Editorial

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Editorial

DEAR READERS,

With the surge in networking in our digital world the economy and society are facing enormous tasks and challenges. In his essay on the future of mobility, Professor Stefan Bratzel of the Fachhochschule der Wirtschaft in Bergisch Gladbach sees the market entry of new players as the opening salvo in a “war of the worlds”.

Exactly what digital networking already means in metrological practice is shown by our subsidiary DMT, a global group of 14 engineering and consulting companies in the mining, oil & gas, infrastructure & construction engineering, and plant engineering markets. The company’s metrological expertise is a byword for absolute reliability and precision. Their highly specialised measuring technology sends data via Wi-Fi from all over the world directly to the corporate headquarters in Essen.

And it isn’t only here that we can see the revolution in the interaction between technology and people. At the same time, the need for security is growing. It’s for this reason that the TÜV NORD GROUP, one of the world‘s leading technology service providers, is working on complex security solutions: As we describe in our essay, the company is optimising its business models and offering customers tailor-made services for a digitally connected future under the banner of “Security4Safety”.

Wishing you an informative read.
Your TÜV NORD GROUP

LETTER FROM THE CEO

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LETTER FROM THE CEO

Dear Customers of the TÜV NORD GROUP,
Dear Colleagues and Partners,

Whatever we do – shopping, listening to music or booking holidays – electronic networking is transforming both our private and our business lives. In all areas of the economy, analogue systems and automated production processes are being gradually digitalised. Thus it is that the demands on technological security services are also changing. In the digitalised and networked world, we want to carry on making a positive contribution to the success of our customers. And this is precisely the aim of our strategic realignment.

The core task of our work is and remains the protection of human beings from the hazards of technology. With mechanisation, electrification and automation, we’ve been involved in monitoring no fewer than three industrial revolutions in just under 150 years, helping to design new security requirements and monitor compliance with them.

And it is out of the fourth industrial revolution – digitalisation and networking – that a significant extension to our mission is emerging. In the future we must also protect technology from people, especially from hackers. Valuable data and IT infrastructures must not be allowed to fall into the hands of cyber-criminals and data thieves. The routes and habits of motorists must not be made accessible to allcomers and exploited for economic gain by third parties without the consent of those affected. And, last but not least, once the Internet of Things finds its way into our homes (“smart home”), routers, central heating systems and kitchen appliances must be effectively protected against unauthorised access.

As can be seen in the 2016 fiscal year classical and innovative technologies are continuing to converge in the TÜV NORD GROUP. The Group has made good progress in all relevant key ratios. At the same time, over € 50 million were specifically invested for the first time in the development of innovative services and state-of-the-art testing instruments, as well as in acquisitions. All the business units contributed to the positive results. And it is for this that the Supervisory Board, the Board of Management and the Group Staff Council would like to thank all the Group’s employees across the globe. This success is all down to them!

At the beginning of 2017, the TÜV NORD GROUP was reorganised and a new management structure was established. The Board of Management now consists of three members, and the operative business is henceforth to be run by a new, integrated body, the Group Executive Committee. This consists, alongside the Board of Management, of a representative from each of the six business units. We are convinced that the flat hierarchies, rapid decision-making and very highest quality standards resulting from this change will deliver an even better performance in the markets in which we are active.

We increasingly see our task as also to focus on the data security of products right from their development phase. At the same time, technology must from the outset be so designed as to ensure that privacy is protected and users maintain control over their own information. Security for people and technology – at all times, everywhere in the world. And it is this idea that is the guiding principle for over 10,000 members of staff in our Group worldwide. Independent certifications and tests are the prerequisites for security in the digital world. They provide transparency and the necessary trust.

With kind regards,
Dr Dirk Stenkamp

Chairman of the Board of Management

“In the digitalised and networked world, we want to carry on making a positive contribution to the success of our customers. And this is precisely the aim of our strategic realignment.”

THE GROUP EXECUTIVE COMMITTEE

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THE GROUP EXECUTIVE COMMITTEE

CFO Jürgen Himmelsbach

Hartmut Abeln (Mobility)

Jörg Becks (Training)

Dr Ralf Jung (Industrial Services)

Chairman of the Board
Dr Dirk Stenkamp

Dirk Kretzschmar (IT)

Luis Gómez (Aerospace)

Prof. Dr Eiko Räkers (Natural Resources)

Harald Reutter (Labour Director)

Rudolf Wieland
(Industrial Services;
retirement date 31 March 2017)

The Group Executive Committee after its first meeting. It consists of the three members of the Board of Management plus a representative of each of the six business units. From left: CFO Jürgen Himmelsbach, Hartmut Abeln (Mobility), Jörg Becks (Training), Dr Ralf Jung (Industrial Services), Chairman of the Board Dr Dirk Stenkamp, Dirk Kretschmar (IT), Luis Gómez (Aerospace), Prof. Dr Eiko Räkers (Natural Resources), Harald Reutter (Labour Director) and Rudolf Wieland (Industrial Services; retirement date 31 March 2017).

“This new collaboration across all company areas will help us achieve our goal of supporting our customers across the world with high levels of shared expertise.”

Dr Ralf Jung,
Industrial Services business unit

“The Group Executive Committee is the forum for us to pool and promote different ideas. This is a motivating factor for everyone working on those ideas. We want to encourage everyone to think in networked and visionary terms.”

Luis Gómez,
Aerospace business unit

“The outstanding level of training and qualification of our employees is the bedrock of all our activities. This is a particular priority for us across the entire Group.”

Jörg Becks,
Training business unit

REPORT FROM THE SUPERVISORY BOARD

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REPORT FROM THE SUPERVISORY BOARD

In the 2016 fiscal year, as before, the Supervisory Board continued at all times and with great care to exercise the monitoring and consultancy responsibilities incumbent on it in accordance with the law, the articles of association and the regulations. In the year under review, the regular meetings took place on 12 April, 17 May, 13 September and 6 December. The principal focus of the meetings was on business development, the status of strategic planning, the ongoing development of the management structure and the management of risks and opportunities in the TÜV NORD Group. At the meeting of 17 May, the Group’s compliance management system was discussed by the Supervisory Board on the basis of a comprehensive report prepared by the Board of Management. At the meeting on 13 September, the Supervisory Board adopted the new Group management structure. At the meeting of 6 December, the budget for 2017 was discussed and approved; in addition, the Board of Management reported at this meeting on the enactment of gender diversity measures in the TÜV NORD Group.

The Board of Management fulfilled its duty of information and informed the Supervisory Board regularly, promptly and comprehensively by word of mouth and in writing of all relevant issues of business development as well as the situation and strategy of the company, including the Group’s key companies, the risk situation and risk and opportunity management. Throughout the fiscal year in question, the Chairmen of the Supervisory Board and the Board of Management also maintained regular contact outside of the plenary and committee meetings and kept abreast of major developments.

In order to carry out its tasks and prepare its deliberations and decisions, the Supervisory Board set up two committees which support the work of the plenum effectively.

Ten sessions of the presidium / personnel committee took place in the year under review. The discussions focused primarily on the preparation of the plenary sessions, the further development of the management structure and the preparation of the personnel and compensation decisions to be made by the Supervisory Board. Where necessary, the Supervisory Board was provided with recommendations for decision-making.

In the year under review the Finance Committee met four times in advance of the Supervisory Board meetings and paid particular attention to the annual financial statement and earnings trends, alongside planning and cost trends with regard to the Group’s pension commitments.

The drafting of TÜV NORD AG’s annual financial statements and consolidated financial statements, including the associated reports on the situation of the company and the Group, was completed by the Board of Management by 31 December 2016. These were validated by the auditors appointed by the Annual General Meeting, BDO AG, Wirtschaftsprüfungsgesellschaft in Essen. The auditors approved the accounts without reservation or obligation.

On 28 March 2017 the Finance Committee met with the Board of Management and the auditors to discuss the annual and consolidated financial statements and the audit reports. In addition, a detailed discussion took place at the meeting of the Supervisory Board on 4 April 2017. The auditors were present at the deliberations on the annual and consolidated financial statements. They reported on the main results of the audits and made themselves available to the Supervisory Board to offer any additional information the latter might need. The auditors also noted that the Board of Management had established an appropriate information and monitoring system whose design and management rendered it suitable for anticipating in good time any developments that might pose a risk to the continued existence of the company.

On the basis of its own audit of the annual and consolidated financial statements and the management reports and on the basis of the report and the recommendation of the Finance Committee, the Supervisory Board felt able to concur with the auditors’ conclusions. No objections were raised. The Supervisory Board has approved both the financial statements and the consolidated financial statements. The annual financial statements are thus adopted.

With effect from 31 December 2016, Dr Rettig and Dr Kleinherbers resigned from the Board of Management. Dr Rettig occupied the post of chairman of the Board of Management until his retirement; Dr Kleinherbers was most recently responsible for the Mobility business unit. The Supervisory Board wishes to thank both gentlemen for their many years of successful work in the Board of Management of TÜV NORD AG and its predecessor companies.

In the meeting of 12 April, the Supervisory Board appointed Dr Stenkamp as the new Chairman with effect from 1 January 2017. The Supervisory Board would like to thank all the employees worldwide, the company’s managers, the Board of Management and the employee representatives for their commitment and successful work in 2016.

The Supervisory Board

Dr Georg Schöning
Chairman

Hanover, April 2017

TAKING SAFETY FORWARD – FROM BOILERS TO BITS OF DATA?

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TAKING SAFETY FORWARD – FROM BOILERS TO BITS OF DATA?

It was the steam engine that revolutionised production in days of yore. The new technology led to a profound transformation in economic and social relations and radically altered working conditions. At the same time, however, steam-generated pressure brought with it lurking dangers to people. This led to the foundation of the TÜV almost 150 years ago: Since then, experts have been protecting people and the environment from technology. The same principle was also applied later on to electrical equipment, power plants and vehicles. Specialists spent their working life identifying and assessing risks and validating new safety standards. In the age of NETWORKING, aspects of analogue and digital safety and security are now converging. This offers opportunities for economic growth. At the same time, companies must adapt to new threats. Independent inspections offer safety and transparency. The guiding principle of TÜV NORD has never been more topical.

“WAR OF THE WORLDS” IN THE AUTOMOTIVE INDUSTRY

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“WAR OF THE WORLDS” IN
THE AUTOMOTIVE INDUSTRY

AN ESSAY BY PROF. DR. STEFAN BRATZEL

The auto industry is entering choppy waters: no fewer than three revolutionary changes are forcing the sector to rethink old ideas.

Nothing of fundamental importance has changed in the business model of car makers for a century. While many other industries have witnessed drastic changes over the past 50 years, the established car makers have continued to utterly dominate the market. But a dramatic change is now taking place. This is because three of the essential principles on which the auto industry has hitherto been based are currently under pressure like never before:

“The internal combustion engine is the heart of the automobile.”

“The customer wants to own his own car as a status symbol.”

“Cars need a trained driver to control them.”

These three assumptions, which used to be unquestioned facts of life, are increasingly being challenged. Firstly, for instance, the electric motor could replace the internal combustion engine as the dominant drive technology within the next 20 years. Secondly, the car is increasingly losing its preeminent position as a status symbol, particularly in conurbations. For instance, about 30 new cars are sold in the US every minute. In the same period, some 125,000 people get into in a taxi or make use of car-sharing services. And, thirdly, driver training will no longer be needed in a future age in which cars drive autonomously. BMW, for instance, is looking to turn out its first series-production selfdriving cars in collaboration with US chip maker Intel and Israeli camera technology specialist Mobile Eye as early as 2021. Other brands too are planning the market launch of robotic cars in the near future. From the point of view of the customer, these trends are leading to three mobility revolutions, on the basis of which new business models and innovations will be developed in the future:

The mobility efficiency revolution

Today’s cars are unused for around 95 percent of the time. And even during the 5-percent period of use, only about 33 percent of their total capacity is utilised. What’s more, even given their relative efficiency, they burn finite fossil fuels. Many new business models and innovations are tackling these inefficiencies at their very root: Driving services portals promise maximum efficiency of car use at minimum cost; sharing concepts make it possible to share hardware that is otherwise unused; and, with electric cars, high levels of efficiency and low environmental costs can be achieved through the use of renewable energy.

The mobility time revolution

According to a study produced by the French automaker Citroën, the average European spends four years and one month in the car in the course of his or her life. Anyone who drives every day sings out loud 4,171 times, eats 1,648 meals behind the wheel, kisses his or her passenger 1,163 times, nods off through tiredness 60 times, and plays games for diversion some 20 times. If, thanks to autonomous driving capabilities, the driver no longer needed to concentrate on the traffic, these numbers might surge or new activities be added to the portfolio of the possible. The spare time made available in the car could be filled by a whole range of attractive new services. Such individualised services would be conceivable in the fields of business, information, entertainment, wellbeing and consumption.

The mobility system revolution

Even today, smartphones with a GPS function can be used in route planning through access to mobility portals, involving all types of transport, which show the fastest and cheapest alternative to driving. In future, information will be even more closely interconnected, meaning that software systems will be able to check the availability of types of transport, including the interfaces, in real time and settle the invoice for multi-modal mobility to the exact kilometre by means of an automated payment procedure. On the basis of these three converging mobility revolutions, new business models will one day arise in forms, the beginnings of which we can only vaguely discern today. As the change accelerates, Big Data players like Apple, Google, Amazon, Alibaba and Baidu are increasingly making inroads into the automotive universe. For the first time in their 100-year history, the car makers are no longer alone in their universe. The big guns should take this “war of the worlds”, the opening salvoes of which are just being fired, very seriously indeed. Because this time they are dealing with really powerful opponents.

“Mobility remains a fascinating mega-trend. Cars are becoming an integral part of the Internet, digital instruments are taking on ever greater numbers of testing tasks.”

Hartmut Abeln, Chairman of the Board of Management of TÜV NORD Mobilität

new cars are sold in the US every minute.

In the same period, some

people get into in a taxi or make use of car-sharing services.

PROF. DR. STEFAN BRATZEL

is the Director of the Center of Automotive Management (CAM) at the Fachhochschule der Wirtschaft (FHDW) in Bergisch Gladbach.

www.auto-institute.com

THE GIFT OF FREE TIME

The acceptance of autonomous vehicles is growing: Eight out of ten motorists in Germany would switch to a such a car. But, instead of working on the road, the passengers would rather relax, eat and read. Here are some of things they would like to do:

Basis: 2,100 German motorists, July 2016
Source: Deloitte

VALUES OF THE MILLENNIALS

Mobility instead of ownership: Only 10 percent of millennials – that in-group whose members were in their teens around the year 2000 – consider ownership of their own car to be important. More important to them is access to mobility, for example through car-sharing services. Where and how they live continues to be important.

Source: Ford Zeitgeist study 2013

ON THE HIGH SEAS AND UNDERGROUND

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ON THE HIGH SEAS AND UNDERGROUND

Whatever the field – be it mining, industrial installations or railway tunnels – the experts from the DMT group measure the world – safely and precisely.

The shaft in the upper Harz, which is more than 1,000 metres underground, is over 150 years old. Until 1980, miners worked here to extract galenite and sphalerite: after that the shaft was abandoned. The air is damp and musty, water drips from the walls. Everywhere you go the space is oppressively restricted – at some points the ceiling is so low that you have to bend down. In other places, fallen pit props and debris block the way.

Some 350 kilometres further north, the Mittelplate oil rig towers up out of the North Sea off the coast of Schleswig- Holstein. Thousands of litres of crude oil are extracted here every day from Germany’s largest oil field – a double pipeline, which lies up to 20 metres below the mudflats, carries the precious commodity to the mainland at Friedrichskoog. The workers are allowed to smoke only in a little room – open fires are strictly prohibited throughout the entire rig. Danger of explosion!

Extreme places of deployment

“At risk of collapse”, “inaccessible”, “explosive”: Extreme starting conditions such as these are the speciality of DMT from Essen. As an independent brand for the natural resources and infrastructure sectors, the company has been a member of the TÜV NORD GROUP for ten years. The history of the company began much earlier – with its predecessor organisations the company can look back on a tradition as a service provider for the mining industry that stretches back some 280 years. Today, the DMT brand stands for an engineering and technical consulting company in the four areas of oil and gas exploration and extraction, mining, construction and infrastructure, as well as plant construction and process engineering.

The company never loses sight of its tradition: Mining is and will remain an important field of work for the experts from Essen. For the measurement, for instance, of inaccessible stretches of shaft in the central German uplands, the innovative measuring system “DMT pilot 3D” is now used. The technology was originally conceived for space missions. The device uses multisensor technology from aerospace technology for precise positioning, navigation, and 3-D documentation in real time,” explains Gerald Kröger, who heads the machine diagnostics and geo-measurement division at DMT. This technology was developed by the German Aerospace Center in collaboration with partners. DMT is responsible for the production of the system and coordination of the global marketing.

Hard-to-reach places

The “DMT pilot 3D” delivers fast and accurate measuring results wherever there is no or inadequate satellite navigation for the task. “This makes the system ideal not just for mining but also, for instance, for ship inspections,” Mr Kröger says. The measurements generate a digital 3-D model of the ship with built-in image recording courtesy of a high-resolution colour camera. Further applications include complex constructions, forestry and underground infrastructure projects such as tunnelling. The instrument is also used in industry: for example, to survey and take measurements of industrial plants. It is a versatile innovation – the device is small, lightweight and ideal for hard-to-reach regions. Even the darkness it encounters in deep mines is no problem for the system. And there is another advantage: since it is no longer necessary to transport, assemble and dismantle bulky measuring systems, the userfriendly “DMT Pilot 3D” saves a considerable amount of time. And DMT can also measure completely inaccessible hollow spaces, such as those found in old mines or karst areas. With the aid of special scanners that can fit through drill holes, the engineers deliver exact metrological results. If, however, the task at hand concerns the safe and highly accurate documentation of shafts in addition to their photorealistic mapping, kinematic surveying systems are used.

Unique cutting-edge technology

The “Gyromat 5000” is by some margin the most accurate surveying gyroscope in the world. Like most DMT systems, this precise piece of equipment can be used for different purposes. Even by these standards, however, its deployment for the Gotthard base tunnel project was unusual: here, the engineers monitored the precision of the measurement of the tubes in the world’s longest railway tunnel.

After all, precision and safety are the two decisive factors that define the services offered by DMT. When Deutsche Erdoel AG (DEA) was looking to rebuild the pipe distribution level on its Mittelplate oil rig, the first call for assistance went out to the metrological experts from Essen. DMT has special measuring equipment that meets the highest safety requirements for use in potentially explosive atmospheres such as offshore rigs and chemical plants. This special technology ensures highly accurate measurements – and does so in compliance with safety standards.

Caution, danger of explosion!

In order to plan the new pipe distribution level precisely and economically, DEA needed an exact model of its actual condition. The challenge: the distribution level with its declared high risk of explosion is subject to strict safety requirements. Access to Germany’s only oil rig is difficult: the engineers have little space in which to transport their equipment. A further risk factor is the weather.

There is a risk of explosion wherever and whenever drilling for oil takes place – and it is under these conditions that the experts have to carry out their measuring tasks. The solution: the explosion-proof “IMAGER 5006EX” 3-D laser scanner. Thanks to its large field of vision, the scanner needs only a few positions for complete documentation. Even from almost 80 metres away, an exact recording is possible. The laser scanner, which was jointly developed by DMT and Z + F, created a full 3-D model of the highly sensitive pipe distribution level and, in the process, documented even the smallest screw connections. The specialists from Essen were thus able to master even this extreme situation and thus help solve the problem.

“The ‘DMT pilot 3D’ was developed for space travel but now we see how much scope there is for its use in the whole Group.”

Prof. Dr Eiko Räkers, General Manager of DMT

The DMT group of 30 German and international offices has to date organised around

projects in some

countries.

THE FOUR MARKETS OF THE DMT GROUP

Measurements on oil platforms: The explosion-proof laser scanner is ideal for dangerous missions.

A SECURE FUTURE IN A NETWORKED WORLD

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A SECURE FUTURE IN
A NETWORKED WORLD

The Internet of Things is revolutionising the interaction between people and technology. New threats must be analysed and measures identified to avert risks.

10 February 2016 – a computer virus forces the Lukaskrankenhaus hospital in Neuss into offline mode. Instead of e-mail, the employees send faxes; couriers bring findings personally to physicians and patients; and more than every tenth planned operation has to be cancelled.

27 November 2016 – almost a million routers issued by Deutsche Telekom are affected by a large-scale hacker attack. For customers, this means doing without their phones, Internet and TV for hours on end.

22 January 2017 – hackers blackmail the “Hotel Jägerwirt” in Austria for the fourth time. This time, the attackers lock the electronic key cards for the guests and demand a ransom. The hotel pays up – and now wants to go back to using real keys.

3 February 2017 – researchers in Bochum discover serious vulnerabilities in network-enabled printers which a British hacker immediately exploits to hijack 150,000 units. The manipulated printers spit out messages from him – with a warning to the users that their technology is not secure.

Crime on the Internet

Such is the price of progress: cybercrime is no longer the stuff of science fiction; it has long since become a potential hazard which encroaches on our everyday lives. The underlying cause of the growing threat is the Internet of Things. Gone are the times in which the only way to connect to the World Wide Web was by clicking on the mouse of your PC. TV and speakers have now IT interfaces; digitalisation is turning cars into computers on four wheels that communicate with traffic lights; and simple household appliances such as toasters or refrigerators can send and receive data.

Digital gadgets for babies

Thanks to their Bluetooth interface, even soothers now have access to the Internet. Concerned parents can use the sensors in the soother and an app on their smart phone to check the body temperature of their offspring and, if necessary, to find out where their missing toddler has gone. But what if hackers acquire the stored data? Many might think that this isn’t a problem. “Whether or not my child has a temperature isn’t a state secret.” “This is a fatal misconception!” says Ulf Theike, General Manager of TÜV NORD Systems and the person responsible for the digital development of services and internal processes in the Industrial Services business unit. You just have to think the scenario through to its logical conclusion, Mr Theike says: With a cyber-attack the hacker would not only have access to the motion profile of the child but could in the worst-case scenario manipulate the temperature reading possibly causing the parents to administer medicines their offspring doesn’t need.

Even with all the vulnerabilities of the Internet, the fact that increasing networking also offers a whole array of opportunities is indisputable. It is ushering in a new era. In the future, your house will be able to think with and for you. Smart devices will communicate with each other, be conveniently controlled using a smartphone or tablet and will be able to save power automatically or independently turn up the heating when the outside temperature drops. Within the next three years, as forecast of the BITKOM industry association, about one million households will be smart homes. The statistics portal Statista estimates that there are already well over 500,000 smart homes. The Internet of Things also represents a radical change for industry. Following on from mechanisation with water and steam power, assembly-line production and the use of software, the next industrial revolution – Industry 4.0 – is in full swing. The TÜV NORD GROUP combines 150 years of industrial experience with over 20 years of IT security expertise. For instance, the TÜViT subsidiary has just produced a standard guide for industrial control systems (“ICS security compendium”) on behalf of the Federal Office for Security in Information Technology.

Two worlds are converging

The TÜV NORD GROUP is not immune to the challenges posed by this enormous change with its new technical possibilities and associated risks. IT security has hitherto been a stand-alone field of testing, totally detached and independent from sectors such as process engineering, chemistry or consumer goods. “We need to rethink things. As toys, lifts, and whole power plants now have IT interfaces, the fields are converging,” Ulf Theike explains. Of one thing he is quite convinced: in a networked world, it no longer makes logical sense to separate industrial safety and IT security from one another. On the one hand the security of traditional products, which have now suddenly also become Internet-capable, must be ensured. On the other completely new types of products are coming onto the market, thanks to networking. Intelligent house technology for the smart home is just one example. “This is going to give rise to totally new requirement profiles for us if we are to guarantee security at all times in the future,” says Mr Theike. What this means in specific terms for the TÜV NORD GROUP is that existing services, even successful ones, are going to be questioned and, in the medium term, digitalised. “In any case this also means that we’re going to have to analyse any new risks that emerge and identify measures to avert these risks,” Mr Theike says. So it will no longer suffice, for instance, merely to test the product features of medical devices like insulin pumps.

“As with a lot of technical equipment, we’re also going to have to test them with regard to security,” he stresses. This is the only way to guarantee that the wireless connections between insulin pumps and their controls are so secure that they cannot be controlled and manipulated by hackers.

Security needs security measures

In a worst-case scenario, hackers might construct a gigantic cyber-weapon from millions of networked devices: vulnerabilities in the software of Internet-enabled printers, routers and phones allow attackers to hijack the processing power of the devices and to use it to develop malicious programs under central control in order to cripple major websites. “A few months ago, online giants like PayPal and Twitter were taken down in a comparable attack,” says TÜViT General Manager Dirk Kretzschmar. With an eye to the multiple threat scenarios, his colleague Ulf Theike therefore insits: “We need security measures if we are going to be able to continue guaranteeing security.” “Security4 Safety” is the banner under which the TÜV NORD GROUP is developing its services in the digital age. The security of the networked future will also depend on identity management, IAM. After all, in times in which vehicles can communicate with each other and domestic appliances transmit private information, it is becoming increasingly necessary to securely manage accounts and identities and to securely assign roles and permissions. “Once cars on the road or machines in a power plant start automatically exchanging data, the identity of the terminal equipment must clearly be protected,” says Ulf Theike. This is the only way to avoid cyber-attacks – and the unauthorised interference from outside that goes with them. Roughly a million people around the world are already falling victim to Internet crime every day. Data thefts give rise to high financial losses in companies. “It’s for this reason that, as time goes on, a targeted and conscious approach to identity, anonymity and pseudo-anonymity has an ever more important role to play in the TÜV NORD GROUP,” says IT expert Dirk Kretzschmar.

Big Data: Risks and opportunities

As far as data security is concerned, the analysis, use, collection, exploitation and marketing of large amounts of data, which is described by the term “Big Data”, bear both risks but also great opportunities to coordinate complex processes in organisations. “In collaboration with the Fraunhofer Institute, we at ALTER TECHNOLOGY TÜV NORD are currently constructing a specialized platform for information, ordering and service for space agencies and satellite manufacturers that is based on Big Data,” explains Luis Gómez, Managing Director of ALTER TECHNOLOGY TÜV NORD. The platform will specifically bring together customers and suppliers by providing technical information, design and construction plans and also information about suppliers. Security4Safety, Big Data, IAM and the like are the companions of progress. When the analogue and digital worlds merge to form a single digital world, new business fields, markets and opportunities will open up for the TÜV NORD GROUP.

“As toys, lifts, and whole power plants now have IT interfaces, the safety and IT security fields are converging.”

Ulf Theike,
General Manager of TÜV NORD Systems

“Once cars on the road or machines in a power plant start automatically exchanging data, the identity of the terminal equipment must obviously be protected.”

Dirk Kretzschmar,
General Manager of TÜViT

Source: Deloitte

CONSOLIDATED FINANCIAL STATEMENT 2016

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GROUP MANAGEMENT REPORT

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GROUP MANAGEMENT REPORT

FUNDAMENTAL PRINCIPLES OF THE GROUP

Business activity

The TÜV NORD GROUP is a global technical services group which offers its customers impartial, reliable and expert support in all matters concerning safety and security. With more than 10,000 employees, the Group offers a wide range of innovative testing, certification, engineering, consulting and training services.

For over 140 years, experts and specialists with high levels of engineering expertise have been testing machinery, equipment and products, and compiling expert reports and issuing certificates in both private and business fields. Its customers include global players and small and medium-sized enterprises with a regional and local focus, alongside organisations, institutions and consumers.

The activities of the Group are concentrated in six business units. Traditional TÜV fields of work from the Industrial Services, Mobility and Training business units are complemented by those in the Natural Resources, Aerospace and IT business units.

The certification, service and testing portfolio of the companies in the Industrial Services business unit includes specific individual tests and the management of complex security solutions. The Mobility business unit offers numerous services such as vehicle and driving tests, vehicle assessments, solutions for used car management and development-related consulting for the automotive sector. The core activities of the Training business unit are vocational education and training for specialists and managers, along with publicly funded training measures. The companies in the Natural Resources business unit are among the leading service providers for testing, consulting, planning, metrology, and development in the areas of natural resources, safety and infrastructure. The Aerospace business unit is involved in activities concerning the procurement, modification, testing and certification of electronic components for the aerospace industry. The services of the IT business unit include the testing and certification of all IT products and components, as well as training in selected security and quality issues in the areas of IT security, IT quality and IT infrastructure.

As of December 31 2016, the Group with its management company TÜV NORD AG embraces a total of 89 fully consolidated companies, 43 of them domiciled in Germany and 46 abroad. TÜV NORD AG consolidated financial statement includes all major companies in Germany and abroad in which TÜV NORD AG either directly or indirectly holds the majority of voting rights.

ECONOMIC REPORT

General economic and sector-specific conditions

As was the case in 2015, the world saw only moderate economic growth in 2016. With an increase of approx. 3 %, economic growth remained at roughly the level of the previous year. The cause is a greater reluctance to invest, mainly due to the high level of political and economic uncertainty generated by the conflicts in Syria and Iraq, the failed coup in Turkey, the Brexit decision and the change of government in the United States. Moreover, the continuing risks in the European banking system and the re-emergence of nationalism impacted negatively on economic development. Growth in Europe and the US has been supported by the low level of interest rates and slightly higher raw material prices. In China, an expansive economic policy has also stabilised growth. The German economy has continued to grow moderately in spite of this uncertain international environment. This trend continues to be dominated by a strong dynamic in the domestic economy. This can be attributed in particular to rising investments – mainly in the construction industry – and strong exports. Gross domestic product is expected to grow by 1.9 % in 2016, marking an increase on the previous year (1.7 %).

The TIC (testing, inspection, certification) sector continues on its path of sustained growth. On the one hand, global demand for quality assurance is rising, for example in the area of food inspection. On the other, companies are seeking to increase the outsourcing of testing procedures because of the complexity of the tests involved. Negative effects are reflected in the persistent weakness of the oil and gas industry as a result of low commodity prices and the slowdown in growth of the Chinese market. Overall, the trend in the TIC industry was positive in 2016.

With its innovative and diverse product portfolio, high quality standards and global network, the TÜV NORD GROUP also expects to profit in the future from the growing demand.

Business Trends

The TÜV NORD GROUP held its own very well in a challenging business environment in the 2016 fiscal year. The basis of the success of the Industrial Services business unit in the fiscal year under review is to be found in its international testing and certification services. The Mobility business unit saw out the fiscal year with solid growth. The Natural Resources and Training business units have stabilised as a result of revenue improvement programmes. The Aerospace and IT businesses recorded ongoing development consistent with their business plans in a highly competitive environment.

The TÜV NORD GROUP strengthened and expanded its product portfolio once again in 2016 through targeted acquisitions. With the acquisition of Optocap Ltd., Livingston/United Kingdom, on January 1 2016 the Group strengthened its position in the aerospace industry, in particular on the British market. The company is a world leader in the fields of opto-electronics, microelectronics and microsystems (MEMS) and counts the ESA among its customers in addition to numerous industrial companies. The Mobility business unit has expanded its core services, i.e. official services along with damage appraisals and valuations, through the acquisition of the Hofmann GmbH & Co. KG engineering office in Bamberg on 1 December 2016, thereby accelerating the spread of its coverage in Germany.

The Group grew profitably in the fiscal year under review. The moderate increases in sales and earnings announced in the management report 2015 and in the forecast 2016 were achieved or exceeded. The best operating result since the founding of the Group was once again obtained. The increase in earnings is based on the positive results of all business units. The Industrial Services and IT business units developed as planned. The Mobility business unit achieved its planned turnover. The earnings trend is below the planned level because of increased costs occasioned by the establishment of business activities in China. The earnings of the Natural Resources business unit were in line with the plan, although sales growth was lower than planned. The Industrial Services and Training business units concluded the fiscal year with higher than expected sales and earnings. The number of employees of the Group grew as forecast. The Group projects that were decided upon in the context of Strategy 2020plus were continued as planned in 2016 with the aim of sustainably increasing the share of new services.

The trends within the Group in the fiscal year 2016 in comparison with the previous year were as follows:

Turnover increased by 3.3 % from € 1,116.6 million to € 1,153.6 million. The rise in sales of € 37.0 million was essentially due to the Industrial Services and Mobility business units.
Before non-operating items, earnings before interest and taxes (EBIT) rose by 12.0 % from € 62.3 million to € 69.8 million. The increase of the result of € 7.5 million can primarily be attributed to the positive development in earnings in the Industrial Services business unit as well as to more rigorous procurement controlling.
The return on sales, measured by EBIT, was thus 6.1 % after 5.6 % in the previous year.
Earnings before tax (EBT) increased by € 14.2 million to € 69.0 million.
The number of employees, including those from first-time recruitment and changes brought about by acquisitions, converted to full-time employees, increased from 9,794 to 10,113 on average in 2016. Staff productivity also increased.

By the end of the 2016 fiscal year, the senior management tier had also undergone reorganisation in the form of changes at the top of the TÜV NORD GROUP. In the course of long-planned retirement of the previous Chairman of the Board of Management, Dr. Guido Rettig, and the chair of the Mobility board, Dr. Klaus Kleinherbers, the Board of Management was scaled down from five members to three. It now consists of chairman Dr. Dirk Stenkamp, CFO Jürgen Himmelsbach and Labour Director Harald Reutter. The operative business is to be run as of 2017 by a nine-strong Group Executive Committee (GEC). In the new body, the chairs of the six business units have the role of supporting the Board in its management tasks. The GEC consults and decides on all strategic, financial and operational issues with significant impact on the business units. These will thereby in the future have the opportunity to participate more directly in shaping the Group. These changes to the management structure are set to further enhance the operational capacity of the TÜV NORD GROUP and supports its continuing development going forward.

Earnings

The 2016 fiscal year came to an end with a turnover of € 1,153.6 million (2015: € 1,116.6 million). The following figure shows the trend in sales in the Group (€ million):

The breakdown of sales by region is shown in the following figure (€ million):

The Group’s domestic revenue amounted to € 843.9 million in 2016 (2015: € 825.4 million). Turnover from the international business amounted to € 309.7 million (2015: € 284.2 million) and achieved a share of 26.9 %.

Broken down by business units, the following overall picture emerged for the year:

Due the heterogeneous nature of their market presence, their various product spectra and their regional alignment, the individual business units developed very differently.

The Industrial Services business unit generated a turnover of € 538.1 million (2015: € 516.5 million), where the development of foreign business was especially positive. The sales in Germany increased by € 4.3 million to € 351.0 million (2015: € 346.7 million). Sales abroad increased to € 187.1 million (2015: € 169.8 million). The companies in China, Europe and India and the first-time consolidation of TN Egypt contributed significantly to this rise. The turnover of the Mobility business unit, at € 333.4 million, represented an increase of 2.9 % over the previous year’s figure of € 323.9 million. The growth is primarily attributable to an increase in turnover in the car dealership and workshop segments. Despite the closure of two vocational colleges, sales in the Training business unit increased to € 107.4 million (2015: € 106.5 million). In the Natural Resources business unit, a turnover of € 106.9 million (2015: € 103.6 million) was generated, the increase being mainly due to major projects in the seismology field. The sales of the Aerospace business unit, at € 47.2 million were roughly equivalent to those of the previous year (2015: € 47.6 million). The sales of the IT business unit increased to € 15.5 million (2015: € 14.2 million) due to the expansion of the service portfolio in the IT security area.

Group expenses increased by 0.8 % to € 1,170.6 million during the year under review. The cost of materials reached a peak of € 192.2 million in comparison to € 198.2 million in the previous year. This is primarily attributable to lower costs for natural resources and of auxiliary and operating materials.

Personnel expense rose by 1.9 % to € 733.1 million. Further information on expenses can be found in the Notes to the Consolidated Financial Statements, under No. 3, Consolidated Income Statement disclosures.

The non-operating items changed from € -8.8 million in the previous year to € -0.6 million in the fiscal year 2016 and principally feature yields from the sale of real estate on the one hand and the assumption of pension liabilities on the other.

All of the business units contributed to the positive result of the Group. Earnings before tax (EBT) amounted to € 69.0 million and were thus € 14.2 million above the previous year’s result of € 54.8 million.

Net profit, at € 43.2 million, exceeded that of the previous year by 27.4 % (2015: € 33.9 million).

Assets

The TÜV NORD GROUP balance sheet reveals a sound structure. Total assets increased to € 876.5 million during the year under review, as against € 851.9 million in 2015.

Non-current assets rose from € 514.2 million to € 540.7 million. This was due in particular to the rise in deferred tax assets as a result of increased pension provisions. The rate of coverage of non-current assets (equity plus pension provisions divided by non-current assets) amounts to 104.0 % (2015: 102.2 %)

Current assets, which make up 38.3 % of total assets, are recognised at € 335.7 million (2015: € 337.7 million). Cash and cash equivalents increased to € 91.7 million (2015: € 84.3 million).

The Group has additional hidden reserves, which primarily take the form of property ownership and investments.

Equity capital, at € 100.8 million, is roughly equal to that of the previous year (2015: € 101.0 million). The equity ratio amounts to 11.5 % (2015: 11.9 %). Due to the lowering of the discounting interest rate for pension obligations, actuarial losses in the Other equity positions amounting to € 41.1 million in 2016 (2015: € 63.1 million) were offset, thereby affecting the consolidated income statement.

In the 2016 fiscal year, € 740.6 million (2015: € 724.5 million) of plan assets were netted against pension provisions. The proportion of the provisions for current and future pension obligations that is not covered by plan assets amounted to € 461.4 million (2015: € 424.7 million). The cause for this increase was the significant reduction of the discount rate of pension provisions. The provision for obligations arising out of pre-retirement part-time working amounts to € 9.7 million (2015: € 12.5 million).

Reinsurance coverage of pension provisions increased by € 12.3 million to € 763.1 million. Through this allocation of funds, the degree of coverage adjusted for the effects of a change in the discount rate was once again enhanced as compared with the previous year.

Further information on the assets situation can be found in the Notes to the Consolidated Financial Statements, under No. 5, “Consolidated Balance Sheet disclosures”.

Financial situation, cash flow

In 2016, the TÜV NORD GROUP successfully boosted its positive net financial position and continued to pursue its conservative financial policy. The most important objectives remain the further maintenance of the Group’s good rating, the safeguarding of an adequate level of liquidity and the centralised financing of the subsidiary companies by the Group at a level that meets their needs. In addition, it is fundamental to the Group’s financial policy to ensure a wide measure of financial flexibility and transparent risk and opportunity management.

The Deutsche Bundesbank, having investigated important financial metrics such as profitability, internal financing strength, liquidity and capital structure on the basis of audited financial statements, has for the tenth year in succession awarded the TÜV NORD Group the accolade of eligibility for rediscount with the central bank. The Group thus belongs to the round of companies whose credit liabilities can be used by commercial banks as collateral with regard to the Deutsche Bundesbank. This guarantees the TÜV NORD GROUP a preferred position in terms of access to financial resources.

The cash flow (see “Consolidated Cash Flow Statement”) amounted to € 67.1 million and was essentially applied to the reinsurance of pension liabilities, investments in intangible asset and in property, plant and equipment, and equity investments. Capital expenditure excluding corporate acquisitions amounted to € 40.6 million in the year under review as against € 42.1 million in 2015. Of this, € 34.1 million was invested by the German companies, and € 6.5 million abroad. The focus was on the construction of real estate in Essen and Hamburg, physical investment in testing equipment, vehicle fleets and computer hardware and software. No material capital expenditure obligations existed as of the reporting date. The Group spent a total of € 9.8 million (2015: € 1.8 million) on the acquisition of companies and equity holdings during the year under review. All projects were assessed by value creation criteria; every potential acquisition or capital investment project was scrutinised and analysed both with regard to the return it would bring, and also from the point of view of its impact on the consolidated balance sheet.

The Group’s net financial position amounted to € 38.8 million at the end of the year under review, a figure which, due to the rise in annual net profit, was significantly higher than that of the previous year (2015: € 32.3 million).

Given the good financial situation, the existing syndicated loan for the Group in the amount of € 175.0 million was reduced to € 100.0 million. The syndicated loan had not been used as of December 31 2016.

In 2016 the Group was in the position to meet its payment obligations at all times.

NON-FINANCIAL PERFORMANCE INDICATORS

Innovation report

The promotion and development of innovations is a focal point of the activities of the TÜV NORD GROUP. In respect of its innovation projects, the strategy process 2020plus, with its focus on economic development to the year 2020 and beyond, is of great importance. As a result of mega-trends, such as globalisation, demographic change, digitalisation and Industry 4.0, traditional testing and inspection services too are undergoing a technological transformation. Innovative services are allowing the Group to tap into new market areas, to enjoy advantages over its competitors and to rise successfully to global challenges. Innovations are crucial drivers of growth in the TÜV NORD GROUP and key strategic factors for sustainable corporate success. The expertise of TÜV NORD employees and the Group’s global presence represent the ideal basis for the development of intelligent testing procedures, innovative vehicle technology and the use of new materials.

To promote its innovation activities, an innovation policy was introduced in the TÜV NORD GROUP in 2016 which contains all the principles that underpin the procedures for the planning, development and implementation of innovation projects, with specifications regarding the requirements, process steps and framework conditions.

Oversight for the innovation projects comes in the form of innovation monitoring. Milestone planning and project progress are queried and evaluated using project status reports. It is in this context that the analysis of key figures, such as sales, costs, investment, and employees takes place.

Furthermore, innovation boards have been implemented in all the business units with responsibility for the monitoring, control and coordination of the innovation process within each business unit. These boards are also the context for assessments and decisions concerning the continuation of individual innovation ideas and projects from the initial idea through to market launch.

Moreover, the TÜV NORD GROUP has committed itself to working with universities and is collaborating with research institutions. The staff of the TÜV NORD GROUP are represented in all the relevant committees charged with the national and international development of regulations.

The individual business units focused in particular on the following projects in the 2016 fiscal year:

Industrial Services: TÜV NORD EnSys is working in an interdisciplinary team (composed of IT professionals and waste disposal experts) on the development of the DARWIN (Database for Radioactive Waste Information) information system. The system enables mobile and fixed-point access to all relevant information on low and medium radioactive waste. It will be available to supervisory authorities as well as operators and TÜV NORD experts. A rights management system ensures that users get access only to information for which they have the corresponding authorisation. DARWIN records all the relevant process data for the waste stream from the generation of the waste through to conditioning for final disposal. All documents are filed in DARWIN and linked together. Data can additionally be acquired from operators. DARWIN provides information about waste along with a cadastre of repositories, correspondence, and conditioning campaigns in regulatory and final disposal procedures.

TÜV NORD Systems and TÜV NORD EnSys successfully continued the THERRI research project in 2016 in cooperation with a large number of partners. The project is now in the advanced stage and is providing valuable insights in the field of thermal fatigue crack growth in power plants. THERRI has also inspired some innovative services, such as the smart inspection concept which now allows inspection intervals to be set in dependence on the mode of operation of a plant, thereby creating the conditions for costoptimised operation.

Mobility: The trend toward digitalisation and automation in all vehicle systems continues. Electronic and IT applications have an ever more crucial role to play in vehicle equipment, with implications for aspects of relevance to driver safety. The business fields of the Institute for Vehicle Technology and Mobility (IFM) of TÜV NORD Mobilität (TNM) are therefore being expanded in the areas of engineering services and testing services – in particular in the field of safety of electronic components/parts. The Car IT field at the IFM is being further expanded to satisfy the latest enhanced requirements in the area of functional safety. TNM is participating in the development of guidelines for type tests and test procedures in the context of automated driving with the aim of having such vehicles approved for road use. The first testing methods are currently being validated in large research projects. In the context of an internal TNM project, relevant projects, collaborations and committee activities were launched which are specifically geared to the development and expansion of competences in the field of testing scenarios for automated driving functions. These include close cooperation with the IT business unit (TÜViT) on the transfer of safety & security into the automotive sector, cooperation in the field of data communication with CETECOM and the AutoConstruct project of the Federal Ministry for Economic Affairs and Energy (BMWi) on real-time environment recognition using cost-optimised camera sensors that are suitable for series production for highly and fully automated driving.

In the field of vehicle valuations, their profitability will be enhanced by means of process innovations. To satisfy the requirements of the actors in the used-car market, which is undergoing rapid change and will continue to do so in the future, innovative order management and valuation systems have been developed in TNM to enable process dovetailing with the customers.

Training: In a joint project of TÜV NORD Bildung and TÜV NORD Akademie, the TÜV NORD Online Akademie was developed in 2016. This digital learning management system grants both internal and external target groups access to digital content. Customers can take advantage of a user-friendly Internet store to obtain information about different training modules and purchase them directly. These modules can be used anywhere and at any time, irrespective of the type of hardware, thereby facilitating adaptive learning. The modular design offers the necessary flexibility in the composition of the individual learning programme. Controls and modern educational media help the students to consistently achieve their objectives. Supporting documents ranging from participation certificates through to the certification of successful conclusion of the programme can be downloaded. With its motto “Making training SMART”, the TÜV NORD Online Akademie is being developed in terms of both functionality and content and is intended in the future to become the “market place of training” in the online training market.

TÜV NORD Akademie is currently developing a digital learning environment for the seminar participants which is designed to offer the customers added value above and beyond selected face-to-face events. By means of personalised access, individual contents are presented with the aim of providing support to the participants before, during and after a face-to-face event. A further aim being pursued is the addition of digital elements to face-to-face seminars. The aim is to use these interactive tools to intensify customer dialogue and strengthen customer loyalty.

Natural Resources: One of the priorities of the Natural Resources business unit in 2016 was research and development orders. At the same time, the business unit was constantly aware of the need to align its services with the technologies that will be required in the future to maintain and further improve its market position as an innovative service provider.

The context for this was the innovation projects defined in the strategy 2020plus that were launched in 2015. These projects are focused on the fields of geotechnical engineering, energy distribution and energy storage, new concepts for extraction and use in mining, nuclear waste repositories, guarantees of origin for raw materials, intelligent sensor networks, model engineering and process control in mining, and industrial process water purification.

Particularly worthy of note is the already very successful participation of DMT as a core partner in the task of establishing the Knowledge and Innovation Community EIT RawMaterials research and development consortium of the European Institute of Innovation & Technology. In the first calls for project proposals, four DMT-led innovation projects were selected for funding. Thematically, these involve the development of an automated system of shaft inspection, the creation of a network of expertise for the reactivation of former mining areas and a detailed concept for the monitoring of mining residues of former mining operations in collaboration with international partners. Work is also being done with TÜV NORD CERT on the development of a certification scheme for critical natural resources. A further 14 projects involving DMT are being funded in the EIT RawMaterials consortium, meaning that funding to the tune of over € 2.8 million was successfully secured in the very first year of the seven-year EU funding programme.

DMT is also involved in innovation projects of other funding programmes, such as Horizon2020, RFCS and projects of the Federal Government. The projects include, for example, innovative extraction technologies, investigations into the feasibility of different energy storage technologies, safety research for the mining industry, and innovations in the field of coking technology concerning the leak-tightness and control of coke ovens.

Aerospace: The Aerospace business unit aspires to extend its value chain and is seeking to further establish itself on the market as an engineering specialist for electronic components for the aviation and aerospace industry through the development of innovative technologies. With the acquisition of Optocap, the business unit has expanded its portfolio with the addition of services in engineering, construction and the special manufacture of opto- and microelectronic components. Moreover, Scotland as a location offers further opportunities, as both the British Government and the European Space Agency (ESA) have decided to invest extensively in the aerospace industry there.

2016 also saw the implementation of the Big Data project known as “Gateway”. This specialised information, ordering and service platform uses Big Data technologies to provide partners and customers in the Aerospace business unit with key technical data. Customers and suppliers are being brought together more effectively by means of technical information, design and construction plans, information to suppliers etc., thereby opening up further market prospects.

In addition, the business unit is supporting customers and manufacturers in the development of new photovoltaic and semiconductor technologies, radiation procedures, cryptography and new technologies and testing methods for the industrial and civil use of drones. The business unit is also cooperating with universities, research organisations, companies and governments.

IT: With digitalisation and the trend toward increasingly intelligent networks in the Internet of Things (IoT), information technology is finding its way into almost all economic and industrial sectors. In the key issues in the fields of Industry 4.0, smart homes, smart cities, smart energy, Car2X and autonomous driving, potential opportunities are continuing to open up for the IT business unit for the development of innovative services. With the increasing level of networking that is going hand-in-hand with the IoT, the issue of IT security is becoming ever more important. It is for this reason that the IT business unit is promoting initiatives such as the creation of a young researcher position in the field of industrial cybersecurity in the “Digital Society Institute” faculty of the European School of Management and Technology (ESMT) in Berlin.

The critical importance of IT security is manifesting not least in the introduction of legal obligations for the protection of critical infrastructure (KRITIS) by the IT Security Act, which was adopted in 2015. The entry into force of the KRITIS regulations on the implementation of the IT Security Act in 2016 and 2017 has paved the way to the further expansion of the market position of the IT business unit as IT security professionals.

In the course of their activities, testers, auditors and certifiers have to review a lot of information and evaluate it according to defined criteria. The intention behind the “Digitalised Audit” process innovation is for testers, auditors and certifiers from the IT business unit to be offered assistance in the inspection process and the generation of test reports through the development of a digital test report generator.

Employees

The TÜV NORD GROUP is one of the TOP 100 employers for young professionals and students. The Group is an interesting and attractive employer in particular for engineering and natural sciences graduates. The TÜV NORD GROUP was also singled out by Kununu for the award of the accolade of “Top Company”.

Also bearing witness to the attractiveness as an employer is the year-on-year increase in the number of applications that the Group receives via the online applicant management system, taloom.

As an employer, the Group is the byword for open and authentic public communication. Since 2012 the Group is the proud bearer of the Kununu “Open Company” seal of quality, which is confirmation of the implementation of this guiding principle.

As of December 31 2016 the domestic and foreign companies of the TÜV NORD GROUP employed an average of 10,113 employees (converted to full-time equivalent) in comparison to 9,794 in the previous year.

Including the experts provided by the associations, the average number of full-time employees was 10,172 (2015: 9,861). On the sampling date of December 31 2016 the absolute number of employees was 13,054. The proportion of women working in the Group is approximately 29 %.

7,486 employees work in Germany. The number of employees abroad increased in 2016 to 2,686. The largest business unit is Industrial Services, with 5,311 employees at home and abroad, followed by the Mobility business unit with 2,505 employees.

The Board of Management of the TÜV NORD GROUP decided in 2016 to carry out a further global staff survey in the wake of the specific improvements that were implemented in the context of a follow-up process after the first survey in 2014. The objective of the survey is to assess the measures taken after the previous one. The survey will also gauge the general mood of the workforce with regard to the current changes and those that will be required in the future. The survey will probably take place in the second half of 2017.

It is the know-how and technical expertise of the staff that form the basis for the future success of the TÜV NORD GROUP. For this to be maintained, a comprehensive and wide-ranging portfolio of measures for the training and development of all the target groups within the Group is an indispensable necessity. In 2016, € 6.5 million was spent on internal and external training events (2015: € 6.4 million). The promotion programmes to prepare staff for management tasks are being further developed and adapted to the needs of the individual target groups. For example, programmes are currently being planned that will pave the way to the enhanced networking of managers from different business units and international companies. For this purpose, alternative forms of learning such as e-learning and blended learning will increasingly be offered. Regular dialogue is now taking place with the HR managers of the international companies with the aim of identifying and communicating best-practice approaches. Moreover, the talent management area is also offering the foreign companies direct on-site support in fields such as succession planning, the introduction of staff selection instruments and the organisation of promotion programmes.

With its dual system of vocational training alongside dual courses with integrated training and practice, the TÜV NORD GROUP offers attractive opportunities for school-leavers and young professionals. With success: One of our trainees was awarded the accolade of best office worker in the state of Lower Saxony in 2016.

49 new recruits are currently preparing themselves for their future positions of responsibility in the TÜV NORD GROUP in the context of their dual studies with integrated practice. The particular focus here is on the technical/information technology field, for instance, on degrees in engineering or computer science and, for instance, on courses of study in mechanical engineering, electrotechnology or computer science. Various models of the training and this dual curriculum are being offered at many sites within Germany. Attractive opportunities in 2016 offered a future perspective in the TÜV NORD GROUP for over 80 % of the graduates of this dual course.

The TÜV NORD GROUP has been sponsoring school students since 2014. With the Start scholarship we have made it possible for a grant recipient from a migrant background to prepare properly for her higher school-leaving exam. In the context of the Start Foundation programme, her individual abilities and talents are being further developed, for instance by projects and training opportunities.

With the aid of inter-regional partnerships with academic institutes, the TÜV NORD GROUP has since 2008 been sponsoring students from Germany and abroad. The awarding of grants at the same time reflects social responsibility by offering financial support to many climbers of the educational ladder and students on degree courses which involve responsibility for society as a whole. The partners include the Leibniz University of Hanover, the University of Hanover, the Technical University of Hamburg-Harburg and the Technical University of Braunschweig. The TÜV NORD GROUP is also the first company group to award an international scholarship for bachelor graduates from abroad with initial professional experience in cooperation with the Northern Institute of Technology Management (NIT) at the Technical University of Hamburg-Harburg.

The Group considers a good work-life balance to be an important factor in ensuring the top performance of its employees. Anyone who wants to be successful professionally needs backing from their family. The TÜV NORD GROUP does more than merely pay lip service to the idea of the compatibility of work and family life. TÜV NORD AG and many of its subsidiaries have already been certified according to the “berufundfamilie” (“work and family”) audit since 2009, and more certifications will follow.

Flexible working hours and the possibility of part-time work help promote the cause of a happy family life. If staff members are confronted with particular challenges in the care of children or elderly relatives, an external service provider is on hand to offer advice. For children there are holiday programmes and care facilities for nursery-age children.

Operational health and safety management lays on a wide range of seminars in addition to a health week and offers an eye school, health coaching, medical check-ups and a stress test. Various sporting activities are offered at many of the sites.

For our companies it is particularly important to cultivate a culture that reinforces a high level of mutual loyalty between employees and companies. One way of measuring this is length of service life. Throughout the Group this averages over ten years, a figure which is significantly higher than comparable statistics from the competition.

The Board of Management would like to thank all the staff and company managers, both at home and abroad. The success achieved in the fiscal year under review would have been impossible without their commitment and dedication to their work. Their thanks also go out to the employee representatives for their trusting and constructive cooperation.

Overall situation

In view of the macroeconomic situation, the TÜV NORD GROUP is generally satisfied with the way the year under review progressed. However, notwithstanding the highest operating profit since the founding of the Group, every effort continues to be made to improve profitability and continuously enhance the company’s position in terms of its earnings, assets and finances. TÜV NORD GROUP assumes that the earnings, asset and financial positions will remain stable in the future.

REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS

Report on expected developments

The leading German economic research institutes anticipate that global economic growth will increase in 2017 and 2018 in comparison to 2016 and that an annual growth of roughly 3.5 % will be achieved in both years. In the industrialised world, we anticipate that the US will contribute significantly to any boost in growth, even bearing in mind the fact that the US Federal Reserve increased interest rates at the end of 2016. This assumption is based in particular on what we expect to be an expansionist economic policy. Growth rates in the Eurozone are expected to be on a par with those of 2016. Major drivers of growth in the emerging markets continue to be China, India and some countries in East Asia, with growth rates of over 5 %. The German economy is expected to continue its course of expansion and, with projected growth rates of 1.7 % for 2017 and 2.0 % for 2018, is set to record above-average growth in comparison to the rest of the Eurozone. The German export sector continues to contribute to this development. However, in the light of existing economic and political risks the outlook remains uncertain.

The TIC sector expects a challenging fiscal year in 2017. The global TIC market will continue to grow, as the demand is growing for neutral, independent and expert testing, surveying and certification services. This is complemented by an increasing trend in companies toward the outsourcing of complex testing procedures. On the other hand, the highly fragmented nature of the industry means that competition is fierce. Rapidly advancing global digitalisation will have an impact on the services of the Group.

In the light of the current political and economic challenges, the TÜV NORD GROUP anticipates a slight growth in sales in the fiscal year 2017. This does not take into account possible effects from the acquisition and sale of companies. All business units, with the exception of the Training business unit, are expected to contribute to the planned growth rates.

All the business units have planned a positive contribution to the Group’s earnings. Overall, we expect a positive operating result which, due to the expenditure associated with the innovation projects, will remain at roughly the same level as the fiscal year 2016.

The Industrial Services business unit expects to see continued stable development in its business activities both domestically and abroad. In international business, the Europe, Southeast Asia and China regions are likely to make a particular contribution to the increase in sales. At the same time, a decline is expected in the nuclear business in Europe. For 2017, due to the start-up losses from the innovation projects and the impact of the introduction of the trademark licence in the foreign companies, a decline in earnings is planned.

The Mobility business unit anticipates a positive sales and earnings trend. Crucial factors in this trend will be an increase in fees (GebOSt), enhanced cooperation with partners in the context of the strategy of market positioning throughout the whole of Germany, the expansion and modernisation of the IFM and the further expansion of international business in cooperation with foreign subsidiaries (e. g. in China).

In the Training business unit, the end of a major individual contract signals an expected decline in sales and earnings in 2017. The positive economic development of TÜV NORD Bildung will however continue in 2017. A further plan is to use improved and more rapid product development to bring about enhanced market penetration in the free market sector, e. g. in the meetings and conferences segment. Also planned is the intensification of business in the field of subsidised further training measures.

In the Natural Resources business unit, sales and earnings in 2017 are expected to remain at the level of the previous year due to the slight recovery of the commodities markets, to which, with the exception of the seismology business segment, all business areas are expected to contribute. At the same time, the business unit is striving to reduce its dependency on the commodities markets by shifting business activities into other markets.

In the Aerospace business unit, a growth in sales is planned due to the expansion of services, including services in the area of new materials technologies, and the reinforcement of the business unit’s technological position in existing fields of activity. As a result of increased expenses relating to the implementation of innovation projects and the expansion of business activities, it is anticipated that earnings will be slightly down on 2016. The inclusion of Optocap services in the overall sales picture should make it possible to engage in cross-selling activities.

The IT business unit plans revenue increases in all service areas and stable earnings. Particular drivers of growth are hardware and software evaluation, cybersecurity, IT infrastructure datacentres, IT infrastructure, elD & Trust services and the optimisation of the sales structure.

The number of employees in the Group is expected to grow in line with turnover in 2017. The objective of human resources development is stabilisation and the further enhancement of productivity. The increase in the workforce can in particular be attributed to operative developments abroad and recruitment in the course of the planned innovations. Domestic operations have seen a modest but stable development.

The innovation projects identified in the context of the strategy 2020plus should contribute to the organic growth of the Group in the long term. These projects will continue in 2017 with the aim of developing new services. In their innovation projects, all the business units are engaging with global megatrends such as Industry 4.0, the Internet of Things, critical infrastructure and connected cars, with the aim of adopting these developments in innovative and profitable business models.

Risk and opportunity management system

Its corporate actions present the TÜV NORD GROUP with various opportunities but also expose it to risks. Systematic risk and opportunity management is integral to the management of the Group.

Opportunities are in the first instance identified and analysed in the risk and opportunity management system. The analysis of market and competitive data plays a relevant role in the process. On this basis we measure, assess and review our sales and service activities and other measures in respect of their effectiveness and viability. All relevant markets are continuously analysed and any resulting macroeconomic and industry-specific opportunities identified at an early stage. Wide-ranging engagement with both established and growth markets is opening up macroeconomic opportunities for the TÜV NORD GROUP. Despite the challenging market conditions currently prevailing across the world, the TÜV NORD GROUP intends to exploit every opportunity that comes its way. The Group’s innovative power is to be consistently augmented, as is our technological position in the relevant markets and industries, with the aim of creating a reliable basis for an improved market position. The Group is thus in the position to participate at an early stage in macroeconomic opportunities as soon as the chance arises to do so.

The recording and management of risks to the future development of TÜV NORD GROUP takes place in the context of the risk management system.

The objectives of the risk management system are the complete and reliable identification of existing risk potentials throughout the Group, comprehensive risk summaries and evaluations, the quest for and development of efficient measures to reduce risk, continuous risk monitoring and comprehensive risk reporting.

The strategy of the existing risk management system consists in the Group-wide systematic identification, evaluation, aggregation, monitoring and notification of the existing risks and implementation of the corresponding measures for risk reduction or elimination in all the companies in which the TÜV NORD GROUP holds a majority stake. These risks are identified each quarter in a standardised, IT-based, periodic process that is carried out in all the business units. The identified risks are analysed and evaluated, taking into account the potential levels of damage and likelihood of occurrence, so that countermeasures for risk mitigation or elimination can be coordinated or developed to complement existing measures. On the basis of the risks that continue to exist after the implementation of countermeasures, a report is sent to the risk management department of the TÜV NORD GROUP.

Key risks that might jeopardise the very existence of the Group are reported immediately as ad-hoc notifications outside the regular reporting schedule.

The risk management system is so structured as to ensure that the individual risks and their impact on the Group are determined in order to accurately map the risk situation of the Group.

Where necessary, financial provision is made for individual risks. Moreover, the Group operates a centralised insurance management system to sets out and implement a Group-wide insurance strategy. To limit or completely eliminate the possible financial impact of potential claims or liability risks, suitable insurance contracts are in place.

The Board of Management and the Supervisory Board are kept informed at regular intervals of the current risk situation of the Group. They discuss at length the causes of the risk situation and the measures taken in response to it.

Additionally, the effectiveness of the risk management system is verified by the corporate audit department and external auditors. The results of these audits are also reported to the Board of Management and the Supervisory Board.

Risks and Opportunities for TÜV NORD GROUP

With its diversified services, the Group is subject to a wide range of risks and opportunities which have not significantly changed in year-on-year comparison.

No risks became apparent during the 2016 fiscal year which might individually or cumulatively jeopardise the company’s continued existence or materially impair its financial position, financial performance or earnings. Nor is there any threat for the foreseeable future of any risks arising that might jeopardise the company’s continued existence.

Interest rate risks can arise in connection with pension obligations. The plan assets intended to finance the pension obligations are managed in a fiduciary capacity by the TÜV NORD PENSION TRUST e. V., which was founded in 2008. Changes to the actuarial interest rates in the valuation of pension obligations can have an impact on the cash value of the discounted pension obligations and thus influence the equity capital and overall earnings.

The Group is not exposed to any material price, credit loss or liquidity risks, nor to risks arising from fluctuations in cash flow. The Group’s financial assets are invested in such a way that, as far as can be seen at present, no material risks exist.

Opportunities for the TÜV NORD GROUP are arising as a result of its presence in growth industries and dynamic markets. Investments in innovative areas and abroad offer an opportunity to respond to increasing competitive pressure and to strengthen the Group’s market position.

The individual business units report the following risks and opportunities in their business activities:

The Industrial Services business unit expects its business to continue to show a positive development in the coming years. The business unit is exposed to risks above all in its core market, Europe. Intense price competition, but also equally intense competition with regard to the recruiting of staff, especially engineers, may have a negative impact on the achievement of objectives. Moreover, there is a real risk in Germany that regulations will be amended with the effect that previously mandatory tests will no longer be required and that other specialist companies will be granted permission to conduct tests alongside the experts currently charged with the responsibility for doing so. This would result in a decline in sales and earnings along with increased competition. Opportunities for the expansion of business activities are to be found in the portfolio of new services, such as the development of digital lift testing. Moreover, existing services are being expanded and activities such as those in the areas of wind energy and food developed around the world. To realise these opportunities, we began the implementation of an organisational structure that is focused even more firmly on the customers, through which all the companies within the business unit will in future be controlled using a standardised process. Furthermore, potential to improve the efficiency of the service provision process is arising out of the implementation of productivity-enhancing measures. Digitalisation offers the opportunity both to mitigate the skill shortage threat posed by demographic developments and to slim down processes.

As a result of the amendment of the Atomic Energy Act in 2011, the nuclear company is confronted with the medium- to long-term risk of declining orders in Germany. Opportunities are presented by activities in the domestic decommissioning and waste management market and, in the long term, in connection with final nuclear waste disposal, and by the reinforcement of sales activities abroad. Involvement in services outside the nuclear field will be exploited more intensively and advanced through collaboration with other TÜV NORD companies. The achievement of both goals will be supported still more effectively in the future by the introduction of a global customer-focused organisational structure.

In the certification business, changes to the statutory base mean that there is always the possibility that individual services will become obsolete or be cut back. However, due to the high level of diversification and the heterogeneity of the customer structure, this risk is manageable. The risk remains unchanged that accreditation bodies will impose drastic sanctions, up to and including the revocation of accreditation for certain areas, in the event of violations of the rules by individual employees of the certification company. In the Industrial Services business unit, a centralised accreditation management system is being installed to minimise the risks by means of targeted redundancies and internal auditing. Due, on the one hand, to the growing international trade in goods and, on the other, to the increasing importance of consumer protection, the domestic and foreign markets for almost all certifications are set to undergo robust growth over the medium to long term. Opportunities will arise through process optimisation and investments in the areas of energy and consumer protection. The anticipated positive trend might be affected by risks arising from changes to the local political, social and economic conditions in some countries at any time.

For the Mobility business unit, the previously known premises and conditions remain largely unchanged. It is for this reason that the business is expected to record stable development in the coming years. With its core service of periodic vehicle inspections, the business unit finds itself in a situation of intensifying competition on the German market in respect of market shares and also with regard to the recruitment and retention of staff. The process of concentration in the car dealership and workshop sector to form supraregional to national car dealership groups and chains is also giving rise to increases in demand for nationwide services and the pooling of different services. These existing risks are currently successfully being countered by the establishment of a nationwide presence for the business unit with the help of franchise partners with high levels of service, and the targeted further development of the product portfolio.

The increasing digitalisation of car dealerships and workshops is leading to more stringent requirements with regard to the processes of the testing service providers. The challenge lies in meeting these requirements in a way that remains economically viable.

Technological developments in the automotive industry and global efforts to reduce pollutions are leading to a greater diversity of propulsion concepts. The VW exhaust scandal uncovered in the 2015 fiscal year could lead to changes in the type approval process – with opportunities and risks for the Mobility business unit. No specific risks from the exhaust gas scandal have been identified. Neither a slump in sales nor a loss of reputation have been identified. As the investigations in the exhaust gas scandal are not yet complete, the possibility of risks in the form of legal defence costs cannot be excluded. Opportunities for the Mobility business unit can be seen in the changes to the testing and measurement procedures (e. g. the further development of type testing for exhaust gases), and in the increased use of the corresponding measurement procedures (for example, RDE, PEMS).

The risk of loss of DAkkS accreditation in connection with the procedure for the calibration of brake test rigs and light adjusting equipment in car dealerships and workshops is manageable as long as the milestone plan required by the German Länder for the implementation of the requirements of the transitional regime is followed.

Associated with the technological developments is an increased global demand throughout the automotive industry for support in vehicle development and the homologation of automotive components. Information technology is an essential ingredient in modern vehicle construction. It is giving rise to completely new demands on vehicle electronics and vehicle information systems with regard to data protection and data security. The development of methods for their monitoring and control offers opportunities for the expansion of the business activities. As a long-standing development partner, TÜV NORD Mobilität boasts the knowledge and methods needed for the verification of electronic systems installed in vehicles and can simulate their interactions with each other. With a view to the development of autonomous driving, the safety and reliability of vehicle electronics and the secure exchange of data in and between vehicles is acquiring a whole new level of significance.

Opportunities are also seen in the implementation of identified projects in international markets. In a manner specifically adapted to country-specific circumstances, the Mobility business unit is collaborating with the local TÜV NORD companies to develop new business models for the implementation of used car evaluations. The TÜV NORD brand represents real added value and is generating confidence and facilitating market entry.

For the companies of the Training business unit, falling unemployment could give rise to risks in the coming years, as it may lead to a substantial reduction in the number of contracts for training measures financed from public funds. The companies intend to extend their portfolios of services for the free market, e. g. for the health and nursing services sector. This will give rise to good opportunities to improve the market position. Constant training and information requirements are to be expected as a result of technical developments or changes to rules and regulations, especially in the TÜV-specific topic areas. The “migration and refugees” issue is continuing to throw up new challenges for education and labour market policy. The educational institutes are accordingly being forced into a prominent role in the development and provision of suitable instruments. This will result in opportunities for the companies in the Training business unit.

Weak capital spending on the commodities markets is expected to continue in the Natural Resources business unit. As a countermeasure, the focus of sales activity will increasingly turn to state-financed projects. Business expansion in the direction of infrastructure should offset the caution being exhibited in the commodities markets. The restructuring and process optimisation carried out in previous years has enhanced the competitiveness of Natural Resources business unit as a whole. The expansion of international representation remains a priority. Growth opportunities will arise from the implementation of innovation projects which have been elaborated in the context of the development of strategies to accompany the relevant megatrends, such as population growth, increasing urbanisation, rising demand for raw materials and convulsions in energy supply.

The companies of the Aerospace business unit are dependent upon successful partnership with the component manufacturers. In the growing market for satellite construction there is a risk that the component manufacturers may enter into direct business relationships with the builders of satellites or systems. The “Gateway” project was launched to minimise any possible negative effects. The idea behind the project is to improve the partnership with the component manufacturers and at the same time to create a marketing platform for customers. Prospects for business expansion are also offered by increased growth in emerging markets as well as the extension of existing services and the marketing of these services for the aviation sector.

In the IT business unit, risks are arising out of the increasingly tough competition for IT security experts. Numerous vacancies have not been filled, and aggressive attempts have been made to poach key individuals. It is for this reason that planned growth projects which are based on the development of experts must now be revised and new business models developed that will succeed without a permanent increase in staff numbers. Opportunities will arise on the basis of the political situation with regard to the digital agenda of the Federal Government, the adoption of new EU regulations on data protection and the Electronic Signature Act, and safety evaluations of international manufacturers for deployment in national markets. Risks are presented by the prioritisation of the concept of data sovereignty, which favours the concept of privacy that has hitherto been pursued and places Germany at a disadvantage as an international player.

The Chinese state programme agenda entitled “Made in China 2025” and the concomitant increase in the demand for quality for Chinese products may generate impetus in a whole array of areas for cooperation between Germany and Chinese authorities and companies in the IT security industry and represent an opportunity for the IT business unit.

IT, in particular IT security and data protection, are of particular importance in virtually all networked intelligent products and solutions. The development of new IT security solutions that are already in the design phase will become a growth field for consulting services in the IT business unit.

CORPORATE GOVERNANCE

Corporate governance provides the framework for the management and supervision of the TÜV NORD GROUP. It is the byword for responsible management and control with the aim of long-term value creation. Corporate governance ensures the regularity of all the business processes and organisational structures of the Group.

The Compliance Management System (CMS) of the TÜV NORD GROUP is highly advanced in comparison to that of our competitors and other internationally active corporations. The main focus is on reinforcing the values of and protecting the TÜV NORD GROUP. To prevent possible risks and avert damage to the TÜV NORD GROUP, the Board of Management has set up a central CMS in TÜV NORD AG with a Compliance point of contact to coordinate compliance issues and tasks. The point of contact is available for all employees. Appropriately conceived and clearly formulated policies and regulations, accessible to all staff at all times via the Intranet, are fundamental factors in ensuring good corporate governance. The adoption of a corporate philosophy and a binding code of conduct have given employees a concrete framework of guidelines for their actions, thus reinforcing business practices in compliance with the law. The corporate philosophy and the code of conduct are regularly reviewed and updated. Information events and training sessions are organised in order to enhance staff awareness of the theme of compliance.

The compliance strategy the TÜV NORD GROUP foresees that all employees will always adhere to applicable laws, respect ethical values and act sustainably. However, compliance is not just an important element of all business activities within the TÜV NORD GROUP itself but also an important assessment criterion in the selection of its suppliers and business partners. It was for this reason that the TÜV NORD GROUP set up a Compliance Code for suppliers and business partners in 2016, which is applied, for instance, by the procurement area to the qualification of its business partner and suppliers and forms the basis of existing and future business relationships. By signing the agreement on the Compliance Code, the suppliers of the Group undertake to act in the spirit of the TÜV NORD compliance standards. These include the basic requirements of human rights, equal opportunities and non-discrimination, environmental protection, product and occupational safety, and the observance of the law and the extirpation of corruption. With the development of the Compliance Code for suppliers and business partners, another important element of the compliance programme was implemented in the TÜV NORD GROUP.

The establishment of an ombudsman represents a further way of drawing attention to violations of the compliance regulations of the TÜV NORD GROUP. A renowned lawyer as external point of contact for all employees, customers and business partners will gather information on violations of the law or policy.

Compliance with the corporate governance rules and regulations is continually monitored by the Internal Audit Department through its risk-orientated audit planning. The quality management system implemented by the Group’s internal audit department aims to guarantee the efficiency and effectiveness of its auditing work. The effectiveness of the established processes is regularly confirmed by an external and voluntary audit in accordance with the DIIR (German institute of internal auditing) standard.

The CMS was successfully audited most recently in 2015 by an external audit company on the basis of the IDW PS 980 auditing standard. The audit report deemed the implementation and orientation of the CMS to be appropriate. The verdict of the audit confirms with sufficient confidence that the compliance management system is suitable for both the identification of risks of major violations of the rules and the prevention of such violations in the first place.

Awareness and sensitivity with regard to compliance at corporate management level and among the employees have been deemed over a sustained period exemplary across the Group. Regular compliance queries submitted by the employees and the recommendations for conduct issued in reply in advance of active business transactions are effective and efficient measures for the prevention of damage.

In addition, compliance audits are regularly held in all areas by the on-site Internal Audit Department. Riskbased process controls, such as, for instance, a compliance check for business partners, systematically reduce potential compliance risks. The tracking, sanctioning, evaluation and documentation of breaches of compliance represent an integral part of the continuous improvement process. In addition to the continuous supply of up-to-date information to the Board of Management, the Group’s compliance contact presents a compliance report twice a year. These measures will further strengthen the tried-and-tested compliance structures and permanently reinforce awareness of the mandatory nature of TÜV NORD compliance in the Group’s day-to-day business.

STATEMENT ON CORPORATE GOVERNANCE

Findings on the promotion of the participation of women in leadership positions acording to Article 76 (4) and Article 111 (5) German Stock Corporation Act

The TÜV NORD GROUP pursues a strategy of diversity and is striving to increase the percentage of women in managerial positions¹.

The Supervisory Board of TÜV NORD AG already resolved in 2015 on the following target for the proportion of women in the Supervisory Board and the Board of Management: that no increase in the number of women is to be sought in the period up to the end of June 30 2017. Should any subsequent appointments become necessary, women will, as always, be offered the same opportunities as men.

For the first tier of management below the Board of Management, the Board set a target of 22 %, thereby maintaining the status quo. For the second tier of management below the Board of Management, the Board set a target of 30 %. As the proportion of women in managerial positions in this management tier currently exceeds 30 %, the target set of 30 % was permissible. For both targets the deadline set for implementation was the end of 30 June 2017.

The adopted targets do not of course exclude the possibility of a higher increase in the proportion of women. The deadline for implementation takes full advantage of the permitted time allowed for the initial definition of the implementation period. In the light of the above, no statement on the achievement of the adopted targets could be made at the time of preparation of the consolidated financial statement.

For the other affected companies in the Group, the targets for the proportion of women in the Supervisory Board, the Board of Management and the next two tiers of management and implementation deadlines were set in a timely manner by September 30 2015.

Pursuant to the act on the equal participation of women and men in managerial positions in the private and public sectors, certain companies in Germany are committed to setting targets for the proportion of women on their supervisory boards, executive boards and in the following two management tiers and to set a date for the achievement of these targets.

FURTHER INFORMATION

In view of the fact that their Boards of Management and Supervisory Boards are in part composed of identical persons, TÜV NORD AG is deemed to be directly dependent within the meaning of Sec. 17 of the Stock Corporations Act (Aktiengesetz – AktG) upon TÜV Nord Holding GmbH & Co. KG of Hamburg and TÜV HSA Holding GmbH & Co. KG of Hanover, and indirectly dependent upon TÜV Nord e. V. and TÜV Hannover/Sachsen-Anhalt e. V. For the period from January 1 to December 31 2016 and in respect of relevant special transactions during the 2016 fiscal year, the Board of Management of TÜV NORD AG has drawn up a report pursuant to Sec. 312 of the AktG regarding relations between the company on the one hand and TÜV Nord Holding GmbH & Co. KG, TÜV HSA Holding GmbH & Co. KG, TÜV Nord e. V., TÜV Hannover/Sachsen-Anhalt e. V. and the affiliated companies on the other.

This report ends with the following declaration:

“We hereby declare that in respect of every legal transaction with affiliates, TÜV NORD AG received consideration that was appropriate in the light of the circumstances known to us at the time when such transactions were performed.

Beyond the activities reported on herein, there were no further reportable transactions, measures or omissions.”

Hanover, February 27 2017

TÜV NORD AG
The Board of Management

CONSOLIDATED INCOME STATEMENT

–

CONSOLIDATED INCOME STATEMENT

€ k	Note	2016	2015

Revenue	3.1.	1,153,601	1,116,569
Change in inventories of finished goods and work in progress		-9,661	4,404
Other internally generated additions to assets		272	359
Other operating income	3.2.	95,612	93,490
Cost of materials	3.3.	-192,202	-198,179
Personnel expense	3.4.
a) Wages and salaries		-595,804	-558,064
b) Social security contributions, post-employment and welfare benefits		-137,299	-161,688
Depreciation, amortisation and impairment losses	3.5.	-33,813	-33,699
Other operating expense	3.6.	-211,489	-209,718

Operating profit		69,217	53,474
Income from investments consolidated at equity		45	1,358
Income from other equity investments		22	59
Interest income		1,656	1,979
Interest expense		-1,875	-1,841
Other financial items		-69	-208
Financial items	3.7.	-222	1,347

EBT (earnings before tax)		68,995	54,821
Taxes on income	3.8.
a) Current tax expense		-22,545	-20,156
b) Deferred tax income		-3,209	-736

Consolidated earnings after tax		43,242	33,929

The consolidated earnings after tax are attributable to
owners of TÜV NORD AG		40,045	31,401
non-controlling interests		3,197	2,528

STATEMENT OF COMPREHENSIVE INCOME

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STATEMENT OF COMPREHENSIVE INCOME

€ k	2016	2015

Consolidated earnings after tax	43,242	33,929

Items that will not be reclassified subsequently to the Income Statement
Actuarial gains and losses
Changes from unrealised gains and losses ¹⁾	-59,638	-91,491
Taxes	18,503	28,437
Interests from subordinated registered debenture
Changes from unrealised gains and losses	-1,439	-429

Total items that will not be reclassified subsequently to the Income Statement	-42,574	-63,483

Items that will be reclassified subsequently to the Income Statement
Financial assets available for sale
Changes from unrealised gains and losses	29	153
Total Financial assets available for sale	29	153

Currency translation
Changes from unrealised gains and losses	379	1,067

Total Currency translation	379	1,067

Total items that will be reclassified subsequently to the Income Statement	408	1,220

Other comprehensive income	-42,166	-62,263

Total comprehensive income	1,076	-28,334
The total comprehensive income is attributable to
owners of TÜV NORD AG	-1,624	-29,908
non-controlling interests	2,700	1,574

1) Including non-controlling interests amounting to € -1,133 k (2015: € -1,365 k).

CONSOLIDATED BALANCE SHEET

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CONSOLIDATED BALANCE SHEET

ASSETS	Note	31.12.2016	31.12.2015
€ k

A. NON-CURRENT ASSETS
Intangible assets	5.1.	94,030	81,957
Property, plant and equipment	5.2.	225,819	220,153
At equity consolidated investments	5.3.	6,895	7,450
Other financial assets	5.4.	36,667	43,003
Trade and other receivables	5.6.	746	389
Other assets	5.7.	3,973	4,416
Deferred tax assets	3.8.	172,608	156,863

TOTAL NON-CURRENT ASSETS		540,738	514,231

B. CURRENT ASSETS
Inventories	5.5.	53,460	65,807
Trade and other receivables	5.6.	172,107	165,397
Other assets	5.7.	11.224	16.733
Current tax assets		6,082	4,260
Cash and cash equivalents	5.8.	91,696	84,277

TOTAL CURRENT ASSETS		334,569	336,474

C. ASSETS HELD FOR SALE	5.9.	1,181	1,181

TOTAL ASSETS		876,488	851,886

EQUITY AND LIABILITIES	Note	31.12.2016	31.12.2015
€ k

A. EQUITY
Subscribed capital	5.10.	10,000	10,000
Capital reserves	5.10.	114,413	114,413
Subordinated registered debenture	5.10.	50,000	50,000
Retained earnings	5.10.	127,820	87,958
Other equity items	5.10.	-212,650	-170,981
Non-controlling interests	5.10.	11,245	9,577

TOTAL EQUITY		100,828	100,967

B. NON-CURRENT LIABILITIES AND PROVISIONS
Provisions for pensions and other post-employment benefits	5.11.	461,409	424,717
Other provisions	5.12.	40,132	45,175
Financial liabilities	5.13.	583	715
Trade and other payables	5.13.	17,397	12,755
Deferred tax liabilities	3.8.	12,447	11,807
Other liabilities	5.13.	17	21

TOTAL NON-CURRENT LIABILITIES AND PROVISIONS		531,985	495,190

C. CURRENT LIABILITIES AND PROVISIONS
Provisions	5.12.	53,446	51,111
Financial liabilities	5.13.	280	276
Trade and other payables	5.13.	114,004	114,868
Current tax liabilities		17,348	11,273
Other liabilities	5.13.	58,597	78,201

TOTAL CURRENT LIABILITIES AND PROVISIONS		243,675	255,729

TOTAL EQUITY AND LIABILITIES		876,488	851,886

CONSOLIDATED CASH FLOW STATEMENT

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CONSOLIDATED CASH FLOW STATEMENT

€ k	Note	2016	2015

Consolidated earnings after tax		43,242	33,929
Adjustments to take account of non-cash transactions
Depreciation of property, plant and equipment and amortisation of intangible assets		33,813	33,699
Amortisation of financial assets		69	208
Pension expense		-10,053	-5,194
Cash flow		67,071	62,642

Appropriation of profits of at equity consolidated investments		721	-1,088
Interest income/expense		220	-138
Changes in deferred tax assets and liabilities recognised as income or expense		3,209	737
Loss/Gain on disposal of intangible assets and property, plant and equipment		-1,679	-277
Changes in inventories, receivables and other assets		13,074	-26,379
Changes in payables, other provisions and other liabilities		1,325	47,715
Income taxes paid		-16,406	-15,277
Cash flow from operating activities	6.	67,535	67,935

Receipts from disposals of intangible assets		24	192
Receipts from disposals of property, plant and equipment		3,654	1,587
Receipts from disposals of other financial assets		44,037	42,032
Payments for investments in intangible assets		-1,712	-3,317
Payments for investments in property, plant and equipment		-38,919	-38,746
Payments for investments in other financial assets		-58,090	-54,870
Acquisitions of consolidated companies		-7,730	-1,599
Cash flow from investing activities	6.	-58,736	-54,721

Receipts from financial resources		1,263	30,000
Interest received		1,115	2,082
Dividends to owners and non-controlling shareholders		-984	-804
Payments for the amortisation of loans		-276	-21,506
Interest paid		-2,613	-1,092
Cash flow from financing activities	6.	-1,495	8,680

Net change in cash and cash equivalents through payments made and received		7,304	21,894
Net change in cash and cash equivalents through changes in exchange rates and in the basis of consolidation		115	776

Cash and cash equivalents at the beginning of the period		84,277	61,607

Cash and cash equivalents at the end of the period		91,696	84,277

Supplementary information:
Receipts from dividends included in cash flow from operating activities		788	329

STATEMENT OF CHANGES IN CONSOLIDIATED EQUITY

–

STATEMENT OF CHANGES IN CONSOLIDIATED EQUITY

					Accumulated Other Comprehensive Income
€ k	Subscribe capital	Capital reserves	Subordinated registered debenture	Retained earnings	Currency translation differences	Financial assets held for sale	Actuarial gains and losses	Interests from subordinated registered debenture	Share of TÜV NORD AG’s owners	Non-controlling interests	Consolidated equity

Carrying amounts as of January 1 2015	10,000	114,413	20,000	57,516	-1,965	-183	-107,524	0	92,257	8,511	100,768
Comprehensive income	0	0	0	31,401	1,067	153	-62,100	-429	-29,908	1,574	-28,334
Payment from subordinated registered debenture	0	0	30,000	0	0	0	0	0	30,000	0	30,000
Dividend payment	0	0	0	0	0	0	0	0	0	-804	-804
Changes in basis of consolidation	0	0	0	-103	0	0	0	0	-103	0	-103
Other changes	0	0	0	-856	0	0	0	0	-856	296	-560

Carrying amounts as of December 31 2015	10,000	114,413	50,000	87,958	-898	-30	-169,624	-429	91,390	9,577	100,967

Carrying amounts as of January 1 2016	10,000	114,413	50,000	87,958	-898	-30	-169,624	-429	91,390	9,577	100,967
Comprehensive income	0	0	0	40,045	79	29	-40,338	-1,439	-1,624	2,700	1,076
Payment from subordinated registered debenture	0	0	0	0	0	0	0	0	0	0	0
Dividend payment	0	0	0	0	0	0	0	0	0	-984	-984
Changes in basis of consolidation	0	0	0	0	0	0	0	0	0	-48	-48
Other changes	0	0	0	-183	0	0	0	0	-183	0	-183

Carrying amounts as of December 31 2016	10,000	114,413	50,000	127,820	-819	-1	-209,962	-1,868	89,583	11,245	100,828

					Accumulated Other Comprehensive Income
€ k	Subscribe capital	Capital reserves	Subordinated registered debenture	Retained earnings	Currency translation differences	Financial assets held for sale	Actuarial gains and losses	Interests from subordinated registered debenture	Share of TÜV NORD AG’s owners	Non-controlling interests	Consolidated equity

Carrying amounts as of January 1 2015	10,000	114,413	20,000	57,516	-1,965	-183	-107,524	0	92,257	8,511	100,768
Comprehensive income	0	0	0	31,401	1,067	153	-62,100	-429	-29,908	1,574	-28,334
Payment from subordinated registered debenture	0	0	30,000	0	0	0	0	0	30,000	0	30,000
Dividend payment	0	0	0	0	0	0	0	0	0	-804	-804
Changes in basis of consolidation	0	0	0	-103	0	0	0	0	-103	0	-103
Other changes	0	0	0	-856	0	0	0	0	-856	296	-560

Carrying amounts as of December 31 2015	10,000	114,413	50,000	87,958	-898	-30	-169,624	-429	91,390	9,577	100,967

Carrying amounts as of January 1 2016	10,000	114,413	50,000	87,958	-898	-30	-169,624	-429	91,390	9,577	100,967
Comprehensive income	0	0	0	40,045	79	29	-40,338	-1,439	-1,624	2,700	1,076
Payment from subordinated registered debenture	0	0	0	0	0	0	0	0	0	0	0
Dividend payment	0	0	0	0	0	0	0	0	0	-984	-984
Changes in basis of consolidation	0	0	0	0	0	0	0	0	0	-48	-48
Other changes	0	0	0	-183	0	0	0	0	-183	0	-183

Carrying amounts as of December 31 2016	10,000	114,413	50,000	127,820	-819	-1	-209,962	-1,868	89,583	11,245	100,828

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

–

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

1. General principles

1.1. Corporate information

The TÜV NORD Group is one of the biggest technical service providers in Germany, offering a broad range of testing, certification, engineering, consulting and training services for its customers in its Industrial Services, Mobility, Training, Natural Resources, Aerospace and IT business units in almost all important countries all over the world.

TÜV NORD AG, with its registered office in Hanover, Germany, is the parent company of the Group, registered with the Commercial Registry of Hanover Local Court under no. HRB 200158.

The Board of Management of TÜV NORD AG completed the preparation of the Consolidated Financial Statements as of December 31 2016 and the Group Management Report for the 2016 fiscal year on February 27 2017, and authorised them for submission to the Supervisory Board.

1.2. Basis of presentation

Taking advantage of the right of election pursuant to Art. 315a (3) of the German Commercial Code (HGB), TÜV NORD AG prepared its Consolidated Financial Statements as of December 31 2016 in accordance with International Financial Reporting Standards (IFRS), while at the same time complying with the German supplementary provisions pursuant to Art. 315a (1) of the HGB. All the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) up to December 31 2016 and all the pronouncements of the International Financial Reporting Standards Interpretations Committee (IFRS IC) have been applied in relation to the 2016 fiscal year, to the extent that such standards had received the endorsement of the Commission of the European Union up to the time of publication of the Consolidated Financial Statements and that their application is mandatory. The use of the two-statement approach shows a breakdown of the expense recognised in equity and income (Income Statement) in addition to the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement.

In order to achieve equivalence with consolidated financial statements prepared in accordance with the German Commercial Code (HGB), all statutory requirements of disclosure and explanation going beyond the IASB requirements have been complied with, in particular the preparation of a Group Management Report.

The Consolidated Financial Statements are presented in Euro and on the basis of original cost (costs of purchase or production), with the exception of certain financial instruments which are recognised at fair value.

Unless otherwise indicated, the amounts are stated in thousands of Euro (€ k). The use of rounded-off values and percentage may result in differences due to financial rounding. For the sake of clarity and to make the financial statements more readily understandable, certain individual items are aggregated in the Balance Sheet and the Income Statement but disclosed and explained separately in the notes.

The Consolidated Financial Statements are based on the consolidated accounts. Separate financial statements of subsidiary companies prepared in their local currencies are translated into euros.

The reporting periods of the TÜV NORD Group and of all consolidated subsidiaries end on December 31 of each successive calendar year.

1.3. Accounting standards applied for the first time in the year under review

The IASB has issued the following standards and amendments to existing standards, which have received endorsement from the EU, i. e. have been adopted into European law, and whose application is mandatory in respect of the 2016 fiscal year:

Effective Application Standard/Interpretation	Mandatory application
Annual improvements to the IFRS Cycle 2010 – 2012	Reporting periods beginning on or after 1.2.2015
Amendments to IAS 19: Employee contributions to defined benefit plans	Reporting periods beginning on or after 1.2.2015
Amendments to IAS 16 and IAS 41: Bearer plants	Reporting periods beginning on or after 1.1.2016
Amendments to IFRS 11: Accounting for the acquisition of shares in a joint arrangement	Reporting periods beginning on or after 1.1.2016
Amendments to IAS 16 and IAS 38: Clarification of allowable depreciation methods	Reporting periods beginning on or after 1.1.2016
Annual improvements to the IFRS Cycle 2012 – 2014	Reporting periods beginning on or after 1.1.2016
Amendments to IAS 1: Disclosure initiative	Reporting periods beginning on or after 1.1.2016
Changes to IAS 27: Equity method in a separate statement	Reporting periods beginning on or after 1.1.2016
Changes to IFRS 10, IFRS 12 and IAS 28: Investment companies: use of the consolidation exemption	Reporting periods beginning on or after 1.1.2016

All the accounting standards whose application is mandatory as of the 2016 fiscal year have been applied by TÜV NORD AG; this has not, however, had any material impact on the presentation of the financial statements.

1.4. Newly issued accounting standards not yet applied

The following standards, interpretations and amendments to existing standards issued by the IASB have already been adopted into European law by the EU, but their application is not yet mandatory for the year under review. The company has not elected to apply this provision in advance of its becoming mandatory.

No elective application in advance Standard/Interpretation	Mandatory application
IFRS 15: Revenue from contracts with customers (including amendments to IFRS 15 effective date of IFRS 15)	Reporting periods beginning on or after 1.1.2018
IFRS 9: Financial instruments	Reporting periods beginning on or after 1.1.2018

TÜV NORD AG is of the opinion that the application of this standard, which was issued before the reporting date but whose application is not yet mandatory, will have no material consequences for its financial position or financial performance.

The following standards and amendments to existing standards issued by the IASB or the IFRS IC have not yet received EU endorsement, with the effect that their application is not yet admissible:

Application in advance inadmissible Standard/Interpretation	Mandatory application
IFRS 14: Regulatory deferral accounts	none
IFRS 16: Leases	Reporting Periods beginning on or after 1.1.2019
Amendments to IFRS 10 and IAS 28: Sale or transfer of Assets between an investor and an associated company or joint venture	indefinitely shifted
Amendments to IAS 12: Latent tax liability approach for unrealised losses	Reporting Periods beginning on or after 1.1.2017
Amendments to IAS 7: Disclosure initiative	Reporting Periods beginning on or after 1.1.2017
Clarification regarding IFRS 15: Revenue from contracts with customers	Reporting Periods beginning on or after 1.1.2017
Amendments to IFRS 2: Classification and valuation of transactions with share-based payment	Reporting Periods beginning on or after 1.1.2018
Amendments to IFRS 4: Application of IFRS 9: Financial instruments together with IFRS 4 Insurance contracts	Reporting Periods beginning on or after 1.1.2018
Annual improvements to the IFRS Cycle 2014 – 2016	Reporting Periods beginning on or after 1.1.2018/1.1.2017
IFRIC interpretation 22 transactions in foreign currency and considerations paid in advance	Reporting Periods beginning on or after 1.1.2018
Amendments to IAS 40: Transfer of real estate held as a financial investment	Reporting Periods beginning on or after 1.1.2018

According to IFRS 16 “Leases”, the previously recognised difference between operating and financial leases in the lessee’s company has now ceased to apply. For all leases, the lessee must now account for a right of use of an asset as well as a lease liability. IFRS 16 supersedes IAS 17 “Leases”. The TÜV NORD Group is currently reviewing the effects of the application of the standard on the consolidated financial statement. No early application of this standard is planned.

2. Summary of significant accounting policies

2.1. Basis of consolidation

In addition to TÜV NORD AG, the Consolidated Financial Statements cover 42 (2015: 42) domestic and 46 (2015: 42) foreign companies in which TÜV NORD AG directly or indirectly holds a majority of the voting power, or over whose financial and operating policies it otherwise exerts control and is thus in a position to obtain benefits from their activities. In determining the situation with regard to control, potential voting rights which are currently exercisable or convertible are also taken into consideration.

Three acquired companies, a newly founded company and, as a result of its increased importance, a nonconsolidated company have been consolidated for the first time in the fiscal year 2016.

A removal from the list of fully consolidated subsidiaries resulted from the merger of a subsidiary with another fully consolidated Group company.

In addition, four companies (see under 5.3) are accounted for by the equity method.

Not included in the consolidation are companies which are of only minor significance for a true and fair view of the financial position, financial performance and earnings of the Group. This waiver of consolidation has the effect of reducing Group revenue by 0.4 % (2015: 0.7 %) and of a change of consolidated earnings before tax (EBT) of 0.0 % (2015: 1.3 %).

A list of shareholdings has been prepared in which TÜV NORD Group’s affiliates and other equity investments are listed, showing the proportion of the capital held. A list of all the Group’s shareholdings is published in the Federal Gazette as part of the Notes to the Consolidated Financial Statements.

2.2. Acquisitions

The list of consolidated companies was extended in the fiscal year 2016 by three acquisitions.

ALTER TECHNOLOGY TÜV NORD S.A.U., Sevilla, Spain, acquired 100 % of the shares in Optocap Holding Ltd. (Optocap H), Livingston, United Kingdom, and 100 % of the shares in operative active subsidary Optocap Ltd. (Optocap), Livingston, United Kingdom, on January 7 2016 with economic effect from January 1 2016. As a result, the Group was able to strengthen its position in the aerospace industry, in particular on the British market. Optocap is a world leader in the fields of opto-electronics, microelectronics and microsystems (MEMS) and counts the ESA among its customers in addition to numerous industrial companies.

The purchase price paid in 2016 for both companies amounted to € 1,735 k. Additionally, agreed and probable Earn-Out rates will lead to a total purchase price of € 2,434 k. The initial consolidation of both companies at the time of purchase resulted in a goodwill value in the amount of € 1,724 k.

Corporate acquisition, Optocap Net assets acquired, goodwill and purchase price € k	Carrying amounts before initial consolidation	Carrying amounts at initial consolidation
Intangible assets, property, plant and equipment	363	363
Other assets (excluding cash and cash equivalents)	424	424
Cash and cash equivalents	342	342
Liabilities	-419	-419
Total net assets acquired	710	710
Non-controlling interests		0
Goodwill		1,724
Purchase price		2,434
Cash and cash equivalents acquired		-342
Net outflow of funds for corporate acquisition		2,092

TÜV NORD Mobilität GmbH & Co. KG, Hanover, Germany, acquired 65 % of the shares in Ingenieurbüro Hofmann GmbH & Co. KG (IBH), Bamberg, Germany on November 17 2016 with economic effect from December 1 2016. The acquisition of the company will allow the Group to continue to expand its portfolio of official services and its damage appraisal and valuation business in southern Germany.

The purchase price paid in 2016 for the company amounted to € 7,183 k. Additionally, through two-way put and call options agreed purchase of remaining 35 % of the shares will lead to a total purchase price of € 12,233 k. The initial consolidation of the company at the time of purchase resulted in a goodwill value in the amount of € 11,027 k.

Corporate acquisition, IBH Net assets acquired, goodwill and purchase price € k	Carrying amounts before initial consolidation	Carrying amounts at initial consolidation
Intangible assets, property, plant and equipment	442	442
Other assets (excluding cash and cash equivalents)	1,475	1,475
Cash and cash equivalents	846	846
Liabilities	-1,620	-1,620
Total net assets acquired	1,143	1,143
Non-controlling interests		63
Goodwill		11,027
Purchase price		12,233
Cash and cash equivalents acquired		-846
Net outflow of funds for corporate acquisition		11,387

2.3. Consolidation policy

The annual financial statements of the subsidiaries included in consolidation are prepared in accordance with TÜV NORD AG’s accounting and valuation methods, which are applied uniformly throughout the Group.

Capital consolidation is effected using the purchase method, pursuant to IFRS 3, Business Combinations. Using the purchase method to account for business combinations assumes that, at the time of initial consolidation, all the assets, liabilities and contingent liabilities of the company acquired and also any intangible assets to be recognised in addition are measured at fair value. Any difference amounts between the cost of acquiring the interest in the company and the acquirer’s pro-rata share in the reassessed equity at the time of acquisition are allocated to the appropriate balance sheet items of the subsidiary up to the amount of their fair value. Any remaining positive difference is recognised as goodwill. If a negative difference arises, it is to be recognised as an expense in profit and loss for the reporting period during which the business combination takes place. Goodwill is tested for impairment at least once a year.

The earnings of subsidiary companies acquired or disposed of in the course of the fiscal year are included in the Consolidated Income Statement from the point in time when control was acquired or up to the effective time of disposal.

Significant associates and joint ventures are accounted for using the equity method. An associate is a business entity upon which the Group can exert significant influence through participation in financial and operating policy decisions, but over which it cannot exercise control. In general, such significant influence may be presumed if the Group holds 20 % or more of the voting power. The pro rata earnings from such equity holdings are recognised under the item Income from investments in associates. Should any such equity investments be subject to long-term impairment, impairment losses are recognised. Where a Group company undertakes transactions with an associate, any resulting unrealised gains or losses are eliminated pro rata to the Group’s interest in the associate or joint venture.

Receivables and payables between companies included in consolidation are netted. Profits and losses arising out of intercompany transfers of assets that are to be recognised in the Consolidated Financial Statements are eliminated unless they are immaterial. Revenue and other income between consolidated companies are offset against the corresponding expenses.

During the process of consolidation, income tax effects are taken into account and deferred taxes are recognised where appropriate.

Shares in the equity of subsidiaries that are held by parties outside the Group are recognised separately within equity capital. The proportions of the earnings of subsidiary companies attributable to outside shareholders (non-controlling interests) are stated separately in the Income Statement.

2.4. Currency translation

Translation into the presentation currency

The annual financial statements of any foreign Group company whose functional currency is not the Euro are translated into the Group presentation currency, i. e. Euro, in accordance with the functional currency concept. In general, the functional currencies of the foreign subsidiaries are their respective local currencies.

Assets and liabilities of foreign subsidiaries are translated at the exchange rate prevailing as of the balance sheet date. Equity is translated at historical rates of exchange. Expense and income are translated into Euro at average rates for the year. Differences arising out of currency translation are recognised in Other comprehensive income. Such a translation difference recognised in comprehensive income is posted to profit and loss only if the company concerned is deconsolidated.

Translation into the functional currency

Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the time of the transaction. Gains and losses resulting from the fulfilment of such transactions and from the translation as at the reporting date of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement.

The following exchange rates are among those used for the translation of the currencies of countries that are not members of the European Monetary Union:

		Exchange rate as of the reporting date		Annual average rate
Currency	ISO Code	31.12.2016	31.12.2015	2016	2015
Brazilian real	BRL	3.439	4.314	3.827	3.701
British pound sterling	GBP	0.858	0.735	0.792	0.758
Bulgarian lev	BGN	1.956	1.956	1.956	1.956
Canadian dollar	CAD	1.423	1.512	1.466	1.460
Chinese renminbi yuan	CNY	7.344	7.072	7.206	7.306
Croatian kuna	HRK	7.556	7.651	7.604	7.656
Czech koruna	CZK	27.020	27.028	27.024	27.381
Danish krone	DKK	7.434	7.462	7.447	7.454
Egyptian pound	EGP	19.157	8.489	11.765	8.554
Hong Kong dollar	HKD	8.194	8.442	8.316	8.912
Indian rupee	INR	71.822	72.309	72.067	74.800
Indonesian rupiah	IDR	14,184.397	15,037.594	14,705.882	15,151.515
Korean won	KRW	1,276.243	1,277.025	1,276.650	1,306.506
Malaysian ringgit	MYR	4.741	4.673	4.706	4.458
Polish zloty	PLN	4.418	4.264	4.339	4.277
South African rand	ZAR	14.495	16.983	15.641	15.382
Swedish krone	SEK	9.566	9.183	9.372	9.302
Thai baht	THB	37.847	39.253	38.537	39.635
Turkish lira	TRY	3.729	3.181	3.434	2.997
US dollar	USD	1.057	1.089	1.073	1.149

2.5. Use of estimates

The preparation of IFRS financial statements requires management to make certain estimates and assumptions which have an impact on the carrying amounts of assets and liabilities, the disclosure of contingent assets and liabilities existing as of the reporting date, and the income and expense recognised for the fiscal year. In compiling the Consolidated Financial Statements, estimates had to be made in particular with regard to the valuation of employee benefits under IAS 19, the impairment testing of goodwill, provisions from the human resources and social sector, the provision for threatened losses from pending transactions and the deferred tax assets relating to loss carryforwards.

Employee benefits relate essentially to obligations arising out of defined benefit pension commitments, which are determined on the basis of actuarial parameters. These require assumptions to be made about future wage and salary increases, trends in pension levels and the discount rate.

Changes in the parameters for determining defined benefit obligations and plan assets do not however affect consolidated earnings for the current year, since any actuarial gains or losses are recognised in Other comprehensive income.

Goodwill is subjected to an annual impairment test on the basis of the smallest cash-generating unit to which goodwill has been allocated and the management’s approved three-year operating plan.

Recognition and measurement of the provisions from the human resources and social sector and the provision for threatened losses are based on estimates of the probability of a future outflow of resources and on the basis of experience values and of the circumstances known at the reporting date. To this extent, the actual outflow of resources may vary from the amount of the provision.

Deferred tax assets relating to loss carryforwards are accounted for on the basis of estimates of the extent to which the tax advantages can be realised in future, i. e. whether adequate taxable income or reduced tax expense is to be expected. The actual tax situation in future periods, and thus the actual extent to which loss carryforwards can be utilised, may vary from the estimate made at the time when the deferred taxes were recognised.

2.6. Accounting policies

Accounting is undertaken in accordance with the following principles:

Revenue realisation

Revenue from services rendered is recognised as soon as performance is completed.

In the case of longer-term contracts, appropriation is carried out pursuant to IAS 18.20 in accordance with the percentage-of-completion method (PoC method). With this method, expenses and income are recorded according to the degree of completion of the contract. The degree of completion per contract to be applied is thereby calculated using the ratio of accrued costs to the calculated total costs (the cost-to-cost method).

Intangible assets

Intangible assets encompass intangible assets acquired for consideration and internally generated intangible assets and goodwill.

Intangible assets acquired for consideration, e. g. software and accreditations, are valued at historical cost. This position also includes items identified during purchase price allocations, e. g. customer relations and trade mark rights.

Internally generated intangible assets, e. g. software or research and development costs, are recognised at production cost if this meets the recognition criteria of IAS 38.

Intangible assets with a certain useful life are subject to amortisation by the straight-line method over a period of generally between 3 and 15 years, depending on the expected future economic benefits. The useful life is subject to annual review, and if necessary is adjusted in accordance with future expectations. If there is any indication of impairment, or if the recoverable amount is less than the amortised cost, an impairment loss must be recognised.

If the reasons for recognising such an impairment loss cease to apply, the impairment loss is reversed, where the resulting enhanced carrying amount may not exceed the amortised cost arrived at by normal amortisation.

Goodwill arising out of a business combination is to be recognised from the time when control is obtained over the company acquired (the acquisition date). It arises whenever the cost of acquiring the business exceeds the netted fair value of the identifiable assets, debts and contingent debts at the acquisition date. Goodwill is not subject to amortisation; instead, it is subjected to an impairment test at least once a year, and more frequently should any triggering events occur. The impairment test is carried out on the basis of cash-generating units, the recoverable amount of a cash-generating unit being compared with its carrying amount. Under IAS 36, an impairment loss is recognised if the carrying amount of a cash-generating unit to which goodwill has been allocated exceeds its recoverable amount. Impairment losses on goodwill, once recognised, may not be subsequently reversed.

Since 2013 the cash generating units correspond with the international business units Industrial Services, Mobility, Training, Natural Resources, Aerospace, IT and the Group unit Holding/Services.

The recoverable amount is the higher of the cashgenerating unit’s fair value less costs to sell and its value in use. The recoverable amount of a cashgenerating unit is calculated by determining its value in use, using the discounted cash flow method on the basis of the three-year plan approved by management. In determining value in use certain assumptions have to be made, relating essentially to the rate at which operating profit will grow over the planning period, the cost of capital as well as the expected sustained growth rate after the end of the three-year plan. The cost of capital is determined on the basis of the weighted average cost of capital (WACC).

Property, plant and equipment

Assets falling into the category of property, plant and equipment are recognised at depreciated costs (purchase or construction costs). Construction costs include not only direct costs but also attributable overheads.

The revaluation model as per IAS 16.31 is not applied. As a result, under current market conditions the carrying amounts of TÜV NORD Group`s real estate include hidden reserves.

Property, plant and equipment is normally depreciated by the straight-line method, unless in exceptional cases some other depreciation method appears more appropriate. Depreciation is based on the following useful lives:

Useful lives of property, plant and equipment	years
Office buildings	30 – 50
Test facilities	20 – 30
Machinery	5 – 12
Furniture, fixtures and office equipment	3 – 20

Under IAS 36, Impairment of assets, property, plant and equipment are subject to impairment if the recoverable amount (see also under “Intangible assets” above) of the asset concerned has fallen below its carrying amount. If the reasons for recognising such an impairment loss cease to apply, the impairment loss is reversed, but only to the extent that the enhanced carrying amount does not exceed the asset’s depreciated cost. Such a reversal of an impairment loss is recognised as income.

Leases

Leases are to be classified either as operating leases or finance leases. Under IAS 17, leases under which all the substantial risks and rewards incidental to ownership of an asset are transferred to TÜV NORD Group are to be classified as finance leases; other leases are operating leases.

In case of finance lease, the leased item is recognised as from the time of its first use at the lower of fair value and the present value of the minimum lease payments, and depreciated by the straight-line method over its estimated economic life, or, if shorter, the term of the lease. The corresponding liability to the lessor is to be recognised in the balance sheet as a liability from a finance lease and amortised over the subsequent period of time using the effective interest rate method. In the case of operating leases, the net lease payments are recognised in the income statement over the term of the lease.

Investments consolidated at equity

Associates and joint ventures are initially recognised at cost at the time of their acquisition, and in subsequent accounting periods in accordance with the proportion of the equity held, using the equity method. The carrying amounts are increased or decreased annually by the amount of the earnings attributable pro rata, the dividends distributed or other changes in equity. Under IAS 28.33, accounting using the equity method is effected on the basis of the financial statements for the previous reporting period. Any goodwill is reviewed in connection with the impairment testing of the investment in the associate (IAS 39) or joint venture. Goodwill is not subject to amortisation.

Other financial assets

The item Other financial assets covers in particular investments in non-consolidated affiliates, other equity investments, loans, securities and claims arising out of the reinsurance of pension obligations.

Under IAS 39, four categories of financial asset are distinguished:

Financial assets at fair value through profit or loss (held for trading),
Available-for-sale financial assets,
Held-to-maturity investments,
Loans and receivables.

Investments in non-consolidated affiliates, other equity investments and securities that are available for sale are assigned to the “Available for sale” category. Investments in non-consolidated affiliates and associates are recognised at amortised cost, since no fair values are available and other admissible measurement procedures do not lead to reliable results. Securities that are available for sale are recognised at fair value. Changes in value are recognised in equity, making due allowance for deferred tax effects.

If the fair value of a financial asset falls below cost, the impairment loss is recognised as expense.

Loans granted fall into the category “Loans and receivables”, and are recognised at amortised cost.

Claims arising out of reinsurance fund shares that do not form part of the plan assets are accounted for at fair value in accordance with IAS 19.

Inventories

Inventories essentially cover work in progress and are measured at cost of production. This includes not only direct labour but also an allocation of proportions of material and production overheads on the basis of normal utilisation of capacity, and also depreciation. In addition, the costs of occupational pensions and of the company’s voluntary welfare benefits are included, to the extent that they are attributable to the production area. Administrative costs are recognised to the extent that they are attributable to the production area.

Inventories may be written down to an appropriate and adequate extent to take account of contractrelated risks. Where necessary, they are recognised at the lower net realisable value. If the reasons for subjecting inventories to such an impairment loss cease to apply, the impairment loss is reversed.

Trade and other receivables, Other assets

Receivables include the company’s trade receivables, other receivables and other assets. They are measured at nominal value or at cost net of impairment. The impairments take into account the individual circumstances of the debtor and are also graded according to the number of overdue days. Non-current receivables bearing no or only low interest are discounted at a rate appropriate to the risk, to the extent that the interest effect is material. The amount discounted is recognised pro rata under interest income until the receivable becomes due.

Other receivables and other assets also include receivables from partly fulfilled contracts to render services pursuant to IAS 18.20, which are recognised by the percentage of completion method. Any advance payments received are netted against the receivables.

Cash and cash equivalents

Cash and cash equivalents include freely disposable cash in hand, cheques and bank credit balances with a term of up to three months. They are recognised at nominal value.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are recognised for all temporary differences between the carrying amounts of assets and liabilities in the IFRS balance sheet and their tax bases, and also for consolidation measures recognised through profit or loss, and are set off as far as is permissible against each other in the balance sheet. Deferred tax assets are recognised to the extent that it is probable that there will be taxable income against which the deductible temporary difference can be offset. Deferred tax assets also include claims for reductions in amounts of tax payable arising out of the expected utilisation of existing loss carryforwards in subsequent years, to the extent that their realisation within a period of 5 years is sufficiently certain. Deferred tax assets and liabilities are also recognised where temporary differences arise in connection with business combinations (corporate acquisitions), with the exception of temporary differences relating to goodwill.

Deferred taxes are determined on the basis of the rates of taxation that apply or are expected to apply under current law in the individual countries at the time of realisation. Tax rates that will be applicable in future years are used for calculation purposes to the extent that they have already been fixed in law or that the legislative process is practically completed.

Changes in deferred tax assets and liabilities in the balance sheet generally lead to tax expense or income in the income statement; unless they relate to items recognised in comprehensive income; in this case the deferred taxes are also recognised in comprehensive income.

Deferred taxes are not recognised at the reporting date in respect of temporary differences in connection with investments in subsidiaries, associates or joint ventures (outside basis differences). It is not possible to make any reasonable estimate of the amounts of these unrecognised deferred tax liabilities.

For the calculation of domestic deferred taxes, a tax rate of 32.0 %, unchanged from the previous year, has been applied.

Assets held for sale

Assets held for sale are shown separately in the balance sheet if they can be sold in their existing condition and it is probable that they will be. When assets are first classified as “held for sale”, they are revalued at the lower of carrying amount and fair value less costs to sell. Impairment losses resulting from the first-time classification of the assets as being “held for sale”, and also any later impairments (or reversals of impairments), are recognised as expense (or income) in the Income Statement. Assets held for sale are not subjected to amortisation.

Provisions for pensions and other post-employment benefits

Post-employment benefit plans are classified as either defined benefit or defined contribution plans, depending on the economic substance of the plan as derived from its principal terms and conditions. Plans are classified as defined benefit plans if the actuarial risk or the investment risk falls on the employer. Postemployment benefit commitments that cannot be unambiguously classified as defined benefit plans are regarded as defined contribution plans.

The requisite level of pension provisions in respect of defined benefit obligations is determined by actuarial valuation using the projected unit credit method. This valuation is carried out by actuaries as of every balance sheet date. Actuarial gains and losses arising are accounted for directly in equity without passing through the Income Statement, and are recognised in the Group Statement of Comprehensive Income.

Through the transfer of claims to reinsurance to TÜV NORD PENSION TRUST e. V. of Hanover, plan assets have been formed which serve to secure the pension obligations.

The service cost included in pension expense and the included net interest expense are recognised under Personnel expense.

Payment obligations under defined contribution pension plans (the statutory pension funds) are recognised in the income statement for the period concerned.

Other provisions

Other provisions are formed if a present legal or constructive obligation exists towards third parties as a result of a past event, in respect of which it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the provision required. The measurement of the provisions is effected using the best estimate of the amount required to settle the obligation, which is not set off against any possible claims for recourse. Non-current provisions are discounted if the interest effect is material.

Trade and other payables

Interest-bearing payables to banks are accounted for at the amount disbursed less directly attributable transaction costs. Financing costs are distributed as expense over the term, increasing the carrying amount of the liability in subsequent periods. Trade and other payables are recognised at amortised cost in accordance with IAS 39. Non-current liabilities that are not subject to interest are discounted using the effective interest method if the interest effect is material. Liabilities arising out of finance leases are recognised at the lower of the fair value of the leased item and the present value of the lease payments. In subsequent years, the lease payments are apportioned between the reduction of the outstanding liability and the finance charge; pursuant to IAS 17.25 this is done in such a way as to produce a constant rate of interest on the remaining balance of the liability.

Contingent liabilities

Contingent liabilities are possible obligations that might arise from past events and whose existence will be confirmed by future events not within the control of the TÜV NORD Group. It may also be a question of existing obligations that cannot be recognised because an outflow of resources is improbable or the amount of the obligation cannot be estimated with sufficient reliability. Such contingent liabilities are recognised at the level of liability existing at the reporting date.

3. Consolidated Income Statement disclosures

3.1. Revenue

Revenue breaks down between the business units as follows:

€ k	2016	2015
Industrial Services	538,109	516,532
Mobility	333,392	323,872
Training	107,396	106,537
Natural Resources	106,873	103,559
Aerospace	47,239	47,610
IT	15,512	14,171
Holding/Services	5,080	4,288
Total	1,153,601	1,116,569

Revenue amounting to € 843,876 k (2015: € 825,443 k) was generated in Germany, € 181,804 k (2015: € 174,244 k) in the rest of Europe and € 127,921 k (2015: € 109,967 k) in the rest of the world.

Revenue includes € 20,420 k (2015: € 26,110 k) relating to partly fulfilled contracts to render services, which were recognised proportionately by the percentage of completion method as of the reporting date.

€ k	2016	2015
Cumulative costs	39,825	71,663
Prepayments received	38,651	22,402
Production orders with a gross amount due from customers as an asset	10,238	23,507
Production orders with a gross amount due to customers as a liability	766	766

3.2. Other operating income

Other operating income amounting to € 95,612 k (2015: € 93,490 k) is made up essentially of the following components: income from the reimbursement of remnant costs in the amount of € 60,841 k (2015: € 61,841 k), income from the reversal of provisions € 7,011 k (2015: € 4,717 k), income from disposal of tangible assets € 2,673 k (2015: € 1,623 k), canteen takings € 2,101 k (2015: € 1,957 k), income from the reversal of impairment losses on trade receivables € 766 k (2015: € 1,091 k), income from tenancy agreements € 757 k (2015: € 754 k), income from the reversal of a negative difference recognised as an expense € 345 k (2015: € 386 k), income from ancillary services € 242 k (2015: € 114 k).

3.3. Cost of materials

€ k	2016	2015
Cost of raw materials and supplies	29,395	44,421
Cost of services bought in	162,807	153,758
Total	192,202	198,179

3.4. Personnel expense

€ k	2016	2015
Wages and salaries	595,804	558,064
Social security contributions	106,046	123,886
Post-employment benefit expense	28,066	33,996
Other employee benefits	3,187	3,806
Total	733,103	719,752

On average over the year, the consolidated companies had 10,113 employees (2015: 9,794) (expressed as fulltime equivalents). Including the experts provided by the associations, the average number of full-time employees was 10,172 (2015: 9,861). 7,486 employees work in Germany. The number of employees abroad increased in 2016 to 2,686. The Group’s employees are for the most part salaried staff.

3.5. Depreciation, amortisation and impairment losses

€ k	2016	2015
Depreciation and amortisation of assets	33,653	33,637
Impairment losses	160	61
Total	33,813	33,698

3.6. Other operating expenses

Other operating expenses € 211,489 k (2015: € 209,718 k) principally relate to occupancy expenses € 60,233 k (2015: € 59,181 k), travelling expenses € 39,914 k (2015: € 40,788 k), operating and administrative expenses € 20,514 k (2015: € 21,061 k), other services € 17,458 k (2015: € 16,214 k), advertising and communication expenses € 16,795 k (2015: € 15,341 k), legal and consultancy fees € 6,936 k (2015: € 10,511 k) and donations and contributions € 2,275 k (2015: € 2,041 k). Value adjustments on doubtful trade receivables amounting to € 3,304 k (2015: € 2,605 k) are also included, as are other taxes in the amount of € 2,693 k (2015: € 2,340 k).

3.7. Financial items

€ k	2016	2015
Income from at equity consolidated investments	45	1,358
Income from other equity investments	22	59
Amortisation of other financial investments and securities	-69	-208
Financial items (excluding interest)	-2	1,209
Interest income on bank balances and sight deposits and other interest income	1,656	1,979
Interest and similar expense	-1,875	-1,841
a) Interest expense on loans and liabilities to banks	-1,750	-1,472
b) Interest included in lease payments	-8	-10
c) Other interest and similar expense	-118	-359
Net interest income/expense	-220	138
Financial items (including interest)	-222	1,347

3.8. Taxes on income

The Group’s tax expense is as follows:

€ k	2016	2015
Current tax expense	-22,545	-20,156
Deferred tax expense/income	-3,209	-736
Total	-25,753	-20,892

The deferred taxes result from the formation or reversal of tax accruals in profit or loss during the fiscal year. In both fiscal years the deferred taxes are predominantly the result of temporary differences being recognised or reversed.

The following reconciliation statement summarises the individual deferred tax items determined in relation to the individual companies and applying the tax rates prevailing in the various countries, taking due account of consolidation measures. The table reconciles expected tax expense with the tax expense actually recognised.

€ k	2016	2015
Earnings before tax	68,995	54,821
Expected income tax expense (tax rate: 32.0 %; 2015: 32.0 %)	22,079	17,543
Effect of different foreign tax rates/Other differences	-745	-701
Changes in tax rates or tax legislation	86	76
Permanent differences resulting from non-deductible expense, tax-free income etc.	1,140	771
Current taxes for previous periods	-175	-676
Deferred taxes for previous periods	-295	284
Effects of value adjustments	3,663	3,595
Recognised income tax expense	25,753	20,892

The expected tax rate for both fiscal years was determined on the basis of a corporation tax rate of 15.0 % plus a solidarity levy of 5.5 % of the tax due and a local business tax rating of 462 %.

Deferred taxes resulting from recognition and measurement differences arose in the following balance sheet items:

	2016		2015
€ k	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Intangible assets	1,758	6,387	1,950	5,736
Property, plant and equipment	1,218	11,282	864	11,112
Inventories	0	1,773	0	2,072
Other assets	1,909	3,456	1,441	3,067
Pension provisions	163,369	0	145,353	0
Other provisions	12,505	776	11,573	523
Other liabilities	603	87	1,462	95
Tax loss carryforwards	2,560	0	5,018	0
Gross amount	183,922	23,761	167,661	22,605
Offsettings	-11,314	-11,314	-10,798	-10,798
Balance sheet recognition	172,608	12,447	156,863	11,807

Deferred tax assets are recognised only if there is sufficient probability that these tax advantages will be realised. Any value adjustments are determined taking into account all positive and negative factors known at the present time that may influence future taxable earnings. The estimates made for this purpose may be subject to future adjustments.

Deferred taxes amounting to € 18,503 k (2015: € 28,437 k) were recognised in comprehensive income. This is essentially a result of the recognition of actuarial gains/losses relating to pension provisions.

As of the reporting date, deferred tax assets were recognised for loss carryforwards in the amount of € 14,657 k (2015: € 30,413 k) existing in the Group. In respect of further tax loss carryforwards in the amount of € 70,175 k (2015: € 51,516 k), no additional deferred tax assets have been recognised as of the reporting date, since it is not sufficiently certain that these can be realised. Under current legislation, there is no limitation, either of time or amount, on such loss carryforwards for tax purposes.

4. Notes on the Consolidated Statement of Comprehensive Income

The deferred taxes in the amount of € 18,503 k (2015: € 28,437 k) reported in Other comprehensive income relate to the actuarial losses of € 59,638 k (2015: € 91,491 k) in the fiscal year. The actuarial losses after deferred tax amount to € 41,135 k (2015: € 63,054 k). The other comprehensive income before deferred tax amounts to € -60,669 k (2015: € -90,700 k).

5. Consolidated Balance Sheet disclosures

In accordance with IAS 1, the Consolidated Balance Sheet (Statement of Financial Position) is structured to present the breakdown between current and non-current assets and liabilities. Assets and liabilities are regarded as current if it is expected that they will be recovered or settled within a year. Inventories and trade receivables are also classified as current, irrespective of their expected use or due dates, if they are to be sold, used or recovered not within one year, but within the company’s normal operating cycle. In accordance with IAS 12, deferred taxes are recognised as non-current assets or liabilities.

5.1. Intangible assets

The following changes in intangible assets occurred:

Changes 2016 € k	Concessions, proprietary rights and similar rights and assets, including licences on such rights and assets	Goodwill	Payments made on account	Total
Cost (of purchase or production)
Amounts as of January 1	57,985	78,539	33	136,556
Changes in basis of consolidation	3	12,751	0	12,753
Additions/Current investments	1,663	0	49	1,712
Disposals	-804	0	-23	-827
Reclassifications	24	0	-24	0
Currency translation differences	-22	-8	1	-29
Amounts as of December 31	58,849	91,282	36	150,166
Accumulated amortisation and impairment losses
Amounts as of January 1	53,477	1,122	0	54,599
Changes in basis of consolidation	0	0	0	0
Additions	2,181	0	0	2,181
Disposals	-635	0	0	-635
Reclassifications	0	0	0	0
Currency translation differences	-10	0	0	-10
Amounts as of December 31	55,013	1,122	0	56,135
Net carrying amounts	3,835	90,159	36	94,030

The changes in the basis of consolidation presented under Goodwill relate to the acquisition of IBH (€ 11,027 k) and Optocap (€ 1,724 k).

Changes 2015 € k	Concessions, proprietary rights and similar rights and assets, including licences on such rights and assets	Goodwill	Payments made on account	Total
Cost (of purchase or production)
Amounts as of January 1	55,605	77,491	59	133,155
Changes in basis of consolidation	143	924	0	1,067
Additions/Current investments	3,261	0	6	3,267
Disposals	-1,225	0	0	-1,225
Reclassifications	216	0	-33	183
Currency translation differences	-15	124	1	110
Amounts as of December 31	57,985	78,539	33	136,556
Accumulated amortisation and impairment losses
Amounts as of January 1	49,111	1,122	0	50,233
Changes in basis of consolidation	117	0	0	117
Additions	5,082	0	0	5,082
Disposals	-950	0	0	-950
Reclassifications	108	0	0	108
Currency translation differences	9	0	0	9
Amounts as of December 31	53,477	1,122	0	54,599
Net carrying amounts	4,508	77,417	33	81,957

In 2015 the changes in the basis of consolidation presented under Goodwill relate to the acquisition of Wesemann (€ 924 k).

Impairment testing of all the goodwill recognised in the Consolidated Balance Sheet did not lead to any additional impairment losses, since in each case the fair value less costs to sell is higher than the carrying amount recognised by the cash-generating unit concerned. The weighted average cost of capital (WACC) applied for discounting purposes is 5.00 % (2015: 5.00 %), whereby a growth discount of 1.0 % is applied after the end of the three-year planning period.

No change that might reasonably be possible to any of the basic assumptions made for the purpose of determining the value in use of the cash-generating units could lead to their carrying amounts materially exceeding the recoverable amounts.

The goodwill subjected to impairment testing is essentially shared between the business units Natural Resources (2016: € 35,687 k; 2015: € 35,687 k), Industrial Services (2016: € 28,892 k; 2015: € 28,892 k), Aerospace (2016: € 14,189 k; 2015: € 12,465 k) and Mobility (2016: € 11,210 k; 2015: € 183 k).

5.2. Property, plant and equipment

The following changes occurred in property, plant and equipment:

Changes 2016 € k	Land, leasehold rights and buildings, including buildings on third-party land	Machinery	Furniture and fittings, other factory and office equipment	Payments made on account and assets under construction	Total
Cost (of purchase or production)
Amounts as of January 1	281,793	131,592	212,158	7,095	632,638
Changes in basis of consolidation	0	2,100	1,499	4	3,603
Additions/Current investments	3,040	10,449	19,518	5,912	38,919
Disposals	-5,475	-3,011	-18,229	-11	-26,725
Reclassifications	1,747	877	432	-3,060	-4
Currency translation differences	22	-20	152	0	154
Amounts as of December 31	281,126	141,987	215,531	9,941	648,584
Accumulated depreciation and impairment losses
Amounts as of January 1	151,731	94,263	166,301	190	412,485
Changes in basis of consolidation	0	1,711	1,054	0	2,765
Depreciation	5,883	8,457	17,289	0	31,630
Impairment	0	0	0	3	3
Disposals	-4,957	-2,860	-16,353	0	-24,170
Reclassifications	-0	-91	103	0	12
Currency translation differences	3	-21	60	0	42
Amounts as of December 31	152,659	101,459	168,454	192	422,765
Net carrying amounts	128,467	40,528	47,076	9,748	225,819

Changes 2016 € k	Land, leasehold rights and buildings, including buildings on third-party land	Machinery	Furniture and fittings, other factory and office equipment	Payments made on account and assets under construction	Total
Cost (of purchase or production)
Amounts as of January 1	281,793	131,592	212,158	7,095	632,638
Changes in basis of consolidation	0	2,100	1,499	4	3,603
Additions/Current investments	3,040	10,449	19,518	5,912	38,919
Disposals	-5,475	-3,011	-18,229	-11	-26,725
Reclassifications	1,747	877	432	-3,060	-4
Currency translation differences	22	-20	152	0	154
Amounts as of December 31	281,126	141,987	215,531	9,941	648,584
Accumulated depreciation and impairment losses
Amounts as of January 1	151,731	94,263	166,301	190	412,485
Changes in basis of consolidation	0	1,711	1,054	0	2,765
Depreciation	5,883	8,457	17,289	0	31,630
Impairment	0	0	0	3	3
Disposals	-4,957	-2,860	-16,353	0	-24,170
Reclassifications	-0	-91	103	0	12
Currency translation differences	3	-21	60	0	42
Amounts as of December 31	152,659	101,459	168,454	192	422,765
Net carrying amounts	128,467	40,528	47,076	9,748	225,819

Changes 2015 € k	Land, leasehold rights and buildings, including buildings on third-party land	Machinery	Furniture and fittings, other factory and office equipment	Payments made on account and assets under construction	Total
Cost (of purchase or production)
Amounts as of January 1	281,674	123,333	200,243	1,927	607,177
Changes in basis of consolidation	0	0	916	0	916
Additions/Current investments	1,132	8,296	23,671	5,647	38,746
Disposals	-1,442	-1,117	-12,806	-213	-15,578
Reclassifications	162	922	-86	-279	719
Currency translation differences	267	158	220	14	658
Amounts as of December 31	281,793	131,592	212,158	7,095	632,638
Accumulated depreciation and impairment losses
Amounts as of January 1	148,368	86,126	161,788	191	396,472
Changes in basis of consolidation	0	0	664	0	664
Depreciation	4,351	8,371	15,833	0	28,555
Impairment	2	3	56	0	61
Disposals	-1,145	-1,017	-12,462	0	-14,624
Reclassifications	113	699	246	-1	1,056
Currency translation differences	42	81	177	0	300
Amounts as of December 31	151,731	94,263	166,301	190	412,485
Net carrying amounts	130,062	37,329	45,857	6,905	220,153

Changes 2015 € k	Land, leasehold rights and buildings, including buildings on third-party land	Machinery	Furniture and fittings, other factory and office equipment	Payments made on account and assets under construction	Total
Cost (of purchase or production)
Amounts as of January 1	281,674	123,333	200,243	1,927	607,177
Changes in basis of consolidation	0	0	916	0	916
Additions/Current investments	1,132	8,296	23,671	5,647	38,746
Disposals	-1,442	-1,117	-12,806	-213	-15,578
Reclassifications	162	922	-86	-279	719
Currency translation differences	267	158	220	14	658
Amounts as of December 31	281,793	131,592	212,158	7,095	632,638
Accumulated depreciation and impairment losses
Amounts as of January 1	148,368	86,126	161,788	191	396,472
Changes in basis of consolidation	0	0	664	0	664
Depreciation	4,351	8,371	15,833	0	28,555
Impairment	2	3	56	0	61
Disposals	-1,145	-1,017	-12,462	0	-14,624
Reclassifications	113	699	246	-1	1,056
Currency translation differences	42	81	177	0	300
Amounts as of December 31	151,731	94,263	166,301	190	412,485
Net carrying amounts	130,062	37,329	45,857	6,905	220,153

The following assets are subject to limitations on their availability:

€ k	31.12.2016	31.12.2015
Machinery	140	151
Furniture and fittings, other factory and office equipment	951	1,061

Items of property, plant and equipment to the value of € 3,653 k (2015: € 3,584 k) are pledged as collateral for debt. The liabilities secured as of December 31 2016 amount to € 345 k (2015: € 390 k).

Compensation payments by third parties in the amount of € 448 k (2015: € 573 k) are recognised as Other operating income.

The following carrying amounts of property, plant and equipment relate to assets on lease under finance leases:

	Initial recognition amounts		Accumulated depreciation and impairment losses		Net carrying amounts
€ k	2016	2015	2016	2015	2016	2015
Furniture and fittings, other factory and office equipment	708	806	252	476	456	330

The following minimum lease payments will be payable in future on the basis of existing finance leases:

	Up to 1 year		1–5 years		Total
T €	2016	2015	2016	2015	2016	2015
Total minimum lease payments	169	157	305	333	474	490
Interest expense included	-6	-7	-4	-6	-10	-13
Present values	163	150	301	327	464	477

There are no minimum lease payments with residual terms of more than 5 years.

Obligations under finance leases are recognised under Other liabilities (see under 5.13.).

Future obligations under operating leases where the benefits of ownership do not lie with TÜV NORD Group as lessee are recognised under Other financial liabilities (see under 5.16.).

5.3. At equity consolidated investments

The following table shows the names and the locations of the registered offices of companies accounted for using the equity method, together with the percentage of the equity held, the company’s total equity and its total earnings after tax:

Name, location of registered office	Share of equity in %	Total equity 100 % in € k	EAT 100 % in € k
National Inspection and Technical Testing Company Ltd. (FAHSS), Damman, Saudi Arabia	25.11	13,979	2,418
TÜV Middle East W.L.L., Manama, Bahrain	25.10	9,149	1,904
UAB TÜVLITA, Vilnius, Lithuania	50.00	5,711	808
TUV NORD NTA Mobility (Shanghai) Co., Ltd. Shanghai, China	50.00	313	-2,411

For the associates that are material to TÜV NORD AG the following table show financial information as well as a reconciliation to the carrying amount of the interest in the associate.

These figures were determined on the basis of audited financial statements for the previous year (see under 2.6.).

€ k	2015	2014
Results from FAHSS
Revenues	29,192	25,689
Earnings after tax/total comprehensive income	2,418	2,569
Share of earnings after tax/total comprehensive income	607	518
Balance sheet information FAHSS	31.12.2015	31.12.2014
Current assets	19,252	15,491
Non-current assets	4,633	5,317
Current liabilities	-5,032	-5,749
Non-current liabilities	-4,874	-4,174
Equity	13,979	10,885

Share of equity	3,311	2,622
Dividend payment during the year	-386	0
Other	-362	-362
Book value of the at equity consolidated FAHSS	2,563	2,260

€ k	2015	2014
Results from TÜV Middle East
Revenues	22,016	20,706
Earnings after tax/total comprehensive income	1,904	1,646
Share of earnings after tax/total comprehensive income	478	413
Balance sheet information TÜV Middle East	31.12.2015	31.12.2014
Current assets	13,566	11,593
Non-current assets	1,233	1,008
Current liabilities	-3,721	-3,553
Non-current liabilities	-1,929	-1,768
Equity	9,149	7,280

Share of equity	2,296	1,827
Dividend payment during the year	-180	-59
Book value of the at equity consolidated TÜV Middle East	2,116	1,768

Results from non-material investments accounted for using the equity method is shown in the following table:

€ k	2015	2014
Revenue	5,641	10,537
Earnings after tax	-1,603	750
Share of earnings after tax	-802	362

The following table shows summarised balance sheet information on the non-material investments accounted for using the equity method:

€ k	31.12.2015	31.12.2014
Assets	8,228	7,844
Liabilities	-2,204	-2,090
Equity	6,024	5,754

Book value of non-material associates	2,216	3,422

5.4. Other financial assets

For TÜV NORD AG’s other equity investments please refer to the list of shareholdings (see under 7.7.).

The following changes in other financial assets occurred during the year under review:

Changes 2016 € k	Investments in affiliates	Investments in joint ventures and associates (not equity accounted)	Other equity investments	Long-term securites	Loans granted	Shares in guarantee funds arising from reinsurance	Total
Cost (of purchase or production)
Amounts as of January 1	5,924	1,811	303	12,992	1,316	26,280	48,624
Changes in basis of consolidation	0	0	0	0	0	0	0
Additions	816	572	3	0	27	3,017	4,435
Disposals	6	-1,419	0	-2,500	-148	-912	-4,973
Reclassifications	-41	6	-110	0	0	-5,849	-5,995
Currency translation differences	65	-1	0	0	0	0	64
Amounts as of December 31	6,769	969	195	10,492	1,195	22,536	42,156
Accumulated amortisation and impairment losses
Amounts as of January 1	3,837	303	123	208	1,151	0	5,622
Additions	0	0	0	69	0	0	69
Disposals	0	0	0	0	-100	0	-100
Reclassifications	0	0	-104	0	0	0	-104
Currency translation differences	2	0	0	0	0	0	2
Amounts as of December 31	3,839	303	19	278	1,052	0	5,489
Net carrying amounts	2,931	667	177	10,214	143	22,536	36,667

Changes 2016 € k	Investments in affiliates	Investments in joint ventures and associates (not equity accounted)	Other equity investments	Long-term securites	Loans granted	Shares in guarantee funds arising from reinsurance	Total
Cost (of purchase or production)
Amounts as of January 1	5,924	1,811	303	12,992	1,316	26,280	48,624
Changes in basis of consolidation	0	0	0	0	0	0	0
Additions	816	572	3	0	27	3,017	4,435
Disposals	6	-1,419	0	-2,500	-148	-912	-4,973
Reclassifications	-41	6	-110	0	0	-5,849	-5,995
Currency translation differences	65	-1	0	0	0	0	64
Amounts as of December 31	6,769	969	195	10,492	1,195	22,536	42,156
Accumulated amortisation and impairment losses
Amounts as of January 1	3,837	303	123	208	1,151	0	5,622
Additions	0	0	0	69	0	0	69
Disposals	0	0	0	0	-100	0	-100
Reclassifications	0	0	-104	0	0	0	-104
Currency translation differences	2	0	0	0	0	0	2
Amounts as of December 31	3,839	303	19	278	1,052	0	5,489
Net carrying amounts	2,931	667	177	10,214	143	22,536	36,667

Of the reinsurance claims on Alters- und Hinterbliebenen- Versorgungsstelle der Technischen Überwachungs- Vereine – VvaG –, Essen, (AHV) claims of € 6,780 k (2015: € 7,978 k) have been pledged as collateral to secure loan liabilities and obligations arising out of pre-retirement part-time working arrangements.

Changes 2015 € k	Investments in affiliates	Investments in joint ventures and associates (not equity accounted)	Other equity investments	Long-term securites	Loans granted	Shares in guarantee funds arising from reinsurance	Total
Cost (of purchase or production)
Amounts as of January 1	6,100	328	301	20,958	1,329	32,091	61,108
Changes in basis of consolidation	-250	0	0	0	0	0	-250
Additions	125	1,483	0	22	20	2,523	4,173
Disposals	-3	0	0	-7,981	-33	-1,045	-9,062
Reclassifications	0	0	0	0	0	-7,289	-7,289
Currency translation differences	-49	0	1	-8	0	0	-55
Amounts as of December 31	5,924	1,811	303	12,992	1,316	26,280	48,624
Accumulated amortisation and impairment losses
Amounts as of January 1	3,831	303	123	0	1,151	0	5,407
Additions	0	0	0	208	0	0	208
Disposals	0	0	0	0	0	0	0
Reclassifications	0	0	0	0	0	0	0
Currency translation differences	6	0	0	0	0	0	6
Amounts as of December 31	3,837	303	123	208	1,151	0	5,622
Net carrying amounts	2,087	1,508	180	12,783	165	26,280	43,003

Changes 2015 € k	Investments in affiliates	Investments in joint ventures and associates (not equity accounted)	Other equity investments	Long-term securites	Loans granted	Shares in guarantee funds arising from reinsurance	Total
Cost (of purchase or production)
Amounts as of January 1	6,100	328	301	20,958	1,329	32,091	61,108
Changes in basis of consolidation	-250	0	0	0	0	0	-250
Additions	125	1,483	0	22	20	2,523	4,173
Disposals	-3	0	0	-7,981	-33	-1,045	-9,062
Reclassifications	0	0	0	0	0	-7,289	-7,289
Currency translation differences	-49	0	1	-8	0	0	-55
Amounts as of December 31	5,924	1,811	303	12,992	1,316	26,280	48,624
Accumulated amortisation and impairment losses
Amounts as of January 1	3,831	303	123	0	1,151	0	5,407
Additions	0	0	0	208	0	0	208
Disposals	0	0	0	0	0	0	0
Reclassifications	0	0	0	0	0	0	0
Currency translation differences	6	0	0	0	0	0	6
Amounts as of December 31	3,837	303	123	208	1,151	0	5,622
Net carrying amounts	2,087	1,508	180	12,783	165	26,280	43,003

5.5. Inventories

€ k	2016	2015
Raw materials and supplies	1,442	1,339
Work in progress	47,248	52,050
Finished products and merchandise	4,079	8,850
Payments made on account	692	3,568
Total	53,460	65,807

Write-downs amounting to € 0 k (2015: € 229 k) are recognised under Inventories.

5.6. Trade and other receivables

Trade and other receivables can be disaggregated in accordance with their residual terms as follows:

	2016			2015
€ k	Current	Non-current	Total	Current	Non-current	Total
Trade receivables
from third parties	158,035	662	158,697	137,315	249	137,563
from partly fulfilled contracts to render services	10,172	66	10,238	23,465	41	23,507
Receivables from affiliates	605	18	623	920	97	1,017
Receivables from joint ventures, associates and other entities in which equity investments are held	3,296	0	3,296	3,697	2	3,699
Total	172,107	746	172,853	165,397	389	165,786

	2016			2015
€ k	Current	Non-current	Total	Current	Non-current	Total
Trade receivables
from third parties	158,035	662	158,697	137,315	249	137,563
from partly fulfilled contracts to render services	10,172	66	10,238	23,465	41	23,507
Receivables from affiliates	605	18	623	920	97	1,017
Receivables from joint ventures, associates and other entities in which equity investments are held	3,296	0	3,296	3,697	2	3,699
Total	172,107	746	172,853	165,397	389	165,786

During the period under review, value adjustments on doubtful receivables were effected in the amount of € 3,304 k (2015: € 2,605 k).

The development of specific value adjustments was as follows:

€ k	2016	2015
Carrying amount as of January 1	8,106	7,856
Changes in basis of consolidation	9	8
Additions	3,304	2,605
Use	751	1,272
Reversals	766	1,091
Carrying amount as of December 31	9,901	8,106

Receivables that have not been subjected to specific value adjustments can be disaggregated as follows:

€ k	2016	2015
Trade receivables from third parties, gross	167,526	145,669
a) of which neither overdue nor impaired	79,896	62,238
b) of which overdue by the following periods, but not yet impaired
1 to 30 days	47,772	47,749
31 to 60 days	15,557	14,029
61 to 90 days	6,422	4,911
91 to 180 days	6,437	5,042
more than 180 days	12,514	11,700
Value adjustments	-9,901	-8,106
Trade receivables from third parties, net	158,697	137,563

5.7. Other assets

Other assets with a residual term of more than one year are classified as non-current, and those with a residual term of less than one year as current.

The other assets recognised essentially consist of accrued items and tax reimbursement claims. The items break down as follows:

	2016			2015
€ k	Current	Non-current	Total	Current	Non-current	Total
Other assets	11,224	3,973	15,197	16,733	4,416	21,149

As of the reporting date there were no items more than 180 days overdue for which no impairment loss had been recognised.

5.8. Cash and cash equivalents

The cash and cash equivalents consist of cheques, cash in hand and balances on account with a number of different banks in various currencies. The bank balances earn interest at customary market rates.

5.9. Assets held for sale

Pursuant to IFRS 5, developed properties in respect of which disposal procedures have been initiated are reported under the item “Assets held for sale”. In the fiscal year 2016 an income of € 0 k was reported from the sale of such assets (2015: € 1,197 k).

5.10. Equity

For further details of changes in equity between January 1 2015 and December 31 2016, see the Statement of Changes in Consolidated Equity.

TÜV NORD’s capital management policy aims not only to secure the continued existence of the business, but also to achieve an adequate return in excess of the costs of capital, thereby enhancing the value of the company in the long term. The equity is monitored regularly on the basis of various indicators.

Subscribed capital

The subscribed capital remains unchanged at € 10,000 k, divided into 100,000 registered no-parvalue shares. All the shares are fully paid.

At the time of the preparation of the Consolidated Financial Statements for the 2016 fiscal year, TÜV NORD AG had neither contingent nor authorised capital. TÜV NORD AG does not grant any share-based remuneration (share option programmes) to its employees.

Capital reserves

The capital reserves of TÜV NORD Group in the amount of € 114,413 k correspond to the capital reserves of TÜV NORD AG.

Subordinated registered debenture

As of December 31 2015, the subordinated registered debentures taken out by TÜV NORD AG amounted to € 50,000.

On December 8 2015 TÜV NORD AG took out a subordinated registered debenture without a fixed term amounting to € 10,000 k with RWTÜV e.V., Essen. The interest rate is fixed at 4.125 % until June 7 2021 and will then increase by 100 basis points for each additional 5-year period. A termination option is exclusively available to TÜV NORD AG for the first time as of June 7 2021, thereafter annually.

On October 1 2015 TÜV NORD AG took out a subordinated registered debenture without a fixed term amounting to € 11,000 k with TÜV Nord e. V., Hamburg and amounting to € 9,000 k with TÜV Hannover/ Sachsen-Anhalt e. V., Hanover. The interest rate is fixed at 4.125 % until March 31 2021 and will then increase by 100 basis points for each additional 5-year period. A termination option is exclusively available to TÜV NORD AG for the first time as of March 31 2021, thereafter annually.

The subordinated registered bond amounting to € 20,000 k, separately itemised on December 31 2014, was taken out without a fixed term with the Alters- und Hinterbliebenen-Versorgungsstelle der Technischen Überwachungs-Vereine – VvaG –, Essen, (AHV). The interest rate is fixed at 4.125 % until June 30 2020 and will then increase by 100 basis points for each additional 5-year period. A termination option is exclusively available to TÜV NORD AG for the first time as of June 30 2020, thereafter annually.

Interest payments are the discretion of TÜV NORD AG. They are also to be paid retroactively in full, for instance, in the event of the redemption of the registered debenture, distributions to the shareholders or the repayment of other liabilities of equal rank or in the case of economically similar procedures.

Retained earnings

The retained earnings include the earnings of the consolidated companies, to the extent that these have not been distributed as dividends. In addition, the offsetting of asset-side and liability-side differences arising out of the capital consolidation of acquisitions up to December 31 2006 and also the net amount of noncash adjustments in connection with the first-time adoption of IFRS are recognised under this item.

Other equity items

The other equity items include the non-cash impacts on equity of the currency translation of foreign subsidiaries’ separate financial statements, of changes in the fair values of available-for-sale instruments, and of actuarial gains and losses arising out of post-employment benefit plans, and also the deferred taxes recognised in connection with these items.

Non-controlling interests

Non-controlling interests cover holdings by investors outside TÜV NORD Group in the consolidated equity of Group companies.

The significant non-controlling interests are held in the following Group companies:

€ k	31.12.2016	31.12.2015
DMT Consulting Private Limited, Kolkata, India	580	729
Höntzsch GmbH, Waiblingen, Germany	1,203	1,015
TÜV India Private Ltd., Mumbai, India	4,841	4,286
TÜV NORD CERT GmbH, Essen, Germany	1,422	1,300
TÜV NORD Mobilität Immobilien GmbH, Essen, Germany	946	854
Various other companies	2,253	1,393
Total	11,245	9,577

The voting rights of other shareholders are in proportion to their share of the equity. No further information is given due to lack of materiality on the subsidiaries in which non-controlling minority shareholders have a stake. More information can be found in the list of shareholdings in chapter 7.7.

5.11. Provisions for pensions and other postemployment benefits

Provisions are formed for obligations arising out of entitlements and current benefits of serving and former employees and their surviving dependents, to the extent that these arise under a defined benefit plan. These provisions are determined in accordance with actuarial valuations of existing benefit obligations, which are recalculated every year. The costs resulting from these commitments are allocated over the employee’s period of service in accordance with the actuaries’ findings, and comprise current or past service cost and interest cost.

The full amount of actuarial gains and losses is recognised in Other comprehensive income, while making due allowance for deferred taxes. These actuarial gains and losses are therefore presented in the Group Statement of Comprehensive Income.

The net pension cost is shown as personnel expense.

A contractual trust agreement (CTA) was initially funded with effect from December 30 2008. Shares in reinsurance guarantee funds which serve exclusively and irrevocably to cover and fund post-employment benefit obligations were vested in TÜV NORD PENSION TRUST e. V. Under IFRS rules, the assets of the CTA are to be regarded as “plan assets”. The plan assets consist exclusively of these reinsurance guarantee fund shares. The plan assets consist exclusively of these reinsurance guarantee fund shares. The plans encumber the Group with general actuarial risks, such as, for example, longevity risk, currency risk, interest rate risk and market risk.

The level of post-employment benefit obligations (the present value, determined by actuarial valuation, of the defined benefit obligation (DBO)) was calculated by actuarial methods, a procedure in which the use of estimated values is unavoidable.

Pursuant to IAS 19, employee benefits, the level of post-employment benefit obligations is determined by the projected unit credit method, under which actuarial methods on the basis of best estimates of the relevant parameters are used to assess the vested future obligations existing as of the valuation date.

The post-employment benefits that are expected to become payable, including dynamic components, are distributed over the employee’s entire period of service. For the year under review, the following assumptions were made by the actuaries with regard to the variable parameters to be included in their calculations:

%	2016	2015
Discount rate as of 31.12.	1.9	2.4
Future pension increases	1.2	1.2
Future wage and salary increases	1.5	1.5
Employee turnover	2.0	2.0

The actuaries review and revise their findings every year. The actuarial assumptions with regard to mortality are based (with regard to Germany) on the Heubeck mortality tables, version 2005G. The actuarial assumptions do not differ materially between Germany and other countries with the exception of the discount rate.

The Group has both defined benefit and defined contribution plans for commitments for retirement, invalidity and surviving dependants’ pensions based on works agreements and individual contractual agreements. Defined benefit pension plans were offered only to staff who joined the company up to and including December 31 1991 or, as the case may be, December 31 1993. The level of these commitments is calculated according to the eligible income and/or social insurance pension as well as length of service. The benefits are paid directly by the company which granted the pension commitment.

The following table shows changes in the present value of future post-employment benefit obligations and of the plan assets.

€ k	Benefit obligation	Plan assets	Total
Carrying amounts as of January 1 2016	1,149,196	-724,479	424,717
Current service cost	12,345	0	12,345
Net interest cost (interest cost/interest income)	27,893	-18,145	9,748
Net pension cost	40,238	-18,145	22,093
Actual interest on plan assets less actuarial interest income	0	-4,908	-4,908
Actuarial gains/losses from changes in financial assumptions	64,547	0	64,547
Remeasurement of defined benefit pension plans	64,547	-4,908	59,639
Pension payments	-53,727	0	-53,727
Payments from the pension plan	0	38,911	38,911
Employer’s contributions to the pension plan	0	-28,148	-28,148
Total payments	-53,727	10,763	-42,964
Transfer of obligations	2,888	-2,453	435
Changes in scope of consolidation/changes in currency translation and other effects	-1,153	-1,358	-2,511
Carrying amounts as of December 31 2016	1,201,989	-740,580	461,409

€ k	Benefit obligation	Plan assets	Total
Carrying amounts as of January 1 2015	1,064,332	-706,210	358,122
Current service cost	14,063	0	14,063
Net interest cost (interest cost/interest income)	32,614	-21,088	11,526
Net pension cost	46,677	-21,088	25,589
Actual interest on plan assets less actuarial interest income	0	-1,854	-1,854
Actuarial gains/losses from changes in financial assumptions	93,344	0	93,344
Remeasurement of defined benefit pension plans	93,344	-1,854	91,490
Pension payments	-53,850	0	-53,850
Payments from the pension plan	0	37,757	37,757
Employer’s contributions to the pension plan	0	-27,818	-27,818
Total payments	-53,850	9,939	-43,911
Transfer of obligations	2,679	-1,549	1,130
Changes in scope of consolidation/changes in currency translation and other effects	-3,986	-3,717	-7,703
Carrying amounts as of December 31 2015	1,149,196	-724,479	424,717

The benefit obligation in proportion to plan assets reflects the funded status of the benefit plan in question, with any excess of the benefit obligation over plan assets constituting a plan deficit. Both the benefit obligation and plan assets can vary over time, leading to an increase/decrease in the plan deficit. Reasons for such fluctuation can include changes in market interest rates and thus in the discount rate, or adjustments to actuarial assumptions.

The TÜV NORD Group’s plan assets exclusively comprise employer’s pension liability insurance policies and are subject to only limited fluctuation on account of the existing minimum returns. A price reporting on an active market does not exist for employer’s pension liability insurance policies. The recognised plan deficit is covered by cash flows from operating activities. It is the long-term goal of the TÜV NORD Group to gradually increase plan assets. The employer contributions to plan assets are expected to amount to € 28.6 million in 2017. The weighted average term of the remainder of benefit obligations is 13.7 years.

The table below shows the effects on the defined benefit obligation (DBO) of any change in the parameters. The analysis relates to parameters where a change was considered possible as of the reporting date. The values here are mean values which were weighted with the present value of the respective pension obligation. Any correlation between the parameters was not taken into account in the calculation.

Sensitivity analysis %	Change in parameter	Increase in parameter	Decrease in parameter
Interest rate	1.0 %	12.3 % DBO decrease	15.3 % DBO increase
Rate of pension progression	0.5 %	5.8 % DBO increase	5.3 % DBO decrease

Employer contributions to mandatory pension schemes as well as contributions to other defined contribution plans were made in the amount of € 43.3 million in 2016 (2015: € 42.2 million).

5.12. Other non-current and current provisions

€ k	Provisions for the areas of personnel and welfare	Sundry other provisions	Total
Carrying amounts as of January 1 2016	50,458	45,828	96,286
Additions	27,946	10,297	38,243
Use	28,924	8,188	37,112
Reversals	1,327	3,803	5,130
Reclassifications/Transfers	498	739	1,237
Currency translation differences	-30	82	52
Carrying amounts as of December 31 2016	48,620	44,956	93,576

The provisions for obligations in the areas of personnel and welfare relate essentially to pre-retirement part-time working, long-service bonuses, social plan measures and other personnel and non-wage personnel costs.

The sundry other provisions relate mainly to provisions for warranty obligations, provisions for threatened losses from pending transactions and other risks.

Of the total amount of the sundry other provisions as of December 31 2016, € 37,185 k (2015: € 37,414 k) are current and € 7,771 k (2015: € 8,414 k) are non-current. No material interest accruals have been recognised on non-current provisions.

5.13. Non-current and current trade and other payables

Payables can be disaggregated in accordance with their residual terms as follows:

	2016			2015
€ k	Current	Non-current	Total	Current	Non-current	Total
Amounts payable to banks	118	282	400	125	388	513
Amounts payable under finance leases	162	301	463	150	327	478
Financial liabilities	280	583	863	276	715	991
Trade payables
to third parties	26,704	314	27,018	27,931	47	27,978
from partly fulfilled contracts to render services	766	0	766	1,160	0	1,160
Payables to affiliates	207	0	207	324	1	325
Payables to joint ventures, associates and other entities in which equity investments are held	492	0	492	1,064	0	1,064
Outstanding invoices	19,869	0	19,869	23,945	0	23,945
Amounts payable to employees	29,380	852	30,232	29,722	740	30,462
Other payables	36,586	16,231	52,817	30,724	11,967	42,691
Trade and other payables	114,004	17,397	131,401	114,868	12,755	127,624
Payments received on account	40,278	17	40,295	62,346	21	62,367
Other taxes	18,318	0	18,318	15,855	0	15,855
Sundry payables	58,597	17	58,614	78,201	21	78,222
Total payables	172,880	17,997	190,878	193,345	13,491	206,836

	2016			2015
€ k	Current	Non-current	Total	Current	Non-current	Total
Amounts payable to banks	118	282	400	125	388	513
Amounts payable under finance leases	162	301	463	150	327	478
Financial liabilities	280	583	863	276	715	991
Trade payables
to third parties	26,704	314	27,018	27,931	47	27,978
from partly fulfilled contracts to render services	766	0	766	1,160	0	1,160
Payables to affiliates	207	0	207	324	1	325
Payables to joint ventures, associates and other entities in which equity investments are held	492	0	492	1,064	0	1,064
Outstanding invoices	19,869	0	19,869	23,945	0	23,945
Amounts payable to employees	29,380	852	30,232	29,722	740	30,462
Other payables	36,586	16,231	52,817	30,724	11,967	42,691
Trade and other payables	114,004	17,397	131,401	114,868	12,755	127,624
Payments received on account	40,278	17	40,295	62,346	21	62,367
Other taxes	18,318	0	18,318	15,855	0	15,855
Sundry payables	58,597	17	58,614	78,201	21	78,222
Total payables	172,880	17,997	190,878	193,345	13,491	206,836

Amounts payable under finance leases relate to leases of capital goods, and are recognised as liabilities in the amount of the future obligation.

Trade payables from partly fulfilled contracts to render services relate to contracts with regard to which the payments received from customers on account exceed the accumulated receivables from the fulfilment of the contracts concerned.

Amounts payable to employees include € 14,745 k (2015: € 14,037 k) for obligations in lieu of free time and € 7,528 k (2015: € 6,712 k) for obligations relating to holiday not yet taken.

Other payables include an accrual of TÜV NORD College GmbH in the amount of € 12,715 k (2015: € 14,801 k), arising out of the financing of the operations of the vocational training colleges.

5.14. Contingent liabilities

TÜV NORD AG bears liability in cases where it and its subsidiaries have given guarantees in favour of various contractual partners.

In the year under review, an amount of € 7,131 k (2015: € 8,512 k) contingent liabilities is recognised and relates to sureties given for the most part to banks. TÜV NORD AG gives performance bonds in respect of liabilities of Group companies arising out of joint projects or consortia. If the consortium partner does not honour its contractual obligations, TÜV NORD AG may be liable to meet claims for payment up to the amount of the agreed surety. Generally, the agreed terms correspond to those of the underlying transaction.

5.15. Litigation

Neither TÜV NORD AG nor its Group companies are involved in litigation that could have a material impact on the economic or financial position of the companies or of the Group. In respect of other litigation, adequate provisions have been formed by the company concerned in any given case for any awards that may be made against it. As of the reporting date, these provisions amount to € 950 k (2015: € 977 k).

5.16. Other financial liabilities

As of December 31 2016, obligations exist to order items of property, plant and equipment to the value of € 1,307 k (2015: € 786 k).

The other financial liabilities relate to rental and leasing obligations for premises, furniture and fittings and factory and office equipment which are classified as operating leases pursuant to IAS 17.

The minimum lease payments fall due as follows:

€ k	Up to 1 year	1–5 years	More than 5 years	Total
Minimum lease payments for rented real estate	15,365	43,222	41,632	100,219
Minimum lease payments under other operating leases	4,062	6,557	4,982	15,601

The other financial rental obligations are predominantly to be classified as non-current. They have terms of between five and ten years.

Expense under such contracts recognised in the Income Statement amounts to € 37,571 k (2015: € 38,637 k).

6. Consolidated Cash Flow Statement disclosures

The figures for cash and cash equivalents presented in the cash flow statement embrace all cash and cash equivalents recognised in the balance sheet, i. e. cash in hand, cheques and balances on account with banks. The recognised cash and cash equivalents are freely disposable and not subject to any restrictions in favour of third parties.

7. Other disclosures

7.1. Events after the reporting period

No events of particular significance occurred after the end of the fiscal year which are having a significant impact on the business of the Group.

7.2. Fees paid to the auditors of the Consolidated Financial Statements

The following fees, paid to the auditors of the Consolidated Financial Statements, BDO AG Wirtschaftsprüfungsgesellschaft, during the year under review, have been recognised as expense pursuant to Article 314 (1) No. 9 of the German Commercial Code (HGB):

€ k	2016	2015
Auditing services	720	733
Tax consultancy services	51	24
Other consultancy services	35	32
Total	806	789

7.3. Financial instruments

The evaluation of categories of financial instruments relevant after IFRS 7 for the reporting and the comparative period is shown in the following overview.

Financial instruments as of December 31 2016 € k	Category as per IAS 39	Carrying amounts	Loans and receivables measured at amortised cost*	Available-for-sale financial assets recognised at fair value in comprehensive income	Financial liabilities measured at amortised cost*
ASSETS
Non-current assets
Securities	AfS	10,214		10,214
Loans	LaR	143	143
Receivables and other assets	LaR	2,512	2,512
Current assets
Trade receivables from third parties	LaR	168,207	168,207
Receivables and other assets	LaR	9,316	9,316
Cash and cash equivalents	LaR	91,610	91,610

LIABILITIES
Non-current liabilities
Financial liabilities	FLAC	282			282
Trade payables to third parties	FLAC	314			314
Other liabilities	FLAC	8,052			8,052
Current liabilities
Financial liabilities	FLAC	118			118
Trade payables to third parties	FLAC	27,470			27,470
Other liabilities	FLAC	120,317			120,317
Total by category as per IAS 39			271,788	10,214	156,554
of which (aggregated by category as per IAS 39):
Loans and receivables (LaR)		271,788
Available-for-sale financial assets (AfS)		10,214
Financial liabilities measured at amortised cost (FLAC)		156,554

Financial instruments as of December 31 2016 € k	Category as per IAS 39	Carrying amounts	Loans and receivables measured at amortised cost*	Available-for-sale financial assets recognised at fair value in comprehensive income	Financial liabilities measured at amortised cost*
ASSETS
Non-current assets
Securities	AfS	10,214		10,214
Loans	LaR	143	143
Receivables and other assets	LaR	2,512	2,512
Current assets
Trade receivables from third parties	LaR	168,207	168,207
Receivables and other assets	LaR	9,316	9,316
Cash and cash equivalents	LaR	91,610	91,610

LIABILITIES
Non-current liabilities
Financial liabilities	FLAC	282			282
Trade payables to third parties	FLAC	314			314
Other liabilities	FLAC	8,052			8,052
Current liabilities
Financial liabilities	FLAC	118			118
Trade payables to third parties	FLAC	27,470			27,470
Other liabilities	FLAC	120,317			120,317
Total by category as per IAS 39			271,788	10,214	156,554
of which (aggregated by category as per IAS 39):
Loans and receivables (LaR)		271,788
Available-for-sale financial assets (AfS)		10,214
Financial liabilities measured at amortised cost (FLAC)		156,554

* The carrying amount corresponds to the fair values.

Financial instruments as of December 31 2015 € k	Category as per IAS 39	Carrying amounts	Loans and receivables measured at amortised cost*	Available-for-sale financial assets recognised at fair value in comprehensive income	Financial liabilities measured at amortised cost*
ASSETS
Non-current assets
Securities	AfS	12,783		12,783
Loans	LaR	165	165
Receivables and other assets	LaR	2,459	2,459
Current assets
Trade receivables from third parties	LaR	160,780	160,780
Receivables and other assets	LaR	14,118	14,118
Cash and cash equivalents	LaR	84,277	84,277

LIABILITIES
Non-current liabilities
Financial liabilities	FLAC	388			388
Trade payables to third parties	FLAC	47			47
Other liabilities	FLAC	2,642			2,642
Current liabilities
Financial liabilities	FLAC	125			125
Trade payables to third parties	FLAC	29,090			29,090
Other liabilities	FLAC	141,572			141,572
Total by category as per IAS 39			261,799	12,783	173,864
of which (aggregated by category as per IAS 39):
Loans and receivables (LaR)		261,799
Available-for-sale financial assets (AfS)		12,783
Financial liabilities measured at amortised cost (FLAC)		173,864

Financial instruments as of December 31 2015 € k	Category as per IAS 39	Carrying amounts	Loans and receivables measured at amortised cost*	Available-for-sale financial assets recognised at fair value in comprehensive income	Financial liabilities measured at amortised cost*
ASSETS
Non-current assets
Securities	AfS	12,783		12,783
Loans	LaR	165	165
Receivables and other assets	LaR	2,459	2,459
Current assets
Trade receivables from third parties	LaR	160,780	160,780
Receivables and other assets	LaR	14,118	14,118
Cash and cash equivalents	LaR	84,277	84,277

LIABILITIES
Non-current liabilities
Financial liabilities	FLAC	388			388
Trade payables to third parties	FLAC	47			47
Other liabilities	FLAC	2,642			2,642
Current liabilities
Financial liabilities	FLAC	125			125
Trade payables to third parties	FLAC	29,090			29,090
Other liabilities	FLAC	141,572			141,572
Total by category as per IAS 39			261,799	12,783	173,864
of which (aggregated by category as per IAS 39):
Loans and receivables (LaR)		261,799
Available-for-sale financial assets (AfS)		12,783
Financial liabilities measured at amortised cost (FLAC)		173,864

* The carrying amount corresponds to the fair values.

As laid down in the three stages of the valuation hierarchy in IFRS 13.72 et seq., the valuation of financial assets and liabilities is subject to the availability of the relevant information. For the first stage, quoted market prices are directly observable for identical asset values and liabilities in active markets. In the second stage, the assessment is made on the basis of valuation models which are influenced by values that are observable on the market. The third stage envisages the application of valuation models that do not rely on observable market inputs.

No financial assets are held for trading or to maturity.

In view of the predominantly short maturities of the assets and liabilities measured at amortised cost, it is assumed that their carrying amounts correspond approximately to their fair values.

For the securities classified as available for sale, the fair values are based on market prices quoted on an active market (level 1 of the fair value hierarchy).

Net profit or loss by category

Net profit or loss from financial instruments that is recognised in the Income Statement is allocated to the following categories:

	2016			2015
€ k	From interest	From subsequent measurement	From disposal	From interest	From subsequent measurement	From disposal
Loans and receivables	1,656	-2,828	0	1,979	-2,641	0
Financial liabilities measured at amortised cost	-1,750	154	0	-1,472	135	0

Interest on financial liabilities and impairment losses on loans granted are recognised in Financial items. Impairment losses on receivables (essentially trade receivables) and gains or losses from disposals of securities are recognised under Other losses or gains.

7.4. Management of financial risks

TÜV NORD Group companies are exposed to financial risks in the course of their operations. These risks consist of credit, liquidity and market risks in the form of currency and interest rate risks. The risk situation has not changed in comparison to the previous reporting period.

Through TÜV NORD AG’s centralised risk management system these risks are managed and controlled on a Group-wide basis. The principles of the risk management system are explained in greater detail in the Management Report.

Credit default risks

Default risks arise in particular out of day-to-day operations. The receivables of TÜV NORD Group companies are generally subject to a default risk which it may seek to counter by demanding security, depending on the type and amount of the performance rendered. Where required, credit insurance with an excess component is concluded in respect of individual counterparties. In addition, payment in advance may be required. In order to minimise the risk of default, counterparties are subjected to creditworthiness assessments in accordance with internal guidelines before contracts are concluded. Furthermore, customers’ financial standing is regularly reviewed during the term of the contract. If there is any concrete risk of default, precautionary write-downs are effected, on the basis either of objective evidence in specific cases, or of the structure of maturities and the actual occurrence of defaults on payment.

Defaults on trade receivables, on receivables based on percentage of completion and on loans cannot exceed their carrying amount as of December 31 2016. The structure of due dates of trade receivables is shown under 5.6.

The maximum credit risk relating to assets held for sale and financial instruments is equivalent to their market prices as of December 31 2016.

Liquidity risks

Possible liquidity risks – the danger that the Group might not be able to meet its payment obligations at all times – are managed through the implementation of comprehensive short-term and long-term liquidity planning, taking into account existing credit lines. Funding requirements are for the most part covered by equity, by participation in cash pooling agreements or by loans from banks or from Group companies, to the extent that this is feasible and reasonable in the context of the legal and tax situation in each case. Bank balances are held exclusively with banks of impeccable standing.

A variety of financing instruments available on the market are used to cover the Group’s central funding requirements. If events should occur that lead to an unexpectedly high requirement for liquidity, both existing liquidity in the form of cash and cash equivalents and also available credit lines can be drawn upon.

A credit line up to a limit of € 100,000 k (2015: € 175,000 k) is available, which can be drawn upon as required; the amount drawn down as of December 31 2016 amounted to € 0 k. Interest at the three month EURIBOR rate plus a margin of 100 basis points was payable on the amount drawn down from the time of disbursement.

An overview of the maturities of financial liabilities and the resulting outflows of funds can be derived from the table of residual terms of liabilities (see under 5.13.).

Currency risks

Currency risks result from the assets and liabilities recognised in the balance sheet that are denominated in foreign currencies, the fair values of which may be negatively influenced by fluctuations in exchange rates, and from pending foreign currency transactions whose future cash flows may develop disadvantageously as a result of exchange rate movements.

Exchange rate risk is of only minor importance, since the receivables and payables are due in local currency in the country in which the company concerned is domiciled. There are scarcely any country risks at the present time.

7.5. Related party disclosures

Under IAS 24, Related party disclosures, companies are subject to an obligation to disclose relationships with, on the one hand, related business entities that are not fully consolidated, and, on the other, with persons with whom a close relationship exists.

Related party entities of TÜV NORD Group are basically TÜV Nord e. V., TÜV Hannover/Sachsen-Anhalt e. V. and RWTÜV e. V. associations, “Aktaios” Verwaltungs- GmbH and RWTÜV GmbH with its subsidiaries. For further information in relation to the registered debentures taken out with the associations, see under section 5.10.

In addition, the Group maintains direct or indirect relationships in the normal course of its business activities not only with its consolidated subsidiaries, but also with non-consolidated affiliates and associates. All trading relationships entered into in the normal course of business with non-consolidated related entities are conducted on the basis of normal market conditions such as are also customary in arm’s-length transactions.

Members of the Board of Management and the Supervisory Board are also considered to be related parties.

7.6. Total compensation of the Board of Management and the Supervisory Board

The compensation of key management personnel whose disclosure is required pursuant to IAS 24 embraces the compensation of the serving members of Board of Management and the Supervisory Board.

During the 2016 fiscal year, the serving members of the Board of Management received total compensation amounting to € 2,242 k (2015: € 2,477 k). The present value of the overall defined benefit obligation (DBO) to the serving members of the Board of Management amounts to € 3,973 k (2015: € 3,903 k) as of the reporting date.

Total payments to former members of the Board of Management and their surviving dependents, consisting of pension payments and other compensation (one-off payments and payments for consultancy services), amounted to € 499 k (2015: € 404 k). A DBO in the amount of € 10,535 k (2015: € 10,206 k) exists towards former members of the Board of Management and their surviving dependents.

Members of the Supervisory Board were paid compensation of € 248 k (2015: € 244 k) for their services.

As in the previous year, no loans or advances were granted to members of the Board of Management or the Supervisory Board in the 2016 fiscal year. As was also the case in the previous year, no severance payments were made.

7.7. List of shareholdings

Name, location of registered office	Share of equity %
Consolidated affiliates
adapt engineering GmbH & Co. KG, Nordhausen, Germany	100.00¹⁾
ALTER TECHNOLOGY TÜV NORD S.A.U., Seville, Spain	100.00
Asesoría y Control en Protección Radiológica, S.L. (ACPRO), Barcelona, Spain	60.00
BRTUV AVALIAÇÕES DA QUALIDADE S.A., São Paulo, Brazil	75.01
Cualicontrol-ACI S.A.U., Madrid, Spain	100.00
DMT Consulting GmbH, Essen, Germany	100.00
DMT Consulting Limited, Nottingham, United Kingdom	100.00
DMT Consulting Private Limeted, Kolkata, India	51.00
DMT GEOSCIENCES LTD., Calgary, Canada	100.00
DMT Geosurvey spol. s.r.o., Prague, Czech Republic	100.00
DMT GmbH & Co. KG, Essen, Germany	100.00¹⁾
DMT Petrologic GmbH, Hanover, Germany	100.00
Dr.-Ing. Wesemann Gesellschaft für Ingenieurgeodäsie mbH, Herne, Germany	100.00
EE Energy Engineers GmbH, Gelsenkirchen, Germany	100.00
ENCOS GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
FS FAHRZEUG-SERVICE GmbH & Co. KG, Hanover, Germany	100.00¹⁾
Guangzhou TÜV Industrial Technical Services Co., Ltd., Guangzhou, China	100.00
GWQ GmbH & Co. KG, Moers, Germany	100.00¹⁾
HIREX ENGINEERING SAS, Toulouse, France	100.00
Höntzsch GmbH, Waiblingen, Germany	75.08
Hundt & Partner Ingenieurgesellschaft mbH & Co. KG, Hanover, Germany	100.00¹⁾
Ingenieurbüro Hofmann GmbH & Co. KG, Bamberg, Germany	65.00¹⁾
MEDITÜV GmbH & Co. KG – Unternehmensgruppe TÜV NORD, Hanover, Germany	100.00¹⁾
Nord-Kurs GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
Optocap Holding Ltd., Livingston, United Kingdom	100.00
Optocap Ltd., Livingston, United Kingdom	100.00
PT. TÜV NORD Indonesia, Jakarta, Indonesia	100.00
THE INSPECTION COMPANY OF KOREA (INCOK), Seoul, Korea	100.00
TOP REL S.R.L., Rome, Italy	100.00
TÜ-Service Anlagentechnik GmbH & Co. KG, Potsdam, Germany	100.001)
TÜ Service Ingenieurgesellschaft mbH & Co. KG, Potsdam, Germany	100.00¹⁾
TÜV ASIA PACIFIC LTD., Kwun Tong, Kowloon, Hong Kong	100.00
TÜV Croatia d.o.o., Slavonski Brod, Croatia	100.00
TÜV CYPRUS LTD., Nicosia, Cyprus	60.16
TÜV Eesti OÜ, Tallinn, Estonia	100.00
TÜV HELLAS (TÜV NORD) S.A., Athens, Greece	100.00
TÜV India Private Ltd., Mumbai, India	50.00
TÜV Informationstechnik GmbH Unternehmensgruppe TÜV NORD, Essen, Germany	100.00
TÜV Nederland QA B.V., Best, The Netherlands	100.00
TÜV NORD Akademie GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
TÜV NORD Austria GmbH, Vienna, Austria	100.00
TÜV Nord Baltik SIA, Riga, Latvia	100.00
TÜV NORD Bautechnik GmbH, Hamburg, Germany	100.00
TÜV NORD Bildung GmbH & Co. KG, Essen, Germany	100.00¹⁾
TÜV NORD Bildung Opel GmbH, Bochum, Germany	80.40
TÜV NORD Bildung Saar GmbH, Saarbrücken, Germany	100.00
TÜV NORD Bulgarien GmbH, Plovdiv, Bulgaria	100.00
TÜV NORD CERT GmbH, Essen, Germany	94.00
TÜV NORD CERT UMWELTGUTACHTER Gesellschaft mbH, Hanover, Germany	100.00
TÜV NORD College GmbH, Essen, Germany	100.00
TÜV NORD Czech, s.r.o., Prague, Czech Republic	100.00
TÜV Nord Danmark ApS, Kolding, Denmark	100.00
TÜV NORD EGYPT FOR INSPECTION AND CERTIFICATION SERVICES (S.A.E.), Cairo, Egypt	60.00
TÜV NORD EnSys GmbH & Co. KG (former TÜV NORD SysTec GmbH & Co. KG), Hamburg, Germany	100.00¹⁾
TÜV NORD Finland Oy, Vantaa, Finland	100.00
TÜV NORD Hangzhou Co., Ltd., Hangzhou, China	70.00
TÜV NORD HONG KONG LTD., Kwun Tong, Kowloon, Hong Kong	100.00
TÜV NORD Immobilien GmbH & Co. KG, Essen, Germany	100.00¹⁾
TÜV NORD InfraChem GmbH & Co. KG, Marl, Germany	51.00¹⁾
TÜV NORD INTEGRA BVBA, Berchem, Belgium	70.00
TÜV NORD International GmbH & Co. KG, Essen, Germany	100.00¹⁾
TÜV NORD ITALIA S.r.l., Legnano, Italy	100.00
TÜV NORD Korea Ltd., Seoul, Korea	100.00
TÜV NORD (Malaysia) SDN. BHD., Petaling Jaya, Malaysia	100.00
TÜV NORD Mobilität GmbH & Co. KG, Hanover, Germany	100.00¹⁾
TÜV NORD Mobilität Immobilien GmbH, Essen, Germany	94.00
TÜV NORD Mobility (Shanghai) Co. Ltd., Shanghai, China	100.00
TÜV NORD MPA Gesellschaft für Materialprüfung und Anlagensicherheit mbH & Co. KG, Leuna, Germany	100.00¹⁾
TÜV NORD NC GmbH & Co. KG, Hanover, Germany	100.00¹⁾
TÜV NORD Nederland Holding B.V., Rijswijk, The Netherlands	100.00
TÜV NORD Polska Sp. z o.o., Katowice, Poland	100.00
TÜV NORD Service GmbH & Co. KG, Hanover, Germany	100.00¹⁾
TÜV NORD SLOVAKIA, s.r.o., Bratislava, Slovakia	100.00
TÜV NORD SOUTHERN AFRICA (PTY) LTD., Cape Town, South Africa	74.00
TÜV NORD Sweden AB, Gothenburg, Sweden	100.00
TÜV NORD Systems GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
TÜV NORD Technisches Schulungszentrum GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
TÜV NORD (Thailand) Ltd., Bangkok, Thailand	99.97
TÜV NORD Transfer GmbH & Co. KG, Essen, Germany	100.00¹⁾
TÜV NORD Umweltschutz GmbH & Co. KG, Hamburg, Germany	100.00¹⁾
TÜV Teknik Kontrol ve Belgelendirme A.S., Istanbul, Turkey	100.00
TÜV Thüringen Anlagentechnik GmbH & Co. KG, Erfurt, Germany	99.94¹⁾
TÜV Thüringen Fahrzeug GmbH & Co. KG, Erfurt, Germany	99.50¹⁾
TÜV UK Ltd., London, United Kingdom	100.00
TÜV USA, Inc., Salem, USA	100.00
Unterstützungseinrichtung des Technischen Überwachungs-Vereins Hannover/Sachsen-Anhalt GmbH, Hanover, Germany	100.00
Verebus Engineering B.V., Rijswijk, The Netherlands	100.00
Versicherungsvermittlung TÜV NORD GmbH, Essen, Germany	100.00
Unconsolidated affiliates
adapt engineering Verwaltungsgesellschaft mbH, Nordhausen, Germany	100.00
British Mining Consultants Ltd., Sutton, United Kingdom	100.00
DMT-KAI BATLA (Mozambique) Limitada, Maputo Cidade, Mozambique	51.00
DMT-Kai Batla Pty. Ltd., Bordeaux, South Africa	51.00
DMT Mining Consulting Ltd., Nottingham, United Kingdom	100.00
DMT Verwaltungsgesellschaft mbH, Essen, Germany	100.00
ENCOS Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
FAHRZEUG-SERVICE Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
FORMATION SaarLor FSL EURL, Forbach, France	100.00
GWQ Verwaltungsgesellschaft mbH, Moers, Germany	100.00
IMC Group Consulting Limited, Nottingham, United Kingdom	100.00
IMC Montan Consulting Limited, Nottingham, United Kingdom	100.00
IMC Montan Russia Limited, Nottingham, United Kingdom	100.00
Ingenieurbüro Hofmann Verwaltungsgesellschaft mbH, Bamberg, Germany	65.00
International Mining Consultants Ltd., Nottingham, United Kingdom	100.00
International Mining Consultants Pty Ltd., Brisbane, Australia	100.00
MacKay & Schnellmann Ltd., Nottingham, United Kingdom	100.00
MEDITÜV Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
Montan Consulting Limited, Nottingham, United Kingdom	100.00
MONTAN RUSSIA Ltd., Nottingham, United Kingdom	100.00
Nord-Kurs Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
PT. DMT Exploration Engineering Consulting Indonesia, Jakarta, Indonesia	74.00
RP GmbH i.L. (former One TÜV BV Technische Inspektions GmbH i.L.), Essen, Germany	100.00
RWTÜV Akademie GmbH, Essen, Germany	100.00
SEIQ – Serviços de Engenharia Industrial e Qualidade Ltda., Rio de Janeiro, Brazil	100.00
TN Portugal, Unipessoal Lda, Sines, Portugal	100.00
TÜ-Service Anlagentechnik Verwaltungsgesellschaft mbH, Berlin, Germany	100.00
TÜ Service Verwaltungsgesellschaft mbH, Potsdam, Germany	100.00
TÜV GmbH Hannover Hamburg Essen Berlin, Hanover, Germany	100.00
TÜV NORD Akademie Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
TÜV NORD ARGENTINA S.A., Buenos Aires, Argentina	100.00
TÜV NORD AUTO GmbH & Co. KG, Essen, Germany	100.00
TÜV NORD AUTO Verwaltungsgesellschaft mbH, Essen, Germany	100.00
TÜV NORD Bauqualität Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
TÜV NORD Bildung Verwaltungsgesellschaft mbH, Essen, Germany	100.00
TÜV NORD Certification (Tianjin) Co., Ltd., Tianjin, China	76.90
TÜV NORD EnSys Hannover Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
TÜV NORD FRANCE S.A.S., La Madeleine, France	100.00
TÜV NORD Immobilien Verwaltungsgesellschaft, Essen, Germany	100.00
TÜV NORD InfraChem Verwaltungsgesellschaft mbH, Marl, Germany	51.00
TÜV NORD International Verwaltungsgesellschaft mbH, Essen, Germany	100.00
TÜV NORD Kft., Budapest, Hungary	100.00
TÜV NORD Luxembourg s.a.r.l., Luxembourg, Luxembourg	100.00
TUV NORD Mobility Inc., Vancouver, Canada	100.00
TÜV NORD MEXICO S.A. DE C.V., Querétaro, Mexico	100.00
TÜV NORD Mobilität Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
TÜV NORD MPA Verwaltungsgesellschaft mbH, Leuna, Germany	100.00
TÜV NORD Philippines, Inc., Manila, The Philippines	100.00
TÜV NORD ROMANIA S.R.L., Bucharest, Romania	100.00
TÜV NORD SafetyConsult GmbH & Co. KG, Hanover, Germany	100.00
TÜV NORD SafetyConsult Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
TÜV NORD Service Verwaltungsgesellschaft mbH, Hanover, Germany	100.00
TÜV NORD SysTec Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
TÜV NORD Systems Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
TÜV NORD Transfer Verwaltungsgesellschaft mbH, Essen, Germany	100.00
TÜV NORD TS Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
TÜV NORD Ukraina GmbH, Donetsk, Ukraine	100.00
TÜV NORD Umweltschutz Verwaltungsgesellschaft mbH, Hamburg, Germany	100.00
TÜV NORD VIETNAM LTD., Hanoi, Vietnam	100.00
TÜV Thüringen Anlagentechnik Verwaltungsgesellschaft mbH, Erfurt, Germany	99.60
TÜV Thüringen Fahrzeug Verwaltungsgesellschaft mbH, Erfurt, Germany	99.50
At equity accounted associates
National Inspection and Technical Testing Company Ltd. (FAHSS), Damman, Saudi Arabia	25.11
TÜV Middle East W.L.L., Manama, Bahrain	25.10
TUV NORD NTA Mobility (Shanghai) Co., Ltd., Shanghai, China	50.00
UAB TÜVLITA, Vilnius, Lithuania	50.00
Not at equity accounted associates (A) and joint ventures (JV)
ARGE „Technische Prüfstelle für den Kraftfahrzeugverkehr 21” GbR, Dresden, Germany (JV)	25.00
EnergieAgentur.NRW GmbH, Düsseldorf, Germany (JV)	50.00
Energy Agency NRW GmbH, Düsseldorf, Germany (JV)	50.00
IMC MONTAN Ltd., Nottingham, United Kingdom (JV)	50.00
Radiologic Facility Services S.A., Tarragona, Spain (A)	20.00
TÜV NORD ENGINEERING SERVICES (M) SDN. BHD., Selangor, Malaysia (A)	30.00
TÜV NORD IRAN JOINT VENTURE CO., Tehran, Iran (A)	49.00
TÜV NORD PV Science and Technology Co., Ltd., Shanghai, China (A)	40.00
Other investments
Engineering Financial Cooperative, Seoul, Korea	0.02
FSD Fahrzeugsystemdaten GmbH, Dresden, Germany	13.43
Gesellschaft für Anlagen- und Reaktorsicherheit (GRS) gGmbH, Cologne, Germany	15.40
Korea Electric Engineers Association, Seoul, Korea	0.12
VIA Consult GmbH & Co. KG, Olpe, Germany	2.50
WINDTEST Grevenbroich GmbH, Grevenbroich, Germany	12.50

1) These trading partnerships take advantage of the exemption rule pursuant to Art. 264b HGB

Members of the Board of Management:

–

Members of the Board of Management:

Dr.-Ing. Guido Rettig, Hanover
(until December 31 2016)
Chairman and CEO,
Natural Resources and Aerospace business units

Dr. rer. nat. Dirk Stenkamp, Bocholt
Chairman and CEO (as of January 1 2017),
Industrial Services and IT business units
(until December 31 2016)

Dipl.-Kfm. Jürgen Himmelsbach, Essen
CFO

Dr. rer. nat. Klaus Kleinherbers, Buxtehude
(until December 31 2016)
Mobility business unit

Harald Reutter M.A., Berlin
Labour Director,
Training business unit (until December 31 2016)

Members of the Supervisory Board:

–

Members of the Supervisory Board:

Dr. rer. nat. Georg Schöning, Rosengarten-Nenndorf
Chairman

Dipl.-Ing. Rüdiger Sparfeld*, Hanover
1st Vice Chairman
Vice Chairman of Group Staff Council of TÜV NORD AG

Prof. Dr. Karl Friedrich Jakob, Dinslaken
Vice Chairman
Chairman of the Board of Directors of RWTÜV e. V.

Peter Bremme*, Hamburg
Vice Chairman
Regional representative ver.di trade union, Hamburg region

Dr.-Ing. Klaus-Dieter Beck, Dinslaken

Prof. Dr.-Ing. Hans-Jürgen Ebeling, Peine

Dipl.-Ing. Christine Flöter*, Detmold
Technical employee, TÜV NORD CERT GmbH

Dr. Wolfram von Fritsch, Hanover
Chairman of the Board of Management of Deutsche Messe AG

Prof. Dr.-Ing. Heinz Jörg Fuhrmann, Salzgitter
Chairman of the Executive Board, Salzgitter AG

Dipl.-Ing. Raimund Gemballa*, Münster
Chairman of Group Staff Council of TÜV NORD AG

Ludger Halasz*, Duisburg
Human Resource Developer of TÜV NORD AG

Kurt Hay*, Herne
Regional Director of IG BCE, Westphalia Region

Dr. jur. Jürgen-Johann Rupp, Dinslaken
Member of the Executive Board, RAG Aktiengesellschaft

Dipl.-Ing. Stephan Schaller, Munich
Head of Motorcycles, BMW Group

Barbara Schipp*, Dortmund
Secretary to the ver.di trade union

DV-Kfm. Michael Schnoor*, Tornesch
Chairman of the Joint Staff Council of TÜV NORD Systems GmbH & Co. KG/TÜV NORD EnSys GmbH & Co. KG Ausgsburg-Berlin-Greifswald-Hamburg

Prof. Dr. Peter Schörner, Bochum
Lecturer at EBZ BUSINESS SCHOOL

Uwe Schulze*, Buchholz/Nordheide
Chairman of the Joint Staff Council of TÜV NORD AG/ TÜV NORD Service GmbH & Co. KG
Hamburg-Bremen-Kiel

Dipl.-Ing. Lothar Velde, Köthen
Consultant of the General Management of VKK Standardkessel Köthen GmbH

Dipl.-Ing. Albert Veldmann*, Nordhorn
Officially recognised expert, Member of Group Staff Council of TÜV NORD AG

* Employees representative

Editorial

DEAR READERS,

LETTER FROM THE CEO

Dear Customers of the TÜV NORD GROUP, Dear Colleagues and Partners,

THE GROUP EXECUTIVE COMMITTEE

REPORT FROM THE SUPERVISORY BOARD

TAKING SAFETY FORWARD – FROM BOILERS TO BITS OF DATA?

“WAR OF THE WORLDS” INTHE AUTOMOTIVE INDUSTRY

AN ESSAY BY PROF. DR. STEFAN BRATZEL

The auto industry is entering choppy waters: no fewer than three revolutionary changes are forcing the sector to rethink old ideas.

THE GIFT OF FREE TIME

The acceptance of autonomous vehicles is growing: Eight out of ten motorists in Germany would switch to a such a car. But, instead of working on the road, the passengers would rather relax, eat and read. Here are some of things they would like to do:

VALUES OF THE MILLENNIALS

ON THE HIGH SEAS AND UNDERGROUND

Whatever the field – be it mining, industrial installations or railway tunnels – the experts from the DMT group measure the world – safely and precisely.

A SECURE FUTURE INA NETWORKED WORLD

The Internet of Things is revolutionising the interaction between people and technology. New threats must be analysed and measures identified to avert risks.

GROUP MANAGEMENT REPORT

CONSOLIDATED INCOME STATEMENT

STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

STATEMENT OF CHANGES IN CONSOLIDIATED EQUITY

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

Members of the Board of Management:

Members of the Supervisory Board:

TÜV NORD GROUP

CONSOLIDATED FINANCIAL STATEMENTS 2016

Dear Customers of the TÜV NORD GROUP,
Dear Colleagues and Partners,

“WAR OF THE WORLDS” IN
THE AUTOMOTIVE INDUSTRY

A SECURE FUTURE IN
A NETWORKED WORLD

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS