Valeo Holding GmbH

Valeo Holding GmbH

Bietigheim-Bissingen

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.01.2022 bis zum 31.12.2022

Valeo S.A.

Paris/Frankreich

2022 Universal Registration Document

SMART TECHNOLOGY FOR SMARTER MOBILITY

The French language version of this Universal Registration Document was filed on March 30, 2023 with the French financial markets authority (Autorité des marchés financiers - AMF) in its capacity as competent authority within the meaning of EU Regulation 2017/1129, without prior approval, in accordance with Article 9 of said regulation.

The Universal Registration Document may also be used for the offer to the public or the admission to trading of securities on a regulated market, provided it is accompanied by a securities note and, if applicable, a summary of all amendments applied to the Universal Registration Document. All of these items are approved by the AMF in accordance with the abovementioned regulation.

For the eighth year running, Valeo has elected to use integrated reporting to present its purpose and business model.

From the vantage point of Group strategy, the report provides an overview of the mechanisms through which its financial and non-financial performance, governance and outlook within its ecosystem contribute to short-, medium- and long-term value creation. Valeo complies with the International Integrated Reporting Council's (IIRC) <IR> framework and applies all the recommendations in its Integrated Report. It addresses all of the Group's stakeholders, namely employees, customers, suppliers, the financial community, institutional and non-governmental organizations, and other local partners. The report covers the Group's financial, sales and non-financial performance for 2022, and its carbon neutrality ambition. The Integrated Report is prepared by Valeo's Investor Relations Department and is the result of a collective effort to collect information and contributions from several departments. It is included in the Universal Registration Document and the standalone version is also available on the Valeo website www.valeo.com

Message from the Chief Executive Officer

CHRISTOPHE PÉRILLAT, CHIEF EXECUTIVE OFFICER

"Valeo accelerated sharply in 2022 in electrification and ADAS."

Despite a challenging environment marked by high inflation, the electronic components shortage, lockdown in China and the war in Ukraine, we managed to achieve all the financial objectives we set ourselves for 2022. We achieved them as we said we would in our Move Up strategic plan: by accelerating sharply in electrification and driving assistance systems (or ADAS). Our sales rose by 16%, topping 20 billion euros for the first time, and we outperformed the automotive market by 3 percentage points. With Valeo Siemens eAutomotive integrated within the Group from July, the Powertrain Systems Business Group's high-voltage business grew by 32% and its losses were halved compared with the prior year, as set out in our strategic plan. On top of that, ADAS sales rose by 29%.

We recorded strong order intake of 32.6 billion euros, up 48% compared with 2021, driven by electrification and ADAS ⁽²⁾. High-voltage electrification accounted for two-thirds of orders recorded by our Powertrain Systems and Thermal Systems Business Groups. And orders for ADAS now amount to three times our original equipment sales in this area.

Several of these orders are particularly strategic - relating to electrification for our 800V SiC systems, and to ADAS for our third-generation LiDAR with Stellantis and for our domain controller with BMW. This proves that our technological positioning is right and that our customers trust us as partners in their transformation. We also generated free cash flow of 388 million euros - above our expectations. This is key to reducing our leverage - one of our priorities. These 2022 results reflect the successful rollout of our Move Up plan, designed to build a Group that is technologically stronger, more efficient operationally, and more financially robust.

In parallel, Valeo continued to demonstrate its commitment to environmental, social and governance (ESG) issues, pursuing the implementation of our "CAP 50" Carbon Neutrality Plan. Not only are we on track with the roadmap we set out -we are actually slightly ahead of schedule.

⁽¹⁾ See glossary.
⁽²⁾ ADAS: advanced driver assistance system.

GILLES MICHEL, CHAIRMAN OF THE BOARD OF DIRECTORS

"The strength of Valeo's governance is a tremendous asset for our Group's performance."

Over the last 14 years, Valeo's corporate governance structure has supported the Group in rolling out its ambitious strategy, particularly in the electrification and ADAS markets and in high-potential countries. It has steered the Group through its achievements and challenges, not least during the Covid-19 pandemic and the semiconductor shortage.

This transformation - which has made Valeo resolutely international and profoundly innovative, positioned at the epicenter of the sustainable mobility challenges and supported by a highly professional corporate governance system - has been led by Jacques Aschenbroich, to whom I would like to extend my warmest thanks.

2022 was a year in which we reconfigured our corporate governance structure, with the separation of the roles of Chairman of the Board of Directors and Chief Executive Officer in January 2022, the appointment of Christophe Périllat as Chief Executive Officer on the same date - a role he has taken on with remarkable leadership - and the appointment of a new Chairman of the Board of Directors, a role that I have had the honor of exercising since January 1, 2023. I would really like to underline the excellent quality of this transition process. In line with the commitments made by the Group, it was executed professionally, smoothly and with great care, allowing for a seamless transition.

One of my roles will be to preserve our solid governance, which is a tremendous asset for our Group's performance. With this in mind, I will make sure that our Board of Directors continues to operate just as effectively as ever, supported by its members' varied career paths, diversity and independence, as well as the unfailing quality of their dialogue, discussions, listening and thinking. Working closely with Christophe Périllat, the Board will continue to validate the Company's major strategic focuses, ensure they are properly implemented, and guarantee that Valeo upholds its obligations and commitments.

The Board of Directors is particularly attentive to ensuring that Valeo keeps leading the way in ESG issues. I'm therefore delighted that the Group is perfectly on track with the objectives it set for itself in its "CAP 50" Carbon Neutrality Plan.

Lastly, our high-quality path to value creation is of course central to the strategy set out in the Move Up plan. In an achievement nothing short of remarkable, the commitments made as part of this plan were all met in its very first year, despite a very difficult context. I know I speak for everyone on the Board of Directors when I express our deepest thanks to the Valeo teams. It is their dedication and excellent work that made this performance possible.

⁽¹⁾ At January 1, 2023.
⁽²⁾ In accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code, this percentage does not include directors representing employees.
⁽³⁾ Including gains resulting from Valeo technologies.
⁽⁴⁾ Sustainability Assessment Questionnaires, to assess suppliers' non-financial performance.

OUR RESOURCES

HUMAN CAPITAL

INTELLECTUAL CAPITAL

INDUSTRIAL CAPITAL

SOCIAL CAPITAL

NATURAL CAPITAL

FINANCIAL CAPITAL

VALUE CREATED

⁽¹⁾ See glossary.
⁽²⁾ Original equipment sales: 84%, Aftermarket: 11%, Miscellaneous sales (R&D, tooling): 5%.
⁽³⁾ Annual average outperformance for original equipment sales for the period 2021-2025, based on S&P Global Mobility estimates.
⁽⁴⁾ To be submitted for approval at next Shareholders' Meeting.
⁽⁵⁾ OEM sales.
⁽⁶⁾ Greenhouse gas.
⁽⁷⁾ Vs. 2019 baseline year.
⁽⁸⁾ Objectives as published in February 2022.
⁽⁹⁾ Science Based Targets initiative.
⁽¹⁰⁾ Number of lost-time occupational accidents per million hours worked (frequency rate [FR1])
⁽¹¹⁾ Under the 2020 performance share plan.
⁽¹²⁾ ADAS: advanced driver assistance system.

Comp. Criterion included in short-term variable compensation and/or long-term compensation of Group executives

1 Group positioning

Technological innovation supporting growth

A balanced global presence with a diversified customer portfolio

Asia

(INCL. MIDDLE EAST & OCEANIA)

Europe

(INCL. AFRICA)

NORTH AND SOUTH

America

⁽¹⁾ Original equipment.

Valeo, tier-one automotive supplier, in the value chain

TIER-ONE SUPPLIER

UPSTREAM SUPPLIERS

Purchase of components from tier-two and tier-three suppliers

2,131 SUPPLIERS represent 95% of Valeo's needs

Top 10 suppliers representing 10% of purchases

16% OF GROUP SALES for raw materials, including

Non-ferrous metals ~30%

Steel ~38%

Resins & plastics ~30%

80% ⁽¹⁾pass-through clause

CUSTOMERS

Original equipment market

(automakers)

84% OF SALES ⁽²⁾

Growth drivers:

Aftermarket

11% OF SALES ⁽²⁾

Growth drivers:

OES ⁽³⁾: Vehicle dealerships

IAM ⁽⁴⁾: Car accessory stores and independent networks

Main opportunities

Main challenges

TO FIND OUT MORE

For more information on Valeo's risk factors, see Chapter 2 of the 2022 Universal Registration Document, "Risks and Risk Management".

⁽¹⁾ In customer contracts/not including compensation received following negotiations.
⁽²⁾ Total sales = Original equipment sales: 84%, Aftermarket: 11%, Miscellaneous sales (R&D, tooling): 5%.
⁽³⁾ Original equipment services.
⁽⁴⁾ Independent aftermarket manufacturers.
⁽⁵⁾ Original equipment manufacturers.

Business portfolio solidly positioned to support the (r)evolutions of tomorrow's automotive industry

Four megatrends driving our four Business Groups' performance...

The Group is benefiting from the four structural megatrends that are transforming the automotive industry. Valeo has been developing and building strong positions in all four areas for more than 20 years.

The Group's growth is driven by the acceleration of electrification and ADAS.

Opportunities to diversify beyond the automotive industry at a marginal cost

New mobility

Data center cooling

Highly complementary expertise throughout the Group

Extensive expertise in electronics and software across all Business Groups

Aftermarket business serving our four Business Groups

The "5 Axes": a proven methodology to provide our customers with operational excellence and continuous improvement

CHRISTOPHE PÉRILLAT, CHIEF EXECUTIVE OFFICER

"Valeo has once again demonstrated its operational excellence, managing to meet demand from its customers without interruption, despite the electronic components shortage that negatively impacted global automotive production."

A product offering to benefit from the four megatrends shaping tomorrow's mobility

Electrification acceleration

POWERTRAIN SYSTEMS BUSINESS GROUP (PTS)

THERMAL SYSTEMS BUSINESS GROUP (THS)

ADAS ⁽²⁾ acceleration

COMFORT & DRIVING ASSISTANCE SYSTEMS BUSINESS GROUP (CDA)

Interior experience reinvention

COMFORT & DRIVING ASSISTANCE SYSTEMS BUSINESS GROUP (CDA)

Lighting everywhere

VISIBILITY SYSTEMS BUSINESS GROUP (VIS)

⁽¹⁾ Onboard charger.
⁽²⁾ Advanced driver assistance system.

Electric vehicle solutions from powertrains to battery thermal management

Electrification acceleration

Integrated thermal management systems for electric vehicles, enabling us to triple our content per vehicle.

1 Compact and quiet front-end cooling module

Disperses heat and cools the engine, electronics, battery and heat pump.

2 Smart Heat Pump

Compact and efficient system with an integrated compressor that provides cooling and heat for the vehicle's cooling and heating loops.

3 Silent HVAC module

Regulates cabin temperature and ensures passenger comfort. Electric vehicle HVAC systems are quieter and more efficient.

4 Battery thermal management system

Large heat exchanger to ensure the battery cells maintain the right temperature range (25-40°C), preserving their lifespan and reliability.

Also cools the battery during rapid charge phases.

5 Electric motor

Electric device that can serve both as a motor (giving torque to the wheels) and a regenerator (recovering energy during deceleration phases).

6 Inverter

Device that converts direct current electricity stored in the battery into AC current to control speed and engine torque.

7 LV/HV, DC/DC converter

Device that reduces the battery's DC voltage (400-800V) to power accessories (>12V).

8 Reversible onboard charger

Charges the vehicle battery by converting alternating current from the power grid into direct current. Can also send electricity stored in the battery to the power grid during periods of peak demand.

Advanced driver assistance systems (ADAS) integrating sensors, control units and software

Typical ADAS architecture of a vehicle capable of level 3 automation ⁽¹⁾

1 Ultrasonic sensor

Sensor capable of detecting solid objects 30 cm away. Several sensors needed on a given surface to reduce detection blind spots.

2 Surround-view camera

Cameras installed all around the vehicle providing a 360° view of the vehicle's environment and assisting the driver during low-speed maneuvering.

Surround-view cameras are also required for autonomous parking applications.

3 Front camera

Front-mounted cameras with 50 m perception capabilities for driving assistance and level 2 automation applications.

4 LiDAR

Uses a laser beam to scan and provide a 3D vision of the vehicle's surroundings, detect, classify and track objects and road markings up to a distance of more than 200 m. The LiDAR, which is the newest sensor for autonomous vehicles, can also position the vehicle on a high-definition map with an accuracy of a few centimeters.

5 Interior camera

Interior system that monitors driver fatigue and distraction in real time and, more broadly, the interior cabin environment. Mandatory in Europe from 2026 on vehicles with high-level automation.

6 ADAS domain controller

Powerful ADAS processor providing high-speed data collection, sensor fusion and real time decision-making.

7 Radar

The corner radar sensor is positioned on all four corners of the vehicle to provide a panoramic, wide-angle view.

It quickly and accurately detects obstacles and people, especially in blind spots, and alerts the driver.

⁽¹⁾ See page 25.

Solutions designed to improve passive and active road safety

LOW-SPEED MANEUVERING & PARKING ASSISTANCE

Valeo develops all parking assistance solutions, including sensors and functional software, from entry-level to fully automated systems.

Autonomous parking applications, in which the system takes control of steering, accelerating and braking, requires a set of sensors that includes ultrasonic sensors and surround-view cameras.

Valet parking applications (i.e., in which the driver is not in the vehicle) require a broader set of sensors, with various possible arrangements between vehicle-mounted and infrastructure-mounted.

HIGH-SPEED DRIVING ASSISTANCE

Valeo's ADAS solutions can be used to delegate driving in many situations (level 2 automation ⁽¹⁾ and above), including on the highway at speeds of up to 130 km/h. Our software solutions (perception and functional algorithms) and sensors (front camera and LiDAR) enable the LiDAR to detect an object (such as a tire) abandoned on the roadway at a distance of more than 150 m, thereby preventing collisions, and provide level 3 ⁽¹⁾ functionalities such as traffic-jam assist with emergency braking.

⁽¹⁾ See page 25.

2 Strategy

geared toward sustainable, value-creating growth

Market conditions

Market conditions in 2022

An environment marked by the return of inflation and the electronic components shortage

THE GROUP HAS ENTERED INTO NEGOTIATIONS WITH ITS CUSTOMERS TO:

Electronic components shortage: situation improving but some lasting impact

After improving in 2022, the electronic components shortage should continue to be gradually resolved in 2023.

No interruption in Group supply to customers since the start of the electronic components crisis.

Very limited impact from the Russia-Ukraine conflict

A partnership strategy

A win-win partnership strategy

SHARED DEVELOPMENT EFFORT & SHORTER TIME TO MARKET FOR OUR PRODUCTS

Valeo THS with TotalEnergies: Development of a new, very high-performance dielectric fluid for battery cooling.

Valeo PTS with Renault: Co-design, development and manufacture of a new-generation, more compact EESM ⁽¹⁾ electric motor (without the use of magnets or rare earths).

Valeo VIS with Swell: Strategic alliance for the development, production and marketing of illuminated front grilles and panels for the Chinese automotive market.

Valeo VIS with SRG Global: Strategic alliance to provide exterior illuminated front panels in North America and Europe.

Valeo CDA with BMW: Major contract with the BMW Group for which Valeo will provide the ADAS domain controller, sensors and software for parking and low-speed maneuvering on the next generation BMW "Neuer Klasse" platform, due to launch in 2025.

CREATION OF NEW GROWTH ACTIVITIES

SIEMENS JV in high-voltage (HV) electric powertrain

TAKEOVER AND INTEGRATION OF VSEA ⁽²⁾ INTO PTS AT THE BEGINNING OF JULY 2022

mobileye Partnership in front cameras

VALEO, MAJOR PARTNER OF MOBILEYE IN FRONT CAMERAS

⁽¹⁾ Electrically excited synchronous motor.
⁽²⁾ Valeo Siemens eAutomotive.

Regulations promoting electrification

Powertrain: increasingly stringent regulations promoting an increase in electrification

Road transportation accounts for more than 18% of greenhouse gas emissions ⁽¹⁾...

...which is pushing regulators and governments to take action...

...to encourage the take-up of electric vehicles

⁽¹⁾ Source: International Energy Agency.
⁽²⁾ Gigatonne.

Powertrain Systems Business Group

Acceleration of electrification in Powertrain Systems (PTS)

Electrification market ⁽¹⁾

PTS 2025 ⁽⁶⁾

⁽¹⁾ Automotive and new mobility.
⁽⁶⁾ Objectives as published in February 2022.

Thermal Systems Business Group

Acceleration of electrification in Thermal Systems (THS)

Market for e-thermal systems

THS 2025 ⁽¹⁾

⁽¹⁾ Objectives as published in February 2022.

Regulations promoting ADAS

Regulations promoting take-up of ADAS

The EU Vehicle General Safety Regulation

From July 2024, all new vehicles sold in the European Union must be equipped with active safety systems covering:

These requirements require higher ADAS content per vehicle, including front cameras, surround-view cameras and interior cameras, as well as onboard and functional software.

Toward greater active safety

EuroNCAP rates safety to four criteria:

Only vehicles equipped with reliable, comprehensive collision avoidance technologies can achieve the highest five-star rating.

Accelerating consumer adoption of ADAS

Comfort & Driving Assistance Systems Business Group

ADAS acceleration

ADAS market ⁽¹⁾

ADAS 2025 ⁽²⁾

⁽¹⁾ Automotive and new mobility.
⁽²⁾ Objectives as published in February 2022.

Reinvention of the interior experience

Reinvention of the interior experience market

IER ⁽²⁾ 2025 ⁽³⁾

CDA OBJECTIVES = ADAS + IER ⁽²⁾

2025 ⁽³⁾

⁽¹⁾ Driver monitoring system.
⁽²⁾ Interior experience reinvention.
⁽³⁾ Objectives as published in February 2022.

Visibility Systems Business Group

Lighting everywhere

Lighting and wiper systems market

Front lighting...

...rear lighting...

...lighting everywhere

2025 ⁽¹⁾

⁽¹⁾ Objectives as published in February 2022.

Aftermarket

A highly dynamic aftermarket and a product diversification strategy...

...targeting growth and profitability for Valeo Service (VS)

PERFORMANCE INTEGRATED WITH THAT OF BUSINESS GROUPS

REMANUFACTURING BUSINESS

⁽¹⁾ Original equipment services.
⁽²⁾ Independent aftermarket manufacturer.

Sustainable development, central to the Group's commitments

Making a sustainable social and environmental impact through innovation and technology

e-Mobility portfolio → Greenhouse gas emissions avoided thanks to our e-Mobility technology

ADAS, IER ⁽¹⁾ & lighting portfolio → Accidents prevented and roads made safer thanks to our driving assistance and visibility technology

⁽¹⁾ Interior experience reinvention.

Carbon neutrality roadmap

The "CAP 50" plan aims to contribute to carbon neutrality by 2050 across the entire Valeo value chain. To manage its progress toward this ambitious objective, the Group has set an intermediate stage for 2030, with two reduction targets, one in line with SBTi ⁽¹⁾ recommendations, and the other integrating the benefits of electrification afforded by Valeo solutions. Both 2030 targets will be included in monitoring and reporting on CAP 50 plan progress.

⁽¹⁾ Science Based targets initiative.

Carbon neutrality: a commitment covering the entire value chain

GHG emissions avoided through electrification of our product portfolio

⁽¹⁾ C-segment vehicles, irrespective of region. The methodology will be updated to include different vehicle segments and differentiate between geographic areas.
⁽²⁾ Stop-Start, 12+12V, 48V MHEV (IBSG), 48V MHEV (eMotor), FHEV, PHEV, EREV, BEV, FCEV.

Diversity, equity and inclusion, Valeo core values

Valeo firmly believes in the importance of diversity of its employees at all levels of its organization and in all areas of the Company. A key element of its culture, Valeo works for diversity, equity and inclusion on four themes: gender equality, cohesion between generations, cultural diversity and the inclusion of people with disabilities. In a competitive environment and diverse society, encouraging diversity among employees and ensuring their inclusion is a means of driving performance and attracting and retaining talent.

To evaluate the measures taken and define the Group's objectives, a Diversity Committee was established in 2012 at the initiative of General Management. Chaired by the Chief Human Resources Officer, assisted by the champions of each of the four diversity themes, it has four specialized sub-committees: Gender, Disability, Culture, and Generations.

GENDER EQUALITY

CULTURAL & INTERNATIONAL DIVERSITY

GENERATIONAL DIVERSITY

DISABILITY DIVERSITY

Corporate citizenship commitments & partner relations

ASSESSING AND SUPPORTING SUPPLIERS' SUSTAINABLE DEVELOPMENT PRACTICES

Under its policy of increased support for suppliers throughout the entire supply chain, Valeo runs a supplier self-assessment system using a Supplier Self-Assessment Questionnaire (SAQ). This questionnaire consists of 52 questions, divided into six equally weighted categories:

Spotlight on CAP 50 and Upstream Scope 3 emissions reduction

To meet its targets on reducing Upstream Scope 3 emissions and help its suppliers improve their carbon maturity, Valeo sets deadlines and objectives for them depending on their level of maturity. Valeo has established four maturity levels (from 0 to 3). By 2025, all suppliers will be required to be at level 3.

If a supplier does not meet the required maturity level, Valeo will establish an action plan either to help the supplier improve or to reduce its own exposure to the supplier.

Suppliers with a CDP Supply Chain rating of A- or higher will be considered to have a maturity level of 3.

Governance in support of strategy

The Board of Directors

determines Valeo's business strategies and ensures that they are implemented effectively. In line with best market practices, the roles of Chairman of the Board of Directors and Chief Executive Officer were separated.

This new governance structure came into effect on January 26, 2022.

Appointment of Gilles Michel as Chairman of the Valeo Board of Directors

Jacques Aschenbroich stepped down as Chairman of the Board of Directors and member of the Board of Directors of Valeo on December 31, 2022 ⁽²⁾. The Board of Directors of Valeo unanimously decided to appoint Gilles Michel as Chairman of the Board of Directors, effective January 1, 2023. Gilles Michel has been an independent director of Valeo since May 23, 2018. He was Chair of the Compensation Committee and of the Governance, Appointments & Corporate Social Responsibility Committee from October 24, 2019 to December 31, 2022, a member of the Strategy Committee from July 22, 2021 to December 31, 2022 and Lead Director from October 24, 2019 to January 26, 2022.

⁽¹⁾ Subject to the ratification of the Shareholders' Meeting to be held on May 24, 2023.
⁽²⁾ In line with the commitments made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022.
⁽³⁾ In accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code, directors representing employees do not count toward the number of independent directors.

Other key information

The Board of Directors has set up four Committees to make recommendations on key matters, improve its operating procedures and, ultimately, ensure the Group's sustainable growth.

Audit & Risks Committee

AT JANUARY 1, 2023

7 members

100% independence ⁽³⁾

AT DECEMBER 31, 2022

Compensation Committee

AT JANUARY 1, 2023

AT DECEMBER 31, 2022

Strategy Committee

AT JANUARY 1, 2023

AT DECEMBER 31, 2022

Governance, Appointments & Corporate Social Responsibility Committee

AT JANUARY 1, 2023

AT DECEMBER 31, 2022

⁽¹⁾ At January 1, 2023.
⁽²⁾ In accordance with Article L. 225-27-1 of the French Commercial Code, directors representing employees do not count for the purpose of determining the proportion of men and women on the Board.
⁽³⁾ I n accordance with the recommendations in Article 9.3 and 15.1 of the AFEP-MEDEF Code, directors representing employees do not count toward the number of independent directors.
⁽⁴⁾ On January 26, 2023, the Board of Directors decided to appoint Grzegorz Szelag as member of the Governance, Appointments & Corporate Social Responsibility Committee, in addition to his seat on the Compensation Committee.

Two management Committees to implement the Group's strategy

5 nationalities represented

in the Executive and Operations Committees

Executive Committee members are indicated by an asterisk.

Composition of the Executive Committee and Operations Committee

Christophe Périllat ^*

Chief Executive Officer

Robert Charvier ^*

Chief Financial Officer

Catherine Delhaye ^*

Chief Ethics, Compliance and Data Protection Officer

Éric Antoine Fredette ^*

General Counsel and General Secretary

Detlef Juerss ^*

Senior Vice-President, Sales & Business Development

François Marion ^*

Senior Vice-President, Group Communication

& Investor Relations

Agnès Park ^*

Chief Human Resources Officer

Geoffrey Bouquot ⁽¹⁾

Chief Technology Officer and Vice-President, Strategy

Xavier Dupont

President, Powertrain Systems Business Group

Marc Guédon

Vice-President, Group Purchasing

Maurizio Martinelli

President, Visibility Systems

Business Group

Francisco Moreno

President, Thermal Systems Business Group

Éric Schuler

President, Valeo Service

Marc Vrecko

President, Comfort & Driving Assistance Systems Business Group

⁽¹⁾ Member of the Operations Committee and Secretary of the Executive Committee.

Target structure of the Chief Executive Officer's annual 2023 compensation

ANNUAL Fixed compensation (24%)

ANNUAL Variable compensation Maximum 120% of fixed compensation (28%)

LONG-TERM Performance shares Maximum 200% of fixed compensation (48%)

76% Compensation subject to performance conditions

Weighting of indicators

1,700 key managers

The annual variable compensation for the Group's 1,700 key managers is indexed to the same criteria, including CSR criteria, as for the Chief Executive Officer.

3 Integrated performance & outlook

Acceleration of electrification and ADAS

Financial indicators

Key financials

TO FIND OUT MORE

For a comprehensive view of Research and Development expenditure, see Chapter 5 of the 2022 Registration Document.

⁽¹⁾ To be submitted for approval at the Shareholders' Meeting to be held on May 24, 2023.

Non-financial indicators

Main indicators and objectives in the Group's sustainable development policy

Outlook

2023 outlook

Given the uncertainty regarding automotive production in our main business regions, and taking into account net inflation and cost reduction measures, we are setting the following objectives for 2023 (see below).

These objectives lead to:

^* 2022 data has been adjusted to include the integration of the high-voltage business (formerly Valeo Siemens eAutomotive) within the Powertrain Systems Business Group as of January 1, 2022.
^** Based on the following assumptions:growth in global automotive production of between 0% and 3.3% in 2023 (3.3% = S&P Global Mobility estimates released on February 16, 2023);an acceleration in automotive production in the second half of the year (in line with the S&P Global Mobility scenario released on February 16, 2023);price increases (in relation to cost inflation) and internal cost reduction measures.

Move Up Plan

COMMITTED TO OUR 2025 OBJECTIVES ⁽²⁾

Based on:

⁽¹⁾ See glossary.

⁽²⁾ Objectives as published in February 2022.

Ratings

Financial and non-financial ratings

Credit ratings as of March 1, 2023

ESG ratings as of March 1, 2023

ESG indexes as of March 1, 2023

⁽¹⁾ The lowest score is the best.

Share ownership

Valeo and its shareholders

Capital allocation policy geared toward deleveraging

⁽¹⁾ To be submitted for approval at the Shareholders' Meeting to be held on May 24, 2023.
⁽²⁾ See glossary.

Glossary

Adjusted data: data for first-half 2022 has been adjusted as though the high-voltage electrification business (formerly Valeo Siemens eAutomotive) had been consolidated in the Group's financial statements as of January 1, 2022. To calculate year-on-year changes in sales on an adjusted basis, 2021 figures have been adjusted as though the high-voltage electrification business had been consolidated in the Group's financial statements as of January 1, 2021.

EBITDA corresponds to (i) operating margin before depreciation, amortization and impairment losses (included in the operating margin) and the impact of government subsidies and grants on non-current assets, and (ii) net dividends from equity-accounted companies.

EBITDA margin: EBlTDA/sales.

Free cash flow corresponds to net cash from operating activities (excluding changes in nonrecurring sales of receivables and net payments for the principal portion of lease liabilities) after taking into account acquisitions and disposals of property, plant and equipment and intangible assets.

Gearing ratio: Net debt/stockholders' equity.

Leverage ratio: Net debt to EBITDA.

Like for like (or LFL): the currency impact is calculated by multiplying sales for the current period by the exchange rate for the previous period. The Group structure impact is calculated by (i) eliminating, for the current period, sales of companies acquired during the period, and (ii) adding to the previous period full-year sales of companies acquired in the previous period, and (iii) eliminating, for the current period and for the comparable period, sales of companies sold during the current or comparable period.

Net debt comprises all long-term debt, liabilities associated with put options granted to holders of non-controlling interests, short-term debt and bank overdrafts, less loans and other long-term financial assets, cash and cash equivalents and the fair value of derivative instruments hedging the foreign currency and interest rate risks associated with these items.

Operating margin including share in net earnings of equity-accounted companies corresponds to operating income before other income and expenses.

Order intake corresponds to business awarded by automakers during the period to Valeo, and to joint ventures and associates based on Valeo's share in net equity, less any cancellations, based on Valeo's best reasonable estimates in terms of volumes, selling prices and project lifespans. Unaudited indicator.

Outperformance is a business growth indicator corresponding to growth in Valeo's like-for-like original equipment sales compared with growth in automotive production volumes, as defined by S&P Global Mobility (formerly IHS Markit), over a given period and geography.

ROA, or return on assets, corresponds to operating income divided by capital employed (including investments in equity-accounted companies), including goodwill.

ROCE, or return on capital employed, corresponds to operating margin (including share in net earnings of equity-accounted companies) divided by capital employed (including investments in equity-accounted companies) excluding goodwill.

Total shareholder return, or TSR, measures share profitability, taking into account, over a given period, the dividends received by the shareholder and the unrealized gains and losses on fluctuations in the share price.

1 PRESENTATION OF VALEO

1.1 History and development of the Group

1923 - 1990: the Group's beginnings

The Group's story began in 1923, with the creation of Société Anonyme Française du Ferodo. The company started by distributing, then manufacturing, brake linings under license from the British company Ferodo Ltd. In 1932, the year it was first listed on the Paris Stock Exchange, it began manufacturing clutches.

The period that followed was a time of industrial expansion, diversification into thermal systems and electrical equipment, as well as international development in Europe (Spain, Italy, Germany, United Kingdom, Turkey), South America (Brazil), North America (United States and Mexico), Asia (South Korea) and North Africa (Tunisia).

In 1980, the Company adopted the name Valeo, a Latin word meaning "I am well", with a view to uniting the various brands under a single name.

1990 - 2009: a new company culture and new international horizons

In the 1990s, the Company deployed "5 Axes", its new company culture, and its forward-looking strategy based on a sustained innovation effort with the opening of new research centers in France specialized in electronics, lighting systems and clutches. Valeo also launched operations in Asia (China, India and Japan) and Eastern Europe (Czech Republic, Poland, Hungary and Romania).

The 1998 acquisition of the Electrical Systems activity of ITT Industries, with its production plants in Germany, the United States and Mexico as well as its expertise in electronics and sensors (parking assistance systems), marked the beginning of the shift toward technology-driven solutions in the 2000s.

In 2001, the Company launched a new innovation program focusing on driver assistance features, powertrain system efficiency and enhanced comfort. This program is supported through a number of technology partnerships and acquisitions, such as that of Connaught Electronics Ltd. (onboard cameras).

Since 2009: an increasingly innovative, high-growth tech company

In 2009, a new strategy was implemented around two main drivers: innovation, with technologies focused on greenhouse gas emissions reduction and autonomous driving, as well as geographic expansion in Asia and developing countries. It involved putting in place a new organizational structure, to improve profitability and efficiency, incorporating four new Business Groups (Comfort & Driving Assistance Systems, Powertrain Systems, Thermal Systems and Visibility Systems) and Valeo Service.

Since then, the acceleration in the growth of Valeo's sales and order intake driven by innovation have enabled the Group to consolidate its position as a technology company.

In February 2022, the Group launched its new Move Up strategic plan for the period 2022-2025. This value-creation strategy is part of a long-term vision for cleaner and safer mobility, and is based on the four megatrends shaping tomorrow's automotive industry: acceleration of electrification, acceleration of driving assistance (ADAS), reinvention of the interior experience, and lighting everywhere.

Valeo's innovation strategy is underpinned by:

ACQUISITIONS AND JOINT VENTURES:

INVESTMENTS IN TECHNOLOGY START-UPS:

INVESTMENTS IN VENTURE CAPITAL FUNDS:

RESEARCH AND TECHNOLOGY PARTNERSHIPS WITH:

1.2 Overview

1.2.1 Company profile

Valeo is an automotive supplier that partners with all automakers worldwide as well as new mobility players. As a technology company, Valeo proposes innovative products and systems contributing to the reduction of greenhouse gas emissions and to the development of safer, more autonomous, more connected, more intelligent and more diverse mobility.

In 2022, the Group generated sales of 20.0 billion euros and invested 10.4% of its original equipment sales in Research and Development. At December 31, 2022, Valeo had 183 plants, 21 research centers, 44 development centers and 18 distribution platforms, and employed 109,900 people in 29 countries worldwide. Valeo is listed on the Paris Stock Exchange.

1.2.2 Legal structure

The Group's legal structure is based on three main holding companies interposed between the parent company, Valeo, and its operating subsidiaries:

At an intermediate level, in some countries, investments can be held directly or indirectly by one or more companies, which play the role of holding company to form a local sub-group. This structure permits the centralization and optimization of the financial management of the sub-group and, where legally possible, the creation of a tax group.

Valeo has also formed jointly owned companies with industrial or technological partners in order to break into new markets, consolidate its systems offering for customers and develop new product offerings.

1.2.3 Valeo's tax policy

Valeo's tax policy is aligned with the Group's strategy to create value for its shareholders, customers, employees and local communities whilst maintaining its reputation and complying with the laws and regulations applicable everywhere the Group operates.

The tax policy adopted by Valeo and its subsidiaries reflects the Group's ethical rules and responsible approach to taxation. It is based on the following three principles: giving priority to operations, applying tax regulations fairly and ensuring tax costs are correctly calculated.

Giving priority to operations

Valeo's tax policy is based on accepting all the tax consequences that arise as a result of the Group's operations. Accordingly, Valeo does not use tax optimization strategies if such strategies do not meet its operating requirements. An efficient tax structure is implemented provided it is in accordance with the law, supports a genuine business activity and is not artificial. Consequently, the Group has not set up any entity within a particular territory for the sole purpose of benefiting from favorable tax arrangements.

The same principle underpins the Group's transfer pricing policy, which takes into account the operating environment in which transactions are carried out, the location of intangible assets (know-how, Research and Development, patents, etc.), relevant functions and economic circumstances.

The Group's tax policy complies with the principles defined by the OECD (Organisation for Economic Co-operation and Development) with respect to declaring income where the value is actually created.

Applying tax regulations fairly

The Group adheres strictly to tax regulations and ensures that it complies with local tax laws, and international treaties and guidelines. While all of these regulations must be complied with, the Group should not overpay tax as a result.

The Group takes a proactive but fair approach in its tax management and if necessary seeks the advice of external consultants, particularly when legislation is open to interpretation.

Developing strong professional relationships with the tax authorities and carrying out operations in full transparency are vital to ensuring the fair application of tax regulations.

In the event of a dispute, if it is legally possible to do so and does not result in the Group's tax liability being unfairly increased, Valeo favors reaching a compromise with the tax authorities as this minimizes the uncertain consequences of litigation.

Ensuring tax costs are correctly calculated

The Group seeks to ensure that tax costs are correctly calculated by using reliable data, documenting tax positions, training local teams, drawing on the advice of external consultants and cooperating with local tax authorities in full transparency.

Valeo ensures that the tax liability recorded in its financial statements has been correctly estimated. To do this, a reporting process has been put in place to provide the Group with the information required to evaluate the tax situation and costs of its subsidiaries.

Regular training is provided to ensure that the Group's tax policy is correctly implemented by those concerned.

1.3 Operational organization

The Group's operational structure is based on four Business Groups, Valeo Service and 12 National Directorates.

The Business Groups (Comfort & Driving Assistance Systems, Powertrain Systems, Thermal Systems and Visibility Systems) operate under the responsibility of the Chief Executive Officer and are responsible for the business growth and operating performance of the Product Groups and Product Lines they manage, across the globe. They propose technology roadmaps to the Group's General Management. With support from the National Directorates, they coordinate the pooling of resources, the allocation of Research and Development expenditure and the optimization of production resources at the plants.

Each of the Business Groups is structured to reinforce cooperation and stimulate business growth worldwide. The Product Groups and Product Lines manage their activities and can draw on all the development, production and marketing resources needed to fulfill their objectives. The Regional Operations manage the operations of a Business Group in a given region.

Valeo Service operates under the responsibility of the Chief Executive Officer. Alongside the Business Groups and Product Groups, it supplies original equipment spares to automaker networks and replacement parts to the independent aftermarket.

The National Directorates are tasked with ensuring the Group's growth in their respective countries and act as the interface with local customers. They also manage all the services that support operational activities in the country (see section 1.5.2 of this chapter, "Sales and Business Development", page 85).

Operational principles and rules, with an appropriate delegation of authority, have been established at all levels, with a precise definition of areas and decision-making thresholds.

The Group defines internal standards and policies and ensures their implementation, with the support of the functional networks. It allocates resources between the Business Groups, and monitors the consistency of sales and industrial policies.

COMFORT & DRIVING ASSISTANCE SYSTEMS (CDA)

The Comfort & Driving Assistance Systems Business Group provides driving assistance technologies (ADAS), detection systems, human-machine interfaces and connectivity solutions for safer, more intuitive and more connected driving.

€4.234bn 21% OF 2022 GROUP SALES

11 PT ORIGINAL EQUIPMENT SALES OUTPERFORMANCE

15.8% EBITDA MARGIN

23,100 EMPLOYEES

28 PLANTS

18 R&D CENTERS

POSITIONING AND STRENGTHS

1.4X INCREASE IN ADAS CONTENT PER VEHICLE BY 2025 (VS 2021)

14% INCREASE IN REINVENTION OF THE INTERIOR EXPERIENCE CONTENT PER VEHICLE BY 2025 (VS 2021)

2025 OUTLOOK ^*

~€6bn ORIGINAL EQUIPMENT SALES

16% ANNUAL GROWTH OVER THE 2021-2025 PERIOD

9 PT OUTPERFORMANCE BETWEEN 2021-2025

~18% EBITDA MARGIN

^* Move Up Plan as published in February 2022.

Valeo third-generation LiDAR - perception capability

DESCRIPTION OF THE BUSINESS GROUP

The automotive industry is changing fast, and the emphasis today is on providing end-users with advanced technologies for a safer and more enjoyable mobility experience. Drivers expect their cars to be intuitive, smart and connected. Regulations demand the development of ever safer vehicles, and automated driving is now a reality thanks to increasingly affordable technology.

The Comfort & Driving Assistance Systems Business Group is at the forefront of progress in this area, working on two of the four pillars of the Move Up plan: acceleration of ADAS and reinvention of the interior experience. These pillars are fundamental to meeting the growing demand for safer driving and enhanced in-vehicle experience.

The Comfort & Driving Assistance Systems Business Group has two areas of activity:

DRIVING ASSISTANCE

ADAS is a major force behind rapid change in today's automotive industry. These systems apply a wide range of sensor technologies and increasingly complex algorithms to make driving safer and more enjoyable for all drivers. The Driving Assistance activity focuses on advances in ADAS as a key pillar of Valeo's strategy, investing in the development of these technologies to meet both growing demand from automakers and consumers, and ever-changing safety regulations and standards.

A wide range of sensor technologies is used to construct a comprehensive approach to the vehicle environment. Ultrasonic sensors, cameras, thermal imaging cameras, mid-range radars and long-range LiDARs are all used to gather accurate and comprehensive data on vehicles, pedestrians, cyclists and obstacles in the vehicle's vicinity. Through this activity, the Group is a world leader in the development and manufacturing of state-of-the-art sensors for ADAS.

With the accelerating adoption of ADAS and the first levels of automated driving they enable, vehicle electrical and electronic (E/E) architecture is changing, and ADAS domain controllers and zonal controllers have become key products in this area.

ADAS domain controllers are dedicated supercomputers that manage vehicle safety and automated driving functions. They process all the sensor data in real time, and host the decision-making algorithms that use this data to improve driving safety or even automate driving. Zonal controllers optimize power distribution to the sensors and actuators located throughout the vehicle, and the collation of data collected by these sensors or transmitted to the actuators.

Building on its experience with vision controllers, a precursor to ADAS domain controllers, and on the performance of its zonal controllers, the Driving Assistance activity is a major player in this rapidly growing market.

The Driving Assistance activity is also a leader in ADAS software development. In particular, Valeo has developed the most advanced parking automation solutions on the market, such as the "trained" automated parking system and automatic valet parking solutions in public parking lots and industrial sites. The Business Group also has level 2, 2+ and 3 automated driving software stacks. Artificial intelligence is central to these developments, and Valeo's advanced AI research laboratory, Valeo.ai, makes major contributions to this work.

To guarantee the quality of its driving assistance systems, the Driving Assistance activity runs both physical and digital testing and validation facilities.

It has nine test tracks and over 200 test cars worldwide, plus many simulation benches with hardware-in-the-loop and over 50 petabytes of data to simulate real-life driving scenarios.

INTERIOR EXPERIENCE

Valeo's Interior Experience activity is one of the world's leading players in human-machine interfaces and interior environment monitoring for vehicles. It develops a cocoon-like interior for vehicle occupants, with cabin monitoring that enhances safety and well-being for driver and passengers.

Its driver monitoring systems detect signs of drowsiness and distraction.

The activity's wide-angle cameras detect passengers' facial expressions and postures to provide specially adapted and personalized services. It also produces interior radars that detect if an infant has been left in the vehicle unattended.

In addition, the activity develops innovative human-machine interface solutions such as touch-screens and intelligent, ergonomic surfaces that are seamlessly integrated into the cabin design.

Valeo also has a strong foothold in electronic equipment for the steering wheel, and has developed a purely software-based solution for detecting the driver's hands on the wheel. Lastly, its head-up display systems not only enable drivers to see all the information they need for driving without taking their eyes off the road, they also use augmented reality to provide assistance in the form of information superimposed on the driver's view of the road or obstacles.

Connectivity is another key component of the Interior Experience activity, with the increasing use of telematics boxes to connect vehicles to the cloud, and the growing uptake of 5G connectivity on new vehicle models. With a strong presence in hands-free access systems, Valeo also offers Phone-as-a-Key solutions, enabling users to lock and unlock their vehicles as they approach or walk away from the vehicle, while their phone is in their bag or pocket.

MARKET TRENDS AND OUTLOOK

The semiconductor shortage remains a reality in 2023. Because of the nature of its products, the Comfort & Driving Assistance Systems Business Group is the Valeo Group's largest consumer of semiconductors. Given the extremely tense supply-chain situation, protecting our customers remains our priority. At the same time, with the increase in content per vehicle and the penetration rate of its technologies, the Comfort & Driving Assistance Systems Business Group has strong growth prospects in both ADAS and the interior experience, for which record orders have been booked. Today, nearly 50% of vehicles are equipped with ADAS for level 2, 2+ and 3. By 2030, more than 90% of vehicles will be using this technology.

Another key trend for the Comfort & Driving Assistance Systems Business Group is the reinvention of the interior experience. As well as enhancing safety, its technologies for the vehicle interior create a comfortable, reassuring cocoon-like experience.

The expansion of ADAS and level 3 automation solutions is set to radically revolutionize the interior experience. The delegation of driving tasks to the vehicle is creating opportunities for new usages and features.

Valeo is one of the world's leading players in human-machine interfaces.

Valeo is a pioneer and leader in the industrial-scale manufacturing of automotive LiDAR systems.

2022 HIGHLIGHTS

Record order intake of 11.3 billion euros, representing 2.9x total OEM sales.

MARCH

Valeo received Honda Supplier Award in the Development Category for its contribution to the world's first SAE Level 3 Automated Driving System authorized for commercial use.

APRIL

Valeo produced its 100 millionth automotive nearfield camera, which gives the car its rear and surround vision, at its Tuam site in Ireland.

JUNE

Stellantis chose Valeo's third-generation LiDAR to equip multiple models of its different automotive brands from 2024. The Valeo SCALA 3 LiDAR will enable these vehicles to be certified for level 3 automation.

JUNE

Valeo and the BMW group entered into a major collaboration for which Valeo will provide the ADAS domain controller, sensors and software for parking and maneuvering for BMW's upcoming platform generation "Neue Klasse", due to launch in 2025.

NOVEMBER

Valeo produced its 10 millionth front camera system integrating Mobileye EyeQ® technology, at its Wemding site in Germany. Valeo has produced nearly 13 million front cameras since launching this activity.

NOVEMBER

New building inaugurated at the Prague R&D center dedicated to ADAS.

DECEMBER

First contract secured in the United States for display systems, at a record amount.

POWERTRAIN SYSTEMS (PTS)

The Powertrain Systems Business Group is at the heart of the electrification revolution, developing and producing powertrain solutions to improve today's electrified powertrains, and to shape the electric mobility of tomorrow.

€5.689bn 29% OF 2022 GROUP SALES

5 PT OUTPERFORMANCE (ADJUSTED ^*)

+10.9% EBITDA MARGIN

25,900 EMPLOYEES

56 PLANTS

25 R&D SITES

^* 2021 and 2022 sales adjusted as if the high-voltage electrification business had been consolidated in the Group's financial statements as of January 1, 2021.

POSITIONING AND STRENGTHS

6X INCREASE IN HIGH-VOLTAGE SYSTEM CONTENT PER VEHICLE BY 2025 (VS 2021)

2/3 OF PTS ORDERS IN 2022 FOR HIGH-VOLTAGE ELECTRIFICATION

2025 OUTLOOK ^*

~€7.5bn ORIGINAL EQUIPMENT SALES

15% ANNUAL GROWTH OVER THE 2021-2025 PERIOD

>8 PT OUTPERFORMANCE BETWEEN 2021-2025

~13% EBITDA MARGIN IN 2026

^* Move Up Plan as published in February 2022.

DESCRIPTION OF THE BUSINESS GROUP

The Powertrain Systems Business Group is at the heart of the electrification revolution, developing and producing innovative powertrain solutions to improve today's electrified powertrains, and to shape the electric mobility of tomorrow.

In July 2022, the integration of Valeo Siemens eAutomotive, the joint venture formed with Siemens in 2016, provided the opportunity to reorganize the Powertrain Systems Business Group into two Product Groups: Powertrain Electrified Mobility Powertrain Systems Driveline

These two Product Groups work closely together to develop and produce:

Valeo's 48V powertrain system is a hybridization solution for all types of vehicles and a full electrification solution for urban vehicles.

It can be used in hybrid and all-electric applications, and is versatile and less expensive than high-voltage (over 60V) motors, with a less complex architecture that requires less safety equipment and is easier to service. Some of its components derive from technologies already in series production (48V starter-alternator, derived from alternator technology, for example), which significantly reduces development costs. Valeo's 48V all-electric motors are versatile, meaning they can be used to power not only cars, but also new urban mobility (urban electric vehicles, autonomous shuttles, motorcycles and even the three-wheel rickshaw vehicles found on Asian markets, as well as electric bikes).

In July 2022, the Valeo Siemens eAutomotive joint venture, which develops high-voltage electric powertrain solutions for plug-in hybrid and all-electric vehicles across all market segments, was integrated into the Powertrain Systems Business Group's Powertrain Electrified Mobility Product Group.

Valeo's all-electric offering addresses growing demand from automakers for electric powertrain systems across the range. Valeo's powertrain systems run at voltages of 60V upwards (up to a power rating of 347 kW, or the equivalent of over 470 hp) and give optimum performance, lower energy consumption and greater comfort.

Valeo builds on nearly a century of extensive experience to take a comprehensive approach to powertrain system design from the outset, covering transmission and integration.

Complementary coverage across the two Product Groups of the Powertrain Systems Business Group enables Valeo to address growth in the hybrid and electric vehicle market with solutions adapted to all types of transmission: automatic, semi-automatic, dual-clutch and hybrid.

Its hybrid and all-electric powertrain systems are designed for integration in all types of vehicle architecture: on the engine shaft, before/after/ in the transmission and/or on the rear axle, with an appropriate transmission system if needed.

Hybrid and plug-in hybrid powertrain systems are optimized as a whole. The electric motor power is adapted to vehicle use and architecture, and the combustion engine is optimized using Valeo solutions (sensors, actuators, electric motor) to ensure optimum operation and compliance with standards on greenhouse gas emissions (and thereby reductions in fuel consumption) and pollutant emissions (particles, NOx, etc.).

Valeo all-electric powertrain systems, both low-voltage (48V) and high-voltage (over 60V), include the motor and inverter (motor control electronics) and the transmission for transferring torque and power to the wheels.

Its comprehensive powertrain systems also include the electric oil pump (for lubrication and thermal management) and anti-theft and clutch systems. Battery charging is managed via an onboard charger that connects to the power grid.

The DC/DC converter links the battery (48V, 400V or 800V depending on the hybrid or all-electric application) to the vehicle's onboard network (12V) to power the vehicle's electrical equipment and accessories (car radio, windshield wipers, etc.).

Valeo has advanced expertise in power electronics, essential for the control of electric motors.

MARKET TRENDS AND OUTLOOK

In 2022, the automotive market once again had to contend with an increase in raw material costs and a semiconductor shortage, but also a major energy crisis. Several regions have confirmed or announced they will phase out internal combustion engine vehicles and transition to all-electric mobility. Market penetration for electric vehicles accelerated in 2022, with sales approaching 8 million units, twice as many as in 2021.

In response to market trends, the Powertrain Systems Business Group has decided to focus all its development and innovation efforts on solutions for all-electric mobility, in both high-voltage and low-voltage formats, since electrification concerns all forms of mobility. The Powertrain Systems Business Group no longer addresses the automotive industry alone, but provides proven and robust solutions to support transition of the entire mobility sector towards all-electric vehicles.

THE POWERTRAIN SYSTEMS BUSINESS GROUP'S GROWTH IS DRIVEN BY:

conventional and hybrid solutions, where Valeo is lengthening its lead, and low- and high-voltage electric mobility solutions, which are growing rapidly.

The electrification market is highly competitive but not yet mature. In this environment, Valeo already produces low- and high-voltage electric powertrain systems and offers a portfolio of innovative solutions to meet automaker and market requirements for coming generations. Valeo has a market share of around 15% in this rapidly growing market.

2022 HIGHLIGHTS

FEBRUARY

Valeo and Renault announced they were joining forces to develop and manufacture a new-generation electric motor without magnets or rare earth metals.

JUNE

Atul, Honda and Valeo announced partnership to accelerate three-wheeler electrification in India.

JUNE

Order intake for high-voltage powertrain systems since January 2021 exceeded target of 4 billion euros set for the 2021-2022 period, seven months ahead of schedule. Orders mainly concern new 800V SiC technology.

JULY

Valeo integrated 100% of Valeo Siemens eAutomotive joint venture and reorganized Powertrain Systems Business Group into two complementary Product Groups to develop solutions for all-electric mobility.

SEPTEMBER

Valeo launched series production of the Valeo Cyclee cargo bike system.

SEPTEMBER

Valeo won a Pace Award for its Pendulum Dual Mass Flywheel Gen. 2.

SEPTEMBER

Valeo and the CEA announced their collaboration for the next generations of power electronics.

DECEMBER

First prototype finalized for an electric mower with five Valeo 48V electric motors (two for propulsion and three for mowing), presented at CES Las Vegas in January 2023.

THERMAL SYSTEMS (THS)

The Thermal Systems Business Group designs and manufactures intelligent solutions for optimizing vehicle thermal energy and in-vehicle comfort for all occupants, especially the ones that are essential to electric vehicle efficiency.

€4.543bn 23% OF 2022 GROUP SALES

5 PT OUTPERFORMANCE

7.3% EBITDA MARGIN

23,500 EMPLOYEES

65 PLANTS

14 R&D SITES

POSITIONING AND STRENGTHS

2.5X INCREASE IN VEHICLE ELECTRIFICATION CONTENT PER VEHICLE BY 2025 (VS 2021)

2025 OUTLOOK ^*

~€5bn ORIGINAL EQUIPMENT SALES 11% ANNUAL GROWTH OVER THE 2021-2025 PERIOD

>4 PT OUTPERFORMANCE BETWEEN 2021-2025

~13% EBITDA MARGIN

^* Move Up Plan as published in February 2022.

Valeo's e-skateboard integrating electric powertrain systems and the associated e-thermal systems

DESCRIPTION OF THE BUSINESS GROUP

THERMAL MANAGEMENT IS MORE IMPORTANT THAN EVER FOR ELECTRIC MOBILITY.

The Thermal Systems Business Group develops systems addressing various electric mobility challenges (for cars, buses, trucks) in terms of cost, energy efficiency and usage, primarily as regards improvements to vehicle range, battery charging speed and carbon footprint.

The Business Group has expertise spanning passenger thermal comfort and thermal energy management for batteries and structural parts enhancing collision protection.

It offers: smart and simplified thermal management systems (global architecture and control laws); compact integrated multifunction modules (HVAC, heat pump modules, front panel modules); efficient, lightweight components with reduced carbon footprint (e-compressor, exchangers, electric valves and pumps, brushless fans and motors, controlled shutters, electric air, water and radiant heaters, beams and structural reinforcements in composite materials, etc.), all controlled by software.

TECHNOLOGICAL SOLUTIONS AND MAJOR INNOVATIONS

Valeo Thermal Systems designs and produces smart, compact heat pump systems integrating all the components (exchangers, valves, pumps, fluid distribution board and sensors) compatible with R-1234 and R-744 fluids. High efficiency in both heating and cooling modes brings weight and cost reductions of up to 20%. The Business Group also offers low-consumption cabin heating with the Valeo FlexHeater radiant heating system, controlled with contact surfaces and the air conditioning unit. Together, these solutions reduce the impact of interior heating requirements on the battery pack by 20% to 45% in cold weather (7°C).

Noise from the front fan and the compressor during rapid charging of EVs can be a key challenge. The Thermal Systems Business Group has developed a silent cooling module that reduces the vehicle's noise signature by up to 7dB(A) during rapid charging. This ultra-compact module (Z<250 mm) also improves vehicle aerodynamics and frees up more space for cameras/LiDARs or front trunk capacity than conventional modules.

With its leading position in battery cooling solutions and firm commitment to reduce greenhouse gas emissions, the Thermal Systems Business Group has developed the next generations of low-carbon solutions, using recycled aluminum or dielectric fluid, combined with thermoplastic composite casings for battery packs.

It also develops structural parts in thermoplastic composite for body reinforcement (bolster, beam and crash box). This recyclable material is lighter, equally robust and offers the same performance. And the switch from a metal to thermoplastic reduces the CO ₂ impact by up to 80%.

IDEAL POSITIONING FOR THE THERMAL SYSTEMS BUSINESS GROUP

With the growing electrification of mobility, thermal management has become a major challenge, opening significant growth opportunities for the Business Group. The thermal systems market is set to more than double by 2030, to 49 billion euros. Valeo Thermal Systems stands as a highly valuable systems partner, with worldwide coverage, close reach to manufacturers and a broad customer portfolio that includes both traditional automakers and new mobility players. Valeo is highly integrated and offers a comprehensive product range effectively addressing the cost and carbon-footprint challenges raised by the mobility of the future.

MARKET TRENDS AND OUTLOOK

Individual mobility solutions have diversified considerably in recent years. However, the light motor vehicle remains attractive for private and commercial use, as do buses for public transportation.

At its current scope, the Thermal Systems Business Group is aiming to outperform its addressable market by more than 4 percentage points by 2030, driven mainly by the mass electrification of vehicles, both hybrid and all-electric. All-electric vehicles alone already accounted for nearly 8% of the world market in 2022, and the figure is expected to reach nearly 29% by 2030.

The thermal management content of an electric vehicle will be 2.5 times higher by 2025.

The technology roadmaps of all automakers accommodate the need for an optimized thermal management system for energy performance and passenger comfort in electric vehicles. Battery thermal management, improved for faster charging, along with heat pump penetration to ensure travel range in winter, are important content and growth drivers.

As a result, the market for automotive thermal systems offers significant momentum and opportunity.

2022 HIGHLIGHTS

In 2022, the Thermal Systems Business Group booked record orders topping 4.6 billion euros in the area of thermal solutions for electrified vehicles, proving that its technology roadmap is on the right track.

MARCH

Valeo signed an advanced development contract with an Asian automaker for a composite rear impact beam including shock absorbers.

MAY

Valeo supplied an XXL battery pack plate heat exchanger for a leading German automaker's new electric vehicle platform.

MAY

Valeo supplied the world's first recycled plastic climate control unit for a leading German automaker, the Business Group's largest order to date, as well as a front-end cooling module (September 2022).

JUNE

Valeo supplied the first Smart Heat Pump module designed by an automotive supplier for a Chinese automaker.

JULY

European automaker with international scope extended order for glycol battery coolers for its electric vehicle platform.

OCTOBER

Valeo signed an agreement with TotalEnergies to develop an innovative way of cooling electric vehicle batteries using a new, very high-performance dielectric fluid.

NOVEMBER

Valeo and École Polytechnique renewed partnership to accelerate innovation projects.

DECEMBER

European Commission granted funding of more than 3.5 million euros for an initial project on laser welding for the aluminum coolers of electric vehicle batteries.

This solution will contribute to a low-carbon Europe.

DECEMBER

European automaker placed substantial order for an even higher performance heat pump system for their new global electric platform.

VISIBILITY SYSTEMS (VIS)

Through its Visibility Systems Business Group, Valeo is the world leader in the lighting and wiper systems markets.

€5.363bn 27% OF 2022 GROUP SALES

-2 PT OUTPERFORMANCE

13.1% EBITDA MARGIN

32,200 EMPLOYEES

48 PLANTS

23 R&D CENTERS

POSITIONING AND STRENGTHS

1.2X INCREASE IN CONTENT PER VEHICLE BY 2025 (VS 2021)

10% GROWTH BY 2025 (VS 2021)

2025 OUTLOOK ^*

~€6bn OEM SALES GROWTH

10% PER YEAR IN 2021-2025

>4 PT OUTPERFORMANCE BETWEEN 2021-2025

~15% EBITDA MARGIN

^* Move Up Plan as published in February 2022.

DESCRIPTION OF THE BUSINESS GROUP

The Visibility Systems Business Group designs and produces innovative, high-performance, smart exterior and interior lighting and signaling systems, along with wiper and sensor cleaning systems.

These solutions help the driver in all driving situations, and improve safety for all vehicle occupants and road users. These systems enable all vehicles, including automated vehicles, to drive in all usage conditions and create a highly immersive experience for all vehicle passengers.

The Visibility Systems Business Group's products are designed to meet driver needs both in manual mode and - in the near future - in autonomous mode, by:

As well as being designed to offer the best performance at an affordable cost, all of the systems developed by the Business Group are also optimized for weight and energy consumption to help minimize the greenhouse gas emissions of internal combustion engine vehicles and increase the travel range of electric vehicles. The entire innovation strategy is aligned with Valeo's CAP 50 carbon neutrality commitments.

Visibility Systems has two Product Groups:

The Lighting Systems Product Group is the world leader in exterior signaling and lighting systems, thanks to its broad portfolio of solutions covering all market needs.

Its innovative interior lighting solutions create a genuine experience on board.

The Wiper Systems Product Group offers sensor cleaning solutions for autonomous vehicles and window wiping and cleaning systems to provide both the driver and the vehicle's optical sensors with perfect visibility of the road.

MARKET TRENDS AND OUTLOOK

Growth opportunities are driven by developments in electric vehicles and the major changes in the style of the front and rear as a means of asserting brand identity and expanding designers' style choices (illuminated logo and front- and rear-ends).

The cabin well-being and safety experience is also a way for brands to differentiate themselves. Since interior lighting is a key factor in this area, there are genuine growth opportunities in this market for years to come.

Autonomous vehicles need to communicate with their surroundings, and lighting is fundamental, enabling the vehicle to provide clear, real-time information for other road users.

This requires an increasingly complex combination of lighting, signalling, electronics and software in order to create advanced smart solutions.

This trend is opening up opportunities in 360° communication-capable lighting systems and in rear lighting.

Safety is paramount in the development of ADAS and autonomous vehicles.

Sensor cleaning for the many cameras, LiDARs (laser detection systems) and infrared sensors that equip these vehicles is an essential function to ensure they operate reliably in all seasons and weather conditions.

Valeo is the world leader in lighting systems.

2022 HIGHLIGHTS

The 15-mm ThinLens module, already fitted on more than 21 models and boasting a hardware standardization rate of nearly 94%, won two awards: the Gasgoo Award in China (October) and the CES Innovation Award in the United States (December).

The Visibility Systems Business Group stepped up its growth through strategic alliances and partnerships with companies such as Ningbo Swell Industry Co. (December) and SRG Global (October) in illuminated front grilles, and with Motherson (February) in interior lighting.

APRIL

Record order intake for wiper systems, especially electronic wiper mechanisms and arm and blade sets with integrated washer systems, a market led by Valeo for over ten years.

MAY

Valeo cemented its status as an innovative player in interior lighting, with first contract signed for dynamic ambient lighting and back-lighting with Chinese automakers.

JUNE

Substantial order intake, particularly in the United States, highlighted growing market interest for our rear signaling solutions, which offer unparalleled consistency and a top-end finish at an optimal price.

OCTOBER

Record order intake, including for adaptive HD headlamps, and a very significant share of orders in China for front lighting systems.

NOVEMBER

Substantial order intake for sensor cleaning systems.

VALEO SERVICE (VS)

Valeo Service supplies original equipment spares and services to car dealer networks and the independent aftermarket.

AS AN AUTOMOTIVE AFTERMARKET SPECIALIST, VALEO SERVICE SUPPORTS REPAIR AND MAINTENANCE PROFESSIONALS IN THEIR OPERATIONS

€2.256bn IN AFTERMARKET SALES, 11% OF 2022 GROUP SALES

9% GROWTH COMPARED TO 2021

1,300 EMPLOYEES

MORE THAN 150 COUNTRIES COVERED

POSITIONING AND STRENGTHS

Valeo Service supplies original equipment spares and services to car dealer networks (OES market) and to the independent aftermarket (IAM market). Valeo Service is a trusted partner that supports the development of aftermarket businesses on the vehicle maintenance, crash and repair markets:

Valeo Service aims to be a value-creating partner for all aftermarket players: a Smart, Trusted and Sustainable partner offering a Premium Experience.

To create this value, Valeo Service:

This mission is summed up in the Smart Care for You promise.

Valeo Service offers technical training to aftermarket professionals.

DESCRIPTION OF THE BUSINESS GROUP

A "SMART" PARTNER

Accelerating worldwide rollout of Valeo Service websites: addressing key users (distributors, mechanics and drivers), with an emphasis on user experience and customization. The international platform valeoservice.com, along with 19 national websites, today covers the United Kingdom, France, Spain, Portugal, Italy, Germany, Poland, the Netherlands, Belgium, the United States, Mexico, Brazil, Argentina, India, Turkey, China and Thailand. Valeo's e-platforms enjoy a large and rapidly growing number of visitors, making them some of the most widely viewed aftermarket websites in the world.

Enhanced digital strategy for original equipment spares (OES) with the creation of innovative communication materials.

A "TRUSTED" PARTNER

To ensure mechanics can keep their spare parts listings and tooling up to date, Valeo Service pays special attention to launching the latest original equipment innovations on the aftermarket and developing dedicated aftermarket solutions. Some 13,000 products were added in 2022.

Upgrade to the Valeo Tech@ssist online technical support platform for workshops, co-designed with workshops and distributors.

A new interactive catalog, specific to clutch kits for trucks. Clutches are one of the product families where Valeo's expertise is particularly recognized.

But given the very large number of items in the catalog, searching for the right part can be time-consuming. Valeo Service's new interactive catalog enables workshops to find the right component from a part number present on the vehicle.

The result is considerable time savings for repair professionals. Valeo is the first automotive supplier to offer such a tool. Already available in some European markets, such as the United Kingdom and Germany, it was released worldwide in the first half of 2022. This interactive catalog received the European Innovation Award from Frost & Sullivan in 2022.

A "PREMIUM EXPERIENCE" PARTNER

Valeo Specialist Club: a unique workshop loyalty program, developed with input from partner workshops. Valeo Specialist Club is accessible via smartphone app or the Valeo Service website, and includes a feature allowing workshops to sign up using a single account or open multiple accounts to reward their teams.

It is accessible via a smartphone app:

For 2022, Valeo received Nexus Automotive's Supplier of the Year award. This recognition solidifies a successful collaboration that began in 2014.

Nexus is the largest international-scale distributor, with sales currently topping 35 billion euros.

A "SUSTAINABLE" PARTNER

Reducing greenhouse gas emissions has long been a concern for the Valeo Group. With today's mounting awareness of the need for more environmentally-friendly vehicles, the Group is reaping the benefit of its longstanding strategic investments in this area. These trends, already apparent in the background of the automotive aftermarket business, have accelerated.

By offering the aftermarket these new technologies for electrified vehicles, Valeo is contributing to the ongoing electric revolution.

It began in 2020 with the release of the iBSG (integrated Belt-driven Starter Generator) for mild-hybrid technologies, the very first on the market. Soon after, in 2022, came the Dual Wet Clutch Dual-Mass Flywheel (DWC DMF) technology, recognized as highly innovative in reducing noise and vibration, while providing flexibility to the stop-start mechanism in hybrid vehicles.

The product is developed in France by Valeo, world number-one in wiper systems.

MARKET TRENDS AND OUTLOOK

The automotive repair market is in a state of transformation, as evidenced by the arrival of new entrants on the aftermarket, the strong growth in online sales, the increasing complexity of automotive technology, and heightening expectations from professional and private customers on ecology, health and safety. In this changing market context, vehicle maintenance and repair specialists face considerable uncertainty, with challenges in productivity, efficiency and profitability, which is under particular strain given the worldwide health crisis and the ensuing business closures and lockdowns.

With its STEPS strategy, Valeo Service makes a firm commitment to support vehicle maintenance and repair specialists with solutions closely tailored to their needs and designed to create value.

We're talking about Smart solutions, that are agile, innovative, digital and personalized, from a Trusted partner, through products and services geared to more Sustainable mobility, the purpose being to bring customers a Premium Experience.

Valeo Service's mission is embodied in its strategic STEPS program: Smart, Trusted, Sustainable, Premium Experience.

1.4 Geographic and industrial footprint

Geographic footprint at December 31, 2022

At December 31, 2022, the net carrying amount of the Group's real estate portfolio (land and buildings) was 1,455 million euros (see Chapter 5, section 5.4.6, Note 7.3 "Property, plant and equipment" to the consolidated financial statements, pages 378 to 381). The portfolio is largely composed of plants, the majority of which are wholly owned.

The net carrying amount of the Group's equipment, which is largely made up of technical facilities, machinery and tools, was 3,607 million euros at December 31, 2022, excluding property, plant and equipment in progress and other property, plant and equipment (see Chapter 5, section 5.4.6, Note 7.3 "Property, plant and equipment" to the consolidated financial statements, pages 378 to 381).

Environmental constraints liable to have an impact on the use of fixed assets and real estate result from the regulations applicable in this area to all Group establishments (see Chapter 4, section 4.1.4 "Sustainable development policies", under "Environmental policy", pages 218 to 220).

1.5 Functional structure

The Group's functional structure is as follows:

1.5.1 Internal Audit and Control

Mission

The Internal Audit and Control Department is tasked with building a robust, integrated and structured risk management and control environment capable of helping the Group achieve its objectives.

Organization

It has four units:

1.5.2 Sales and Business Development

Valeo partners with practically all of the world's automakers and truck manufacturers in developing, producing and marketing innovative products, systems and modules for both the original equipment market and the aftermarket.

Valeo supports its customers in the development of their markets on all continents, fielding a unique portfolio of innovative technologies and products designed to meet the automotive industry's challenges in accelerating powertrain electrification and ADAS, the reinvention of the interior experience and lighting everywhere.

Mission

The Sales and Business Development Department is tasked with designing and implementing a sales strategy adapted to all markets, and forging local and global partnerships with automakers to sustain profitable, global growth.

Organization

The Sales and Business Development Department pursues a program of continuous improvement to ensure customer expectations are met as fully as possible. It breaks down into three main functions:

2022 highlights

The breakdown of 2022 original equipment sales among the Group's customers once again confirms the geographic diversity and balance of Valeo's customer portfolio:

Thanks to its diverse customer portfolio and powerful product strategy in electrification and ADAS, Valeo recorded order intake of 32.6 billion euros in 2022, 1.9 times the Group's original equipment sales. This confirms the successful positioning of Valeo's new technologies and products.

1.5.3 Communications

Mission

The Communications Department is tasked with defining and implementing the Group's communications strategy and with strengthening Valeo's image and reputation across the world and with all stakeholders (employees, customers, shareholders, journalists, suppliers, partners and the general public).

Organization

It is structured around five units:

All of the Group's communications professionals in both the Communications Department and within the Business Groups and countries work together to reinforce the Group's image and reputation across the world, in line with the main areas of focus determined annually by the Communications Department.

1.5.4 Ethics, Compliance and Personal Data Protection Office

Mission

The Valeo Group's Ethics, Compliance and Personal Data Protection Office proposes, designs, pilots and coordinates the implementation of programs to detect and prevent risks of corruption and anti-competitive practices, and to ensure compliance with international sanctions and export controls as well as with regulations on personal data protection and human rights.

Organization

The Ethics, Compliance and Personal Data Protection Office is headed by the Group Chief Ethics, Compliance and Personal Data Protection Officer, who sits on the Executive Committee and the Operations Committee and chairs the Alerts Committee.

It comprises two units:

1.5.5 Finance

The Finance Department comprises the following departments: Management Control, Reporting, Accounting, Financing, Cash Management, Tax, Investor Relations (see Chapter 6, section 6.2 "Investor relations", pages 467 to 468), Strategic Operations, Information Systems and Risk Insurance. Operating either on a Group-wide network basis or centrally from headquarters, these functions execute Valeo's financial strategy. In particular, they are tasked with:

Management Control

The management control function acts as co-pilot, assisting operations managers in the management of Group activities and in preparing and approving investment documentation and responses to tenders launched by automakers. It assists with the monthly accounts closing and provides analyses of performance, risks and opportunities using both key financial and operating indicators. It draws up three-month forecasts on a monthly basis and sets out the budget and the medium-term plan.

The management control function is present at all levels of the organization (sites, Product Lines, Product Groups, Regional Operations, Business Groups and Group). It works together with the accounting and cash management services to provide relevant and reliable information. The management control function has a number of effective tools to enable it to carry out its duties, including standardized enterprise resource planning and reporting systems.

Accounting

Mission

The Group Accounting Department is responsible for preparing the consolidated financial statements for the Group and the individual financial statements for Valeo. Its mission is to supervise and control all the Group's accounting activities.

Organization

To perform these duties, the Group Accounting Department is organized into three units:

The accounts function for Group subsidiaries is usually handled by the Shared Services Centers (SSC). The Group currently has 13 SSCs worldwide.

The Group Accounting Department guarantees the quality of the consolidated financial statements and their consistency with IFRS, and ensures that subsidiaries' statutory financial statements are compliant with local accounting standards. As part of its role, it strives for continuous improvement in the transparency, relevance and readability of the financial information reported by Valeo.

Financing and Treasury

Mission

The Financing and Treasury Department develops and implements the Group's finance, cash management and financial risk management strategy. It guarantees the security and optimization of cash flows and manages relations with banks and rating agencies.

Organization

The Financing and Treasury Department is structured into three sub-departments:

2022 highlights

At the end of November 2022, Valeo placed 750 million euros' worth of sustainability-linked bonds. This second issue based on the "Green and Sustainability-linked financing framework" established in July 2021, underlines Valeo's commitment to achieving carbon neutrality and is a natural extension of the Group's overall efforts in terms of sustainability.

Tax

The Tax Department supports the Group's strategic and operational decisions and manages all tax matters.

The Tax Department is divided into three functions:

Information Systems

Mission

The Group's Information Systems Department is tasked with defining and implementing solutions that address all of the Group's business needs. It is structured into six Functional Departments and five Continental Departments.

Organization

The six Functional Departments define Group standards for IT systems and infrastructure as follows:

The five Continental Departments oversee the measures taken to roll out and support adherence to standards at Business Group level. These departments, which work closely with operational staff, contribute to defining needs and are responsible for the implementation of solutions and services at Group sites. They are organized into a network of SSCs, usually one per country. Specialized functional analysts provide systems support for the IT managers at each site.

2022 highlights

Risk and Insurance

The two main responsibilities of the Risk and Insurance Department are to (i) help draw up the management policy for insurable risks and oversee its application, and (ii) take out global insurance covering the risks relating to Valeo's businesses.

The Risk and Insurance Department contributes to updating the Group's risk map within the Risks Committee.

It specifies and implements the policy relating to the transfer of the Group's residual risks to the insurance and reinsurance markets by taking out insurance coverage and rolling it out globally. It ensures that coverage is constantly adapted to changes in the Group's situation.

Risks that could impact Valeo's business are set out in Chapter 2, section 2.1.1 "Strategy risks", page 95 et seq. Details on insurance and risk coverage are given in Chapter 2, section 2.2 "Insurance and risk coverage", page 104.

1.5.6 Legal

Mission

The Legal Department ensures that Valeo's operations are carried out in compliance with all applicable legislation and internal procedures, and works closely with Valeo's specialist departments to defend Group interests on any issues arising.

Organization

The Legal Department is run by the Group's General Counsel, who sits on the Executive Committee and the Operations Committee. He is also the Group's General Secretary.

He leads a team that is mainly based at the Paris headquarters but also extends to Valeo's main markets: Germany, United States, Japan and China. The Paris-based team comprises the Deputy Group General Counsel, whose tasks include handling due diligence and negotiating and drafting contracts during mergers and acquisitions, and five General Counsels each responsible for a Business Group or Valeo Service, who supervise legal affairs worldwide for the activity under their remit. The other members of the Legal Department are based abroad. These regional General Counsels report to their respective National Directorates and are more particularly dedicated to operations in their particular countries or regions, in coordination with and under the responsibility of the General Counsels of the Business Groups and Valeo Service. All of the General Counsels advise operations managers and ensure that transactions within their remit are carried out in line with the Group's applicable ethics and compliance rules, the delegation and approval procedures implemented by General Management, and the interests of the Group.

The legal team works alongside the other functions, from the product design stage through to marketing and sales and beyond. It assists the Research and Development Department in forming R&D partnerships, the Industrial Department in setting up new industrial facilities, the Purchasing Department in its relations with suppliers, and the Sales and Business Development Department in contracts with both old and new customers, as well as in managing product warranties.

The General Counsels of the Business Groups and Valeo Service are supported by and collaborate closely with the other functional departments to ensure maximum overall business security. They also oversee legal matters at Group entities.

1.5.7 Purchasing

Mission

The main responsibilities of the Purchasing function are to reduce overall purchasing costs by sourcing from the most competitive suppliers, to implement rigorous selection processes for new suppliers, to ensure suppliers and subcontractors comply with its total quality and innovation approach, and to establish close partnerships with the most innovative and efficient suppliers. Valeo sees its purchasing strategy as a path to achieving a truly competitive edge.

Organization

The Group's Purchasing Department has two major priorities:

Thanks to its Purchasing Department and its global reach, Valeo sources from cost-competitive regions while remaining close to customers. Valeo is particularly vigilant that suppliers comply with its Code of Ethics, focusing special attention on labor rights, human dignity and environmental protection.

2022 highlights

In 2022, Valeo continued to strengthen measures to ensure the continuity and performance of its supplier panel:

This reflects Valeo's commitment to supporting its suppliers in their own quality initiatives, and to integrating them into Group projects.

The year 2022 was marked by rising energy prices, especially in Europe, with the war in Ukraine. In addition, the post-Covid recovery period brought tighter inflationary pressure on raw materials and ongoing tension in the electronic components market.

Despite this, the Group's purchasing organization as a whole showed excellent resilience, ensuring uninterrupted deliveries to all Valeo customers.

1.5.8 Research and Development and Product Marketing

Mission

The main purpose of Valeo's Research and Development and Product Marketing Department is to position Valeo among the world's leading automotive suppliers, in terms of innovation, CO ₂ emissions reduction and accident prevention, largely through the development of electric, autonomous and connected vehicles.

Organization

Valeo's Research and Development and Product Marketing Department covers Research, Innovation, Development, Product Marketing and Intellectual Property.

Product Marketing teams carry out surveys to develop a fuller understanding of users' mobility expectations, factoring in new usage patterns related to electric, autonomous and connected vehicles. These surveys are correlated with the needs expressed by automakers. The findings, along with benchmarking results, enable Valeo to draw up the most appropriate roadmaps.

Valeo's successful open innovation program has led to various types of partnership with start-ups and top-ranking universities and research institutes in Europe, Asia and North America. It is also an efficient way of staying abreast of technological progress.

Partnerships with universities, laboratories and start-ups have intensified and become more international in scope, especially in Asia and the United States. Collaborative projects with leaders in other industries have been strengthened to share experience, best practices and research efforts in a spirit of collaborative innovation.

In 2022, Valeo stepped up its initiatives to decarbonize its products under the "CAP 50" Carbon Neutrality Plan. Specifically, carbon footprints have been quantified for all technological platforms, and a massive reduction plan has been put in place accordingly. In addition, a 4Rs (Robust Design, Remanufacturing, Repair, Recycle(d)) Circular Economy policy is already yielding tangible results, such as with the qualification of 100% recycled polycarbonate and polypropylene. Finally, remanufacturing and repair operations are to be intensified over the coming decade, with the aim of doubling volumes of parts produced using materials from the circular economy.

To ensure the most efficient use of resources, the Research and Development function optimizes team location on the basis of customers, costs, the skills market, and opportunities for synergies within the Group. Teams were accordingly strengthened in China, Japan, India and the United States.

Skills development continued: the R&D workforce grew by more than 2,000 to 17,244; the number of Experts increased by 15% to 1,619 (11% women); and Internal Technical Schools delivered 383,000 hours of technology training worldwide.

Processes, methods and development tools are continually adapted to enhance team performance and improve the technical and economic efficiency of the technological platforms that structure developments in electrification and in autonomous and connected vehicles.

The Group has rolled out a major policy to standardize components and products (platforms) across all Product Groups. A crossfunctional technologies engineering organization (Engineering Disciplines) has been set up to coordinate, standardize and develop key technologies across the Group in seven areas: systems, software, electronics, artificial intelligence, mechanics, materials and cybersecurity.

2022 highlights

In 2022, the Group's gross Research and Development expenditure totaled 2,077 million euros, representing 10.4% of sales. Innovation is central to Valeo's organization, and innovative Valeo products (i.e., products that did not exist three years ago) such as ADAS, electric powertrains, battery thermal management and intelligent lighting systems accounted for 62% of orders received in 2022.

Valeo gives priority to protecting its innovations, and its policy has proved effective on several counts. Its innovations are protected by a portfolio of more than 35,400 patents worldwide.

Valeo's coverage of new mobility solutions expanded with the announcement of a major partnership with Atul and Honda on the electrification of three-wheeled vehicles in India, and with the market release of its made-in-France electric assistance system for bikes, Valeo Cyclee.

1.5.9 Human Resources

Mission

The Human Resources Department holds a key place in Valeo's strategy, helping to build a common corporate culture rooted in strong values (teamwork, transparency, empowerment, professionalism, ethics) and personal behaviors (courage, agility, solidarity), geared toward achieving the Group's industrial and commercial objectives.

Its multiple aims address primordial challenges (see Chapter 4, section 4.1.4 "Sustainable development policies", paragraph "Employee policy", pages 222 to 225):

Organization

Valeo's Human Resources strategy plays a key role in the Group's international expansion and positioning as a company developing and manufacturing high-tech products and systems. It is based on a comprehensive approach, taking into account specific cultural, economic and market conditions.

It is rolled out through the "One HR" project, which is based on three pillars:

This "three pillars" model is rolled out at each level of the organization: in the Group Human Resources Department, in each Business Group, in each country and in certain Product Groups and Product Lines. A total of more than 1,660 people work in the Human Resources network, broken down between the various specialties:

This organizational model, built around Valeo Employee Services, is designed to reinforce the partnership between business and Human Resources teams, develop Human Resources expertise, and thereby foster greater efficiency in the function.

2022 highlights

Against the backdrop of high inflation, the continuing global pandemic, and the semiconductor supply crisis, the Human Resources Department played a key role in satisfying the Group's two priorities of protecting all employees and ensuring business continuity.

Cost control in an inflationary environment

Faced with production stoppages arising from the semiconductor shortage, then global inflation in 2022, the Group continued to variabilize its costs by adapting its workforce to weekly production requirements. This involved the discontinuation of temporary contracts (fixed-term and temporary staff). At the same time, the Group continued its efforts to recruit employees with production management skills.

Health protocol

In the first half of the year, the Group continued with the health protocol introduced in 2020, based on measures that go beyond the recommendations issued by the medical administrations of various countries. It allowed for a smooth return to work after the lockdown period and, today, enables all sites to operate as normal while ensuring maximum protection for all employees. The protocol, which is audited, is mandatory and applicable consistently at all Valeo sites worldwide, whether in plants, R&D centers or head offices (see section 4.3.3 "Valeo's non-financial risks", paragraph "Health and safety risk", page 256).

Acquisition and integration of Valeo Siemens eAutomotive

On July 4, 2022, Valeo acquired Siemens' 50% stake in Valeo Siemens eAutomotive, and now holds 100% of Valeo Siemens eAutomotive, the leader in high-voltage electrification, which has been integrated within its Powertrain Systems business. With Valeo Siemens eAutomotive, Valeo brings on board a recognized technological and industrial leader with a workforce of around 4,000, including more than 1,600 engineers, at seven plants in four countries (China, Germany, Hungary and Poland), as well as cutting-edge R&D (laboratories, test benches, simulation tools) and production capabilities.

Measures were taken to stabilize the manager turnover rate, given the scarcity of certain resources.

Preparation of new human resources management systems

As part of the digitalization and transformation of the Human Resources function, the Group prepared for the introduction of new management systems.

These new information systems will enable the Group to improve employee experience management, skills management, and workforce optimization, as from 2023.

2 RISKS AND RISK MANAGEMENT

2.1 Risk factors

The environment in which the Group conducts its business is constantly changing. Valeo is therefore exposed to risks, i.e., events which, if they occurred, could prevent it from meeting its medium-term objectives.

Methodology

Risks are mapped using a global, iterative approach involving several stages:

This general risk map is updated on a regular basis.

Two other specific maps were also put in place in 2018 to meet new regulatory requirements:

The Group has also initiated a process to identify risks and opportunities related to climate change, using the classification proposed by the TCFD ⁽³⁾ (see section 4.3.3 "Valeo's non-financial risks", pages 236 to 273).

The relationship between risk management and internal control is described in section 2.3.3 "Components of the Group's internal control and risk management system", pages 107 to 109.

Risk evaluation criteria

Risks are assessed according to two measures, each divided into four levels:

This chapter describes the main risk factors to which the Group is exposed.

Main risk factors

The list below indicates those risks that are considered to have a high level of criticality for the Group:

⁽¹⁾ Law No. 2016-1691 of December 9, 2016 on transparency, anti-corruption and economic modernization, known as the Sapin II law.
⁽²⁾ Government order No. 2017-1180 of July 19, 2017 on the disclosure of non-financial information by certain large corporations and groups of corporations.
⁽³⁾ Task Force on Climate-Related Financial Disclosures.

The other risks shown in the table below are considered to have a medium level of criticality.

The Group's operations could also be impacted by other risks of which it is not currently aware, or which it does not consider material at the date of this document. These procedures do not provide absolute assurance that the Group's objectives will be achieved and that risks will be avoided.

2.1.1 Strategy risks

Risks related to the automotive equipment industry

Risk factor

The Group's sales are directly dependent on the level of automotive production, which itself depends on registrations and automaker sales and production policies. In turn, these are influenced by a number of contextual factors linked to the geopolitical, macroeconomic and health situation. It should also be pointed out that supply contracts with automakers take the form of open orders, with no minimum volume guarantee.

Potential impact on the Group and risk management

A deterioration in the automotive market or a geopolitical conflict, as well as a change in regulations, customs, taxes or other barriers or restrictions to doing business in the regions in which the Group and its customers are present, particularly Europe, Asia or North America, could lead to a decline in the Group's revenue or profitability and/or to the default of some of its customers or suppliers, and could thereby affect Valeo's financial position.

In the event of a deterioration in the automotive market or the relocation of automotive production, Valeo has the necessary expertise and resources to implement large-scale action plans in order to variabilize costs and safeguard the Group's cash position. The Group maintains a tight rein on costs, particularly by ensuring good workforce flexibility. Moreover, the Group has operations in 31 countries and its sales are generated in some 60 countries. The diversity of the Group's sales in terms of region, customer, brand and platform makes it less vulnerable to negative trends in one of its markets. In line with its development strategy, Valeo also seeks to ensure that its original equipment sales are well balanced. The Group's two largest customers in 2022 accounted for 27% of its sales, its five largest customers, 53%, and its ten biggest customers, 79%. Valeo also derives 11% of its sales from the aftermarket, which is less sensitive to fluctuations in the economy. The balanced geographic alignment of Valeo's businesses and its diversified customer portfolio are described in Chapter 5, section 5.1.1 "2022 business review", pages 322 to 324.

Having dealt with the Covid-19 health emergency in 2020, Valeo's business in 2021 was affected by the electronic components crisis.

While the health emergency led to a sharp deterioration in the automotive market in 2020, in 2021 and 2022, the electronic components shortage resulted in major disruptions to production in the regions where Valeo and its customers are based. Ultimately, business was up year on year by 6.6% (source: IHS as of March 16, 2023), but remains well below pre-Covid levels, reflecting the ongoing electrical components shortage.

In this context, the Group's priority is to secure its customer deliveries and its teams worked hard to supply all customers without the slightest interruption in production.

However, the Group incurred additional costs linked to the price of electronic components as well as the extreme volatility of automakers' production programs (stop and start), which resulted in an increase in inventories. Valeo is currently negotiating with its customers in an effort to obtain compensation and thereby limit the impact of these disruptions on the consolidated financial statements.

Risks related to attracting and retaining talent

Risk factor

The Group operates in a competitive environment and in a sector that is undergoing radical change. This requires an increase in human resources as well as a broader spectrum of critical skills to ensure that it can adapt to changes in the automotive industry.

However, Valeo may face difficulties; firstly, in attracting and retaining talent, and secondly, in adapting and taking on the necessary qualifications and skill sets to develop and manufacture its systems and products.

The Group's huge investments in innovation mean that it needs to carry out targeted recruitment of skilled Managers and Professionals. The scarcity of labor in certain employment areas makes it difficult to hire the employees needed to increase production.

Potential impact on the Group and risk management

Failure by the Group to attract and retain talent could impact its product innovation, development, launch and production, and have a negative impact on its business, financial results and reputation.

For more information on the program, policies and actions implemented by the Human Resources Department and the related results, see Chapter 4, section 4.3.3 "Valeo's non-financial risks", paragraphs "Risk related to attracting talent" and "Risk related to developing and retaining talent", pages 259 to 266.

Attracting the highest performers is a key challenge for the Group amid a competitive environment undergoing a profound transformation. To meet its growth and development objectives, a recruitment organization system is in place in the form of Talent Acquisition Centers (TACs). These TACs bring together all teams dedicated to scouting and attracting talent in a given country or region. In 2022, working groups defined and implemented measures to improve the efficiency of the Group's recruitment procedures and increase the visibility of Valeo as well as its job vacancies. As a result of these measures, 85% of job vacancies (12,000 in total) were filled. A co-optation program is in place for employees. The Group regularly reports on career opportunities and job vacancies through a variety of channels, particularly its website, as well as social networks and partnerships with higher education institutions including universities, engineering schools and business schools. In the first half of 2022, a global recruitment campaign - Very Valeo - was launched and promoted digitally to develop the Group's employer image across all new recruitment channels.

Ensuring that high-performing employees remain with the Group is also a key priority for Valeo. Wishing to facilitate quick and successful integration, the Group has developed an onboarding program called "Valeo Discovery" for its Managers and Professionals. Valeo's internal mobility policy is based on annual interviews as well as on "country mobility forums", which were launched in 2019. The aim is to better identify all employees looking for mobility opportunities and be able to place them in vacant positions across the country concerned. Since 2020, an annual Career Week has been organized and an Internal Mobility Charter has been created to enable employees to accelerate their career paths. In 2022, more than 8,000 employees took part in the Career Week. An e-learning platform was also rolled out within the Group to develop employees' skills. During the year, a worldwide mentoring program called "Grow Together", which brings together nearly 500 Group managers and leaders (of whom 51% are women), was rolled out to promote manager development. An ambitious compensation, career development and training policy is also a critical way of recognizing, developing and leveraging talent. Manager training is a priority for the Group: three new training programs were launched in 2022 and more than 700 managers have already completed them. Valeo seeks to encourage diversity when recruiting talent: in 2022, 26% of Managers and Professionals hired were women. The Group seeks to promote women to senior management positions with the aim of doubling the number of women on management committees to 32% by 2030. Progress on this objective is monitored and reviewed several times a year. In 2022, women made up 21% of management committees, as in 2021.

In a bid to remain attentive to its employees and improve their satisfaction, the Group conducted a digital survey of over 91,000 employees in 2022, which had a participation rate of 77%. The survey raised the issue of homeworking conditions in the context of the pandemic; the results of the survey highlighted the quality of managerial relations. Valeo has rolled out action plans in each country addressing local recruitment and employee loyalty issues, particularly in areas of full employment.

The Group strives to recruit its blue-collar workers from the communities surrounding its plants. Wherever possible, it hires under permanent rather than temporary contracts while maintaining a certain degree of flexibility. It also adapts its teams' work schedules and ensures that new recruits are well integrated. The Group's compensation, training and career development policy is key to retaining blue-collar staff.

2.1.2 Operational risks

Risks related to the development and launch of new products

Risk factor

Valeo is exposed to the risks inherent in developing and launching new products. The Group may face problems in connection with project management, from design through to industrialization and including management of changes to orders already made.

As the Group conducts its business in an international environment, it is also exposed to risks resulting from changes in applicable laws or regulations affecting its products in all or some of its markets, or affecting export control regimes.

Potential impact on the Group and risk management

Failure to deliver in a timely manner innovative solutions, solutions that meet new regulatory requirements, or products expected by its clients, could harm Valeo's reputation and affect its financial position.

The Group may incur administrative and/or criminal sanctions and its customers and/ or suppliers may be unable to carry on their business either temporarily or definitively.

Measures in place to mitigate the risk inherent in developing and launching new products are based on:

In order to anticipate regulatory changes and ensure that the products it develops and manufactures are compliant, Valeo has implemented the following measures:

Valeo's export control policy consists of a specific compliance program based on strict rules and procedures applicable to Purchasing and Research & Development teams.

The Group constantly looks to anticipate changes in technology and in the regulatory landscape. However, it cannot be sure to anticipate all such changes.

For more details on Valeo's Research and Development policy, see Chapter 4, section 4.5.2 "Technological commitments", pages 289 to 292.

Risks related to the quality and safety of products and services sold

Risk factor

Some products and services may be intrinsically linked to the safety of people and goods.

Regulations seeking to protect car users and/or defend the public interest, particularly in terms of the environment, are increasingly strict and checks that such regulations have been complied with are ever more frequent and thorough.

Similarly, the contractual commitments imposed by Group customers, which are also highly demanding, reflect the excellence they expect from their suppliers in terms of operational performance.

If products sold by the Group were to prove insufficiently robust, present design, manufacturing or operational defects, or prove non-compliant or incompatible with applicable regulations, Valeo could be exposed to the following risks:

Potential impact on the Group and risk management

The Group's businesses, earnings and financial position as well as its image and reputation could be significantly affected.

During the product design and development phase, the Research and Development and Quality Departments are in charge of managing these risks. These departments ensure that the product has a robust design and complies with customer specifications, standards and regulations. During volume production, the Purchasing, Industrial and Quality functions, driven by the same total quality approach, seek to ensure that components and materials purchased are appropriate and meet the requisite quality standards, and also ensure that production processes are stable. The measures described below illustrate this approach during product development. It concerns all networks: R&D, Quality, Purchasing, Projects, Processes, etc.

The Group has taken out specific insurance policies to cover the risk that products may be recalled and protect itself against civil liability claims. However, it is uncertain whether these policies would be adequate to cover the full financial consequences of any such claims. In any case, criminal liability risk cannot be insured and certain coverage exclusions can be applied. The Group's insurance policy is presented in section 2.2 "Insurance and risk coverage" of this chapter, page 104.

Provisions for customer warranties are set aside to cover the estimated cost borne by Valeo to replace the products covered by the various warranties granted to customers. These amounted to 460 million euros at December 31, 2022 (see Chapter 5, section 5.4.6, Note 8 "Other provisions and contingent liabilities" to the consolidated financial statements, pages 387 to 389).

Cybersecurity

Risk factor

The Group depends on infrastructure and IT applications common to all of its businesses. These include procurement, production, distribution, billing, reporting and consolidation software, as well as new product design and development.

Cybersecurity risks can include breaches of confidentiality, loss of integrity and/or availability of the data and/or transactions processed by the information systems (system malfunction, data theft, data destruction and loss of data integrity). These may result from external (attempted denial of service, attempted damage, attempted hacking, malware ⁽¹⁾) or internal (tampering, breach of rules, human error, breach of data confidentiality) threats. Valeo also faces other indirect social engineering-type threats such as "fake chairman" or "fake treasurer" fraud, blackmail and ransomware ^{1 (2) 3 4 5 6 7}, as well as indirect threats resulting from third party access to its network, and subcontracting.

In addition, the Group faces threats in relation to onboard systems and products, in their design phase and also in their operational and service phases, as the case may be. These threats are increasing with the rise of autonomous and connected cars.

Potential impact on the Group and risk management

All of these risks and threats could impact the Group's operations, its reputation and its profitability.

To address these risks and threats, in 2016 the Group stepped up information system security by recruiting a Group Chief Information Security Officer, who reports to the Chief Financial Officer. The Chief Information Security Officer is responsible for the governance and continuous improvement of information system security policy, and particularly:

Cybersecurity risks are managed across all geographies by a cybersecurity officer in each region, for all sites and at each site. The program for vetting suppliers and more generally, for verifying external systems interfacing with the Group's information systems or managing data on the Group's behalf (SaaS) ⁽⁵⁾ has been stepped up to better take into account any associated risk, the needs of Valeo's customers, current and future legal and regulatory requirements, and the recommendations on information system security issued by various government organizations.

All information system security rules are formally documented in an Information Systems Security Policy (ISSP), set out in an Information and Communications Technologies User Charter put in place by the Group and applied by all users. This charter is explained and illustrated in a practical guide that aims to raise users' awareness of the importance of safeguarding the Group's assets on a daily basis through the fair and responsible use of available IT resources. An additional program to raise employee awareness of emerging IT threats was rolled out in 2017 and, since 2020 also covers phishing ⁽⁶⁾. An operational security improvement program is also being deployed to combat the new threats faced by industries, which includes advanced detection and threat intelligence ⁽⁷⁾ features.

Product cybersecurity was enhanced in 2017 when the Group recruited a product cybersecurity officer. As of 2019, the Cybersecurity Officer reports to the Group Chief Information Security Officer. Working closely with the Product Groups, the Cybersecurity Officer is responsible for:

⁽¹⁾ Malicious software used to contaminate information systems.
⁽²⁾ Malicious software taking data hostage. Ransomware encrypts and locks files saved on computers and demands a ransom in exchange for a key allowing them to be decrypted.
⁽³⁾ "Security by Design" (SbD) is a strategy to mitigate cybersecurity risks with processes "that build security into IT systems from the beginning using sound design principles, rather than trying to tack it on at the end," (NIST definition - National Institute of Standards and Technology).
⁽⁴⁾ "Security by default" means processes are always applied whenever necessary, in terms of privacy, for example, as required by the General Data Protection Regulation (GDPR).
⁽⁵⁾ "SAAS" or "software as a service" is an application software solution hosted and operated outside the organization by a third party, also called a service provider.
⁽⁶⁾ "Phishing" is a fraudulent technique intended to trick Internet users through the use of deceptive emails into revealing personal (log-ons, passwords, etc.) and/or banking data by pretending to be a trusted third party.
⁽⁷⁾ "Threat Intelligence" refers to a body of expertise used to identify and analyze external IT threats to an organization on an ongoing basis.

Supplier and supply chain failure risk

Risk factor

In purchasing primarily specific products, Valeo is exposed to the risk that one of its suppliers fails to deliver on schedule the quantities required, or that the products supplied fail to meet the requisite quality standards.

Potential impact on the Group and risk management

Supplier failure risk

Failure of one or more of the Group's major suppliers in this respect could cause interruptions to suppliers and prevent the Group from delivering to its customers, or cause returns of products under warranty or product recalls.

This would also generate additional costs (exceptional transportation costs, deterioration in the supplier's production facilities or financial difficulties of the supplier). The Group's earnings and financial position could be affected.

Supplier failure could result:

The Group ensures secure relations with its suppliers through:

Since the supply capacity of certain businesses is limited, particularly electronic components, Valeo may be exposed to inadequate capacity leading to production allocation issues. To address this, production purchases are made with a broad range of suppliers, with several suppliers for each business and in each region where necessary and where possible. Ninety-five percent of Valeo's needs are handled by 2,131 suppliers. The Group's biggest supplier accounts for 2% of its purchases, its five biggest suppliers, 7% and its ten biggest suppliers, 10%. In addition, a detailed action plan involving the Purchasing Department, the Research and Development Department and the Industrial Department, set up following the recent supply shortages observed for certain electronic components, was maintained in 2022. Under this plan, the Group's projected requirements are to be communicated to its supplier database and the purchasing strategy is to systematically factor in purchases of components in product designs.

Valeo is highly involved with its suppliers, in particular to continually improve the quality of the products it delivers to automakers. This does not mean, however, that there are ownership links between Valeo and its suppliers.

⁽¹⁾ The International Automotive Task Force (IATF) standard 16949 has replaced ISO TS 16949.

Risk factor

The Group's supply chain and delivery procedures apply worldwide and incorporate all physical and information flows throughout the logistics process, upstream and downstream of plants and warehouses. A breakdown in this chain arising from either internal or external factors - whether regarding supply, transportation or logistics - exposes the Group to the risk that it will be unable to deliver on schedule the quantities required, or that the products supplied fail to meet the requisite quality standards.

Potential impact on the Group and risk management

Supply chain failure risk

Failures in the supply chain could lead to production line interruptions and production stoppages at automakers. This would also generate additional costs (exceptional transportation, financial and commercial penalties due to customer production stoppages). The Group's earnings and financial position could be affected.

A failure in the supply chain could result:

The Group manages this risk using various processes:

In 2022, the Russia-Ukraine conflict caused a breakdown in trade flows between Asia and Europe and led to reduced air freight capacity, as well as land freight capacity in Europe. Transportation flows had to be reorganized in order to bypass the affected regions, resulting in an increase in in-transit inventories, amplified by congestion at ports, mainly in Europe. To better manage its electronic component needs, the Group has set up tools and processes, in the form of the 3T (Transverse Transparency Tool) project, to ensure complete visibility of needs and resources throughout the supply chain, from suppliers to customers.

Claims, litigation, and governmental, legal and arbitration proceedings

Proceedings arising within the ordinary course of business

In the ordinary course of the Group's operations, certain entities may be involved in legal proceedings. Lawsuits have been brought by certain current or former employees for asbestos-related damages, or on the grounds of previous asbestos exposure. Almost exclusively in France, employees exposed to asbestos in the Group's plants could have developed an illness as a result of this exposure. If such illnesses were considered as occupational illnesses by health insurance funds, the employees concerned could bring a claim against Valeo (as their employer) for inexcusable misconduct (faute inexcusable). If the claim of inexcusable misconduct and the occupational nature of the illness are confirmed, Valeo will be required to pay compensation to claimants and any beneficiaries as well as the increase in the annuity awarded by the primary health insurance fund (Caisse Primaire d'Assurance Maladie).

In 1999, French law introduced an early retirement scheme for workers having been employed at sites officially recognized by decree as having contained asbestos. Under certain conditions, the workers concerned are entitled to early retirement. Pursuant to rulings previously handed down by the Supreme Court (Cour de cassation), many former employees have brought claims against Valeo before the French Labor Court (Conseils de prud'hommes) seeking damages for anxiety regarding an asbestos-related illness.

Other claims may be filed against Group companies, for example by their employees or by the tax authorities.

Each of the known cases involving Valeo or a Group company is examined at the end of the reporting period and the provisions deemed necessary based on the advice of legal counsel are set aside to cover the estimated risks.

Provisions for employee-related and other disputes notably cover risks relating to former employees, particularly in connection with asbestos. A provision is also set aside for tax disputes.

Even though the outcome of outstanding lawsuits cannot be foreseen, at the date of this report Valeo considers that they will not have a further material impact on the Group's financial position.

Antitrust investigations and resulting proceedings

At the end of July 2011, antitrust investigations were initiated against numerous automotive suppliers (including Valeo) by the US and European antitrust authorities in the area of components and systems produced for the automotive industry (see Chapter 5, section 5.4.6, Note 8.2 "Antitrust investigations" to the consolidated financial statements, page 388).

In the United States, the Department of Justice and Valeo's Japanese subsidiary, Valeo Japan Co. Ltd, reached a settlement of the Department of Justice's investigation into conduct involving climate control products on September 20, 2013 as part of which Valeo Japan Co. Ltd agreed to pay a fine of 13.6 million US dollars.

This settlement agreement, which was ratified by the United States District Court for the Eastern District of Michigan on November 5, 2013, terminated any proceedings instituted or likely to be instituted by the US federal authorities against the Group for practices that came to light during their investigations. Separately, the Department of Justice investigated conduct involving access mechanism products, but granted Valeo amnesty and so did not fine Valeo for this conduct.

Also in the United States, three class actions were filed by automotive dealers, direct purchasers and automotive end-payers against Valeo Group companies with the United States District Court for the Eastern District of Michigan, for alleged antitrust violations involving the sale of climate control products. Each of these class actions was settled with court approval. Separately, Valeo reached court-approved settlement agreements in connection with two prospective actions relating to access mechanisms over which automotive dealers and end customers were threatening to file claims. Certain customers opted out of the aforementioned US settlement agreements, and Valeo has reached settlements with some of these customers. In addition, two class actions were filed against Group companies in British Columbia and Ontario in Canada. An agreement - pending approval by the competent court - was reached with the plaintiffs in 2022.

In Europe, the European Commission issued a decision on March 8, 2017, fining certain automotive air conditioning and engine cooling suppliers for conduct involving thermal systems products. Valeo was fined a total of 26.8 million euros. On June 21, 2017, the European Commission issued a further decision fining automotive lighting system suppliers and marking an end to all its investigations involving Valeo. Valeo was among those identified by the Commission in the automotive lighting system case, but was granted immunity and was therefore not fined.

Valeo remains in contact with a number of European automakers regarding ongoing claims for damages resulting from the European Commission's proceedings. On June 17, 2022, the Group was informed that BMW had withdrawn a claim filed with the Munich Regional Court in Germany seeking compensation from Valeo for alleged damages, after a settlement was reached between the parties. Elsewhere, two automakers have filed individual claims against Valeo and other automotive suppliers with the UK's High Court of Justice.

Additional actions for damages can or may be brought further to the aforementioned antitrust investigations. The Group sets aside provisions whenever the payment of compensation is likely and can be quantified.

2.1.3 Financial risks

Valeo's Financing and Treasury Department (part of the Finance Department) proposes and implements rules on managing financial risks. These risks are generally managed centrally by the parent company. Financing, investment, risk identification and hedging strategies are reviewed each month by the Group's Finance Department.

The Financing and Treasury Department is supported by, among other things, a treasury management system that constantly monitors the main liquidity indicators and all of the financial derivatives used at central level to hedge commodity, currency and interest rate risks. Valeo's Finance Department receives periodic reports about market trends and the liquidity, commodity, currency, interest rate and counterparty risks incurred by the Group, as well as hedging operations implemented and their valuation.

Risks related to an increase in operating costs

Risk factor

The strong economic recovery in 2021 and the supply disruptions that followed the Covid-19 pandemic, as well as the geopolitical events in Ukraine, have accelerated the increase in the cost of raw materials, electronic components, energy, transportation and wages. The Group purchases more than 50 billion electronic components every year, and uses a certain number of raw materials for its industrial operations, including non-ferrous metals, steel, plastics and rare-earth metals.

The Group is therefore directly impacted by the inflationary environment.

Potential impact on the Group and risk management

This risk could have a major impact on the Group.

As the Group may not always be able to pass on the full extent of a rise in raw material prices to its customers, this may have an adverse effect on its earnings.

See Chapter 5, section 5.4.6, Note 9.1.4.2 "Fair value of commodity (non-ferrous metals) derivatives" to the consolidated financial statements, pages 403 to 404.

Foreign currency risk

Risk factor

As the Group conducts its business in an international environment, Group entities conducting cross-border operations may be exposed to operational currency risk, resulting from purchases or sales of products or services in currencies other than their functional currency.

The financing needs, met by intra-Group borrowings, of foreign subsidiaries outside the eurozone expose some entities of the Group to financial currency risk. This risk corresponds to the risk of changes in the value of financial receivables or payables denominated in currencies other than the functional currency of the borrowing or lending entity.

Potential impact on the Group and risk management

The Group's earnings may be adversely impacted in the event of significant fluctuations in certain currencies.

See Chapter 5, section 5.4.6, Note 9.1.4.1 "Fair value of foreign currency derivatives" to the consolidated financial statements, pages 401 to 403.

2.2 Insurance and risk coverage

The Group's insurance strategy is combined with a strong risk prevention and protection approach and coverage includes major claims.

With the aim of optimizing insurance costs, the Group self-insures risks that are likely to recur frequently, but that are not deemed financially material.

The Group pools and thereby reduces its risks in worldwide insurance plans taken out in each country in accordance with local rules, guaranteeing uniform quality and coverage level for the Group's risks throughout the world. This strategy also contributes to reducing volatility of costs and coverage.

All Group companies are insured by first-rate insurance companies for all major risks that could have a material impact on their business, earnings, assets and liabilities.

The risks covered include:

Property damage and business interruption events are sufficiently covered to meet the estimates drawn up by the Group's insurers during their annual prevention/protection audits with regard to the maximum possible number of claims that they could receive. Valeo endeavors to optimize the part of its insurance coverage which is subject to sublimits by current practice and restrictions common to the insurance and reinsurance markets. In particular, special attention is given to coverage of natural events.

In 2022, the general liability insurance policy provided coverage in line with the continental insurance market's highest standards. With regard to the recall policy, Valeo pays 15 million euros per claim per year through its reinsurance subsidiary, above and beyond the applicable deductibles.

Insurance is adjusted each year and cover is extended where necessary in order to best protect the Group's exposures, taking into account the constraints and limits of the insurance and re-insurance markets.

The Group also took out an insurance policy allowing each production supplier to contract insurance with appropriate coverage and amounts so as to protect themselves against any damage they could cause Valeo as a result of the products they supply. This policy now covers a significant panel of suppliers.

2.3 Internal control and risk management

The Board of Directors has asked the Group Internal Audit and Control Director to describe in this section the internal control and risk management procedures in place in accordance with the reference framework and the Application Guide prepared in 2010 under the aegis of the French financial markets authority (Autorité des marchés financiers - AMF).

The Group's comprehensive risk management system can be illustrated in accordance with the IIA's (Institute of Internal Auditors) Three Lines model. It outlines the responsibilities of the Group's different governance bodies and defines the roles and relationships between the different functions.

Board of Directors

The Board of Directors defines the composition and the responsibilities of the Audit & Risks Committee, and its modus operandi.

Audit & Risks Committee

The Audit & Risks Committee oversees the effectiveness of the risk management and internal control systems within the Group. It regularly reviews the risk mapping of the main risks identified by General Management, the results of the operation of the risk management and internal control systems and the relevance of the risk monitoring procedure. It also ensures that appropriate action plans have been implemented to mitigate any problems and weaknesses identified.

General Management

General Management sets strategic guidelines, arbitrates the allocation of resources to the Business Groups/Product Groups and Valeo Service, develops synergies between the Business Groups and National Directorates through the functional networks, and ensures that internal control procedures are duly in place.

Risks Committee

The Risks Committee coordinates the risk management process, reviews risk mapping and heads up the dynamic risk management system.

External assurance service providers

External auditors report on any material internal control weaknesses with regard to the procedures for preparing and processing accounting and financial information. This is part of their annual statutory audit and consolidated/parent company financial statement certification engagement.

The regulators also play a part in reinforcing existing risk management procedures.

Management

Management is responsible for achieving the Group's objectives.

The Business Groups, Product Groups, Valeo Service and National Directorates verify the performance of operational entities and provide entity coordination and assistance. Each manager is directly involved in implementing internal controls and is responsible for assessing and mitigating risks associated with the processes falling within his/her remit.

The First-Line and Second-Line functions and the Internal Audit Department work in close cooperation, maintaining an ongoing dialog with each other.

2.3.1 Internal control and risk management - Definitions and applicable standards

Definition

Risk management is a comprehensive system for identifying, assessing and managing risks of all kinds, involving risk mapping and action plans to address these risks. The methodology and the main risks to which the Group is exposed are described in Chapter 2.1 "Risk factors", pages 94 to 103.

Internal control as defined by the Group is the process implemented by management and employees to provide reasonable assurance regarding the due and proper management of operations with regard to the following objectives:

As with any control system, Valeo's risk management and internal control procedures cannot provide absolute assurance that the Group's objectives will be achieved and that all risks will be eliminated. The purpose of the system put in place by Valeo is to reduce the probability of incidents occurring and their potential impact.

Applicable standards

Valeo refers to the international standards of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to define and continuously improve its overall risk management system.

The Group has adopted a definition of internal control in line with the COSO findings published in 1992 in the United States. There are no significant discrepancies between Valeo's internal control organization and the procedures and principles described in the reference control framework and the Application Guide set out by the AMF.

2.3.2 Scope of internal control and risk management

Valeo's overall risk management procedures are applied to the entire Valeo Group, defined as the parent company Valeo and all of its fully consolidated subsidiaries (see Chapter 5, section 5.4.6, Note 3 "Scope of consolidation" to the consolidated financial statements, pages 347 to 350).

2.3.3 Components of the Group's internal control and risk management system

Valeo's internal control procedures are based on the five components defined in the COSO framework.

Control environment

The control environment sets the tone of an organization, influencing the level of awareness of its employees to the need for controls within the Group.

Valeo's internal control system - which falls under the Board's supervision, but operates entirely independently - is organized around a multi-tier operational structure: General Management, Group functional departments, Business Groups/Product Groups, Valeo Service, National Directorates and operational entities. General Management sets strategic guidelines, arbitrates the allocation of resources to the Business Groups/Product Groups, and develops synergies between Business Groups and National Directorates in the functional networks. The Business Groups/ Product Groups, Valeo Service and the National Directorates control the performance of the operational entities and play a key role of coordination and support between the entities, notably with regard to the pooling of resources, the allocation of Research and Development expenditure and the optimization of production among the different industrial plants. Each level is directly involved in implementing the internal control system. For this purpose, the Group has established operating principles and rules with appropriate delegations of powers, starting with those of the Chairman and Chief Executive Officer, which precisely define the areas and levels of decision-making and control for each operational manager.

Valeo's self-imposed policies and behavioral principles are set out in its Code of Ethics, which aims to ensure that Valeo operates in accordance with national and international rules of ethics and law. The code places major emphasis on upholding fundamental rights with respect to the prohibition of child labor, the fight against discrimination and harassment, occupational health and safety, diversity, and promoting the employment of disabled workers (see Chapter 4, section 4.5.4 "Employee-related commitments", pages 296 to 301). It also highlights the Group's commitment to sustainable development, based on respect for the environment and the relentless drive for environmental protection, both of which are a priority for the Group. Lastly, the Code of Ethics deals with social issues and integrity in business conduct, the fight against corruption and anti-competitive practices. These values are also broken down in the Valeo Business Partners Code of Conduct, which explains the Group's expectations of its business partners in terms of integrity and ethics. Available on the intranet and translated into 26 languages, the Code has been sent out to all of the Group's employees. It is also available on Valeo's website (www.valeo.com).

Capitalizing on its Code of Ethics and its culture of integrity, the Group has implemented a compliance initiative since 2012 under the aegis of the Ethics and Compliance Office, which created four in-depth programs tailored to the regulatory requirements of each country in which Valeo does business. The programs are dedicated to the fight against corruption and anti-competitive practices, compliance with regulations on export control and economic sanctions, and personal data protection.

The anti-corruption program (described in this chapter, section 2.4 "Ethics and compliance", pages 111 to 112) is based on annual and mandatory training campaigns for all Group Managers and Professionals. In 2017, the entire program was reviewed in order to bring it up to date with the provisions of France's Sapin II law ⁽⁴⁾. In particular, the Group drew up a specific corruption risk map, carried out specific audits, and now continues to roll out action plans aimed at reducing these risks. The section of the Code of Conduct concerning the prevention of insider trading and the notification procedure for those affected has been in place since the entry into force of EU Regulation No. 596/2014 on market abuse (see Chapter 3, section 3.2.2 "Preparation and organization of the Board of Directors' work", pages 147 to 159).

A data protection compliance program has also been set up in accordance with global regulations, in particular the General Data Protection Regulation (see section 2.4 "Ethics and compliance" of this chapter, pages 111 to 112).

Risk management and assessment

The overall risk management system is designed to ensure the ongoing identification, prioritization, management and analysis of risks that may prevent Valeo from carrying out its strategy or meeting its objectives.

During the risk mapping process, risks are reviewed in depth and their impact and likelihood of occurrence are assessed. The risk assessment criteria are detailed in section 2.1 "Risk factors", pages 94 to 103. By prioritizing risks, action plans can be devised for identified risks to improve risk management and control, by acting on their impact or on their likelihood of occurrence.

The risk management process is coordinated by a Risks Committee made up of eleven permanent members: the Chief Financial Officer, the Vice-President, Powertrain Systems Business Group, the President, Research & Development and Corporate Strategy, the General Counsel and General Secretary, the Chief Ethics, Compliance and Data Protection Officer, the Chief Human Resources Officer, Senior Vice-President, Group Communications and Investor Relations, the Risk and Insurance Director, the Group Accounting Director, the Group Internal Audit and Control Director, and the Head of Risk Management. The committee met six times in 2022 and was mainly tasked with reviewing the risk mapping process and the procedures in place to address those risks. For each major risk in the risk map, a "risk owner" is identified. The risk owner reports to a member of the Risks Committee and his or her role is to (i) assess the criticality of the risk and the effectiveness of the associated risk control procedures, and monitor changes in the risk on the basis of key indicators, and (ii) identify and implement action plans to manage the risks where appropriate.

Risk monitoring by the Business Groups and National Directorates enhances the dynamic risk management implemented by the Risks Committee. Along with the functional networks, the Business Groups and National Directorates are responsible for assessing and managing risks within their remit, and for ensuring compliance with local regulatory requirements. They are also responsible for ensuring that guidelines and recommendations defined at Group level are properly applied throughout their operational entities. The Group therefore has a global view of risks.

Risk mapping gives rise to an annual update approved by the Risks Committee, based on a detailed analysis of the major risks and monitoring carried out by the risk owners. The findings of the latest update were presented to the Audit & Risks Committee at its meeting on November 24, 2022. A 2023 audit plan was defined on the basis of these findings, with a focus on the most acute risk areas.

The major risks identified and the procedures for managing these risks are presented in section 2.1 of this chapter "Risk factors", pages 94 to 103. They are:

Control activities

Control activities are the policies and procedures that help ensure that General Management directives are carried out. They are performed throughout the organization, at all levels and in all functions with the aim of mitigating the risks described above.

The Group has a Financial and Administrative Manual that contains all the financial management procedures. It is used throughout the operating departments on a daily basis and is divided into four main sections defining the rules relating to:

Every year, letters of representation regarding compliance with the Group's internal control and management guidelines are drawn up at the different levels of the operational organization. At the end of 2022, the National Directors and National Financial Directors, the Financial Directors of the Shared Services Centers (SSC), as well as the Financial Directors and Controllers of the operational entities all signed these letters of representation.

In addition to the Financial and Administrative Manual, the functional departments have implemented special rules and procedures that are consistent with financial and management standards:

⁽⁴⁾ Law No. 2016-1691 of December 9, 2016 on transparency, anti-corruption and economic modernization, known as the Sapin II law.

Details of these rules and procedures can be consulted on the Group's intranet by the staff concerned.

As regards quality, Valeo has set its own standard - Valeo 5000. In addition, the Quick Response Quality Control (QRQC) method ensures the prompt implementation of corrective action, and the Lessons Learned Cards (LLC) process enables the Group to monitor best practices and explore avenues for improvement. These changes were incorporated into product standards and processes through the RAISE (Robustness Accountability Innovation Standardization Expertise) customer feedback consolidation process.

For the past 15 years or so, the Group has organized Valeo Finance Academy seminars with the aim of developing internal control and financial management skills. By combining modules (on accounting, cash flow, management control and internal control) with case studies and simulations, these yearly training sessions help the Group's younger financial managers to get better acquainted with the methods and tools used in financial control.

Information and communication

Pertinent information must be identified and communicated in a form and timeframe that enable all of the Group's staff to carry out their responsibilities and perform the checks required of them. The information originating from the management system is analyzed and circulated once a month to all operational personnel. A monthly summary is then presented to the Group's Operations Committee, comprising the Chief Executive Officer and 13 other functional or operational directors.

Steering the internal control system

The internal control system is jointly monitored and steered by General Management, the Risks Committee, and the Internal Audit and Control Department, with support from the functional departments, as well as management teams at the Business Groups/Product Groups, Valeo Service and the National Directorates.

The internal control system is audited by the Internal Audit and Control Department. This department is tasked with carrying out assignments within the Group to ensure that the procedures are implemented, the performance indicators are calculated in accordance with the rules of the business lines and the processes are effective. The tasks set out in the annual audit plan are set down based on the risk map. For 2022, Internal Audit performed financial and IT audits of the operational entities and Shared Services Centers (finance and accounting), as well as cross-functional audits examining project and R&D activities, and non-financial risks.

In 2022, the Internal Audit Department's Anti-Fraud Unit also performed more than 100 specific investigations following allegations of fraud received by email or letter (most of them anonymously) or via the whistleblower hotline put in place in February 2014. These allegations were handled by a dedicated audit team under the responsibility of the Group's Fraud Investigation Officer. The Alerts Committee was informed of the detailed findings of the investigations carried out by the Internal Audit Department, which decides on the actions to take and sanctions to apply in the case of actual fraud.

Recommendations for critical issues identified during the various assignments carried out by Internal Audit are put forward to the audited entities and Shared Services Centers (SSC), which are subsequently required to implement appropriate action plans. Internal Audit's work and findings, as well as the progress made with the action plans in the audited entities, are presented to the Audit & Risks Committee every year in accordance with the Committee's internal procedures.

The Internal Audit Department is certified by the French Institute of Audit and Internal Control (IFACI) in accordance with the profession's international standards.

The application of Valeo's quality, industry, project management and safety standards is regularly checked via VAQ (Valeo Audit Quality) audits, and the environmental and safety aspects are overseen by the Health, Safety and Environment Department. Valeo has thus launched a certification program for its manufacturing plants in accordance with the ISO 14001 standard (relating to environmental management) and the ISO 45001 standard (concerning occupational health and safety).

At December 31, 2022, 145 plants had been certified ISO 14001 and 120 plants had been certified ISO 45001, out of a total of 154 eligible plants. The percentage of ISO 14001 and ISO 45001 certified plants is therefore 94% and 78%, respectively. In 2013, Valeo launched a certification program for its manufacturing plants in accordance with ISO 50001 (relating to energy management systems). At December 31, 2022, 60 plants (40%) had been certified ISO 50001 out of a total of 154 eligible plants (see Chapter 4, section 4.1.4 "Sustainable development policies", paragraph "Environmental policy", pages 218 to 222).

2.3.4 Organization of internal control and description of the assessment process

The Internal Control Department reports directly to the Internal Audit and Control Department. At the end of December 2022, it was made up of a team of 15 people, exclusively dedicated to internal control at Group and regional level. In 2022, the main role of the regional controllers was to assist the Group Internal Control Director in overseeing the internal control self-assessment campaign and ensuring best practices are applied uniformly across the regions with the support of the Business Groups and National Directorates.

The Group has developed a self-assessment process based on a questionnaire in order to measure and assess correct implementation of existing internal control procedures throughout all of its operational entities.

In 2022, the self-assessment questionnaire was rolled out, focusing on the following 12 processes: accounts closing; sales, management of customers and incoming payments; production purchases, management of suppliers and outgoing payments; non-production purchasing; projects and research & development; monitoring of fixed assets; monitoring of inventories; payroll and human resources; cash management; customs and duties; information systems and compliance. The self-assessment campaign involved 342 operational entities including 15 finance Shared Services Centers (SSC).

As part of the campaign, rules for documentation and testing (size of the sample used) were set so as to ensure reliability and uniformity of the tests carried out in the entities. A special database of internal control best practices has been posted on the Group's intranet.

A report of the initiative implemented in 2022 was presented to the Audit & Risks Committee on November 24, 2022. The results make it plain that internal control guidelines and the assessment procedure have been significantly improved, owing mainly to the department's greater visibility and efficiency, thanks to the establishment of clear objectives, the increased use of information systems and regular additions to department staffing.

The areas for improvement for the Group's internal control and risk management procedures are presented in section 2.3.7 "Outlook" of this chapter, page 111.

In addition to the internal control self-assessment and the implementation of action plans, Valeo has rolled out a procedure aimed at reviewing user profiles and access controls for the integrated accounting software package used within most of the Group's entities. The aim of this process is to ensure that the rules relating to separation of tasks laid down by internal control are applied consistently across all operational entities and Shared Services Centers (SSC). Using matrices that show incompatibilities for each of the processes, standard user profiles respecting the principles for separation of tasks have been defined and deployed. Whenever the package is deployed for the first time, the Internal Audit team provides manuals and tracks incompatibility matrices, in liaison with the entities concerned.

2.3.5 Procedures for preparing and processing financial and accounting information for the financial statements of the Company and the Group

The Finance Department is responsible for preparing the parent company and consolidated financial statements, and reports to the Chief Executive Officer. The budget and monthly reporting procedure is a critical tool for Valeo in managing its operations. The same information system tool is used for the consolidation and reporting processes, thus ensuring completeness and consistency in the preparation of financial information.

The Finance Department is in charge of the internal control procedures pertaining to the preparation and processing of financial information. Production and analysis of this information is handled as follows:

⁽⁵⁾ See financial glossary, page 47.

2.3.6 Outlook

Valeo will pursue ongoing efforts to improve its identification and analysis of risks, and its internal control system. The purpose of these efforts, in place for several years now, is to constantly adapt human resources, management and control tools and information systems in line with changes in the Group's structure and objectives. In 2023, the Group will continue to develop its internal control policy by:

The Group's aim is to develop pertinent and effective internal controls at each level of responsibility, based on:

The Group will continue developing its risk management system, drawing inspiration from professional standards (COSO ERM ⁽⁶⁾), including in particular:

This approach is actively supported by the Group's General Management.

2.4 Ethics and compliance

Run by General Management and the Ethics and Compliance Office, endorsed by all management teams and relayed worldwide by Compliance Champions, Data Protection Champions and Data Protection Officers, the Group's Compliance Programs are designed to prevent a number of risks and ensure compliance with the applicable regulations regarding:

Designed in line with the highest international standards, including France's Sapin II law, the Foreign Corrupt Practices Act (FCPA) and the General Data Protection Regulation (GDPR), the Compliance Programs break down into different principles, policies, instructions, recommendations, tools and training modules.

They are based on a Code of Ethics and risk mapping, and a set of internal rules that:

The Compliance Programs come with a range of awareness and training campaigns aimed at newcomers, as well as Managers and Professionals, along with those people identified as the most exposed.

Training courses, whether generic or targeted in light of a particular need or activity, are subject to rigorous and systematic monitoring by the Group's Human Resources Department and the Ethics and Compliance Office, with mandatory catch-up sessions. Awareness-raising involves recurring and regular communication campaigns.

The Compliance Programs are rolled out globally by the Ethics and Compliance Office, with the support of Compliance Champions, Data Protection Champions and Data Protection Officers, who are experienced executives known and acknowledged by their peers and their teams. Drawing on their detailed knowledge of the specificities of their network, country, Business Group or Activity, they help relay all of the programs to their teams, and guide employees on these challenges, thereby actively supporting their implementation at all levels of the organization.

In 2022, these programs were regularly evaluated and adjusted to ensure that the content fully matched the needs.

⁽⁶⁾ COSO ERM (Enterprise Risk Management): the risk management framework defined by the Committee of Sponsoring Organizations of the Treadway Commission.
⁽⁷⁾ Task Force on Climate-Related Financial Disclosures.

For example, the Anti-Competitive Practices Program was supplemented by tools and training related to the risks of sharing sensitive information, particularly in the context of professional events, online or in person.

The Anti-Corruption Program was clarified in the light of corruption risk mapping carried out in 2022 by country, by function and by Business Group or Activity. Additional tools have been made available to operational staff to take into account the risks identified in the Group's various operations.

In view of the situation in 2022, international economic sanctions, export control regimes and their applicability to Valeo products were closely monitored, and the compliance program, which sets the conditions for developing business relationships with potential partners (customers, suppliers, etc.) located in or linked to countries targeted by international sanctions, was adjusted accordingly. Updates were rolled out with the support of the Operations Committee and the Compliance Champions as part of a regular communication and awareness campaign.

To ensure compliance with international sanctions against Russia and Belarus, the Group rolled out a dedicated compliance system worldwide. The system is updated as regulations evolve and is scrupulously monitored.

The protection of personal data is a global issue and is subject to specific regulations in virtually all of the countries in which Valeo does business. The Data Protection Program, initially developed in accordance with the General Data Protection Regulation (GDPR), also meets international standards. The Valeo Data Protection Principles (VDPP), which are applicable worldwide, form the basic framework. They are rounded out where necessary, depending on local regulations, with principles specific to the various countries in which Valeo operates.

The Whistleblowing System, accessible to employees and stakeholders via a dedicated and secure platform available free of charge 24/7, allows all employees and stakeholders to issue detailed, confidential - even anonymous - and documented alerts, either orally or in writing, by completing a pre-selected questionnaire in the language of their choice. Access to the system is provided by a European operator. It is available on PC, smartphone, and tablet, via a link or a QR code.

Alerts received are systematically analyzed and investigated when they are deemed admissible.

Chaired by the Chief Ethics, Compliance and Data Protection Officer, the Alerts Committee is responsible for allocating resources to investigate alerts received as well as for approving action plans, including disciplinary measures if necessary, depending on the severity of the alert. The committee is composed of the Group Internal Audit and Control Director, the General Counsel and Corporate Secretary, the Chief Human Resources Officer, the Vice-President, Employee Relations, the Chief Financial Officer and the Vice-President, Purchasing. Depending on the severity of the alert, the committee may be extended to include the Chief Executive Officer and the Senior Vice-President, Group Communications and Investor Relations.

All of the values, principles and Compliance Programs are presented in the Group's Code of Ethics and apply to all of the Group's employees, executives and managers.

Moreover, fair trade practices, mutual respect and integrity among partners, customers, suppliers and other stakeholders are the foundation of long-term, quality and mutually beneficial relationships. This set of rules is reflected in the Valeo Business Partner Code of Conduct. The free training program made available to Valeo business partners has been updated. The Group is rigorous in its selection of third parties liable to represent it, with a view to forming honest and lasting partnerships, and meeting its obligations as regards both the fight against corruption and respect for international economic sanctions.

3 CORPORATE GOVERNANCE

Valeo refers to the 2020 version of the AFEP-MEDEF Corporate Governance Code for Listed Companies, in its version of January 2020 applicable for the 2022 financial year ⁽¹⁾ (the "AFEP-MEDEF Code"). The Code is available on the MEDEF website (www.medef.com). The application of the recommendations of the AFEP-MEDEF Code is described in section 3.2.4 of this chapter, "Corporate Governance Code", page 160.

The information contained in this chapter, pages 113 to 204, constitutes the Corporate Governance Report required by Article L.225-37 of the French Commercial Code (Code de commerce). The information comprising this report was prepared by several of Valeo's Functional Departments, mainly the Legal, Finance and Human Resources departments. It was reviewed by the Compensation Committee and the Governance, Appointments & Corporate Social Responsibility Committee for the parts under their respective authority, and then by the Board of Directors.

⁽¹⁾ The AFEP-MEDEF Code as amended in December 2022 applies to shareholders' meetings held to approve the financial statements for financial periods beginning on or after January 1, 2023.

3.1 Executive bodies

At December 31, 2022, the Group's Executive Management team comprised the Chairman of the Board of Directors, the Chief Executive Officer as well as the Functional Directors and the Operational Directors, who are members of the Operations Committee. The Group also has an Executive Committee that works alongside the Chief Executive Officer and the Operations Committee.

Chairman and Chief Executive Officer (until January 26, 2022)

Chairman of the Board of Directors

(from January 26, 2022 to December 31, 2022)

Jacques Aschenbroich

(Current term of office began on May 23, 2019 and expired on December 31, 2022 ⁽¹⁾).

In 2022, in his capacity as Chairman of the Board of Directors, Jacques Aschenbroich organized and presided over the work performed by the Board of Directors. He ensured that the Company's governance functioned effectively and that the directors were able to perform their duties. During the management transition, he was vested with specific missions carried out at the request of General Management.

⁽¹⁾ Jacques Aschenbroich's term of office as a director was renewed for a term of four years at the Shareholders' Meeting of May 23, 2019. He was then reappointed as Chairman and Chief Executive Officer at the Board meeting held on the same date. As specified in a press release published on October 27, 2020, the roles of Chairman of the Board of Directors and Chief Executive Officer were separated on January 26, 2022, and the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, appointed Christophe Périllat as Chief Executive Officer of Valeo on January 26, 2022. Jacques Aschenbroich was to continue to serve as Chairman of the Board of Directors until the end of his remaining term of office, i.e., until May 2023. Jacques Aschenbroich stepped down as Chairman of the Board of Directors of Valeo on December 31, 2022, in line with the commitments he made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022.

Deputy Chief Executive Officer (until January 26, 2022)

Chief Executive Officer (since January 26, 2022)

Christophe Périllat

(Current term of office began on May 26, 2021 and expires at the close of the Shareholders' Meeting that will be called to approve the financial statements for the year ended December 31, 2024 ⁽²⁾).

In his capacity as Chief Executive Officer, Christophe Périllat has the widest possible powers to act in any circumstances in the Company's name. He exercises these powers within the limits of the Company's corporate purpose and subject to the provisions of the law, the Company's articles of association and the Internal Procedures. He represents the Company in its relations with third parties.

⁽²⁾ Christophe Périllat was appointed Associate Chief Executive Officer of Valeo on October 27, 2020 and Deputy Chief Executive Officer and director of Valeo on May 26, 2021. In accordance with the succession plan, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, appointed Christophe Périllat as Chief Executive Officer of Valeo effective January 26, 2022.

Chairman of the Board of Directors (since January 1, 2023)

Gilles Michel

(Current term of office began on May 24, 2022 and expires at the close of the Shareholders' Meeting that will be called to approve the financial statements for the year ended December 31, 2025 ⁽³⁾).

In his capacity as Chairman of the Board of Directors, Gilles Michel organizes and presides over the work performed by the Board of Directors, and presents a report on its activities to the Shareholders' Meeting. He ensures that the Company's governance functions effectively and that the directors are able to perform their duties

⁽³⁾ Gilles Michel's term of office as a director was renewed for a term of four years at the Shareholders' Meeting of May 24, 2022. At its meeting held on December 8, 2022, the Board of Directors unanimously decided to appoint Gilles Michel, independent director, as Chairman of the Board of Directors of Valeo, effective January 1, 2023. Gilles Michel has been an independent director of Valeo since May 23, 2018. He was Chair of the Compensation Committee and of the Governance, Appointments & Corporate Social Responsibility Committee from October 24, 2019 to December 31, 2022, a member of the Strategy Committee from July 22, 2021 to December 31, 2022 and Lead Director from October 24, 2019 to January 26, 2022.

COMPOSITION OF THE EXECUTIVE COMMITTEE AND OPERATIONS COMMITTEE AT DECEMBER 31, 2022

Executive Committee members are indicated by an asterisk.

⁽¹⁾ Member of the Operations Committee and Secretary of the Executive Committee.

3.2 Composition of the Board of Directors, and preparation and organization of its work

3.2.1 Composition of the Board of Directors

Composition of the Board of Directors at December 31, 2022 and changes (made or approved) during 2022

The composition of the Board of Directors at December 31, 2022 is shown in the table below.

^N/A = Not applicable.
⁽¹⁾ Except for the directorship in the Company.
⁽²⁾ ARC = Audit & Risks Committee; GACSRC = Governance, Appointments & Corporate Social Responsibility Committee; CC = Compensation Committee; SC = Strategy Committee.
⁽³⁾ Chairman and Chief Executive Officer until January 26, 2022 and Chairman of the Board of Directors until December 31, 2022, i.e., the end of his term of office as director and Chairman of the Board of Directors of Valeo.
⁽⁴⁾ Deputy Chief Executive Officer until January 26, 2022, and Chief Executive Officer since that date.
⁽⁵⁾ Christophe Périllat also holds 27,744 shares in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 128,539 shares.
⁽⁶⁾ This figure includes the directorship in IBL Ltd which ended on December 31, 2022.
⁽⁷⁾ These shares are held by Bpifrance Participations.
⁽⁸⁾ At its meeting held on July 26, 2022, the Board of Directors of Valeo unanimously decided, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, to co-opt Alexandre Dayon as an independent director to replace C. Maury Devine, who resigned from her office effective that same day, for her remaining term of office, i.e., until the close of the Shareholders' Meeting called to approve the financial statements for the year ended December 31, 2024.
⁽⁹⁾ These shares are held by Fonds Stratégique de Participations.
⁽¹⁰⁾ In accordance with the law, the articles of association and the Internal Procedures, the directors representing employees are not required to hold 1,500 shares. Éric Poton and Grzegorz Szelag also hold 90 shares and 4 shares, respectively, in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 416 shares and 18 shares, respectively.
⁽¹¹⁾ Directors representing employees do not count, in accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code.

The changes in the composition of the Board of Directors and its Committees in 2022 (made or approved) are shown in the table below.

^N/A: Not applicable.
⁽¹⁾ Until July 26, 2022, the effective date of her resignation as director and member of the Governance, Appointments & Corporate Social Responsibility Committee and the Compensation Committee.
⁽²⁾ By decision of the Board of Directors on July 26, 2022, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee.
⁽³⁾ At its meeting held on December 8, 2022, the Board of Directors unanimously decided, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, to appoint Gilles Michel, independent director, as Chairman of the Board of Directors of Valeo, effective January 1, 2023, to replace Jacques Aschenbroich, who stepped down as Chairman of the Board of Directors and director on December 31, 2022, in line with the commitments he made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022. At this same meeting, the Board of Directors co-opted Stéphanie Frachet as an independent director to replace Jacques Aschenbroich, effective January 1, 2023, and acknowledged the appointment of Alexandre Ossola as the permanent representative of Bpifrance Participations, effective January 1, 2023. In line with these decisions, the Board of Directors also decided to change the composition of the Committees by appointing (i) Véronique Weill as Chair of the Governance, Appointments & Corporate Social Responsibility Committee and of the Compensation Committee, replacing Gilles Michel who has become Chairman of the Board of Directors (ii) Stéphanie Frachet as a member of the Governance, Appointments & Corporate Social Responsibility Committee, the Compensation Committee and the Strategy Committee (she was already a member of these Committees as permanent representative of Bpifrance Participations) and (iii) Bpifrance Participations, represented by Alexandre Ossola, as a member of the Audit & Risks Committee.
⁽⁴⁾ By decision of the Board of Directors on July 22, 2021, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, effective January 26, 2022.
⁽⁵⁾ At the Shareholders' Meeting of May 24, 2022.

Composition of the Board of Directors at January 1, 2023

The composition of the Board of Directors at January 1, 2023 is shown in the table below:

^N/A = Not applicable.
⁽¹⁾ Except for the directorship in the Company.
⁽²⁾ ARC = Audit & Risks Committee; GACSRC = Governance, Appointments & Corporate Social Responsibility Committee; CC = Compensation Committee; SC = Strategy Committee.
⁽³⁾ At its meeting held on December 8, 2022, the Board of Directors unanimously decided to appoint Gilles Michel, independent director, as Chairman of the Board of Directors of Valeo effective January 1, 2023, to replace Jacques Aschenbroich, who stepped down as Chairman of the Board of Directors and director on December 31, 2022, in line with the commitments he made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022.
⁽⁴⁾ Christophe Périllat also holds 27,744 shares in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 128,539 shares.
⁽⁵⁾ At its meeting held on December 8, 2022, the Board of Directors acknowledged the appointment of Alexandre Ossola as permanent representative of Bpifrance Participations on the Board of Directors of Valeo, effective January 1, 2023.
⁽⁶⁾ These shares are held by Bpifrance Participations.
⁽⁷⁾ These shares are held by Fonds Stratégique de Participations.
⁽⁸⁾ At its meeting held on December 8, 2022, the Board of Directors unanimously decided, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, to co-opt Stéphanie Frachet as independent director, effective January 1, 2023, to replace Jacques Aschenbroich, for his remaining term of office, i.e., until the close of the Shareholders' Meeting called to approve the financial statements for the year ended December 31, 2022. The renewal of Stéphanie Frachet's term of office will be proposed at the Shareholders' Meeting of May 24, 2023.
⁽⁹⁾ On March 1, 2023, Stéphanie Frachet acquired 1,500 shares in the Company, in accordance with the rules set out in the articles of association and the Internal Procedures.
⁽¹⁰⁾ Stéphanie Frachet has served three years on the Board of Directors, taking into account her term of office as permanent representative of Bpifrance Participations between June 21, 2019 and December 31, 2022.
⁽¹¹⁾ In accordance with the law, the articles of association and the Internal Procedures, the directors representing employees are not required to hold 1,500 shares. Éric Poton and Grzegorz Szelag also hold 90 shares and 4 shares, respectively, in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 416 shares and 18 shares, respectively.
⁽¹²⁾ Directors representing employees do not count, in accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code.
⁽¹³⁾ At its meeting held on January 26, 2023, the Board of Directors decided, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, to appoint Grzegorz Szelag as a member of the Governance, Appointments & Corporate Social Responsibility Committee, in addition to serving as a member of the Compensation Committee.

Summary of the main rules regarding the composition of the Board of Directors

According to the Company's articles of association, the Board of Directors comprises at least three and no more than 18 members (subject to any amendments in line with changes in the applicable law). Directors representing employees are not included in the minimum and maximum number of directors. On December 31, 2022, the Board of Directors had 14 members, including two directors representing employees. The number of directors remained unchanged following the change in the composition of the Board on January 1, 2023.

Directors are appointed by shareholders at Shareholders' Meetings on the recommendation of the Board of Directors, which in turn receives recommendations from the Governance, Appointments & Corporate Social Responsibility Committee. They are appointed for a term of four years ending at the close of the Shareholders' Meeting called in the year in which their term expires to approve the financial statements for the previous year. They may be reappointed and may be removed from office by the Shareholders' Meeting at any time. To ensure smooth turnover on the Board of Directors, the Company's articles of association provide for staggered terms of office, with one quarter of the directors up for reappointment in any one year in principle. Where one or more seats on the Board become vacant due to the death or resignation of any member or members, the Board of Directors may appoint new members on a temporary basis until the next Shareholders' Meeting, in accordance with the applicable legislation. The term of office of the Chairman of the Board of Directors may not exceed his term of office as a director.

By exception and in accordance with the applicable law, the directors representing employees are appointed in accordance with the arrangements provided for in the articles of association. If the Board of Directors has eight members or less, it must include a director representing employees, appointed by the Group Works Council. If there are more than eight directors, a second director representing employees must be appointed by the European Works Council. The second director representing employees will only take up office if the Board still has more than eight members at the date on which that director is appointed (which must be within six months of such threshold being exceeded).

The rules, presented above, applicable to directors appointed by the Shareholders' Meeting as regards the term and renewal of office also apply to the directors representing employees (other than the rule regarding the reappointment of one quarter of the Board of Directors' members), insofar as their term of office will end at the expiration of that four-year term. If a seat as director representing employees becomes vacant for any reason, it shall be filled under the conditions provided for by law, i.e., in the same way as the outgoing director representing employees was appointed. Should the number of directors fall below or be equal to the legal threshold of eight, the term of office of the second director representing employees appointed by the European Works Council will be maintained until it expires. If the requirement to appoint a director representing employees no longer applies, the term of a director or directors representing employees may be ended, on the decision of the Board of Directors, at the close of the Board meeting at which the Board of Directors duly notes that Valeo is no longer subject to that requirement.

Directors appointed by the shareholders are selected on the basis of the diversity policy as described in paragraph "Board of Directors' diversity policy" of this section, pages 124 to 126.

For details of the directorships and other positions held by the members of the Board of Directors (including those held in the last five years), and their experience and expertise, see paragraph "Presentation of directors 2022" of this section, pages 129 to 146.

Attendance rate at Board of Directors' meetings

The Board of Directors met ten times in 2022, including the Board meeting that closed the annual strategy seminar.

The average attendance rate of directors at Board of Directors' meetings held in 2022 was 98.38%. All meetings of the Board of Directors were held in person.

In addition, 21 Board Committee meetings were held in 2022:

The attendance rate of directors at Board and Committee meetings in 2022 is shown in the table below.

^N/A: Not applicable.
⁽¹⁾ Board = Board of Directors; ARC = Audit & Risks Committee; GACSRC = Governance, Appointments & Corporate Social Responsibility Committee; CC = Compensation Committee; SC = Strategy Committee.
⁽²⁾ Chairman and Chief Executive Officer until January 26, 2022, then Chairman of the Board of Directors until December 31, 2022.
⁽³⁾ Deputy Chief Executive Officer until January 26, 2022, and Chief Executive Officer since that date.
⁽⁴⁾ Since his appointment as a member of the Audit & Risks Committee effective January 26, 2022.
⁽⁵⁾ Since his co-optation as a director and appointment as a member of the Strategy Committee on July 26, 2022.
⁽⁶⁾ Until July 26, 2022, the effective date of her resignation as director and member of the Governance, Appointments & Corporate Social Responsibility Committee and member of the Compensation Committee.

Director independence review

Classification as an independent director is reviewed by the Governance, Appointments & Corporate Social Responsibility Committee and the Board of Directors on two occasions: when a new director is appointed and every year before the Corporate Governance Report is prepared.

In compliance with the AFEP-MEDEF Code, the Internal Procedures classify as independent a director who has no relations whatsoever with the Company, the Group or its Management that may compromise his/her ability to exercise freedom of judgment.

In particular, in accordance with the Internal Procedures and in line with the AFEP-MEDEF Code, independence is presumed to exist when a director:

A non-executive corporate officer cannot be deemed independent if he/she receives variable compensation in cash or shares, or any compensation tied to Company or Group performance (Criterion 7).

Directors who represent major Company shareholders can be deemed independent if those shareholders do not have a controlling interest in the Company. However, above a 10% threshold of the share capital or voting rights in the Company, the Board of Directors, acting on a report from the Governance, Appointments & Corporate Social Responsibility Committee, will decide whether the directors qualify as independent, taking into account the composition of the Company's share capital and the existence of any potential conflict of interest (Criterion 8).

Director independence review on appointment or co-optation in 2022

For each appointment or co-optation during the year, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, reviews the independence of the new members based on each of the above criteria.

Pursuant to the Board of Directors' decision of July 26, 2022 to co-opt Alexandre Dayon as director to replace C. Maury Devine for her remaining term of office, i.e., until the close of the Shareholders' Meeting called to approve the financial statements for the year ended December 31, 2024, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, reviewed his independence and concluded that he qualified as independent.

In addition, pursuant to the Board of Directors' decision of December 8, 2022 to co-opt Stéphanie Frachet as director to replace Jacques Aschenbroich for his remaining term of office, i.e., until the close of the Shareholders' Meeting called to approve the financial statements for the year ended December 31, 2022, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, reviewed her independence and concluded that she qualified as independent.

Following the appointment of Alexandre Ossola as permanent representative of Bpifrance Participations, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, also reviewed his independence and concluded that he qualified as independent.

It should be specified that, during the independence review, business relationships between the Group and the groups or entities in which some of these new members hold directorships or other positions were identified. Based on the criteria described in the following section, these relationships were not considered very significant for the Group or for the other groups/entities identified.

Director independence review upon preparation of the Corporate Governance Report

In accordance with the Internal Procedures and the AFEP-MEDEF Code, and on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee at its meeting held on January 23, 2023, the independence of the directors in office was reviewed at the Board of Directors' meeting of January 26, 2023.

The table below provides an overview of the status of each director at December 31, 2022 (unless stated otherwise), in light of the independence criteria set out in the AFEP-MEDEF Code and the Internal Procedures.

^N/A: Not applicable.
⁽¹⁾ In the table, √ signifies an independence criterion that has been met and X signifies an independence criterion that has not been met.
⁽²⁾ At its meeting held on December 8, 2022, the Board of Directors unanimously decided to appoint Gilles Michel, independent director, as Chairman of the Board of Directors of Valeo, effective January 1, 2023.
⁽³⁾ Deputy Chief Executive Officer until January 26, 2022, and Chief Executive Officer since that date.
⁽⁴⁾ This independence assessment was conducted for both the company (Bpifrance Participations) and its permanent representative (Stéphanie Frachet then Alexandre Ossola since January 1, 2023).
⁽⁵⁾ Bpifrance Participations held 5.17% of Valeo's share capital and 5.04% of the voting rights at December 31, 2022. Bpifrance Participations is controlled by Bpifrance SA, a 50%-50% joint venture between Caisse des Dépôts et Consignations and EPIC Bpifrance.
⁽⁶⁾ Directors representing employees do not count, in accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code.
⁽⁷⁾ This independence assessment was conducted for both the company (Fonds Stratégique de Participations) and its permanent representative (Julie Avrane).
⁽⁸⁾ Fonds Stratégique de Participations held 4.19% of Valeo's share capital and 4.09% of the voting rights at December 31, 2022.

During the independence review, the Board of Directors paid particular attention to the independence of Bruno Bézard: Bruno Bézard is one of the Managing Partners of Cathay Capital Private Equity, a private equity company of the Cathay Capital group. The Cathay Capital group comprises several investment fund management companies. The Group has made five investments in the Sino-French (Innovation) Fund, the Sino-French (Innovation) Fund II, the Sino-French (Innovation) Fund III, the Cartech fund and the Taicang fund (the "Cathay Funds") managed by the group Cathay Capital management entities (two of which were made before Bruno Bézard's co-optation as director on October 24, 2017). The review to determine whether the business relationships between the Group and the Cathay Capital group should be classified as significant was based on several quantifiable and qualitative criteria. As regards financial transactions, the Group's investment commitments relating to the Cathay Capital group via the Cathay Funds represented approximately 0.7% of its 2022 sales and 3.7% of the Cathay Capital group's assets under management at December 31, 2022, and are therefore not material. In addition, management fees, which are charged on an arm's length basis, are paid in proportion to the percentage held by each investor in the Cathay Funds and the Group's share is not material. Bruno Bézard does not sit on any committee responsible for the Group's past or future investments in the five funds. Bruno Bézard has no direct or indirect decision-making power in the continuation of this business relationship, which existed before he was appointed as a director of the Company. Moreover, the Group is free to make investments via funds that do not belong to the Cathay Capital group. There is no relationship of exclusivity or dependency, economic or otherwise, between the Group and the Cathay Capital group. The same is true for the Cathay Capital group funds, in which many other investors have invested. Lastly, Bruno Bézard does not receive any form of compensation in relation to the abovementioned investments. Accordingly, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, the Board of Directors concluded that Bruno Bézard qualified as independent. The business relationships between the Group and the Diot-Siaci group, of which Bruno Bézard is a director, were also reviewed. The review showed that these business relationships were not significant, for either the Group (0.003% of sales in 2022) or for the Diot-Siaci group (less than 0.1% of sales in 2021).

Business relationships between the Group and groups or entities in which certain directors hold positions or directorships were also identified, but they are not significant for either the Group or the other groups/companies identified, based on quantitative criteria (sales, amount of purchases, arm's length conditions) and, where applicable, qualitative criteria (in particular, whether the business relationship predated the event, possible economic dependence, exclusivity, existence of other suppliers, position within the group and influence on the business relationship).

As regards the executive corporate officers, Jacques Aschenbroich cannot be considered as independent as he was Valeo's Chairman and Chief Executive Officer until January 26, 2022. At December 31, 2022, there was a non-material business relationship between the Group and the BNP Paribas group, of which Jacques Aschenbroich is a director. This business relationship, which is conducted on an arm's length basis, is described in section 3.2.3, paragraph "Conflicts of interest", page 159. Regarding Christophe Périllat, he cannot be considered as independent as he holds the office of Chief Executive Officer.

Following the independence review of the directors in office on January 26, 2023, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, concluded that 11 of the 12 directors were independent (the directors representing employees do not count in accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code): Bruno Bézard, Bpifrance Participations (represented by Stéphanie Frachet and then Alexandre Ossola since January 1, 2023), Alexandre Dayon, Fonds Stratégique de Participations (represented by Julie Avrane), Stéphanie Frachet (since January 1, 2023), Mari-Noëlle Jégo-Laveissière, Gilles Michel, Thierry Moulonguet, Patrick Sayer, Ulrike Steinhorst and Véronique Weill.

Board of Directors' diversity policy

Valeo firmly believes in the importance and relevance of broader diversity at all levels and in every profession within the Company, not only as a question of social responsibility, but also as a tool for performance. Valeo is thus committed to promoting diversity within its governing bodies and across the Group as a whole (see Chapter 4, section 4.5.4 "Respecting and promoting diversity, equity and inclusion", pages 298 to 301).

The policy described below reflects Valeo's approach to diversity within the Board of Directors.

Diversity policy statement

The Board of Directors believes it is essential to encourage gender diversity on the Board, as well as a broad mix of backgrounds and expertise, to ensure that the Board can operate smoothly, to help the Group achieve its objectives, including by ensuring a high quality of discussion within the Board, and to protect the interests of both the Company and all its shareholders and stakeholders.

A broad mix of experience and viewpoints and the independence of the directors gives the Board of Directors the objectivity required in relation to General Management and a specific shareholder or group of shareholders. A diversified composition of the Board of Directors also means seeking a permanent balance between recently appointed members and more long-serving directors, to bring a fresh slant to the Board's discussions whilst ensuring the long-term consistency of its decisions. The length of the directors' term of office and staggered appointments also help to maintain the stability of the Company's corporate bodies.

Through that experience and diversity, Valeo's directors are able to exercise good judgment and have an ability to anticipate events, enabling them to act in the Company's interests and to respond to the challenges facing the Group.

The Board of Directors regularly reviews its composition and identifies ways in which to ensure the broadest possible diversity.

Composition of the Board of Directors and objectives

Gender diversity and independence

At December 31, 2022, the Board of Directors had 14 members, of which five women and nine men, including two directors representing employees appointed respectively by the Group Works Council and the European Works Council. In accordance with Article L.225-27-1 of the French Commercial Code (Code de commerce), the directors representing employees do not count for the purpose of determining the proportion of men and women on the Board of Directors. The percentage of women on the Board of Directors is therefore 42%. This percentage remained unchanged following the change in the composition of the Board of Directors on January 1, 2023. Valeo intends to continue its drive to diversify the composition of the Board.

All of the Board members were independent directors with the exception of (i) Jacques Aschenbroich (Chairman of the Board of Directors) and Christophe Périllat (Chief Executive Officer) at December 31, 2022 ⁽¹⁾ and (ii) Christophe Périllat (Chief Executive Officer) following the change in the composition of the Board of Directors on January 1, 2023 ⁽²⁾, it being specified that in accordance with the recommendation in Article 9.3 of the AFEP-MEDEF Code, directors representing employees do not count toward the number of independent directors.

⁽¹⁾ In respect of the 2022 financial year, Jacques Aschenbroich and Christophe Périllat cannot be considered as independent given their respective positions as Chairman and Chief Executive Officer until January 26, 2022 and Chief Executive Officer since January 26, 2022.
⁽²⁾ Jacques Aschenbroich stepped down as Chairman of the Board of Directors and director of Valeo on December 31, 2022, in line with the commitments he made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022.

Diversity of backgrounds and experience

At December 31, 2022, eight of the directors held directorships or other positions in French or international listed companies outside the Group, and only Jacques Aschenbroich (Chairman of the Board of Directors), Christophe Périllat (Chief Executive Officer), Éric Poton and Grzegorz Szelag (directors representing employees) held positions within the Group. Following the change in the composition of the Board of Directors on January 1, 2023 (with the departure of Jacques Aschenbroich on December 31, 2022), the situation remains unchanged.

The directors (and where applicable, the permanent representatives of legal entities holding directorships) of the Board of Directors at December 31, 2022, and at January 1, 2023 following the change in the composition of the Board of Directors, come from different backgrounds, bringing the Group the benefit of their broad range of experience and expertise in business, industry, operations, technology and finance. Furthermore, the two directors representing employees bring the Board of Directors the benefit of their knowledge of the Company and its businesses, markets, customers and expertise. For a presentation of the background and experience of each Board member, see paragraph "Presentation of directors 2022" of this section, pages 129 to 146. The Board of Directors intends to further diversify the profiles of its members.

Procedure for selecting directors in accordance with the diversity policy

The Board of Directors regularly reflects on how best to evolve its composition, particularly when co-opting directors or proposing directors for appointment or reappointment and as part of the annual assessment of the Board's operating procedures, composition and organization. The assessment carried out at the end of 2022 and the beginning of 2023, for example, revealed that the directors are committed to further enhancing the diversity and mix of profiles among the Board members (background, nationality, skills) (for further information on the Board's selfassessment, see section 3.2.2 "Preparation and organization of the Board of Directors' work", pages 147 to 159).

The Board of Directors relies on advice from the Governance, Appointments & Corporate Social Responsibility Committee, which initially selects candidates for the position of director. In its drive to achieve a diversified composition guided by the interests of the Company and all its shareholders, the Board takes the following considerations into account: (i) the appropriate balance based on the composition of and changes in the Company's ownership structure, (ii) gender balance, (iii) any representation of vested interests, (iv) the timeliness of renewing directorships, (v) the integrity, skills, international experience, nationality and independence of each candidate, and (vi) the appropriate number of independent directors. The Governance, Appointments & Corporate Social Responsibility Committee, in its search, can also call on external specialized independent consulting firms to identify potential directors meeting the relevant selection criteria and diversity objectives set in the current policy. Where appropriate, the Governance, Appointments & Corporate Social Responsibility Committee conducts its own independence review to confirm that the profiles identified meet this criterion.

Based on the principles and objectives of the diversity policy, the Governance, Appointments & Corporate Social Responsibility Committee identifies new candidates of interest for appointment or co-optation to the Board of Directors.

The process continues with the selection of candidates and, after interviews with them, a recommendation is submitted by the Governance, Appointments & Corporate Social Responsibility Committee to the Board of Directors, which decides whether to co-opt the candidate or to propose his or her appointment to the Shareholders' Meeting (for further information on the role of the Governance, Appointments & Corporate Social Responsibility Committee, see section 3.2.2 "Preparation and organization of the Board of Directors' work", pages 147 to 159).

In accordance with the law, the directors representing employees are appointed in accordance with the procedures set out in the articles of association (see section 3.2.1 "Summary of the main rules regarding the composition of the Board of Directors", page 120).

The Company's new directors are eligible for training to help them learn about the Company, its business lines and business sector, and its corporate social responsibility (CSR) challenges (for further information on the directors' training, see section 3.2.2 "Preparation and organization of the Board of Directors' work", pages 147 to 159).

The Board of Directors reports annually on the results of this diversity policy in the Corporate Governance Report.

Results achieved in the previous year

The following objectives, which had been set by the Board of Directors for 2022, were achieved:

Diversity policy within the governing bodies

As part of the Group's diversity policy, the Board of Directors also ensures that the Chief Executive Officer implements a policy of non-discrimination, diversity and gender parity, particularly as regards a balanced representation of women and men on the governing bodies. Valeo promotes equality between men and women, particularly pay equality, and ensures that women are represented at all levels of the Company, including top management. At December 31, 2022 and at January 1, 2023, Valeo's Executive Committee has seven members, five of whom are men and two of whom are women - Catherine Delhaye (Chief Ethics, Compliance and Data Protection Officer) and Agnès Park (Group Chief Human Resources Officer) - for a proportion of 28.5%. Catherine Delhaye and Agnès Park are also members of the Operations Committee, which has 14 members.

Valeo is committed to making the further progress required and taking all possible measures to improve gender diversity on governing bodies. In accordance with the recommendations of the AFEP-MEDEF Code, in 2020 the Board of Directors set its 2030 gender diversity targets for the governing bodies as well as intermediate targets on the recommendation of General Management.

Gender diversity is a priority for Valeo and the Company plans to double the number of women on its management committees from 16% at January 1, 2020 to 32% by December 31, 2030. Intermediate targets have been set for December 31, 2024 (23% women) and December 31, 2027 (27% women), by applying a linear annual progression up to the December 31, 2030 target, which is 32% women ⁽³⁾.

Progress in achieving these targets will be monitored regularly by the Board of Directors.

In addition, action and measures taken by Valeo to promote diversity and equality between men and women are presented in Chapter 4, section 4.5.4 "Respecting and promoting diversity, equity and inclusion", pages 298 to 301.

Lead Director

Since October 21, 2015, the Internal Procedures have provided for the possibility of appointing a Lead Director in order to, in the case of the combination of the roles of Chairman of the Board of Directors and Chief Executive Officer, (i) offer additional assurance as to the smooth operation of the Board of Directors and the balance of powers within General Management and the Board of Directors, and (ii) avoid potential conflicts of interest.

This provision was applied following the decision by the Board of Directors at its meeting held on February 18, 2016 to combine the positions of Chairman of the Board of Directors and Chief Executive Officer. This position was held by Georges Pauget (February 18, 2016 to October 24, 2019) and by Gilles Michel (October 24, 2019 to January 26, 2022). In accordance with Article 1.7 (a) of the Internal Procedures, Gilles Michel's duties as Lead Director ended on January 26, 2022, the date on which the roles of Chairman of the Board of Directors and Chief Executive Officer were separated.

Shareholder dialogue

The Group maintains a regular dialogue with its investors. The Chief Executive Officer and the Head of Investor Relations serve as an interface between the Group and the international financial community, including institutional investors such as ESG investors and impact investors, as well as financial analysts and individual shareholders. For further information on the Group's interaction with the financial community, see Chapter 6, section 6.2 "Investor relations".

Furthermore, in view of the importance of having an independent director in charge of shareholder dialogue and discussions with proxy advisory firms about corporate governance matters, it was decided that as from the date when the Chairman and Chief Executive Officer's roles were to be separated, i.e., on January 26, 2022 - and therefore when the Lead Director's duties ended in accordance with the Internal Procedures - and until the end of the term of office of the non-independent Chairman of the Board of Directors, these responsibilities would be entrusted to the Chair of the Governance, Appointments & Corporate Social Responsibility Committee and the Compensation Committee. Consequently, in meetings held with the Company's main shareholders and the main proxy advisory firms in preparation for the May 24, 2022 Shareholders' Meeting, the Chair of these Committees, assisted by the General Counsel and General Secretary, presented the key points relating to Valeo's governance in 2022 and the proposed resolutions.

CSR policy

The Group's CSR and its challenges in the area of sustainable development, including climate change, in relation to its activities are carefully examined by the Governance, Appointments & Corporate Social Responsibility Committee. In view of the increasing importance of CSR issues in the Group's strategy, on October 27, 2020, the Committee decided to appoint Ulrike Steinhorst as member in charge of CSR issues.

CSR issues are presented to the Governance, Appointments & Corporate Social Responsibility Committee several times a year: (i) at meetings attended by the Group Vice-President, Sustainable Development & External Affairs on subjects relating to CSR and climate policy, (in particular the presentation of changes in the structure of the teams in charge of sustainable development, the monitoring of sustainable development objectives and results, the deployment of the CAP 50 program on carbon neutrality, non-financial reporting and non-financial ratings (climate report, non-financial performance statement including taxonomy and taxonomy reporting), the presentation of new challenges that have been identified, as well as the related action plans) (ii) at meetings attended by the Vice-President, Health, Safety & Environment, on subjects relating to health, safety and the environment, in particular on 2021 achievements in terms of health, specifically Covid-19, 2021 achievements in terms of safety, including the launch of specific risk mapping, the continued development of a culture of safety through training and the monitoring of key performance indicators for safety, the main areas of development for safety in 2022, as well as 2021 achievements in environmental matters, with the increase in ISO 50001 certification of sites, the reduction of CO ₂ emissions and the reduction of waste, (iii) at meetings attended by the Chief Ethics, Compliance and Data Protection Officer on subjects relating to diversity and equality, in particular, the monitoring of the Group's commitments to promoting diversity within its governing bodies, the presentation of actions implemented to promote diversity within the Group, the renewal of the mentoring program for women by a member of the Operations Committee, and changes in legislation on diversity, and (iv) at meetings attended by the Group Chief Human Resources Officer on employment issues, in particular on union representation, relations with trade unions and changes in regulations mainly relating to compensation.

⁽³⁾ Intermediate targets were adjusted in March 2021 to take into account the progression in 2020.

In 2022, Valeo, which is a member of the CAC 40 ESG, once again had its non-financial performance acknowledged by the main rating agencies in this area (as it has for several years), and maintained its position as one of the highest rated automotive suppliers by MSCI (AAA), CDP (A-), Sustainalytics ("Low Risk") and S&P Global Corporate Sustainability Assessment (score of 72/100).

In line with Valeo's climate strategy and in accordance with best practices, the Group was one of the first tier-one automotive suppliers to publish a climate report. This report, which was published in May 2022 for the Shareholders' Meeting, presents (i) the commitment, trajectory, governance and actions that Valeo is deploying to contribute to carbon neutrality and (ii) an analysis of climate change risks and opportunities, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures. The publication of this document was welcomed by investors and non-financial rating agencies.

For further Information on Valeo's climate strategy, see Chapter 4, section 4.1 "Valeo and sustainable development: governance, challenges and policies", pages 208 to 228.

Succession plan

Succession planning

Executive succession planning is an important matter for Valeo. In order to protect the interests of the Company and its shareholders, Valeo takes all possible measures to anticipate and prepare for the succession of its executive corporate officers and, where necessary, prepare for the potential unforeseen departure of an executive corporate officer. Valeo's succession plan covers various time horizons depending on the nature of the succession:

Implementing the succession and development plan mainly involves monitoring the career of each candidate and their acquisition of the expertise and experience regarded as necessary, and assessing these periodically. The succession plan, which is reviewed in depth regularly by the Governance, Appointments & Corporate Social Responsibility Committee, is then presented to the Board of Directors.

The orderly succession process of Jacques Aschenbroich was carried out in accordance with the principles governing succession planning (see next section).

Implementation of the succession of Jacques Aschenbroich

During the second half of 2019, the Board of Directors of Valeo started working, under the guidance of the Lead Director ⁽⁴⁾ and the Governance, Appointments & Corporate Social Responsibility Committee, on a comprehensive process to decide on a succession plan for Jacques Aschenbroich.

The succession plan was unanimously approved by the Board of Directors of Valeo at its meeting held on October 27, 2020 and announced publicly the same day. It followed the decision taken by the Board of Directors, within the context of Jacques Aschenbroich's reappointment as director at the Shareholders' Meeting of Valeo held on May 23, 2019, to implement the separation of the roles of Chairman of the Board of Directors and Chief Executive Officer during the first two years of Jacques Aschenbroich's term of office as Chairman and Chief Executive Officer (after his reappointment).

A rigorous and transparent process for assessing potential candidates was thus carried out with the assistance of external consultants.

The process led to the selection of Christophe Périllat, Chief Operating Officer of the Group since 2011, based on the quality of his performance in this role, his ability to deliver results and his extensive knowledge of the automotive industry.

This succession at the level of General Management took place in an extremely complex environment, in which Valeo not only had to deal with the effects of the Covid-19 pandemic but also with the challenge posed by the profound change taking place in the automotive industry. The Board of Directors therefore adapted the succession plan to these circumstances and the executive handover took place in three successive stages to give Valeo every chance of managing the crisis effectively and securing its position in a changing industry.

Christophe Périllat, Chief Operating Officer of the Group since 2011, was therefore appointed Associate Chief Executive Officer of Valeo, effective from October 27, 2020 until May 26, 2021, the date on which the Board of Directors appointed him as Valeo's Deputy Chief Executive Officer and the shareholders appointed him as a director at the Shareholders' Meeting.

In accordance with the succession plan, the Board of Directors, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, at its January 26, 2022 meeting appointed Christophe Périllat as Valeo's Chief Executive Officer. Jacques Aschenbroich continued to serve as Chairman of the Board of Directors, vested with specific missions at the request of the Chief Executive Officer, without prejudice to (i) the executive functions of the Chief Executive Officer, who has sole responsibility for Valeo's management and operations, and (ii) the powers of the Board of Directors, these missions are:

The main purpose of these specific missions was to ensure a smooth transition with Christophe Périllat.

In line with the commitments he made in the context of his appointment as Chairman of the Board of Directors of Orange and as announced in a press release dated March 30, 2022, Jacques Aschenbroich stepped down as director and Chairman of the Board of Directors of Valeo on December 31, 2022.

⁽⁴⁾ Until the end of his role as Lead Director on January 26, 2022.

As part of the succession plan for the Chairman of the Board of Directors, the Board of Directors set up an Ad Hoc Committee responsible for the selection procedure for the new Chairman in 2022. This committee was assisted by a specialized external independent consulting firm.

A rigorous and transparent process for assessing potential candidates was thus carried out.

In line with the selection process implemented by Valeo's Board of Directors ended on December 8, 2022 with the Board of Directors' unanimous decision, on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, to appoint Gilles Michel as Chairman of the Board of Directors' effective January 1, 2023. The Board of Directors considered that Gilles Michel had all the qualities required for the position of Chairman of the Board of Directors of Valeo:

The phased succession plan for Jacques Aschenbroich created the conditions for an optimal executive handover, in the interests of the Group's operations and of all its stakeholders and shareholders, by ensuring that the change of governance took place in line with the Company's culture and values.

Presentation of directors 2022
(Information as at December 31, 2022, unless otherwise specified)

Jacques Aschenbroich
Chairman and Chief Executive Officer (until January 26, 2022)
Chairman of the Board of Directors (from January 26 to December 31, 2022)

French

Age: 68

Valeo

100, rue de Courcelles

75017 Paris, France

First appointed: 03/20/2009

Start of current term of office: 05/23/2019

End of current term of office: 12/31/2022

Number of shares held: 876,394

Membership of Board Committees:

-

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Jacques Aschenbroich continued to serve as Chairman of Valeo's Board of Directors until December 31, 2022 following the change in the Group's governance structure on January 26, 2022. He previously held the position of Valeo's Chief Executive Officer from March 20, 2009 until February 18, 2016, and of Chairman and Chief Executive Officer until January 26, 2022. He has extensive experience in senior executive positions in major industrial groups in France and abroad, as well as senior civil service positions.

Before joining Valeo, he held several positions in the French administration and served in the Prime Minister's office in 1987 and 1988. He then pursued an industrial career in the Saint-Gobain group from 1988 to 2008. After having managed subsidiaries in Brazil and Germany, he became Managing Director of the Flat Glass division of Compagnie de Saint-Gobain and went on to become Chairman of Saint-Gobain Vitrage in 1996.

As Senior Vice-President of Compagnie de Saint-Gobain from October 2001 to December 2008, he managed the flat glass and high-performance materials sectors as from January 2007 and, as the Vice-Chairman of Saint-Gobain Corporation and General Delegate to the United States and Canada, he directed the operations of the group in the United States as from September 1, 2007. He was also a director of Esso SAF until June 2009.

Jacques Aschenbroich has, in particular, been Chairman of the Board of Directors of Orange since May 19, 2022 and a director of BNP Paribas and TotalEnergies.

He graduated in engineering from École des mines.

He is a French citizen and speaks French, English, German and Portuguese.

● Listed company (for directorships and positions currently held).

Christophe Périllat
Director
Deputy Chief Executive Officer (until January 26, 2022)
Chief Executive Officer (since January 26, 2022)

French

Age: 57

Valeo

100, rue de Courcelles

75017 Paris

France

First appointed: 05/26/2021

Start of current term of office: 05/26/2021

End of current term of office: Shareholders' Meeting called to approve the 2024 financial statements

Number of shares held: 174,528 ⁽¹⁾

Membership of Board Committees:

-

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Christophe Périllat joined the Valeo Group in 2000 and held a number of management positions in Group entities of increasing size before becoming Chief Operating Officer in 2011, Associate Chief Executive Officer in 2020, Deputy Chief Executive Officer in 2021 and Chief Executive Officer in January 2022.

Prior to joining Valeo, Christophe Périllat worked in the aerospace industry at equipment manufacturer Labinal, where he held roles in supply chain management, as well as plant, project and subsidiary management positions in France and the United States.

He is a Board member at ALD.

Christophe Périllat is a graduate of École polytechnique and École des mines de Paris. He also holds an EMBA from the French business school HEC.

Christophe Périllat is a French citizen and speaks French and English.

● Listed company (for directorships and positions currently held).

⁽¹⁾ Christophe Périllat also holds 27,744 shares in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 128,539 shares.

Gilles Michel
Independent director
Lead Director (until January 26, 2022)
Chairman of the Board of Directors (since January 1, 2023)

French

Age: 66

Valeo

100, rue de Courcelles

75017 Paris

France

First appointed: 05/23/2018

Start of current term of office: 05/24/2022

End of current term of office: Shareholders' Meeting called to approve the 2025 financial statements

Number of shares held: 2,500

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Gilles Michel has extensive experience in the automotive industry, having spent several years in senior management positions at PSA Peugeot Citroën, where he held roles such as Chief Executive Officer of the Citroën brand and member of the Management Board of Peugeot SA.

He began his career at ENSAE, then at the World Bank in Washington DC, before joining Saint-Gobain in 1986, where, for 16 years, he held various senior management roles, notably in the United States, before being appointed President of the Ceramics & Plastics division in 2000. He joined PSA Peugeot Citroën in 2001 as Executive Vice-President of Platforms, Technical Affairs and Purchasing, before becoming Chief Executive Officer of the Citroën brand and a member of Peugeot SA Management Board. In 2008, he was the first Chief Executive Officer of Fonds Stratégique d'investissement (FSI), in charge of equity investments in companies offering growth and competitiveness for the French economy, which he set up and then managed. He headed the Imerys group from 2010 to 2019, as Deputy Chief Executive Officer, Chairman and Chief Executive Officer and then Chairman of the Board of Directors.

Gilles Michel is a graduate of the École polytechnique, ENSAE and the Institut d'études politiques de Paris (IEP).

He is a French citizen and speaks French and English.

● Listed company (for directorships and positions currently held).

Bruno Bézard
Independent director

French

Age: 59

Cathay Capital

Private Equity

52, rue d'Anjou

75008 Paris

France

First appointed: 10/24/2017

Start of current term of office: 05/24/2022

End of current term of office: Shareholders' Meeting called to approve the 2025 financial statements

Number of shares held: 3,000

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

-

Summary of main areas of expertise and experience

Bruno Bézard has experience in the most prestigious roles in the French civil service, spanning the economic, industrial and financial spheres, as well as in the private equity world. In addition, over the past few years he has gained in-depth knowledge of China, where he lived for several years and spends a substantial amount of time in his current position. He also speaks the language.

Bruno Bézard served as Head of the French Public Finance Administration after spending two years as Minister-Advisor in Beijing, overseeing France's Greater China Regional Economic Department. He created, and then headed, the French State Shareholding Agency (APE), representing the State as a shareholder on a large number of company boards and acquiring vast experience in corporate governance and mergers & acquisitions.

He has notably held a seat on the boards of EDF, SNCF, Areva, La Poste, Thales, Air France, Engie, PSA and Fonds Stratégique d'Investissement (FSI). He was Head of the French Treasury and President of the Paris Club before joining Cathay Capital as Managing Partner in 2016, a private equity fund that invests in start-ups, SMEs and middle market companies, and supports their international development in Europe, the United States and China.

Bruno Bézard is a member of the Supervisory Board of Diot-Siaci and a director of Matmut and Binance France.

An Inspector General of Finance, Bruno Bézard is a graduate of the École polytechnique and the École nationale d'administration (ENA), and taught at both schools for a number of years.

He is a French citizen and speaks French, English, Chinese and Russian.

Bpifrance Participations
Independent director

Bpifrance Participations

27/31, avenue du Général-Leclerc

94710 Maisons-Alfort Cedex

France

First appointed: 06/21/2019

Start of current term of office: 05/24/2022

End of current term of office: Shareholders' Meeting called to approve the 2025 financial statements

Number of shares held: 12,600,000

Membership of Board Committees:

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Bpifrance Participations is a Bpifrance subsidiary, and invests both directly and through funds of funds. It is the parent company of Bpifrance Investissement and engages in these business activities under the general interest mission entrusted to Bpifrance.

● Listed company (for directorships and positions currently held).

Alexandre Ossola
Independent permanent representative of Bpifrance Participations (since January 1, 2023)

French

Age: 48

6-8, boulevard Haussmann

75009 Paris

France

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Alexandre Ossola is Head of Mid Cap Funds and Automotive Future Funds (FAA) at Bpifrance and a member of the Management Committee of Bpifrance Capital Développement. He has over twenty years of experience in private equity and M&A.

He began his career in 1998 as an M&A analyst at Wasserstein Perella, and then at Credit Suisse First Boston. From 2000 to 2011, he was a Director in the Paris office of CVC Capital Partners, and then head of venture capital transactions at CDC Climat between 2011 and 2013. He joined Bpifrance Investissement in 2013 as Director of Nuclear and Rail Funds. In 2015, he joined Bpifrance's Mid & Large Cap Management Committee as head of the FAA funds. In 2017, he also took over the management of Mid Cap operations within Bpifrance Capital Développement, where he is a member of the Management Committee.

Alexandre Ossola is a member or permanent representative of Bpifrance Investissement on the boards of directors or supervisory boards of unlisted companies and groups Novares, Trèves, ADIT, Carizona, Ipesup and Odyssey. Previously, he was appointed, on the recommendation of Bpifrance, as non-voting director of the Supervisory Board of PSA (2017-2021) and permanent representative of Bpifrance Participations as a member of the Supervisory Board of Vallourec (2016-2021).

Alexandre Ossola is a graduate of ESCP Business School.

He is a French citizen and speaks French and English.

Stéphanie Frachet
Independent director (since January 1, 2023)

French

Age: 45

CAPZA Paris

103, rue de Grenelle

75007 Paris

France

First appointed: 12/08/2022, effective 01/01/2023 ⁽¹⁾

Start of current term of office: 01/01/2023

End of current term of office: Shareholders' Meeting called to approve the 2022 financial statements

Number of shares held: 0 ⁽²⁾

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Stéphanie Frachet is a Partner of the Flex Equity Mid Market fund at CAPZA, a European private investment platform. She has more than 20 years of experience in finance and private equity.

From 2001 to 2007, she was in charge of audit and transactions at, respectively, Ernst & Young and PricewaterhouseCoopers, working on M&A and LBO transactions. In 2007, she joined the Leveraged Finance team of Société Générale, in charge of LBO transactions for SMEs and large groups. Stéphanie Frachet then joined Bpifrance (formerly Fonds Stratégique d'Investissement) in 2009 where she was Director of Bpifrance Investissement and member of the Management Committee of Bpifrance Capital Développement between 2017 and 2022.

Previously, she was a permanent representative of Bpifrance Participations, notably as a director of Eutelsat Communications and Sulo (formerly Plastic Omnium Environnement). She was also a director of Constellium (a company listed on the New York Stock Exchange) and a member of the Supervisory Board of Sabena Technics Participations, as well as Board Observer of Horizon Parent Holdings (Verallia), Paprec and Diot-Siaci.

She is a graduate of ESSEC Business School.

She is a French citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

⁽¹⁾ Stéphanie Frachet was permanent representative of Bpifrance Participations from June 26, 2019 to December 31, 2022.
⁽²⁾ On March 1, 2023, Stéphanie Frachet acquired 1,500 Valeo shares in accordance with the rules set out in the articles of association and the Internal Procedures.

Alexandre Dayon
Independent director (since July 26, 2022)

French-American

Age: 55

Salesforce, Inc.

Salesforce Tower

415 Mission Street,

3 ^rd Floor, San Francisco,

CA 94105, United States

First appointed: 07/26/2022

Start of current term of office: 07/26/2022

End of current term of office: Shareholders' Meeting called to approve the 2024 financial statements

Number of shares held: 15,000

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

-

Directorships and other offices held within the past five years

-

Summary of main areas of expertise and experience

Alexandre Dayon, an information technology entrepreneur, brings to the Board of Directors recognized experience in the digital, software and more generally new technology sectors. His professional background, mainly in the United States but also in France, also allows the Board of Directors to benefit from his vision as an entrepreneur and a corporate officer.

Alexandre Dayon began his career in 1989 when he contributed to the creation of Business Objects, a company specializing in decision-making analysis, where he led the Products team for 10 years. He then founded, managed and developed InStranet, a software company for call centers, in the United States. He joined Salesforce when it acquired InStranet in 2008 and has held, for nine years as part of the Management Committee, key operational positions as President in charge of Product and Product Marketing, which have contributed to the growth of Salesforce.

Since 2017, he has led strategic initiatives, working closely with the major international customers, notably in the automotive sector. He is also Chairman of the Advisory Board of Salesforce.

Alexandre Dayon is an engineer and a graduate of École supérieure d'électricité (Supélec).

He is of French and American nationality and speaks French and English.

C. Maury Devine
Independent director (until July 26, 2022)

American

Age: 71

1219 35 ^th Street NW

Washington, DC 20007

United States

First appointed: 04/23/2015

Start of current term of office: 05/26/2021

End of current term of office: 07/26/2022

Number of shares held: 1,500

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

C. Maury Devine has held several management positions in international and industrial groups in the United States and Europe. She has also served in public office in the United States and has extensive knowledge of US public affairs.

From 1972 to 1987, C. Maury Devine worked for the US government in various capacities, most notably for the Department of Justice, the White House and the US Drug Enforcement Administration (DEA). Between 1987 and 2000, she held a number of positions at ExxonMobil Corporation, including Chair and Chief Executive Officer of its Norwegian subsidiary from 1996 to 2000 and Secretary General of Mobil Corporation between 1994 and 1996.

She was also Vice-Chair of the Board of Directors of Det Norske Veritas (DNV) from 2000 to 2010 and Fellow at the Belfer Center for Science and International Affairs at Harvard University from 2000 to 2003. She also served on the Board of Directors of FMC Technologies and Technip.

C. Maury Devine is, in particular, a director of John Bean Technologies and ConocoPhillips (US companies).

She is a graduate of Middlebury College, the University of Maryland and Harvard University (master in public administration).

She is an American citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

Fonds Stratégique de Participations
Independent director

Fonds Stratégique de Participations

9, rue Duphot

75001 Paris

France

First appointed: 03/24/2020

Start of current term of office: 06/25/2020

End of current term of office: Shareholders' Meeting called to approve the 2023 financial statements

Number of shares held: 10,213,000

Membership of Board Committees:

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Fonds Stratégique de Participations (FSP) is a long-term investment vehicle whose purpose is to support French companies in their growth and transition projects over the long term. FSP thus acquires significant equity interests in companies and plays a role in their governance by obtaining a seat of the Board of Directors or the Supervisory Board. The shareholders of the funds are seven French insurance companies: BNP Paribas Cardif, CNP Assurances, Crédit Agricole Assurances, Groupama, Natixis Assurances, Société Générale Assurances, and Suravenir.

FSP's portfolio currently consists of ten equity interests in French companies that are leaders in their field: SEB, Arkema, Safran, Eutelsat Communications, Tikehau Capital, Elior, Neoen, Valeo, Believe and Soitec.

FSP is managed by the investment management company, ISALT.

• Listed company (for directorships and positions currently held).

Julie Avrane
Independent permanent representative of Fonds Stratégique de Participations

French

Age: 51

148, rue de la Pompe

75116 Paris

France

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

A Senior Partner in McKinsey & Company's Paris office from 1999 to July 2020, Julie Avrane headed the firm's high-tech industries practice in France (advanced electronics, aerospace and defense, automotive and assembly). She also co-led the firm's high-tech skills practice worldwide.

Julie Avrane specializes in high-tech industries, IT services and software. At McKinsey, she mainly dealt with strategy, growth, M&A and post-merger integration issues in cross-border contexts as well as large-scale transformation plans.

Prior to joining McKinsey's Paris office, Julie Avrane worked as a researcher with Bull Honeywell in the United States in 1993, then with Cogema (Areva) in 1994, and as a business analyst in McKinsey's London office for two years from 1995 to 1997.

Julie Avrane is Chair of Clear Direction. She is also, in particular, a member of the Supervisory Board of Unibail-Rodamco-Westfield and a director of Bureau Veritas and Exail Technologies.

Julie Avrane is a graduate of the École nationale supérieure des télécommunications de Paris and of the Collège des ingénieurs. She also holds an MBA from INSEAD.

She is a French citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

Mari-Noëlle Jégo-Laveissière
Independent director

French

Age: 54

Orange

Orange Bridge

111, quai du

Président-Roosevelt

92130 Issy-les-Moulineaux

France

First appointed: 05/26/2016

Start of current term of office: 05/26/2021

End of current term of office: Shareholders' Meeting called to approve the 2024 financial statements

Number of shares held: 1,500

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Mari-Noëlle Jégo-Laveissière brings the Board of Directors her considerable experience in new technologies and in research and development, particularly in telecommunications, areas in which she has spent most of her career.

She began her career in 1996 at the Paris regional office (Direction Régionale de Paris) of France Télécom's commercial distribution network. Since then, she has held various leadership positions within the Orange group: head of Consumer Marketing France (Marketing Grand Public France), Director of Research and Development and Director of International Networks. She became a member of the Executive Committee of Orange in March 2014 in her capacity as Executive Vice-President of Innovation, Marketing & Technologies.

Mari-Noëlle Jégo-Laveissière has been Deputy Chief Executive Officer, Europe (excl. France) of Orange since September 1, 2020. She is also a director of Engie, Orange Belgium and Orange Poland.

Mari-Noëlle Jégo-Laveissière holds a degree from École normale supérieure and she graduated in engineering from Corps des Mines. She also holds a doctorate in quantum chemistry from the Université de Paris XI - Waterloo (Canada).

She is a French citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

Thierry Moulonguet
Independent director

French

Age: 71

Fimalac

97, rue de Lille

75007 Paris, France

First appointed: 06/08/2011

Start of current term of office: 06/25/2020

End of current term of office: Shareholders' Meeting called to approve the 2023 financial statements

Number of shares held: 3,000

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Thierry Moulonguet has extensive experience in the French and international automotive industry. He spent most of his career with the Renault-Nissan group, where he held a number of top positions including Associate Chief Executive Officer and Chief Financial Officer of Nissan in Japan and Associate Chief Executive Officer and Chief Finance Officer of the Renault group. Thierry Moulonguet joined the Renault-Nissan group in February 1991 as Head of Banking Strategy and Financial Communication. He later served as Director of Financial Relations, Director of Capital Expenditure Control, Associate Chief Executive Officer and Chief Financial Officer of Nissan before becoming Associate Chief Executive Officer and Chief Financial Officer of the Renault group, also in charge of Information Systems, and then member of the Management Committee for the Americas and member of its Executive Committee from January 2004 to July 1, 2010. He served as Special Advisor to Renault's Chairman and Chief Executive Officer until March 31, 2011, the date on which he retired. He also served as Board member of Fitch Ratings Ltd, Ssangyong Motor Co. (South Korea), RCI Banque and Renault Retail group.

Thierry Moulonguet is a graduate of École nationale d'administration (ENA) and Institut d'études politiques de Paris (IEP).

He is a French citizen and speaks French and English.

Éric Poton
Director representing employees

French

Age: 56

Valeo Systèmes d'Essuyage

1, rue

Pierre-et-Marie-Curie

63500 Issoire

France

First appointed by the Group Works Council: 06/18/2021, effective 06/30/2021

Start of current term of office: 06/30/2021

End of current term of office: 06/30/2025

Number of shares held: 38 ⁽¹⁾. In accordance with the law, the articles of association and the Internal Procedures, the director representing employees is not required to hold 1,500 shares.

Membership of Board Committees:

Main position held outside the Company

-

Directorships and other offices currently held

Directorships and other offices within the Group

Directorships and other offices held within the past five years

-

Summary of main areas of expertise and experience

Thanks to his career within the Group and his involvement in the employee representative bodies and trade unions, Éric Poton has in-depth knowledge of the Group's business and employee relations, which are key attributes for a director representing employees.

Éric Poton has worked at Valeo since 1998. He has held various positions within the Issoire plant, mainly in the R&D and Aftermarket teams.

Since 2017, he has been project manager for P2 and R&I and standard owner, with a particular focus on developing Aftermarket platform standards for the wiper business. He leads a research and innovation project team and contributes to the Group's innovation activities on wiper system products.

He started his career at Valeo as a design engineer before becoming a member of the R&D project team. Between 2007 and 2011, he held the position of R&D standardization coordinator and in 2012 was appointed P2 project manager.

Éric Poton was a member of the Economic and Social Committee at the Issoire site and a member of the Central Works Council at Valeo Systèmes d'Essuyage (VSE). He was also the site and central union delegate for VSE, as well as a full member of the Group Works Council and the European Works Council for the CFE-CGC trade union.

Éric Poton holds a higher education diploma in industrial product design and has followed a further education course in management. He is a French citizen and speaks French and English.

⁽¹⁾ Éric Poton also holds 90 shares in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 416 shares.

Patrick Sayer
Independent director

French

Age: 65

Augusta

143, avenue Charles-de-Gaulle

92200 Neuilly-sur-Seine

France

First appointed: 05/23/2019

Start of current term of office: 05/23/2019

End of current term of office: Shareholders' Meeting called to approve the 2022 financial statements

Number of shares held: 11,700

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Patrick Sayer is Chairman of Augusta, a family office that focuses on investing in three core sectors: new technologies, luxury goods and real estate.

Patrick Sayer served as Chairman of the Management Board of Eurazeo, one of Europe's leading listed investment companies, from 2002 to 2018. He became a member of Eurazeo's Supervisory Board in 2018. Eurazeo directly and indirectly manages almost €32 billion in assets.

Previously, Patrick Sayer was a Managing Partner at Lazard Frères et Cie in Paris, which he joined in 1982, and a Managing Director of Lazard Frères & Co. in New York, where he was Global Head of Media and Technology. His private equity experience dates back to the creation of Fonds Partenaires, where he was active from 1989 to 1993. He is also a director of Ipulse. He was, in particular, Chairman and then member of the Supervisory Board of Europcar Mobility Group until February 26, 2021, and a director of ANF Immobilier, AccorHotels, Gruppo Banco Leonardo (Italy) and Rexel. Between 2006 and 2007 he was President of the French Association of Investors for Growth (Association française des investisseurs pour la croissance) (AFIC), and he is also a founding member of the legal think-tank Club des juristes and the President of the Financial Law Chamber (money and financial markets) of the Paris Commercial Court (Tribunal de commerce de Paris). He is a lecturer in finance (master's program) at Paris Dauphine university.

Patrick Sayer is a graduate of École polytechnique (1980) and École des mines de Paris (1982). He is also a certified financial analyst, completing the course at the French Society of Financial Analysts training center, where he has also taught classes.

He is a French citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

Ulrike Steinhorst
Independent director ⁽¹⁾ , in charge of CSR issues

German

Age: 71

3, villa du Coteau 92140 Clamart

France

First appointed: 02/24/2011

Start of current term of office: 06/25/2020

End of current term of office: Shareholders' Meeting called to approve the 2023 financial statements

Number of shares held: 1,500

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

-

Summary of main areas of expertise and experience

Ulrike Steinhorst has extensive experience in top-level corporate positions, mainly at EDF, Degussa/Evonik group and EADS/ Airbus, with a strong focus on international business and strategy. She also has considerable expertise in CSR.

She joined the Électricité de France (EDF) group in 1990 after being at the office of the Minister for European Affairs at the time of German reunification. Within EDF she held a number of positions before becoming head of the International Subsidiaries in the Industrial division. In 1999, she joined Degussa AG group in Germany, before returning to France in 2003 to head up the group's French business. In 2007, she joined EADS where she served as Chief of Staff to the Executive Chairman.

From 2012 to the end of 2015, she served as Strategy, Planning and Finance Director of Airbus group's Technical Corporate division before serving, until June 2017, as Advisor to the Chief Technical Officer.

In 2017, she founded the consulting firm Nuria Consultancy, of which she is Chair. In addition to her consulting activities, she is, in particular, an independent director of Mersen and Albioma, companies specialized in renewable energy. She has also served on the Board of Directors of F2I (UIMM) and the Imagine genetic disease research institute.

Ulrike Steinhorst is a state-certified German lawyer and graduate of the HEC Executive MBA, Université Paris II - Panthéon (post-graduate degree in public law) and the École nationale d'administration (ENA).

She is a German citizen and speaks German, English and French.

• Listed company (for directorships and positions currently held).

⁽¹⁾ Ulrike Steinhorst will have served on the Board of Directors for 12 years as of February 24, 2023. In accordance with the AFEP-MEDEF Code, she will no longer be considered independent as of that date.

Grzegorz Szelag
Director representing employees

Polish

Age: 45

Valeo Electric and Electronic Systems Sp. z.o.o.

ul. Bestwinska 21

43-500

Czechowice-Dziedzice

Poland

First appointed by the European Works Council: 11/19/2020

Start of current term of office: 11/19/2020

End of current term of office: 11/19/2024

Number of shares held: 218 ⁽¹⁾. In accordance with the law, the articles of association and the Internal Procedures, the director representing employees is not required to hold 1,500 shares.

Membership of Board Committees:

Main position held outside the Company

-

Directorships and other offices currently held

Directorships and other offices within the Group

Directorships and other offices held outside the Group

-

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Thanks to his long experience with the Group and his involvement in its employee representative bodies for more than 15 years, Grzegorz Szelag possesses all the professional and interpersonal qualities required to fulfill the role of director representing employees.

Grzegorz Szelag has been working at Valeo in Czechowice, Poland, since 2002. He started his career as a production operator, before being promoted to production supervisor in 2002, and then quality technician in 2004.

In 2005, he became employee representative at the Czechowice site. He joined Valeo's European Works Council in 2006 as representative for Poland and became its Secretary in 2018.

Grzegorz Szelag has a degree from a mechanical engineering school.

He is a Polish citizen and speaks Polish and English.

⁽¹⁾ Grzegorz Szelag also holds 4 shares in the Valeorizon mutual fund (Group employee share ownership plan), which would represent 18 shares.

Véronique Weill
Independent director

French

Age: 63

CNP Assurances

4, promenade Issy-Cœur de Ville

92130 Issy-les-Moulineaux

France

First appointed: 05/26/2016

Start of current term of office: 05/26/2021

End of current term of office: Shareholders' Meeting called to approve the 2024 financial statements

Number of shares held: 2,390

Membership of Board Committees:

Main position held outside the Company

Directorships and other offices currently held

Directorships and other offices within the Group

-

Directorships and other offices held outside the Group

Directorships and other offices held within the past five years

Summary of main areas of expertise and experience

Véronique Weill has a strong background in finance and M&A, as well as insurance, having spent more than 20 years in investment banking in the United States and France and then at AXA. She also has extensive experience in new and digital technologies.

Véronique Weill spent more than 20 years at J.P. Morgan, where she held various positions including global head of operations and trading for the investment banking business and global head of IT and operations for the asset management and private banking business. In June 2006, she joined AXA as Chief Executive Officer of AXA Business Services and Director of Operational Excellence. She was also Chair of the Board of Directors and a director of various AXA subsidiaries in France, Spain, Italy and Belgium.

She was Chief Customer Officer for the AXA group and Chief Executive Officer of AXA Global Asset Management until January 18, 2017 and then General Manager in charge of Operations, IT, Real Estate, Insurance and M&A at the Publicis group until December 2020. She was also a member of the Scientific Board of the AXA Research Fund. She has been Chair of the Board of Directors of CNP Assurances since July 2020. She is also, in particular, a member of the Supervisory Board of Rothschild & Co, Lead Director of Kering and co-spokesperson, with the Chair of the Board, to investors on ESG (environment, social and governance) issues.

Véronique Weill is a graduate of Institut d'études politiques de Paris (IEP) and has a bachelor's degree in literature from the Sorbonne University.

She is a French citizen and speaks French and English.

• Listed company (for directorships and positions currently held).

3.2.2 Preparation and organization of the Board of Directors' work

Internal Procedures

On March 31, 2003, the Board of Directors adopted Internal Procedures, which are regularly updated, defining the operating procedures of the Board of Directors in addition to applicable legal and regulatory requirements and the provisions of the Company's articles of association. Acting on the recommendation of the Governance, Appointments & Corporate Social Responsibility Committee, the Board of Directors updated its Internal Procedures on February 23, 2023. Internal procedures have also been drawn up for the Board of Directors' Committees, and are included in the appendices of the Board of Directors' Internal Procedures.

The Internal Procedures apply to each member of the Company's Board of Directors and to each permanent representative of a legal entity that is a member of the Board.

The Internal Procedures are available on the "Corporate Governance" page of the Company's website (www.valeo.com).

Directors' rights and duties

The Internal Procedures include a Directors' Charter that sets out the principles that the directors must follow. This Charter imposes certain duties on directors in order to ensure, in particular, that (i) they are aware of the rules and regulations applicable to them, (ii) conflicts of interest are avoided, (iii) they dedicate the necessary time and attention to their duties and comply with the applicable provisions relating to multiple directorships, and (iv) as regards undisclosed information, they are bound by a duty of confidentiality that goes beyond the mere obligation of discretion provided by law. Notwithstanding this duty of confidentiality, the permanent representative of a legal entity that is a member of the Board may provide information to persons within that legal entity, it being specified that such communication can only be used for the purposes of fulfilling its duties as permanent representative.

Furthermore, members of the Board of Directors are responsible for ensuring that they have all the necessary information to carry out their duties. To this end, the Chairman of the Board or the Chief Executive Officer provides directors with the information and documents required in order for them to fully perform their duties.

As compensation for the work carried out by directors, Shareholders' Meetings may grant an annual fixed amount, allocated by the Board of Directors to its members pursuant to Article L.22-10-8 of the French Commercial Code on the compensation policy for corporate officers (ex ante vote). The Board of Directors may also grant directors exceptional compensation for specific assignments or tasks entrusted to them. The Board of Directors sets the compensation of the corporate officers (including the directors), based on recommendations made by the Compensation Committee. The compensation policy is subject to an ex ante vote by the shareholders and the compensation paid or awarded pursuant to that compensation policy is then subject to a general ex post vote by the shareholders.

Article 14 of Valeo's articles of association provides that each director must hold at least 1,500 registered shares throughout their term of office. This obligation is also set out in Article 1.1(b) of the Internal Procedures. In accordance with the law and the provisions of the Company's articles of association and the Internal Procedures, this requirement does not apply to directors representing employees.

Although not expressly provided for by the Internal Procedures, in practice the directors attend the Company's Shareholders' Meetings, in accordance with the recommendation in Article 20 of the AFEP-MEDEF Code.

On January 23, 2008, the Board of Directors adopted a Code of Conduct on trading in financial instruments and compliance with regulations on insider trading, which governs trading in the Company's securities by members of the Board of Directors, executive corporate officers, members of the Executive Committee, Operations Committee and the Liaison Committee, and any person with inside information (within the meaning of Article 7 of Regulation No. 596/2014 of April 16, 2014 on market abuse). The Board of Directors last updated its Code of Conduct on October 24, 2019 pursuant to Law No. 2019-744 of July 19, 2019 on the simplification, clarification and modernization of company law. On accepting their position, each member of the Board of Directors agreed to comply with this Code of Conduct.

This Code sets out the legal and regulatory provisions regarding the disclosure of trading in the Company's securities applicable to insiders, and in particular members of the Board of Directors, the Executive Committee, the Operations Committee and the Liaison Committee, any person with permanent or regular access to inside information and any Group employees who may appear on the lists of occasional insiders drawn up by Valeo ("Insiders").

Under the Code of Conduct, it is prohibited for any person to carry out one or more transactions based on inside information at any time. It is prohibited at any time for these people to carry out or attempt to carry out, either on their own behalf or for third parties, directly or indirectly, one or more transactions (including the sale of shares resulting from the exercise of stock purchase or subscription options or the cancelation or modification of an order) on financial instruments (shares, bonds, etc., and any related derivatives) of the Company if they have inside information about the Company or any other Group entity. This Code also prohibits any person having inside information from disclosing or attempting to disclose inside information about the Company or any Group entity, other than in the normal course of their duties, to any person, particularly when the circumstances of such disclosure would enable that person to carry out one or more transactions on the Company's financial instruments. They are also prohibited from advising or attempting to advise any person to carry out one or more transactions in respect of the Company's financial instruments based on inside information about Valeo or any other Group entity, or encouraging or attempting to encourage any person to carry out such transactions in Valeo's financial instruments based on this inside information.

The Chairman of the Board, the Chief Executive Officer, the members of the Board of Directors, the members of the Executive Committee, Operations Committee and the Liaison Committee and other Group executive managers are also prohibited from carrying out, directly or indirectly, the following transactions:

The Code of Conduct also applies to the purchase or sale (or forward transaction) of the financial instruments of any company other than Valeo by any persons having inside information if such transaction is based on inside information obtained in the course of their duties.

In the event of uncertainty as to whether information is considered inside information, all persons must contact the General Counsel and General Secretary before carrying out any transactions involving the Company's financial instruments. The Chairman of the Board, the Chief Executive Officer, the directors and the members of the Group's Executive Committee and Operations Committee must check with the General Counsel and General Secretary before carrying out any transactions involving the Company's financial instruments that they do not have inside information as a result of their position.

Restrictions on trading in the Company's financial instruments apply to any person having inside information up to and including the date of publication by the Group of the press release on the inside information in question.

In addition, subject to the exceptions provided for in the applicable regulations, Insiders are prohibited from carrying out one or more transactions involving the Company's shares, debt securities, derivatives or other related financial instruments (including the sale of free shares), either on their own behalf or for third parties, directly or indirectly, during the following black-out periods:

In addition, pursuant to the Code of Conduct, the Chairman of the Board, the Chief Executive Officer, the members of the Board of Directors, other executive managers and persons having close personal ties with them must comply with obligations to inform the Company and the AMF following transactions in the Company's shares, debt securities, derivatives or other related financial instruments in accordance with applicable laws and regulations.

Rules governing the operation and organization of the Board of Directors, and their application

Average notice period for calling Board meetings

In accordance with its Internal Procedures, the Board of Directors meets at least six times a year, and at least once every three months, on dates that are sent to each director at the beginning of the fiscal year at the latest, and at any other time in the interest of the Company. The average notice period for calling a meeting of the Board of Directors is approximately ten days, allowing the directors to review any useful information for such meetings.

Representation of directors

Directors may be represented at Board of Directors' meetings by another director; however, at a single meeting each director only has a proxy to represent one director. The proxy must be given in writing. In 2022, only one of the directors was represented by proxy at Board meetings.

Chairmanship of Board meetings

Board of Directors' meetings are chaired by the Chairman of the Board or, in his absence, by a Vice-Chairman, where applicable, or a director designated by the Board of Directors. All ten Board of Directors' meetings held in 2022 were chaired by its Chairman.

Directors' participation in Board meetings

The Internal Procedures allow directors to participate in Board of Directors' meetings by any videoconferencing or telecommunications technology that enables them to be identified and ensures that they actually participate in the meeting. Accordingly, directors who take part in Board meetings through such means are deemed to be present for the purposes of calculating the quorum and majority, except at meetings dedicated to the preparation of the annual parent company and consolidated financial statements and the related management reports (as provided for in Articles L.232-1 and L.233-16 of the French Commercial Code). The Chairman of the Board is required to state in the relevant meeting notice whether these methods can be used for certain meetings. Directors wishing to participate in a Board meeting by these methods must contact the General Secretary at least two working days before the meeting date (except in an emergency) in order to ensure that the relevant technical information can be exchanged and tests performed before the meeting takes place.

Under Article 16.4 of the Company's articles of association and Article 1.2 (f) of the Internal Procedures, the directors may be consulted in writing for decisions that fall within the Board of Directors' scope of authority as set out in the French Commercial Code, Article L.225-24 (appointment of a director if a seat becomes vacant due to death or resignation, or if the number of directors falls below the minimum legal requirement or the minimum requirement provided for under the articles of association, or if the gender balance is not observed), Article L.225-35, final paragraph (authorization of sureties, endorsements and guarantees), Article L.225-36, second paragraph (compliance of the articles of association with applicable laws and regulations) and Article L.225-103, I (calling a Shareholders' Meeting), as well as the decision to transfer the Company's registered office to any other location in the same département or a neighboring département.

Decision-making on the Board of Directors

Except in the event of a written consultation in accordance with the law, the Board of Directors is only validly constituted if half of its members are present or represented. Decisions are taken by a majority vote of the members present or represented. In the event of a tie, the Chairman has the casting vote.

Record of Board decisions

In addition to written consultations, minutes are drawn up at each meeting and signed by the Chairman of the Board and a director. The draft minutes must first be sent to all directors no later than two weeks after the meeting. To ensure a clear account of Board of Directors' meetings, the minutes include, in addition to the information required by law, a summary of the discussions and decisions made, briefly mentioning the issues and reservations raised, along with an explanation of any technical issue related to videoconferencing or telecommunications technology used if it disrupted the meeting. The minutes of Board of Directors' meetings provide a record of the Board of Directors' proceedings.

Frequency and duration of Board meetings and average attendance rates of directors

The frequency of Board of Directors' meetings and the average attendance rate of directors in the 2022 fiscal year are set out in section 3.2.1 "Attendance rate at Board of Directors' meetings", pages 120 to 121. All meetings of the Board of Directors were held in person. The average duration of Board of Directors' meetings was about four hours. The frequency and duration of Board meetings allow for the review and in-depth discussion of matters falling within the Board of Directors' scope of authority.

Directors' access to information

Directors' training

The Company's new directors are eligible for training to help them learn about the Company, its business lines and business sector, and CSR challenges. They also attend an annual strategy seminar, held over several days in a different part of the world each year. This seminar is mainly to provide genuine insight into the discussions of the Board of Directors, as well as strategies, the competitive environment and industry trends, and to gain a practical understanding of the Group's specificities. During the seminar, the directors visit the Group's production facilities and those of its partners. They also meet the local operational teams and local management, and are given presentations on the Group's products and business operations. Given the diversity of the program and the topics discussed, this seminar contributes to the directors' continuous training. The 2022 strategy seminar took place over a period of four days in Hungary.

In accordance with the recommendations in the AFEP-MEDEF Code, the Company has devised a specific training program for directors representing employees. Grzegorz Szelag attended various training courses, including a course provided by the IFA during the year entitled "Salaried Directors Workshop, a guide to being a member of the Board". Éric Poton, the second director representing employees, also attended various training courses, including a directorship training course designed by the French Institute of Directors (Institut français des administrateurs - IFA) in partnership with Sciences Po Executive Education entitled "Certificate of Corporate Director" as well as several other IFA training sessions about the fundamental aspects of finance and about audit committees. Both directors representing employees were also given immersion sessions with the executive corporate officers, the General Counsel and General Secretary, the Chief Financial Officer, the Group Chief Human Resources Officer, Human Resources; and the Chief Technology Officer and Vice-President, Strategy.

In general, any time after their appointment, the directors may receive additional training, if they deem it necessary, to learn about the Company, its business lines and business sector, and its CSR challenges, in particular on climate issues (including the Group's CAP 50 plan).

Directors' access to information

Within the scope of the Board of Directors' work, each director is given all the information required to perform his/her duties. The agenda for any upcoming Board of Directors' meeting and details of agenda items requiring upfront analysis and consideration are provided within a sufficient time frame and at least 48 hours (except in an emergency) before the meeting, provided that this is not incompatible with confidentiality requirements.

Directors who are not able to make an informed decision due to a lack of information must notify the Chairman of the Board and request the information they deem necessary to fulfill their duties. Requests for information needed to perform their duties must be made to the Chairman. Generally, each director receives the information that he/she needs to perform his/her duties and may be given all the related documents by the Chairman of the Board of Directors once the Board has determined that they are relevant.

The Chairman of the Board shares with the directors any information about the Company that he has and that he deems relevant to share on an ongoing basis. The Lead Director is in regular contact with General Management and ensures that any information concerning the Company is reported to the Board of Directors.

Guests of the Board of Directors

In 2022, the General Counsel and General Secretary and the Chief Financial Officer attended all meetings of the Board of Directors. Other members of the Group's Management attended for certain specific matters, including the Chief Ethics, Compliance and Data Protection Officer for matters relating to the Group's compliance program. The Group's Statutory Auditors attended parts of some Board of Directors' meetings.

Non-executive sessions

At the end of each Board meeting, it is proposed that the independent directors meet without the executive corporate officers and non-independent directors being present, unless invited. These non-executive sessions encourage debate among the independent directors. In 2022, a meeting without executive corporate officers and non-independent directors was held at the end of each of the 10 meetings of the Board of Directors.

Role of the Board of Directors

The principal role of the Board of Directors, which is a collegial body appointed by the shareholders, is to determine the Company's business strategies and ensure that they are implemented effectively. Subject to the powers expressly granted to Shareholders' Meetings and within the limits of the corporate purpose, it handles any issues related to the proper operation of the Company and takes care of any business in this respect during its meetings.

In accordance with applicable laws and regulations, the Company's articles of association and the provisions of the Internal Procedures, the Board of Directors has the power, in particular, to:

The Board of Directors is also informed of market and competitive trends and the main challenges faced by the Company, including those related to CSR. It endeavors to promote the Company's long-term value creation whilst taking into consideration the CSR impacts of its operations.

In 2022, the main topics addressed by the Board of Directors related to, in particular:

a) the financial position, cash position, and commitments of the Group, and in particular:

b) business, strategy and risk management, and in particular:

c) executive compensation, and in particular:

d) corporate governance, and in particular:

e) corporate social responsibility, including climate issues, and in particular:

f) The Shareholders' Meeting, and in particular:

Committees created by the Board of Directors

The Board of Directors has set up several committees in order to enhance its operating procedures and provide assistance with preparing its decisions by issuing recommendations and opinions.

At December 31, 2022, and at the date of this Universal Registration Document, the Committees of the Board of Directors were:

The Specialized Committees of the Board of Directors have their own internal procedures which set out their composition, their missions and their operating procedures. These internal procedures are available on the Company's website (www.valeo. com/en/corporate-governance).

These Committees, which exercise their duties under the responsibility of the Board, are intended to streamline the Board's operations and to assist the Board with the preparation of its decisions. They are responsible for studying issues submitted to them by the Board or the Chairman, preparing the Board's work in relation to these questions, and reporting their conclusions to the Board in the form of reports, proposals, opinions, information or recommendations. The role of the Committees is strictly advisory. The Board shall decide, at its own discretion, the measures it wishes to take based on the opinions, studies, investigations or reports issued or prepared by the Committees.

In order to carry out their duties, the Committees may decide to hear members of the Group's executive management or third parties, subject to notifying the corporate officers and reporting thereupon to the Board. The Committees may be assisted by external consultants, if needed, subject to their qualifications and independence, and subject to the prior notification of the Chairman of the Board or the Board.

The various Committees reported regularly on their work to the Board of Directors in 2022.

Governance, Appointments & Corporate Social Responsibility Committee (GACSRC)

Composition of the Committee

At December 31, 2022, the composition of the Governance, Appointments & Corporate Social Responsibility Committee was as follows:

The changes in the Committee's composition (made or approved) during 2022 are set out in the table in section 3.2.1 "Composition of the Board of Directors at December 31, 2022 and changes (made or approved) during 2022", pages 117 to 118.

All the members are independent directors and the Company therefore complies with the provisions of Article 17.1 of the AFEP-MEDEF Code recommending that the majority of directors on the Appointments Committee be independent. This provision has been written into the committee's internal procedures.

Committee roles and responsibilities

According to its internal procedures, the roles and responsibilities of the Governance, Appointments & Corporate Social Responsibility Committee are, in particular, as follows:

a) as regards corporate governance:

b) as regards selection and appointments: