFRS 9 will be applied with effect from the 2018 financial year. Since the new requirements are intended to
better illustrate risk management within the group, and since the range of possible hedged items and hedging transactions has been
extended, the existing hedging relationships can continue to be accounted for as hedging relationships under IFRS 9.

IFRS 9 introduces the concept of the cost of hedging. For this, the fair value of an option, the forward element of a forward contract and
any foreign currency basis spreads can be excluded from the designation of a financial instrument as a hedging instrument and accounted
for as the cost of hedging. In this regard, fluctuations in the value of these components that have optionally not been designated are
recorded as hedging costs under other comprehensive income and reclassified in the income statement in the event that the hedged item is
recognized in profit or loss. KTM plans to implement this concept during the 2018 financial year.

Overall, as at January 1st 2018, no changes are expected with regard to the reserves under equity as a result of the application of the
accounting provisions for hedging relationships under IFRS 9.

Furthermore, no significant impacts are expected for the consolidated financial statements as a result of the application of the new hedge
accounting provisions under IFRS 9. We will not be taking advantage of our right to choose to continue recording hedging in accordance
with the provisions of IAS 39 until further notice.

» IFRS 16 leases

IFRS 16 governs the identification, recognition, measurement, reporting, and disclosure requirements for leasing agreements. The standard
specifies a single accounting treatment for lessees. This model requires the lessee to record all assets and liabilities under lease arrange-
ments in the statement of financial position, except where the lease is for a term of twelve months or fewer or the asset is of low value (in
which cases application is optional).

KTM AG intends to apply the standard IFRS 16 to its consolidated financial statements with effect from January 1st 2019. Modified
retrospective recognition will be applied to ensure that the cumulative effect of the restatement is reflected in the equity as at January 1st
2019. The use of modified retrospective recognition will enable the following concessions to be applied:
» All leasing contracts that are due to expire within 12 months from the date of first-time application (i.e. until December 31st 2019)
can be reported in accordance with the old regulations under IAS 17. This option can be applied to each individual lease. At present,
KTM AG intends to avail itself of this option for the purposes of its consolidated financial statements.
» The marginal capital interest rate as at January 1st 2019 can be used to determine leasing liabilities. The following options are available
with regard to the determination of the right of use asset and can be selected for each individual lease:
1. Accounting will be performed as if IFRS 16 were still being applied. However, the marginal capital interest rate as at
January 1st 2019 will be used. Since the right of use asset is amortized on a straight-line basis, with the leasing liability being
calculated in accordance with the effective interest method, a difference arises, which is to be recorded in the equity. Or:
2. The right of use asset is capitalized in the amount of the leasing liability to ensure that the leasing liability as at January 1st 2019
corresponds to the right of use asset, meaning that no equity amendments are required. .
At present, KTM AG intends to apply the second option for its consolidated financial statements to ensure that the right of use asset
corresponds to the leasing liability as at January 1st 2019.

As at December 31st 2017, the group has payment obligations associated with irredeemable operating leases that amount to EUR 69.4
million. A preliminary assessment has shown that these agreements fall under the definition of a leasing agreement under IFRS 16 and the
group must therefore account for the corresponding right of use assets and leasing liabilities under the application of IFRS 16. However, it
is expected that advantage will be taken of the exemptions for short-term leases and low-value assets. It can be expected that the capitali-
zation of leases will bring about an increase in the carrying amount of property, plant, and equipment, as well as an increase in financial
liabilities.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 81

 Lease obligations exist in the following areas in particular: Vehicle-fleet leasing, rental of business premises and offices, rental of movable
property, etc.

In the case of finance leases for which KTM is the lessee, assets and liabilities are already being accounted for today.

» 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 separate financial statements as at the same date as the consolida-
ted 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 unquali-
fied audit opinions were issued on them.

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 was 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 consolidated
but are reported as other non-current assets and measured at amortized cost.

Accordingly, 43 companies are fully consolidated in the KTM group, in addition to the group parent. The entities included in the consolidated
financial statements are specified in the schedule of equity holdings as of December 31st 2017 (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 accounted for in these financial statements using the equity method. Under the equity method, investments
in associates are included in the consolidated balance sheet 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. Nine associates are accounted for using the equity method in the KTM group.

The end of the reporting period for all companies included in the KTM AG consolidated financial statements is December 31st 2017. 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.

082 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Changes in the scope of consolidation during the 2017 financial year were as follows:

Full consolidation At equity

2017 2016 2017 2016

Balance as at January 1st 42 39 6 3

Additions 2 3 6 3
Disposals -1 0 -3 0
Balance as at December 31st 43 42 9 6

thereof in Austria 7 8 5 3
thereof abroad 36 34 4 3

WP Suspension North America, Inc.

By way of a sale and purchase agreement dated July 31st 2017, KTM North America, Inc., USA acquired 100 % of the shares in WP Suspension
North America Inc., USA from WP Performance Systems GmbH, Austria. The initial consolidation of WP Suspension North America Inc. took
place on July 31st 2017.

The following assets and liabilities were absorbed into the group:

EURk

Fixed assets 66
Cash and other current assets 99
Trade receivables due from third parties 88
Inventories 518
Trade payables -541
Other current liabilities -7
Purchase price 223

Cash taken over 79

Net cash outflow on acquisition 144

The carrying amount of equity represents the fair value on the acquisition date.

The trade receivables include outstanding gross amounts for contractual receivables, amounting to EUR 91k, of which EUR 3k has been
assessed as being likely to be uncollectible as at the acquisition date.

In the five months to December 31st 2017, WP North America Inc., USA contributed revenues of EUR 681k and a profit of EUR 2k to the
consolidated result. Had the acquisition taken place on January 1st 2017, WP North America Inc., USA would have contributed revenues of
EUR 1,678k and a profit of EUR 131k to the consolidated result for the 2017 financial year.

The costs associated with the business combination, which comprised EUR 3k in legal fees, were included in the administration expenses.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 083

KTM do Brasil Ltda

The initial consolidation of KTM do Brasil Ltda, which had previously been accounted for at cost due to non-materiality, took place on December
31st 2017. As the initial consolidation took place on the basis of materiality considerations rather than as a result of a company acquisition,
there is no purchase price in this regard.

The following assets and liabilities were absorbed into the group:

EURk

Fixed assets 79
Cash and other current assets 729
Trade receivables due from third parties 50
Inventories 463
Trade payables -390
Other current liabilities -43
Negative difference -888
Purchase price 0

Cash taken over 593

Net cash inflow on acquisition 593

The carrying amount of equity represents the fair value on the acquisition date.

The trade receivables include outstanding gross amounts for contractual receivables, amounting to EUR 64k, of which EUR 14k has been
assessed as being likely to be uncollectible as at the acquisition date.

The difference (credit item) of EUR 888k arising on initial consolidation was recognized as other operating income.

KTM Technologies GmbH and Kiska GmbH

By way of a sale and purchase agreement dated June 30th 2017, the 74 % share in KTM Technologies GmbH, Anif held by KTM AG was sold to
KTM Industries AG, together with the 26 % share held in Kiska GmbH, Anif.

Kiska GmbH was previously recognized as an entity accounted for using the equity method in the consolidated financial statements. Further
information regarding the disposal of this company can be found in Note 14.

The deconsolidation of KTM Technologies GmbH took place on June 30th 2017. The following assets and liabilities were deconsolidated:

EURk

Fixed assets 679

Cash and other current assets 1,971
Trade receivables 139
Deconsolidated assets 2,789
Employee benefits 13
Trade payables 1,119
Other current liabilities 971
Deconsolidated liabilities 2,103
Deconsolidated net assets 686

084 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The values cited correspond to the carrying amounts at the time of deconsolidation.

As a result of the loss of control, interests held by non-controlling shareholders amounting to EUR 178k were derecognized.

The consideration received as a result of the disposal of the interests amounted to EUR 1,020k. This resulted in a capital gain on disposal of
EUR 512k, which is recognized under other operating income.

The net cash outflow on disposal is recognized in the cash flow from investing activity and breaks down as follows

EURk

Fees received 1,020

Inventory of cash and cash equivalents disposed of -1,383
Net cash outflow on the disposal of subsidiaries -363

KTM Events & Travel Services AG

The liquidation of KTM Events & Travel Services AG was completed in April 2017. The deconsolidation of this company had already taken place
during the 2015 financial year. The difference between the liquidation proceeds from the 2015 deconsolidation and the actual liquidation
proceeds amounted to EUR 2k and was included under miscellaneous investment income.

WP Performance Sports GmbH

By way of a sale and purchase agreement dated December 15th 2017, the remaining 26 % share of WP Performance Sports GmbH was
purchased by KTM AG for a purchase price of EUR 26k. The resulting difference, which amounted to EUR 7k, was recorded in the consolidated
equity as profit neutral in accordance with IFRS 10.

Motorcycle Distributors Australia Pty Ltd.

In July 2017, KTM Sportmotorcycle GmbH acquired a 26 % share of Motorcycle Distributors Australia Pty Ltd., Australia. In the consolidated
financial statements, the company is recognized as an entity accounted for using the equity method. On July 4th 2017, KTM New Zealand Ltd.,
in which KTM Sportmotorcycle GmbH also holds a 26 % share, was merged into a subsidiary of Motorcycle Distributors Australia Pty Ltd.

During the course of the acquisition of the 26 % share in Motorcycle Distributors Australia Pty Ltd., Australia, a call option for the purchase of
25 % shares (right to exercise) and a put option on a 49 % share (obligation to purchase if exercised) was agreed with the other shareholder. The
put option can only be exercised by the other shareholder if the call option has previously been exercised by KTM Sportmotorcycle GmbH. It is
exercised on the basis of set multipliers and other variables. Furthermore, KTM Sportmotorcycle GmbH has a preemption right for the purchase
of the remaining share in the event that the other shareholder does not exercise the put option. The options are accounted for on the reporting
date at their cost of acquisition, which is EUR 0.00.

Other

On December 31st 2017, the holdings in four flagship stores (KTM Wien GmbH, Vösendorf, KTM Braumandl GmbH, Wels, MX – KTM Kini
GmbH, Wiesing, and KTM Regensburg GmbH, Regensburg) and Cero Design Studio S.L., Barcelona, Spain were taken into account for the first
time using the equity method; these had previously been accounted for as other non-current assets.

With effect from December 14th 2017, 25 % of the share in KTM MIDDLE EAST AL SHAFAR LLC, Dubai was disposed of.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 085

Changes in the scope of consolidation during the 2016 financial year are described below:

KTM Logistikzentrum GmbH

Under a sale-and-purchase agreement dated September 16th 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 Immobilienleasing 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 28). At the extraordinary general meeting held on September 16th 2016,
Oberbank Mattigtal Immobilienleasing GmbH, Linz, resolved to change its name to KTM Logistikzentrum GmbH and to transfer its registered
office to Mattighofen. The initial consolidation of KTM Logistikzentrum GmbH took place as from September 16th 2016.

The following assets and liabilities were absorbed into the group:

EURk

Fixed 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 to credit institutions 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 consolida-
tion, on account of the preexisting finance lease relationship.

KTM Sportmotorcycle MEA DMCC

The KTM group holds 100 % of the shares of the newly established sales subsidiary KTM Sportmotorcycle MEA DMCC, Dubai. The initial
consolidation took place on December 1st 2016.

WP Performance Sports GmbH

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

086 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Cero Design Studio S.L.

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.

Mattighofen Museums-Immobilien GmbH (now: KTM MOTOHALL GmbH), Mattighofen

During the 2015 financial year, 49 % of the shares of Mattighofen Museums-Immobilien GmbH (now: KTM MOTOHALL GmbH), Mattighofen,
were acquired. It has been accounted for using the equity method since the 2016 financial year.

W Verwaltungs AG (formerly: WP AG)

In July 2016, KTM AG acquired 24 % of the shares of WP AG, Munderfing (now: W Verwaltungs AG, Wels). In the consolidated financial
statements, the company is recognized as an entity accounted for using the equity method.

KTM Asia Motorcycle Manufacturing Inc

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 entity accounted for using the equity method.

The following is an abridged representation of the structure of the KTM group:

KTM AG

KTM KTM Sport- KTM Husqvarna WP Performance

WP Gruppe *)
Immobilien GmbH motorcycle GmbH Sportcar GmbH Motorcycles GmbH Sports GmbH

Sales companies Sales companies

Organizational chart (abridged)

*) As of January 2018, KTM AG holds 99.86 % of W Verwaltungs AG (formerly: WP AG).

KTM AG is the ultimate group parent of the KTM group. The corporate purpose of KTM AG includes the development and production of
motorcycles under the KTM and Husqvarna brands, as well as the X-Bow super sports car. 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 with sites in Austria and controls most of the KTM group’s financing arrangements.

The sales subsidiaries 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 that carry their own inventories. The two companies also hold equity interests in a total of 23 domestic and foreign sales
subsidiaries that provide sales and marketing-related services in local markets on behalf of KTM Sportmotorcycle GmbH and Husqvarna
Motorcycles GmbH.

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

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

WP Performance Sports GmbH provides the after-sales service for products under the WP brand.

W Verwaltungs AG (formerly: WP AG) is the ultimate group parent of the WP group, one of the leading European system suppliers of
performance-defining components for the motorcycle and powersport industries.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 87

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 acquisition
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. On the reporting date, foreign currency items 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.

The group currency is the euro. Subsidiaries located outside the eurozone are regarded as economically independent entities. In line with the
concept of 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 mean rate of exchange valid on the reporting
date and items in the consolidated income statement are translated using the 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:

088 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

 Closing rate Average rate
December December
2017 2016
31st 2017 31st 2016

CHF 1.1702 1.0739 1.1163 1.0909

JPY 135.0100 123.4000 127.3040 120.4408
USD 1.1993 1.0541 1.1370 1.1032
ZAR 14.8054 14.4570 15.0634 16.1289
MXN 23.6612 21.7719 21.4285 20.6817

Source: Exchange rates as at December 31st 2017 as per the ECB

4. ACCOUNTING POLICIES

The financial reporting of the entities included within the consolidated financial statements is based on uniform accounting policies. These
policies are identical to those of the 2016 financial year, 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.

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 determina-
tion of the income can be made.

In the income statement, the share of the profit 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 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.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 089

Consolidated statement of financial position

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

Useful life

Buildings 10-50 years

Machinery/tools 2-10 years
Fixtures and fittings, tools and equipment 3-8 years

The production costs of self-constructed property 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 are recognized as
finance leases. Such assets are recognized at the lower of the fair value or 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. Amortization 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 11.0 % (prior year: 10.4 %).

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 rate is applied. Medium-term planning is based on internal assumptions concerning the future development of
sales, prices, and costs, the future development 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. All other conditions being equal, any increase in input tax for
WACC to 13.5 % (prior year: 13.2 %) or decline in budgeted future EBITs by up to 18.6 % (prior year: 20.8 %) would continue to provide
sufficient coverage for the carrying amount of the cash-generating unit.

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.

090 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

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 accounted for
in profit and 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 approach.
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 31st 2017 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 12.9 % (prior year: 12.5 %) was taken as the discounting rate. This was
made up of the group pre-tax WACC of 9.9 % (prior year: 9.5 %) 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. A sensitivity
analysis regarding these parameters shows that, all other conditions being equal, sufficient coverage is provided for the carrying amount if a
consolidated input tax for WACC of 24.4 % (prior year: 23.6 %) is applied and, all other conditions being equal, at a royalty of 0.7 % (prior year:
0.7 %). All other conditions being equal, sufficient coverage is provided for the carrying amount in the event of a decline in the budgeted future
revenues by up to 56.0 % (prior year: 56.0 %).

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 carryforwards 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

» 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.

» 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 com-
prehensive 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.

» 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 their fair value as of the reporting date.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 91

» 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 translated at the closing rate, less any impairment charges required 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 uncollectible or partly uncollectible. 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.

» 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.

» 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 closing rate. Any changes in earnings that are caused by the ineffectiveness of the derivative financial instruments are
recognized in the consolidated income statement.

The application of hedge accounting requires certain conditions to be met. The hedging relationships 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 socalled maturity
bands according to the hedged risk. The maturity bands should not cover more than one quarteryear. 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 approach.

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 their market value are recognized in their full amount in
profit or loss in the current period and shown in the financial result.

092 C O NS O LIDATED FIN A N CIA L S TATEMENT S 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
issue severance pay upon termination by the employer or upon retirement to all employees in Austria whose employment relationship com-
menced before January 1st 2003. This defined benefit obligation depends on the number of years of service and on the employee’s relevant
remuneration at the time of departure. It amounts to between two and twelve monthly remuneration payments. For all employees in Austria who
joined after December 31st 2002, KTM AG pays 1.53 % of their remuneration each month 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 payment of the contributions, 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 (as from 25 years of service) (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 budgeted 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.

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.

NOTES / PRINCIPLES OF FINANCIAL REPORTING AND ACCOUNTING POLICIES 0 93

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 credit institution offers suppliers the option to have their accounts receivable from KTM AG discounted at the credit
institution and paid out in advance of the due date. As the financing costs are based on the good creditworthiness rating 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 credit institution.

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 credit institution. 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 82,569k; prior year: EUR 64,949k) are disclosed under trade payables and the cash flows under cash flow from operating
activities.

Estimates and uncertainties in judgements 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
previous assumptions are revised accordingly.

» Assumptions are made in particular to assess the recoverability of goodwill and intangible assets of indeterminate useful life. Goodwill of EUR
78,588k (prior year: EUR 78,614k) 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.

» 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 eighteen 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 signifi-
cance (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 27.2 “Financial risk management”.

» 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
turnover, as well as financial assumptions such as the discount rate and future wage and salary trends. Liabilities for severance pay entitle-
ments of EUR 14,712k (prior year: EUR 14,396k) were recorded as at the reporting date. For further explanations, see Note 23 “Employee
benefits”.

» 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. On the basis
of longstanding experience, the Executive Board 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
at December 31st 2017 provisions relating to guarantees and warranties of EUR 10,480k (prior year: EUR 9,388k) were recorded. An average
increase in the guarantee cost percentage of 10 % would have led to an increase in the provision of EUR 985k (prior year: EUR 769k). For
movements in the provisions relating to guarantees and warranties, see Note 24 “Provisions”.

094 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The following judgements were made in respect of the application of accounting policies within the KTM group:

» 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 15, “Other
non-current assets”.

» Finance leases
Evaluations were made with respect to the criteria for classification as a finance lease. Further details are provided under Note 12, “Property,
plant, and equipment” and Note 28, “Finance leases”.

» 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 27, “Other
financial instruments”.

» 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 that 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.

» 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 / NOTES TO THE CONSOLIDATED INCOME STATEMENT 0 95

III. NOTES TO THE CONSOLIDATED INCOME STATEMENT

5. REVENUE

Revenue by region

EURk 2017 2016

Austria 54,515 55,038

Other Europe 645,720 548,524
North America 381,263 327,704
Other countries 250,219 210,553
1,331,717 1,141,819

Revenue by product group

EURk 2017 2016

Offroad sport motorcycles 546,743 526,082

Street sport motorcycles 515,087 381,983
Sportminicycles 55,461 44,749
X-Bows 5,712 5,000
Total - vehicles 1,123,003 957,814

Parts, garments and accessories as well as other revenues less revenue reductions 208,714 184,005
1,331,717 1,141,819

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 2017 2016

Cost of materials and cost of purchased services 824,381 684,965

Personnel expenses 70,508 57,465
Depreciation of property, plant and equipment and amortization of intangible assets 19,590 16,090
Amortization of capitalized development costs 28,520 25,851
Other operating expenses 14,120 7,910
957,119 792,281

Cost of sales includes income from foreign currency translation differences of EUR 12,310k (prior year: EUR 2,720k) that is measured at fair
value through profit or loss. These exclude differences arising on the measurement of financial instruments.

096 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Selling and racing expenses

EURk 2017 2016

Cost of materials and cost of purchased services 36,912 18,184

Personnel expenses 65,117 53,819
Depreciation of property, plant and equipment and amortization of intangible assets 4,418 4,501
Other operating expenses 81,254 88,045
Sponsorship income and contributions -29,725 -12,451
157,976 152,096

Research and development expenses

EURk 2017 2016

Cost of materials and cost of purchased services 6,202 5,751

Personnel expenses 14,574 13,846
Depreciation of property, plant and equipment and amortization of intangible assets 3,525 3,678
Other operating expenses 17,928 11,465
42,230 34,740
Subsidies -13,275 -8,722
28,955 26,017

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 44,482k (prior year: EUR 38,197k).

During the 2017 financial year, gross research and development expenses amounted to EUR 107,201k (previous year: EUR 92,580k). Of these,
development costs of EUR 64,970 (prior year: EUR 57,841k) were capitalized.

Infrastructure and administration expenses

EURk 2017 2016

Cost of materials and cost of purchased services 742 491

Personnel expenses 20,157 17,377
Depreciation of property, plant and equipment and amortization of intangible assets 9,107 6,583
Rental and leasing expenses 6,469 3,958
Insurance expenses 3,529 2,577
Other operating expenses 7,820 12,581
47,825 43,566

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

During the 2017 financial year, total personnel expenses before the effects of capitalizing development costs were EUR 205,598k
(prior year: EUR 171,331k).

Expenses for the auditor of the financial statements

The expenses attributable to the 2017 financial year for the auditor of the financial statements, KPMG Austria GmbH Wirtschaftsprüfungs- und
Steuerberatungsgesellschaft, amount to EUR 214k (prior year: EUR 208k). Expenses in relation to other assurance services were EUR 12k (prior
year: EUR 10k). Expenses in relation to miscellaneous audit-related advisory services were EUR 35k (prior year: EUR 47k).

NOTES / NOTES TO THE CONSOLIDATED INCOME STATEMENT 0 97

Employees

Employees (annual average):

2017 2016

Manual workers 1,408 1,156

Clerical staff 1,797 1,581
3,204 2,737

Employees as at December 31st:

2017 2016

Manual workers 1,426 1,250

Clerical staff 1,819 1,681
3,245 2,931

thereof in Austria 2,776 2,491

thereof abroad 469 440

Employee numbers as stated include agency and external staff.

7. OTHER OPERATING EXPENSES

Other operating expenses of EUR 31,318k (prior year: EUR 27,526k) comprise customer service, guarantee, and warranty expenses of EUR
31,293k (prior year: EUR 27,329k) and miscellaneous expenses of EUR 24k (prior year: EUR 197k).

8. OTHER OPERATING INCOME

Other operating income of EUR 2,574k (prior year: EUR 107k) comprises income from the deconsolidation of KTM Technologies GmbH, Anif
and Kiska GmbH, Anif in the amount of EUR 1,389k, the difference (credit item) of EUR 888k in connection with the initial consolidation of
KTM do Brasil, Sao Paulo, Brazil and income from asset sales amounting to EUR 217k (prior year: EUR 107k) and other income of EUR 80k.
During the previous year, other operating income included all income from the derecognition of a finance lease.

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

EURk 2017 2016

Kiska GmbH, Anif 55 357

KTM New Zealand Ltd., Auckland, New Zealand 39 36
W Verwaltungs AG, Wels (formerly: WP AG, Munderfing) 1,798 1,964
KTM Asia Motorcycle Manufacturing Inc., Binan, Laguna, Philippines -221 0
Motorcycle Distributors Australia Pty Ltd, West Perth, Australia 352 0
Four flagship stores and miscellaneous -62 0
1,961 2,357

098 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

By way of a sale and purchase agreement dated June 30th 2017, the holding in Kiska GmbH, Anif, was sold to KTM Industries GmbH, Wels. For
that reason, the profit share set out above only relates to the first half of 2017. Further statements in this regard can be found under point 2 of
the scope of consolidation.

During the 2017 financial year, the holdings in four flagship stores and in Cero Design Studio S.L. were taken into account for the first time
using the equity method; these had previously been accounted for as other non-current assets.

10. OTHER FINANCIAL RESULT

The other financial result is made up as follows:

EURk 2017 2016

Foreign exchange valuation of bank deposits -769 69

Valuation of securities 0 178
Proceeds from the disposal of securities 258 0
Impairment of non-current financial assets -738 -718
Interest expenses for employee benefits -246 -284
Loss from the disposal of non-consolidated subsidiaries -21 0
Loss from the disposal of subsidiaries accounted for using the equity method -171 0
Income from other investments 244 68
-1,443 -686

11. TAX EXPENSES

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

EURk 2017 2016

Current tax:
Austria 13,330 9,985
Abroad 5,663 4,143
18,993 14,128
Deferred tax:
Austria 8,957 7,385
Abroad 411 -58
Consolidation level -312 814
9,056 8,141
28,049 22,269

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 099

The expected tax expense for the financial year (derived from applying the group tax rate of 25 % to the profit before tax of EUR 107,012k
(prior year: EUR 94,378k)) and the actual tax expenses disclosed are reconciled as follows:

EURk 2017 2016

Expected tax expense -26,753 -23,595

Effects of foreign tax rates -1,211 -968
Changes to the tax rate -374 0
Non-temporary differences -1,092 -601
Investment benefits 3,161 2,090
Utilization of loss carryforwards not recognized as deferred tax assets 0 -331
Withholding tax 312 400
Taxes in relation to prior periods -2,276 152
Effect of the share on entities accounted for using the equity method 490 606
Consolidation effects -317 0
Other 11 -22
-28,049 -22,269

On December 22nd 2017, the “H.R. 1 – Tax Cuts and Jobs Act” was signed in the USA. This had an impact on the way in which taxes are
accounted for in consolidated financial statements. IAS 12.47 stipulates that deferred taxes are to be measured using the tax rate that is valid or
anticipated at the end of the reporting period. The new regulations, which provide for an adjustment of the federal corporate income tax rate
from 35 % to 21 %, have therefore already been taken into account within the scope of accounting as at December 31st 2017. The calculation
of deferred tax assets therefore results in a deferred tax expense of EUR 374k as a result of the changes to the tax rate.

Total deferred tax assets and liabilities were calculated from the following statement of financial position items:

EURk December December

31st 2017 31st 2016

Deferred tax assets:

Inventories 5,307 6,161
Financial investments 544 506
Employee benefits 3,306 3,063
Provisions 2,673 2,381
Liabilities 1,112 1,910
12,942 14,021

Deferred tax liabilities:

Receivables and other current assets -1,988 -1,101
Intangible assets -62,159 -51,519
Property, plant, and equipment -832 -2,298
Other -71 -90
-65,050 -55,008
-52,108 -40,987
Of which deferred tax assets 2,964 3,317
Of which deferred tax liabilities -55,072 -44,305

Deferred tax assets in relation to financial assets include EUR 2,177k (prior year: EUR 2,025k) in relation to the remaining sevenths of write-
downs of equity holdings to going concern value pursuant to sec. 12 para. 3 no. 2 of the Austrian Corporate Tax Act (KStG). During the year
under re-view, sevenths of write-downs to going concern value amounting to EUR 585k (prior year: EUR 480k) 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.

10 0 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The temporary differences in the item “Intangible assets” result mainly from the development costs not capitalizable for tax purposes and the
quasi-permanent differences as a result of the valuation of the “KTM” brand.

As at December 31st 2017 (as 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 foreseea-
ble 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 taxable temporary differences of EUR 53,659k
(prior year: EUR 46,690k) arising in connection with holdings in subsidiaries and entities accounted for using the equity method.

Movements in deferred taxes are as follows:

EURk 2017 2016

Deferred tax (net) at January 1st -40,987 -34,147

Deferred taxes recognized in the income statement -9,056 -8,141
Deferred taxes recognized in other comprehensive income -2,028 1,199
Currency translation differences -37 101
Deferred tax (net) at December 31st -52,108 -40,987

NOTES / NOTES TO THE CONSOLIDATED INCOME STATEMENT 101

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

The tables below provide a breakdown of property, plant, and equipment along with movements during the 2017 and 2016 financial years:

EURk Land Buildings Machinery Fixtures and Advance Total

fittings, tools payments
and equipment made and
assets under
construction
COST OF ACQUISITION
AND PRODUCTION
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

as of January 1,2017 14,181 118,426 148,090 65,386 9,444 355,527

Additions 1,643 12,493 17,981 13,142 18,557 63,816
Additions due to consolidation scope 0 0 43 256 0 299
Transfers 0 28 5,133 252 -5,413 0
Disposals -135 -103 -4,618 -4,084 0 -8,940
Disposals due to consolidation scope 0 0 -608 -555 0 -1,163
Currency translation -13 -1,181 0 -1,601 -107 -2,902
as of December 31, 2017 15,676 129,663 166,021 72,796 22,481 406,637

ACCUMULATED DEPRECIATION
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

as of January 1,2017 0 29,350 110,219 42,670 0 182,239

Additions 0 4,234 16,969 8,511 0 29,714
Additions due to consolidation scope 0 0 17 143 0 160
Disposals 0 -39 -4,600 -3,960 0 -8,599
Disposals due to consolidation scope 0 0 -336 -307 0 -643
Currency translation 0 -441 0 -1,209 0 -1,650
as of December 31, 2017 0 33,104 122,269 45,848 0 201,221

Carrying amounts December 31, 2016 14,181 89,076 37,871 22,716 9,444 173,288
Carrying amounts December 31, 2017 15,676 96,559 43,752 26,948 22,481 205,416

10 2 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The disposals of EUR 26,043k under buildings for the 2016 financial year 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 consoli-
dation of KTM Logistikzentrum GmbH.

Additions to machines during the 2017 financial year include an amount of EUR 2,286k (prior year: EUR 1,291k) in relation to assets held under
finance leases, which had no cash flow effect. For more details, please refer to Note 28, “Finance leases”.

In the consolidated statement of cash flows, an adjustment of EUR 4,411k (prior year: EUR 4,887k) has been made to other 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 equipment
during the year.

13. INTANGIBLE ASSETS

The breakdown of intangible assets and the development of that item over the 2017 financial year as well as over the 2016 financial year are
shown in the following tables:

EURk Goodwill Development Concessions, Advance Total

costs industrial property payments made
rights and similar and assets under
rights and benefits construction
as well as licenses
derived therefrom
COST OF ACQUISITION
AND PRODUCTION
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

as of January 1,2017 96,085 177,470 106,226 313 380,094

Additions 0 64,970 3,980 4,956 73,906
Transfers 0 0 86 -86 0
Disposals 0 -2,369 0 0 -2,369
Disposals due to consolidation scope 0 0 -548 0 -548
Currency translation -35 0 -108 0 -143
as of December 31, 2017 96,050 240,071 109,636 5,183 450,940

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

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

ACCUMULATED DEPRECIATION
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

as of January 1,2017 17,471 32,184 14,787 0 64,442

Additions 0 28,520 7,523 0 36,043
Disposals 0 -2,369 0 0 -2,369
Disposals due to consolidation scope 0 0 -389 0 -389
Currency translation -9 0 -46 0 -55
as of December 31, 2017 17,462 58,335 21,875 0 97,672

Carrying amounts December 31, 2016 78,614 145,286 91,439 313 315,653
Carrying amounts December 31, 2017 78,588 181,736 87,761 5,183 353,269

In the consolidated statement of cash flows, an adjustment of EUR 1,265k (prior year: EUR 901k) has been made to additions to intangible
assets to reflect transactions that had no cash flow effect.

During the 2017 financial year, an impairment charge of EUR 1,650k (prior year: EUR 214k) was recorded against development costs in relation
to an asset that was 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 15k (prior year: EUR 2,663k) 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 December December

31st 2017 31st 2016

Goodwill in the KTM cash-generating unit 78,588 78,614

In accordance with IAS 36 “Impairment”, the goodwill disclosed is not amortized but is tested for impairment on an annual basis. Testing during
the 2017 financial year did not reveal a need to record an impairment loss. For the method of calculation, see the Accounting policies section.

By means of an assignment agreement dated September 17th 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 10 years.

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 31st 2017, this test did not reveal a need to record an impairment loss.
For the method of calculation, see the Accounting policies section.

10 4 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

14. COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD

As at December 31st 2017, associates comprise investments in W Verwaltungs AG, Wels (formerly: WP AG, Munderfing), minority interests in
importers and four flagship stores.

By way of a sale and purchase agreement dated July 6th 2016, KTM AG purchased 1,200,000 of the 5,000,000 registered shares of no par
value into which the share capital of WP AG, Munderfing (now: W Verwaltungs AG, Wels) is divided from KTM Industries AG, Wels for 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 (now: W Verwaltungs AG, Wels) 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 31.

The following table shows summarized IFRS financial information for W Verwaltungs AG (formerly: WP AG) for the financial year from January 1st
to December 31st 2017. The full amounts are dis-closed, i.e. they have not been adjusted to reflect KTM AG’s proportionate holding and no
consolidation adjustments have been made.

EURk December December

31st 2017 31st 2016

Non-current assets 64,768 63,303

Current assets 53,013 43,211
Equity 58,174 53,460
Non-current liabilities 23,710 29,490
Current liabilities 35,897 23,564

EURk 2017 2016

Revenue 179,738 166,106

Earnings before taxes (EBT) 9,513 11,374
Total comprehensive income 7,702 14,091
thereof profit for the year 7,581 14,228
thereof other comprehensive income 121 -137

The reconciliation from equity to carrying amount for the holding in W Verwaltungs AG (formerly: WP AG) is as follows:

EURk December December

31st 2017 31st 2016

Equity of the owners of the parent company 57,510 52,794

thereof relating to KTM AG holdings with 24% in shares 13,802 12,671
Goodwill 3,785 3,785
Consolidation effects -90 -65
Carrying amount 17,497 16,390

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

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 105

As at December 31st 2016, Kiska GmbH was once again included in the consolidated financial statements of KTM AG as an associate.
Kiska GmbH is a design business that provides development and design services for KTM. By way of a sale and purchase agreement dated
June 30th 2017, the 26 % holding in Kiska GmbH was sold to KTM Industries AG. The resulting capital gain on disposal of EUR 877k was
recognized as other operating income.

In July 2017, KTM Sportmotorcycle GmbH acquired a 26 % share of Motorcycle Distributors Australia Pty Ltd., Australia. On July 4th 2017,
KTM New Zealand Ltd., in which KTM Sportmotorcycle GmbH also holds a 26 % share, was merged into a subsidiary of Motorcycle Distributors
Australia Pty Ltd. For that reason, on June 30th 2017, the equity measurement was performed at the level of KTM New Zealand Ltd. for the last
time. With effect from the second half of 2017, the consolidated financial statements of Motorcycle Distributors Australia Pty Ltd. will be used
for the equity measurement.

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

KTM Asia Motorcycle Manufacturing Inc., Philippines, was jointly founded in June 2016 in partner-ship with Ayala Corp. The KTM group holds
26 % of the company. The company began 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 31st 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 was not accounted for using the equity
method as at December 31st 2016. The company was accounted for using the equity method during the 2017 financial year following the
commencement of operational activities.

With effect from December 14th 2017, 25 % of the share in KTM MIDDLE EAST AL SHAFAR LLC, Dubai was disposed of. The resulting loss,
which amounted to EUR 171k, was recorded under other financial result.

The companies accounted for using the equity method also include the holding in KTM MOTOHALL GmbH (formerly:
Mattighofen Museums-Immobilien GmbH), Mattighofen, which amounts to EUR 2,349k (prior year: EUR 2,349k), which functions purely as a
project company (for the construction of KTM Motohall) and makes no operating profit or loss.

During the 2017 financial year, the holdings in four flagship stores and in Cero Design Studio S.L. were taken into account for the first time
using the equity method; these had previously been accounted for as other non-current assets and have therefore been reclassified from other
non-current assets to companies accounted for using the equity method.

Movements in the carrying amounts of companies accounted for using the equity method were as follows during the 2017 financial year:

EURk W Verwaltungs AG Other Total

(formerly: WP AG) associates

Balance as at January 1st 2017 16,390 6,311 22,702

Acquisition of holdings in entities accounted for using the equity method 0 3,766 3,766
(including capital increase)
Reclassification adjustment of holdings (of other non-current assets) 0 372 372
Disposal of holdings in entities accounted for using the equity method 0 -2,995 -2,995
Pro rata annual profit 1,798 163 1,961
Other comprehensive income – cash flow hedge reserve -4 0 -4
Other comprehensive income – IAS 19 reserve 33 0 33
Other comprehensive income – foreign currency translation 0 -141 -141
Dividends -720 -156 -876
Balance as at December 31st 2017 17,497 7,320 24,817

10 6 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Movements in the carrying amounts of companies accounted for using the equity method were as follows during the 2016 financial year:

EURk WP AG (now: W Other Total

Verwaltungs AG) associates

Balance as at January 1st 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
Balance as at December 31st 2016 16,390 6,311 22,702

15. OTHER NON-CURRENT ASSETS

EURk December December

31st 2017 31st 2016

Non-consolidated subsidiaries 0 507

Companies not accounted for using the equity method 0 420
Receivables arising from financing activities 3,514 0
Other 10 0
3,524 927

With effect from June 30th 2017, 100 % of the share in A + U Management GmbH (formerly: KTM Finance GmbH), Switzerland, was divested.
The resulting capital gain on disposal, which amounted to EUR 2k, was recorded under other financial result.

With effect from July 31st 2017, 51 % of the share in Kiska Inc., USA was sold to Kiska GmbH, Anif. The sale took place at the carrying amount
of the holding and was therefore profit-neutral.

During the 2017 financial year, the holdings in four flagship stores and in Cero Design Studio S.L. were taken into account for the first time
using the equity method; these had previously been accounted for as other non-current assets and have therefore been reclassified from other
non-current assets to companies accounted for using the equity method.

The receivables arising from financing activities include a non-current loan to KTM MOTOHALL GmbH (see Note 31 for details) and other
non-current financing activities.

16. INVENTORIES

EURk December December

31st 2017 31st 2016

Raw materials and supplies 39,981 29,569

Work in progress 10,850 16,763
Finished goods and merchandise 154,467 118,213
205,298 164,544

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 107

EURk December December
31st 2017 31st 2016

Inventories (gross) 225,496 190,667

Write-down -20,198 -26,123
Inventories (net) 205,298 164,544

Inventories of EUR 81,571k (prior year: EUR 93,041k), excluding raw materials and supplies, were recognized at their net realizable value.

17. TRADE RECEIVABLES

Trade receivables are made up as follows:

EURk December December

31st 2017 31st 2016

From third parties 93,289 93,694

From associates 2,322 4,660
From non-consolidated associates and non-consolidated subsidiaries 0 885
From affiliated companies 650 0
96,261 99,239

The gross value of third-party trade receivables is stated net of individual allowances of EUR 2,261k (prior year: EUR 3,418k). No general
allowances were made.

Movements in allowances on receivables were as follows:

EURk

Balance as at January 1st 2016 1,908

Exchange rate differences -18
Additions 2,222
Utilization -507
Reversals -187
Balance as at December 31st 2016 = balance as at January 1st 2017 3,418
Exchange rate differences -75
Additions 506
Utilization -277
Reversals -1,311
Balance as at December 31st 2017 2,261

Expenses for the complete derecognition of trade receivables amounted to EUR 78k (prior year: EUR 172k).

10 8 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

18. OTHER CURRENT ASSETS

Other current assets are made up as follows:

EURk December December

31st 2017 31st 2016

Receivables from derivative financial instruments 11,625 3,169

Receivables from financing activities 160 774
Asset backed securities financing (ABS) 6,258 2,722
Securities 0 2,047
Others 4,634 7,459
Other current financial assets 22,677 16,171

Subsidies 19,309 6,864

Advance payments for inventories 2,277 6,983
Receivables from value added taxes (from tax group settlement with KTM Industries AG) 4,866 0
Other current non-financial assets 26,452 13,847
Other current assets 49,128 30,018

19. CONSOLIDATED EQUITY

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

As of December 31st 2017, the share capital amounts to EUR 10,845k 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 [Aktiengesetz]. 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 Annual 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.

The figure of stock outstanding remained unchanged during 2017 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.

During the 2017 financial year, it was agreed that a dividend of EUR 2.00 per share (prior year: EUR 2.00) would be paid out in relation to the
2016 financial year; this corresponds to a total payment of EUR 21,690k (prior year: EUR 21,690k). As unidentified small shareholders failed to
claim dividends amounting to EUR 19k, only EUR 21,671k in dividends was paid out.

In addition, it is planned that a dividend of EUR 2.00 per share will be agreed upon for the 2017 financial year.

The revaluation reserve was generated in 2005 during the course of the gradual acquisition of the former KTM group GmbH. The amount
derived from the pro-rated 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 10 9

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

EURk

Balance as at January 1st 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
Balance as at December 31st 2016 = balance as at January 1st 2017 -2,350
Realization of hedged item (recognition in operating income) 1,967
Realization of hedged item (recognition in the financial result) 193
Addition 4,362
Cash flow hedge reserve in relation to entities accounted for using the equity method -4
Balance as at December 31st 2017 4,168

As of December 31st 2017, 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 subsidi-aries that had been drawn up in foreign currency.

Net investments in foreign subsidiaries of KTM AG included a loan of USD 3,863k to KTM North America, Inc., USA, with no fixed date for
repayment; this was repaid in October 2017. The cumulative effects of foreign currency translation are still included under other comprehensive
income.

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

EURk

Balance as at January 1st 2016 1,075

Foreign currency translation of foreign subsidiaries 1,014
Foreign currency translation of companies accounted for using the equity method -11
Net investments of foreign operations 87
Balance as at December 31st 2016 2,165
Foreign currency translation of foreign subsidiaries -2,878
Foreign currency translation of companies accounted for using the equity method -141
Net investments of foreign operations -602
Balance as at December 31st 2017 -1,456

Reserves including retained earnings include actuarial gains of EUR 33k (prior year: losses of EUR 1k) in relation to companies measured at
equity.

110 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The following subsidiaries are included in non-controlling investments:

Group company Co-shareholders 2017 Share of equity 2016 Share of equity

% EURk % EURk

KTM Technologies GmbH, Anif Kiska Holding GmbH 0.00 0.00 26.00 26.00
KTM Immobilien GmbH, K KraftFahrZeug Holding GmbH 0.39 62.40 0.39 62.40
Mattighofen
WP Performance Sports GmbH, WP Performance Systems GmbH 0.00 0.00 26.00 26.00
Mattighofen
KTM Logistikzentrum GmbH, P Immobilienverwaltung GmbH 6.00 6.00 6.00 6.00
Mattighofen

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
44.7 % (prior year: 40.5 %).

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

Net financial debt is made up of the following:

EURk December December

31st 2017 31st 2016

Bonds 0 83,061
Promissory note loans 119,629 119,572
Non-current financial liabilities 67,292 92,982
Current financial liabilities 28,448 22,760
215,369 318,375
Cash and cash equivalents -142,366 -236,752
Receivables arising from financing activities -3,674 -774
Net financial debt 69,329 80,850

The other key figures are as follows:

EURk December December

31st 2017 31st 2016

Gearing 14 % 19 %
Free cash flow 39,262 18,838
Working capital 92,470 103,700

Gearing = net financial debt/equity incl. non-controlling interest

Free cash flow = cash flow from operating activity - cash flow from investing activity
Working Capital = receivables + inventory - liabilities

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 111

20. BONDS AND FINANCIAL LIABILITIES

A five-year bond (ISIN: AT0000A0UJP7) with an issue volume of EUR 85,000k was successfully placed on April 24th 2012. The bond was
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 %. During the 2016 financial year, bonds with a value of EUR 1,966k (nominal value: EUR 1,900k) were purchased
and offset against the financial liability. The bond was repaid according to schedule in April 2017.

Group companies’ liability owed to credit institutions is secured by pledge agreements recorded in the land register and duly filed with a total
value of EUR 29,052k (prior year: EUR 29,052k).

Composition of financial liabilities

EURk
December 31st 2017 December 31st 2016

Nominal value Carrying mount Nominal value Carrying mount

Non-current financial liabilities:

Promissory note loan 120,000 119,629 120,000 119,572
Research loans 43,125 43,125 61,875 61,875
Promotional loans 8,025 8,025 12,610 12,610
Investment loans 14,061 14,061 17,485 17,485
Liabilities from financial leasing 2,081 2,081 1,013 1,013
187,292 186,921 212,983 212,554

Current financial liabilities:

Bonds 0 0 83,100 83,061
Research loans 18,750 18,750 13,125 13,125
Promotional loans 4,585 4,585 4,544 4,544
Investment loans 3,422 3,422 3,415 3,415
Liabilities from financial leasing 952 952 278 278
Other 739 739 1,398 1,398
28,448 28,448 105,860 105,822
215,740 215,369 318,843 318,376

21. OTHER NON-CURRENT AND CURRENT LIABILITIES

Other non-current liabilities essentially comprise the following:

EURk December December

31st 2017 31st 2016

Security deposits = other non-current financial liabilities 7,773 6,923

Sundry other non-current non-financial liabilities 471 504
Other non-current liabilities 8,244 7,426

112 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Other current liabilities essentially comprise the following:

EURk December December

31st 2017 31st 2016

Current employee liabilities 32,328 24,720

Tax allocation of group taxation (Pierer Konzerngesellschaft mbH) 12,077 0
Liabilities tax offices 4,840 1,257
Other current non-financial liabilities 49,245 25,977
Liabilities from derivative financial instruments 2,018 7,051
of which derivatives held as cash flow hedge 2,018 7,051
Sales bonus 20,260 17,004
Price bonus 2,895 3,757
Sundry other current financial liabilities 7,799 11,194
Other current financial liabilities 32,972 39,006
Other current liabilities 82,218 64,983

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

22. TRADE PAYABLES

Trade liabilities are made up as follows:

EURk December December

31st 2017 31st 2016

To third parties 205,132 153,684

To affiliated companies 3,708 2,844
To associates 249 3,556
209,089 160,084

23. EMPLOYEE BENEFITS

Social capital obligations comprise employee entitlements that fall due upon retirement at the age fixed by law or on completion of a certain
number of years of service in the company and therefore constitute benefits 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 14,712k (prior year: EUR 14,396k) and
obligations to pay anniversary bonuses of EUR 2,985k (prior year: EUR 2,914k). The present value of the defined benefit obligations is reported
in the consolidated statement of financial position. Obligations relating to social capital are not financed through a fund.

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 113

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

EURk 2017 2016

as of January 1 14,396 12,627

Current service cost 683 709
Interest expense 208 242
Severance payments -245 -216
Additions/disposals -154 285
Actuarial gain/loss -178 759
Other 0 19
as of December 31 14,712 14,396

The actuarial gain/loss is made up of the following factors:

EURk 2017 2016

Change in expected values 357 261

Change in demographic assumptions -61 27
Change in financial assumptions -474 470
Actuarial gain/loss -178 759

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

2017 2016

Discount rate 2.00 % 1.50 %

Trend in wages and salaries 2.50 % 2.25 %
Retirement age (years) women/men (with transitional provisions) 65 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 at the end of the reporting period.

Employee turnover 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.

A sensitivity analysis of the claims to severance pay calculated on the basis of actuarial principles showed a change in actuarial parameters with
the following effects during the 2017 financial year:

Change in assumption Change in DBO when the Change in DBO when the
parameter decreases parameter increases

Discount rate 0.5 percentage points 6.6 % -6.0 %

Trend in wages and salaries 0.5 percentage points -6.0 % 6.5 %

114 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

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

Change in assumption Change in DBO when the Change in DBO when the
parameter decreases parameter increases

Discount rate 0.5 percentage points 7.1 % -6.5 %

Trend in wages and salaries 0.5 percentage points -6.5 % 7.0 %

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

EURk December December

31st 2017 31st 2016

Within the next 12 months 1,005 707

Between 2 and 5 years 3,245 2,998
Between 6 and 10 years 3,655 3,144
More than 10 years 16,075 15,862
Total expected payments 23,981 22,712

Movements in obligations relating to claims to anniversary bonuses were as follows:

EURk 2017 2016

as of January 1 2,914 2,308

Current service cost 297 235
Interest expense 40 46
Anniversary bonus payments -228 0
Additions/disposals -1 69
Actuarial gain/loss -26 259
Changes in consolidation scope -11 0
Others 0 -3
as of December 31 2,985 2,914

The weighted average durations of the obligations for severance pay and anniversary bonuses at December 31st 2017 were 13 and 17 years
respectively (prior year: 14 and 16 years).

For employees of Austrian group companies whose employment commenced on or after January 1st 2003, contributions amounting to 1.53 % of
wages or salary were paid into a statutory staff severance pay fund. Total contributions of EUR 1,363k were paid during the year (prior year:
EUR 1,168k).

NOTES / NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 115

24. PROVISIONS

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

EURk Provisions relating to Provisions for litigations Total current provisions

guarantees and warranties

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
as of January 1, 2017 9,388 819 10,207
Utilization -9,388 -340 -9,728
Reversals 0 -10 -10
Additions 10,480 115 10,595
as of December 31, 2017 10,480 584 11,063

The KTM group establishes provisions relating to guarantees and warranties. The amounts of expected expenses are primarily based on previous
experience. For more details, see the note on estimates and uncertainties in judgements and assumptions.

25. STATEMENT OF CASH FLOWS

The changes in the statement of financial position items presented in the cash flow statement can-not be derived directly from the statement of
financial position since non-cash effects due to currency translation and other non-cash items are eliminated. The effects associated with
changes in the scope of consolidation have been eliminated and are accounted for as cash flow from investing activities.

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

EURk 2017 2016

- profits/+ losses on disposal of intangible assets and property, plant, and equipment 38 1,251
+ addition/- reversal from employee benefits 535 1,806
- gains/+ losses from the disposal of financial assets -238 0
- remaining other non-cash income/+ expenses -3,575 -3,151
-3,239 -94

The remaining other non-cash income/expenses mainly comprise changes in the measurement of foreign-currency receivables and payables and
movements in allowances to receivables and inventories.

116 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The change in accounting for financial liabilities and the values shown in the statement of cash flows can be reconciled as follows:

Changes
affecting cash Changes that do not affect cash flow
flow
Carrying Change Acquisition Reclassifica- Transaction Accrued Carrying
amount January tion costs interest amount
1st 2017 December
31st 2017

Current financial
liabilities 105,543 -86,450 0 8,966 96 -659 27,496
Non-current financial
liabilities 211,542 -17,736 0 -8,966 0 0 184,840
Leasing liabilities
(current) 278 -278 0 952 0 0 952
Leasing liabilities
(non-current) 1,013 -267 2,286 -952 0 0 2,081
Total 318,376 -104,730 2,286 0 96 -659 215,369

V. OTHER NOTES

26. 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 developments. 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 talent management.

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 were further refined during the 2017 financial year
to ensure that the Executive Board is informed even sooner, and more comprehensively, about the degree of target achievement and about
changes concerning markets and competition.

NOTES / OTHER NOTES 117

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 conditions regulating offroad motorsport, motorcycle registration and driver’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 achievements 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 under racing conditions at racing events. Before being intro-
duced 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.

Product liability risk: In its business environment, the KTM group is also exposed to damage claims arising as a result of accidents and injuries.
This applies especially to the US, where claims asserted in product liability cases involve higher amounts of liability. Appropriate 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. Thanks 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 U.S. market. 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.

118 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Financial risks

With regard to financial risks (currency risks, interest rate risks, default risks, and liquidity risks), please refer to the relevant comments
under Note 27.2.

IT risks

Within the KTM group, an IT security and risk management system is operated with the aim of making it possible to recognize and manage
company-relevant risks in the area of information security. In addition, evidence of compliance and the exercising of due diligence when handling
and using information and equipment for the processing of information is to be provided by customers, the Executive Board of the KTM group
and the general managers of each participating company, and that evidence must be documented.

The ever-increasing threat of IT and cyber risks is countered within the KTM group through the ongoing development of IT security measures and
the use of state-of-the-art security technologies. Cyber attacks are averted using a multi-level technical concept, which makes use of state-of-
the-art security features, such as an intrusion prevention system and additional upstream or internal technical security systems. In addition,
behaviorbased security solutions are used with a view to identifying security-related abuse. Incidents are identified and handled by a malware
incident response process. In parallel, regular internal and external vulnerability analyses are performed and any vulnerabilities identified are
countered by means of an established patch and update management process. Regular internal and external security audits are documented,
evaluated and prioritized by means of risk management measures and a solution is then applied.

Care is taken to ensure that all users of the KTM group’s IT system possess the requisite knowledge and awareness for the use of the IT system
within the scope of their role through the provision of regular IT security awareness training. This training is provided in a preventative and
traceable manner.

We apply the same high quality standards in the area of data security and data protection as we do for our products.

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 any changes can be responded to in a timely manner.

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: With regard to the growth course in particular, 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.

NOTES / OTHER NOTES 119

27. FINANCIAL INSTRUMENTS

27.1. 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
during the financial year.

The table below shows the carrying amounts and fair values of financial assets (financial instruments shown on the assets side) 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.

EURk Note Carrying Fair value Fair value

amount Dec. 31, Level 1 Level 2 Level 3 Total
Dec. 31, 2017
2017

Loans and receivables

Cash and cash equivalents 142,366 - - - - -
Trade receivables 17 96,261 - - - - -
Other financial assets 15, 18 14,566 - - - - -
Sum 253,193

Available for sale

Other non-current financial assets 15 10 - - - - -
Sum 10

Fair value - Hedging instruments

Other current assets - derivatives 18 11,625 11,625 - 11,625 - 11,625
with positive market value
(cash flow hedge)
Sum 11,625
Total sum 264,828

12 0 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

EURk Note Carrying Fair value Fair value
amount Dec. 31, Level 1 Level 2 Level 3 Total
Dec. 31, 2016
2016

Loans and receivables

Cash and cash equivalents 236,752 - - - - -
Trade receivables 17 99,239 - - - - -
Other financial assets 18 10,955 - - - - -
Sum 346,946

Available for sale

Other non-current financial assets 15 927 - - - - -
Sum 927

Held for trading

Other current assets - securities 2,047 2,047 2,047 - - 2,047
Sum 2,047

Fair value - Hedging instruments

Other current assets - derivatives 18 3,169 3,169 - 3,169 - 3,169
with positive market value
(cash flow hedge)
Sum 3,169
Total sum 353,089

Receivables sold in connection with the current ABS program are derecognized in accordance with the rules under IAS 39. Under the
ABS program, trade receivables insured on a revolving monthly basis are sold up to a maximum volume of EUR 120,000k (prior year:
EUR 75,000k). As at the reporting date, trade receivables of EUR 107,310k (prior year: EUR 54,071k) had been sold to third parties.
Up to a contractually defined amount, KTM continues to bear a risk from credit risk related defaults. As at December 31st 2017, the maximum
ensuing risk of loss was EUR 1,195k (prior year: EUR 391k). The expected loss is recorded as a liability and expensed at the time of sale. As at
December 31st 2017, the carrying amount of the ongoing commitment was EUR 1,195k (prior year: EUR 391k) and is disclosed under other
current liabilities. The carrying amount represents the fair value of the ongoing commitment. Expenses of EUR 804k (prior year: EUR 6k) were
recognized in the income statement during the period under review; the cumulative total since the commencement of the transaction is
EUR 1,195k (prior year: EUR 391k). During the 2017 financial year, the ABS program was increased by EUR 45,000k. An amount of
EUR 653k was recorded in the income statement in this regard.

NOTES / OTHER NOTES 121

The table below shows the carrying amounts and fair values of financial liabilities (financial instruments shown on the liabilities side), 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 Note Carrying Fair value Fair value

amount Dec. 31, Level 1 Level 2 Level 3 Total
Dec. 31, 2017
2017

At amortized cost
Financial liabilities 20 92,707 94,234 - - 94,234 94,234
Finance lease liabilities 20 3,033 - - - -
Trade payables 22 209,089 - - - - -
Bond 20 - - - - - -
Promissory note loan 20 119,629 123,070 - - 123,070 123,070
Other current and non-current 21 38,727 - - - - -
financial liabilities
Sum 463,185

Fair Value - Hedging instruments

Other financial liabilities - derivates 21 2,018 2,018 - 2,018 - 2,018
with negative market value
(cash flow hedge)
Sum 2,018
Total sum 465,204

EURk Note Carrying Fair value Fair value

amount Dec. 31, Level 1 Level 2 Level 3 Total
Dec. 31, 2016
2016

At amortized cost
Financial liabilities 20 114,452 116,254 - - 116,254 116,254
Finance lease liabilities 20 1,291 - - - -
Trade payables 22 160,084 - - - - -
Bond 20 83,061 85,439 85,439 - - 85,439
Promissory note loan 20 119,572 123,112 - - 123,112 123,112
Other current and non-current 21 38,878 - - - - -
financial liabilities
Sum 517,337

Fair Value - Hedging instruments

Other financial liabilities - derivates 21 7,051 7,051 - 7,051 - 7,051
with negative market value
(cash flow hedge)
Sum 7,051
Total sum 524,388

12 2 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Fair value determination

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

Financial instruments measured at fair value

Type Measurement technique Significant unobservable Connection between significant
input factors unobservable input factors and
measurement 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
recognized valuation models.
They are regularly checked for
plausibility.
Securities Securities are measured at the Not applicable Not applicable
current stock-exchange price on
the reporting date.

Financial instruments not measured at fair value

Type Measurement technique Significant unobservable input factors
Bonds Exchange-listed bonds are measured at the Not applicable
closing price on the reporting date.
Promissory note loans, Financial liabilities Discounted cash flows Risk premium for own credit risk

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.

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.

NOTES / OTHER NOTES 123

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

Financial assets 2017

Other financial assets - 18
derivates with positive market value
Foreign currency forwards 11,625 0 11,625 -230 11,396
Total 11,625 0 11,625 -230 11,396

Financial liabilities 2017

Other financial liabilities - 21
derivates with negative market value
Foreign currency forwards 1,725 0 1,725 -230 1,496
Interest rate swaps 293 0 293 0 293
Total 2,018 0 2,018 -230 1,789

Financial assets 2016

Other financial assets - 18
derivates 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

Financial liabilities 2016

Other financial liabilities - 21
derivates with negative market value
Foreign currency forwards 6,503 0 6,503 -2,043 4,460
Interest rate swaps 548 0 548 0 548
Total 7,051 0 7,051 -2,043 5,008

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 interest from subse- from from result of Net result
quent fair value allowance disposal (total)
measurement

2017
Loans and receivables 1,882 0 805 -78 2,609
Available for sale 244 0 -738 -20 -514
Fair value - Held for trading 0 0 0 258 258
At amortized cost -6,229 0 0 0 -6,229
Total -4,103 0 67 160 -3,876

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

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.

124 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

27.2. 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 manage-
ment 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 developments.

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 ex-change 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.

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
parities 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. Approxi-
mately 23 % of revenues were earned in US dollars during the 2017 financial year (prior year: 24 %). 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 in particular; for the 2018
financial year, the US dollar business was hedged by means of positions involving EUR/USD rates ranging from 1.0732 to 1.1511.

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 perform 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 2017 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 instru-
ments 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 other than the euro were aggregated at 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 ex-change rate of ±10 % are shown as profit or
loss, other income, and equity.

NOTES / OTHER NOTES 125

The KTM group bases the analysis on the following assumptions:

» For the sensitivity of profit and loss, the group’s bank balances, receivables and payables are considered, as are future receipts and payments
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 underlying transaction has already been realized on the reporting date (recognized as income). Exposure, taking
account of derivative currency hedges, is indicated in the table below.

» 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 as at the reporting date (movements are not recognized in profit or loss). The exposure corresponds to the notional amount of the
open derivatives.

EURk Exposures Sensitivity Devaluaton Sensitivity Revaluaton

of EUR by 10 % of EUR by 10 %

Dec. 31, 2017

EUR - USD 15,086 -1,288 1,054
EUR - GBP 45,877 -3,823 3,128
EUR - CAD 22,473 -1,873 1,532
EUR - JPY -62,065 5,172 -4,232
EUR - CHF 20,214 -1,684 1,378
EUR - ZAR 18,956 -1,584 1,296
EUR - SEK 15,640 -1,303 1,066
Others 28,473 -2,374 1,942
Sensitivity of profit or loss -8,756 7,164
(receivables and liabilities)
Sensitivity of other comprehensive 12,897 -10,552
income (by cash flow hedge derivates)
Sensitivity of equity 4,141 -3,388
+ expense / - income

Dec. 31, 2016

EUR - USD 48,403 -4,053 3,316
EUR - GBP 27,024 -2,253 1,843
EUR - CAD 24,775 -2,065 1,689
EUR - JPY -53,208 4,434 -3,628
EUR - CHF 15,040 -1,253 1,025
EUR - ZAR 17,705 -1,480 1,211
EUR - SEK 7,509 -625 511
Others 21,738 -1,419 1,161
Sensitivity of profit or loss -8,713 7,129
(receivables and liabilities)
Sensitivity of other comprehensive 14,305 -11,704
income (by cash flow hedge derivates)
Sensitivity of equity 5,592 -4,575
+ expense / - income

126 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Interest rate risks

Certain financial instruments on both the assets side and the liabilities side carry 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 follows:

EURk Note fixed variable not interest Total

interest interest bearing

Dec. 31, 2017

Cash and cash equivalents 1) 0 142,366 0 142,366
Receivables from financing activities 15 0 3,514 0 3,514
Financing volume ABS programm 0 -107,310 0 -107,310
Financial liabilities and 20 -134,541 -80,828 0 -215,369
finance lease liabilities
Total -134,541 -42,258 0 -176,799

Dec. 31, 2016

Cash and cash equivalents 1) 81,783 154,969 0 236,752
Financing volume ABS programm 0 -54,071 0 -54,071
Financial liabilities and 20 -143,347 -91,968 0 -235,314
finance lease liabilities
Bond 20 -83,061 0 0 -83,061
Total -144,625 8,931 0 -135,695

1)
Variable interest subject to zero percent floor for reference interest rate

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 Dec. 31, 2017 Dec. 31, 2016

Sensitivity Sensitivity Sensitivity Sensitivity
Decrease of Increase of Decrease of Increase of
interest level interest level interest level interest level
by 50Bp by 50Bp by 50Bp by 50Bp

Sensitivity of profit or loss 74 -74 0 146

(receivables and liabilities)
Sensitivity of other comprehensive income -136 133 -245 240
(by cash flow hedge derivates)
Sensitivity of equity -61 59 -245 386
+ expense / - income

NOTES / OTHER NOTES 127

Default risks (credit and creditworthiness risks)

The risk of default on receivables from customers can 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
obligors of optimum creditworthiness. The default risk on derivative financial instruments with positive market value is limited to their replace-
ment 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 un-der Note 27.1 to the consolidated financial statements.

The carrying amounts of the receivables comprise the following:

EURk Note Carrying of which: of which: not impaired as of the balance sheet date and of which:
amount neither overdue wihtin the following time bands impaired
impaired nor
overdue as of less than 30 to 60 60 to 90 more than
the balance 30 days days days 90 days
sheet date
Dec. 31, 2017
Trade receivables 17 96,261 76,361 11,484 2,110 1,123 3,873 1,311
Other financial receivables 15, 18 14,566 14,566 0 0 0 0 0
Total 110,827 90,927 11,484 2,110 1,123 3,873 1,311

Dec. 31, 2016

Trade receivables 17 99,239 83,114 11,228 901 700 2,480 816
Other financial receivables 15, 18 10,955 10,955 0 0 0 0 0
Total 110,194 94,069 11,228 901 700 2,480 816

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 obligors will not meet their payment obligations. There are no concentration risks. For a reconciliation of the impairment loss to the
portfolio of trade receivables, see Note 17.

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 contribut-
ing 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 with excellent 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 invest-
ment expenditure. From today’s perspective, sufficient commitments have been given concerning the creditworthiness of our strategic financing
partners and therefore the security of current liquidity reserves.

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

128 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

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

EURk Note Carrying Cash flows 2018 Cash flows 2019 to 2022 Cash flows from 2023 on
amount fixed variable redemp- fixed variable redemp- fixed variable redemp-
Dec. 31, interest interest tion interest interest tion interest interest tion
2017

At amortized cost
Financial liabilities 20 92,707 980 336 26,758 1,289 318 62,710 68 - 2,500
Finance lease liabilities 20 3,033 - 27 952 - 28 2,081 - - -
Trade payables 22 209,089 - - 209,089 - - - - - -
Bond 20 - - - - - - - - - -
Promissory note loan 20 119,629 1,267 562 - 5,041 2,196 8,000 3,933 838 112,000
Other current and 21 38,727 - - 38,727 - - - - - -
non-current financial
liabilities
Sum 463,185 2,247 925 275,526 6,331 2,541 72,791 4,000 838 114,500

Fair Value -
Hedging instruments
Other financial 21 2,018 207 - 2,279 414 - -261 - - -
liabilities - derivates
with negative market
value (cash flow hedge)
Sum 2,018 207 - 2,279 414 - -261 - - -
Total sum 465,204 2,454 925 277,804 6,745 2,541 72,531 4,000 838 114,500

EURk Note Carrying Cash flows 2017 Cash flows 2018 to 2021 Cash flows from 2022 on
amount fixed variable redemp- fixed variable redemp- fixed variable redemp-
Dec. 31, interest interest tion interest interest tion interest interest tion
2016
At amortized cost
Financial liabilities 20 114,452 1,173 494 21,084 2,207 687 88,207 129 0 3,763
Finance lease liabilities 20 1,291 - 13 278 - 22 1,013 - - -
Trade payables 22 160,084 - - 160,084 - - - - - -
Bond 20 83,061 1,178 - 85,000 - - - - - -
Promissory note loan 20 119,572 1,272 562 - 5,062 2,232 8,000 5,166 1,363 112,000
Other current and 21 38,878 - - 38,878 - - - - - -
non-current financial
liabilities
Sum 517,337 3,623 1,069 305,324 7,270 2,942 97,220 5,295 1,363 115,763

Fair Value - Hedging

instruments
Other financial 21 7,051 273 - 6,249 818 - 255 - - -
liabilities - derivates
with negative market
value (cash flow hedge)
Sum 7,051 273 - 6,249 818 - 255 - - -
Total sum 524,388 3,895 1,069 311,572 8,088 2,942 97,474 5,295 1,363 115,763

NOTES / OTHER NOTES 12 9

27.3. DERIVATIVES AND HEDGES

The following derivative financial instruments used as hedging instruments are employed as of December 31st 2017:

Foreign currency forwards Currency Nominal Fair value Exposures Terms of Terms of
amount in EURk EURk up to 1 year 1 - 5 years
1,000 local
currency
December 31, 2017
USD 151,000 8,790 150,762 116,000 35,000
JPY 3,265,000 -1,495 36,225 3,265,000 0
CAD 41,100 577 50,252 41,100 0
GBP 36,650 707 70,694 36,650 0
CHF 15,550 960 23,343 15,550 0
SEK 107,800 282 26,941 107,800 0
DKK 0 0 3,600 0 0
PLN 28,900 -117 11,335 28,900 0
NOK 56,200 267 9,973 56,200 0
CZK 160,700 -90 10,478 160,700 0
ZAR 65,000 20 21,299 65,000 0
Interest rate swaps (Payer) 22,500 -293 0 0 22,500

December 31, 2016

USD 135,800 -4,625 160,189 118,800 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
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

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 eighteen months are hedged.

As at December 31st 2017 (as well as during the prior year) there were no derivative financial instruments for which no hedging relationships
were able to be established.

Forward currency transactions

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

13 0 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Interest rate swaps

In order to control the interest rate risk in relation to variable rates of interest, amortizing interest rate swaps with a nominal value of
EUR 30,000k and a term of 6 years were entered into during the 2014 financial year. As at December 31st 2017, the outstanding notional
amount was EUR 22,500; (prior year: EUR 30,000k).

28. LEASES

Finance leases

Since the 2016 financial year, finance leases have been entered into for tools (special leasing) for a term of between 3 and 5 years, in
connection with which interest payments amounting to EUR 22k (prior year: EUR 0k) were accrued during the 2017 financial year.

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

EURk Machinery

2017
Costs of acquisition 3,602
- Accumulated depreciation and amortization 591
Carrying amount December 31st 2017 3,011

2016
Costs of acquisition 1,316
- Accumulated depreciation and amortization 325
Carrying amount December 31st 2016 1,291

The cash value of the minimum lease payments on the relevant reporting dates was as follows:

EURk Minimum lease payments Interest payments Present value of

minimum lease payments

2017
< 1 year 979 27 952
> 1 to 5 years 2,109 28 2,081
> 5 years - - -
3,088 55 3,033

2016
< 1 year 291 13 278
> 1 to 5 years 1,035 23 1,013
> 5 years - - -
1,327 36 1,291

Payment obligations under finance leases are disclosed in the consolidated statement of financial position under financial liabilities
(see Note 20).

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

NOTES / OTHER NOTES 131

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.

Payments from minimum lease payments (rental and lease expenses) recorded as expenses amounted to EUR 15,202k during the 2017
financial year (prior year: EUR 12,221k). The reported operating lease expenses from operating leases 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 December 31st December 31st

2017 2016

Up to 1 year 15,573 12,328

2-5 years 43,574 36,943
Over five years 10,291 10,214
69,438 59,485

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:

» Land and buildings: The rental agreements/leases have remaining terms to maturity of up to 41 years.

» IT infrastructure, licenses, and software: The rental agreements/leases have terms of up to 5 years.

» Vehicles and machinery: The rental agreements/leases have terms of up to 6 years.

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

29. EVENTS AFTER THE REPORTING DATE

On January 9th 2018, KTM AG acquired 75.9 % of the shares in W Verwaltungs AG (formerly: WP AG), Wels, thereby increasing its holding from
24.0 % to 99.9 %. W Verwaltungs AG (formerly: WP AG) was therefore fully consolidated as at January 1st 2018.

The WP group is a subsidiary of KTM Industries AG and previously acted as a supplier of automotive parts to the KTM group. The integration of
the WP group into KTM AG should bring about increases in efficiency and greater potential for synergies.

In the present consolidated financial statements, W Verwaltungs AG (formerly: WP AG) is shown as a company accounted for using the equity
method.

On the basis of the agreements that were entered into after the reporting date, all of the following items must be considered as provisional for
reasons of time, as per IFRS 3.

132 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

The fair values of the identifiable assets and liabilities of W Verwaltungs AG upon the attainment of control (effective as of the 2018 financial
year) were as follows:

EURk

Non-current assets 62,121

Current assets 53,394
Net assets 53,633
Non-current liabilities 23,710
Current liabilities 38,173
Addition of non-controlling interests 788
Fair value of the share previously accounted for using the equity method 16,800
Goodwill 17,059
Consideration (payment in two instalments during 2018) -53,103
Acquired cash and cash equivalent 15,133
Net cash outflow on acquisition -37,970

The recognition of the “WP” brand at its fair value, which is included with the non-current assets at a carrying amount of EUR 5,813k, is
currently being examined. The goodwill amounting to EUR 17,059k is based on the earning potential of the company that, according to IFRS,
cannot be assigned to individual capitalizable items. The full amount of the goodwill is assigned to the “WP” cash-generating unit.

The previous holding was accounted for using the equity method. Immediately prior to the attainment of control, the previous holding was
remeasured at its fair value. This resulted in an expense of EUR 697k, which will be accounted for in profit and loss in the consolidated financial
statements for the 2018 financial year.

Within the scope of the company acquisition, fair values of trade receivables amounting to EUR 1,351k, receivables from affiliated companies
amounting to EUR 3,712k and other receivables and assets amounting to EUR 2,660k were acquired. The receivables that are likely to be
uncollectible are to be regarded as immaterial.

Further events that occurred after December 31st 2017 and that are material for the measurement of the assets and liabilities have either been
reflected in these financial statements or are not known.

30. SEGMENT REPORTING

As a result of the delisting of KTM AG from the Vienna Stock Exchange during the 2016 financial year and the full repayment of the bond during
the 2017 financial year, KTM AG is no longer classified as a capital market-oriented company within the meaning of IFRS 8.2b(i). For that
reason, segment reporting will not be carried out.

31. RELATED PARTY DISCLOSURES

KTM Industries AG, Wels, which is indirectly controlled by Mr. Stefan Pierer, holds 51.67 % of the voting rights in KTM AG, Mattighofen, directly
and indirectly through K KraftFahrZeug Holding GmbH, Wels, and, on account of the factual situation, is the controlling shareholder of KTM AG,
Mattighofen.

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

NOTES / OTHER NOTES 13 3

Executive Board and Supervisory Board

During the Supervisory Board meeting of June 2016, a decision was made with regard to the departure by mutual consent of
Mr. Friedrich Roithner from the Executive Board of KTM AG with effect from the end of July 20th 2016. On July 20th 2016, an Extraordinary
General Meeting of KTM AG was held in Mattighofen. At this meeting, a resolution was passed electing Mr. Friedrich Roithner to the Supervisory
Board with effect from July 21st 2016 (for the remainder of the term of office of the Supervisory Board elected at the 28th Ordinary General
Meeting on April 21st 2016).

During the 2017 financial year, 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 within the KTM group amounted to EUR 1,329k (prior
year: EUR 1,323k). Liabilities of EUR 5,599k (prior year: EUR 4,900k) 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 2017. Following
the expiration of the agreed contractual term, the members of the Executive Board receive a one-off payment (severance pay). During the 2017
financial year, severance payments of EUR 1k (prior year: EUR 41k) were paid to members of the Executive Board. As of December 31st 2017,
liabilities of EUR 3,561k exist for Executive Board severance payments (prior year: EUR 2,076k).

At the General Meeting held in April 2018, it will be proposed that the remuneration to be paid to the Supervisory Board for the 2017 financial
year (payout during the 2018 financial year) shall amount to a total of EUR 26k (prior year: EUR 24k).

There are no stock option plans.

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

By means of an assignment agreement dated September 17th 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 10 years and is periodically tested for
impairment. Pierer Industrie AG is a subsidiary of Pierer Konzerngesellschaft mbH (ultimate group parent company). Mr. 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 therefore carried
out at arm’s length.

Furthermore, there was an offset of a group allocation from KTM Industries AG to KTM AG of EUR 2,530k (prior year: EUR 1,722k).

Mr. 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 as at December 31st 2017. As at December 31st 2017, liabilities from Bajaj Auto Ltd.,
Pune, India amounted to EUR 5,389k, and receivables amounted to EUR 221k (prior year: receivables of EUR 4,255k and payables of EUR 2k).
Bajaj Auto International Holdings B.V., Amsterdam, Netherlands, granted KTM AG two short-term, arm’s-length, interest-carrying loans of
EUR 10,000k each from October 24th 2016 to December 22nd 2016 and from January 11th 2017 to April 7th 2017.

A cooperation with the Indian Bajaj group has been in place since 2007. The Bajaj group is India’s second largest manufacturer of motorcycles,
selling approximately 3.67 million motorcycles and three wheelers during the last financial year (reporting date: March 31st 2017). 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 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 of WP AG (now: W Verwaltungs AG) from KTM Industries AG, Wels for a purchase price of
EUR 14,400k. The transaction was approved at the Supervisory Board meeting of June 21st 2016.

13 4 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

Arm’s-length deliveries of motorcycles and spare parts are made to KTM New Zealand Ltd. and KTM MIDDLE EAST AL SHAFAR LLC,
two former general importers in the KTM group that were accounted for using the equity method. The holding in KTM MIDDLE EAST AL
SHAFAR LLC was sold during the 2017 financial year. In addition, 26 % of Motorcycle Distributors Australia was purchased; this company acts
as an importer for the Australia and New Zealand market. In July 2017, KTM New Zealand Ltd. was merged into a subsidiary of Motorcycle
Distributors Australia.

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 using the equity method (prior year: 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 began 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 31st 2016.

Mattighofen Museums-Immobilien GmbH (now: KTM MOTOHALL GmbH), which was founded in 2015, is held by Pierer Konzerngesellschaft
GmbH (51 %) and KTM Immobilien GmbH (49 %). Receivables of EUR 3,107k existed as at December 31st 2017 (prior year: EUR 17k). As at
July 1st 2017, the receivables included a granted loan carrying interest at arm’s length with a term ending on June 30th 2020 and amounting to
EUR 3,087k. In proportion to its shareholding during the 2016 financial year, KTM Immobilien GmbH paid a capital contribution of EUR 2,300k
to KTM MOTOHALL GmbH (formerly: Mattighofen Museums-Immobilien GmbH).

KTM AG has granted an arm’s length, interest-carrying loan to TRUE Management & Investment GmbH, which is within the sphere of influence
of Mr. Hubert Trunkenpolz, a member of the Executive Board. The loan has a maturity date of December 31st 2017, subject to annual options to
prolongation up to a final date of February 28th 2018. The loan was repaid early in March 2017. As of the December 31st 2016 reporting date,
loan receivables in the amount of EUR 100k were recognized.

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.

Further related party disclosures

Mr. Gerald Kiska serves on the Supervisory Board of KTM Industries AG, Wels, and acts as managing shareholder of Kiska GmbH, Anif, in
which KTM AG, Mattighofen, held an interest of 26.0 % until June 30th 2017. Furthermore, Mr. Kiska was appointed to the position of general
manager of KTM Technologies GmbH, Anif, in which KTM AG held a 76 % share until June 30th 2017. Expenses of EUR 19,222k were incurred
for services provided by Kiska GmbH, Anif, during the financial year (prior year: EUR 13,679k). As of December 31st 2017, accounts payable to
Kiska GmbH stood at EUR 2,488k (prior year: EUR 3,473k).

During the 2017 financial year, Wohnbau-west Bauträger Gesellschaft m.b.H., a direct subsidiary of Pierer Konzerngesellschaft mbH, provided
services as general contractor in relation to the planning, construction, and extension of the KTM logistics center in Munderfing on behalf of
KTM Logistikzentrum GmbH. Construction services supplied by Wohnbau-west Bauträger Gesellschaft m.b.H. in 2017 amounted to EUR 6,508k
(prior year: EUR 0k).

By way of a sale and purchase agreement dated June 30th 2017, the 74 % share in KTM Technologies GmbH, Anif held by KTM AG was
sold to KTM Industries AG for a purchase price of EUR 1,020k, together with the 26 % share held in Kiska GmbH, Anif for a purchase price
of EUR 3,701k.

With effect from July 31st 2017, 51 % of the share held in Kiska Inc., USA was sold to Kiska GmbH, Anif at the carrying amount of the holding,
which amounted to USD 51k.

By way of a sale and purchase agreement dated July 31st 2017, KTM North America, Inc., USA acquired 100 % of the shares in WP Suspension
North America Inc., USA from WP Performance Systems GmbH, Austria for a purchase price of EUR 223k.

NOTES / OTHER NOTES 135

Since the 2017 financial year, the KTM AG group has formed a group for corporation tax purposes with Pierer Konzerngesellschaft mbH, Wels
and has formed a tax group for VAT purposes with KTM Industries AG, Wels. As at the reporting date, liabilities arising as a result of tax
compensation for Pierer Konzerngesellschaft mbH in the amount of EUR 12,077k remained outstanding, together with receivables from sales
tax credits for KTM Industries, amounting to EUR 4,866k.

Material operating 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

Investments accounted for using the equity method 100,602 168,792 31,129 478
thereof WP group 7,746 161,070 789 2,822
KTM Industries AG, Wels 49 7,912 4,702 0
Wethje Carbon Composites GmbH, Hengersberg, Germany 2 1,662 0 51
Pankl Gruppe, Kapfenberg 571 16,231 6 361
Bajaj Auto Ltd., Pune, India 12 99,173 221 5,389
TRUE Management GmbH, Thalheim bei Wels 0 38 0 0
Pierer Konzerngesellschaft mbH, Wels 0 12,778 0 12,077
KTM Technologies GmbH, Anif 656 4,789 510 0
Kiska GmbH, Anif 728 19,222 0 2,488
Wohnbau-west Bauträger Gesellschaft m.b.H 0 6,508 0 1
Other companies 134 896 1 13
102,755 337,999 36,569 20,858

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

Investments accounted for using the equity method 10,324 153,962 3,018 3,654
thereof WP group 3,495 139,328 57 180
Other non-current financial assets 3,183 2,507 1,201 123
Other non consolidated subsidiaries 2,055 218 105 11
KTM Industries AG, Wels 27 5,325 112 2,267
Wethje Carbon Composites GmbH, Hengersberg, Germany 108 903 43 90
Pankl Gruppe, Kapfenberg 0 5,565 0 426
Bajaj Auto Ltd., Pune, India 0 65,452 4,255 2
TRUE Management & Investment GmbH, Thalheim bei Wels 2 25 2 0
Pierer Konzerngesellschaft mbH, Wels 412 516 0 0
Other companies 800 761 862 29
16,911 235,235 9,598 6,601

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

13 6 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

32. CORPORATE BODIES OF KTM AG

The following individuals were members of the Supervisory Board in 2017:

» Friedrich Roithner, Chairman

» Rajiv Bajaj, Deputy Chairman
» Ernst Chalupsky
» Srinivasan Ravikumar
» Friedrich Lackerbauer (Employee representative)
» Franz Hattinger (Employee representative) (from June 20th 2017)
» Horst Resch (Employee representative) (until June 20th 2017)

The following individuals were members of the Executive Board with collective power of representation in 2017:

» Stefan Pierer, Chairman

» Harald Plöckinger
» Viktor Sigl
» Hubert Trunkenpolz

Mattighofen, February 13th 2018

The Executive Board

Stefan Pierer Harald Plöckinger Hubert Trunkenpolz Viktor Sigl

KONZERNANHANG / 137
SCHEDULE
OF EQUITY HOLDINGS
ANNEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OF KTM AG, MATTIGHOFEN, AUSTRIA, AS OF DECEMBER 31, 2017

EURk Initial Dec. 31. 2017 Dec. 31. 2016

consolidation Interest Consolidation Interest Consolidation
date % type % type

Affiliated companies:
KTM Immobilien GmbH, Mattighofen Sept. 1, 1999 99.61 FC 99.61 FC
KTM North America, Inc., Amherst, Ohio, USA Sept. 1, 1993 100.00 FC 100.00 FC
KTM-Motorsports, Inc., Amherst, Ohio, USA Sept. 1, 2000 100.00 FC 100.00 FC
KTM Japan K.K., Tokyo, Japan Sept. 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 AEst Europe S.A., Elefsina, Greece Nov. 1, 2010 100.00 FC 100.00 FC
KTM Technologies GmbH, Anif - 0.00 - 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 Germany GmbH, Ursensollen, Dec. 31, 2013 100.00 FC 100.00 FC
Germany
KTM Switzerland Ltd., Frauenfeld, Switzerland Dec. 31, 2013 100.00 FC 100.00 FC
KTM Sportmotorcycle UK Limited, Brackley, United
Dec. 31, 2013 100.00 FC 100.00 FC
Kingdom
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., Merano (former: Gorle), Dec. 31, 2013 100.00 FC 100.00 FC
Italy
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 AEst 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
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 SAE PTE. Ltd. Singapore, Singapore Jan. 1, 2014 100.00 FC 100.00 FC
Husqvarna Motorcycles Italia S.r.l. Merano (former: Albano Dec. 31, 2013 100.00 FC 100.00 FC
Sant'Alessandro), Italy
Husqvarna Motorcycles Germany GmbH, Ursensollen, Dec. 31, 2013 100.00 FC 100.00 FC
Germany
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, Dec. 31, 2013 100.00 FC 100.00 FC
France

13 8 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

EURk Initial Dec. 31. 2017 Dec. 31. 2016
consolidation Interest Consolidation Interest Consolidation
date % type % type

HQV Motorcycles Scandinavia AB, Örebro, Sweden Dec. 31, 2013 100.00 FC 100.00 FC
Husqvarna Motorcycles North America, Inc. Murrieta, CA, Dec. 1, 2013 100.00 FC 100.00 FC
USA
Husqvarna Motorsports, Inc. Murrieta, CA, USA Apr. 1, 2015 100.00 FC 100.00 FC
Husqvarna Motorcycles S.A. Pty. Ltd., Northriding, South Apr. 1, 2015 100.00 FC 100.00 FC
Africa
KTM Events & Travel Services AG, Frauenfeld,
- 0.00 - 100.00 -
Switzerland 1)
KTM Logistikzentrum GmbH, Mattighofen Sept. 16, 2016 93.63 FC 93.63 FC
WP Performance Sports GmbH, Munderfing Nov. 30, 2016 100.00 FC 74.00 FC
KTM Sportmotorcycle MAE DMCC, Dubai Nov. 30,2016 100.00 FC 100.00 FC
WP Suspension North America, Inc. Murrieta, CA, USA Aug. 31, 2017 100.00 FC 0.00 -
KTM do Brasil Ltda., Sao Paulo, Brazil Dec. 31, 2017 100.00 FC 100.00 AE

Associated companies
KTM New ZAEland Ltd., Auckland, New ZAEland 2) - 0.00 - 26.00 AE
Kiska GmbH, Anif - 0.00 - 26.00 AE
KTM MIDDLE AEST AL SHAFAR LLC, Dubai, - 0.00 - 25.00 AE
United Arab Emirates
W Verwaltungs AG, Wels (former: WP AG, Munderfing) - 24.00 AE 24.00 AE
KTM Asia Motorcycle Manufacturing Inc., Binan, Laguna, - 34.00 AE 34.00 AE
Philippines
KTM MOTOHALL GmbH (former: Mattighofen - 49.00 AE 49.00 AE
Museums-Immobilien GmbH), Mattighofen
Motorcycle Distributors Australia Pty Ltd, West Perth, - 26.00 AE 0.00 -
Australia
KTM Wien GmbH, Vösendorf - 26.00 AE 76.00 AC
KTM Braumandl GmbH, Wels - 26.00 AE 26.00 AC
MX - KTM Kini GmbH, Wiesing - 26.00 AE 26.00 AC
KTM Regensburg GmbH, Regensburg, Germany - 26.00 AE 26.00 AC
Cero Design Studio S.L., Barcelona, Spain - 26.00 AE 26.00 AC

Other non-current financial assets:

KTM Australia Pty Ltd., Perth, Australia 1) - 0.00 - 100.00 AC
A + U Management GmbH (former: KTM Finance GmbH), - 0.00 - 100.00 AC
Frauenfeld, Switzerland
Project Moto Rütter & Holte GmbH, Oberhausen, - 0.00 - 26.00 AC
Germany
KISKA, Inc. Murrieta, USA - 0.00 - 51.00 AC

VC: Full consolidation

1) Liquidation in financial year 2017 AE: at-Equity
2) Merger in Motorcycle Distributors Australia Pty Ltd. AC: at cost

SCHEDULE OF EQUITY HOLDINGS 139

AUDITOR’S REPORT
KTM AG, MATTIGHOFEN, AUSTRIA REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017, 13 FEBRUARY 2018

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 Statement of Financial Position as at 31 December 2017, the Consolidated Income Statement/Consolidated Statement of Other
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cashflows for the year then ended, and
the Notes to the Consolidated Financial Statements.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of
31 December 2017, 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 Austrian Generally Accepted Accounting Principles.

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 (ISAs). Our responsibilities under those standards are described in the „Auditor‘s Responsibilities“
section of our report. We are independent of the audited Group in accordance with Austrian Generally Accepted Accounting Principles and
professional regulations, and we 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.

RESPONSIBILITIES OF MANAGEMENT AND THE AUDIT COMMITTEE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the EU, Austrian Generally Accepted Accounting Principles 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, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting, unless management either intents to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.

The audit committee is responsible for overseeing the Group’s financial reporting process.

14 0 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

AUDITOR‘S RESPONSIBILITIES

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement - whether due to fraud or error - and to issue an auditor‘s report that includes our audit opinion. Reasonable assurance represents
a high level of assurance, but provides no guarantee that an audit conducted in accordance with Austrian Standards on Auditing (and therefore
ISAs), will always detect a material misstatement, if any. Misstatements may result from fraud or error and are considered material if, individually
or in the aggregate, they could 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, we exercise professional judgment and maintain professional skepticism
throughout the audit.

Moreover:

» We identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, we design
and perform audit procedures responsive to those such risks and obtain sufficient and appropriate audit evidence to serve as a basis for our
audit opinion. The risk of not detecting material misstatements resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misprepresentations or override of internal control.

» 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 Group‘s internal control.

» We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.

» We conclude on the appropriateness of management‘s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group‘s ability to
continue as a going concern. If we conclude that a material uncertainty about the entity‘s ability to continue as a going concern, we are
required to draw attention in our audit report to the respective note in the consolidated financial statements. If such disclosures are not
appropriate, we will modify our audit opinion. Our conclusions are based up to the date of our auditor‘s report. However, future events or

AUDITOR’S REPORT 141

 conditions may cause the Group to cease to continue as a going concern.

» We evaluate the overall presentation, structure and content of the consolidated financial statements, including the notes, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

» 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.

» We communicate to 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 during our audit.

GROUP MANAGEMENT REPORT

In accordance with the Austrian Generally Accepted Accounting Principles, the group manage¬ment report is to be audited as to whether it is
consistent with the consolidated financial state¬ments and prepared in accordance with legal requirements.

Management is responsible for the preparation of the group management report in accordance with 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 is consistent with the consolidated financial statements and has been prepared in accordance with
legal requirements.

STATEMENT

Based on our knowledge gained in the course of the audit of the consolidated financial statements and our understanding of the Group and its
environment, we did not note any material misstatements in the group management report.

Linz, 13 February 2018

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Ernst Pichler
Wirtschaftsprüfer
(Austrian Chartered Accountant)

142 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

STATEMENT OF
ALL LEGAL REPRESENTATIVES
FOR THE 2017 FINANCIAL YAER, KTM AG, MATTIGHOFEN

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 group 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 2018

The Executive Board of KTM AG

Stefan Pierer Harald Plöckinger Hubert Trunkenpolz Viktor Sigl

STATEMENT OF ALL LEGAL REPRESENTATIVES 14 3

INVESTOR RELATIONS
VIKTOR SIGL
Stallhofnerstraße 3
5230 Mattighofen, Austria
Phone: +43 7742 6000-144
E-Mail: ir@ktm.com

IMPRINT
Owner and publisher:
KTM AG, Stallhofnerstrasse 3, 5230 Mattighofen, Austria
Registered at the Regional Court Ried im Innkreis:
FN 107673 v
Concept: KTM
Design: www.grafik-buero.at
Photos: KTM archives, Husqvarna archives, WP 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.

14 4 C O NS O LIDATED FIN A N CIA L S TATEMENT S K TM AG

KTM AG
Stallhofnerstraße 3 M: ir@ktm.com
5230 Mattighofen, Austria W: www.ktmgroup.com