Report By the Board of Directors

Risks and Uncertainties

EB has identified a number of business, market and finance related risk factors and uncertainties that can affect the level of sales and profits.

In September 2014, Parrot S.A. withdrew the legal proceeding taken against GmbH, a jointly owned company of EB and AUDI, in the Tribunal de Commerce de Paris (Commercial Court Paris). In the claim Parrot S.A. requested to collect damages in the amount of approximately EUR 18.4 million for loss of profit and reputational damage. During the reporting period, in January 2015, EB has received information that Parrot S.A. has filed a request for arbitration against GmbH at the International Court of Arbitration of the International Chamber of Commerce seeking remuneration and/or damages currently in an amount of approximately EUR 9.4 million in connection with an automotive supply contract. The place of arbitration is Munich, Germany. Based on GmbH´s initial legal analysis the claim is without merit both in terms of the grounds and the amount of the claim. The claim is based on Parrot S.A.´s allegation that GmbH breached a supply contract between GmbH and Parrot S.A. by not ordering Parrot S.A.´s products for GmbH´s new infotainment software system. Parrot S.A., also, claims that GmbH´s new infotainment software system infringes its IP rights. Based on the current analysis, the arbitral proceedings will not cause any financial obligation to GmbH or to EB that would affect EB´s profit outlook and financial position. It is possible that, based on later information, this view may need to be reconsidered. At worst, Parrot S.A.´s claim could have significant negative impact on´ and EB´s profit, cash flow and financial position. More information about Parrot S.A.´s legal proceedings and its withdrawal as well as about the request for arbitration is presented in the “Significant Events during the Reporting Period´ and in April 4, 2014, September 22, 2014 and January 9, 2015 stock exchange releases.