Annual Report RENK 2011 an MAN Group Company

RENK AG

Gögginger Str. 73 86159 Augsburg, Germany Phone (+49-821) 5700-0

Fax (+49-821) 5700-573 Annual Report RENK www.renk.eu 2011 An MAN Group Company

Innovative Power Transmission

Annual Report 2011 RENK AG At a glance Products and services

• Operating profit of €53 million (up from €52 million) • ROS: 13.6 percent (up from 12.9) Vehicle transmissions • ROCE: 33.5 percent (down from 36.9) Fully automatic power-shift, reverse and steering transmissions with brake systems and final drives for medium and heavy tracked vehicles. • EpS: €5.58 (up from €5.54) • Proposed dividend: €1.80 (unchanged) • Cash flow from operating activities: €40 million (down from €81 million) Industrial gear units Gear units for the cement industry. Spur-wheel and planetary gear units for turbo- machines especially for the petrochemical industry and power generating plants. High- RENK Group speed gear units for the plastics industry. Gear units for wind turbines. € million 2011) 2010) Change in % Marine gear units Order intake 456) 525) –13 Gear units for merchant vessels, ferries, cruise liners and naval craft with diesel engine Sales 389) 403) –3 and/or turbine as well as electric propulsion, marine reversing gear units, reduction gear Order backlog1) 586) 522) +12 units and variable-speed gears for ship generators. Headcount1) 2,013) 1,882) +7 thereof temporary employees1) 69) 68) – Slide bearings Change Standard and special versions of horizontal and vertical slide bearings for electrical in € mill. machines, air blowers/fans, compressors, pumps, turbines, and general mechanical Operating profit 53) 52) +1 engineering. Slide bearings for transmissions. Marine shaft bearings and thrust bearings. EBT 54) 52) +2 EAT (net income) 38) 38) – Earnings per share (EpS) in € 5.58) 5.54) +0.04 Clutches and couplings Dividend per share in € 1.80) 1.80) –) Curved-tooth couplings for industry, marine and ocean technology, as well as for rail- Return on sales (ROS) in % 13.6) 12.9) –) bound vehicles; multidisk steel clutches for slow- and high-speed industrial duties, dia- Return on capital employed (ROCE) in % 33.5) 36.9) –) phragm couplings for high-speed machinery, safety couplings. Torsionally elastic couplings. Capital expenditures 24) 23) +1 Amortization and depreciation 13) 13) – Internally funded R&D expenditures 6) 4) +2 Testing systems Cash earnings 51) 53) –2 Testing rigs for development and quality assurance in the motor vehicle and aviation Cash flow from operating activities 40) 81) –41 industries as well as for railroad engineering. Cash flow from investing activities (24) (23) –1 Free cash flow 16) 58) –42 Net liquid assets 103) 99) +4 Equity1) 236) 217) +19

1) as of December 31, 2011 vs. 2010

Financial diary Fiscal 2011 annual general meeting April 26, 2012 Q1/2012 interim report May 3, 2012 Semiannual financial report 2012 July 31, 2012 Q3/2012 interim report October 30, 2012 Press release on financial information 2012 February 22, 2013 Fiscal 2012 annual general meeting April 24, 2013

RENK—an MAN SE Company Contents

04 Supervisory Board 05 Executive Board 06 Report of the Supervisory Board 10 Corporate governance at RENK 16 Board compensation report for fiscal 2011 23 RENK stock

24 RENK Group Management Report for fiscal 2011 25 The RENK Group’s business focus 26 Economic environment 28 Order situation and operating profit 34 Income statement 35 Reconciliation to net income (EAT) 36 Controlling system and shareholder value management 38 Financial position 39 Asset and capital structure 42 Capital-related disclosures 44 Research and development 48 Capital expenditures, environmental management 50 Employees 54 The situation at the divisions 66 Risk report 80 Outlook 84 Subsequent events

85 RENK consolidated financial statements for the fiscal year ended December 31, 2011 86 Consolidated income statement 86 Statement of comprehensive income 87 Consolidated balance sheet 88 Statement of changes in equity 89 Consolidated statement of cash flows 91 Notes to RENK’s consolidated financial statements 91 Accounting principles 102 Notes to the consolidated income statement 107 Notes to the consolidated balance sheet 118 Other information 136 Subsequent events 137 Supervisory and Executive Board memberships in other statutory boards or equivalent 140 Management representation 141 Independent auditor’s report and opinion

143 Six-year overview

03 RENK Annual Report 2011 Supervisory Board

Dipl.-Kfm. Frank H. Lutz Klaus Ketterle*) Munich Neusäss Supervisory Board Chairman Technical clerk, RENK AG Executive Board member of MAN SE

Herbert Köhler*) Dipl.-Oec. Hiltrud Werner Augsburg Munich Senior Foreman, RENK AG Supervisory Board member as from May 5, 2011 Supervisory Board Vice-Chairwoman as from May 26, 2011

Head of Corporate Internal Auditing of *) elected by the employees MAN SE As of March 5, 2012

Prof. Dipl.-Ing (FH) Gerd Finkbeiner Neusäss

CEO of manroland AG

Dr.-Ing. Hans-O. Jeske Wesel

Executive Board member of MAN Diesel & Turbo SE

04 Executive Board

Ulrich Sauter Dipl.-Ing. (FH) Florian Hofbauer Augsburg Augsburg Spokesman responsible for Production and Administration responsible for Engineering and Marketing

05 RENK Annual Report 2011 Report of the Supervisory Board

Frank H. Lutz

Ladies and Gentlemen:

In fiscal 2011, the Supervisory Board periodically and thoroughly dealt with RENK’s situation and development and throughout performed the tasks and duties incumbent on it under law, the Company’s bylaws and its own Rules of Procedure. We provided the Executive Board members with advice on the conduct of business and oversaw their activities.

The Supervisory Board convened in 2011 at four meetings, attendance averaging 88 percent. Detailed Executive Board reports (oral and written) informed the Supervisory Board on

• business trends and transactions of relevance,

• RENK’s performance and financial trends,

• the corporate plan and any variances and their causes, as well as

• the present strategic focus.

Other key subjects were the constituents and detailed configuration of the risk management system, the establishment of an assembly and distribution center of Slide Bearings in China, plus the acquisition of Berlin-based ADMOS-Gleitlager Produktions- und Vertriebsgesellschaft mbH.

06 In March 2011, the Supervisory Board resolved to revise the compensation system for Executive Board members.

The Supervisory Board’s Presidential Committee met twice in fiscal 2011; no other committees exist within the Supervisory Board.

The Supervisory Board was involved as advisory body in all issues and decisions of import to RENK.

As part of its management monitoring functions, the Supervisory Board satisfied itself of the installation by the Executive Board of an effective and efficient compliance management system for the RENK Group, and obtained reports on compliance-related tests and audits.

German Corporate Governance Code In December 2011, RENK AG’s Executive and Supervisory Boards issued the declaration of conformity on the current recommendations of the German Corporate Governance Code Government Commission (as amended up to May 26, 2010). This declaration is published on RENK AG’s website. The Supervisory Board approved the corporate governance report 2011 at the present meeting.

Annual and dependency report audits 2011 The separate financial statements and management report of RENK AG, as well as the consolidated financial statements and group management report, for the fiscal year ended December 31, 2011, were all examined by PricewaterhouseCoopers AG, Wirt schaftsprüfungsgesellschaft (“PwC”), Munich, the statutory auditor duly elected by the annual general meeting; PwC issued its unqualified opinion on both sets of financial statements. The focal audit areas defined by the Supervisory Board referred to pension accruals, IT infrastructure progress with particular emphasis on the IT roadmap, IT outsourcing processes and access rights, as well as A/R management.

Pursuant to Art. 312 German Stock Corporation Act (“AktG”), the Executive Board prepared a dependency report on affiliations for fiscal 2011. The statutory auditor examined this report and issued the following opinion thereon:

“According to our due audit and analysis we hereby confirm • that the facts stated in the report are true and valid, and • that the consideration the Company received for the legal transactions mentioned therein was not unreasonably high.”

The Supervisory Board endorsed the statutory auditor’s conclusions from the latter’s examination of the dependency report.

The statutory auditor attended, and reported on its key audit conclusions at, our annual accounts meeting today. We took approving note of the audit results.

According to the final results of our own review of RENK AG’s separate and consolidated financial statements and the management reports, we do not raise any objections either. We approve the separate financial statements as prepared by the Execu-

07 RENK Annual Report 2011 tive Board, which are thus adopted, as well as the consolidated financial statements. After thorough discussion of the RENK Group’s financial budget and capital expenditure plan, we agree with the Executive Board’s proposal (also reviewed by us) for the appropriation of net earnings.

After reviewing the final results of our own examination, we found no reasons for objections to the Executive Board’s concluding statement in the dependency report on affiliations.

Changed Supervisory Board membership By letter dated February 22, 2011, Dipl.-Wirtsch.-Ing. Klaus Stahlmann stepped down from RENK AG’s Supervisory Board (both as vice-chairman and member).

On May 5, 2011, MAN SE notified RENK AG that, in accordance with the delegation privi- lege laid down in our bylaws, Klaus Stahlmann be succeeded with immediate effect by Dipl.-Oec. Hiltrud Werner as RENK AG’s Supervisory Board member. Effective as from May 26, 2011, the Supervisory Board elected by written circular vote Ms. Hiltrud Werner Supervisory Board Vice-Chairwoman and member of the Presidential Committee.

Our thanks go to the Supervisory Board retiree, the Executive Board, and the RENK Group’s employees for their efforts and dedicated service. We also thank the employee representatives for the constructive cooperation in RENK’s interests.

Augsburg, March 5, 2012

Frank H. Lutz Supervisory Board Chairman

Corporate governance at RENK

For RENK, corporate governance and control are designed to ensure, in line with social market economy principles, its continuance as a going concern by adding the necessary sustainable shareholder value and commensurate earnings.

A prime driver of these efforts is the corporate governance system, which is defined by current legislation, RENK’s articles of incorporation (bylaws) and in-house rules, as well as by nationally and internationally accepted standards of sound and responsible corporate management. The German Corporate Governance Code (the “Code”) describes the regulations applicable to RENK under stock corporation law and provides recommendations and suggestions on how to practice good corporate governance according to generally accepted standards.

RENK’s corporate governance statement pursuant to Art. 289a German Commercial Code (“HGB”) has been published on the Internet at www.renk.eu within Investor Rela- tions.

Corporate governance at RENK*) RENK AG’s Executive and Supervisory Boards have thoroughly dealt with corporate governance system details and the implementation of the Code’s recommendations, and are aware that sound and transparent corporate governance is essential to responsible and far-sighted corporate management.

Declaration of conformity In December 2011, RENK AG’s Executive and Supervisory Boards issued the following declaration of conformity:

“RENK AG adopted the recommendations of the German Corporate Governance Code Government Commission subject to its declaration of conformity of December 10, 2010, and will implement the recommendations of the Code as amended up to May 26, 2010, with the following exceptions:

Besides the existing Presidential Committee (in charge of Executive Board staffing issues), no further Supervisory Board committees are or will be established (§ 5.3.1–3 of the Code). With a membership of only six, neither efficiency nor any other reasons would support the formation of such additional committees from among the Super visory Board members.

Presidential Committee chairmanship and membership will not be remunerated (§ 5.4.6 of the Code) since committee work has not been and will not within the foreseeable future be of any significant extent.”

Certain significant recommendations and suggestions of the Code are commented on in detail below:

*) Also the Corporate Governance Report of the Executive and Supervisory Boards in accordance with section 3.10 of the German Corporate Governance Code as amended on May 26, 2010

10 Promotion of stockholder rights and transparency On our website at www.renk.eu under Investor Relations, and through published financial reports, we offer our stockholders and other interested parties the opportunity to obtain anytime an updated and authentic portrayal of RENK and its corporate governance practices. Promptly on disclosure (cf. § 6.3 of the Code), RENK AG publishes on its website annual and interim reports, a financial diary with all upcoming events of financial relevance, as well as the Annual Document whose publication is required by the provisions of Sec. 10 German Securities Prospectus Act (“WpPG”) and where all relevant corporate information of the preceding calendar year is compiled.

General meeting The (annual) general meeting of stockholders is the platform for all RENK stockholders to exercise their voting rights, obtain information, as well as to dialogue with the Exec- utive and Supervisory Boards.

RENK AG organizes and conducts its AGM in order to efficiently, comprehensively and effectively inform all its stockholders before and during the meeting. The invitation to the AGM is published in the digital version of the German Federal Gazette (“Bundes anzeiger”) and made available to all stockholders and other interested parties on RENK’s website, including all AGM-related reports and documents.

Where stockholders do not attend the AGM they may authorize as voting proxy not only a bank, shareholder association or other person but also a RENK employee, either in writing or electronically.

Interaction of Executive and Supervisory Boards In accordance with German stock corporation legislation, RENK AG has two boards in addition to the general meeting as corporate body: the Executive and Supervisory Boards closely collaborate in RENK’s best interests and endeavor to add sustainable shareholder value.

The Executive Board is in charge of RENK’s management and conduct of business while the Supervisory Board has overseeing and advisory functions. Both boards pursue their activities in accordance with applicable statutory regulations and their respective rules of procedure. The Executive Board briefs the Supervisory Board timely and comprehensively on all relevant strategic, planning, business trend and risk position issues. Any business subject to Supervisory Board approval is submitted to the Supervisory Board in due course. Moreover, the Executive Board promptly reports any extraordinary event to the Supervisory Board Chairman.

Executive Board The Executive Board is RENK AG’s top management body and has two members (as of December 31, 2011) who conduct RENK’s business under their joint responsibility. Executive Board members are appointed by the Supervisory Board. The Executive Board’s work is governed by rules of procedure.

The Executive Board determines the business goals and aims for the entire RENK Group and is accountable not only for compliance with the law, official regulations

11 RENK Annual Report 2011 and in-house policies but also for open, fair and transparent corporate communication. The risk management system is designed to assist the Executive Board in early identifying any business and financial risks.

In accordance with German stock corporation legislation and § 4.3.5 of the Code, the acceptance by an Executive Board member of any sideline activity (including the membership in a nongroup company’s supervisory board) is subject to prior Supervisory Board approval. Moreover, Executive Board members are obligated to report any con- flicts of interests promptly to the Supervisory Board and to their peers on the Execu- tive Board. In the year under review, no clashing interests of Executive Board members were reported, nor did any company of the RENK Group transact any business with RENK AG’s Executive Board members or parties related to these.

Supervisory Board As another corporate body, the Supervisory Board performs monitoring and advisory functions at RENK AG and is generally composed of four stockholder and two employee representatives. Stockholder representatives are elected by the general meeting but according to our bylaws MAN SE has the right to appoint one of them, and this right was exercised in May 2011 after an MAN supervisory board member had stepped down. Employee representatives are elected by the workforce. Supervisory Board members are elected individually (i.e., not by collective slate). For details of Supervisory Board membership and its changes in 2011, see also the Supervisory Board report and the notes to the consolidated financial statements.

In the year under review, no clashing interests were reported by Supervisory Board members either.

Memberships of Supervisory Board members in boards of other enterprises are listed in the notes to the consolidated financial statements. No Supervisory Board member holds any office on a board of, or provides any consultancy services to, major RENK competitors.

A directors & officers (D&O) insurance policy has been taken out to cover liability claims in accordance with the requirements of VorstAG (German Act on the Reason ableness of Executive Board Compensation, dated July 31, 2009) and the Code.

Regulatory and corporate compliance/risk management In line with the responsibility assigned by the Code, the Executive Board has appointed a Compliance Officer who is answerable for developing and implementing the integrity and compliance program with emphasis on combating corruption and bribery as well as preventing antitrust and data privacy infringements; he reports to RENK AG’s Execu- tive Board and works closely together with MAN SE’s Chief Compliance Officer.

Major compliance-ensuring measures enacted by the Compliance Officer in 2011 include:

• RENK AG participated in 2011 in MAN SE’s Compliance Risk Reassessment Program, with a view to identifying potential compliance risks inherent in the MAN Group’s defined business models. Compliance risk assessment results aim, inter alia, to spec-

12 ify actions suitable for compliance risk avoidance. Further, RENK AG joined MAN SE’s Data Privacy Risk Assessment Program.

• In addition to the existing guidelines, RENK AG implemented a framework that comprises all current compliance-related guidelines. Moreover, the Company issued a Code of Conduct for Suppliers & Business Partners that defines certain ethical minimum standards, and any RENK supplier, vendor or business associate must agree to comply with these.

• Besides the Compliance Officer, RENK AG employees may also continue to address any compliance-related queries to the MAN SE Compliance Helpdesk, which in 2011 answered six relevant employee questions.

• As follow-up program to earlier-year training events, the Compliance Officer trained employees who are exposed in their day-to-day work to related risks, by enhancing their awareness in presence training courses with primary focus on the basic facts and knowledge of anticorruption/anti-bribery issues and infringements against antitrust laws.

• “Speak up!” (MAN SE’s whistleblower portal launched in 2011) is also available to RENK employees to detect risks that may also jeopardize RENK AG. Via this portal, leads, clues and evidence are received and followed up on that refer to cases of grave noncompliance, particularly in the fields of business crime (corruption/bribery offenses), antitrust legislation and data privacy laws.

• RENK AG does not condone or tolerate any noncompliance. Tips hinting at any potential infringement are thoroughly investigated, any actual infringements are brought to a stop and punished to the extent permitted by labor legislation.

No case of noncompliance was reported in the year under review.

Risks emanating from noncompliance, as well as other business risks were all assessed by the risk management system (RMS) and effectively dealt with by the Executive and Supervisory Boards. Reference is made to the risk chapter of the management report.

Reportable securities transactions Sec. 15a German Securities Trading Act (“WpHG”) and the applicable provisions of the Code require any board members and other officers, as well as parties related to these (whether closely related family members, legal entities or other institutions) to report to the issuer as well as the German Federal Financial Supervisory Authority (“BaFin”) on the purchase and sale of RENK shares and financial instruments based thereon. Such reported related-party transactions (so-called directors’ dealings) are published on our website at www.renk.eu under Investor Relations. In the year under review, no such transactions were reported to RENK AG.

Accounting The Executive Board prepares RENK’s consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), and RENK AG’s separate financial statements in conformity with German GAAP, i. e., the Commercial Code

13 RENK Annual Report 2011 (HGB) provisions. The financial statements were reviewed and approved by the Super- visory Board. In fiscal 2011, all deadlines for publication of the consolidated financial statements and the interim reports were duly kept.

As recommended in § 7.1.2 of the Code, the Supervisory Board discusses RENK’s semiannual and quarterly reports with the Executive Board prior to publication.

Statutory audit In the year under review, the Supervisory Board proposed that PricewaterhouseCoopers AG, Wirtschaftsprüfungsgesellschaft (PwC) be elected as statutory auditor. The annual general meeting endorsed this proposal.

Board compensation report for fiscal 2011*)

Remuneration of the Executive Board The plenary Supervisory Board fixes the total remuneration of Executive Board members in accordance with the law. The topic is prepared by the Supervisory Board’s Presi- dential Committee. As and when proposed by this Committee, the plenary Supervisory Board periodically deliberates on the Executive Board remuneration structure and—in accordance with the Code recommendation in § 4.2.2—decides on, periodically reviews and, where appropriate, revises, this compensation system.

The aim is to stipulate a reasonable compensation, based on criteria such as each Exec- utive Board member’s responsibilities and personal performance, as well as on the economic situation, the success and the future prospects of RENK and the MAN Group, besides considering aspects such as a reasonable remuneration level in comparison to industry peers.

Compensation structure and components The remuneration of Executive Board members is made up of performance-unrelated fixed salaries and payments in kind, plus pension entitlements, as well as of performance-linked components. The latter, variable, amounts comprise annually recurring components hinging on corporate performance and long-term incentives that involve a certain risk.

(a) Fixed compensation The fixed compensation is paid as monthly salary. Additional are benefits in kind, such as the provision of a company car and the payment of insurance premiums. The fixed compensation is periodically reviewed and, where appropriate, revised after accounting for the general pay trend and the respective Executive Board member’s responsibilities.

(b) Variable compensation The business performance-related annual bonus is predicated on two equally weighted criteria, so-called performance elements:

Performance element 1 This element equals the MAN Group’s differential between the operating profit returned on capital employed (ROCE) and the weighted average cost of capital (WACC), its 2-year average (current and succeeding year) being compared to a benchmark range previously fixed by MAN SE’s supervisory board.

If performance is at or below the benchmark range minimum, the target achievement degree is 0 percent; if equal to or exceeding the range maximum, performance corresponds to a target achievement degree of 200 percent, which is also the cap. Any degree between the minimum and maximum of the range is determined on a straight- line basis.

The annual bonus of performance element 1 amounts to 50 percent of the fixed annual salary if the target achievement degree is 100 percent; if 200 percent is achieved, the

*) The Remuneration Report is part oft the Group Management Report in Accordance with section 315 of the HGB

16 annual bonus equals one full fixed annual salary, the ceiling for this performance element. If target achievement in the succeeding year outperforms the current year, thus improving the 2-year average, the annual bonus is retroactively stepped up accordingly unless the 200-percent cap has been reached. By analogous calculation, any underper- formance in the succeeding year reduces this year’s annual bonus accordingly.

The current benchmark corridor for the differential of ROCE over WACC ranges from –5 to +5 percent, which corresponds to a straight-line range of target achievement degrees between 0 and 200 percent. Consequently, if ROCE equates with WACC, the annual bonus for performance element 1 is 50 percent of the fixed annual salary; if the differential is equal to or exceeding 5 percent, one full fixed annual salary is paid out.

Performance element 2 For this second element, RENK’s current-year operating profit returned on sales (ROS) is juxtaposed with a predefined benchmark. The target achievement degree is determined in analogy to performance element 1.

The current ROS benchmark corridor ranges from 7 to 11 percent. This range between minimum and maximum performance corresponds to a straight-line corridor of target achievement degrees between 0 and 200 percent. Consequently, if ROS equals or exceeds 11 percent, the annual bonus for this performance element is one full fixed annual salary while for an ROS of 9 percent, 50 percent of the fixed annual salary is paid out.

The 2-element annual bonus is hence capped at two full fixed annual salaries, but is disbursed only in cases where the MAN Group’s ROS exceeds 2 percent.

Fiscal 2011 results

Performance benchmarks and target achievement in 2011:

Performance 100% 200% Actual Target Annual element benchmark benchmark 2011 achievement bonus (cap) 1* (ROCE-WACC) 0% 5% 14.4% 200% (cap) 1.0 fixed salary 2 ROS 9% 11% 13.6% 200% 1.0 fixed salary

* This element is based on a 2-year (current and succeeding years) average. It may therefore well be a repayable install- ment.

Supplementary information on the annual bonus for 2010 Performance element 1 is based on a 2-year (current and succeeding years) average. Now that the 2011 actual figures are available, the annual bonus calculated a year ago for this element has proved to remain unchanged.

17 RENK Annual Report 2011

(c) MAN stock program (MSP) An additional component as long-term incentive is the grant of 50 percent of a fixed annual salary. Net after taxes, this cash payment is earmarked for purchasing MAN common stock. Such shares are subject to a 4-year freeze period.

(d) Postretirement benefits The postretirement benefits of Executive Board members encompass pensions as retirement and invalidity (disability) income and for surviving dependants. The postretirement benefit is a fund-based defined contribution plan. RENK AG pays annual contributions of 20 percent of pensionable pay (contractually agreed fixed salary plus variable remuneration). Additional contributions by deferring gross compensation are optional. The contributions and the return thereon are maintained in individual capital accounts. Capital account performance is directly tied to the capital market and is governed by a basket of indexes and other suitable parameters. Investment risks are gradually downscaled as the beneficiary grows older (so-called life-cycle concept). Upon retirement, the capital account balance or the aggregate total of contributions paid, whichever is higher, will be paid out either in one sum, in installments (annuities) or as retirement pension, at the beneficiary’s discretion. When pension benefits become payable upon invalidity or death, the accumulated capital account balance or a capital corresponding to four times the fixed annual salary plus bonus, whichever is higher, will be paid out.

Remuneration of Executive Board members in 2011 The compensation of active Executive Board members in 2011 totaled an unchanged k€1,421 plus k€262 for postretirement benefits (down from k€272). For an itemized breakdown by fixed, annual variable and long-term incentive components, see the list in Note (32) to the consolidated financial statements.

Special employment contract provisions If the appointment of an Executive Board member is revoked early by the Company for reasons other than good cause, the employment contract provisions effective since 2010 stipulate that such dismissed Executive Board member receive his fixed salary, annual bonus, insurance premium allowances and pension plan contributions up to the regular end of his term of office or for two years, whichever is shorter. Any income earned from other activities will be offset, the pensionable pay base underlying plan contributions being the reduced amount. The past fiscal year and the estimated bonus for the current year will underlie the calculation of the annual bonus payable as termination benefit after the Executive Board member’s separation.

If an Executive Board member gives notice of termination and steps down from office at 18 months’ notice (permitted without disclosing any reason), he will receive his pay up to the effective date of his notice. No particular stipulations apply upon a change of control.

Remuneration of the Supervisory Board Structure and level of Supervisory Board fees are fixed by the general meeting and governed by Art. 12 of the bylaws. These fees hinge on the functions and responsibilities of the Supervisory Board members and the Group’s economic performance.

20 Annual compensation breaks down into these components:

• A fixed basic fee of €2,100.

• A variable profit-related fee. The variable fee corresponds to €200 for each €0.01 of the RENK AG dividend in excess of €0.10 per no-par share and is capped at €6,000 each.

• Additional compensation for Supervisory Board (vice-)chairmanship: The Supervisory Board Chairman receives double, the vice-chairman 1.5 times, the fixed and variable fees.

• Moreover, Supervisory Board members are reimbursed for their out-of-pocket expenses.

Remuneration of Supervisory Board members in 2011 The compensation payable to Supervisory Board members for 2011 totals €58,106 (up from €57,939). For an itemized breakdown of the active Supervisory Board members’ remuneration in 2011, see the list in Note (33) to the consolidated financial statements.

21 RENK Annual Report 2011

RENK stock

Prices in 2011 determined by stock market environment

A tough stock market year Stock market performances in 2011 suffered—especially after midyear—from global uncertainty and the pronounced volatility prevailing on all the major exchanges.

Within this uncertain setting, Germany’s lead index, the DAX, was punished severely and closed the year at 5,898, a twelve-month loss of 14.7 percent. The MDAX (Germany’s midcaps) fared almost as badly and closed the year at 8,898 (down 12.2 percent).

Performance of RENK stock Such market uncertainty likewise overshadowed the performance of RENK stock in 2011. Starting out at €69.95 (year-end 2010) the share price had slipped to €61.08 by the end of the period (a loss of €8.87). The annual performance (down 12.7 percent) thus almost matches that of the MDAX. The dividend payout caused the aggregate yield for owners of RENK stock in 2011 therefore to turn around to a negative 10.5 percent.

A longer-term view shows a much more attractive picture, however. Over the past five years and excluding dividend payments, RENK stock has shown an average annual growth of 9.6 percent.

For fiscal 2011, the Executive and Supervisory Boards will propose to this year’s AGM an unchanged dividend of €1.80 per share. Measured against the year-end 2011 price, this represents a yield of 2.9 percent.

RENK stock indicators 2011 2010) ) Earnings per share (EpS) € 5.58) 5.54) ) Cash dividend per share € 1.80) 1.80) ) Market capitalization1) € mill. 428) 490) ) Annual closing price2) € 61.08) 69.95) ) Annual high2) € 76.10) 71.00) ) Annual low2) € 58.00) 49.50) ) Price-earnings ratio (PER) 10.95) 12.63) ) Dividend yield3) % 2.9) 2.6) ) Aggregate yield4) % (10.5) 44.7 Total shares outstanding 6,800,097) 6,800,097

1) based on 7 million shares 2) daily closing price at the Frankfurt/Main Stock Exchange 3) cash dividend related to the annual closing price 4) all-in return if reinvesting the cash dividend at the post-AGM month-end

23 RENK Annual Report 2011 RENK Group Management Report for fiscal 2011

Order intake and operating profit strong

• Order intake: €456 million (down from €525 million)

• Sales: €389 million (down from €403 million)

• Operating profit €53 million (up from €52 million)

• ROS: 13.6 percent (up from 12.9)

• ROCE: 33.5 percent (down from 36.9)

• EpS: €5.58 (up from €5.54)

• Free cash flow: €16 million (down from €58 million)

• Proposed dividend: €1.80 per share (unchanged)

Prospects for 2012

• Another rise in order intake to over €500 million probable

• Sharp resurgence in sales with corresponding impact on earnings

24 The RENK Group’s business focus

RENK AG RENK AG dates back to 1873 when Johann Julius Renk established a small workshop for the mechanical production of gear wheels in Augsburg Lechviertel. In 1879, the successful start-up moved to Gögginger Str., still the Group’s headquarters. The prospering enterprise was transformed into a stock corporation as early as 1897; since 1923, MAN SE has been the Company’s major stockholder.

Nowadays, RENK is a prime supplier of high-grade propulsion equipment. Its business is global and its major production locations are at Augsburg, Rheine, and Hannover.

Division overview The Vehicle Transmissions division is foremost manufacturer of fully automatic transmissions built into medium- and heavy-weight tracked vehicles as well as of a broad spectrum of test rigs included in its product range. RENK’s automatic power-shift transmissions are suitable for use with all modern diesel engines, with rear or front installation. Electronically controlled and monitored, the units are built at Augsburg.

A member of the Vehicle Transmissions division, the French subsidiary RENK France S.A.S., Saint-Ouen-l’Aumône, is chiefly involved in providing maintenance services for French army tank transmissions. Another member of the division is Augsburg-based RENK Test System GmbH (RTS) and its US marketing arm RENK Labeco Test Systems Corporation, Mooresville, Indiana, which manufacture customized test rigs for development, production and quality assurance applications in the car, commercial vehicle, helicopter, rail engineering and wind energy markets.

The Slide Bearings division along with its locations at Hannover and the American sales company RENK Corporation, Duncan, South Carolina, supply hydrodynamic, lubricated slide bearings for electric motors, generators, pumps, blowers, water turbines, conveyors, and marine applications. RENK’s standard series have been market leaders for over 10 years.

The Special Gear Units division comprises RENK AG’s large-gear production at Augs- burg and the Swiss subsidiary RENK-MAAG GmbH, Winterthur. The product lineup covers marine gear units for fast craft and naval applications with up to 80-MW power transmission capacity as well as stationary gear units for wide-ranging industrial environments including the cement industry and energy production. The turbo gear units are rated for capacities of up to 140 MW.

The Standard Gear Units division encompasses large-gear production at Rheine and specializes in marine gear units for merchant ships, ferries, LNG/LPG tankers, and supply vessels. Also manufactured are gear units for turbine plants and couplings for industrial use. The relocation of large-gear units for offshore wind energy plants from Augsburg to Rheine is more or less complete and will substantially broaden the product lineup starting from 2012.

25 RENK Annual Report 2011 Working together closely Merging and converging the strengths and product expertise of the various divisions are an opportunity to exploit synergies through close interdivisional cooperation. Selective product allocation allows ongoing optimization of large-gear unit production and assembly capacities.

Sharpening the competitive edge Ever since 2008, an extensive capital expenditure program designed to broaden and improve manufacturing structures has fostered the RENK Group’s international growth.

Other foundations for competitiveness are to maintain technological leadership as a strategic success factor and to provide excellent service quality tailored to the needs of our international customers.

Economic environment

Following the preceding vigorous recovery, the German mechanical engineering sector, too, experienced initial symptoms of fatigue in the wake of a global weakening in economic growth since mid-2011. There were a variety of factors accounting for this: the sovereign debts of some euro nations, the debt situation in the USA, and growing con- cerns regarding economic and structural problems in important newly industrialized countries such as China.

For the export-centered German mechanical engineering sector, this development tended to lead to falling order intake compared with the previous year. Germany’s mechanical engineering association, VDMA, expects for 2012 a production rise of 4 percent, following the 14-percent surge in 2011. This forecast, based on an ongoing largely full utilization of capacities and in many cases tall order backlogs at a number of VDMA member companies, is subject to some unreliability due to the still existing uncertainty regarding the outcome of the European debt crisis and worldwide economic risks. Generally, it can be observed that economic cycles are getting shorter and shorter and the swings ever wilder.

Order situation and operating profit

Mostly steep growth rates in order intake The drop in order intake from €525 million in 2010 to €456 million in 2011 is attributable to the megacontract for the PUMA infantry fighting vehicle booked in 2010 by the Vehicle Transmissions division. As anticipated, the other RENK divisions showed growth rates of around 20 percent and more in 2011. Without the PUMA contract and hence like-for-like, the RENK Group reported an order growth of 15 percent for the period.

The Slide Bearings division shared in the worldwide surge in demand for electric machinery slide bearings—propelled in particular by demand from the newly industrialized countries. In the case of Special Gear Units, sizable orders for naval gear units and an again blooming market for turbo gear units fueled growth. Standard Gear Units benefited from rising demand for products intended for “green” energy production and distribution as reflected in particular in large volumes of gear units for LNG tankers and 5-MW offshore wind energy gear units. The only division failing to repeat the prior year’s order intake was Vehicle Transmissions due to delays in order placement by the international defense industry.

Order intake in € million

525

456 439 443

306 281 294 263 262 240

199 197

162 150

2007 2008 2009 2010 2011

Total Abroad Germany

28 Sales down as expected As already predicted in previews of fiscal 2011, sales during the period at €389 million again inched down, by 3 percent from €403 million. Given the year’s opening order backlog of €522 million, this seemingly contradictory situation is due to the lengthy lead times typical of Large Gear production and to the multiyear contracts at Vehicle Transmissions. The sales shortfall is most evident at Vehicle Transmissions where prior-year sales had been buoyed by the final shipments of several series-production contracts; in 2011 there were no deliveries of equivalent value. Standard Gear Units also reported falling sales due to shrinking shipments of merchant vessel gear units. Special Gear Units was only just short of the prior year’s figure while the short lead times at Slide Bearings translated the rising demand for this division’s products into a revenue hike.

Sales in € million

527

474

430 403 389

316 301 283 265 243 211 173 165 146 120

2007 2008 2009 2010 2011

Totel Abroad Germany

29 RENK Annual Report 2011 Taller order backlog With order intake outpacing sales, order backlog at year-end 2011 climbed from €522 million (year-end 2010) to €586 million. Whereas order backlog at Vehicle Transmis- sions crept down from its high level, Special Gear Units’ rose slightly and Slide Bear- ings’ somewhat more steeply. Standard Gear Units almost doubled its orders on hand. This means that Slide Bearings has enough to keep it busy for 4 months, Special Gear Units for a little more than 12 months, and Standard Gear Units for over 24 months. This is a solid base for added sales in 2012, assuming no major economic downturns.

Order backlog in € million

684

612 586

522

415 397 379

302 287 282 284 262 233 240

153

2007 2008 2009 2010 2011

Total Abroad Germany

30 Solid operating profit slightly improved Although sales inched down, RENK’s operating profit was up to €53 million, thus edging up from the prior-year €52 million. The year-on-year clearly higher workload and reduced risk provisions impacted favorably on EBIT. A sales-related decline eroded Vehicle Transmissions’ EBIT while Slide Bearings remained at the high 2010 level. Standard and Special Gear Units upgraded their operating profit.

Operating profit (EBIT) in € million

68 66

52 53

2007 2008 2009 2010 2011

31 RENK Annual Report 2011

Income statement

2011 2010 € mill.) %) € mill.) %) Net sales 389) 100.0) 403) 100.0) Cost of sales (286) (73.5) (303) (75.2) Gross margin 103) 26.5) 100) 24.8) Other operating income 5) 1.3) 7) 1.7) Selling expenses (27) (7.0) (26) (6.4) General administrative expenses (15) (3.9) (13) (3.2) Other operating expenses (14) (3.6) (16) (4.0) Net investment income 1) 0.3) –) –) Operating profit (EBIT) 53) 13.6) 52) 12.9)

The relative gross margin, up from 24.8 to 26.5 percent of sales, was upgraded thanks to pared warranty expenses and swelling capacity utilization at the production sites, albeit certain input market prices for both materials and services did climb.

Selling expenses inched up from €26 million to €27 million after additional manpower was recruited as the expansion of our worldwide operations progressed. Proliferating information and documentation requirements in many an area of our administration called for additional personnel, too; these recruitments along with further cost increases pushed up general administrative expenses from €13 million to €15 million.

Mainly as income from the release of accruals shrank, other operating income con- tracted as well (down from €7 million to €5 million), but so did other operating expenses: they sank from €16 million to €14 million, largely after not only losses on forex transactions but also legal and other professional expenses and expenses for bad debts were leveled down.

34 Reconciliation to net income (EAT)

€ million 2011) 2010) Operating profit 53) 52) Net interest result 1) (0) EBT 54) 52) Income taxes (16) (14) Net income (EAT) 38) 38) Earnings per share (EpS) in € 5.58) 5.54) Cash dividend per share in € 1.80) 1.80)

The turnaround to net interest income was ascribable to climbing interest income and a slightly narrowed gap between the interest portion of transfers to pension accruals and the expected return on CTA plan assets.

Tax expenses went up from €14 million to €16 million since the prior year benefited from nonrecurring tax refunds for earlier periods. The tax load ratio picked up year- on-year from 27 to 29 percent. This ratio reflects the income tax rates of domestic and foreign group companies, as well as nonperiod and deferred taxes.

Net income (earnings after taxes) at €38 million was a repeat, EpS improved from €5.54 to €5.58.

35 RENK Annual Report 2011 Controlling system and shareholder value management

The RENK Group’s most important financial controlling benchmarks are return on sales (ROS) and return on capital employed (ROCE). ROS and ROCE mirror the percentage operating profit returns on sales and annual average capital employed, respectively.

These benchmarks are applied both at RENK Group level and for the purpose of controlling the performance of each division. They are also the yardsticks for calculating major portions of the performance-related pay awarded to management and staff.

Operating profit Operating profit is the key parameter for calculating ROS and hence assessing and controlling a division’s performance, and virtually equals EBIT, except that for operating profit accounting, EBIT is adjusted for the effects on income of purchase price alloca- tions and nonrecurring items. “Nonrecurring items” refers to major losses or gains that do not originate in operating activities. RENK had no nonrecurring items to report in either 2011 or 2010.

ROS For the MAN Group’s Power Engineering business area and hence also RENK, ROS (virtually the EBIT margin) is targeted at 9.0 percent as an average for an economic cycle, with a bandwidth of ±2 percentage points.

With an ROS of 13.6 percent (up from 12.9), RENK not only achieved but significantly and once again outperformed its benchmark in 2011; while the Vehicle Transmissions and Slide Bearings divisions repeated an above-average performance, the Special and Standard Gear Units divisions reported an ROS within the bandwidth.

ROCE ROCE relates operating profit to the weighted annual average capital employed (CE), defined as total assets excluding financial funds and tax assets, less all accruals and liabilities other than financial debts, pension accruals and taxes. Additionally eliminated from CE are any M&A-related effects produced by finite-lived tangible and intangible assets. Prepayments received are not deducted unless they have already been applied to contract work. RENK’s performance target is to outstrip the WACC benchmark of 10 percent. In fiscal 2011, we achieved 33.5 percent (down from 36.9). The lower ROCE is mainly due to the heightened average CE (hiking from €140 million in 2010 to €157 million in 2011); this CE increase resulted from the buoyant order situation and is essential for boosting sales in 2012.

36 Return ratios in %

48.3 47.2

38.8 36.9 33.5

15.7 15.1 13.9 12.9 13.6

2007 2008 2009 2010 2011

ROCE ROS

WACC The weighted average cost of capital (or WACC for short) is the minimum return investors expect to receive for the capital they have invested and the investment risk they have incurred. WACC is composed—for the equity portion of CE—of the yield of long- term risk-free securities in line with a capital asset pricing model (CAPM) plus a specific investment risk premium, and—for the debt portion of CE—of the rate of return on risk-free investments plus a risk premium applicable to long-term industrial securities.

For the determination of controlling indicators, WACC is used as basis for defining minimum ROCE requirements and has been set at 10 percent for fiscal 2011 within the MAN Group and thus also RENK.

37 RENK Annual Report 2011 Financial position

Financial management In 2011 as in prior years, RENK’s funding has been ensured through MAN SE’s central finance system.

Aim and purpose of the centralized financial management are to ensure sufficient cash at all times, contain financial risks, and thus enhance shareholder value.

This central finance system guarantees the availability of the cash needed for business operations, capital expenditures and strategic growth as well as the hedging against currency risks. RENK AG is integrated with MAN’s central cash management system, as are its five consolidated subsidiaries.

Cash flows

€ million 2011) 2010) Opening net liquid assets 99) 53) Net cash provided by operating activities 40) 81) Net cash used in investing activities (24) (23) Free cash flow 16) 58) Net cash used in financing activities (12) (12) Net change in net liquid assets 4) 46) Closing net liquid assets* 103) 99)

* including long-term cash investments of €7.5 million as of December 31, 2011 (down from €15 million)

The net cash of €40 million provided in 2011 by operating activities plunged from the prior-year €81 million. With business booming, RENK’s inventories had to be restocked considerably, which cost a sizable €35 million and compares with the prior- year €13 million inventory downscaling. The net €10 million surge in trade receivables in late 2011 contrasted with a prior-year net slump of €21 million. It was particularly the €37 million hike of prepayments received that throttled cash outflows; the year before, these customer prepayments had receded by €10 million. The €10 million decrease in other accruals (down from a prior-year €8 million rise) was another factor to erode the net cash provided by operating activities.

The net cash used in investing activities edged up year-on-year from €23 million to €24 million.

The free cash flow generated by the RENK Group in 2011 came to €16 million (down from €58 million).

38 The net cash used in financing activities reflects the dividend payout of €12 million. Closing net liquid assets—which break down into cash and cash equivalents, short- and long-term cash investments and financial debts—climbed €4 million to €103 million.

Asset and capital structure

€ million 2011 2010 Tangibles and intangibles 127 116 Investments 1 1 Tax assets 18 13 Inventories 145 110 Trade receivables 83 73 All other current and noncurrent assets 16 21 Cash and cash equivalents 96 85 Total assets 486 419

Equity 236 217 Pension accruals 23 14 Other accruals 53 63 Prepayments received 83 46 Tax liabilities 22 22 Trade payables 43 35 All other current and noncurrent liabilities 26 22 Total capital 486 419

The capex budget for the selective replacement/addition of operating plant and equipment for RENK’s core technologies remained unchanged in 2011. Therefore, the total of tangible and intangible assets advanced by €11 million to €127 million.

The steep rise in inventories from €110 million to €145 million mirrored the healthy order situation and the accordingly raised work in process. The high level of trade receivables, up 14 percent to €83 million, was attributable to exceptionally brisk sales invoiced in late 2011. The total of all other current and noncurrent assets includes long- term receivables of €7.5 million from intragroup finance transactions with MAN SE (down from €15 million).

The equity ratio stayed at a solid level, albeit inching down from 51.8 to 48.6 percent, and has been maintained at a magnitude that provides a sound economic and financial basis for medium-term growth. The burden of upstream financing of orders in progress was eased by prepayments of €83 million received from customers. The progress achieved in quality management was reflected in the shrinkage of other accruals (down from €63 million to €53 million).

39 RENK Annual Report 2011 Unchanged dividend proposed Our dividend policy aims at allowing our stockholders to commensurately share in RENK’s success. According to German GAAP (i. e., Commercial Code principles), RENK AG earned net income of €28.1 million (up from €21.1 million) for fiscal 2011, including €14.0 million (up from €8.5 million) transferred to the reserves retained from earnings. Adding the profit carryover, the Company’s net earnings totaled €33.2 million (up from €31.4 million) from which the Executive Board, subject to the Supervisory Board’s approval, will propose to the annual general meeting to distribute an unchanged dividend of €1.80 per share. Measured against the year-end 2011 stock price of €61.08, this represents a yield of 2.9 percent (up from 2.6).

Capital-related disclosures

The provisions of Art. 315(4) HGB require the disclosures itemized below.

(1) Capital stock breakdown: RENK AG’s capital stock of €17.9 million is divided into 7 million no-par bearer shares of common stock, excluding any other stock classes.

(2) Restraints on voting rights or share transfer: One share entitles to one vote. No restrictions or restraints on voting rights or share transfer/assignment exist at RENK AG.

(3) Direct or indirect shareholdings of 10+ percent In fiscal 2011, Munich-based MAN SE owned a 76-percent stake in RENK AG’s capital stock. Given their interests in MAN SE, Wolfsburg-based Volkswagen AG and Stuttgart-based Porsche Automobil Holding SE, too, held indirect 76-percent stakes in RENK AG’s capital stock. We have received no further WpHG- related notifications of any voting interest of 10+ percent.

(4) Shares with controlling rights, etc.: No special-right shares exist that would entitle stockholders to exercise any controlling powers.

(5) Voting control of employee shareholdings No controlling-vote interests attaching to employee-held shares exist either.

(6) Appointment/removal of Executive Board members and other bylaw- amending provisions: The appointment and removal of Executive Board members are subject to the provisions of Art. 84 German Stock Corporation Act (“AktG”), according to which an Executive Board member is appointed by the Supervisory Board for a maximum 5-year term. Art. 5 of the bylaws specifies a minimum of two members on the Executive Board, the actual number of members being determined by the Supervisory Board.

According to Art. 179(2) AktG, amendments to the bylaws (articles of incorporation) require a special vote (i.e., 75 percent or more of the capital represented) by the general meeting.

42 (7) Stock repurchase or issuance authority of the Executive Board: The Executive Board’s authority to repurchase treasury stock expired Novem- ber 8, 2007; up to that date, 199,903 treasury shares (2.86 percent of the total) had been reacquired.

Subject to Supervisory Board approval, the Executive Board is authorized to dispose of such treasury stock (while excluding stockholders from subscrip- tion) also in a way other than by sale on stock markets or public offering to all stockholders, however, always provided

• that the repurchased treasury shares are sold at a price that is not significantly below market, and/or

• that they are used as consideration in a business combination or for the acquisition of other enterprises or any equity interest therein.

After first obtaining Supervisory Board approval but without further AGM vote, the Executive Board is, moreover, authorized to redeem and withdraw treasury shares.

In fiscal 2011, none of these authorities were exercised. No authorized capital for the issuance of new stock exists.

(8) Arrangements upon any change of control, etc.: No agreements have been made that are contingent on a change of control in the wake of a takeover bid.

(9) Compensation agreements upon change of control: No arrangements for post-takeover indemnification or other compensation of RENK AG’s Executive Board members or employees upon a change of control have been made either.

43 RENK Annual Report 2011 Research and development

The accelerating transformation of industry and society caused by globalization is a challenge that companies must get to grips with. Added to this are ambitious environmental protection goals whose repercussions are having deep-rooted consequences regarding product innovation and production technology.

In coping with these challenges, R&D plays a lead role. Since most RENK products have a long life-cycle, ongoing refinements and further enhancements in the interests of improved customer benefits are essential ingredients in our innovation management efforts.

Internally funded expenses dedicated to developing new and refining existing products amounted to altogether €5.9 million in 2011 (up from €3.9 million). Stepped-up development expenditures address rising demand for “green” energy production and distribution. In developing its custom-engineered gear concepts for such applications, RENK identifies a major source of business ahead.

Vehicle Transmissions worked on a new final drive and, in particular, together with a customer on a new powerpack control and monitoring system. This system consists of a transmission controller, a main display unit, an “above hatch” display unit, and an operating data storage unit. The controller monitors the operation of both the RENK transmission and the diesel engine. The integrated operating data storage unit delivers vital information on the actual use of the transmission, thus acting as a database for servicing and future developments. The first test runs have been successfully completed at customer sites.

Completed was stage I of a project launched in 2010 for fine-tuning processes and rules applied in the development and production of our vehicle transmissions. The steps and one-off measures necessary in the implementation of the project were worked out and defined together with an external institute with the objective of significantly shorten- ing the time leading up to the launch of new products.

RENK Test System GmbH worked on a new release of the automation software for the RDDS test rigs. Also developed were further mechanical, electronic and software concepts for wind energy test rigs.

Among the R&D priorities at Slide Bearings was the design of slide bearings for reliability on heavy electrical machinery and wind energy plant under conditions of excessive wear. For this purpose, computations were worked out for designing high-duty hydrodynamic (with hydrostatic assistance) slide bearings. CFD (Computer Fluid Dynamics) will be used for adapting and optimizing computing programs. Customer response confirms the keen interest in the outcome of these efforts.

44 All-electric propulsion is already being used on numerous cruise liners and naval vessels with conventional shafting. The introduction of a hybrid pod propulsion system mounted beneath the vessel’s hull and developed together with the customer, is opening up incremental slide bearing opportunities for RENK in a sector previously the domain of antifriction bearings.

Just as in the preceding year, the Special Gear Units division was working on a test rig gear unit which, as the world’s biggest and most powerful planetary gear unit, will be installed in a wind turbine drivetrain testing unit at Clemson University, USA. In order to validate the critical operating parameters such as virtually zero RPM and maximum torques of up to 15 million Nm (equivalent to the combined torques of around 60,000 Volkswagen Golf Diesels) extensive tests were successfully conducted. Rounding off the product-related R&D efforts were value analyses into the gear unit ranges for the cement industry and efficiency improvements on turbo gear units.

The project started the previous year concerning the dynamic simulation of drivetrains was finalized to allow an effective instrument for predicting vibration developments on complete systems such as marine propulsion or wind energy plants. With the aid of multibody simulation, it is possible to clarify both undesired phenomena occurring in operation as well as carry out comprehensive investigations for risk minimization on new projects.

Marine market requirements are prompting new kinds of propulsion concepts for further developing RENK CODELAG technology. This latter is a combination of gas turbines and electric motors serving as the vessel’s main propulsion system. New types of elastic mountings for gear units were tested.

A key development project at Standard Gear Units for marine applications was a new series of small and simple antifriction-bearing-mounted gear units. Following the map- ping out of the structure and series details, prototypes are currently being designed and produced. In order to validate the design, preparations are presently underway for testing prototypes under full-load conditions. With a view to addressing current market requirements, another project has been launched in which gear units installed in dredges are being modified. The draft of a revised propeller shaft clutch (PSC) was prepared; after further detailed refinements this will also serve as a key component in the subsequent development of a marine hybrid propulsion system.

A new series of multidisk steel clutches based on extensive analyses of existing products was developed and detailed. At present, prototypes are designed and built and will then be tested on a rig under load.

45 RENK Annual Report 2011 With a view to extending our range of gear units for offshore wind energy plants, a gear unit has been developed for high-speed generators in the range of 5 to 6 MW. The proj ect is being accompanied by a customer order for a corresponding prototype gear unit developed for a broad market. A core objective of the project is to obtain maximum reliability; the advantages of RENK’s Aerogear concept are being consequently exploited.

Capital expenditures, environmental management

Capital spending on tangible and intangible assets in fiscal 2011 amounted to €24 million (up from €23 million).

Shipments of RENK offshore wind energy gear units earmarked for the years ahead pre- suppose the corresponding expansion expenditures at all three locations of RENK AG. Fiscal 2011 saw the first tangible-asset additions from this multiyear program. At the Augsburg location, these targeted the hardening shop infrastructure and a large turning center for machining planetary carriers. At Rheine, the wind gear unit test bay was completed and expenditures made on the machining and measuring units for offshore gear unit components. Hannover invested specifically in the complete machining of large and special bearings which are also used in the RENK offshore program. The addition of two turning machines also ensures higher-capacity machining of bearing bush- ings and sealing systems.

5-year trend in € million

24 23

15 13 13 11 11

2007 2008 2009 2010 2011

Amortization/depreciation Capital expenditures

48 In order to ensure efficient production processes for vehicle transmissions even with small batches and, at the same time a high variety of products, it is planned to largely renew the manufacturing facilities at Augsburg. The period under review saw the purchase of three turning/milling centers for manufacturing rotating parts. With 5-axis operation, the new machining tools can completely process the workpieces in a single clamp.

Expenditures on offshore wind energy gear units and on reengineering production at Vehicle Transmissions will continue over the years ahead with due regard to market exigencies.

Environmental considerations are accorded high priority at RENK AG’s production plants. This is reflected in the certification of the environmental management system to DIN EN ISO 14001, which has already been introduced at Hannover. Augsburg’s certification is scheduled for fiscal 2012, Rheine’s will follow later. Annual official inspections (by TÜV) ensure compliance with the requirements of federal legislation on pollution control (BlmSchG) and water resources (WHG). In addition, plants with environmental impact such as the pickling and painting and the collection points for recyclables are regularly inspected by certified third parties or approved test institutes.

49 RENK Annual Report 2011 Employees

At the close of fiscal 2011, the RENK Group had a workforce of 2,013 (up from 1,882) including 69 temporary (up from 68). The number of employees in Germany totaled 1,844 (up from 1,720); outside of Germany 169 (up from 162).

The rise in employees is mainly due to the added workload, which required corresponding capacity adjustments, especially at the German locations. Even though in a few instances short time was still necessary at Rheine in early 2011, the workload situation progressed very well at all locations as the year proceeded.

Pension plan A cornerstone of RENK’s pension plan is the MAN Profit-Sharing & Pension Plan (MPP). In addition to benefiting from employer contributions, active employees are given the opportunity to make additional provision through deferred compensation which, unless exceeding the statutory income threshold, is exempt from social security and income taxes.

Letting employees share in business success The hard work by employees was again encouraged in Germany in 2011 by letting them directly share in corporate success. The rewards are based on the RENK Group’s defined profitability targets.

Employee survey In May 2011, the RENK Group participated in the first groupwide employee survey organized by MAN SE. Altogether, over 1,800 employees were interviewed. The per centage of replies was very high at 77. Thanks to the high level of participation by our employees, the responses serve as a very good basis for identifying further improvement potentials and strong points at the individual operating areas.

The total results for the RENK Group were published on the intranets and our staff newspaper for the information of all employees. Together with management and employee representatives, RENK’s Executive Board reviewed the results and identified improvement potentials. All employees and management staff will, together with the Works Council, implement the defined measures in order to further improve communication and cooperation within the Group.

Employee training The program of basic and advanced vocational and other training courses continued and will even be stepped up next year.

A mainstay of our programs for youngsters in 2011 continued to be apprenticeship training.

50 Our domestic plants (Augsburg, Rheine, and Hannover) employed altogether 65 apprentices at year-end. RENK is also increasingly organizing dual training courses. Another 45 gray- and blue-collar apprentices were indentured at the Augsburg-based MAN apprenticeship training center. As in the previous year, the number of apprentices in relation to the workforce was very high.

Training courses again centered on foreign languages and one-off coaching for specific needs besides, increasingly, on teamwork and interpersonal skills. Courses on the subject of corporate and regulatory compliance continued.

To make sure we stay successful we need to repeatedly recruit, retain and train young talent; traditionally close contacts with a number of academic institutes assist us in scouting for suitable candidates.

Our thanks to the employees and their representatives Our thanks go to all the employees for their dedicated and hence successful efforts. We also thank the Supervisory Board employee representatives, the Works Councils and the Economic Committee for continuing the constructive cooperation of the past years.

We cherish the memory of those of our present and former employees who passed away during the period under review.

51 RENK Annual Report 2011

The situation at the divisions

The total figures for order intake and sales in the tables preceding the division reports include intersegment transactions.

Vehicle Transmissions (Augsburg plant/RENK France/RTS/LABECO) € million 2011 2010 Change Total order intake 84 258 –174 Total sales 100 117 –17 Operating profit 15 21 –6 ROS (%) * 15.5 18.0 –2.5

* ROS based on k€

Economic parameters The market for medium- and heavy-duty tracked vehicles accessible to RENK is still characterized by a low number of procurement programs extending over lengthy periods with small volumes of annual shipments. To this extent, the market parameters in 2011 have hardly changed compared with fiscal 2010. For future business to stay on a stable footing it is vital to be considered as a transmission supplier for the majority of worldwide procurement programs.

Alongside the market for new programs there continues to exist a secondary market derived from government sale of used vehicles to second- and even third-hand buyers. This mode of business is linked to the shortage of funds in the respective defense budgets and also encouraged by the possibility of making such products available at short notice. This is a situation that for RENK opens up opportunities in aftermarket business since the resold products are accompanied by reconditioning, manpower training and parts shipments. In the medium term, however, we expect this market to stagnate or contract since, on the one hand, such transactions appear to have settled at a certain level of saturation and, on the other, the procurers are no longer providing the necessary funds.

As to the years ahead, we have reconciled ourselves to a steady yet modest order intake trend for new transmissions and stable to slightly receding demand for repair work and parts. For RENK France (renamed from SESM since January 1, 2011) its first year under the new name was a period of stability. A mainstay of business is servicing work on three French vehicle transmission series carried out on the basis of long-term maintenance contracts.

The economic scenario for RENK Test System GmbH (RTS) has become tougher. Orders for test rigs are increasingly subject to tighter price and delivery timing constraints. Parallel to this, procurement market prices for test rig components are rising. The consequences are higher competitive and profit margin pressures and this will stay this way in the medium term.

54 Business trend The previous year had seen the award of the megacontract for the PUMA infantry fighting vehicle. Since there was no equivalent contract in 2011, order intake plunged from €258 million to €84 million.

The first part of the second batch for the PIZARRO, the Spanish infantry fighting vehicle, was ordered in fiscal 2011 since efforts to come up with a nationally developed alternative could not be completed in time. On the basis of the current international program plans, further contracts are there to be awarded albeit the timing for RENK is dependent on the decisions made by the national procurement organization. We do expect, however, substantial orders in fiscal 2012.

Likewise completed in 2011 was the contract for the final batch of parts shipped to a Middle East customer.

In the case of the British program for the SV infantry fighting vehicle (formerly, FRES) we booked an order to supply prototype transmissions including the related one-off services. Participation in this phase of the project is a precondition for being considered in the planned series production.

We are negotiating with a Middle East customer a contract for further developing the RK 325 transmission. Within this context, we are aspiring to participate in the production of the customer’s future procurement program. Given, however, the international funding arrangements, only a comparatively small portion of production can be taken over by our Augsburg location.

Contrary to existing plans and in order to allow time for a competitive national option, the decision by a South Korean customer to purchase RENK’s HSWL 295 was again shelved. We expect a definitive decision in 2012.

With respect to the aforementioned government sales we are negotiating aftermarket business with a number of customers. During the period, we shipped out replacement transmissions for Turkey.

Sales at €100 million were also short of the prior-year €117 million. A sizable portion of the division’s revenue was accounted for by the final shipment of HSWL 354 units destined for our Spanish customer as part of the LEOPARD 2 E program, delivery of the first series production transmissions for the PUMA and the supply of parts batches for a customer in the Middle East. Our aftermarket business continued to represent a steady source of revenue.

RENK France concluded a deal in 2011 with an Eastern European partner to the effect that within the framework of a planned vehicle revamp, a transmission will be installed and tried out in a test unit. RENK France and RTS have reached an agreement on accessing the French market for test rigs.

55 RENK Annual Report 2011 Fiscal 2010 had seen the award by Clemson University, South Carolina, USA, of a contract for two wind-turbine drivetrain testing rigs. This is RTS’s biggest ever individual order. Hence and in contrast, order influx in 2011 subsided to a much more modest level. Contracts were won from the auto component, truck and wind energy sectors. Together with large contracts extending over several years and booked in previous periods, RTS thus still has a very tall order backlog whose handling poses many engineering and organizational challenges.

Earnings With an operating profit of €15 million and an ROS of 15.5 percent, the Vehicle Trans- missions division again delivered a solid performance in 2011. The key success factors are:

• High share of revenue from profitable aftermarket business (mainly RENK France).

• No business risk burdens.

• Steady profit margins from HSWL 354 shipments.

Developments ahead Present vehicle procurement programs in RENK’s segment of the market are typically low in volume and of high heterogeneity. Moreover, there is an ongoing insistence on local content. The conditions required to fulfill this latter stipulation are of growing complexity and frequently associated with a risk of know-how seepage. At the same time, established systems are being kept longer in service. This may generate aftersales business but it does limit opportunities for the sale of new products. The repercussions of sovereign debt-related budget consolidations on national defense spending and hence on procurements, is more difficult than ever to assess.

Reconciling the core operations in Augsburg with the market requirements and param eters continued vigorously during the period. Dexterity in managing and controlling international cooperations with local shares of production is our prime objective and a vital prerequisite if we are to hold on to our market position.

Over the next couple of years, RENK France is looking to steady servicing business prompted by the multiyear plans of the French army.

Business prospects at RTS are mixed, with potential for test rig contracts for railway engineering and wind power, albeit in the latter case the procurement of rigs from all-in system suppliers has only partly established itself. Business with auto component suppliers, truck and special vehicle manufacturers is likely to stay at the present volume; only slight demand for helicopter transmission test rigs suggests no notable new contracts within the immediate future.

56 In summary, RTS identifies good industry-related business prospects thanks to high product diversification and a specialization in engineering concepts outside the run-of- mill. On the downside are the risks of growing protectionism in countries such as the USA and China and the heightening threat of funding risks in export business outside of Europe.

57 RENK Annual Report 2011 Slide Bearings (Hannover plant/RENK Corporation) € million 2011 2010 Change Total order intake 107 81 +26 Total sales 99 87 +13 Operating profit 22 21 +1 ROS (%)* 21.8 23.9 –2.1

* ROS based on k€

Economic parameters Despite the general economic downturn observable in late 2011, the need for expenditures on power plants in the developing and newly industrialized nations continued un abated. Growing populations and the desire for a better standard of living are factors forcing these regions to carry out further appreciable infrastructure investments.

Business trend The Slide Bearings division benefited abundantly from the worldwide steep rise in demand for electrical machinery slide bearings in 2011. Even though the final quarter did show the first signs of demand subsiding at a high level, order intake at €107 million mounted 32 percent over the prior year’s volume. The main reason is the so far vigorous demand from the newly industrialized countries. The mainstay of such demand is infrastructure projects such as energy production and industrial settle- ments for the local downstream processing of natural resources including Brazil, India and, especially, China. Our customers both inside and outside of Germany benefited equally. Thanks to our growing export orientation and broadening presence on the local markets, the share of exports is advancing steadily. In order to allow for the growing significance of the Chinese market, an assembly and distribution center for slide bearings was opened on the plant premises of MAN Diesel & Turbo in Changzhou in May 2011.

Wholly-owned RENK Corporation also reported significant growth rates in its North American and export markets. Fiscal 2011 saw for the first time order intake and sales cross above the threshold of $20 million. Propelling this expansion was the sale of slide bearings for electric motors used in pumps, compressors and blowers as well as generators driven by diesel engines and gas turbines.

Sales of €99 million (up from €87 million) failed to match the dynamic influx of new orders. Whereas orders and sales of standard bearings (only a few weeks’ lead time!) rose by well over 30 percent, in the case of the project bearings and despite almost 40 percent added orders, the record sales volume of 2010 was not repeated. Because of the longer lead times, the newly received orders for project bearings will produce higher sales only in the course of 2012.

Earnings The healthy order situation was also the basis for the good operating profit. The reasons for the stable earnings position were, above all, good capacity utilization and continuing process improvements along the entire value-adding chain.

58 Developments ahead The biggest threat to business continuing at this rate is the imponderabilities of the sovereign-debt situation in Europe and the USA. This uncertainty is seen as a threat to the global capital expenditure climate.

Over the years ahead, we therefore expect an appreciable softening in demand for our products in the established markets, with demand of potential users having to be addressed locally. Rising demand in the Chinese growth market should represent a certain potential to compensate for contrary trends in other regions of the world. With the distribution center set up in Changzhou, China, we have created the structures for local presence as required by the market. At the same time, another logical step has been taken in the direction of a global supply network for RENK’s slide bearings. This powerful supply infrastructure also represents an opportunity to partially offset the repercussions of regional economic fluctuations. The acquisition of ADMOS-Gleitlager GmbH (discussed later) is another move toward the improvement of procurement dependability.

59 RENK Annual Report 2011 Special Gear Units (Augsburg plant/RENK-MAAG) € million 2011 2010 Change Total order intake 142 117 +25 Total sales 132 136 –4 Operating profit 11 6 +5 ROS (%)* 8.0 4.2 +3.8

* ROS based on k€

Economic parameters The stationary gear product group at Special Gear Units again had to contend with mostly arduous market conditions in 2011. A major threat was the sovereign-debt crisis and along with it a sentiment of uncertainty among international investors. This was also apparent in the building and construction sector. One consequence was that demand for cement mills was much more modest than had been predicted. Exceptions to this wait-and-see attitude were the oil-producing nations and India.

More congenial for gear units was the climate in the energy sector. Given the relatively high and stable price of crude oil, power plant, oil production and refining projects proved important applications for RENK turbo gear units; these projects could go ahead uninfluenced by the financial market turmoil, especially in the newly industrialized nations.

The marine unit whose forte is highly complex naval gear units, still sees itself as a keen competitor on the important markets of the USA, the Middle & Far East, albeit the potentials contained in these markets of largely state-launched procurement programs may be stable yet they are barely expandable.

Switzerland’s RENK-MAAG GmbH saw itself confronted with a special economic challenge due to the rapid and unforeseen appreciation of the Swiss franc against almost all currencies and especially the euro and US dollar. This, too, was a consequence of the volatile financial markets in which Switzerland over periods of time was treated as a safe haven in a storm of fluctuating currencies. It was only after the Swiss National Bank in September 2011 had set a floor of 1.20 Sfr/euro that the situation settled down. For RENK-MAAG, the appreciation represented a clear disadvantage over gear unit suppliers from soft-currency nations and could only be combated by price discounts. Apart from the currency rate handicaps, RENK-MAAG just as the Special Gear Units location in Augsburg benefited from the healthy demand for turbo gear units.

Business trend The surge in order intake, from €117 million to €142 million, was driven by the naval gear group which, as a supplier for the US Littoral Combat Ship (LCS) program, booked its first orders for gear units to be installed in four frigates. The group has options for further orders. The program will continue until 2016. South Korea likewise placed orders for the FFX gear units for its frigate program. Turbo gear units also boosted order intake whereas in the case of grinders, the desired resurgence in orders failed to materialize.

60 Despite the generally healthy order situation, sales at €132 million failed to quite match the prior year’s €136 million. This is due to the decline in naval gear shipments in 2011; in contrast, both the stationary-gear group and RENK-MAAG managed to outgrow 2010 sales by over 10 percent. Major billings included the shipments for the new F125 Ger- man frigate and the world’s biggest megayacht currently under construction.

Mid-2011, the Augsburg-based naval unit staged a symposium at which developments in marine propulsion systems were discussed by 130 guests from 20 nations. The echo among the participants was extremely positive. In this way, RENK has underpinned its technology leadership claim as a supplier of highly complex naval gear systems.

Earnings The appreciable EBIT improvement by Special Gear Units despite slightly lower sales compared with 2010, is attributable to better capacity utilization and, most especially, a steep decline in warranty-covered incidents which in 2010 had required commensurate provisions.

Developments ahead Given the sophisticated product lineup, high market acceptance and ongoing innovation processes, Special Gear Units is able to enter fiscal 2012 in a spirit of optimism despite the turmoils on the financial markets. This upbeat appraisal is based, in the case of stationary applications, on a continuation of vigorous market demand for turbo gear units combined with the expectation that the cement industry will worldwide regain its momentum.

In the case of naval gear units, we are assuming market conditions to remain largely unchanged. Thanks to its leading market position, RENK has a certain confidence of being awarded gear unit contracts for new frigate or corvette programs.

RENK-MAAG has opened up for itself new market opportunities by extending its product range to include Multicam geared-compressor gear units and MAAG synchronous couplings.

61 RENK Annual Report 2011

Standard Gear Units (Rheine plant) € million 2011 2010 Change Total order intake 137 75 +62 Total sales 66 71 –5 Operating profit 6 5 +1 ROS (%)* 8.5 7.5 +1.0

* ROS based on k€

Economic parameters The nuclear disaster of Fukushima and the downstream measures stimulated unex- pectedly high resurgence in demand for new LNG tankers. Offshore vessels were likewise in demand while other merchant vessels suffered from the financial turmoils. The market for steam turbine gear units was strong, for other turbo units normal. Also buoyant was the couplings segment where the dominant sector for industrial applications gained momentum in comparison to 2010.

Business trend Thanks to the strong position in the LNG tanker market, virtually all gear unit orders placed by South Korean shipyards in 2011 went to RENK. This was a prime cause for the 83-percent leap in order intake to €137 million. In the relevant multi-engine gear unit segment, orders even tripled.

The market for steam turbine applications proved stable in 2011. One highlight was the biggest contract ever placed in the company’s history by the Dutch subsidiary of a Ger- man turbine manufacturer. This order comprised over 40 turbine gear units for compressor lines in Australia required to generate the pressure for piping natural gas in Queensland to the liquefaction station at the coast.

Prices suffered substantially from keen competitive intensity in the market for couplings on major projects. Still, coupling business in 2011 expanded by around 30 percent.

With the relocation of the offshore wind gear unit business from Special Gear Units in Augsburg to Rheine, 2011 again saw a number of Standard Gear Units’ shipments called under the framework agreement with AREVA Wind GmbH. This is a second major factor accounting for the growth in incoming orders during the period. The tall order backlog at year-end will ensure full capacity utilization beyond 2012.

Sales at €66 million bottomed out, the figure reflecting the again reduced shipments of marine gear units.

Earnings With revenue somewhat receding, the operating profit rose above the prior year’s level. Despite short-time in H1/2011, fuller capacity utilization and an improved risk profile were the main reasons for the EBIT improvement shown by Standard Gear Units in 2011.

64 Developments ahead For some time now, the economic situation at the Rheine plant has been wedded to demand for new merchant ships. This close attachment to such a volatile sector is being abated by the relocation of the offshore wind energy gear unit business to Rheine. Given the politically willed increased use of regenerative energy sources in Europe, this sector, worldwide too, is forecast to grow at a buoyant rate. Against this setting, we predict a strong growth in sales for offshore wind energy gear units; the other product segments of this division will either retain or expand their market positions.

65 RENK Annual Report 2011 Risk report

Groupwide risk management system Doing business entails repeated risk exposure. RENK defines risk as the threat that events, decisions or actions prevent us from achieving defined goals or successfully pursuing certain strategies. In order to seize the market opportunities we consciously accept risks if we can thereby expect a commensurate addition to shareholder value. Essential for this purpose is an efficient risk management system tailored to the requirements of our business activities, one that provides in good time the information needed to guide the Group.

Risk management at RENK is nested in the MAN Group’s own risk management system and forms an integral constituent of business management, processes and procedures. Its core elements are corporate planning including the quarterly review processes, risk & reward management (“RMS”), and the internal control and compliance systems.

Among the purposes of corporate planning are to identify and assess in good time risks and rewards so that suitable measures may be adopted. The risk management system is at all levels organized to obtain up-to-date and pertinent information on the situation regarding major risks and the effectiveness of the risk containment measures early on. At the focus of the internal control system (“ICS”) is the close monitoring and control of risks, in particular with reference to the effectiveness of business processes, the reliability of financial reporting, and compliance with legislation and regulations. The RENK Compliance System assists in ensuring compliance with all legislation, internal guidelines and codes of behavior applicable within the Group, with special emphasis on the subjects of antitrust legislation, data privacy and protection, as well as combating corruption and bribery. For more details refer to the Compliance chapter.

Organization of the risk management and internal control systems The overall responsibility for setting up and maintaining a suitable and purposeful system for the early identification of risks lies with the Executive Board. RENK AG’s Execu- tive Board has assumed responsibility for organizing the risk management and internal control systems to an extent and in a form matching the requirements and circumstances peculiar to RENK. “Industrial governance” is a mode of management that calls for local decision-making processes for operations within the RENK Group. It is management’s responsibility to make sure that not only RENK AG (by far the most important company) but also the subsidiaries are included in the risk management and internal control systems to the degrees required. A groupwide guideline for risk & reward management and internal controls (“Group Guideline”) provides the framework for a RENK-wide understanding of the RMS and ICS by specifying rules for risk organization, processes, and reporting.

66 Organization The organization of the RMS and ICS is based on RENK’s management hierarchy. Roles and bodies have been set up with defined responsibilities regarding risks and their monitoring. There are coordinators for risk management and the ICS who ensure that the processes defined in the Group Guideline are implemented. They are also involved in the ongoing development and improvement of the risk management system. RENK has set up an interdisciplinary Risk Board which acts as a central control, monitoring and supervisory body in RMS and ICS matters. In the course of discussions by this board, the risk situation is assessed and measures for coping with risks and remedying weak points are resolved.

Internal regulatory process within the RMS Risk management system processes include rules for identifying, analyzing, assessing, controlling, monitoring and reporting risks; these are classified into near-term (one year or less) or far-term (up to five years) ones. Risks are analyzed according to their probability and the extent of possible loss. Loss, in turn, is graded as “net” and “gross,” in its impact on each organizational unit’s operating profit, “net” already taking into account any risk-abatement measures. Within their area of responsibility, risk officers define, carry out and monitor for effectiveness suitable counteracting measures. With the aid of risk areas, defined uniformly, any risk aggregation can be identified and counteracted in good time. Besides risks, also rewards are continuously monitored.

Reporting Quarterly Risk Board reports to the Executive Board deal with current risks and expo- sures, major control weaknesses and measures designed to not only manage and contain risks but also eliminate weak points in the RMS or ICS. In addition, the Supervisory Board is briefed in periodical reports on the risk position and major ICS shortcomings.

67 RENK Annual Report 2011 Accounting-related risk management and internal control systems Generally, the risk management system (RMS) and the internal control system (ICS) embedded in the RMS also encompass all accounting-related processes and parts thereof which can materially affect the consolidated financial statements, as well as all risks and control mechanisms that are related to the accounting system. The RMS assesses identified risks in terms of their impact on the Group’s accounts and takes appropriate counteractions.

The ICS aims to contain any risks not only of material misstatement in financial reports but also from regulatory noncompliance or from fraud, besides minimizing operational and business risks (e.g., asset risks resulting from unauthorized decisions or obligations assumed). One of the purposes of the accounting-related ICS is, by implementing suitable controls, to provide reasonable assurance that Corporate Accounting processes conform with International Financial Reporting Standards (IFRS), German GAAP (HGB provisions) and other accounting-related rules and regulations, and are reliable.

Patterned on the MAN Group’s approach, RENK has structured and documented its ICS in accordance with the framework of COSO (Committee of Sponsoring Organiza- tions of the Treadway Commission) in order to systematically assess the effectiveness of its internal controls. The documentation covers all standard business processes, as well as all known specific business risks and all processes and controls required for the proper annual close. The extent of the documentation—reviewed annually according to certain defined criteria—depends on the relevance of subsidiaries which are material to the consolidated financial statements or whose qualitative characteristics imply a higher exposure to risks.

Key elements of accounting-related RMS and ICS include the unambiguous allocation of responsibilities and controls for all closing processes, transparent process criteria in the form of guidelines, policies and responsibilities for keeping and closing the accounts, clearly defined rules for accessing accounting-related IT systems, as well as precisely described responsibilities for involving outside specialists. Peer reviews and strict segregation of functions/duties are also essential to effective internal controls along the entire accounting process chain and have been duly implemented at RENK.

The effectiveness of accounting-related internal controls is tested at least once annually, primarily when closing the accounts. Identified control weaknesses and agreed remedial steps are included in the quarterly reports to the Risk Board. Additionally, as and when necessary or appropriate, RENK AG’s Executive Board will involve MAN SE’s Corporate Internal Auditing as independent auditor.

The control environment and across-process controls as a framework for a functional operating ICS are centrally documented at division level and tested once annually for their propriety and workability.

The control system is regularly checked for completeness, suitability and effectiveness to ensure that the rules for reducing procedural and organizational risks are adhered to throughout all hierachical levels.

Risks and rewards RENK divides the major risks and rewards for the RENK Group with substantial impact on the asset and capital structure, financial position and/or results of operations into five categories: market, products, processes, personnel, finances.

Market In its relevant markets, RENK identifies medium- to long-term opportunities for profitable growth in many areas. There will be a continuation of the fundamental international economic trends such as ongoing business growth, increased international division of labor and the associated worldwide expanding haulage distances and volumes, capital expenditure needs on the part of the oil and gas industry and innovations driven by the developing global climate policies.

Despite the expected growth trend, there does exist in the present economic environment which continues to be overshadowed by uncertainty, some risk of a downturn. This may have a sudden impact on our markets, such as a decline in demand or the cancellation of contracts already awarded. RENK counteracts economic risks by a variety of instruments, such as flexible production and costs through hiring temporary labor, flexitime and, where required, short-time. Protectionism in some countries and changed competitive conditions may throttle growth. Military markets, in particular, are reliant on political decision-making processes and risk-prone due to cash-strapped public sectors. RENK is keeping an eye on and assessing regularly its economic, political, legal and social environments in order to take into account in good time when making decisions the related risks and rewards.

Products As a foremost supplier in the technology market the RENK Group’s mission is to develop technologically and economically leading products and launch them onto the market in outstanding quality. Abandoning such a mission would entail irresponsibly risking the Group’s market position. Still, the rollout of new products is accompanied by conceptual and market risks. These are counteracted by meticulous strategic planning that analyzes developments in the marketplace and RENK’s environment. In making sure that its products are of a continuously high quality, RENK establishes an essential precondition for tapping further worldwide market potentials.

Regarding products already introduced onto the market, quality risks exist. Poor quality can lead to costs for implied, express and/or goodwill warranties and, in the long term, to loss of market share and to lower profit margins. In extreme cases, product liability claims and related damages are conceivable. Vendors and the components they supply must undergo a strict approval procedure so that high quality standards are maintained. Once production has started up, defined in-process quality assurance measures ensure that manufacturing defects or malfunctions are identified and reme- died in good time. Later, when the products are in use, any defects or malfunctions are registered, analyzed, and eliminated.

An international presence and a wide variety of products and services allow diversification and thus the opportunity to abate risks from reliance on major customers, individual products or markets as well as the risk of unauthorized disclosure or transfer to third parties of RENK know-how.

70 Long-term customer contracts harbor additional risk potential: changes in the political or business environment within a market can entail additional expenses in the execution of major projects. Wherever commitments or obligations under bonds or guaranties are a firm fixture of customer contracts, the risk exists that any such bond or guaranty is called upon and enforced against RENK without being justified. This risk is managed by formulating contracts and agreements with utmost care.

Processes A continuous task for RENK is the fine-tuning of business processes in R&D, Purchas- ing, Production, Sales, and Administration. Suppliers are monitored well in advance to identify in good time any delivery delays, failures or cases of nonperformance and soften their impact. In order to optimize the funds tied up in current assets, RENK rigorously and strictly pushes ahead with the improvement of its working capital management processes.

Among the risks peculiar to the performance of major projects are faults in contract formulation, miscosting, postcontracting changes in the economic and technical conditions, and substandard performance by subcontractors or consortium partners. It is with the aid of comprehensive project management and contract controlling mechanisms that the RENK Group minimizes these risks. Major projects are submitted for approval to RENK AG’s Executive Board and, starting from a certain magnitude, MAN SE’s Controlling and Finance departments as well as MAN SE’s Executive Board for eval- uation. Contracts already approved and in execution yet clearly deviating from plans, are the subject of special reports that are regularly submitted to the Executive Boards of RENK AG and MAN SE.

Business processes at the RENK Group are closely supported and in some cases even facilitated by IT. This leads to efficiency gains but also harbors risks. Parts of the IT infrastructure may fail due to accidents, natural disasters or technical malfunctions and hence a wide variety of business processes may be hampered or brought to a complete standstill. Other risks involve unauthorized access, theft, deletion or misuse of business information and data. The ensuing financial damage and image loss may impact on RENK companies or even the entire Group. To ensure the availability, integrity, confidentiality and authenticity of information and to reduce or avoid risks, RENK deploys state-of-the-art hardware and software and effective IT organizational mechanisms in combination with a continuously improved IT-related ICS. By centralizing and outsourcing certain IT operations and rigorously introducing IT service management processes according to ITIL (IT Infrastructure Library organizational standard for IT processes) and increasingly organizing the RENK Group’s IT security in line with the internationally recognized security standard ISO 27001, RENK has significantly upgraded the transparency, operational reliability and security of its IT processes and infrastructure.

A pivotal role in business including accounting process security is played by the ICS whose function is to make sure that the relevant rules and procedures are adhered to. In this way, it largely contributes toward the protection of assets and the reduction of risks.

71 RENK Annual Report 2011 Personnel Highly skilled specialist and managerial staff that set technological standards in the form of RENK products and effectively and efficiently run the Group, represent a vital success factor. HR opportunities are to be found in the skills, international focus and innovative resources of employees developing continuously improved forward-looking products, services, and processes. Risks exist in an inability to staff key positions in good time according to future requirements. With a wide array of personnel marketing efforts we have succeeded in tying to the Group personnel with excellent technical and managerial skills.

Finances As an international player the RENK Group finds itself exposed to considerable market price, liquidity and credit risks. These are counteracted through RENK’s groupwide financial-risk management system.

The term market price risks subsumes currency, interest rate and commodity price risks. RENK’s international business transactions involve cash flows in several different currencies. If RENK companies transact business in a currency other than their functional they are exposed to a forex risk which may affect not only the price of products or services but also profit margins. RENK therefore hedges underlyings (contracts, receivables and payables) against currency risks to a large, and forecast sales transactions to some, extent. The Group’s and its operating companies’ financing functions are exercised centrally by MAN SE. RENK needs sizable commodity amounts to manufacture its products. Commodity market price trends or escalator clauses in contracts with suppliers expose RENK to risks which cannot always be downloaded onto customers and which therefore erode profit margins. Such risks are counteracted through long-term supply contracts and escalator clauses in contracts with customers.

Liquidity risks describe a situation where the RENK Group may no longer be able to adequately meet its financial obligations. In order to ensure the availability of sufficient liquidity, all inflowing and outflowing cash is subject to ongoing control and management. RENK’s integration with the MAN Group’s central cash management system safeguards a sufficient cash supply. Moreover, cash flow trends are monitored within a fine-tuned financial planning system.

Given the nature of its business, RENK is exposed to counterparty or default risks, meaning the potential failure by a counterparty to meet its contractual obligations, either on account of its own financial constraints or due to the political environment, thus causing a financial loss to RENK. Such country and counterparty risks are contained by carefully weighing business transactions and counterparties, by stipulating appropriate contract and payment terms and conditions, as well as by using documentary credits (LCs) and requiring guarantee bonds.

If an investee carried at cost presents any indication of an impairment loss, RENK is exposed to the risk of recognizing this loss in its income statement.

For further details of the management of market price, liquidity and credit risks, see Note (30) to the consolidated financial statements. With a view to reducing the inher-

72 ent financial risks and, outside of Germany, also complying with statutory regulations, the RENK Group’s defined benefit obligations (DBO) are covered by plan assets which are largely separated from operating assets. For detailed information on pensions, see Note (21) to the consolidated financial statements.

Assessment by the Executive Board of RENK’s risk situation On the basis of the risk management system set up by the MAN Group and introduced at RENK, the Executive Board notes that at the present time no risks are identifiable that might have a substantial and sustained adverse impact on the asset and capital structure, financial position and/or results of operations of the RENK Group. The risk management system installed and the related organizational mechanisms allow the Executive Board in good time to become aware of a risk situation and initiate adequate measures.

Risk management is a permanent and unremitting corporate activity and as such is, of course, continuously subject to improvements. For RENK, this means that in future we will again be fine-tuning our risk management and internal control systems to match changed scenarios. Given the still uncertain economic outlook, activities in 2012 will again focus on managing market and product risks.

Compliance system In the course of 2011, RENK continuously refined and applied the Compliance Program set up in 2009, on the subjects of combating corruption and bribery as well as preventing antitrust and data privacy infringements.

RENK’s Executive Board has appointed a Compliance Officer who is answerable for developing and implementing the integrity and compliance program; he reports to RENK AG’s Executive Board and works closely together with MAN SE’s Chief Compliance Officer. Besides this officer, RENK employees can also use MAN SE’s Compliance Help- desk.

The following were the chief compliance measures enacted in 2011:

• RENK AG participated in MAN SE’s compliance risk reassessment program, with a view to identifying potential compliance risks inherent in the RENK Group’s defined business models. Compliance risk reassessment results aim, inter alia, to specify actions suitable for compliance risk avoidance. Further, RENK AG joined MAN SE’s data privacy risk assessment program.

• In addition to the existing guidelines, RENK AG implemented a framework that comprises all current compliance-related guidelines. Moreover, the Company issued a Code of Conduct for Suppliers & Business Partners that defines certain ethical minimum standards, and any RENK supplier, vendor or business associate must agree to comply with these.

• As follow-up program to earlier-year training events, the Compliance Officer trained employees who are exposed in their day-to-day work to related risks, by enhancing

73 RENK Annual Report 2011

their awareness in presence training courses with primary focus on the basic facts and knowledge of anticorruption/anti-bribery issues and infringements against antitrust laws.

• “Speak up!” (MAN SE’s whistleblower portal launched in 2011) is also available to RENK employees to detect risks that may also jeopardize RENK. Via this portal, leads, clues and evidence are received and followed up on that refer to cases of grave noncompliance, particularly in the fields of business crime (corruption/bribery offenses), antitrust legislation and data privacy laws.

• To prevent any noncompliance associated with the acquisition or divestment of shareholdings, the Compliance organization will be involved in envisaged M&A projects right from the start. Additional requirements will be met by the due dili- gence to allow early detection of possible infringements.

RENK AG does not condone or tolerate any noncompliance. Tips hinting at any potential infringement are thoroughly investigated, any actual infringements are brought to a stop and punished to the extent permitted by labor legislation. No case of noncompliance was reported in the year under review.

Outlook

Given the sovereign-debt situation in many industrialized countries and the still prevailing multiple interdependence of the BRIC and other emerging nations on the economic development of the industrialized countries, any forecast of global trends is fraught with uncertainty. Such uncertainty is also reflected in the diverging assess- ments by the economic and financial pundits, their prophecies ranging from a tough recession, at least in the industrialized world, to cautious optimism in the guise of further, modest growth.

Germany’s mechanical engineering organization, VDMA, sees no signs of a looming crisis and expects for 2012 another production growth of 4 percent on top of the high level in 2011. This growth is perceived to be generated outside of Europe, mainly in Asia, with China enjoying a special role.

Pending projects for Vehicle Transmissions prompt us to predict order intake above €500 million for the RENK Group in 2012 and 2013. Sales should rebound to well over €400 million. Driving forces are steep demand for offshore wind energy gear units and for gear units/slide bearings for energy production and monitoring plant. The tall order backlog for large gear units will also increasingly translate into sales.

EBIT is expected to reach a commensurate level. To address the still intense competi- tion, RENK will again rigorously seize all the available options for greater flexibility and savings. As a consequence, the Group’s management still expects double-digit rates of ROS in the years to come.

Escorting this growth will be an extensive capex program designed to consolidate both the high quality of RENK products and create the planned capacities for shorter gear unit lead times. Outsourcing for reasons of limited capacity when addressing short- term workload peaks cannot be a substitute for setting up fundamentally needed infrastructure.

Another key component of future strategy at RENK is the R&D required in dealing with a tough competitive environment in order to defend RENK’s position as a foremost supplier of gear unit technology. We mean to step up our innovative pace over the years ahead.

As to RENK’s individual divisions, this is the situation over the next two years:

Vehicle Transmissions has opportunities of winning follow-up and new contracts in notable quantities over the next two years. In some instances, the governments have already made the fundamental procurement decisions. Contractual obstacles exist in the respective local content and offset requirements and obligations. RENK still has the goal of securing for itself a relevant content of any new contracts. Because of the lengthy lead-up times, a period of 18 months normally elapses between contract placement and the shipment of the first transmissions. For 2012, this will mean that revenue from any new contracts will barely rise but thereafter pick up again appreciably.

80 Over the years ahead, RENK France’s maintenance work for the French army will continue more or less at the present rate.

RTS and its US marketing subsidiary, LABECO, will be busy working on their megacon- tracts. Demand for RTS’s test rigs is likely to remain steady, with wind energy constitut- ing the biggest potential.

Slide Bearings business in 2011 was very strong and in gauging what lies ahead we expect continuity without any sizable momentum. In standard-bearing business the logistic foundations have been laid in recent years by setting up distribution centers close to big customers in Brazil and China to provide the best conditions for flexible and short-notice shipments.

Developments in special-bearing project business dependent on funding, is much more difficult to forecast and the repercussions of the euro crisis on the entire global economy is likely to have a major impact. At the turn of 2011/12, the adverse effects are already perceivable in terms of postponements and cuts due to a lack of funds. This risk which might lead to weaker demand for capital goods and hence impinge on standard-bearing business contrasts with quite conceivable prospects of another upturn in demand in 2012, especially from the developing and newly industrialized countries.

In the market for Special Gear Units we likewise perceive uptrends to continue. High innovative resources combined with value-analytic goals will together develop our high-performance gear unit ranges and ensure a highly competitive portfolio.

In the case of stationary applications, ongoing strong demand for turbo gear units over the next two years is likely on account of worldwide energy infrastructure projects. The cement industry is also showing signs of recovery.

In the market for naval gear units, the focus will be on maintaining and expanding the supremacy we have established. Key elements in this strategy are our close customer contacts and holding on to our technological lead.

Business at RENK-MAAG is overshadowed by how the presently very strong Swiss franc fares. Apart from this temporary competitive drawback, we identify ongoing bright prospects for RENK-MAAG as a result of the extended product range and the markets in which it operates.

An important aspect of business prospects, one that is largely uninfluenced by the economy, is aftermarket business at Special Gear Units. Over the past years, the organization and its processes have been closely adapted to market needs and so we now have a customer-friendly infrastructure acting as a mainstay in our successful marketing efforts.

At Standard Gear Units, the signals are set to growth thanks to the solid order situation. Business in offshore wind energy gear units plus the boom in LNG tanker gear units lead us to expect especially in 2012 very vigorous growth in sales and earnings. This also represents a major challenge for us to keep to the agreed delivery schedules

81 RENK Annual Report 2011 and with the combined Rheine and Augsburg manufacturing facilities we are now in a strong position.

The above statements and information regarding future trends are founded on present expectations and specific assumptions and, as such, are accompanied by a string of risks and uncertainties. There are a host of factors—many beyond our control—that impact on our business operations and results. Such factors might mean that the actual results and performance on the part of the RENK Group significantly deviate from those made in the foregoing forward-looking comments.

Subsequent events

An important step toward strengthening our engineering capabilities was taken in December 2011 with the signing of the share deal for acquiring Berlin-based ADMOS- Gleitlager Produktions- und Vertriebsgesellschaft mbH (“ADMOS-Gleitlager”). The deal takes effect as from the start of 2012. The acquiree has been assigned to the Slide Bear- ings division.

ADMOS-Gleitlager emerged from ADMOS (Allgemeines Deutsches Metallwerk Ober- schöneweide), founded in 1909, and has a metallurgical tradition extending back over a century at its location in Berlin-Oberschöneweide.

The company has gained for itself an outstanding market reputation as a specialist and flexible manufacturer of slide bearing parts and components from a wide variety of paired materials. Notable companies in the energy and plant engineering sectors (propulsion system engineering, compressor and pump manufacturers, the rail technology sector, etc.) are among its customers.

ADMOS-Gleitlager will continue to operate autonomously under this name; the subsidiary will expand its range of customers and hence generate further growth. Through RENK’s global distribution network, ADMOS-Gleitlager has much improved opportunities for marketing on an international scale its OEM and aftermarket products until now somewhat regionally limited. For further information, see note (39) to the consolidated financial statements.

Augsburg, January 31, 2012

RENK AG The Executive Board

Florian Hofbauer Ulrich Sauter

84 RENK consolidated financial statements for the fiscal year ended December 31, 2011

86 Consolidated income statement 86 Statement of comprehensive income 87 Consolidated balance sheet 88 Statement of changes in equity 89 Consolidated cash flow statement 91 Notes to RENK’s consolidated financial statements 91 Accounting principles 102 Notes to the consolidated income statement 107 Notes to the consolidated balance sheet 118 Other information 136 Subsequent events 137 Supervisory and Executive Board memberships in other statutory boards or equivalent 140 Management representation 143 Independent auditor’s report and opinion

85 RENK Annual Report 2011 Consolidated income statement for fiscal 2011

k€ Note 2011) 2010) Net sales (6) 388,822) 402,766) Cost of sales (285,646) (302,712) Gross margin 103,176) 100,054)

Other operating income (7) 4,597) 6,519) Selling expenses (27,012) (25,900) General administrative expenses (15,128) (13,279) Other operating expenses (8) (13,800) (16,051) Sundry investment income 916) 446) EBIT 52,749) 51,789)

Interest income (9) 1,137) 664) Interest expense (9) (407) (791) EBT 53,479) 51,662)

Income taxes (10) (15,524) (14,005) Net income (EAT) 37,955) 37,657)

Earnings per share (EpS) in € (11) 5.58) 5.54)

Statement of comprehensive income

k€ 2011) 2010) Net income (EAT) 37,955) 37,657) Currency translation differences (491) 2,167) Change in fair value of financial derivatives 477) (1,547) Change in actuarial gains/losses on pensions (8,057) (1,957) Deferred taxes on OCI 1,104) 1,176) OCI (6,967) (161)

Comprehensive income 30,988) 37,496)

Deferred taxes on OCI break down into a red k€150 (down from a black k€483) on OCI from the change in fair value of financial derivatives, k€1,487 (up from k€693) on OCI from the change in actuarial gains/losses on pensions, and a red k€233 from a DBA (excess cover of plan assets according to IAS 19:58).

86 Consolidated balance sheet as of December 31, 2011

Assets k€ Note 12/31/2011) 12/31/2010) Intangible assets (14) 6,228) 7,364 Tangible assets (15) 120,828) 108,389) Sundry investments 1,493) 1,493) Deferred tax assets (10) 17,861) 13,455) Trade receivables (17) 2,403) 4,027) Other noncurrent assets (18) 7,517) 15,205) Total noncurrent assets 156,330) 149,933)

Inventories (16) 145,378) 110,250) Trade receivables (17) 80,182) 68,703) Income tax assets 2,618) 1,755) Other current assets (18) 5,241) 3,496) Cash and cash equivalents (19) 96,451) 85,170) Total current assets 329,870) 269,374) 486,200) 419,307)

Equity & liabilities k€ 12/31/2011) 12/31/2010) Capital stock 17,920) 17,920) Additional paid-in capital 10,669) 10,669) Reserves retained from earnings 137,497) 123,497) Net earnings 84,142) 72,427) Accumulated OCI (14,625) (7,658) Total equity (20) 235,603) 216,855)

Noncurrent financial liabilities (23) 508) 726) Pension accruals (21) 22,924) 14,466) Deferred tax liabilities (10) 18,215) 14,982) Other noncurrent accruals (22) 7,102) 18,281) Other noncurrent liabilities (26) 587) 588) Total noncurrent liabilities and accruals 49,336) 49,043)

Current financial liabilities (23) 240) 227) Trade payables (24) 42,927) 35,484) Prepayments received (25) 83,100) 46,225) Current income tax liabilities 4,079) 6,568) Other current accruals (22) 45,906) 44,286) Other current liabilities (26) 25,009) 20,619) Total current liabilities and accruals 201,261) 153,409) 486,200) 419,307)

Payables from capital leases are shown under noncurrent and current financial liabilities, the prior-year comparatives have been restated accordingly.

87 RENK Annual Report 2011 Statement of changes in equity

k€ Capital Additional Reserves Net) Accumu-) Total) stock paid-in retained earnings) lated OCI) capital fr. earnings Balance at Dec. 31, 2009 17,920 10,669 114,972 55,535) (7,497) 191,599) Net income (EAT) – – 8,525 29,132) –) 37,657) OCI – – – –) (161) (161) Comprehensive income – – 8,525 29,132) (161) 37,496) Dividend payout – – – (12,240) –) (12,240) Balance at Dec. 31, 2010 17,920 10,669 123,497 72,427) (7,658) 216,855) Net income (EAT) – – 14,000 23,955) –) 37,955) OCI – – – – (6,967) (6,967) Comprehensive income – – 14,000 23,955) (6,967) 30,988) Dividend payout – – – (12,240) –) (12,240) Balance at Dec. 31, 2011 17,920 10,669 137,497 84,142) (14,625) 235,603)

For details see Note (20).

88 Consolidated statement of cash flows for fiscal 2011

k€ Note 2011) 2010) EBT 53,479) 51,662) Current taxes (15,633) (12,923) Depreciation/amortization/write-down of tangibles, intangibles and investments (14, 15) 12,996) 12,826) Change in pension accruals 343) 1,113) Cash earnings 51,185) 52,678)

Change in inventories (34,667) 12,768) Change in prepayments received 36,064) (9,532) Change in trade receivables (9,740) 21,278) Change in trade payables 7,349) (2,940) Change in other accruals (9,590) 7,686) Change in other assets (1,574) 374) Change in other liabilities 5,573) (1,291) Elimination of the net gain/loss on the disposal of tangibles, intangibles and investments (84) (253) Other changes in working capital (4,349) 352) Net cash provided by operating activities 40,167) 81,120)

Cash outflow for additions to tangibles and intangibles (14, 15) (24,316) (23,154) Cash inflow from the disposal of tangibles, intangibles and investments 396) 608) Net cash used in investing activities (23,920) (22,546)

Dividend payout (20) (12,240) (12,240) Change in financial liabilities (229) 864) Net cash used in financing activities (12,469) (11,376)

Net change in cash and cash equivalents 3,778) 47,198) Parity-related change in cash and cash equivalents 3) 5) Consolidation group-related change in cash and cash equivalents (2) – ) –) Opening cash and cash equivalents 85,170) 52,967) Noncash change in cash and cash equivalents (18) 7,500) (15,000) Closing cash and cash equivalents (19) 96,451) 85,170)

The cash flow from operating activities includes interest received at k€1,137 (up from k€664), interest paid at k€76 (up from k€67), and income taxes paid at k€18,958 (up from k€12,083). The noncash change in cash and cash equivalents was due to the reclassification of previously long-range credit term extensions of MAN intragroup financial receivables.

89 RENK Annual Report 2011

Notes to RENK’s consolidated financial statements

Accounting principles

(1) General

RENK AG is a German listed company with business domicile at Gögginger Strasse 73 in Augsburg. RENK develops, manufactures and markets worldwide upscale drive technology products. The RENK Group breaks down into the Vehicle Transmissions, Slide Bearings, Special Gear Units and Standard Gear Units divisions. As 76-percent subsidiary of Munich-based MAN SE, RENK is included in its parent’s consolidated financial statements. MAN SE, in turn, is a 53.7-percent subsidiary of Wolfsburg-based Volkswa- gen AG. Therefore, both MAN SE and RENK AG will be included in the consolidated financial statements of Volkswagen AG, which will be published in the digital version of the German Federal Gazette (“Bundesanzeiger”). The subject consolidated financial statements of RENK AG for the fiscal year ended December 31, 2011, conform with Art. 315a(1) German Commercial Code (“HGB”) and hence with the International Finan- cial Reporting Standards (IFRS, which include the IAS) of the International Accounting Standards Board (IASB), London, UK, as endorsed by Regulation (EC) No. 1606/2002 of the European Parliament and Council on the application of international accounting standards in the European Union (EU). As resolved by the Executive Board, the consolidated financial statements were released on January 31, 2012, for submittal to the Supervisory Board.

The consolidated financial statements are prepared in euros (€), the Group’s functional currency, and presented in € ’000 (“k€”) unless expressly otherwise stated.

(2) Consolidation

(a) Consolidation group RENK’s consolidation group includes, besides RENK AG as parent, the wholly-owned subsidiaries, viz. RENK France SAS, Saint-Ouen-l’Aumône, France; RENK Corporation, Duncan, SC, USA; RENK Test System GmbH, Augsburg; RENK-MAAG GmbH, Winterthur, Switzerland; and RENK LABECO Test Systems Corporation, Mooresville, IN, USA.

The subsidiaries not included in the consolidated financial statements are, even in the aggregate, of minor significance for the RENK Group’s asset and capital structure, financial position, and results of operations.

A complete listing of the RENK Group’s shareholdings has been appended to these notes.

91 RENK Annual Report 2011 (b) Business combinations and consolidation principles The acquisition method is used for capital consolidation in business combinations. For initial consolidation, all identifiable assets and (effective and contingent) liabilities in the acquiree’s accounts are stated at their fair value. Any positive difference between the cost (purchase price) of the acquiree and the prorated equity is allocated to the appropriate RENK division as cash-generating unit (CGU) and capitalized as goodwill. The division (CGU) including the assigned goodwill is tested for impairment at least once annually and, if found impaired, written down to its current fair value. Upon the disposal of a subsidiary, any goodwill allocable to it will be taken into account when calculating the net gain or loss on such divestment.

Intercompany accounts (profits, gains, losses, income, expenses, receivables and pay ables) among companies included in the consolidated financial statements, as well as intercompany profits/losses from intragroup transfers of inventories and noncurrent assets, are all eliminated. Taxes are deferred for consolidation transactions recognized in net income.

(c) Currency translation Foreign-currency transactions are first translated at the applicable historical rate. In subsequent periods, monetary assets and liabilities are translated at the current (closing) rate, the resulting translation differences being recognized in the income statement. Nonmonetary items valued at historical cost in a foreign currency are translated at the historical rate.

The functional-currency concept is used to translate the financial statements of non-Euroland companies. Since it is the primary business environment that governs functional currency, that of RENK’s consolidated subsidiaries corresponds to the local currency. The financial statements are translated according to the modified closing- rate method, using the current rate for balance sheet lines (except for equity, which is translated at historical rates) and the annual average rate for the income statement. The annual average rates are derived from the monthly means.

In the movement analyses of assets, accruals and equity, the fiscal year’s opening and closing balances as well as consolidation group changes are translated at the applicable current rates, while for the remaining balance sheet lines, the annual average rates are used. Differences from the prior-year currency translation of balance sheet captions are recognized in equity only (OCI) but, upon divestment of a subsidiary, recycled to the income statement.

92 The euro (€) exchange rates of major currencies are as follows:

Current rate of €1 at Average rate of €1 in 12/31/2011 12/31/2010 2011 2010 US dollar 1.29390 1.33620 1.40178 1.32503 Swiss franc 1.21560 1.25040 1.23328 1.37968 Pound sterling 0.83530 0.86075 0.87231 0.85715 Chinese yuan 8.15880 8.82200 9.05768 8.96988 Japanese yen 100.200 108.650 111.673 116.280

(3) Accounting and valuation

Except for certain financial instruments carried at fair value, the consolidated financial statements are based on cost, as well as on the financial statements of RENK AG and consolidated RENK subsidiaries as prepared in accordance with MAN’s groupwide uniform accounting and valuation principles.

(a) Sales recognition Sales are recognized as and when the underlying products or goods have been delivered or the services rendered and after risk has passed to the customer, always net after all such sales deductions as cash and other discounts, allowances granted to customers, etc. Sales are not recognized unless the amount is reliably determinable and the receiv- able’s collection reasonably certain.

Revenue from dedicated contracts for customized manufacture (or construction) is recognized according to the percentage-of-completion (PoC) method. For details see Note (h) below.

(b) Operating income/expenses Operating expenses are recognized when the underlying products or services are utilized, whereas expenses for advertising and sales promotion and other sales-related expenses are recognized when incurred. Cost of sales breaks down into the production cost of goods sold and the purchase cost of merchandise sold. In addition to direct materials and direct labor, production cost also comprises production-related overheads, including the depreciation of manufacturing plant and equipment.

Warranty obligations are accrued when the products are sold. Research expenses, as well as interest and other costs of debt are directly expensed in the period, unless such borrowing costs are capitalized as part of the cost of qualifying assets.

(c) Intangible assets Separately acquired intangible assets are capitalized at cost. Intangibles acquired in a business combination or M&A transaction are capitalized at fair value as of the acquisition date. Finite-lived intangibles are amortized on a straight-line basis over their useful lives. The amortization period for software is mostly three years, while licenses and similar rights or assets are amortized over the agreed or contractual term of use.

93 RENK Annual Report 2011 Indefinite-lived intangible assets (i.e., whose useful life cannot be determined) are not amortized but tested at least once annually for impairment. If found impaired, they are written down. As of December 31, 2011, no goodwill or other indefinite-lived intangibles were capitalized.

Expenses incurred for developing new products or series are capitalized (i) when the new products or series are found technically and economically feasible, (ii) when they have been scheduled for internal use or for marketing, (iii) if the expenses can be reliably determined, and (iv) if sufficient resources are available for development project completion, any other development and all research expenses being directly expensed. Capitalized development costs are amortized as from the date of market rollout on a straight-line basis, as a rule over five to seven years. As long as a development project is still in progress, its accumulated capitalized cost is tested at least once annually for impairment. No development costs were capitalized as of December 31, 2011.

(d) Tangible assets Tangible assets (a.k.a. property, plant and equipment) are carried at historical (purchase or production) cost, less accumulated depreciation and, where appropriate, write-down. The production cost of internally manufactured tangibles includes all direct costs (labor and materials), prorated indirect materials and indirect labor, as well as interest cost proratable to the manufacturing period. If tangible assets consist of significant identifiable components with different useful lives, these components are capitalized and depreciated separately.

Unless subject to capitalization, maintenance and repair (M&R) costs are expensed.

Tangible assets are depreciated according to the straight-line method over their estimated useful lives. The groupwide uniform asset depreciation ranges are based on the following useful lives:

Buildings 10 to 50 years Land improvements 5 to 33 years Production plant and machinery 3 to 33 years Factory and office equipment 3 to 25 years

(e) Leases According to IAS 17, leases for tangible assets (investment leases) may either be capital or operating leases. Contracts where substantially all the risks and rewards incidental to beneficial ownership of the leased asset are transferred to any RENK company as lessee are capitalized and therefore treated as capital leases (a.k.a. finance leases). In these cases, the lessee capitalizes the leased asset at the present value of the minimum lease payments or the leased asset’s fair value, whichever is lower, and then depreciates it over the shorter of the estimated useful life or the lease term. Concurrently, the lessee recognizes a corresponding financial liability, the latter being amortized in subsequent periods on the basis of the effective interest method. All other leases where companies of the RENK Group are lessees, are accounted for as operating leases, the lease payments being expensed.

94 (f) Write-down for impairment losses If anything indicates that the book value of an intangible or tangible asset or an investment may be impaired, it is tested accordingly by determining the asset’s recoverable amount, which is the higher of the asset’s value in use or net fair value (NFV: fair value less costs to sell). The value in use, in turn, corresponds to the value of expected cash flows, which is then discounted at a fair market rate. Where an individual asset’s recoverable amount cannot be determined, that for the smallest identifiable asset group (a so-called cash-generating unit, or CGU for short) to which the asset can be assigned is determined instead. Where the book value exceeds an asset’s (or CGU’s) recoverable amount, such excess is directly recognized as write-down (i.e., impairment loss) within other operating expenses. No indications existed in fiscal 2011 that would have required an impairment test. If the fair value of an asset (or CGU) previously written down rebounds in full or in part, the asset other than goodwill (or the CGU excluding goodwill) is written up accordingly, the contra being other operating income. This write-up is capped at the amortized or depreciated cost (excluding a CGU’s goodwill) which would have resulted had the asset not been written down.

(g) Inventories Inventories are stated at the lower of (purchase or production) cost or net realizable value. Production cost includes all manufacturing-related direct costs (materials and labor), as well as proratable fixed and variable indirect materials and indirect labor. The allocable overheads are mostly determined on a normal workload basis. General administrative and selling (GAS) expenses are not capitalized. Raw materials and merchandise are generally priced at average purchase cost.

(h) Customized manufacturing contracts Dedicated contracts for customized manufacture (or construction) are recognized according to the percentage-of-completion (PoC) method: Based on agreed revenues and expected contract costs, sales and cost of sales are recognized by prorating them at the PoC achieved by the balance sheet date. The contract progress, or PoC, is as a rule determined on a cost-to-cost basis (i.e., from the ratio the costs incurred by the balance sheet date bear to the expected total contract costs). If the profit or loss from a PoC contract is not yet reliably determinable, revenue is recognized according to the zero-profit method, i.e., only at the amount of contract costs incurred to date. In the balance sheet, the contract portions proratable according to such PoC are carried as trade receivables net after deducting customer prepayments.

Expected losses on customized manufacturing contracts (so-called onerous contracts) are immediately and fully recognized by writing down the affected capitalized assets and providing for any additional loss.

(i) Straight financial instruments Straight financial instruments primarily include trade receivables from customers, loans, (financial) investments, securities, cash and cash equivalents, as well as financial liabilities and trade payables. Straight financial instruments are initially capitalized or recognized as of the transaction date at fair value, which generally equals the transaction price (value of the consideration given or received). Thereafter straight financial instruments are carried at fair value or amortized cost, depending on the category to which they are assigned.

95 RENK Annual Report 2011 Loans and receivables held for purposes other than trading are generally carried at amortized cost (less any write-down). Within the RENK Group, this category primarily includes trade receivables from customers, the remaining receivables, and loans. Non- or low-interest receivables with a remaining term above twelve months are discounted. Write-down is charged wherever evidence of an impairment loss exists. Receivables expected to be uncollectible are fully written off (specific bad-debt allowance).

Financial instruments neither held to maturity, nor for trading, nor assigned to any other specific category, are treated as financial assets available for sale and hence carried at fair value; within the RENK Group, they include mainly securities and (financial) investments. The difference between cost and fair value is recognized in, and only in, other comprehensive income (OCI) within equity after duly deferring taxes thereon. Wherever the book value exceeds fair value long-term or substantially, such excess is recognized as write-down in the income statement.

The fair value of securities is as a rule their quoted market price. Investments not quoted in an active market and whose fair value is not reliably determinable are carried at cost. Where considered potentially impaired, such assets are tested accordingly, any write-down for an impairment loss being recognized in expense.

Financial liabilities are initially recognized at cost and thereafter carried at amortized cost, except for financial derivatives.

(j) Derivative financial instruments The MAN Group uses various financial derivatives to hedge underlyings against currency, interest rate and other price risks, mainly from ordinary business. Major financial derivatives of relevance to the RENK Group are currency forwards and forex options.

Financial derivatives are (re)measured at fair (market) value upon first-time recognition (as of the trading date) and at each succeeding balance sheet date. The fair value of exchange-listed derivatives is their quoted positive or negative market value, where applicable, with due regard to counterparty risks. Where no market prices are quoted, fair value is determined on the basis of the terms and conditions current at the balance sheet date (such as interest or exchange rates) and by using generally accepted option pricing models or DCF techniques.

The recognition of the resulting unrealized gains/losses depends on the category to which the derivative is assigned.

Any financial derivatives failing to meet, or no longer meeting, the IAS 39 requirements for a hedging relationship are considered instruments held for trading, and for these, any gains/losses from fair value remeasurement are immediately recognized in the income statement. If no market value is quoted, their fair value is determined by means of suitable methods (such as DCF).

If and when the IAS 39 hedge accounting criteria are met, RENK accounts as from such date for this hedge as either fair value or cash flow hedge.

96 A fair value hedge (FVH) secures recognized assets or liabilities or unrecognized firm commitments against potential fair value variations, and these changes in the derivative’s (= hedge’s) and its underlying’s fair values are recognized in net income. There- fore, any upward change in a perfect hedge’s fair value is virtually offset by the down- ward movement of the underlying’s fair value, and vice-versa.

Cash flow hedges (CFHs) secure recognized assets or liabilities, or unrecognized firm commitments or forecast transactions (high-probability customer projects), against the risk of cash flow variations. In a CFH, the effective portion of the change in the derivative’s fair value is initially recognized in a separate equity line (OCI) after deducting deferred taxes. When the hedged underlying (if a sales transaction) is recognized in the income statement, the proratable OCI is recycled to net sales. If a purchasing transaction resulting in the future recognition of a nonfinancial asset, the gains/losses from the statement at fair value of the financial derivative that have been accumulated as OCI change the hedged nonfinancial asset’s value. The ineffective portion of such gains/losses on fair value remeasurement is directly recognized in the income statement. When the hedging instrument expires, or is sold, terminated or exercised, or if and when the hedge ceases to exist although the forecast transaction is expected to materialize nonetheless, the unrealized gains/losses by then accumulated in OCI continue to be carried as OCI and are recycled (as described above) to, once the hedged underlying is recognized in, the income statement. If and when the originally hedged underlying is no longer expected to materialize, the proratable accumulated OCI is released to the income statement, too.

See Note (30) for the RENK Group’s hedging strategy and the current notional volumes.

(k) Deferred taxes Deferred tax assets and liabilities are recognized for temporary differences between tax bases and book values, as well as for consolidation transactions recognized in net income, and tax loss carryforwards. Deferred taxes are valued by applying the tax rates either effectively or substantively enacted and hence current at the balance sheet date for 2011 and subsequent fiscal periods.

Deferred tax assets are recognized only to the extent that taxable income for the utilization of deductible temporary differences is believed to be available.

Any changes in deferred taxes recognized in the balance sheet generally result in deferred tax expense or income. However, if the deferred taxes have directly been recognized in OCI, their changes are, too.

(l) Pension obligations Pension obligations arising from defined benefit plans are determined according to the projected unit credit (PUC) method by measuring the defined benefit obligations (DBO) on the basis of the prorated employee entitlements acquired by the balance sheet date, discounting them to their present value and duly taking into account assumptions of the future trend of certain parameters that impact on future pension levels. Differences between assumptions and actual trends or changed actuarial parameters may produce actuarial gains or losses, these being recognized (after duly

97 RENK Annual Report 2011 accounting for deferred taxes) in, and only in, OCI and shown in the statement of comprehensive income (SOCI).

The fair value of plan assets (which are used to cover pension obligations) is deducted from pension accruals. For measurement details, see Note (21). A defined benefit asset (DBA: excess of plan assets over pension obligations) is capitalized as such only to the extent that it results in a refund from the plan or reduces future contributions.

The current service cost, which represents the increase in a DBO’s present value as active employees have acquired additional entitlements in the period, is shown in the appropriate functional expense category. The interest cost included in net pension expense, as well as the expected return on plan assets, are recognized within the net interest result.

(m) Other accruals The other accruals provide for all identifiable risks and uncertain commitments which arise from past events, are likely to result in an outflow of economic resources, and whose amount can be reliably estimated. An accrual is measured at the best estimate of the amount required to settle the obligation. Where the effect of interest is material, the accrual is discounted by applying a current market rate. Any accrual-related reim- bursement or refund expected from a third party, if virtually certain to be received, is capitalized as a separate asset.

The recognition of accruals is periodically reviewed for appropriateness and adjusted accordingly when newly established facts or changed circumstances require so. If a reassessment reduces the obligation, the accrual portion proratable to such reduction is released by crediting it to the same functional expense category to which the provision had originally been debited.

Warranty obligations are provided for when the warranted products are sold or services rendered, primarily on the basis of previously incurred warranty expenses. Further- more, specific warranties are accrued for known claims. Costs yet to be billed and other business obligations are provided for at the value of the payment or work/service to be performed, as a rule the future production cost thereof. Impending losses on onerous contracts in progress are accrued wherever the expected economic benefit from the contract is below the unavoidable costs required to perform the contract.

(n) Financial statement presentation In the balance sheet, assets and liabilities are grouped into noncurrent and current ones. Items are deemed current if due within one year or any longer business cycle. Deferred tax assets and liabilities, as well as assets and accruals relating to defined benefit pension plans, are all classified as noncurrent. The cost-of-sales format is used for consolidated income statement presentation.

(o) Estimates and latitude Preparing the consolidated financial statements requires certain judgment, estimates and discretionary decisions. RENK’s estimates are based on empirical data and other relevant factors, as well as on a going concern. Accounting estimates and assumptions are all made to the best of RENK’s knowledge and belief, with a true and fair view of the

98 Group’s asset and capital structure, financial position and results of operations in mind. Although valuation reasonably allows for identifiable uncertainties, future events may differ from such estimates. Accounting estimates and assumptions are periodically reviewed.

The following accounting estimates as of the closing date are of particular significance:

The test for goodwill impairment, required at least once annually, calls inter alia for the forecast of future cash flows and their discounting. Forecasts predicated on financial budgets or plans approved by management underlie such cash flow projections. Fur- ther material assumptions are needed for WACC (weighted average cost of capital) and tax rates. If the book value of tangible or intangible assets or financial investments carried at cost is tested for impairment, management’s judgment and estimates are again inevitable to determine recoverable amounts.

Certain manufacturing contracts are accounted for according to the percentage-of- completion (PoC) method, which requires the degree of contract progress to be estimated with great care. Revenue is recognized according to contract progress, measured as PoC. Depending on the PoC measurement method used, contract revenue, total contract costs, costs to completion, contract risks and other judgmental factors are among the key parameters of estimates. Each operating division’s management regularly reviews such PoC estimates and, where required, restates or adjusts the values or parameters accordingly.

RENK makes use of the MAN Group’s central finance management system. In a cash- pooling process, RENK accounts are netted (as a rule daily) and then balanced, thus giving rise to receivables from or payables to MAN SE. Through its central cash management system, MAN SE manages and ensures the MAN Group’s supply with cash and credit facilities by conducting appropriate transactions on the international financial markets. RENK shows receivables from intragroup finance transactions with MAN SE as cash equivalents (if current) or other noncurrent assets (if long-term) while any (current or noncurrent) financial liabilities originating from this MAN finance management system are shown as such.

Pension and similar obligations are measured using actuarial methods which, in turn, mainly hinge on assumptions of discount rates, expected returns on plan assets, pay and pension trends, and mortality. A changed market or business environment may considerably impact on these actuarial assumptions, actual pension and similar obligations thus differing substantially.

Since the Group operates in quite a number of countries it is also subject to a multitude of tax laws and regulations. Actually expected income taxes as well as deferred tax assets/liabilities must be predicted for each corporate taxpayer, and this also calls for assumptions (such as the interpretation of complex tax regulations and the ability to earn sufficient taxable income, depending on tax type and jurisdiction). Any depar- ture of assumed factors from the actual taxation outcome may affect tax expense or deferred taxes.

99 RENK Annual Report 2011 Depending on the underlying transaction, the measurement of certain other accrued liabilities and similar obligations may be complex and largely rely on substantial judgment and a number of estimates. Management estimates of the probability and amounts required for the settlement are, inter alia, predicated on empirical and currently available technical data, cost trend predictions, potential warranty claims, and the cash inflow from realization. Litigation and other legal disputes may also pose complex legal problems and entail a plethora of difficulties and imponderabilities. Such risks are provided for if an obligation is likely to arise from any such action that will probably result in a future outflow of economic resources at an amount determinable by reliable estimates. The decision whether as of the closing date a present obligation exists that has arisen from a past event, the future outflow of economic resources is likely, and the obligation can be reliably estimated, requires considerable judgment and extensive estimates on the part of management. Future events or trends and changed estimates or assumptions may subsequently result in a different or updated assessment. Therefore, additional expenses with a material effect on RENK’s asset and capital structure, financial position or results of operations cannot be fully ruled out.

(4) Cash flow statement

The cash flow statement breaks down cash flows into those from operating, investing and financing activities. Effects of changes in the consolidation group and exchange rates are eliminated in the lines concerned. The net (forex) parity-related change in cash and cash equivalents is shown in a separate line. The indirect method is used to determine the cash flow from operating activities.

In the cash flow from operating activities, the noncash operating expenses and income, as well as the net gain/loss from the disposal of intangibles, tangibles and investments are all eliminated.

The cash flow from investing activities reflects the cash outflow for, which is offset against the cash inflow from the disposal of, tangible/intangible assets and investments.

The cash flow from financing activities mirrors the dividend payout, cash inflow from and outflow for securities transactions and financial liabilities redeemed or newly raised, as well as endowments of pension funds or plans.

Cash and cash equivalents comprise cash on hand and in bank (including highly liquid, temporarily invested funds readily convertible into cash and subject to only insignificant volatility risks), as well as the short-term receivables from MAN intragroup finance transactions.

100 (5) Changed accounting policies, methods and rules

(a) Newly applied rules RENK has applied all legally obligatory accounting standards in 2011.

In November 2009, the IASB revised IAS 24, Related Party Disclosures. On the one hand, the revised Standard provides a partial exemption from the disclosure requirements for transactions of government-related entities inter se; on the other, the definition of a related party has been simplified by clarifying its intended meaning and eliminating inconsistencies from the definition. For RENK, which newly applied the revised Stan dard as from January 1, 2011, the group of related parties was extended by the redefini- tion when Volkswagen AG acquired on November 9, 2011, the majority in MAN SE. Besides Volkswagen AG, which by dint of its stake in, exercised up to November 9, 2011, a significant influence on, MAN SE, also companies and joint ventures controlled by Volkswagen were henceforth deemed entities related to RENK. After Volkswagen AG had acquired the majority in MAN SE on November 9, 2011, this extended group of related parties included MAN and thus RENK and therefore automatically met the definition of the revised IAS 24. For further details, see also Notes (37) and (38) below.

As part of the IFRS improvement process, which resulted in 2010 in a revised IFRS 7, the disclosure obligations regarding type and extent of risks emanating from financial instruments were updated accordingly. The obligatory disclosures include details of the financial impact of collateral held as security and of credit enhancements. In contrast, the previously mandatory disclosure of the book values of financial instruments whose terms have been renegotiated since they would otherwise be past due, is no longer required.

Moreover, the IASB issued further Standards and Interpretations to be applied by RENK as from January 1, 2011, but which, though duly adopted by RENK, had no significant effect on its consolidated financial statements:

• IFRS 1: Limited Exemption from Comparative IFRS 7 Disclosures for First-Time Adop- ters

• IAS 32: Classification of Rights Issues

• IFRS Improvements 2010: Minor amendments to a multitude of IFRS (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 18, IAS 27, IAS 34, IFRIC 13) and the resulting downstream updates

• IFRIC 14: Prepayments of a Minimum Funding Requirement

• IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments

(b) Newly issued rules endorsed by the EU but not applied early The IASB issued a number of further publications, their potential effects on the consolidated financial statements being currently assessed and analyzed. However, no significant effect is expected to ensue for RENK’s consolidated financial statements from the new accounting pronouncements.

101 RENK Annual Report 2011 Notes to the consolidated income statement

(6) Net sales

Sales by geographical market/region k€ 2011) 2010 Germany 146,338) 120,021 Other EU 103,201) 120,075 Other Europe 13,034) 13,718 Asia 89,996) 110,801 Americas 32,495) 35,272 Africa 2,277) 1,958 Australia and Oceania 1,481) 921 388,822) 402,766

(7) Other operating income k€ 2011) 2010 Income from the release of accruals 259) 1,147 Gains from the disposal of tangible/intangible assets 97) 415 Income from other trade business 544) 806 Gains from foreign exchange and derivatives 2,504) 3,326 Miscellaneous 1,193) 825 4,597) 6,519

(8) Other operating expenses k€ 2011) 2010 R&D 5,850) 3,925 Change in accruals (104) 704 Write-down of current assets 2,912) 3,350 Losses on foreign exchange and derivatives 1,948) 3,463 Miscellaneous 3,194) 4,609 13,800) 16,051

The other operating expenses comprise the expenses not assigned to any of the functional expense categories (primarily to cost of sales); R&D expenses reflect only such portion as is contract-unrelated production cost. The miscellaneous other operating expenses include legal, consultancy and audit fees, functionally unallocable personnel expenses, as well as a multitude of single items.

102 (9) Net interest income k€ 2011) 2010) Interest and similar income 1,137) 664) Interest and similar expenses (76) (67) Interest portion of addition to pension accruals (4,221) (4,220) Expected return on plan assets 3,890) 3,496) 730) (127)

k€1,136 (up from k€609) of interest income was earned from intragroup finance transactions with MAN SE.

(10) Income taxes

The recognized income tax expense breaks down as follows:

k€ 2011) 2010) Current taxes Germany 12,627) 8,296) abroad 3,006) 4,627) Deferred taxes Germany (218) 2,153) abroad 109) (1,071) 15,524) (14,005)

The income tax expense expected for 2011 was calculated by applying a total 31.18 percent (down from 31.58) to EBT for the assessment period 2011, this percentage being the combined result of municipal trade income tax at 15.35 percent, corporate income tax at 15.0 percent, plus solidarity surtax of 5.5 percent of corporate income tax.

Reconciliation of expected to actual income tax expense:

k€ 2011) %) 2010) %) EBT 53,479) 100.0) 51,662) 100.0) Expected income tax 16,675) 31.2) 16,315) 31.6) Tax rate differential (56) 0.0) (331) (0.6) Tax-exempt income/gains (759) (1.4) (144) (0.3) Nondeductible business expenses 60) 0.1) 17) 0.0) Loss carryforwards not capitalized in 2010 –) –) 122) 0.2) Taxes for previous years and sundry (396) (0.8) (1,974) (3.8) Actual tax expense 15,524) 29.0) 14,005) 27.1)

The actual tax expense includes nonperiod income taxes of k€167.

103 RENK Annual Report 2011 Allocation of deferred taxes to balance sheet lines::

k€ 12/31/2011 12/31/2010 Deferred tax assets Pension accruals 6,582 4,320 Inventories and receivables 8,450 5,644 Other accruals 1,442 1,604 Sundry 1,387 1,887 17,861 13,455 Deferred tax liabilities Noncurrent assets 7,971 6,946 Inventories and receivables 3,436 4,340 Sundry 6,808 3,696 18,215 14,982

In connection with shares in subsidiaries, temporary differences exist for which taxes of k€227 have not been deferred (up from k€0).

(11) Earnings per share

2011 2010 Net income (k€) 37,955 37,657 Weighted average number of shares outstanding (1,000) 6,800 6,800 Earnings per share in € 5.58 5.54

In accordance with IAS 33, the number of shares outstanding is divided into the Group’s net income (EAT) to obtain earnings per share (EpS). No unexercised stock options existed to dilute earnings per share, at either December 31, 2011 or 2010.

(12) Additional notes to the income statement

Cost of sales includes the following cost of materials:

k€ 2011 2010 Cost of raw materials, supplies, and merchandise purchased 117,569 110,378 Cost of services purchased 22,096 35,430 139,665 145,808

104 Personnel expenses break down as follows:

k€ 2011 2010 Wages and salaries 113,852 99,919 Social security taxes and pension expense 24,328 22,515 138,180 122,434

Including statutory Social Security taxes of k€8,916 (up from k€8,382), pension expense for 2011 totaled k€12,395 (up from k€11,720) and was allocated to the appropriate functional categories but excludes the interest portion contained in the period’s pension provision at k€4,221 (up from k€4,220).

In fiscal 2011, the RENK Group’s headcount averaged 1,883 employees (up from 1,823), including 1,140 (up from 1,110) directly and 743 (up from 713) indirectly working in Production.

Breakdown of amortization/depreciation:

k€ 2011 2010 Amortization of intangible assets 1,531 1,365 Depreciation of tangible assets 11,465 11,461 12,996 12,826

Lease payments expensed:

k€ 2011 2010 Minimum operating lease payments 123 129 123 129

(13) Total fees of statutory auditor

In the year under review, the Supervisory Board proposed Munich-based Pricewater- houseCoopers AG Wirtschaftsprüfungsgesellschaft (PwC) to be engaged as statutory auditor, and the AGM of April 14, 2011, endorsed this proposal.

The table below specifies the fees charged by PwC and auditing firms of the international PwC network in fiscal 2011 and 2010.

105 RENK Annual Report 2011 k€ 2011 2010 (a) Fee for statutory audits 159 144 Incidentals 2 – (b) Other certification/assurance and valuation services 7 12 (c) Tax accounting 10 9 (d) Other services 33 – Total fees of statutory auditor 211 165

The fees charged by the Munich-based statutory auditor PwC in 2011 totaled k€142 (up from k€122), including k€123 for the statutory audit and k€19 for other certification, assurance and valuation services (up from k€110 and k€12, respectively).

106 Notes to the consolidated balance sheet

(14) Intangible assets k€ Licenses,) Technologies) Customer) Total) software,) purchased) relations) similar rights) and assets) Gross book value at 1/1/2010 9,353) 1,518) 2,766) 13,637) Accumulated amortization/write-down (6,838) (5,831) (270) (737) Balance at 1/1/2010 3,522) 1,248) 2,029) 6,799) Additions 913) –) – 913) Book transfers 37) –) – 37) Amortization (959) (109) (297) (1,365) Currency translation differences 412) 222) 346) 980) Balance at 12/31/2010 3,925) 1,361) 2,078) 7,364)

Gross book value at 1/1/2011 10,975) 1,801) 3,281) 16,057) Accumulated amortization/write-down (7,050) (440) (1,203) (8,693) Balance at 1/1/2011 3,925) 1,361) 2,078) 7,364) Additions 452) –) – 452) Book transfers (249) –) – (249) Disposals (35) –) – (35) Amortization (1,076) (122) (333) (1,531) Currency translation differences 64) 38) 55) 157) Balance at 12/31/2011 3,151) 1,277) 1,800) 6,228)

Gross book value at 12/31/2011 10,741) 1,853) 3,375) 15,969) Accumulated amortization/write-down (7,590) (576) (1,575) (9,741)

The amortization charged to capitalized intangibles is included in the appropriate functional expense categories, mainly cost of sales.

107 RENK Annual Report 2011 (15) Tangible assets k€ Land) Production) Other plant,) Prepayments) Tangible) and) plant) factory and) on tangibles,) assets) buildings) and) office) construction) machinery) equipment) in progress)

Gross book value at 1/1/2010 64,644) 124,406) 25,997) 10,006) 225,053) Accumulated depreciation/ write-down (30,297) (77,537) (20,056) –) (127,890) Balance at 1/1/2010 34,347) 46,869) 5,941) 10,006) 97,163) Additions 2,363) 8,097) 1,721) 10,060) 22,241) Book transfers 5,460) 3,189) 13) (8,699) (37) Disposals (29) (306) (20) –) (355) Depreciation (1,926) (7,856) (1,679) –) (11,461) Currency translation differences 8) 700) 54) 76) 838) Balance at 12/31/2010 40,223) 50,693) 6,030) 11,443) 108,389)

Gross book value at 1/1/2011 72,365) 133,726) 26,604) 11,443) 244,138) Accumulated depreciation/ write-down (32,142) (83,033) (20,574) –) (135,749) Balance at 1/1/2011 40,223) 50,693) 6,030) 11,443) 108,389) Additions 866) 9,117) 1,612) 12,269) 23,864) Book transfers 148) 4,358) 157) (4,698) (35) Disposals –) (33) (30) –) (63) Depreciation (2,029) (7,751) (1,685) –) (11,465) Currency translation differences 2) 114) 11) 11) 138) Balance at 12/31/2011 39,210) 56,498) 6,095) 19,025) 120,828)

Gross book value at 12/31/2011 73,402) 146,664) 28,025) 19,025) 267,116) Accumulated depreciation/ write-down (34,192) (90,166) (21,930) –) (146,288)

The depreciation charged to tangible assets is included in the appropriate functional expense categories, mainly cost of sales. No write-down was charged in either 2011 or 2010.

108 (16) Inventories k€ 12/31/2011 12/31/2010 Raw materials and supplies 28,078 21,883 Work in process and finished products 115,638 87,795 Prepayments made 1,662 572 145,378 110,250

Inventories valued at k€251,104 (up from k€247,202) were in 2011 recognized as cost of sales. Inventories of a gross k€29,996 (up from k€23,419) were stated at their net realizable values (NRV) of k€8,116 (up from k€4,294). The write-down expensed in 2011 alone totaled k€2,755 (down from k€3,161).

(17) Trade receivables k€ 12/31/2011) 12/31/2010 Due from customers 68,337 66,555 Due from nonconsolidated group companies 6,071 848 Due from investees 590 1,739 PoC receivables 7,587 3,588 82,585 72,730

k€2,403 (down from k€4,027) of trade receivables has a remaining term above one but below five years. The remaining k€80,182 (up from k€68,703) now falls due in less than one year. The accounts due from nonconsolidated group companies included for 2011 not only receivables from RENK subsidiaries but also those from Volkswagen and MAN companies. The prior-year comparative (which had reflected only the nonconsolidated RENK subsidiaries) for the meantime extended group was a total k€5,619. PoC receivables comprise k€1,789 due from MAN companies (up from nil).

Analysis and breakdown of PoC receivables:

k€ 12/31/2011) 12/31/2010) PoC contract costs and prorated profits 36,952) 16,843) Currency translation differences 1,172) (64) Gross PoC receivables 38,124) 16,779) Prepayments received (30,537) (13,191) 7,587) 3,588)

Revenue from PoC contracts amounted to k€20,529 in 2011 (up from k€11,982).

109 RENK Annual Report 2011 Movement analysis of specific allowances for bad debts among trade receivables:

k€ 2011) 2010) Balance at January 1 707) 1,309) Added 129) 353) Utilized –) (347) Reversed (289) (639) Exchange rate effects 6) 31) Balance at December 31 553) 707)

A specific allowance for bad debts was charged to receivables of k€553 gross book value (down from k€707).

Movement analysis of the specific portfolio allowances for trade receivables:

k€ 2011) 2010) Balance at January 1 565) 680) Added 76) 27) Reversed (27) (149) Exchange rate effects 1) 7) Balance at December 31 615) 565)

(18) Other assets k€ 12/31/2011) 12/31/2010) Financial derivatives 32) 540) Loans and other receivables from third parties 14) 202) Noncurrent receivables from MAN intragroup financing 7,500) 15,000) VAT assets 3,475) 1,075) Other non-income tax assets 33) 34) Advances, clearing account balances 779) 797) Prepaid expenses and deferred charges 798) 860) Sundry assets 127) 193) 12,758) 18,701)

The other assets are disclosed in these balance sheet lines:

k€ 12/31/2011 12/31/2010 Other noncurrent assets 7,517 15,205 Other current assets 5,241 3,496

Pursuant to IAS 39, financial derivatives are stated at fair value; most of them are hedges against either currency risks in customer contracts or other forex risks.

110 (19) Cash and cash equivalents k€ 12/31/2011 12/31/2010 Cash on hand and in bank 138 159 Due from MAN intragroup financing 96,313 85,011 96,451 85,170

The accounts due from MAN intragroup financing reflect current receivables under the central cash-pooling system of, and short-term investments with, MAN companies.

(20) Equity

RENK AG’s capital stock of €17,920,000 is divided into 7 million fully paid-up no-par shares of common stock that all rank pari passu. During the year under review, 76 percent of RENK AG’s capital stock has been owned by Munich-based MAN SE.

As of December 31, 2011, RENK AG held a total 199,903 treasury shares in its portfolio, equivalent to 2.86 percent of the capital stock or a stake of k€512. The additional paid- in capital solely comprises stock premiums from increases in RENK AG’s capital stock. The accumulated other comprehensive income (OCI) is mostly attributable to the remeasurement of pension accruals at fair value.

The actuarial gains/losses within OCI break down as follows:

k€ 12/31/2011) 12/31/2010) (Gain)/loss on the PV of the DBO 4,236) 2,379) (Gain)/loss on plan assets 3,821) (422) Change in actuarial gains/losses 8,057) 1,957) Deferred taxes (1,254) (693) Actuarial gains/losses 6,803) 1,264)

Dividend distribution is subject to the provisions of the German Stock Corporation Act (“AktG”), according to which cash dividends may be distributed from the Group parent’s (RENK AG’s) net earnings; these net earnings according to German GAAP totaled k€33,264 at December 31, 2011. The Company’s Executive and Supervisory Boards will propose to the annual general meeting on April 26, 2012, to pay a cash dividend of €1.80 per eligible share from said net earnings, corresponding to €12,240,174.60 for 7,000,000 no-par shares after deduction of the dividends proratable to the 199,903 treasury shares (which do not rank for dividend pursuant to Art. 71b AktG).

RENK’s capital management primarily targets the sustainable increase in shareholder value while safeguarding the Group’s liquidity and thus its credit standing. Contribut- ing to these targets are ongoing efforts toward trimming capital costs, improving the cash flow from financing activities, perfecting the capital structure, as well as ensuring an effective risk management system.

111 RENK Annual Report 2011 For the measurement and direction of business operations and the best-possible allocation of capital within the Group, RENK uses the excess of ROCE over WACC as controlling parameter, i.e., the difference between return on capital employed (ROCE) and the weighted average cost of capital (WACC).

For capital management purposes, the Group’s capital employed (CE) comprises total assets excluding financial funds and tax assets, less all accruals and liabilities other than financial debts, pension accruals and taxes. Additionally eliminated from CE are any M&A-related effects produced by finite-lived tangible and intangible assets. Pre- payments received are not deducted unless they have already been applied to contract work.

The RENK Group’s capital employed as of December 31, 2011, totaled k€176,897 (up from k€151,365).

RENK AG’s articles of incorporation (bylaws) do not require the creation of any statutory reserves.

(21) Pension accruals

(a) Pension plans and coverage capital Employees of German RENK companies benefit from a pension plan to provide additional retirement income including disability (invalidity) and death benefits during their active service life.

Under the current pension plans, active employees receive employer contributions pegged to their pensionable pay and are offered the opportunity to top up their retirement income through deferred compensation to which, where covered by collective agreements, their employers make certain contributions. All these defined contributions (funded by both employers and employees) plus the income earned from the investment on the capital market help accumulate during active service a pension capital to be paid out on retirement in one sum or in installments; capital redemption in the form of annuities is optional in certain cases. When investing the employees’ pension capital, the related investment risks are scaled back with growing age (according to the life-cycle concept). Pension capital performance is directly linked to the capital market and controlled by a basket of indexes and other suitable parameters.

RENK’s pension plan assets in Germany are managed by MAN Pension Trust e.V., a membership corporation under German law, as well as by MAN Pensionsfonds AG; under irrevocable agreements, these trust assets are exempt from recourse or attachment by RENK (trustor) and earmarked solely to fund current pension payments or settle employee claims in the case of employer insolvency. For the purpose of overseeing due and proper management and appropriation of the special pension trust assets, security trustees independent of MAN have been appointed. MAN Pensions- fonds AG is, moreover, subject to the supervision by BaFin, the German Federal Finan- cial Supervisory Authority. The assets held under the CTA (contractual trust agreement)

112 are invested by several professional asset managers in various funds on the capital market in accordance with investment policies specified by an investment board. The acquisition of securities issued or floated by MAN SE or an MAN company is prohib- ited, as is any investment in real estate for internal use.

Switzerland-based RENK-MAAG GmbH has incurred defined benefit obligations which are all plan-funded and managed by an independent pension fund. In addition, France’s RENK France S.A.S. is subject to certain statutory payment obligations when employees separate early or go into regular retirement.

The employer contributions to defined benefit plans are expected to amount in 2012 to k€4,427.

(b) Funding status

The following actuarial parameters are assumed in order to calculate the DBO’s present value and the plan assets:

% Germany Abroad 2011 2010 2011 2010 Discount rate 4.60 5.00 2.35 2.40 Pension rise 2.00 2.00 0.00 0.00 Pay rise 2.75 2.75 1.52 1.50 Expected return on plan assets 5.00 4.63 4.00 4.00

The discount rates mirror the year-end returns on prime industrial bonds at matching maturities and currencies. Current local actuarial tables underlie the biometric accounting bases. For Germany, the 2005G mortality tables of Prof. Klaus Heubeck were adjusted to reflect specific empirical corporate data. The return expected long term to be earned on plan assets is derived from assumed yields of national and international investments in line with the portfolio structure.

Breakdown of funding status and pension accruals:

k€ 12/31/2011) 12/31/2010) 12/31/2009) 12/31/2008) Plan-unfunded DBO 2,509) 2,279) 1,928) 1,658) Plan-funded DBO 99,429) 92,221) 84,883) 73,535) Total DBO 101,938) 94,500) 86,811) 75,193) Plan assets at fair value (79,014) (80,024) (75,732) (69,773) Pension accruals 22,924) 14,466) 11,079) 5,420) thereof Germany 20,243) 12,448) 8,814) 2,987) thereof abroad 2,681) 2,018) 2,265) 2,433)

113 RENK Annual Report 2011 Movement analysis of the present value of the DBO:

k€ Germany Abroad 2011) 2010) 2011) 2010) Present value of the DBO at Jan. 1 80,163) 74,448) 14,327) 12,363) Current service cost 2,269) 2,403) 899) 743) Past service cost – ) – ) (139) 37) Interest cost 3,865) 3,818) 356) 402) Actuarial losses/(gains) 4,264) 3,071) (28) (691) Pension payments (3,977) (3,832) (1,283) (1,149) Contributions by beneficiaries 384) 253) 459) 391) Exchange rate changes, other (27) 2) 407) 2,231) Present value of the DBO at Dec. 31 86,941) 80,163) 14,998) 14,327)

Movement analysis of plan assets:

k€ Germany Abroad 2011) 2010) 2011) 2010) Plan assets at Jan. 1 67,715) 65,634) 12,309) 10,098) Expected return on plan assets 3,393) 3,065) 497) 431) Actuarial gains/(losses) (3,098) 385) (723) 37) Contributions by employers 1,451) 1,514) 672) 571) Contributions by beneficiaries 368) 228) 459) 390) Pension payments (3,102) (3,114) (1,245) (1,134) Exchange rate changes, other (29) 3) 346) 1,916) Plan assets at Dec. 31 66,698) 67,715) 12,315) 12,309)

Breakdown of plan asset portfolio:

k€ Germany Abroad 12/31/2011 12/31/2010 12/31/2011 12/31/2010 Fixed-income bonds 30,872 34,324 5,457 5,104 Money market instruments 1,752 1,320 1,093 735 Equities 11,221 12,511 2,551 2,660 Real estate 893 – 2,757 2,698 Other investments 21,960 19,560 457 1,112 Total plan assets 66,698 67,715 12,315 12,309

114 (c) Pension expense

Breakdown of pension expense:

k€ 2011) 2010) Current service cost 3,168) 3,145) Past service cost (139) 37) Interest cost 4,221) 4,220) Expected return on plan assets (3,890) (3,496) 3,360) 3,906)

(d) Gains and losses recognized as OCI

k€ 2011) 2010) Actuarial gains/losses at Jan. 1 10,634) 8,636) Changes in fiscal year 8,057) 1,957) Consolidation group changes/other –) (1) Exchange rate effects 10) 42) Actuarial gains/losses at Dec. 31 18,701) 10,634)

(e) Empirical adjustments

The empirical adjustments, i.e., the variances between the values calculated on the basis of actuarial assumptions and the actual trend of DBO and plan assets, present the following picture over time:

% 2011) 2010 2009 2008 % of the present value of the DBO (1.07) 0.74 0.72 (0.37) % of plan assets (4.84) 0.53 3.99 (8.56)

115 RENK Annual Report 2011 (22) Other accruals k€ 12/31/ Currency Utilized) Added Released) 12/31/ 2010 translation 2011 diff., other Warranties 43,356 859 (9,264) 5,662 (6,796) 33,817 Unbilled costs 6,540 – (1,324) 2,267 (1,815) 5,668 Other business obligations 5,018 51 (1,291) 1,899 (526) 5,151 Obligations to personnel 4,819 98 (2,307) 2,888 (54) 5,444 Remaining accruals 2,834 20 (93) 212 (45) 2,928 62,567 1,028 (14,279) 12,928 (9,236) 53,008

The other accruals are disclosed in these balance sheet lines:

k€ 12/31/2011 12/31/2010 noncurrent current noncurrent current Warranties 4,850 28,967 15,439 27,917 Unbilled costs – 5,668 – 6,540 Other business obligations – 5,151 – 5,018 Obligations to personnel 1,637 3,807 2,264 2,555 Remaining accruals 615 2,313 578 2,256 7,102 45,906 18,281 44,286

The warranty accruals provide for implied and express warranties, as well as accommo- dation/goodwill warranties voluntarily extended to customers. Warranty accruals are utilized when the warranty claim takes effect, which may be anytime during the warranty period. The accruals for unbilled costs refer to products or services yet to be provided under contracts already invoiced (or parts thereof) and to obligations under maintenance and service contracts. The other business obligations refer to accrued losses on onerous contracts, to default/performance-related penalties, etc. The accruals for obligations to personnel provide for employment anniversary allowances, termination indemnities, preretirement part-time work, and statutory postretirement benefits.

(23) Financial liabilities k€ 12/31/2011 12/31/2010 Payables under capital leases 748 953 748 953

Payables under capital leases are included in noncurrent or current financial liabilities, the prior-year comparatives have been restated accordingly.

116 (24) Trade payables k€ 12/31/2011 12/31/2010 Trade payables 42,927 35,484

Trade payables are disclosed within current liabilities and accruals and include k€910 (up from k€190) due to nonconsolidated group companies of the entire MAN Group.

(25) Prepayments received k€ 12/312011 12/312010 Prepayments received 83,100 46,225

Prepayments received are disclosed within current liabilities and accruals and include k€1,810 (up from k€614) received from nonconsolidated group companies.

(26) Other liabilities k€ 12/31/2011 12/31/2010 Personnel-related 20,692 16,928 Statutory Social Security 1,376 1,396 Currency hedges 1,198 729 Non-income taxes 1 9 Remaining liabilities 2,329 2,145 25,596 21,207

The personnel-related liabilities refer to wages, salaries and social security taxes due but not yet paid at the balance sheet date, as well as to prorated vacation pay and special year-end payments.

As in 2010, the other current liabilities included the negative market values of financial derivatives. Since they mostly served as hedges against currency risks in customer contracts, their negative market values contrasted with increased values in the balance sheet lines of the underlyings.

The other liabilities are disclosed in the following balance sheet lines:

k€ 12/31/2011 12/31/2010 Other noncurrent liabilities 587 588 Other current liabilities 25,009 20,619 25,596 21,207

117 RENK Annual Report 2011 Other information

(27) Contingent liabilities

k€ 12/31/2011 12/31/2010 Guaranties and suretyships 947 917 947 917

In fiscal 2007, RENK AG furnished MAN SE with a non-expiring payment guaranty for the liabilities of RENK subsidiaries from the latter’s business relationship with MAN SE.

(28) Other financial obligations

Other financial obligations exist from and under leases. Future rents for the minimum terms of operating leases fall due as follows:

k€ 12/31/2011 12/31/2010 Operating leases Due within 1 year 102 103 Due >1–5 years 124 54 226 157

Financial purchase obligations to third parties from pending capital expenditure projects were within the ordinary scope of business. Financial obligations to nonconsolidated group companies existed in 2011 at k€137.

(29) Additional disclosures for financial instruments

This Note (29) additionally highlights details of financial instruments (FI) and discloses further information on FI-related balance sheet and income statement lines. The table below details according to IFRS 7 the book values, the breakdown into valuation categories, the fair values (FV) and FV hierarchy level of financial instruments, all as of December 31, 2011.

118 k€ Book thereof IAS 39 Fair value Fair value value covered valuation hierarchy by IFRS 7 category*) level Assets Investments 1,493 1,493 AfS 1,493 n/a Other noncurrent/current assets 12,758 8,408 – – – Other financial assets 8,408 8,408 – 8,408 – financial derivatives at FV through IS (no hedge) 32 32 aFV 32 2 financial derivatives in hedges – – n/a – – sundry assets 8,376 8,376 LaR 8,376 – Assets not covered by IFRS 7 4,350 – n/a – – Trade receivables 82,575 82,575 LaR 82,575 – Cash and cash equivalents 96,451 96,451 LaR 96,451 – Liabilities Other noncurrent/current liabilities 26,344 2,958 – – – Noncurrent/current financial liabilities 748 748 aAC 748 – Other financial debts 2,210 2,210 – 2,210 – financial derivatives at FV through IS (no hedge) 467 467 aFV 467 2 financial derivatives in hedges 1,198 1,198 n/a 1,198 2 sundry liabilities 545 545 aAC 545 – Liabilities not covered by IFRS 7 23,386 – n/a – – Trade payables 42,927 42,927 aAC 42,927 –

*) AfS: financial assets available for sale LaR: loans and receivables aFV: at fair value through income statement aAC: financial payables at amortized cost n/a: not applicable

The table below details according to IFRS 7 the book values, the breakdown into valuation categories, the fair values (FV) and FV hierarchy level of financial instruments, all as of December 31, 2010.

119 RENK Annual Report 2011 k€ Book thereof IAS 39 Fair value Fair value value covered valuation hierarchy by IFRS 7 category*) level Assets Investments 1,493 1,493 AfS 1,493 n/a Other noncurrent/current assets 18,701 16,680 – – – Other financial assets 16,680 16,680 – 16,680 – financial derivatives at FV through IS (no hedge) 383 383 aFV 383 2 financial derivatives in hedges 157 157 n/a 157 2 sundry assets 16,140 16,140 LaR 16,140 – Assets not covered by IFRS 7 2,021 – n/a – – Trade receivables 72,730 72,730 LaR 72,730 – Cash and cash equivalents 85,170 85,170 n/a 85,170 – Liabilities Other noncurrent/current liabilities 22,160 2,638 – – – Noncurrent/current financial liabilities 953 953 – 953 – Other financial debts 1,685 1,685 – 1,685 – financial derivatives at FV through IS (no hedge) 202 202 aFV 202 2 financial derivatives in hedges 729 729 n/a 729 2 sundry liabilities 754 754 aAC 754 – Liabilities not covered by IFRS 7 19,522 – n/a – – Trade payables 35,484 35,484 aAC 35,484 –

*) AfS: financial assets available for sale LaR: loans and receivables aFV: at fair value through income statement aAC: financial payables at amortized cost n/a: not applicable

120 Breakdown of the accumulated book values of financial instruments by IAS 39 valuation category:

k€ 12/31/2011 12/31/2010 IAS 39 valuation category Assets Liabilities Assets Liabilities AfS 1,493 – 1,493 – aFV 32 467 383 202 LaR 187,402 – 174,040 – aAC – 44,220 – 37,191

Fair values have been determined on the basis of market conditions available at the closing date and the valuation techniques described below and reflect the prices at which market participants would exchange the rights and/or obligations arising from the measured financial instruments in a transaction at arm’s length. The valuation techniques used have remained substantially unchanged in comparison with those applied the year before.

Cash, cash equivalents, trade receivables, other financial assets, trade payables and other financial debts all have largely a short remaining term and, therefore, their current book values substantially equal their fair values. Moreover, trade receivables are reasonably written down wherever evidence of their impairment exists.

The financial assets available for sale include equity interests of k€1,493 (virtually unchanged) which are stated at cost. They represent securities and shares in nonlisted companies for whose valuation DCF methods could not be and were not used for lack of reliably determinable cash flows. These nonlisted companies are enterprises for which no quoted market prices are available since no active market exists for their shares. At present, we do not intend to dispose of these shares.

The future cash flows of financial derivatives without option components (mainly currency forwards) are determined by using forward rate trajectories. The fair value of these derivatives corresponds to their discounted cash flows. Options for currency pairs are valued on the basis of generally accepted option-pricing models, such as the Black-Scholes formula or similar generalized closed-form models.

Fair value hierarchy:

A hierarchy that prioritizes the inputs to valuation techniques used to measure fair value of financial instruments into three broad levels helps assess the significance of fair value measurements and related disclosures:

121 RENK Annual Report 2011 Level 1: Inputs in the form of (unadjusted) quoted prices in active markets for identical assets or liabilities;

Level 2: Direct inputs other than Level 1 quoted prices for identical or similar assets or liabilities or indirect inputs derived from observable market data;

Level 3: Unobservable inputs for an asset or liability that are used to measure fair value in cases where little or no market data is available.

Neither in fiscal 2010 nor 2011 were any fair value measurement inputs recategorized between Levels 1 and 2, nor was any fair value measurement transferred to or from Level 3.

The interest income and expense earned or incurred in connection with financial assets and debts break down as follows:

k€ 2011) 2010) Interest income 1,392) 800) Interest expense (1,012) (169)

Interest income from impaired financial assets is insignificant given the mostly short periods to expected receipt of payment.

The table below lists the net gains/losses from financial instruments:

k€ 2011) 2010) Loans and receivables 664) 257) Financial assets available for sale 916) 446) Financial instruments held for trading (578) (61) Financial debts at cost (10) 7) Net gain/(net loss) 992) 649)

The net gains/losses from loans and receivables mainly reflect changes in allowances, write-down and currency translation differences, as well as income from cash inflows and write-up.

The net gains/losses from financial assets available for sale basically mirror net income/loss from investments.

122 The net gains/losses from financial assets/debts at fair value recognized in the income statement (IS) represent changes in the fair value of financial derivatives to which no hedge accounting rules are applied.

The net gains/losses from financial debts carried at cost chiefly comprise currency translation differences and income from liabilities charged off.

The net forex gain on the aforesaid items totaled k€744 in 2011 (down from k€916).

(30) Derivative financial instruments and hedging strategies

Given its international business activities and operations, the assets, liabilities and forecast transactions of the MAN Group are exposed to not insignificant an extent to market price, credit and liquidity risks for whose identification, measurement and containment a groupwide risk management system has been set up. RENK has been integrated with this RMS and makes use of the risk-managing tools thereby placed at its disposal.

(a) MAN SE’s risk management system Companies of the MAN Group generally hedge their transactions against currency and interest rate risks through MAN SE’s central Group Treasury, on terms as if at arm’s length and using straight and derivative financial instruments. In countries where foreign-exchange, supervisory or other regulatory legislation prevent MAN SE from hedging (mainly Brazil), MAN SE makes or negotiates any forex, interest rate and money-trading contracts in the name and for the account of the group company concerned. Financial instruments are recognized at the trading date.

Group Treasury’s risk positions are hedged externally with banks within predeter- mined risk limits. The contracting of hedges substantially meets the risk management requirements also applicable to banks and is subject to stringent monitoring, which is particularly ensured through the strict segregation of contracting, settlement and controlling functions.

The groupwide cash management system centralizes the MAN Group’s liquidity management and investment. When it comes to investing any cash surplus, the credit institutions, banks and investment vehicles are carefully selected and spread in accordance with a system of defined limits; these limits and their utilization are regularly monitored. Most liquid assets are cash investments kept with investment-graded banks.

The MAN Group’s market price risk positions are regularly reported to MAN SE’s Executive and Supervisory Boards. Compliance with guidelines and directives is checked by MAN’s Internal Auditing.

123 RENK Annual Report 2011 (b) RENK’s currency risks Any future cash flows not transacted in the functional currency of a RENK company are exposed to currency risks. In order to counteract the effects of exchange rate volatility, RENK companies ensure the ongoing quantification of forex risks and contract currency forwards and options to hedge against all such risks wherever material.

Within the RENK Group, generally all firm customer contracts, all purchase orders issued in foreign currency, as well as forex receivables and payables are hedged. Currencies that closely correlate with the euro (such as the Danish krone), equity interests or equity-type loans in foreign currency are hedged in isolated cases only. Moreover, hedging transactions provide for planned foreign-currency revenues from series-manufacturing business within defined limits and for high-probability customer projects (so-called forecast transactions).

The RENK Group’s currency positions are regularly reported to RENK AG’s Executive and Supervisory Boards.

At December 31, 2011, RENK was primarily exposed to forex risks originating from business in US dollar, Swiss franc, Japanese yen, and Chinese yuan renminbi. However, since such risks were counteracted by hedges, RENK’s exposure to currency risks was altogether insignificant.

Virtually throughout, hedges are recognized according to cash flow hedge (CFH) accounting rules, in exceptional cases also as fair value hedges (FVH).

In fiscal 2011, unrealized pretax gains of k€442 (comparing with losses of k€1,113 in 2010) from the measurement at fair value of derivatives in CFHs were recognized in, and only in, OCI. During the year under review, losses of k€89 (up from k€12) were recycled from OCI to the income statement.

As of December 31, 2011, the longest time to maturity among cash flow hedges for forecast transactions was 44 months. Two percent of hedged forecast transactions is expected to materialize in Q1/2012, another 50 percent by the end of 2012.

In connection with fair value hedges (FVHs), the total gain from derivatives, and the mirror-image total loss on underlyings, amounted to k€112 (down from k€194).

124 Theoretical what-if scenarios were used to analyze the straight and derivative financial instruments existing at the balance sheet date for the effects of a 10 percent higher or lower exchange rate for each currency pair:

k€ 12/31/2011 Equity EBT) Currency relation +10% –10%) +10%) –10%) Euro/US dollar 4,086 (4,086) 3,896) (3,896) Euro/Swiss franc – – (475) 475) Euro/Chinese yuan – – 51) (51) Euro/pound sterling – – (147) 147) Swiss franc/US dollar – – 97) (97) Euro/Japanese yen – – 160) (160)

(c) Commodity price risks RENK is exposed to the risk of fluctuations in prices and availability of commodities (i. e., commodity sourcing risks), both regarding production materials and energy (power, gas, oil, etc.).

Wherever possible, these risks are counteracted by agreeing on fixed prices with suppliers. Given the wide variety of raw materials in use and the consequently small quantities involved, commodity price hedging through suitable financial market instruments is presently no viable option for RENK. No commodity derivatives existed in 2011 at RENK.

(d) ) Default risks Given its business operations, the RENK Group is exposed to default risks (a. k. a. credit or counterparty risks), i. e., the risk that a counterparty fails to perform its contractual obligations, thus causing a financial loss. The term default risk covers not only the direct nonpayment risk but also the credit risk from a deteriorated credit standing.

The total value at risk from all default risks combined (VaR) is capped by the aggregate total book value of capitalized financial assets, see Note (29). Mainly the following steps are taken to mitigate, contain, and provide for, such risks:

In business operations, country and counterparty risks are constantly assessed locally; on this basis, risks are mapped and profiled. A/R balances are throughout monitored and tracked locally. Nonpayment risks are adequately allowed for or reflected in write- down. Default risks are contained by means of various forms of collateralization (as appropriate in the country concerned), such as documentary credits, credit insurance, guaranties, bonds, suretyships, liens, retention of title, or customer deposits. In project business, nonpayment risks are reduced to a minimum by insisting on downpayments and the provision of collateral security.

125 RENK Annual Report 2011 The collection risks inherent in trade receivables are adequately allowed for within the RENK Group. All receivables are subject to ongoing monitoring, and wherever there is any evidence of potential noncollectibility or other noncontractual performance, a due allowance or write-down is charged. Major individual receivables and potentially bad debts are assessed itemwise. With due regard to specific country risks and, where applicable, collateral security received, the remaining receivables are grouped into portfolios of similar contracts and their potential need for write-down assessed accordingly.

Aged analysis of financial assets not impaired:

k€ Due in 2011 2010 30 days or less 13,554 7,071 31–90 days 3,798 3,342 91–180 days 2,069 1,120 181–360 days 2,390 2,757 >1 year 2,886 1,336 Total financial assets not impaired but past due 24,697 15,626 Financial assets neither impaired nor past due 52,101 52,911 Book values of financial assets not impaired 76,798 68,537

Regarding receivables neither impaired nor past due, there were no signs of uncollecti- bility at December 31, 2011.

In line with the nature of RENK’s integration with the MAN Group’s central finance management (by agreement with MAN SE), a sizable portion of RENK’s financial assets is concentrated in one counterparty, MAN SE. Consequently, this portion is generally exposed to the same risks MAN SE is exposed to in its entirety. The risk management tools installed at MAN SE contain such risks.

126 (e) Liquidity risks These refer to the risk that the RENK Group can no longer meet its payment obligations to an adequate degree or is required to pay a price to do so.

RENK is integrated with the MAN Group’s liquidity management system. The MAN Group’s effective finance management system with ongoing monitoring and control of cash inflows and outflows and their due dates is an effective tool for liquidity risk management. The primary sources of funds are business operations and external finance.

Finance management for business operations is substantially centralized and ensured through a cash-pooling system. By daily netting and pooling the cash balances of both RENK companies and MAN SE, cash available or required is managed as needed and appropriate. For external finance the sources of funds available on financial markets are routinely monitored in order to ensure financial flexibility and contain inappropri- ate refinancing risks.

Cash and cash equivalents are mainly used to fund working capital and capital expenditures. Management is regularly briefed on the inflow and outflow of funds.

Cash flows within RENK are governed by the (mainly short-term) maturities in the Group’s business operations. Cash inflows and outflows are netted through RENK’s integration with the MAN Group’s central finance management system.

127 RENK Annual Report 2011 Maturity analysis1) k€ 12/31/2011 12/31/2010 2013– 2012– 2012 2016 > 2016 2011 2015 > 2015 Cash outflows from

straight financial debts2) 66,137 891 128 55,067 1,659 – thereof financial liabilities 240 508 – 227 727 – thereof trade payables 42,879 48 – 34,968 516 – thereof remaining financial debts 23,018 335 128 19,872 416 – Cash outflows from financial derivatives with negative market value2) 1,360 621 – 751 166 – thereof with gross cash flow exchange4) 1,228 621 – 751 166 – thereof with net cash flow exchange 132 – – – – – Potential cash outflows from contingent liabilities3) 947 – – 917 – – thereof for obligations under guaranties/bonds 947 – – 917 – –

1) Amounts were generally determined as follows: – for no fixed maturity date, the liability refers to the earliest possible due date; – interest payments at variable rates are reflected according to the terms and conditions prevailing at the balance sheet date; – cash outflows are assumed not to occur earlier. 2) As required by IFRS 7, only undiscounted cash outflows for the agreed payments of principal and interest are shown. 3) Contingent liabilities under guaranties exist for formally guaranteed trade obligations, the highest possible cash outflows being shown. Amounts are assumed to fall due in the first year. 4) For financial derivatives with a gross cash flow exchange, not only the cash outflow has been shown but also the cash inflow upon the financial derivative’s settlement.

128 (f) Breakdown of hedges by hedging instrument type The table below states the fair values (FV) of hedging instruments, primarily currency forwards.

k€ 12/31/2011 12/31/2010 with pos. FV with neg. FV with pos. FV with neg. FV Fair value hedges (FVH) – 81 2 196 Cash flow hedges (CFH) – 957 21 533 – 1,038 23 729

(31) Stock-based payments

RENK AG’s Executive Board members receive stock-based payments under the MSP (MAN Stock Program, first launched in 2005) in the form of taxable cash compensation on condition that they appropriate 50 percent thereof to purchase MAN common stock. Such shares are acquired and held in custody centrally by MAN SE in the name and for the account of the beneficiaries, who may freely dispose of the stock after a 4-year qualifying period. During this freeze period, the shares may not be sold, assigned, pledged or hedged. When an MSP participant goes into retirement or sepa- rates from the MAN Group, the period is shortened to one year as from the date of retirement or separation.

Under the MSP 2011, its participants acquired in the year under review a total 1,043 MAN common shares (down from 1,402) at an average price of €92.98 (up from €69.53), the full cash payments amounting to k€195 (virtually unchanged).

(32) Remuneration of the Executive Board

The remuneration of RENK AG’s Executive Board members consists of three components: a fixed compensation, a variable remuneration, and stock-based payments (cf. Note 31 above). In addition, Executive Board members are vested with pension entitlements. The itemized remuneration of Executive Board members active in 2011 [2010 in brackets] is shown in this table:

129 RENK Annual Report 2011 Remuneration components k€ Fixed ) Variable,) Stock-) Pension) Total) salary) annual) based) expense) bonus) payments) ) ) (MSP)) Florian Hofbauer 226) 400) 100) 121) 847) [226] [400] [100] [121] [847] Ulrich Sauter 220) 380) 95) 141) 836) [220] [380] [95] [151] [846] Total 446) 780) 195) 262) 1,683) [446] [780] [195] [272] [1,693]

Pension payments to former Executive Board members and their surviving dependants amounted to k€316 (virtually unchanged), while the accrued pension obligations to such former members and their surviving dependants totaled k€3,424 (up from k€3,410). The Executive Board members including their memberships in other statutory supervisory and comparable boards are disclosed in Note (39).

(33) Supervisory Board

Supervisory Board compensation is subject to the provisions of RENK AG’s bylaws. Accordingly, Supervisory Board members are reimbursed for their official expenses and receive an annual fee which consists of a basic €2,100 and a variable fee of €200 for each €0.01 of the RENK AG dividend in excess of €0.10. The variable portion is capped at €6,000 each. The Supervisory Board Chairman receives double, the vice- chairman 1.5 times, this amount.

Supervisory Board remuneration 2011 in w Name Membership Fixed Variable Total period fee fee Dipl.-Kfm. Frank H. Lutz all year 4,200 12,000 16,200

Dipl.-Oec. Hiltrud Werner 5/05–12/31 2,009 5,742 7,751 Dipl.-Wirt.-Ing. Klaus Stahlmann 1/01–2/22 455 1,300 1,755 Prof. Dipl.-Ing. (FH) Gerd Finkbeiner all year 2,100 6,000 8,100 Dr.-Ing. Hans O. Jeske all year 2,100 6,000 8,100 Klaus Ketterle all year 2,100 6,000 8,100 Herbert Köhler all year 2,100 6,000 8,100 Total 2011 15,064 43,042 58,106 Total 2010 15,022 42,917 57,939

130 If employed by RENK AG, the employee representatives on the Supervisory Board additionally receive their regular collectively agreed pay. For the Supervisory Board members including their memberships in other statutory supervisory and comparable boards, turn to Note (40).

(34) German Corporate Governance Code

On December 12, 2011, RENK AG’s Executive and Supervisory Boards issued, and disclosed to the stockholders on the Internet at www.renk.eu under Investor Relations, the declaration of conformity pursuant to Art. 161 AktG, which reads as follows:

Presidential Committee chairmanship and membership are not remunerated (§ 5.4.6 of the Code) since committee work has not been and will not within the foreseeable future be of any significant extent.”

131 RENK Annual Report 2011 (35) Segment reporting

The RENK Group’s operations are segmented into the Vehicle Transmissions, Slide Bearings, Special Gear Units and Standard Gear Units divisions. The management of, as a corporate body accountable for, each segment reports directly to RENK AG’s Executive Board.

The parameter used to assess and control segment performance is operating profit, which as a rule equals EBIT; in exceptional cases EBIT is adjusted for nonrecurring items, these being defined as major gains or losses that do not originate in operating activities. Segment assets comprise all operating assets, i.e., the noncurrent and current assets excluding income tax assets and deferred tax assets.

The segment financial information has been determined in conformity with the disclosure and accounting methods applied to the consolidated financial statements, too. Intersegment transfer prices are based on product cost or cost of sales plus a reasonable markup, or on fair market transfer prices.

For details of the ROS formula, see the management report.

Segment information by operating division k€ Vehicle Transmissions) Slide Bearings Special Gear Units Standard Gear Units Consolidation Group 2011) 2010) 2011 2010 2011 2010) 2011 2010) 2011) 2010) 2011 2010) Order intake from third parties 83,865) 258,672) 103,819 80,326 134,561 113,848) 134,044 72,651) –) –) 456,289 525,497) Intersegment order intake (101) (325) 2,809 992 7,669 3,450) 2,723 1,895) (13,100) (6,012) – –) Total order intake 83,764) 258,347) 106,628 81,318 142,230 117,298) 136,767 74,546) (13,100) (6,012) 456,289 525,497) Sales to third parties 97,707) 113,051) 97,060 84,360 131,515 135,510) 62,540 69,845) –) –) 388,822 402,766) Intersegment transfers 1,900) 3,689) 1,824 2,332 931 224) 3,434 1,304) (8,089) (7,549) – –) Total segment sales 99,607) 116,740) 98,884 86,692 132,446 135,734) 65,974 71,149) (8,089) (7,549) 388,822 402,766) Order backlog at Dec. 31 255,560) 272,304) 37,519 29,605 163,377 154,464) 148,193 79,075) (18,191) (13,179) 586,458 522,269) EBIT 15,420) 21,039) 21,553 20,683 10,600 5,740) 5,576 5,355) (400) (1,028) 52,749 51,789) Net interest result 245) (53) 215 39 229 (3) 41 (110) –) –) 730 (127) Segment assets at Dec. 31 125,271) 120,325) 92,190 78,061 154,010 141,156) 91,142 71,603) 4,466) (7,048) 467,079 404,097) Segment debt at Dec. 31 76,342) 70,570) 18,901 13,561 88,170 70,780) 47,772 32,007) (1,523) (6,016) 229,662 180,902) Capex 2,765) 7,508) 3,219 1,421 8,846 9,650) 9,486 4,575) –) –) 24,316 23,154) Amortization/depreciation 2,879) 3,051) 1,849 1,729 5,500 5,441) 2,768 2,605) –) –) 12,996 12,826) ROS 15.5%) 18.0%) 21.8% 23.9% 8.0% 4.2%) 8.5% 7.5%) –) –) 13.6% 12.9%)

132 Segment information by region k€ Germany Other Europe Other world Consolidation Total 2011 Segment sales 146,338 116,235 126,249 – 388,822 Segment assets 433,726 39,657 26,118 (32,422) 467,079 Capex for tangibles/intangibles 23,721 500 95 – 24,316

2010 Segment sales 120,021 133,793 148,952 – 402,766 Segment assets 378,310 36,378 20,304 (30,895) 404,097 Capex for tangibles/intangibles 22,496 601 57 – 23,154

133 RENK Annual Report 2011 (36) List of RENK AG’s shareholdings as of December 31, 2011

Company’s name Share- Local currency Equity Net income and registered office holding unit in % (LCU) (1,000 LCU) (1,000 LCU) RENK France S.A.S., 100 EUR (€) 6,738 2,833 Saint-Ouen-l’Aumône, France RENK Corporation, 100 USD (US$) 6,932 1,552 Duncan, SC, USA (EUR 1 = USD 1.2939) RENK Test System GmbH, 100 EUR (€) 3,319 2,285 Augsburg, Germany RENK Labeco Test Systems 100 USD (US$) 773 119 Corporation, Mooresville, (EUR 1 = USD 1.2939) IN, USA RENK Transmisyon Sanayi A.S¸., 55 TRY (TL) 1,310 124 Istanbul, Turkey1) (EUR 1 = TRY 2.0694) RENK UAE LLC, Abu Dhabi, 49 AED (UAE D) 16,877 5,361 United Arab Emirates1) (EUR 1 = AED 4.90800) COFICAL RENK MANCAIS 98 BRL (Rs) 7,544 2,290 DO BRASIL LTDA, (EUR 1 = BRL 2.2177) Guaramirim, Brazil1) RENK-MAAG GmbH, 100 CHF (Sfr) 11,504 4,528 Winterthur, Switzerland (EUR 1 = CHF 1.2156) RENK (UK) Ltd., London, 100 n/a n/a n/a UK (inactive)

1) As of Dec. 31, 2010

(37) Notified stakes in RENK AG

For many years (between 2002 and March 16, 2010, indirectly through a wholly-owned subsidiary), MAN SE has held a 76-percent voting interest in RENK AG.

On November 14, 2011, Volkswagen AG notified RENK AG pursuant to Sec. 21(1) Clause 1 WpHG that on November 9, 2011, its voting interest crossed above the thresholds of 3, 5, 10, 15, 20, 25, 30, 50 and 75 percent to reach 78.86 percent (corresponding to 5,519,903 out of a total 7,000,000 voting shares) in RENK AG and that it has since held this stake.

According to Sec. 22(1) Clause 1 No. 1 WpHG, all of the aforesaid 5,519,903 votes are attributed to Volkswagen AG via Munich-based MAN SE. The reason for the difference between MAN SE’s 76-percent stake in RENK AG and Volkswagen AG’s voting interest is that the latter additionally includes the 199,903 treasury shares directly held by RENK AG, equivalent to a 2.86-percent voting interest.

Furthermore, Porsche Automobil Holding SE and its controlling stockholders notified RENK AG on November 14 and 15, 2011, respectively, that the 78.86-percent voting interest attributed to Volkswagen AG is equally attributed to Porsche Automobil Holding SE and its controlling stockholders.

134 Neither has RENK AG received any notification to such effect nor is it aware of any further direct or indirect shareholdings in its capital stock that have crossed above the voting-interest threshold of 10 percent (or any other threshold reportable according to WpHG).

(38) Related-party transactions Due to its 76-percent stake in RENK AG, MAN SE is parent of, and thus a company related to, RENK AG; therefore, MAN SE’s subsidiaries and its related companies are also companies related to RENK AG. In particular, this includes Volkswagen AG and Porsche Automobil Holding SE and their group companies, too.

Trade transactions and other business between RENK and related entities are based on terms as if at arm’s length.

The types of such legal trade transactions with MAN Group companies basically comprise:

• Products delivered to MAN companies, primarily marine and turbine gear units and bearings, plus the related services;

• Products and materials sourced from MAN companies, mainly upstream material for gear/transmission manufacture (such as castings);

• Other reciprocal transfers, such as debit and credit interest for or from MAN SE’s intercompany payment transaction system and cost refunds for sundry services.

The exchange of products/services with companies of the Volkswagen and Porsche groups covers specific projects for the supply of test rigs and related services. RENK sources services from such companies under vehicle leases.

The table below lists the extent of relations of RENK with the above related entities:

k€ 2011 2010 Outbound transfers (income) 28,708 21,222 Inbound transfers (expense) 4,802 4,301 Receivables (Dec. 31) 115,228 106,461 Payables (Dec. 31) 5,678 1,751

Further legal transactions with MAN SE involve guaranties for borrowings in favor of RENK companies (totaling k€2,062 as of December 31, 2011), as well as derivative currency hedges (totaling k€53,165 as of December 31, 2011). Receivables under the cash management system with MAN SE/MCC amounted to k€105,172 at year-end 2011.

135 RENK Annual Report 2011 RENK subsidiaries and investees not included in the consolidated financial statements are also companies related to RENK AG. Such intragroup trade transactions among related parties substantially cover the supply of parts and provision of services on terms as if at arm’s length, the extent of the transactions resulting from the table below

k€ 2011 2010 Outbound transfers (income) 5,126 5,224 Inbound transfers (expense) 260 407 Receivables (Dec. 31) 1,079 2,575 Payables (Dec. 31) 129 140

Trade receivables from, and trade payables to, nonconsolidated group companies are disclosed in Notes (17) and (24).

Unpaid items have neither been collateralized nor were they written down as of December 31, 2011.

Parties related to RENK also encompass individuals who may be influenced by, or are able to influence, RENK AG, such as the members of RENK AG’s and MAN SE’s Super- visory and Executive Boards.

For the compensation paid to senior management, etc. (reportable according to IAS 24), see Notes (32) and (33) above.

(39) Subsequent events

In December 2011, RENK AG executed a share deal to acquire all of the shares (100 percent) in Berlin-based ADMOS-Gleitlager Produktions- und Vertriebsgesellschaft mbH (“ADMOS”). The shares were transferred as of January 2, 2012, at a cash price of k€2,881.

ADMOS manufactures slide bearings from a variety of paired materials according to customer drawings. The acquiree, employing a workforce of a good 90 and generating sales of about €8.7 million in 2011 (including €4.6 million through business with RENK companies), has to date been RENK AG’s longstanding strategic supplier. For fiscal 2012, the new subsidiary is expected to report total sales of some €10 million.

When the consolidated financial statements 2011 were approved, the accounts for the business combination were still incomplete, and therefore no further details are published here.

136 Supervisory and Executive Board memberships in other statutory boards or equivalent

(40) Supervisory Board

Dipl.-Kfm. Frank H. Lutz Munich Supervisory Board Chairman

Executive Board member of MAN SE

Ferrostaal AG1) manroland AG1) MAN Truck & Bus AG2) MAN Diesel & Turbo SE2) MAN Pensionsfonds AG (chairm.)2) Munich Stock Exchange3) MAN Latin America Indústria e Comércio de Veículos Ltda., Brazil4) MAN Capital Corporation, USA (chairm.)4)

Dipl.-Oec. Hiltrud Werner Munich Supervisory Board member as from May 5, 2011 Supervisory Board Vice-Chairwoman as from May 26, 2011

Head of Corporate Internal Auditing of MAN SE

MAN Diesel & Turbo SE2)

Dipl.-Wirtsch.-Ing. Klaus Stahlmann Kempen Supervisory Board member and Vice-Chairman up to Feb. 22, 2011

Former Executive Board member of MAN SE Former Executive Board Spokesman of MAN Diesel & Turbo SE

manroland AG1)

Prof. Dipl.-Ing. (FH) Gerd Finkbeiner Neusäss CEO of manroland AG

manroland Vertrieb und Service Süddeutschland GmbH (chairm.)2) manroland Vertrieb und Service GmbH (chairm.)2) manroland Inc., USA (chairm.)4)

137 RENK Annual Report 2011 manroland Western Europe Group B.V., Netherlands (chairm.)4) manroland CEE AG, Austria (chairm.)4) manroland Japan Co. Ltd., Japan4) manroland Korea Ltd., Korea4)

Dr.-Ing. Hans-O. Jeske Wesel Executive Board member of MAN Diesel & Turbo SE

RW TÜV Essen1) MAN Diesel & Turbo Shanghai Co., Ltd., China (chairm.)4) MAN Diesel & Turbo China Production Co., Ltd., China (chairm.)4) MAN Diesel Shanghai Co., Ltd., China (chairm.)4) MAN Turbo India Pvt. Ltd., India (chairm.)4) MAN Diesel & Turbo India Ltd., India4) PT MAN Diesel & Turbo Indonesia, Indonesia4)

Klaus Ketterle*) Neusäss Technical clerk, RENK AG

Herbert Köhler*) Augsburg Senior Foreman, RENK AG

*) elected by the employees

As of Jan. 31, 2012, or resignation date (if earlier)

1) member of a German company’s supervisory board 2) member of a German group company’s supervisory board 3) member of a comparable foreign board 4) member of a foreign group company’s comparable board

138 (41) Executive Board

Dipl.-Ing. (FH) Florian Hofbauer Landsberg Spokesman

Ulrich Sauter Wertingen

Augsburg, January 31, 2012

RENK AG The Executive Board

Florian Hofbauer Ulrich Sauter

139 RENK Annual Report 2011 Consolidated financial statements/ group management report as of Dec. 31, 2011 Management representation

We represent that, to the best of our knowledge and in accordance with applicable accounting principles, the consolidated financial statements present a true and fair view of the RENK Group’s asset and capital structure, financial position and results of operations, as well as that the group management report describes fairly, in all material respects, the Group’s business trend and performance, the Group’s position, and the significant risks and rewards of the Group’s future development.

Augsburg, January 31, 2012

RENK AG

Florian Hofbauer Ulrich Sauter

140 Independent auditor’s report and opinion

We have audited the consolidated financial statements (consisting of balance sheet, income statement, statement of changes in comprehensive income, statement of changes in equity, cash flow statement, and notes) and the group management report, all as prepared by RENK AG for the fiscal year ended December 31, 2011. The prep- aration of the consolidated financial statements and group management report in accordance with the IFRS whose application is mandatory in the European Union, and the additional financial-accounting provisions of Art. 315a(1) HGB, as well as with the supplementary provisions of the articles of incorporation and bylaws is the responsibility of the Company’s Executive Board. Our responsibility is, based on our audit, to express an opinion on the consolidated financial statements and group management report.

We have conducted our annual group audit in accordance with Art. 317 HGB and with due regard to generally accepted standards on the audit of financial statements as established by IDW, the Institute of Sworn Public Accountants & Auditors in Germany. Said standards require that we plan and perform the audit to obtain reasonable assurance that any misstatement or fraud which has a material impact on the view of the asset and capital structure, financial position and results of operations as presented by the consolidated financial statements in accordance with applicable accounting principles and by the group management report is identified. When planning the audit procedures, knowledge and understanding of the Group’s business, its economic and legal environment as well as sources of potential errors are given due consideration. An audit includes examining, largely on a test basis, the accounting-related internal control system’s effectiveness and the evidence supporting the amounts and disclosures in the consolidated financial statements and group management report. An audit also includes assessing the financial statements of companies included in the consolidated financial statements, the definition of the consolidation group, the accounting and consolidation principles used, and significant estimates made, by the Company’s Executive Board, as well as evaluating the overall presentation of the consolidated financial statements and group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not resulted in any objections or exceptions.

It is our opinion that, based on our audit conclusions, the consolidated financial statements are in conformity with the IFRS whose application is mandatory in the EU, and with the additional financial-accounting provisions of Art. 315a(1) HGB, as well as with the supplementary provisions of the articles of incorporation and bylaws, and with due

141 RENK Annual Report 2011 regard to these standards, regulations and provisions, present a true and fair view of the Group’s asset and capital structure, financial position and results of operations. The group management report is in conformity with the consolidated financial statements and presents fairly, in all material respects, both the Group’s position and the risks and rewards inherent in its future development.

Munich, January 31, 2012

PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft

Petra Justenhoven Andreas Eigel Wirtschaftsprüferin Wirtschaftsprüfer

142 Six-year overview

€ million 2006 2007 2008 2009 2010 2011 Order intake 417 439 443 294 525 456 Germany 180 199 162 97 262 150 Abroad 237 240 281 197 263 306 Sales 356 430 527 474 403 389 Germany 130 165 211 173 120 146 Abroad 226 265 316 301 283 243 Order backlog at Dec. 31 672 684 612 415 522 586 Germany 254 287 233 153 282 284 Abroad 418 397 379 262 240 302 Employees at Dec. 31 Headcount incl. temporary employees 1,654 1,854 2,041 1,903 1,882 2,013 Temporary employees 79 126 135 35 68 69 Regular workforce 1,575 1,728 1,906 1,868 1,814 1,944 Annual average headcount 1,550 1,695 1,875 1,911 1,823 1,883

Capital expenditures and funding Tangible and intangible assets 17 15 29 20 23 24 Amortization/depreciation 8 8 11 11 13 13 Cash earnings 30 52 69 59 53 51 Cash flow from operating activities 24 61 68 62 81 40

Key indicators/ratios in %* ROS 10.5 15.7 15.1 13.9 12.9 13.6 ROCE 28.9 47.2 48.3 38.8 36.9 33.5 Equity ratio 25.6 34.7 39.8 48.9 51.7 48.6

RENK share data Earnings per share (EpS in €, acc. to IAS 33) 2.97 5.83 8.10 6.80 5.54 5.58 Dividend per share (€) 1.80 2.00 1.80 1.80 1.80 1.80 Price-earnings ratio (PER) 13.00 9.95 6.60 7.35 12.63 10.95

Balance sheet data Noncurrent assets 72 75 109 120 150 156 Inventories 139 150 154 121 110 145 Other current assets 95 105 114 99 74 89 Cash and cash equivalents 42 10 23 53 85 96 Equity 89 118 159 192 217 236 Pension accruals 72 5 5 11 14 23 Other noncurrent liabilities and accruals 17 12 15 28 35 26 Prepayments received 81 89 78 55 46 83 Other current liabilities and accruals 89 116 143 107 107 118 Total assets/total capital 348 340 400 393 419 486

Income statement data Net sales 356 430 527 474 403 389 Cost of sales (286) (325) (396) (355) (303) (286) Gross margin 70 105 131 119 100 103 Other operating expenses/income, net (32) (37) (51) (53) (48) (50) Operating profit (EBIT) 38 68 80 66 52 53 Net interest result (3) (1) 0 (1) 0 1) Earnings before taxes (EBT) 35 67 80 65 52 54 Income taxes (15) (27) (25) (19) (14) (16) Net income (EAT) 20 40 55 46 38 38

*) Based on k€

143 RENK Annual Report 2011

At a glance Products and services

• Operating profit of €53 million (up from €52 million) • ROS: 13.6 percent (up from 12.9) Vehicle transmissions • ROCE: 33.5 percent (down from 36.9) Fully automatic power-shift, reverse and steering transmissions with brake systems and final drives for medium and heavy tracked vehicles. • EpS: €5.58 (up from €5.54) • Proposed dividend: €1.80 (unchanged) • Cash flow from operating activities: €40 million (down from 81 million) Industrial gear units Gear units for the cement industry. Spur-wheel and planetary gear units for turbo- machines especially for the petrochemical industry and power generating plants. High- RENK Group speed gear units for the plastics industry. Gear units for wind turbines. € million 2011) 2010) Change in % Marine gear units Order intake 456) 525) –13 Gear units for merchant vessels, ferries, cruise liners and naval craft with diesel engine Sales 389) 403) –3 and/or turbine as well as electric propulsion, marine reversing gear units, reduction gear Order backlog1) 586) 522) +12 units and variable-speed gears for ship generators. Headcount1) 2,013) 1,882) +7 thereof temporary employees1) 69) 68) – Slide bearings Change Standard and special versions of horizontal and vertical slide bearings for electrical in € mill. machines, air blowers/fans, compressors, pumps, turbines, and general mechanical Operating profit 53) 52) +1 engineering. Slide bearings for transmissions. Marine shaft bearings and thrust bearings. EBT 54) 52) +2 EAT (net income) 38) 38) – Earnings per share (EpS) in € 5.58) 5.54) +0.04 Clutches and couplings Dividend per share in € 1.80) 1.80) –) Curved-tooth couplings for industry, marine and ocean technology, as well as for rail- Return on sales (ROS) in % 13.6) 12.9) –) bound vehicles; multidisk steel clutches for slow- and high-speed industrial duties, dia- Return on capital employed (ROCE) in % 33.5) 36.9) –) phragm couplings for high-speed machinery, safety couplings. Torsionally elastic couplings. Capital expenditures 24) 23) +1 Amortization and depreciation 13) 13) – Internally funded R&D expenditures 6) 4) +2 Testing systems Cash earnings 51) 53) –2 Testing rigs for development and quality assurance in the motor vehicle and aviation Cash flow from operating activities 40) 81) –41 industries as well as for railroad engineering. Cash flow from investing activities (24) (23) –1 Free cash flow 16) 58) –42 Net liquid assets 103) 99) +4 Equity1) 236) 217) +19

1) as of December 31, 2011 vs. 2010

RENK—an MAN SE Company AG

RENK AG

Gögginger Str. 73 86159 Augsburg, Germany Phone (+49-821) 5700-0

Fax (+49-821) 5700-573 Annual Report RENK www.renk.eu 2011 An MAN Group Company

Innovative Power Transmission

Annual Report 2011 RENK AG