Annual Report 2013 The BAUER Group is an international and machinery manufacturing concern based in , . The stock market-listed holding company BAUER Aktiengesellschaft is the parent of more than 110 subsidiary businesses across its Construction, Equipment and Resources segments. Bauer is a leader in the execution of complex excavation pits, foundation and vertical seals, as well as in the development and manufacture of related machinery for this dynamic market. The Group also deploys its expertise in the exploration, mining and safeguarding of valuable natural resources. In 2013 the companies of the BAUER Group employed some 10,300 people in around 70 countries and achieved total Group revenues of EUR 1.5 billion.

Passion for progress

The origins of Bauer date back as far as 1790, and still today the company's success is founded on highly flexible application of the specialist know-how it has built up over those many years. As an innovator and technology leader,

Bauer has played a major role in the advancement of the international specialist foundation engineering industry and related busniess fields. Indeed, today Bauer is also the world market leader in the manufacture of the relevant machinery. It is with just such innovative strength and a keen focus on the challenges of the future that the Group is also developing its recently established Resources segment. The Group at a glance

GROUP KEY FIGURES 2010 – 2013

IFRS in EUR million 2010 2011 2012 2013 Change (restated) 2012/2013

Total Group revenues 1,304.0 1,371.8 1,435.8 1,506.2 4.9 % of which 339.1 370.3 378.6 412.1 8.8 %

International 964.9 1,001.5 1,057.2 1,094.1 3.5 %

International in % 74.0 73.0 73.6 72.6 n/a of which Construction 615.4 606.6 655.2 742.7 13.4 %

Equipment 581.7 636.5 589.1 628.6 6.7 %

Resources 177.7 211.5 262.8 189.9 -27.8 %

Other/Consolidation -70.8 -82.8 -71.3 -55.0 n/a

Consolidated revenues 1,255.6 1,327.1 1,376.1 1,449.5 5.3 %

Sales revenues 1,131.7 1,219.6 1,344.4 1,404.2 4.4 %

Orders received 1,410.0 1,506.9 1,470.8 1,486.5 1.1 %

Orders in hand 614.9 750.0 785.0 765.2 -2.5 %

EBITDA 165.5 164.5 163.8 126.0 -23.1 %

EBITDA margin in % (of sales revenues) 14.6 13.5 12.2 9.0 n/a

EBIT 88.4 82.3 72.0 32.1 -55.4 %

EBIT margin in % (of sales revenues) 7.8 6.7 5.4 2.3 n/a

Net profit or loss 39.8 34.1 25.8 -19.4 n/a

Capital investment in property, plant and equipment 90.7 96.6 96.4 91.9 -4.7 %

Shareholders' equity 443.9 461.0 462.5 419.4 -9.3 %

Equity ratio in % 33.2 30.9 30.2 26.5 n/a

Net assets 1,337.7 1,491.1 1,529.4 1,585.2 3.6 %

Earnings per share 2.04 1.86 1.44 -0.99 n/a

Dividend payment 10.28 8.57 5.14 0.00* n/a

Dividend per share in EUR 0.60 0.50 0.30 0.00* n/a

Return on equity after tax in % 9.9 7.4 5.6 -4.6 n/a

Employees (on average over the year) 9,094 9,646 10,253 10,264 0.1 % of which Germany 4,036 4,065 4,090 4,144 1.3 %

International 5,058 5,581 6,163 6,120 -0.7 %

* Proposed; subject to the consent of the Annual General Meeting to be held on June 26, 2014

At variance with the consolidated revenues presented in the Group income statement, the total Group revenues presented here include portions of revenues from associated companies as well as revenues of non-consolidated subsidiaries and joint ventures. > > > DEVELOPMENT OF TOTAL GROUP REVENUES BY SEGMENT in EUR million Construction Equipment Resources

2010 1,304

2011 1,372

2012 1,436

2013 1,506

CONSTRUCTION SEGMENT KEY FIGURES

in EUR '000 2012 2013 Change

Total Group revenues 655,165 742,662 13.4 %

Sales revenues 579,069 659,063 13.8 % GROUP KEY FIGURES AT A GLANCE

Orders received 702,938 728,276 3.6 %

Orders in hand 513,087 498,701 -2.8 %

EBIT 22,025 22,816 3.6 %

Net profit or loss 8,586 5,472 -36.3 %

Employees (on average over the year) 5,454 5,531 1.4 %

EQUIPMENT SEGMENT KEY FIGURES

in EUR '000 2012 2013 Change

Total Group revenues 589,093 628,612 6.7 %

Sales revenues 520,576 561,615 7.9 %

Orders received 585,966 632,053 7.9 %

Orders in hand 113,084 116,525 3.0 %

EBIT 33,977 32,223 -5.2 %

Net profit or loss 8,897 5,055 -43.2 %

Employees (on average over the year) 2,952 2,998 1.6 %

RESOURCES SEGMENT KEY FIGURES

in EUR '000 2012 2013 Change

Total Group revenues 262,848 189,868 -27.8 %

Sales revenues 244,273 182,968 -25.1 %

Orders received 253,232 181,061 -28.5 %

Orders in hand 158,827 150,020 -5.5 %

EBIT 15,196 -23,576 n/a

Net profit or loss 5,664 -31,444 n/a

Employees (on average over the year) 1,578 1,449 -8.2 % BAUER Aktiengesellschaft 2013 Annual Report

2 Management Board of the Company 88 Report of the Supervisory Board

4 Foreword 91 Balance Sheet and Income Statement of BAUER Aktiengesellschaft in 6 Milestones in the Company's History accordance with HGB

8 The World is our Market 95 Consolidated Financial Statements in accordance with IFRS 10 Highlights of 2013

12 Mission and Strategy 176 Assurance by the Legal Representatives

15 Combined Management Report 177 Auditors´ Report

82 The Bauer Share 178 Glossary

84 Corporate Governance Report 180 Imprint 2

Management Board of the Company

PROF. DR.-ING. E.H. DIPL.-KFM. THOMAS BAUER (CHAIRMAN)

Professor Thomas Bauer (born 1955) heads the Participa- tions in Subsidiaries, Financial Reporting, Planning and Controlling functions on the Management Board of BAUER Aktiengesellschaft.

After studying business economics at the Ludwig Maximilian University in , he worked in the USA. He joined the family company in 1982. In 1986 he became sole managing director of BAUER Spezialtiefbau GmbH and since 1994 he has been Chairman of the Management Board of BAUER Aktiengesellschaft.

Prof. Thomas Bauer is President of the German Construction Industry Confederation, Vice-President of the Confederation of German Industry (BDI) and Vice-President of the Confeder- ation of Bavarian Industry (vbw). He is an honorary professor of the Technical University in Munich. Heinz Kaltenecker

Supervisory Board mandates: • BAUER Spezialtiefbau GmbH, Schrobenhausen DIPL.-BETRIEBSWIRT (FH) HARTMUT BEUTLER (Chairman) ¹ • BAUER Maschinen GmbH, Schrobenhausen Hartmut Beutler (born 1957) is responsible for the Finance, (Chairman) ¹ Legal Affairs and Insurance, and Facility Management • BAUER Resources GmbH, Schrobenhausen ¹ functions on the Management Board of BAUER Aktien- • SCHACHTBAU NORDHAUSEN GmbH, Nordhausen gesellschaft. (Chairman) ¹ • BAUER EGYPT S.A.E., Cairo (Chairman) ¹ He studied business economics (specializing in the construc- tion industry) at Biberach University of Applied Sciences and joined BAUER Spezialtiefbau GmbH as a trainee in 1983. He later became deputy head of the company's Accounting department and assistant to the Management Board. After working as head of IT, Facility Management, Legal Affairs and Insurance at BAUER Spezialtiefbau GmbH, as well as being a company "Prokurist" (holder of power of attorney), Hartmut Beutler was appointed to the Management Board of BAUER Aktiengesellschaft in 2001.

Supervisory Board mandates: • BAUER Resources GmbH, Schrobenhausen ¹ • Schrobenhausener Bank e.G. (Chairman) ² VORSTAND DER GESELLSCHAFT 3

Thomas Bauer Hartmut Beutler

DIPL.-ING. HEINZ KALTENECKER Supervisory Board mandates: • BAUER Spezialtiefbau GmbH, Schrobenhausen ¹ Heinz Kaltenecker (born 1951) is responsible for Participa- • BAUER Maschinen GmbH, Schrobenhausen ¹ tions in Subsidiaries as well as the Human Resources and • BAUER Resources GmbH, Schrobenhausen Information Technology functions on the Management (Chairman) ¹ Board of BAUER Aktiengesellschaft. He is also the Labour • SCHACHTBAU NORDHAUSEN GmbH, Nordhausen ¹ Relations Director.

After studying civil engineering at the Technical University of Karlsruhe, he joined BAUER Spezialtiefbau GmbH in 1978. He has held a number of senior management posts, including being managing director of BAUER Spezialtiefbau GmbH from 2001 to 2007. Heinz Kaltenecker was managing director of BAUER Resources GmbH from 2007 to 2010. He has been a member of the Management Board of BAUER Aktiengesellschaft since 1997. Heinz Kaltenecker is a board member of the German Geotechnical Society and a member of the Large Construction Companies subcommittee of the German Construction Industry Confederation.

¹ Internal Supervisory Board membership

² Members of Supervisory Boards or comparable supervisory bodies of business entities in Germany and abroad, in accordance with Section 285 No. 10 of the German Commercial Code (HGB) 4

Foreword

Dear Shareholders, Partners and Friends, Ladies and Gentlemen,

The 2013 financial year was a very disappointing one for the BAUER Group. Although we achieved our planned revenue of EUR 1.51 billion, we recorded a substantial loss. We are just as disappointed about that as our shareholders. Over the com- ing years we will be making every effort to turn the situation around.

A well construction project in Jordan saw a risk occur which resulted in a major loss. The causes of the loss were not of a structural nature. On our large-scale construction projects we have to make assumptions regarding the ground conditions which do not always match the reality when actually carrying out the work. This can have significant consequences – both positive and negative.

We carry out a risk assessment in respect of our business on a yearly basis. This analyzes both risks and opportunities, weighted according to the probability of their occurrence, and evaluates potential effects. A mathematical method is applied to calculate a probability curve in relation to the expected result. Based on that analysis, the 2013 result was just as likely as, for example, the extraordinarily good result achieved in 2008. We make great efforts to avoid risk, but that is not always pos- sible given the nature of our business.

Nor are risks in specific countries entirely avoidable, given the international scale of our operations. That international scale is one of the key strengths of our business. Although it entails risks, it much more importantly delivers opportunities. It is only through our international operations that we are able to largely compensate for varying economic cycles in individual coun- tries. It is common for economic trends to vary widely in many countries around the world. We are able to follow the positive trends and so mostly – as in the year under review too – achieve growth. Periods when many countries are suffering econom- ic problems at the same time – such as in the wake of the recent financial crisis – are rare.

When risks occur as in the year under review, it does not mean that the ability of the business as a whole to generate reason- able profits is diminished. Because the structure of the business has not changed. So we are convinced that the Group's performance in 2014 will recover to follow the trend seen in 2012. We expect to see a rise in revenues and earnings which will restore us to good progress.

Alongside the prudent management of risk, there are many other issues on which we are focused so as to shape the future of our business in a positive way.

One of the key aspects is the fundamental change in trends on global markets. The emergence of major economies such as China is substantially altering international market structures. China has an enormous domestic market, and its low production cost base gives it major advantages in meeting demand for high-volume products on markets around the world. Moreover, domestic manufacturers have big advantages over international competitors.

This situation has already resulted in Chinese companies attaining dominance in a number of sectors, such as toys and cloth- ing. On the construction machinery market, too, the Chinese are in a position to gain an advantage in the high-volume sector. On the other hand, the emergence of new powerful economies onto global markets has entailed a substantial growth in FOREWORD 5

international trade overall. German companies are now relatively minor global players; they no longer have to generate interna- tional market shares of around 30 percent for example, but instead are able to achieve healthy utilization of production capaci- ties with a share of around 10 percent. As a consequence, German manufacturers are able to focus increasingly on specialist areas. This has already proved very fruitful in the automotive sector.

The BAUER Group is fully aware of these trends, and we are making great efforts to focus our products increasingly on project-specific equipment and larger machinery, in order to fulfil that new role on the market. This applies not only to our machinery but also to our wide-ranging construction services. It is a major success that we have been able to increase our revenues in these circumstances.

It is only possible to succeed in running an international business such as ours in today's world if the infrastructure and or- ganization of the business are set up in the right way. We have been working hard to achieve that in recent years, and we are convinced that we are now outstandingly well prepared to meet the challenges of the future. Our communication structures are state of the art. All our major Group locations are equipped with videoconferencing systems, thereby greatly reducing travel costs. The IT infrastructure is based on an international data network integrating almost all Group companies operat- ing identical software systems. This means, for example, that our customer support staff, wherever they may be, are able to access the various parts stores around the world at any time in order to provide our customers with optimum service backup. We have also established a worldwide network of service centres, providing maintenance and support for equipment, which can be used in our machinery sales operations and our construction services business. Our worldwide machinery manufac- turing facilities – specifically in Germany, Italy, Russia, the USA, China and Malaysia – enable us to adapt our production in line with global exchange rate shifts and tailor individual machines to local market and customer needs.

With a look at the markets for our products and services, we can confidently predict that construction markets will continue to grow over the coming decades. Europe, North America and Japan have all invested far too little in construction – both new building and maintenance – in recent decades. And the emerging economies have a great need to upgrade their infrastructures and building stock in line with the developed world. So there will be sustained demand for our services in the years ahead. The skill in meeting that demand will be to position ourselves correctly on the market and to exploit opportunities as they arise.

After the disappointment of 2013, we are facing up to the challenges of the future with vigour. We have implemented a cost-cutting programme to "slim down" every part of our business, making us even more fit for the future. Unfortunately, the loss made has also entailed some additional expenditure, which we have had to absorb in terms of our financing. All in all, however, we are very confident that our business will achieve healthy growth. We will increase our revenues and return to a reasonable level of profit. All BAUER Group employees are making very great efforts to fully meet the expectations of our shareholders and partners again in future.

Sincerely,

Prof. Thomas Bauer 6

Milestones in the Company's History

1790 1956 - Sebastian Bauer acquires a coppersmith's shop in the - Dr.-Ing. Karlheinz Bauer, a shareholder in the company centre of Schrobenhausen; in the 19th century, subsequent since 1952, becomes sole managing director; Construction Bauer generations were engaged in copper working, pri- of a first office building in Wittelsbacherstrasse marily for breweries and domestic households

Dipl.-Ing. Karl Bauer (left) turned the company into an industrial well builder known throughout Bavaria. Dr.-Ing. Karlheinz Bauer (centre) led the company onto 1840 the international stage, taking it into the field of special- - Copper cladding for the steeple roof of St. Jakob's church ist foundation engineering and launching equipment in Schrobenhausen manufacturing operations. Prof. Dr. Dipl.-Kfm. Thomas Bauer shaped the current global Group, with a network 1900 of operations on every continent. - Start of well drilling by Andreas Bauer

1790 – 1948 1956 – 1984

1902 1958 - Drilling of an artesian well for the Schrobenhausen rail- - Invention of the injection anchor on the construction site way station of the Bayrischer Rundfunk building in Munich

1969 - First anchor drilling rig UBW 01

1972 - Construction of the new head office administration block

1975 - First contracts in Libya, and the 1928 - Dipl.-Ing. Karl Bauer constructs the Schrobenhausen 1976 water supply system; construction of wells and water - First heavy-duty rotary drilling rig BG 7 pipes throughout Bavaria 1984 1948 - Work complex West begins operations; Manufacture - First works on Wittelsbacherstrasse and deployment of the first trench cutter MILESTONES IN THE COMPANY'S HISTORY 7

1986 2007 - Prof. Thomas Bauer becomes sole managing director of - Founding of BAUER Resources GmbH, entailing a BAUER Spezialtiefbau GmbH and drives forward the restructuring of the mining and environmental business; international growth of the Group market launch of the three new segments: Construction, Equipment and Resources 1990 - Founding of BAUER und MOURIK Umwelttechnik GmbH 2008 and of SPESA Spezialtiefbau und Sanierung GmbH - Expansion of machinery manufacturing capacities in Aresing and Nordhausen as well as in Tianjin and 1992 , China - Takeover of SCHACHTBAU NORDHAUSEN GmbH 2009 - The BAUER Group concludes the largest capital invest- ment programme in its history: new head office adminis- tration building in Schrobenhausen, the Edelhausen plant, the machinery manufacturing plant in Conroe, Texas, USA

2011 - The first deep drilling rig is sold to South America; con- struction of an underwater drilling rig and successful de- ployment of it for a tidal turbine off the coast of Scotland

1986 – 2006 2007 – 2013

1994 2012 - Founding of BAUER Aktiengesellschaft - During the year, the Group's global workforce topped the 10,000 mark for the first time 1998 - Takeover of KLEMM Bohrtechnik GmbH 2013 - Bauma Innovation Prize for an underwater drilling technique; 2001 foundation works on the future tallest buildings in the world - BAUER Maschinen GmbH becomes independent company and in Europe respectively

2002 - Purchase of large machinery manufacturing facility in Aresing

2003-2005 - Specialist companies in a variety of fields are acquired and integrated into the BAUER Group: FWS Filter- und Wasser- technik GmbH; PRAKLA Bohrtechnik GmbH; TracMec Srl, Imola, Italy; Pileco, Inc., Houston, Texas, USA

2006 - BAUER AG is listed on the stock market 8

The World is our Market

OVER 110 IN MORE THAN 70 GROUP COMPANIES COUNTRIES

EUR 1.5 BILLION TOTAL GROUP REVENUES

10,264 EMPLOYEES FROM 81 NATIONS THE WORLD IS OUR MARKET 9

31 PRODUCTION FACILITIES and many more service centres and construction yards

Construction

Equipment sales

Resources

Equipment production locations 10

Highlights of 2013

Big construction sites in Germany and up to 17 metres deep. The 10,000 Techniques category. The award was in Germany – Between January and m2 of diaphragm walling work began recognition of a project in which Bauer December 2013, BAUER Spezialtiefbau in late May and was completed at the Maschinen developed an entirely new GmbH worked on three large-scale end of September. underwater drilling rig within just a few projects in Germany. The biggest is months. Engineers from Bauer Spezial- the "Schwabinger Tor" project. On the tiefbau then put the corresponding eastern side of Munich's Leopold- techniques into practice. strasse, a complex including a hotel, theatre, shops, doctors' practices The outcome of the fair was positive and apartments is under construc- all in all. Bauer attracted a great deal tion. Residents and users of such a of attention especially with its RB-T complex also need parking. Bauer is 90 deep drilling rig, designed for mine executing the 10.5 metre deep excava- rescue, and with the new flagship of tion pit for the complex's underground the BG range, the BG 46, which is car park covering an area of 35,000 m2 In the heart of Mannheim is the city's able to drill down to a depth of 102 in several phases. The demolition and biggest construction site: a new urban metres with a 2.2 metre diameter. The foundation engineering works began in quarter complete with a four-star hotel, stand welcomed and served as many December 2012 and are scheduled for wellness facilities, shops, offices, medi- as 10,000 visitors a day. A fleet of 10 completion in July 2014. cal services, apartments and a capa- heavy-duty transporters and 60 trucks cious underground parking garage is was deployed to transport the rigs and The second large-scale project carried being constructed in city quadrants Q6 stand materials from Schrobenhausen out by BAUER Spezialtiefbau GmbH in and Q7, with completion scheduled for to Munich. Germany was the Zerben lock on the 2016. BAUER Spezialtiefbau GmbH Elbe-Havel canal located between the was contracted to provide the enclo- cities of Magdeburg and Brandenburg. sure wall for a 15 metre deep excava- A new larger lock basin, designed to tion pit as well as to install foundation handle Euro-size trains of barges, was piles and groundwater control over an constructed parallel to the existing lock. area of 16,000 m2. The demolition and foundation engineering works began in October 2012 and were completed in December 2013.

Bauma 2013 Projects for the automotive industry Munich, Germany – From April 11 to Wolfsburg/Ingolstadt, Germany – In 17, BAUER Maschinen GmbH exhib- 2013 BAUER Water GmbH completed ited for the ninth time at the Bauma projects for two German car-makers. trade fair. At the very beginning of the At the VW site in Wolfsburg, it con- event, BAUER Maschinen GmbH and structed a new water treatment plant For the new lock Bauer constructed a BAUER Spezialtiefbau GmbH were to handle contaminated waste water 265 metre long pit which is 22.5 me- jointly awarded the Bauma Innovation from the press shop, car body shop, tres wide in its narrow centre section Prize in the Construction Engineering production, paint shop and final as- HIGHLIGHTS OF 2013 11

sembly departments. The plant is part were deployed to mount the structure of VW's wider programme to reduce on the 264 piles. The foundation works the environmental impact of its facto- began in January and ended in July. ries. The waste water is pre-treated The Lakhta Tower is scheduled to and pollutants selectively removed ac- open in 2018. cording to the constituent substances occurring. Then, in a downstream pro- Under construction on an extensive cess stage, it is cleaned in an in-house site in the north of Jeddah, Saudi treatment plant. The project at the VW Arabia, the Kingdom Tower will surpass facility was completed in April 2013. all existing records to become the After a construction period of one world's tallest building at above 1,000 and a half years, in October BAUER metres. In executing the foundations Tianjin Technologies Co. Ltd. was able for the structure, by December 2013 to mark the opening of its new facility Bauer had installed a total of 270 piles with a traditional Chinese ceremony. in 1.5 and 1.8 metres diameter down Highlights included the handover of to a depth of 109 metres. In addition to a BG 26 rig to its customer and the two BG 28 rigs, for the long piles two announcement that the BG 25 had BG 40 drilling rigs modified specially been recognized as one of the 10 best for long kellys were also deployed. drilling rigs in all China. The subse- In August 2013 a new washing and quent in-house exhibition featured the leak-testing plant was installed at the BG Value Line and an RB-T 90 among Audi factory in Ingolstadt – the second other products. such facility following the installation of the first back in December 2012. The Foundations for the tallest buildings two plants now leak-test, wash and dry St. Petersburg, Russia/Jeddah, a total of more than 600 vehicles a day. Saudi Arabia – In October 2012, Russian BAUER Spezialtiefbau GmbH New plants subsidiary OOO BAUER Technologie Singapore/Tianjin, China – In March was contracted to carry out the foun- Following on from the , for 2013 the new BAUER Regional Service dation works for the Lakhta Tower in which Bauer executed the foundations Center in Singapore was opened. With St. Petersburg. On completion, the back in 2004, the new tallest building office facilities, warehousing and a building, planned as the new head- in the world will once again be resting workshop, it provides our customers quarters of Gazprom, will be the tallest on Bauer piles. with optimal service backup and is of in Europe, reaching a total height of key importance to our selling activities 462 metres. The works involved drilling in South East Asia. The relocation be- down to a depth of 82 metres in the came necessary owing to the expira- face of highly challenging geological tion of a lease agreement – as was the conditions and winter temperatures More information: case also with regard to the plant in down to -30°C. Three state-of-the-art http://www.bauer.de/ Tianjin, China. BAUER BG 40 drilling rigs and a BG 28 en/bauer_group/world 12

Mission and Strategy

OUR MISSION

>>> SERVICES, EQUIPMENT AND PRODUCTS DEALING WITH GROUND AND GROUNDWATER

>>> Target: ~ 40 percent of total Group revenues >>> Market leader in specialist foundation engineering machinery and equipment >>> New products for mining, deep drilling and offshore drilling >>> 80 percent of sales generated outside of Germany >>> Multi-branding strategy MISSION AND STRATEGY 13

OUR STRATEGY

>>> The world is our market. >>> Optimization of worldwide organizational structures >>> World market leadership in specialist foundation and of the Group's self-managed business units. technologies. >>> Annual growth from 3 to 8 percent. >>> Powerful development of drilling techniques and applications for related markets such as resources, water and energy.

>>> Target: ~ 20 percent of total Group revenues >>> Activities in environmental technology, mining, deep drilling, well construction, materials

>>> Target: ~ 40 percent of total Group revenues >>> Global provider of specialist foundation engineering services >>> Specialist construction services >>> Focus on complex international projects

15

Combined Management Report

17 I. The Group 17 Group Structure 17 Corporate Governance and Control system

1 9 II. Business Report 19 Macro-Economic Trend 23 Course of Business

29 III. Trend by Segment 29 Construction Segment 33 Equipment Segment 37 Resources Segment 40 Other/Consolidation Segments

45 IV. Earnings, Financial and Net Asset Position 45 Trend in Orders 46 Group Earnings Position 48 Group Financial and Net Asset Position

53 V. Financial Statements of BAUER Aktiengesellschaft

55 VI. Sustainability 55 Sustainability within the BAUER Group 55 Employees 57 Capital Investments 58 Research and Development 59 Health Safety Environment (HSE) 60 Quality

61 VII. Legal Disclosures 61 Remuneration Report 63 Statutory Disclosures Regarding Takeovers

65 VIII. Follow-up Report

67 IX. Risk and Opportunity Report 67 Risk Report 74 Opportunity Report

77 X. Outlook

> > > In the canton of Ticino, Switzerland, BAUER Spezialtiefbau GmbH deployed a BG 28 rig to install foundation piles for bridge pillars on the Camorino viaduct between Lugano and Bellinzona. For the third and final construction phase, piles with 1,200 mm diameter and lengths between 19 and 29 m were executed.

17

Combined Management Report

I. THE GROUP

GROUP STRUCTURE resources, accounting, finance, legal and tax affairs, IT, The products and services of the BAUER Group, based in fa cility management, and health, safety and environment the Bavarian town of Schrobenhausen, are focused on the (HSE). ground and groundwater fields. The Group's three seg- ments – Construction, Equipment and Resources – operate CORPORATE GOVERNANCE AND CONTROL SYSTEM more than 110 subsidiary companies in some 70 countries The principal task of the Management Board of BAUER AG worldwide. is the strategic management of a global group of companies. Beneath that level, the main companies in the three oper- The Construction segment carries out all the established ating segments – Construction, Equipment and Resources methods and techniques of specialist foundation engineering – develop their own detailed strategies which are converged all over the world. This includes executing complex excava- at holding company level and integrated into the strategic tion pits, foundations for large-scale infrastructure projects corporate planning process. and buildings, cut-off walls and ground improvement. It also carries out other specialist construction activities, including The development and implementation of a self-managing civil engineering and remediation works. organizational structure with decentralized business units unburdened by complex decision-making hierarchies is the The Equipment segment develops and produces construc- primary characteristic of corporate governance within the tion machinery, equipment and tools for the specialist foun- BAUER Group. The managers of those Group companies dation engineering sector as well as for other underground operate under their own responsibility, and are provided with drilling operations, such as for mines, water wells, geother- a large degree of independence within the framework of the mal energy sources, and oil and gas extraction. In addition corporate strategy in determining how their business units to its headquarters in Schrobenhausen, the Equipment progress. segment operates a global distribution network, as well as additional production facilities in Germany, China (Shanghai The autonomous management of the individual operating and Tianjin), Malaysia, Russia (at two locations), Italy and business units is constrained by framework guidelines and the USA, among other locations. With exports accounting standards laid down in the Group and subsidiary Corporate for around 80 percent of its total sales, BAUER Maschinen Management Manuals. The principles of proper conduct, GmbH is the world market leader in specialist foundation including adherence to our ethical and moral standards, are engineering equipment. defined by an ethics management and values programme covering all the companies of the BAUER Group, backed by The Resources segment focuses on products and services corporate management guidelines and a code of conduct in the fields of water, energy, mineral resources and environ- imposed on our employees, among other measures. mental technology. BAUER Resources GmbH is the holding company of this most recently created segment, overseeing Systems and departments handling central functions assist its three competence areas: Materials, Exploration and Mining in implementing standard processes and support the work Services, and Environment. of the operating units by providing the necessary backup services. The self-managing structure is linked to a cen- BAUER Aktiengesellschaft is the holding company of the tralized system of risk management and control, and to a Group, and is listed on the Frankfurt Stock Exchange. central Group accounting function. Internal auditing systems BAUER AG provides central management and service monitor compliance with laws and standards across the functions for its affiliates. These specifically include human Group.

> > > BAUER Spezialtiefbau GmbH had been working on the large-scale Luise-Kiesselbach-Platz site in Munich since autumn 2009. The works were completed in 2013. Over 10,000 piles were driven for the tunnelling works, including by the use of a BG 40. 18 COMBINED MANAGEMENT REPORT The Group

Statements regarding the role of the Management Board and A wide range of other financial performance indicators of Supervisory Board and in relation to other issues of corpo- comparatively minor significance to the medium- and long- rate governance are set out in the Declaration on Corporate term development of the Group are collated and integrated Governance on pages 84 to 87 of this Annual Report, which within the scope of internal Group management activities. is published on the Internet at http://www.bauer.de/en/inves- They primarily include key performance indicators from the tor_relations/reports/in the Investor Relations section under balance sheet and the income statement, as well as those Reports & Accounts. relating to capital structure, profitability and liquidity.

Financial performance indicators Non-financial performance indicators The trend in total Group revenues is used as the fundamen- As part of a comprehensive reporting system, many non- tal and significant key financial performance indicator for financial indicators are measured in assessing the perfor- the management of the Group. The total Group revenues mance of the Group which, in isolation in terms of internal represent the revenues of all the companies forming part controls and beyond that scope, have no material significance. of our Group. The difference between the consolidated The reporting on trends in those performance indicators in revenues and the total Group revenues is derived from the the "Sustainability" section is primarily intended to convey an revenues of the associated companies, from our subcon- overall picture of the operations of the BAUER Group. tractor shares in joint ventures, and from the revenues of non-consolidated companies. The trend in total Group reve- The indicators included originate, among other sources, nues and the contributions to them by the various segments from the Human Resources area, such as workforce num- are depicted in the Business Report and in the "Trend by bers broken down by segment, employment terms and Segment" section. region. They also include performance indicators relating to training activities, such as budget committed, the number of Alongside total Group revenues, earnings before interest and employees attending the seminars on offer, and the number taxes (EBIT) and the net profit or loss for the period are used of seminars and conferences held. Reporting also covers as key financial performance indicators for internal manage- performance indicators from the Research and Development ment. The Business Report and the "Trend by Segment" area. They include the number of registered patents, expend- section detail the trends in EBIT and net profit or loss for the iture on research and development, and the number of staff period and trends in the various segments. employed in those areas. COMBINED MANAGEMENT REPORT 19 Business Report

II. BUSINESS REPORT

MACRO-ECONOMIC TREND returned some time ago. The countries in question are Global economic trends remain marked by significant concerned primarily with domestic political issues, so the turbulence. Many events – and the effects of them – over future of their infrastructure and building stock has been the last two decades have resulted in sequences of reaction pushed into the background. and counter-reaction in a wide variety of different areas, making the system as a whole subject to continual change • A number of technical advances in recent decades have like the cross-seas in an ocean. The following events are had an enormous influence on the global economy. The the most noteworthy in relation to trends on construction considerably faster and cheaper logistics systems have markets: eliminated most regional advantages previously enjoyed by companies and provided a powerful boost to global • The end of the communist and socialist economic systems competition. The effects of information and communica- some 20 years ago enabled countries such as China and tions technologies are at least as significant. The rise of India to grow their economies very rapidly, as has been the Internet in particular, making any required information seen in recent years. The biggest opportunities arising immediately available, has permanently altered the com- from this trend for established businesses are to be found petitive situation. This trend will continue in the future. in the sustained rapid growth of sales markets in the countries concerned. The German automotive industry, These and other factors are making world markets more and many engineering sectors, are profiting greatly from volatile than ever before. Such markets offer major opportu- this trend. It is countered by a number of risks, as many nities, but also pose risks. Market players capable of always industries have seen heavy competitive pressures develop following the upward trends will profit. Those who are not, which, in view of the widely divergent cost base, are having and who are more frequently confronted by downturns, will some ruinous effects. As is often the case in relatively new suffer. market economies, market players tend to over-react to the new competitive environment, sometimes making it Under such circumstances, it may be better for construction difficult for competitors from established markets to adjust companies to operate on only a small number of markets to that situation. This behaviour also makes economic as and when they are on an upswing. But if those markets events more cyclic. decline again, such a strategy can very quickly lead to major problems. A business such as the BAUER Group, however, • The impact on markets of the financial crisis which began which operates on a very large number of markets, must some six years ago remains heavy. It has, for a few years, expect to face a multitude of problems in volatile times. been exacerbated by the euro crisis, driven by budget Nevertheless, a global presence does mean that there will problems in a number of member states of the euro zone. always be rising markets available. We regard our strategy In the construction sector especially, the financial con- as the biggest advantage in terms of our ongoing develop- straints are causing considerable volatility on world mar- ment in that respect. As well as confronting country-specific kets. Some construction markets in Europe have almost problems, this also means that strategic options regularly entirely collapsed. open up, providing us with the opportunity to grow.

• The revolutions, government crises and civil wars in the Looking at global construction markets within this context, Middle East have had further significant impact on mar- the basic trend is positive. There is a huge pent-up demand kets, including the construction sector especially. The for construction all around the world. For decades, much too oil- and gas-rich countries in the region have the financial little has been built in the established economies of Western resources to sustain their ambitious development plans, Europe, the USA, Canada and Japan, for example. After the but in view of the many crisis hotspots they do not have period of reconstruction following the Second World War, the courage to implement them with any impetus. In the governments and the public at large took the view – some countries which experienced the "Arab Spring", winter time around the mid-1970s – that everything which needed 20 COMBINED MANAGEMENT REPORT Business Report

to be built had been built. So budgets were cut back much economic situation in the construction industry will be sus- too severely as a result. Now a sustained period of updating tained for a number of years to come. is required to upgrade infrastructure to a reasonable level once again. Against the background of that economic situation in the construction sector, we are convinced that the BAUER Far too little was invested in developing countries over a Group will again be able to achieve increasing orders so as period of many decades prior to the creation of market econ- to sustain healthy growth in the years ahead. omies. The catch-up process urgently needed to help them develop further will keep construction companies busy for Sales of construction machinery are linked directly to the many years. So in the years ahead construction markets will situation on construction markets, so healthy selling oppor- tend to be on the brighter side of global economic trends. tunities are also to be expected in that sector over the years ahead. Deep drilling markets will also grow, as future oil and The only inhibiting factor is the ability of countries to afford gas exploration drilling will need to be carried out at ever the building works. Pleasingly, however, there are many shorter intervals, so entailing a rise in drilling capacity. In the countries which have created a sound foundation to provide offshore sector, drilling rigs will increasingly be needed to adequate budgets based on their positive growth over recent install foundations for energy-generating installations. years. In the housing and commercial construction sector, prospects for procuring finance are likewise mostly good In parallel with the general trends, future trends on construc- thanks to healthy economic trends. tion markets in the various regions around the world will vary in some cases: Additionally, the trend towards urbanization will be sustained in many countries over the coming decades. This will require Germany extensive investment in transport infrastructure. All the build- The German construction market will see relatively positive ings will have to be constructed in the tightest of spaces, growth over the coming years. The healthy general economic entailing an even greater demand for specialist foundation climate and the new federal government's policy of promot- engineering services. ing infrastructure works offers bright prospects for construc- tion companies. Construction market statistics for Germany – Change 2013 against 2012 The widely anticipated positive effects of the reversal of energy policy in Germany have not been realized to date. in % Germany West East Only the onshore wind power sector is generating healthy overall Germany Germany orders. The necessary north-to-south power transfer lines Sales 2.7 3.1 1.2 are not currently being implemented, and the development Hours worked 0.9 1.5 -1.5 of offshore wind power has largely come to a standstill. Even Employees 1.4 2.0 -0.4 the urgently required growth in conventional power station Orders received 3.7 4.8 -0.4 capacity is not yet happening due to a lack of clear policy Source: Central Association of the German Construction Industry framing. Those statements do contain a positive aspect: once the works start, they will have to be completed rapidly. Economic trends in Germany, especially in the construction sector, are somewhat better than in the other EU member- Europe states. The newly elected federal government has decided Markets in Eastern Europe largely collapsed as a result of to promote infrastructure projects. The boom in the private the financial crisis. There have recently been signs of a slight construction sector continues, as people look to invest in upturn, though at a very low level. There are large numbers bricks and mortar as the best home for their money given of new construction projects currently in planning in Russia low interest rates and concerns about inflation. The healthy especially, as the country utilizes its enormous raw material COMBINED MANAGEMENT REPORT 21 Business Report

wealth to drive recovery more rapidly than in other countries collapse by providing large-scale financial assistance. Those in the region. The construction market in some regions, such efforts are seeing numerous construction projects emerge as around St. Petersburg, is very active. The forecast for onto the market once again. Our local business will be able Eastern Europe overall is a generally positive trend. Unfortu- to profit from them. Sales increased substantially last year, nately, however, setbacks are always likely to occur, as the and prospects for 2014 give cause to expect further growth example of Ukraine demonstrates. in revenues and earnings.

We predict that growth on construction markets in Western Asia-Pacific, Far East & Australia Europe will be modest over the coming years. Many coun- Construction markets in the Far East remain pleasingly tries have had to impose strict budget constraints which will stable. Almost every country in the region is undertaking hamper the further development of their infrastructure. There major infrastructure projects. In Hong Kong, construction are nevertheless a number of opportunities for us around the sector capacities are being well utilized by extensive rail and region, including in Switzerland. In France, a new metro ring road construction works. The same is true in Singapore and planned for Paris will entail major construction work. Other Malaysia. For example, new underground railway lines and cities are also planning to upgrade their infrastructure. urban motorways are being constructed in Singapore. The port – one of the most important and biggest in the world – Middle East & Central Asia is being relocated further away from the city centre. Econo- The oil-rich and gas-rich countries of the Middle East, such mies such as Indonesia and the Philippines are also seeing as Abu Dhabi, Saudi Arabia and Qatar, have lots of large- healthy growth. By contrast, the Australian economy is no scale construction projects in the pipeline, and have suffi- longer developing quite so positively. Trends on construction cient financial resources to sustain their development plans markets are somewhat slower. strongly. In Qatar, major contracts were awarded in the first half of 2013 for underground railway construction works as America well as for many other construction projects in preparation The situation in the USA now appears to be improving after for the football World Cup. Unfortunately, events in Syria and a number of weak years. A very high level of backlog de- the renewed discussions concerning the World Cup have mand has arisen in many infrastructure areas, due to a lack again led to a slowdown. The confirmation by FIFA that the of adequate investment over recent decades. Major efforts World Cup will indeed be hosted by Qatar, and the fact that will be made over the coming years to make good this deficit, the conflict in Syria has not spread, have recently offered and a positive side effect of this commitment will be a further brighter prospects for growth. These developments will boost to the economy. Overall, we regard the situation as entail good opportunities once again for our businesses. stable, and offering good opportunities for further growth in both our Construction and Equipment segments. The In view of the turbulence on Arab markets, the positive trend construction market in Canada is likewise sound. Interesting in is the most surprising development. Few people projects are regularly arising in Central America. would have thought even two years ago that the market could recover as it has. Property developers have now Africa started marketing major housing projects again, and they In Africa, it will be worthwhile actively pursuing new business, are enjoying some very positive results. even though the economic weakness of the countries con- cerned means the business generated will not make a major Somewhat unexpectedly, Egypt last year experienced a contribution to our total Group revenues overall. Some coun- second revolution, which has again impeded the country's tries have very good chances of improving their prosperity economic growth. Our local subsidiary was severely affected based on their enormous raw material resources. too, as on many construction sites work came to a standstill for a number of weeks. A number of neighbouring countries As a result of the issues described, a number of vitally are now attempting to help the country avoid economic important challenges which also need to be met have been 22 COMBINED MANAGEMENT REPORT Business Report

pushed into the background. In Germany and many other Resources segment is focused on matters relating to the countries, demographic trends are posing major economic environment, water and natural resources. It has already challenges. Environmental problems, particularly air pollution, achieved success in many countries around the world, and are rising. In this context, too, necessary policies are currently we believe that demand for these products and services will no longer being pursued with the same commitment as they continue to grow strongly. were just a few years ago, when environmental issues were seen as the major risk to global economic development. Global economic trends will stabilize again in the medium Dialogue with major polluters, such as China, must be in- term. Some destabilizing factors will be eliminated entirely tensified. The financial burdens we face in dealing with this over the coming years. The currently still enormous cost over the years ahead will be substantial. On the other hand, differences and imbalances between many different coun- it does of course offer major opportunities for companies tries will likewise reduce significantly. After all, people in operating in the relevant fields. China are also aware of the value of professional work in other countries, and will demand the same standards for These issues are opening up wide-ranging new opportu- themselves. There are already some signs of this happen- nities for us too. In operation for several years now, our ing: good equipment operators in most countries now enjoy

> For the new court centre in Bochum, BAUER Spezialtiefbau GmbH installed 503 foundation piles in diameters up to 1,200 mm employing the CFA and kelly technique. Some of the piles have geothermal energy lines running on them. COMBINED MANAGEMENT REPORT 23 Business Report

similar pay structures to those in the old-established indus- Sales in that sector depend on whether there are enough trial nations for example. This will impact on all businesses, large-scale projects, or applications of techniques requiring including our competitors. use of the equipment, around the world. This was – some- what randomly – less frequently the case in the year under The outcome of the global changes will be much larger review. The deep drilling department was likewise restricted markets, on which orders will again need to be fought for essentially to its fulfilment of the order for smaller rigs sold to against a background of similar conditions. German com- China in 2012. This generally resulted in a decline in margins panies will be able to focus on their specialities and enjoy in the Equipment segment, thus also entailing a fall in the healthy revenues on the larger market. The BAUER Group, segment's net result for the period. too, will maintain that focus. Market trends were pleasingly positive again in the last quar- COURSE OF BUSINESS ter of the year. Sales were highly satisfactory, and most of the The business of the BAUER Group in 2013 was overshad- machines ordered were also delivered. This led to a healthy owed by a number of troublesome events which overall increase in full-year sales revenues, demonstrating that we resulted in an after-tax loss while reaching the planned total are generally on the right course despite the tough market Group revenues target. We began last year full of optimism conditions. We also believe our selling successes were the based on the very healthy levels of our orders in hand and fruits of our substantial efforts in developing new products, a number of large-scale projects which were about to be improving our product quality and enhancing our service signed up. Unfortunately, those high expectations did not provision to customers. come to fruition. Another influencing factor is the increased competition in the At the start of the year, virtually all our large-scale construc- machinery manufacturing business. The market has changed tion projects were delayed for reasons beyond our control. substantially over the last ten years. The enormous construc- Causes included specialists having problems entering the tion boom in China doubled the global specialist foundation country, failures of developers to obtain construction permis- engineering equipment market. In view of that trend, many sion, and late availability of the building land. Problems with Chinese companies built up large capacities in order to gain our dam project in the USA relating to site set-up and detailed a share of the market. Total capacities outstripped market planning – some of them in this instance of our own making – demand however, causing major turmoil – and declines in likewise led to significant delays. Once the projects were fully margins – in recent years. Owing to the shifts on general operational, around the middle of the year, their technical and construction machinery markets, other European vendors commercial performance levels were all very satisfactory. also began supporting their sales with specialist foundation Nevertheless, our Construction segment was unable to com- engineering equipment. pensate for the problems encountered during the start-up phase, and so did not achieve its planned earnings target. These trends of course pose a major challenge to us, as All in all, however, business in the Construction segment was we need to position ourselves on the markets even more healthy and stable, and we recorded a steady flow of incom- clearly. We are doing so based on a number of strategies: ing orders, providing us with a sound foundation for 2014. by focusing on drilling techniques, we are able to distance ourselves clearly from European manufacturers. In combating Contrary to the trend seen in the previous year, the Equip- Chinese competitors, we rely on the top quality, functionality ment segment had a bad start to 2013. Orders received in and productivity of our equipment to provide us with a major the first three months were very unsatisfactory. Only following edge. We also concentrate on the custom machinery needed Bauma, the world's largest construction machinery trade particularly for large-scale specialist foundation engineering fair held in Munich, was a substantially improved trend projects. We are building our opportunities for further sales seen. The relatively weak order inflow for large and custom growth with new products such as well drilling rigs, cranes machinery over the entire year posed an additional burden. specially designed for foundation engineering, deep drilling 24 COMBINED MANAGEMENT REPORT Business Report

Geographical breakdown of total Group revenues substantial additional expenditure on this project. We had to

in EUR million accept that we would not be able to pass all of that expend- Total 1,506 iture on to the developers, ultimately meaning that a loss was made. A pleasing fact is that the project is technically Germany 412 (27 %) complete, so no further risks can arise. Africa 58 (4 %) Moreover, the Resources segment did not succeed in secur- America 186 (12 %) ing contracts for two very large projects which had been in the pipeline in the Middle East. Also, sales of well-engineer- Asia-Pacific, Far East ing materials were weak, due to conditions on international & Australia markets and the ending of the project in Jordan. By contrast, 364 (25 %) the performance of the Environmental Technology area was generally very positive. The trend in the Resources segment was, however, responsible for the overall loss made by the Group. As a result of the failure, intensive work is required this year to deliver improvements. New management in the Materials area will enable us to turn its business around. Environment will be able to build further on its healthy posi- tion established over past years. In Exploration and Mining Europe (other) Services, we need to make great efforts to attain the desired 155 (10 %) Middle East & Central Asia level once again. 163 (11 %)

EU excl. Germany Despite the setback, we still regard our overall strategy as 168 (11 %) being right. Our Resources segment is operating in one of rigs and underwater drilling rigs. The general trend of the past the world's strongest growth markets. Even though such a year under review indicates to us that our efforts are resulting setback is painful, we will succeed in turning our business in our Equipment segment being well capable of meeting the around. A number of major project opportunities also give challenges posed. cause for hope of some special successes.

Our biggest single problem occurred in our Resources seg- Although the general trend in 2013 was very unsatisfacto- ment. The construction works on our well project in Jordan ry, the overall situation of the Group has not undergone a finished in 2013. Unfortunately, our outstanding claims could negative change. In the year under review we succeeded in not be definitively clarified in negotiation with the developers, increasing overall revenues slightly, and we acquired enough so the resultant write-off of receivables and its further conse- orders to again achieve a slight rise in total Group revenues quential effects led to a significant loss. Owing to the highly this year. Markets are growing ever more stable in the wake complex conditions throughout the duration of the works, of the financial crisis; construction demand is rising, and we both we ourselves, and other parties involved, incurred are in a better position to fend off the new competition in

2013 forecast/actual comparison

in EUR million Forecasts 2013 actual 11.04.2013 01.08.2013 28.10.2013

Total Group revenues >1,500 >1,500 ~1,500 1,506.2 EBIT ~85 ~70 ~25 32.1 Net profit or loss >30 ~20 ~ -20 -19.4 COMBINED MANAGEMENT REPORT 25 Business Report

the machinery business. These trends enable us to make a forced to reduce our full-year forecast for total Group rev- generally optimistic forecast. enues to around EUR 1.5 billion and EBIT to around EUR 25 million, and predict a net loss of approximately EUR 20 As a result of the aforementioned problems, we were forced million. to adjust our forecast downwards twice in the course of 2013. In our 2012 Annual Report we predicted total Group The final results for 2013 are now as follows: total Group revenues of over EUR 1.5 billion, EBIT around EUR 85 mil- revenues rose by 4.9 percent to EUR 1.51 billion. Sales lion, and profit after tax of above EUR 30 million. revenues increased by 4.4 percent to EUR 1.40 billion. EBIT (earnings before interest and taxes) decreased to In early August 2013 we had to issue an ad-hoc release ad- EUR 32.1 million (previous year: EUR 72.0 million). The net justing our forecast due to delays on large-scale construction loss for the period was EUR 19.4 million (previous year: projects, the decline in margins in the Equipment segment EUR 25.8 million profit). and the weaker than expected performance of the Resourc- es segment. With forecast total Group revenues remaining Summary the same, we then predicted EBIT around EUR 70 million All in all, we cannot be satisfied with our results for 2013. and profit after tax of around EUR 20 million. Owing to a major one-off effect, we returned a loss for the first time in 14 years. We nevertheless see business trends At the end of October 2013 expectations were lowered again as continuing to develop positively, because in the past year by negative one-off effects, primarily resulting from our well we succeeded in increasing total Group revenues even in a construction project in Jordan. We also re-evaluated earnings tough climate. The financial year 2014 will build soundly on from the Equipment and Construction segments and took that foundation. into account costs of restructuring. As a result, we were

Development of total Group revenues by segment in EUR million (segments after deducting Other/Consolidation) Total 1,506

1,500 Resources 197

1,250

1,000 Equipment 591

750

500 Construction, international 532

250 Construction, Germany 0 186 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 26 KONZERNLAGEBERICHT Gesamtwirtschaftliche Entwicklung COMBINED MANAGEMENT REPORT 27 Business Report

Breakdown of total Group revenues by subsegment

in EUR million 2012 2013 Share Change against Orders revenues revenues 2013 previous year in hand

BAUER Spezialtiefbau GmbH (BST) BST, Germany 101.0 120.1 8.0 % 18.9 % + Subsidiaries, Germany 20.3 24.0 1.6 % 18.2 % • BST, International 86.6 67.3 4.5 % -22.3 % + Subsidiaries, International 486.4 547.3 36.3 % 12.5 % + BST Group total 694.3 758.7 50.4 % 9.3 % +

Construction SCHACHTBAU NORDHAUSEN GmbH (SBN) subsidiaries 65.7 74.2 4.9 % 12.9 % • less intra-Group revenues and IFRS adjustments -104.8 -90.2 -6.0 % Construction total 655.2 742.7 49.3 % 13.4 % + BAUER Maschinen GmbH (BMA) 354.7 391.7 26.0 % 10.4 % • Equipment subsidiaries 412.8 453.3 30.1 % 9.8 % • BMA Group total 767.5 845.0 56.1 % 10.1 %• SBN 53.0 62.3 4.1 % 17.5 % •

Equipment less intra-Group revenues and IFRS adjustments -231.4 -278.7 -18.5 % Equipment total 589.1 628.6 41.7 % 6.7 %• BAUER Resources GmbH (BRE) 8.6 9.6 0.6 % 11.6 % Resources subsidiaries 265.0 193.6 12.9 % -26.9 % - BRE Group total 273.6 203.2 13.5 % -25.7 % - SBN 25.9 20.4 1.4 % -21.2 % ++ Resources less intra-Group revenues and IFRS adjustments -36.7 -33.7 -2.2 % Resources total 262.8 189.9 12.6 % -27.8 %• BAUER Aktiengesellschaft (BAG) 40.4 37.0 2.5 % -8.4 % Other subsidiaries 2.2 2.3 0.2 % 4.5 % Other Total Other/services 42.6 39.3 2.7 % -7.7 % less intra-Group revenues and IFRS adjustments -113.9 -94.3 -6.3 % Group total (including minority interests) 1,435.8 1,506.2 100.0 % 4.9 %•

of which: Germany 378.6 412.1 27.4 % 8.8 %

International 1,057.2 1,094.1 72.6 % 3.5 %

Notes on the table: List also includes non-consolidated holdings Valuation of orders in hand relative to budgeted sales: Breakdown Germany/international according to country -- weak; - slightly weak; • adequate; + well adequate; ++ very well adequate; in which accounting figures were allocated. For reasons Percentages and totals are calculated on the basis of unrounded starting values of complexity the figures are not absolutely precise.

> > > Our customer L&M Foundation Specialist Pte Ltd. is using a BC 40 trench cutter mounted on an MC 96 duty-cycle crane to install 1.5 m thick foundation elements down to a depth of 65 metres as part of the extension of Singapore's mass rapid transit (MRT) rail line.

COMBINED MANAGEMENT REPORT 29 Trend by Segment

III. TREND BY SEGMENT

CONSTRUCTION SEGMENT

Construction segment key figures

in EUR '000 2012 2013 Change (restated)

Total Group revenues 655,165 742,662 13.4 % Sales revenues 579,069 659,063 13.8 % Orders received 702,938 728,276 3.6 % Orders in hand 513,087 498,701 -2.8 % EBIT 22,025 22,816 3.6 % Net profit or loss 8,586 5,472 -36.3 % Employees (on average over the year) 5,454 5,531 1.4 %

The Construction segment again increased its total Group A particularly pleasing aspect was that large numbers of revenues in 2013 by a substantial 13.4 percent from EUR major projects were again acquired and successfully com- 655.2 million to EUR 742.7 million. Segment EBIT of EUR pleted, including in Mannheim, in Munich, and at the Zerben 22.8 million was slightly up on the previous year's level of lock. Orders in hand at the year-end were at a high level. EUR 22.0 million. The net profit for the period decreased A key factor in that achievement was the contract award in from EUR 8.6 million to EUR 5.5 million. In the previous year June 2013 to carry out the specialist foundation engineering the net result for the period was very positively influenced by works on the bypass rail link between Hanau and Nanten- the sale of a real estate project by a subsidiary, which was bach, worth some EUR 46 million in total. The works had reflected in the result for investments accounted for using started by the end of 2013. the equity method. The plan for German specialist foundation engineering The major undertakings of 2013 were large-scale projects in operations in 2014 is to attain a slight rise in revenues and Russia, Saudi Arabia, Hong Kong and the USA. They were to improve earnings. key factors in the rise in revenues. However, delays on all projects in the first half of the year meant that the targeted SCHACHTBAU NORDHAUSEN GmbH, which operates net profit for the period could not be achieved. Results were primarily in Germany, works on behalf of all three of the additionally impacted by weather conditions in the first quar- Group's segments. The company and its subsidiaries ter, weakness on a number of markets, and political factors increased total revenues against the previous year's figure, in some regions. but earnings were down against planned levels. An improve- ment is expected in 2014. As the company operates in all Germany three segments, the effects of the individual divisions are As in the previous year, our German construction business detailed in the respective segment reports. The Construc- performed better than expected. Revenues were well ahead tion division saw a slight decline in the past financial year. of plan. The contracts procured were spread very unevenly The Environmental Technology division, operating primarily around the various regions however. Capacities in the South in the biogas field and in the construction of treatment region were well utilized, while the North East and West plants, is likewise assigned to the Construction segment. regions failed to meet their planned targets. The planned In difficult market conditions, its revenues and earnings fell earnings were achieved in total, and the planned revenues substantially. were well surpassed.

> > > BAUER Hong Kong Ltd. is installing the foundations for the first 9.4 km section of the Hong Kong-Zhuhai-Macau bridge. The piles are being sunk down to a depth of 90 m, working from a drilling platform. 30 COMBINED MANAGEMENT REPORT Trend by Segment

Geographical breakdown of total Group revenues – be expected. By contrast, performance in Russia was very Construction segment pleasing, primarily thanks to the successful execution of the

in EUR million (after deducting Consolidation) Lakhta Tower project in St. Petersburg. The foundation works Total 718 for what will be Europe's tallest building were completed successfully, and made a healthy contribution to earnings. Germany 184 (26 %) We are at present installing the foundation piles for other

Africa 32 (4 %) buildings in the same complex. This prestige project will generate good prospects for future work. America 80 (11 %)

The positive situation on markets in Western Europe was Asia-Pacific, Far East sustained. The subsidiary in the Netherlands achieved a & Australia slight rise in revenues. In Switzerland, though revenues were 209 (29 %) slightly down against planned levels, earnings were just above the previous year. Here, the high levels of orders in hand provide good prospects for 2014. In England, work on the London Underground and other contracts resulted in a rise in revenues. By contrast, markets in Southern Europe remain weak. The subsidiary in Austria achieved very little improvement in revenues and earnings.

Europe (other) Middle East & Central Asia 55 (8 %) Middle East & Central Asia Markets in the Middle East in the past year were charac- 87 (12 %) terized mainly by political factors, such as in Egypt and EU excl. Germany 71 (10 %) Syria. As a consequence, investment activity in the region was negatively impacted. In Lebanon and the United Arab SPESA Spezialbau und Sanierung GmbH increased its Emirates revenues increased, though earnings declined. The revenues in the year under review, though earnings were construction market in Dubai is beginning to recover slightly. down against planned levels. The company will in future be Construction projects in Qatar were postponed further due organizationally assigned to SCHACHTBAU NORDHAUSEN to the debate surrounding the 2022 football World Cup and GmbH. This offers the opportunity to utilize synergies in because of the situation in Syria. Consequently, the revenues project handling in some specific business fields, including and earnings of our subsidiary fell back significantly. renovation and reconstruction. The holding Wöhr + Bauer GmbH, which develops and implements city real estate The main focus of our work in the region was on the foun- projects such as office buildings and underground parking dations for what will be the tallest building in the world, the garages, was not able to sell any major projects in the year Kingdom Tower in Saudi Arabia. After some initial delays, the under review, so its earnings were well down against those project was completed very successfully and with a good of the previous year. Its much increased revenues stem from result by the end of 2013. We expect to see an improvement work in progress on new large-scale projects in Munich. in the situation in the region during 2014.

Europe Asia-Pacific, Far East & Australia Trends on European construction markets remain region- Markets in the Far East again maintained their very healthy ally very variable. In Eastern Europe, revenues in Hunga- trends in the past financial year. Numerous projects were ry increased, while Bulgaria, Georgia and Romania saw again acquired and successfully executed in Malaysia. declines which in some instances were severe. Earnings Revenues were well above planned levels. Levels of orders were generally unsatisfactory. No rapid improvement is to in hand also remain very healthy. The subsidiary in Hong COMBINED MANAGEMENT REPORT 31 Trend by Segment

Kong likewise achieved revenues in line with planned levels, Africa with healthy contributions to earnings. The focus of opera- The performance of our holding in Egypt during 2013 was tions was on the foundation works for a section of the Hong more than pleasing. In the difficult prevailing conditions, it Kong-Zhuhai-Macau Bridge, which will also keep us busy in succeeded in closing the financial year with revenues well up the current financial year. on the previous year and healthy earnings. Prospects remain bright, thanks to additional order receipts. The other markets We achieved very healthy increases in revenues and earnings declined however. We will be downsizing our operations in in Indonesia and Thailand, as did our subsidiary in the Philip- Angola in line with market conditions, and will close the local pines. In Bhutan, we again acquired a contract to carry out subsidiary in Algeria. diaphragm walling work on a dam, after having successfully completed an initial project in 2012. Revenues in Australia fell Large-scale projects against the previous year, though earnings remained relatively During 2012 we succeeded in acquiring a number of large- stable. scale projects in all parts of the world. Some were completed during 2013, while some are continuing in 2014. We see We expect the region to see a generally positive ongoing further opportunities for acquiring interesting large-scale trend in 2014. Orders in hand are at a high level, and oppor- projects around the world in future too. Such projects are tunities to acquire new construction objects are continually unfortunately often subject to political hurdles, so a uniform arising. spread in the timing of orders received is not possible.

America Outlook Our subsidiary in the USA was kept busy through 2013 The Construction segment achieved a healthy increase in primarily by the large-scale Center Hill Dam project. There revenues in the past financial year. It was unable to improve were few others. Revenues were well up on planned levels, its net profit for the period owing to the factors outlined. After but earnings performance was unsatisfactory due to lengthy initial delays, we now see the large-scale projects in the USA on-site delays, as a result of which a notable loss was made and Hong Kong to be making good progress. We will be for the full year 2013. The project is scheduled to run until withdrawing from some weak markets where no improve- 2015. As work is now progressing very well, this will have a ment is to be expected, and conversely will be concentrating positive effect on business overall. The trend in Canada was capacities on focus markets so as to utilize the opportunities again very positive. Revenues were slightly down against the they offer. Even though there are still many factors impeding previous year, but earnings improved. progress in some regions, our worldwide presence enables us to predict a sustained positive trend in our construction By contrast, the markets in South America were rather weak. business. Revenues and earnings in Panama were below our expec- tations. Rates of capacity utilization improved towards the Even though some of the large-scale projects have been year-end. Few projects were handled in the other markets, completed, orders in hand at the year-end were only slightly such as Columbia, Costa Rica and the Dominican Repub- lower than at the end of 2012. Hence, we generally expect lic. Activities there will in future be largely discontinued, and to see a slight increase in revenues and a strong improve- capacities concentrated on Panama as the focus market. ment in earnings in 2014, thanks to globally healthy and very evenly spread orders in hand. We predict that revenues and earnings in both North and South America will improve in 2014. 32 KONZERNLAGEBERICHT Entwicklung in den Geschäftssegmenten COMBINED MANAGEMENT REPORT 33 Trend by Segment

EQUIPMENT SEGMENT

Equipment segment key figures

in EUR '000 2012 2013 Change (restated)

Total Group revenues 589,093 628,612 6.7 % Sales revenues 520,576 561,615 7.9 % Orders received 585,966 632,053 7.9 % Orders in hand 113,084 116,525 3.0 % EBIT 33,977 32,223 -5.2 % Net profit or loss 8,897 5,055 -43.2 % Employees (on average over the year) 2,952 2,998 1.6 %

The Equipment segment increased its total Group revenues In Western Europe and Scandinavia, planned sales targets in the past financial year by a healthy 6.7 percent from EUR were achieved and in part surpassed. Even in Italy – con- 589.1 million to EUR 628.6 million. The segment's sales trary to the general impression – we enjoyed good market revenues rose correspondingly by 7.9 percent from EUR conditions. By contrast, the markets in Spain and Portugal 520.6 million to EUR 561.6 million. Segment EBIT declined remained weak. Planned revenue targets in Eastern Europe somewhat, falling 5.2 percent from EUR 34.0 million to EUR were not met. Market conditions remained very weak. In 32.2 million. The net profit for the period deteriorated from Russia, though, sales were again very pleasing. Our two EUR 8.9 million to EUR 5.1 million. production facilities in Russia were also kept busy.

Although more machines were again sold in total in 2013 Middle East & Central Asia – reflected in the rise in sales revenues – earnings failed to The countries of the Middle East were again severely impact- meet expectations. This was mainly due to heavier compet- ed by unrest and political instability during the past year. The itive pressure, particularly from China. The unsatisfactory situation in Syria, especially, had a major influence on mar- earnings performance also resulted from a number of weak kets in the region. In Qatar, numerous projects – particularly markets – especially in India, China and South America – as for the transport infrastructure – were postponed, and on well as losses made by some subsidiaries and the burden of some projects the construction methods were changed. By fixed costs incurred as a result of some plants not yet making contrast, the United Arab Emirates saw a recovery. All in all, sufficient use of capacities. we substantially improved our sales in the region compared to the previous year, achieving revenues in line with planned Germany & Europe levels. However, they were still markedly below the levels Sales in Germany rose healthily against the previous year, seen in the boom years prior to 2008 however. and were above our expectations. The rental business and sales of drilling accessories also improved. The generally We achieved good sales in Turkey and in Azerbaijan in 2013, positive trend on the German construction market was key both performing above expectations. Planned revenue to this. Capacities of the plants at the home base location targets in Kazakhstan and the other countries of Central Asia in Schrobenhausen were better utilized in 2013, as more were not met. The past year in India was also disappointing, machines were produced and special orders – including the as no major construction projects were carried out. The production of six deep drilling rigs of the 100-tonne class for country's construction market is generally suffering badly a Chinese customer – were also fulfilled. under the negative disturbances related to planning and

> > > BAUER Maschinen GmbH was once again represented at the Bauma trade fair in Munich in April 2013. Occupying over 2,700 m2, its stand attracted as many as 10,000 visitors a day, all keen to explore the innovations and new products on show, including the RB-T 90 deep drilling rig for rescue missions and the new flagship of the BG drilling rig range, the BG 46. 34 COMBINED MANAGEMENT REPORT Trend by Segment

Geographical breakdown of total Group revenues – based on machinery exports to the other strong markets in Equipment segment Asia. The move to the new plant in Tianjin, built to replace

in EUR million (after deducting Consolidation) the former site on which the lease had expired, was finalized Total 591 in October with the official opening. The new plant provides an outstanding base for future development. Germany 105 (17 %)

Africa 19 (3 %) The market in Japan again performed better thanks to recent political developments, as a result of which our revenues America 96 (16 %) were in line with planned levels. By contrast, the market in Australia was rather weak during the past financial year – Asia-Pacific, Far East among other factors due to the low level of activity in the & Australia mining sectors. 154 (28 %)

America The USA was rather a weak market in the past year. Planned targets for revenues and earnings could not be achieved. The business there is characterized mainly by renting, due to companies' ongoing uncertainty as to the general state of the economy. Our plant in Houston increased its revenues, but its capacity is still not being sufficiently utilized. Europe (other) 97 (16 %) Middle East & Central Asia Sales in South America were likewise rather disappointing. 37 (6 %) The political uncertainty in Brazil was the main factor, as EU excl. Germany 83 (14 %) it also had a negative effect on the other countries in the region. contract award procedures, as a consequence of which the machinery market is virtually stagnating. We improved our Africa market share based on a low level of sales. On markets in Africa, after a rather slow year we were able to achieve planned revenues thanks to good performance Asia-Pacific, Far East & Australia towards the end of the year. In Botswana, where our joint Markets in the Far East were generally very positive. Nu- venture manufactures blast-hole drilling rigs and well drilling merous infrastructure projects were carried out in Malaysia, rigs for southern Africa, production capacity was not yet Singapore, Indonesia, Hong Kong and the Philippines. As adequately utilized due to variable market conditions after a result, the sales trend in those countries was very positive, launch in 2012. delivering healthy revenues with corresponding earnings being above planned levels. Our new plant in Malaysia, Parts & Service opened in 2012, acquired increased volumes of orders to The Parts & Service area again made very good progress in overhaul older Bauer machines. We officially opened our the past year. Parts & Service offers our customers opti- new service centre in Singapore in 2013, following the expi- mum backup in supplying replacement and wearing parts ration of the lease on the previous building. and in carrying out maintenance and repair work. Alongside conventional selling channels, products can also be or- The Chinese market remained very difficult. The construction dered through an online shop. The online shop can also be market is still on comparatively low levels, so there is over- accessed from the optionally-installed tablet in our machines. capacity on the machinery market. Our production facilities Parts & Service made a healthy contribution to revenues in China were nevertheless able to increase their revenues, and a positive contribution to earnings in the past financial COMBINED MANAGEMENT REPORT 35 Trend by Segment

year. This illustrates the widespread usage of our equipment In 2012 and 2013 a number of new rigs were launched in throughout the world. Parts & Service will continue to be of both lines, and existing machines were upgraded to meet great importance to us in future. the latest demands. The reorganization of the two lines has proved successful, and the machines are well established on Deep drilling the market. It is pleasing to report that in 2013 production The Deep Drilling area had a disappointing year in 2013. It and sales of all product groups increased. However, heavier was not able to sell any of the larger rigs. An anticipated sale competitive pressures, the still inadequate utilization of our to a customer in Nigeria could not yet be fulfilled due to lack production capacity and the weaker market for large-sized of financing. rigs and cutters resulted in a decline in earnings.

The TBA 200 medium-sized rig was rented at the end of Among the subsidiaries, a good year, with pleasing and 2013 to a customer in Germany and successfully deployed in positive earnings performance, was enjoyed especially by early 2014. The delivery of the six 100-tonne RB-T 90 rigs to RTG Rammtechnik GmbH, with its pile-drivers and piling China was pleasing. They are to be used as emergency mine leaders; SPANTEC Spann- & Ankertechnik GmbH, which rescue equipment in case of accidents. makes anchor products for foundation engineering applica- tions; EURODRILL GmbH, which makes rotary drives; and The new TBA 440 M2 large-sized rig was presented at a PRAKLA Bohrtechnik GmbH, a specialist in well drilling rigs. customer day in October 2013. Its technical specifications Other subsidiaries were confronted by a range of problems and innovative features ideally meet customers' needs and and increased competitive pressures in the past financial wishes. Interest in the new development was very high, so year, meaning that some of them returned a loss. we can expect to see an improved trend in the Deep Drilling area in 2014. The Equipment segment was generally faced by the chal- lenge of increased competitive pressures and a number of The demerger of deep drilling operations into the newly weak markets in 2013, all of which had a marked impact on founded BAUER Deep Drilling GmbH aims to improve the earnings. It is pleasing that more machines were sold again – ongoing development and sales of the rigs. Moreover, great as reflected in the improved sales revenues. This meant that efforts are underway to obtain API (American Petroleum the plants' capacities were better utilized, although not yet Institute) certification. This will open up additional sales adequately overall in terms of fixed cost coverage. opportunities. Outlook Products and subsidiaries Orders in hand improved in the past year to regain higher BAUER Maschinen GmbH manufactures rotary drilling levels than those seen in 2012, though business remains rigs (the BG series), duty-cycle cranes (the MC series) and very heavily characterized by short lead times on customer cutters (the BC series) at a number of plants. The BG series orders. This remains a great challenge in terms of production is the most important and extensive machine range, and is planning, as procurement lead times have to be scheduled divided in two product lines: the ValueLine rigs are optimized many months in advance. We are confident that we will be for kelly drilling, while the PremiumLine rigs are multifunction able to increase sales in all areas this financial year, and so units for a wide variety of specialist foundation engineering achieve improved revenues and earnings. applications. 36 KONZERNLAGEBERICHT Entwicklung in den Geschäftssegmenten COMBINED MANAGEMENT REPORT 37 Trend by Segment

RESOURCES SEGMENT

Resources segment key figures

in EUR '000 2012 2013 Change (restated)

Total Group revenues 262,848 189,868 -27.8 % Sales revenues 244,273 182,968 -25.1 % Orders received 253,232 181,061 -28.5 % Orders in hand 158,827 150,020 -5.5 % EBIT 15,196 -23,576 n/a Net profit or loss 5,664 -31,444 n/a Employees (on average over the year) 1,578 1,449 -8.2 %

The total Group revenues of the Resources segment fell companies in the Exploration and Mining Services and by a substantial 27.8 percent from EUR 262.8 million to Environment areas. EUR 189.9 million. Segment EBIT of EUR -23.6 million was well down against the previous year comparative (EUR 15.2 Materials million). The net result for the period deteriorated from a net The Materials area manufactures and sells products for the profit of EUR 5.7 million to a net loss of EUR 31.4 million. exploration, extraction and distribution of water, gas and geothermal energy worldwide. The Resources segment was faced by wide-ranging negative effects and problems in financial 2013, which had a signif- The GWE Group was heavily impacted by postponements icant impact on the Group's performance. The substantial of major overseas projects and by customers' reluctance full-year loss was mainly due to the following reasons: to invest during the past financial year. Although markets in Germany and the rest of Europe stabilized after a weak first • The earnings forecast had to be adjusted downwards by half, and new products succeeded in gaining more market some EUR 20 million following completion of the extensive share, the missing sales could ultimately not be made good. well construction project executed by the segment in Jor- As a result, GWE pumpenboese GmbH made a substantial dan. The adjustment was made necessary by the complex loss in Germany. conditions under which the project was operated, which substantially increased the costs of the construction com- The subsidiary in Poland made a small loss due to a weak panies involved. Moreover, the financial difficulties being first half of the year. Expectations for 2014 are positive experienced by Jordan meant that no mutually agreeable however. The subsidiary in Hungary achieved a slight rise final settlement could be obtained. This adjustment trig- in revenues, but its earnings were somewhat down against gered additional impairment losses. planned levels. There, the situation should also improve in 2014. After a good start to 2013, the subsidiary in Chile was • At the start of 2013, we were very much expecting up hit by the collapse in demand from the mining sector. The to two large-scale projects to be contracted. These did planned revenues were achieved, but earnings were below not come to fruition, resulting in an excessive fixed cost expectations. One-off costs of process optimization were burden on the segment. also incurred there.

• Moreover, reduced demand meant that our companies Sales in France delivered revenues that were above planned manufacturing well engineering materials were not prof- levels in a difficult market, mainly thanks to specialist prod- itable. We also had generally higher expectations for our ucts. Expected projects in Morocco could not yet be exe-

> > > Esau & Hueber GmbH, a member of the Resources segment, specializes in brewing and beverage technology and the life sciences industry. It installed a short-time heater with an output of 30 hl/h for biological preservation of beer in a brewery. 38 COMBINED MANAGEMENT REPORT Trend by Segment

Geographical breakdown of total Group revenues – The aforementioned large-scale Disi-Amman project han- Resources segment dled by the Site Group for Services and Well Drilling Ltd.

in EUR million (after deducting Consolidation) Co. in Jordan, involving the sinking of wells to supply water Total 197 to the city of Amman, proved highly problematic and made a substantial loss. This additionally resulted in impairment Germany 123 (62 %) losses. Complex conditions, major delays and significant Africa 7 (3 %) additional work requirements overshadowed the project, America 10 (6 %) which was completed in a technically flawless way by the Asia-Pacific, Far East & Australia end of 2013. 1 (0 %)

FORALITH Holding AG, a specialist in deep and extended- Middle East & Central Asia reach exploration drilling based in Switzerland, and BAUER 39 (20 %) Foralith GmbH were unable to achieve their planned reve- nues due to project delays.

The subsidiary in Canada achieved revenues and earnings above planned levels and up on the previous year, despite difficult market conditions. It also has prospects for acquiring some major projects. The markets in Ghana, South Africa and Senegal remained subject to weak demand for drilling Europe (other) 3 (2 %) services in the mining sector. The local subsidiaries were unable to achieve planned revenues. The market conditions were tough in Australia too. They were additionally impacted by negative exchange rate effects. EU excl. Germany 14 (7 %)

cuted, so planned revenues were not achieved. Prospects Exploration and Mining Services was generally impacted by there remain positive however. The subsidiary in Spain could the global decline in exploration drilling. Only towards the end not achieve planned revenue and earnings targets. Many of the year did the situation turn around on some markets. projects were continually postponed owing to the difficult So, all in all, 2013 was extremely difficult, and was overshad- economic conditions in the country. owed especially by the loss made in Jordan.

Online sales of well engineering materials increased signif- The segment also incorporates the mining operations of icantly compared to the previous year. Costs of marketing SCHACHTBAU NORDHAUSEN GmbH. Revenues were and developing the offer meant that a profit was not yet somewhat down against planned levels, but were again made. up on the previous year. The division again made a good contribution to segment earnings. Materials companies had a very unsatisfactory year overall. Revenues were well down against planned levels and the Environment previous year, and an overall loss was made. The Environment area offers complete solutions relating to the remediation of polluted sites, the preparation and Exploration and Mining Services treatment of drinking water and process and waste water, Exploration and Mining Services bundles expertise in the as well as waste gases. It also manufactures plant for water exploration of deposits, production drilling for water, oil, gas treatment, drinking water preparation, clean-room media and geothermal energy, and in a wide variety of open-cast handling and brewing. and underground mining services. COMBINED MANAGEMENT REPORT 39 Trend by Segment

The full-year revenues of BAUER Umwelt GmbH were a little fruition in the past financial year. Earnings were nevertheless above planned levels, and were around the previous year's very satisfactory. All in all, though, revenues and earnings level. The planned earnings target was missed however. The were below expectations. order book situation was stable at the year-end. BAUER Water GmbH significantly increased its revenues over the Reorganization previous year. However, its earnings were negative owing to The Resources segment faced a wide range of problems, problems in the execution of projects. difficult market conditions and one-off effects in 2013, all of which had a marked impact on the result of the Group as a Esau & Hueber GmbH, a specialist in brewing and beverage whole. technology and the life sciences industry, saw revenue below planned levels and down against the previous year. Earnings These developments do, however, also provide the oppor- were negative owing to a number of difficult projects, with an tunity to undertake a fundamental reorganization in order to unsatisfactory order book situation over long periods of time. be fit for the future. A wide-ranging cost-cutting programme was launched during the past financial year. The costs The international subsidiaries in Environment also had a incurred in implementing it are in part already reflected in difficult year. The market in Italy remained very weak. The the earnings. In future, the segment will move away from its company was unable to achieve its planned revenue target, structure with three areas and focus much more strongly and made a negative contribution to earnings. In Spain, the on being a full-package vendor. The existing three areas – market has also been severely hit by the country's economic Materials, Exploration and Mining Services and Environment problems. Capacities there have been greatly reduced. Rev- – were replaced at the beginning of 2014 by a regionalized enues in Great Britain likewise fell. In Hungary, after a weak structure. This essentially focuses on the markets in Europe, year, two projects towards the end delivered a slight rise in Africa and the Middle East. It provides the opportunity to revenues and ensured earnings were in line with planned offer all products and services within the individual subsidiar- levels. The subsidiary in Abu Dhabi was likewise unable to ies directly on the local markets. This regional sales organi- achieve its planned revenue and earnings targets. zation is backed by centres of competence providing advice and support on projects and focusing the know-how of the BAUER Nimr LLC in Oman is operating a large-scale reed- former areas. bed treatment plant to treat polluted water from the oil indus- try. Following the completion of phase II, the plant has been In the course of this reorganization, some companies have expanded to treat 95,000 m3 per day. The plant is unique been, and will be, merged, some locations closed, and cost worldwide in its scale and engineering. A minor upgrade to structures at many points improved. As a result, the situation the plant was commissioned in the year under review and in the Resources segment is expected to improve substan- completed in early 2014. The expected contract for a further tially in 2014. The order book situation as per the end of extensive upgrade of the existing plant did not come to 2013 provides a sound basis for that improvement. 40 COMBINED MANAGEMENT REPORT Trend by Segment

OTHER / CONSOLIDATION SEGMENTS

The Other and Consolidation segments bundle the revenues (previous year: EUR 13.7 million) includes EUR 1.4 million es- and earnings of the Group which cannot be allocated to the sentially comprising the net profit of BAUER AG disregarding operating segments. The Other segment essentially com- the aforementioned payments. The segment's revenues are prises the revenues of the parent company BAUER AG itself, especially generated by intra-Group charges. generated from a wide variety of administrative services provided to Group subsidiaries. The Consolidation segment reflects the consolidation within the Group. The negative EBIT of EUR -4.5 million (previous The Other segment reports EBIT of EUR 5.1 million (pre- year: EUR -11.3 million) almost matches the EUR 4.4 million vious year: EUR 12.1 million). This includes EUR 4.4 million of dividend payments by Group subsidiaries to parent com- of dividend payments by Group subsidiaries to the parent pany BAUER AG. The net loss for the period was EUR 4.5 company. The net profit for the period of EUR 6.0 million million (previous year: EUR 11.1 million).

> The Angelroda viaduct in Thuringia is an open steel truss construction, and a historic railway structure. In renovating the 80-tonne trusses, the structural steel engineers from SCHACHTBAU NORDHAUSEN GmbH had to finish much of the bolt detailing by hand. COMBINED MANAGEMENT REPORT 41 Trend by Segment

Breakdown of total Group revenues across the member companies of the BAUER Group

Shareholdings < 50 % listed pro rata

2012 ** 2013 in EUR million (restated) BAUER Spezialtiefbau GmbH Group BAUER Spezialtiefbau GmbH Schrobenhausen, Germany (BST) 187.6 187.4 Wöhr + Bauer GmbH, Munich, Germany (33 % share) (subsidiary consolidated financial statements) 16.5 17.5 BAUER FOUNDATION CORP., Odessa, United States of America 47.4 48.9 BAUER Foundations Canada Inc., Calgary, Canada 21.8 19.1 BAUER FUNDACIONES PANAMÀ S.A., Panama City, Panama 13.6 11.9 BAUER Funderingstechniek B.V., Mijdrecht, Netherlands 4.4 4.8 BAUER RENEWABLES LIMITED, Bishops Stortford, Great Britain 1.5 0.4 BAUER Technologies Limited, Bishops Stortford, Great Britain 27.1 43.2 BAUER Spezialtiefbau Schweiz AG, Baden, Switzerland 14.5 15.2 TERRABAUER, S.L., Madrid, Spain (30 % share) 1.9 1.0 BAUER Magyarorszàg Speciális Mélyépitö Kft., Budapest, Hungary 3.4 6.0 BAUER ROMANIA S.R.L., Bucharest, Romania 2.2 1.9 BAUER BULGARIA EOOD, Sofia, Bulgaria 2.9 1.8 BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria 14.3 15.0 OOO BAUER Technologie, Moscow, Russian Federation 10.5 36.7 BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt 13.2 20.8 BAUER LEBANON FOUNDATION SPECIALIST S.a.r.l., Beirut, Lebanon 10.6 11.3 BAUER Georgia Foundation Specialists LCC, Batumi, Georgia 5.1 3.0 BAUER International F.Z.E., Dubai, United Arab Emirates 27.9 35.5 BAUER International Qatar LLC, Doha, Qatar 18.3 8.0 Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia 3.4 25.3 BAUER (MALAYSIA) SDN. BHD., Ptaling Jaya, Malaysia (subsidiary consolidated financial statements) 94.7 95.4 BAUER Foundation Australia Pty Ltd, Brisbane, Australia 21.8 13.8 BAUER Hong Kong Limited., Hong Kong, People's Republic of China 56.0 41.6 BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam 1.5 3.1 BAUER Foundations Philippines, Inc., Quezon City, Philippines 11.7 15.9 P.T. BAUER Pratama Indonesia, Jakarta, Indonesia 18.8 26.0 Thai BAUER Co. Ltd., Bangkok, Thailand 9.8 17.6 Other participations of BST 28.3 24.2 Joint ventures, Germany (BST share only) 3.6 6.4 Intra-Group sales -97.1 -84.3 BST Group total 597.2 674.4 SCHACHTBAU NORDHAUSEN GmbH Group SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany (SBN) 92.1 102.7 SBN participations 28.5 30.1 Joint ventures SCHACHTBAU NORDHAUSEN GmbH (BST share only) 3.1 1.7 SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany 15.5 17.2 Joint ventures SPESA (SPESA share only) 5.4 5.1 Intra-Group sales -50.0 -61.2 SBN Group total 94.6 95.6

* In the segment reporting set out in the notes to the financial statements, BAUER Umwelt GmbH is assigned by virtue of the nature of its business operations to the Resources segment; the shares had not been legally transferred by the closing date.

** In contrast to the breakdown of total Group revenues by subsegment, in the breakdown of total Group revenues between the companies the total of the individual groups is stated after consolidation. 42 KONZERNLAGEBERICHT Entwicklung in den Geschäftssegmenten COMBINED MANAGEMENT REPORT 43 Trend by Segment

Breakdown of total Group revenues across the member companies of the BAUER Group (continued)

Shareholdings < 50 % listed pro rata

2012 ** 2013 in EUR million (restated) BAUER Maschinen GmbH Group BAUER Maschinen GmbH, Schrobenhausen, Germany (BMA) 354.7 391.7 EURODRILL GmbH, Drolshagen, Germany 9.3 13.1 KLEMM Bohrtechnik GmbH, Drolshagen, Germany 34.2 39.9 MAT Mischanlagentechnik GmbH, Immenstadt, Germany 13.8 12.3 Olbersdorfer Guß GmbH, Olbersdorf, Germany 7.8 7.4 PRAKLA Bohrtechnik GmbH, Peine, Germany 18.5 27.9 RTG Rammtechnik GmbH, Schrobenhausen, Germany 25.4 28.4 SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany 17.7 18.5 BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana 2.4 2.6 TracMec Srl, Mordano, Italy 8.7 12.1 BAUER Macchine Italia Srl, Mordano, Italy 7.1 8.3 BAUER EQUIPMENT UK LIMITED Rotherham, Great Britain 5.6 7.9 BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey 5.7 5.5 BAUER Technologies Far East Pte. Ltd., Singapore, Singapore (subsidiary consolidated financial statements) 101.6 120.9 NIPPON BAUER Y.K., Tokyo, Japan 5.3 7.9 BAUER Manufacturing Inc., Conroe, United States of America 19.2 22.9 BAUER-Pileco Inc., Houston, United States of America 86.9 68.9 OOO BAUER Maschinen – Kurgan, Kurgan, Russian Federation 6.2 7.8 OOO BAUER Maschinen Russland, Moscow, Russian Federation 12.2 15.5 OOO BG-TOOLS-MSI, Ljuberzy, Russian Federation 4.1 2.9 Other participations of BMA 21.1 22.6 Intra-Group sales -191.7 -229.2 BMA Group total 575.8 615.8 BAUER Resources GmbH Group BAUER Resources GmbH, Schrobenhausen, Germany (BRE) 8.6 9.6 GWE pumpenboese GmbH, Peine, Germany 64.9 51.0 GWE Prakla Services GmbH, Peine-Stederdorf, Germany 2.9 2.2 GWE POL-Bud Sp.z.o.o, Lodz, Poland 2.6 2.9 GWE Tubomin S.A., City of Santiago, Chile 2.9 3.5 BAUER Foralith GmbH, Schrobenhausen, Germany 5.1 5.9 FORALITH Drilling Support AG, St. Gallen, Switzerland 6.1 3.1 BAUER Resources GmbH / Jordan Ltd. Co., Amman, Jordan (subsidiary consolidated financial statements) 53.8 20.7 BAUER Technologies South Africa (PTY) Ltd, Cape Town, South Africa (subsidiary consolidated financial statements) 7.6 4.2 BAUER RESOURCES GHANA LIMITED, Accra, Ghana 2.7 1.4 BAUER Resources Canada Ltd., Edmonton, Canada (subsidiary consolidated financial statements) 2.7 3.1 BAUER Umwelt GmbH, Schrobenhausen, Germany * 38.2 42.9 BAUER Water GmbH, Dunningen, Germany 7.9 13.5 Esau & Hueber GmbH, Schrobenhausen, Germany 13.0 11.5 BAUER Ambiente S.r.l., Milan, Italy 3.4 1.4 BAUER Nimr LLC, Maskat-Al Mina, Sultanate of Oman 37.0 11.8 BAUER Emirates Environment Technologies & Services LLC, Abu Dhabi, United Arab Emirates 4.3 3.3 Other participations of BRE 9.9 11.2 Intra-Group sales -34.1 -27.9 BRE Group total 239.5 175.3 BAUER Aktiengesellschaft, Schrobenhausen, Germany (BAG) 40.4 37.0 Other participations of BAG 2.2 2.3 Intra-Group sales -113.9 -94.3 GROUP TOTAL 1,435.8 1,506.2

> > > The "Alte Zimmerei" (Old Carpentry Shop) building in Esslingen on the river Neckar is being converted into a restaurant. BAUER Spezialtiefbau GmbH deployed a BG 15 to construct a water-tight excavation pit inside and outside the historic structure. 44 KONZERNLAGEBERICHT Auftragsentwicklung

Ttl

TTL-EBENE00 COMBINED MANAGEMENT REPORT 45 Earnings, Financial and Net Asset Position

IV. EARNINGS, FINANCIAL AND NET ASSET POSITION

Orders in hand / orders received by segment

2012 2013 in EUR '000 Range of orders in hand based on 2013 total Group In hand Received In hand Received revenues, in months Construction 513,087 702,938 498,701 728,276 8.1 Equipment 113,084 585,966 116,525 632,053 2.2 Resources 158,827 252,232 150,020 181,061 9.5 Intra-Group revenues and IFRS adjustments 0 -71,299 0 -54,915 --- Total 784,998 1,470,837 765,246 1,486,475 6.1

TREND IN ORDERS follow-up contract was acquired relating to other buildings in At the end of 2013, the BAUER Group held orders in hand the complex surrounding the Lakhta Tower. The work on the totalling EUR 765.2 million, 2.5 percent below the previ- Hong Kong-Zhuhai-Macau Bridge and the diaphragm walling ous year's level of EUR 785.0 million. Despite the slight fall, work on the Center Hill Dam in the USA will continue in full the level of orders in hand is very healthy overall. operation in 2014. An interesting project has been acquired on Mauritius. It involves the installation of a diaphragm wall The Construction segment last year had a number of for a large dam. It is pleasing that there is currently healthy very large orders on its books which have for the most part demand from all regions around the world, providing us with already been completed. In 2013 there were fewer orders plenty of work on many small and medium-sized projects in of that magnitude on the market, but many small and medi- almost all areas. A particularly positive aspect is the situation um-sized orders were acquired from all regions around the of our subsidiary in Egypt which, despite the difficult situation world, so orders in hand remained virtually stable compared in the country, has healthy levels of orders in hand for the cur- to the 2012 year-end. The even regional spread around the rent year, enabling us to predict an increase in its revenues. world is also a very positive aspect. All in all, the levels of orders in hand provide a sound basis for achieving 2014 The construction and environmental operations of targets. SCHACHTBAU NORDHAUSEN GmbH have orders in hand totalling EUR 42.9 million, well up on the previous year's In the specialist foundation engineering field in Germany, a level. Efforts have been undertaken over the last two years large-scale project was acquired with the rail bypass link be- to restructure this business in Germany. We also integrated tween Hanau and Nantenbach, worth some EUR 46 million. SPESA Spezialbau und Sanierung GmbH into the organiza- Many smaller orders also provide us with a sound foundation tional structure of this area of business in the past year. We to predict a very consistent course of business in Germany. believe that we will be able to build further on the successes Total orders in hand in this area have risen by 73.0 percent already achieved. to EUR 94.9 million. Orders in hand in the Equipment segment of EUR 116.5 By contrast, orders in hand in the international specialist million are around the previous year's level of EUR 113.1 mil- foundation engineering business fell by 15.9 percent to lion. Trends in orders in hand in the past year varied widely: EUR 360.2 million owing to the completion of large-scale in the first three months our order intake was extremely projects. The foundations for the tallest building in the world, weak. Construction companies in all markets were very hes- the Kingdom Tower in Jeddah, Saudi Arabia, and the tallest itant, waiting to see how business would develop. From April building in Europe, the Lakhta Tower in St. Petersburg, onwards the order book situation improved very significantly, Russia, were completed successfully. In St. Petersburg, a so order receipts in the second and third quarters were

> > > In Kuala Lumpur, the local subsidiary carried out the diaphragm walling works for the Merdeka station on the new rapid transit rail line. To execute the approximately 14,000 m2 diaphragm wall, a Bauer MC 64 with grab unit was deployed together with an MC 96 duty-cycle crane as a base carrier for a BC 40 cutter. 46 COMBINED MANAGEMENT REPORT Earnings, Financial and Net Asset Position

satisfactory. In the last quarter of the year order intake again GROUP EARNINGS POSITION increased substantially. Pleasingly, most of the machines Group earnings in 2013 were significantly worse than in the ordered were delivered before the end of December. This previous year. A substantial loss was made overall, owing es- meant that orders in hand at the 2013 year-end fell back to pecially to major losses on our large-scale project in Jordan. the 2012 level. The many efforts by our company to improve The net result for the period deteriorated from a profit of and specialize products and services are being welcomed EUR 25.8 million to a loss of EUR 19.4 million. by our customers, so we are confident of achieving the nec- essary order intake for the current year. Business continues The ability of the Group to generate revenue did not funda- to be extremely short-term in nature however. Our customers mentally deteriorate in 2013 however. The loss was caused expect their machines to be delivered within just a few weeks by a convergence of specific problems and issues: the main of ordering. This poses major challenges for all the units of one was the Resources segment's aforementioned project in our machinery business, as we have to schedule the compo- Jordan, along with the resulting impairment losses. Additional nent supplies many months ahead of production. This entails losses were incurred in particular due to start-up difficulties holding increased stocks however. on the Center Hill Dam project in the USA.

In the Resources segment, orders in hand decreased slight- EBIT (earnings before interest and taxes) decreased by ly, by 5.5 percent, from EUR 158.8 million to EUR 150.0 mil- 55.4 percent from EUR 72.0 million to EUR 32.1 million. lion. Of that total, a significant proportion – worth EUR 45.5 EBITDA (earnings before interest, taxes, depreciation million – was held by the Mining division of SCHACHTBAU and amortization) fell by 23.1 percent from EUR 163.8 mil- NORDHAUSEN GmbH. We have interesting projects, in both lion to EUR 126.0 million, representing 8.7 percent (previous Kazakhstan and Germany, which can provide us with work year: 11.9 percent) of consolidated revenues. for years to come. The pre-tax return on equity as the ratio of pre-tax profit The orders in hand of the BAUER Resources Group itself to shareholders' equity (equity at the start of the period) have fallen slightly to EUR 104.5 million (previous year: EUR deteriorated against the previous year from 8.4 percent to 110.9 million). In the Environment area, in particular, our lev- -1.3 percent. The return on equity after tax was -4.2 percent els of orders in hand are very healthy. Our large-scale project (previous year: 5.6 percent). The return on revenues after operating the reed-bed treatment plant in Oman will provide tax (relative to the consolidated income statement revenues) us with plenty of work well into the future. Our capacities are declined from 1.9 percent to -1.3 percent year-on-year. We also being well utilized in Germany. Conversely, the well- expect to be able to increase our returns again in the coming engineering materials business is very short-term in nature, years. so there are never high levels of orders in hand. We expect these levels to remain consistent. The exploration and mining There have been substantial changes to some income state- business is problematic at present for customers in many ment items in the year under review. This is mainly attributa- different countries around the world. Mine operators are ble to the special losses described. again faced with economic problems, as a result of which very few contracts are being awarded. This business overall The previous year's income statement has been adjusted accounts for only a very small proportion of our total reve- as follows: firstly, some reclassification has been undertaken nues however. Major projects are continually arising around among the "Other income" and "Other operating expenses" the world for the segment to target. We therefore remain items. They relate to the reversal of provisions and value convinced that this business especially will continue to pro- adjustments, which are now no longer stated as income, but vide us with interesting opportunities in future. are deducted from the "Other operating expenses", which has resulted in a reduction in consolidated revenues of EUR With regard to the Group as a whole, orders in hand are in 9.8 million. Secondly, the effects of IAS 19 increased the net line with our forecast for growth in the current year. profit for the period by EUR 0.4 million. COMBINED MANAGEMENT REPORT 47 Earnings, Financial and Net Asset Position

The individual income statement items are summarized in in an amount of EUR 21.2 million (realized and unrealized the following. foreign currency losses and losses from foreign exchange forward contracts) is entered under "Other operating expens- Consolidated revenues rose by 5.3 percent against the es". The difference between the gains and losses shows previous year (EUR 1,376.1 million) to EUR 1,449.5 million. that we suffered overall foreign currency losses of EUR 9.7 million in the year under review. The considerable fluctuations Sales revenues increased at a slightly lesser rate than the in exchange rates towards the end of the year, especially in consolidated revenues, rising 4.4 percent against the previ- "softer" currency countries, were the main causes of this dis- ous year's EUR 1,344.4 million to EUR 1,404.2 million. The pleasing result. The other major items under "Other income" main reason for the smaller increase was that the changes are income from insurance refunds (EUR 3.0 million) and in inventories item was barely negative, at EUR -4.4 million book profits on asset disposals (EUR 4.4 million). compared to the previous year's EUR -22.4 million. Cost of materials increased by 10.1 percent in the year un- The other capitalized goods and services for own der review to EUR 755.9 million – a much greater rate of rise account item decreased by 20.8 percent from EUR 24.2 than in consolidated revenues. This is in part a consequence million to EUR 19.2 million. of the incurred losses, and in part due to the lower margins in the Equipment segment. Costs of materials on projects in the Other income barely rose against the previous year, increas- Construction segment vary widely, so comparisons between ing from EUR 29.8 million to EUR 30.6 million. Key changes individual years are only possible to a very limited extent. to this item related to realized and unrealized foreign currency gains as well as gains from foreign exchange forward con- Personnel expenses increased by 5.5 percent to EUR tracts, which overall decreased by EUR 1.1 million to EUR 342.8 million – virtually at the same rate as the consolidated 11.5 million compared to the previous year. Realized and revenues. The somewhat higher increase is likewise ex- unrealized foreign currency gains and losses as well as gains plained by the weaker margins in the Equipment segment. and losses from foreign exchange forward contracts result from our currency hedge management activities. Fluctua- The rise in depreciation of fixed assets by 4.3 percent to tions in hedged and unhedged currencies can cause the EUR 79.7 million is mainly attributable to impairment adjust- corresponding income statement items to vary widely over ments and high depreciation of development costs. the years depending on trends. The unbalanced statement of exchange rate shifts is in line with IFRS rules reflecting the Write-downs of inventories due to use reflect the use practice that exchange rate hedging cannot always be set of rental equipment made available to our customers. This exactly against the underlying transactions, even though in equipment does not form part of the fixed assets, but is operational reality they are aligned as closely as possible to recognized under inventories. The reason for this approach is each other. The Group's objective is to undertake exchange that most of this equipment remains within the company only rate hedging which rules out the possibility of foreign curren- for a relatively short time. The aim of the rental operation is cy gains or losses as far as possible. The countering item to subsequently sell the equipment under a rental-purchase

Development of total Group revenues by quarter in EUR million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Full year 2013

BAUER Group 331.233 393.292 384.996 396.706 1,506.227 Construction 153.609 193.685 182.425 212.943 742.662 Equipment 152.624 158.207 162.747 155.034 628.612 Resources 39.158 54.987 52.709 43.014 189.868 Other/Consolidation -14.158 -13.587 -12.885 -14.285 -54.915 48 COMBINED MANAGEMENT REPORT Earnings, Financial and Net Asset Position

agreement. As the equipment has to be financed corre- countries have had virtually no effect in reducing the Group's spondingly on the Equity and Liabilities side of the balance tax charge. sheet, its depreciation forms part of the company's EBITDA. As a consequence of the financial crisis, our customers are The minority interests in profit/loss item was negative in increasingly entering into these rental transactions. Write- the year under review, at EUR -2.5 million. This essentially downs of inventories due to use decreased slightly in the reflects a balance of the effects of the loss in Jordan against year under review from the previous year's high figure, being the profits made in Oman and Egypt. reduced by 7.8 percent to EUR 14.2 million. The profit attributable to BAUER AG shareholders was Other operating expenses rose 12.2 percent to EUR 224.8 EUR -16.9 million. million – a much greater rate of rise than in the consolidated revenues. This likewise reflects the problems during the year GROUP FINANCIAL AND NET ASSET POSITION under review. The many individual components of this item With consolidated revenues up 5.3 percent on the previous develop in very different ways depending on the course of year, the Group's net assets rose 3.7 percent from EUR business and the mix of the order portfolio. This item includes 1,529.4 million to EUR 1,585.2 million. The equity ratio the realized and unrealized foreign currency losses described of 26.5 percent is significantly lower than in the previous under "Other income". year (30.2 percent) in particular due to the loss made and the slight increase in net assets. Our aim generally is not to Financial income rose by 29.4 percent from EUR 6.0 million allow the equity ratio to fall below 30 percent. That aim was to EUR 7.7 million. The key change is attributable to gains not met in the year under review. We will be working hard in from shifts in the market values of derivatives based on inter- the years ahead to get the equity ratio back well above 30 est rate hedging transactions. Financial expenses rose by percent. All investment and growth plans of the business are 2.0 percent from EUR 44.7 million to EUR 45.5 million. aligned to this target.

The share of the profit or loss of associated companies The net debt of our business increased by 10.1 percent in accounted for using the equity method totalling EUR -0.2 the year under review. We will also be making great efforts million was EUR 5.8 million below the previous year. In 2012 in the years ahead to reduce this again. We must stress, this item included special income from the sale of a real es- however, that in view of the nature of our business and the tate development project in Germany. The negative contribu- current economic climate, that is only possible to a certain tion to earnings arose primarily due to our investment holding extent. The reasons for the considerable rise over recent in Spain, which made a loss. years following the financial crisis are detailed below:

Income tax expense of EUR 13.5 million was down slightly, The level of net debt within the Group depends essentially EUR 0.4 million below the previous year's level. The neg- on the working capital, as the intangible assets, the property, ative contributions to earnings by subsidiaries in individual plant and equipment and the investment property are very

Development of EBIT by quarter

in EUR million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Full year 2013

BAUER Group 2.339 6.089 4.927 18.726 32.081 Construction 0.325 2.947 15.225 4.319 22.816 Equipment 3.773 1.998 7.540 18.912 32.223 Resources -2.383 0.533 -17.609 -4.117 -23.576 Other/Consolidation 0.624 0.611 -0.229 -0.388 0.618 COMBINED MANAGEMENT REPORT 49 Earnings, Financial and Net Asset Position

largely covered by the shareholders' equity. The working Our levels of inventories, finished goods and receivables have capital of our businesses is inevitably relatively high due to increased beyond the normal bounds. This is not good, but the nature of our business model and the special market in on the other hand is explainable, because we are aware of which we operate. Our construction projects run for only the reasons why it is so: they reflect market trends as well comparatively short periods of time. As opposed to build- as a number of special effects. Substantial amounts are ing construction contractors, who work on longer-running currently imposing an additional burden, as claims in respect projects, we very rarely receive advance payments for the of supplementary work on completed international construc- construction project in question or generate positive cash tion projects are having to be asserted by legal action. Even flow over the term of the project by billing high prices at the though the amounts are recognized with due commercial start and low prices at the end. Short-running construction caution in the accounts, they are nevertheless imposing a contracts – such as we mostly carry out – require financing burden in terms of the indebtedness of the business. across the Group's many construction sites corresponding to roughly three months' sales of the Construction segment. We are aware that the Group's higher financing require- All our billing therefore takes place after the works have been ments place greater weight on the question of our in-house carried out. Moreover, we also have to finance retentions of financing capabilities. Following the loss made in 2013, the payment as security. equity ratio has fallen too low, so it will have to be increased again in the years ahead. It would be much higher if the The situation in the Equipment segment is similar. Produc- hidden reserves were included. Our financial reporting policy tion lead times for our specialist machinery are around 12 has always been to try to avoid impairment risk arising from months. Since customers usually only order equipment once goodwill on the balance sheet as far as possible. Our bal- they have an actual contract to fulfil, and so expect short ance sheet assets include no goodwill. Since changing over delivery lead times from us, we are forced to hold stocks to IFRS we have used the historical cost model to value land of finished machinery. And since we also offer a very wide and buildings. With a carrying amount for the land and build- product range – as is likewise demanded by the market – ings of EUR 211.6 million, there is a considerable reserve our financing needs are increased correspondingly. The here. Our construction machinery likewise represents another working capital also covers the machines we rent out to hidden reserve. customers, or which are only bought by customers after a certain rental period based on a rental-purchase agree- The net debt to EBITDA and EBITDA to net interest coverage ment. With worldwide inventories now extending to several ratios have worsened since the financial crisis, and especially thousand Bauer machines, many of our locations have to as a result of the loss made in the 2013 financial year. The hold considerable stocks of spare parts in order to provide net debt to EBITDA ratio of 5.34 at the end of 2013 is signifi- customers with the necessary service backup. cantly above the previous year's figure. The two other agreed covenant ratios – EBITDA to net interest coverage above 2.8 Nevertheless, we judge that the working capital of the BAUER and equity ratio above 25 percent – are adequately within the Group is currently too high relative to our business volumes. agreed thresholds. The Group has entered into covenants in

Exchange rate development in 2013

1 EUR equals

Average rate in Q1 2013 Q2 2013 Q3 2013 Q4 2013 Average rate in 2012 2013

USD 1.2918 1.2841 1.3001 1.3536 1.3767 1.3301 GBP 0.8113 0.8459 0.8572 0.8358 0.8331 0.8497 RUB 40.0461 39.8559 42.6660 43.8022 45.2582 42.5912 CNY 8.1397 7.9786 7.9832 8.2849 8.3314 8.1686 50 COMBINED MANAGEMENT REPORT Earnings, Financial and Net Asset Position

respect of a number of long-term loans, which were valued change also entailed an adjustment of the previous year's as per the 2013 year-end at EUR 237.8 million. The cove- figures. As per January 1, 2012 the provisions for defined nants on them stipulate net debt to EBITDA ratio thresholds benefit plans had increased by EUR 13.1 million, and as per of 4.75 and 4.0 respectively. Those thresholds were exceed- December 31, 2012 by EUR 28.5 million. As per Decem- ed due to the loss made in 2013. Some 80 percent of the ber 31, 2012 the non-current provisions for defined benefit creditors concerned affirmed to us even during 2013 that plans were EUR 80.4 million (previously: EUR 51.9 million). they will be maintaining their credit lines, at a slightly higher financing cost to us, despite the expected breaking of cove- The contra-items increasing the provisions for defined benefit nants. plans related to deferred tax assets in amounts of EUR +3.6 million (January 1, 2012) and EUR +7.9 million (December Development of covenants 31, 2012) respectively; to the equity of BAUER AG share-

2012 2013 holders in amounts of EUR -9.4 million and EUR -20.3 million (restated) respectively; and to minority interests in amounts of EUR -0.1 Net debt / EBITDA 3.73 5.34 million and EUR -0.2 million respectively. The equity ratio as EBITDA / net interest coverage 4.19 3.33 per December 31, 2012 decreased as a result of this matter Equity ratio in % 30.2 26.5 from 31.8 percent to 30.2 percent. Net assets rose corre- spondingly as a result of the additional deferred tax assets In order to safeguard our financing for the years ahead, we by EUR 7.9 million. The company will experience a long-term will agree a syndicated loan with our bankers. Though this effect from this change to the balance sheet. Our aim is to will impose additional interest costs on our business, it will return to an equity ratio above 30 percent soon. All other enable us to grow on a stable financing base in the years disclosures relate to the adjusted balances. ahead. We expect the new financing structure to be in place in the second quarter. We plan to comply with the covenants On the Assets side: again in the years ahead. • Intangible assets increased by EUR 0.8 million. Among them, capitalized development costs rose by EUR 4.3 mil- With regard to the individual items on the balance sheet, the lion, concessions and industrial property rights decreased following key changes should be noted: by EUR 1.2 million, and goodwill decreased by EUR 2.2 million. The revision of the chart of accounts and the revised catego- rization pursuant to the requirements of IAS 39 has improved • Land, land rights and buildings increased by EUR 8.7 transparency with regard to financial assets and liabilities, million to EUR 211.6 million. The key change resulted from necessitating appropriate adjustments to the financial state- the completion of building work on our new machinery ments. Liabilities from outstanding invoices and project- plants in Singapore and in Tianjin, China. related provisions have been transferred from "Other current liabilities" to "Trade payables". This increased the trade pay- • Payments on account and assets in course of con- ables as per January 1, 2012 by EUR 32.6 million and as per struction decreased by EUR 17.7 million. They related December 31, 2012 by EUR 35.6 million. mainly to assets in course of construction totalling EUR 9.4 million and machinery and plant for a large construction site As the former item "King piles, sheet piles" is no longer of in the USA started in early 2013 totalling EUR 9.5 million. major significance, it has been merged with the "Raw materi- als and supplies" item. • Technical equipment and machinery increased by EUR 3.8 million. The increase resulted mainly from the first-time Material changes have occurred in relation to shareholders' consolidation of a Russian Construction segment subsid- equity and deferred taxes resulting from the first-time adop- iary (EUR +6.2 million) and the equipment deployed in the tion of IAS 19 R (provisions for defined benefit plans). The year under review on a large construction site in the USA COMBINED MANAGEMENT REPORT 51 Earnings, Financial and Net Asset Position

Assets Equity and liabilities

Non-current assets Shareholders' equity

EUR 584.6 million (36.9 %) EUR 419.4 million (26.5 %) (2012: EUR 600.1 million (39.2 %)) (2012: EUR 462.6 million (30.3 %))

Current assets Non-current assets

EUR 943.4 million (59.5 %) EUR 382.3 million (24.1 %) (2012: EUR 884.1 million (57.8 %)) (2012: EUR 572.3 million (37.4 %))

Liquid funds Current assets

EUR 57.2 million (3.6 %) EUR 783.5 million (49.4 %) (2012: EUR 45.2 million (3.0 %)) (2012: EUR 494.5 million (32.3 %))

EUR 1,585.2 million EUR 1,585.2 million

(EUR +8.8 million). The principal contra-items were asset which was financed by us and which we have been con- sales and depreciation and amortization in Hong Kong, tracted to operate for a period of 20 years. The plant was the United Arab Emirates and Jordan totalling EUR 13.0 financed partly by ourselves and partly by our customer. million. The shift in demand on international construction The balance sheet value is reduced each year through markets means that our construction works require in- the payment of order-related costs, countered by interest creasingly large machinery and equipment. Consequently, income. It was EUR 36.8 million. small equipment is increasingly being replaced by much larger machinery, leading to a general increase in fixed as- • Other non-current financial assets decreased by EUR sets. They were nevertheless reduced in the past financial 1.4 million to EUR 5.4 million. year. • Raw materials and supplies were reduced by EUR 7.7 • Other equipment, factory and office equipment de- million against the previous year to EUR 146.7 million. creased by EUR 0.4 million to EUR 27.3 million. Around 40 percent of this item relates to the Construction and Resources segments. Property, plant and equipment and investment property were reduced overall by EUR 5.8 million to EUR 459.5 mil- • Work in progress and finished goods and merchan- lion. dise decreased by EUR 2.7 million to EUR 272.7 million. We aim to reduce inventories in the Equipment segment • Investments accounted for using the equity method further. decreased by EUR 3.2 million to EUR 10.0 million. The key change related to dividend payments by Wöhr + Bauer • Receivables from construction contracts (PoC) GmbH. increased by EUR 26.8 million to EUR 143.2 million. Changes in this item result from the random percentage • Deferred tax assets decreased by EUR 1.9 million. of completion of our projects at the year-end.

• Receivables from concession arrangements include the • Trade receivables increased by EUR 50.6 million to biological water treatment plant for the oil industry in Oman EUR 323.0 million. They include the receivables from joint 52 COMBINED MANAGEMENT REPORT Earnings, Financial and Net Asset Position

ventures which at the year-end totalled EUR 19.7 million, duction at the balance sheet date also represents a very up EUR 5.2 million against the previous year. substantial capital tie-up.

• Other current assets decreased by EUR 9.6 million to • Receivables from construction contracts (PoC) almost EUR 30.7 million. entirely relate to the Construction and Resources seg- ments. The trade receivables item is broken down ac- • Other current financial assets increased from EUR 17.5 cording to the respective segments' shares of total Group million to EUR 19.6 million. revenues.

• Cash and cash equivalents increased by EUR 12.0 These different weightings are barely relevant to inter-period million to EUR 57.2 million. Attempts are made to minimize balance sheet comparisons when the rate of growth – either this figure at the year-end by appropriate liquidity manage- positive or negative – of the business areas is roughly the ment. Those attempts were not sufficiently successful in same. the year under review. Some transfers from abroad could no longer be executed. On the Equity and Liabilities side: • Shareholders' equity decreased by EUR 43.1 million In assessing the Assets side of the consolidated balance to EUR 419.4 million. The key changes reflect the loss for sheet, it is important to note that this is composed of a Con- the period (EUR -19.4 million), changes in exchange rates struction element (relating to the Construction and Resources (EUR -15.7 million), the first-time consolidation of a Con- segments) and an Equipment element (relating to machinery struction segment subsidiary in Russia (EUR -2.9 million) manufacturing operations). Some specific items relate pri- and the 2013 dividend payment (EUR -6.6 million). marily to the Construction segment, while others, in contrast, relate to the Equipment segment. The main items of such • Minority interests decreased by EUR 10.4 million to kinds are listed in the following: EUR 22.8 million. The minority interests of third-party shareholders in Jordan decreased as a result of a share- • Within property, plant and equipment, well over two holder's capital contribution and the loss attributable to the thirds of the land, land rights and buildings item relates to minority interest. The equity of BAUER AG shareholders the Equipment segment, whereas around three quarters of decreased by EUR 32.7 million as a result. the technical equipment and machinery item is attributable to the Construction segment. • The non-current portion of liabilities to banks de- creased from EUR 426.2 million to EUR 247.8 million. • Some 60 percent of the raw materials and supplies item The main factor in the reduction in this item is that a is linked to the machinery manufacturing operations of the number of long-term loans are due for refinancing in 2014 Equipment segment. and were transferred to the current liabilities to banks at the year-end. Owing to the expected failure to meet • Some 90 percent of the work in progress and finished agreed covenants, we had already made an offer to the goods and merchandise item relates to the Equipment banks concerned at the end of 2013 to continue the loans segment, with a small percentage attributable to the against an appropriate additional payment. The loans on Construction and Resources segments. In the Equipment which no such agreement was obtained from the bank segment, it is essential to successful selling operations at the accounting date were likewise transferred to the to maintain stocks of rental equipment as part of current current liabilities to banks. assets, so that customers can try out the machinery before making their final purchasing decision. Equipment can • Non-current defined benefit liabilities increased by EUR also be drawn from the pool to cover short-term capacity 1.2 million to EUR 81.6 million. bottlenecks on construction sites. The machinery in pro- COMBINED MANAGEMENT REPORT 53 Financial Statements of BAUER Aktiengesellschaft

• Deferred tax liabilities decreased by EUR 4.6 million. construction contracts resulted in a capital tie-up of EUR -90.0 million. • The current portion of liabilities to banks increased from EUR 168.1 million to EUR 427.6 million. The increase also • In addition to the unplanned write-downs of inventories relates to the effects described in relation to the "Non-cur- due to use, negative exchange rate shifts also impacted on rent portion of liabilities to banks" item. Financing increased operating cash flow (EUR -22.7 million). by EUR 81.1 million overall in terms of current and non-cur- rent liabilities to banks. Taking into account the increase in • Trade payables increased by EUR 20.5 million. The increase the "Cash and cash equivalents" item (EUR 12.0 million), was explained in the notes on the net asset position. the increase was EUR 69.1 million. The increase was nec- essary owing to the reduced shareholders' equity and the Cash flow from investment activities totalled EUR -67.2 increase in net assets. million, decreasing to EUR 9.0 million below last year's figure, especially due to the reduced investment activity. • Liabilities from construction contracts relate primarily to construction projects on which the payments received The inflow of funds from financing activities was EUR 43.6 surpass the work carried out. They increased by EUR 2.9 million. A major factor in this was the new indebtedness to million. banks totalling EUR 111.7 million. This was partly compen- sated for by loan repayments totalling EUR 17.3 million and • Trade payables increased by EUR 21.8 million to EUR interest payments totalling EUR 39.3 million. 194.5 million. This increase is partly coincidental. It does, however, also in part conform to our strategy of includ- ing our suppliers more closely in providing the increased V. FINANCIAL STATEMENTS OF BAUER up-front financing needed. By this practice we are able to AKTIENGESELLSCHAFT make use of all discounting opportunities. For the 2013 financial year we have, for the first time, com- • Other current liabilities increased by EUR 9.4 million to bined the Group Management Report and the Management EUR 69.9 million. Report of parent company BAUER AG. Consequently, notes on the balance sheet and income statement of BAUER AG • Other current financial liabilities decreased by EUR 1.7 are presented at this point. They changed materially in the million to EUR 12.1 million. following items in the past financial year relative to the previ- ous year. The ratio of net assets to consolidated revenues decreased slightly from 111.1 percent to 109.4 percent. Main changes to the balance sheet: • Financial assets rose from EUR 105.7 million to EUR Net cash from operating activities shown in the cash flow 115.7 million, mainly due to the EUR 10.0 million increase statement decreased substantially from EUR 165.7 million in shares in affiliated companies, specifically in BAUER to EUR 38.4 million. The following factors contributed to this Resources GmbH. change: • Receivables and other assets increased by EUR 5.5 mil- • Owing to the effects set out under "Earnings", a pre-tax lion. This is primarily down to the EUR 6.6 million increase loss of EUR 6.0 million was made. in receivables from affiliated companies, which results from the issue of more loans to subsidiaries. • Depreciation of fixed assets totalled EUR 79.7 million. • Liabilities increased from EUR 122.2 million to EUR 137.1 • The increase in trade receivables and in receivables from million. The increase in liabilities to affiliated companies of 54 COMBINED MANAGEMENT REPORT Financial Statements of BAUER Aktiengesellschaft

EUR 15.0 million is primarily due to the increased creation into account the Group's consolidated earnings. The divi- of credit balances with BAUER AG by subsidiaries. dend policy of BAUER AG is one of continuity, meaning that in principle a dividend should be paid even in difficult years, Main changes to the income statement: where financially justifiable. As the Group's holding company, • Sales revenues, primarily related to charging of admin- BAUER AG is dependent on the earnings of its subsidiaries, istrative services to subsidiaries, increased by EUR 1.7 and additionally provides financing to them. million. The payment of a dividend this year would not be financially • EBIT fell by EUR 2.1 million to EUR -0.7 million, mainly due justifiable in view of the impact on the balance sheet of the to the EUR 3.6 million rise in other operating expenses. past financial year, the decline in the Group's equity ratio Significantly higher expenses were incurred during the and the loss made by the Group as a whole. The Manage- financial year in currency management. Moreover, special ment Board will therefore recommend to the Supervisory expenditure was incurred as a result of breaking agreed Board that it propose to the Annual General Meeting that covenants on a number of long-term loans. no dividend be paid to shareholders on the net retained earnings totalling EUR 27,428,937.64. An amount of EUR • The net profit for the year fell by EUR 8.3 million to EUR 27,428,937.64 should therefore be carried forward. 5.1 million. In view of the difficult trading conditions in the various Group segments, dividend payments to BAUER As the Group's holding company, BAUER AG receives earn- AG by subsidiaries were reduced, so income from par- ings in particular from its subsidiaries. In 2014 the dividends ticipations decreased by EUR 6.0 million. The lower EBIT paid by the subsidiaries will be significantly lower than in the additionally had an impact. year under review, as the subsidiaries need the capital base on their own books. For that reason, and due to the higher The payment of dividends to shareholders is based on the financing costs, the financial statements of BAUER AG will net earnings of BAUER AG as the parent company, taking show significantly lower earnings. COMBINED MANAGEMENT REPORT 55 Sustainability

VI. SUSTAINABILITY

SUSTAINABILITY WITHIN THE BAUER GROUP The main responsibility within the Group in terms of the The BAUER Group has consolidated its key action areas sustainable development of the business and policies relating under the maxim "BAUER's Triple A". The slogan is based on to matters of quality, health and safety and environmental the top mark awarded by credit rating agencies. It flags the protection lies with the Group Management Board and the concerns regarded as being of particular importance within directors of the holding companies. The joint monthly meet- the Group as a whole. They include the area of health, safety ings also deal with the topics in question. and the environment (HSE), which has been substantially expanded in the last two years through an array of measures, The Corporate Social Responsibility (CSR) Committee, which with still more in the pipeline. Other key concerns are quality meets once a year and comprises the Group Management and ethics. We aim to provide our customers with top quality, Board members together with representatives of the Human and seek to act fairly and equitably in relations with all our Resources, HSE, Training and Investor Relations depart- stakeholders. The third 'A' relates to performance – that is to ments/areas at BAUER AG, reviews the latest trends and de- say, the commercial profitability of the business. The aim is velopments and stipulates measures and goals. The annual to achieve the top mark in all three areas – triple A in fact. Sustainability Report, which has been compiled in compli- ance with the requirements of the Global Reporting Initiative (GRI) since 2011, provides information on the actions taken and the set goals.

EMPLOYEES The commitment, know-how and innovative ideas of our employees are vital to the success of the business. In view of Performance that fact, personnel development is of the highest priority to Health the management of the BAUER Group. Safety Environment Employee-related data The companies of the BAUER Group worldwide employed The areas highlighted under BAUER's Triple A are also the 10,264 people (previous year: 10,253) on average over the core elements of our sustainability management practices. year. The workforce is broken down as follows:

Value added 2013 in EUR million Value added Other expenses Depreciation and amortization Cost of materials 382 225 94 756

Minority interests Public purse -3 13

Profit (in Share- Interest Employees the com- holders expenses 343 pany) 0 46 -17 56 COMBINED MANAGEMENT REPORT Sustainability

• Construction segment: 5,531 (previous year: 5,454) key goals is to retain the loyalty of our core permanent work- • Equipment segment: 2,998 (previous year: 2,952) force, which we again succeeded in doing in the past year. • Resources segment: 1,449 (previous year: 1,578) • BAUER AG and subsidiaries: 286 (previous year: 269) In the year under review the workforce of the Resources segment was reduced primarily in Jordan due to the con- The trend in workforce numbers within the Group was in line clusion of the major project carried out by the Site Group for with our expectations. Changes to subsidiaries' workforce Services and Well Drilling Ltd. Co. numbers were primarily recorded outside of Germany, linked to international construction projects. Individual contracts Education often facilitate major changes. Bauer employed 240 apprentices in Germany in 2013. Most of them were training to become industrial mechanics, con- By the nature of its operations, the workforce of the Con- struction machinery operators, or clerical staff. We attach struction segment is subject to the greatest fluctuation great importance to providing practically oriented training. dependent on the number of major projects being handled Apprentice construction machinery operators, for example, in specific countries. Consequently, the biggest growth was have the opportunity while still in their apprenticeship period achieved by the subsidiaries in Indonesia (135 employees), to gather some initial experience on our proving grounds and the Philippines (60 employees) and in the USA (56 employ- to participate in work on construction sites. On completing ees). In some countries, such as Vietnam and the United their apprenticeship, they have the chance to work on excit- Arab Emirates, fewer people were employed in the year ing construction projects in Germany and abroad. under review than in the previous year owing to the weaker state of the market. The generally healthy levels of orders in For higher education students, we offer dual-study courses in hand led to a slight increase in the Construction segment engineering and information technology in cooperation with workforce overall. the Hochschule Ingolstadt technical college. Students can also establish initial links with our business through internships Workforce numbers in the Equipment segment increased or by undertaking their Bachelor's or Master's thesis with us. only marginally. Most of the small rise was attributable to recruitment of new staff at the production facilities in the Far Training and development East (17 employees) and the USA (15 employees). Workforce The BAUER Training Center GmbH is the Group's in-house numbers in Germany remained virtually constant. One of our training facility, providing specially tailored courses both for

Employees by segment Employees by employment relationship

12,000 12,000

10,253 10,264 10,253 10,264 10,000 9,646 269 269 10,000 9,646 239 240 9,094 251 9,094 1,449 248 245 1,578 264 1,367 8,000 1,019 8,000 3,664 3,835 3,371 2,952 2,998 3,108 2,775 2,915 6,000 6,000

4,000 4,000 6,350 5,454 5,531 5,722 6,027 6,189 5,055 5,113 2,000 2,000

0 0 2010 2011 2012 2013 2010 2011 2012 2013

Construction Equipment Resources Other Industrial Salaried staff Apprentices COMBINED MANAGEMENT REPORT 57 Sustainability

our own staff and for external target groups. Its extensive In 2013, approximately 12 percent of the Group's workforce programme of seminars and courses in a wide variety of were women – a figure which essentially reflects the technical fields covers many different subjects. In 2013 the BAUER nature of our business and the small numbers of women who Training Center GmbH had a budget of around EUR 2.3 mil- apply for such careers. lion (previous year: EUR 2.1 million) for employee training and development. Almost 2,948 in-house staff (previous year: CAPITAL INVESTMENTS 2,817) attended the seminars. A total of 599 (previous year: In view of the general economic climate, we significantly 534) internal and external seminars and external conferences reduced our capital investments compared to previous years were attended. in 2013. They were nevertheless still above our depreciation levels. The pace of technological progress in our business We support our employees' career development through a has become faster, so it is only possible to improve perfor- system of reviews, coaching sessions and various mentoring mance by increasing investment. programmes. We also conduct international training courses. Construction of the new plants for the Equipment seg- Diversity ment in China and Singapore was completed in 2013. Both The BAUER Group employs people of a wide variety of eth- investments had become necessary because the govern- nic origins. The workforce comprises colleagues from 81 dif- ment agencies in the locations concerned had terminated ferent countries, all working together to realize our projects. the company's existing lease agreements in order to use Mutual respect – regardless of religion, age, gender, ethnic the sites for other purposes. A positive outcome of this origin or sexual orientation – is key. Diversity is an integral situation is that the new leases will run for much longer part of everyday life and work in our company. terms: 50 years in China, and 30 years in Singapore. The Chinese plant continues to produce our rotary drilling rigs We assume a high degree of responsibility when it comes for the local market. The plant in Singapore serves as a to equality of opportunity. We assess our employees solely central warehouse facility, rental centre and service work- according to their performance and potential. Personal and shop for our equipment customers in the Far East. With the professional suitability are the sole criteria which apply when completion of the two plants, all major production facilities we fill posts. We have taken it upon ourselves to raise aware- have now been made fit for the future, meaning significantly ness of equality issues. less capital investment will be necessary in the years ahead. Depreciation and amortization will enable us to reduce our

Employees by region fixed assets in the Equipment segment over the coming years. 12,000

10,253 10,264 Major investments were also made on behalf of the Re- 10,000 9,646 9,094 965 950 sources segment in the past year. The upgrading of our 924 967 542 612 plants that manufacture well engineering materials, especially, 8,000 402 478 2,061 2,212 necessitated capital investment. New machinery was also 1,599 1,891 6,000 purchased for drilling. 1,489 1,658 1,869 1,584 726 762 4,000 601 630 Further intensive investments were made in equipment, spe- cifically in the Construction segment, in order to meet the 4,090 2,000 4,036 4,065 4,144 market demand for ever more powerful machinery to handle specialist projects. We have for years now been seeing a 0 2010 2011 2012 2013 trend towards ever larger volumes in international infrastruc- ture projects, and we are increasingly needing ever larger Germany Europe (other) Middle East & Central Asia Far East & Australia America Africa machinery to carry out the associated specialist foundation 58 COMBINED MANAGEMENT REPORT Sustainability

engineering works. This demands higher levels of investment, sold to China have been successfully delivered. In the large- but also opens up new market opportunities for us. rig segment, the 440-tonne unit has been upgraded and equipped with a fully automatic rod handling and walking In financial 2013 the BAUER Group invested a total of EUR system. 91.6 million (previous year: EUR 96.4 million) in property, plant and equipment. Depreciation of fixed assets across the In the underwater drilling rig segment we have opened up Group totalled EUR 79.7 million (previous year: EUR 76.4 an entirely new field. Our existing rig is capable of executing million). Write-downs of inventories due to use Group-wide large-diameter bores in hard rock to install piles for tidal tur- totalled EUR 14.2 million (previous year: EUR 15.4 million). bines. Tidal turbines are feasible almost exclusively in ocean narrows, where the rock prevents the water from becoming Additions to the property, plant and equipment assets of deeper, so that strong currents can occur. By contrast, wind BAUER AG in the 2013 financial year totalled EUR 1.7 million turbines are mostly installed out at sea. The beds vary widely, (previous year: EUR 2.1 million), against depreciation of EUR though with less rock, instead comprising mostly sediment 1.4 million (previous year: EUR 1.4 million). of differing quality. To date, foundations for wind turbines are sunk primarily using driven piles. The major disadvantage of Ongoing capital investments were funded primarily by cash such methods is the enormous noise, which is very hazard- and cash equivalents from business operations and from ous to marine animal life. financing. In 2014 we will be able to keep capital investments below depreciation, which will also help reduce balance Drilling techniques in such environments is enormously sheet items. complex, as bores are very difficult to stabilize under water. We have devised a drilling technique which, serving as a RESEARCH AND DEVELOPMENT mixed-in-place technique, mixes the surrounding soils with The BAUER Group invested substantial sums in developing cement suspension and at the same time installs a steel pile. new construction methods and machinery in financial 2013. We have subjected the new technique to extensive testing Key areas of focus were heavy-duty rotary drilling rigs; cranes on land, and it exhibits a wide range of advantages over the for specialist foundation engineering applications; drilling tool conventional method. Whether such a technique will be able technology; small boring equipment in the field of anchoring to establish itself on the market remains to be seen. and high-pressure injection; diaphragm wall technology; deep drilling; underwater drilling; and measuring technology For many years now, our products and services have extend- for quality control purposes. Many new electronic applica- ed well beyond the bounds of specialist foundation engineer- tions and techniques have been created or enhanced in ing. The BAUER Group today is a machinery manufacturer order to optimize on-site processes. and service provider in all fields relating to ground and groundwater. Pursuing that strategy, many units within the The reorganization of research and development structures Group have been undertaking additional development work, within BAUER Maschinen GmbH in 2011 has again proved such as to design new pipes for underground engineering very worthwhile, resulting in a marked enhancement of de- installations, to advance water purification based on a wide velopment work in the individual business units. The various variety of methods, and to produce modern materials for use machine groups have dedicated, product-specific depart- in geotechnical applications. A state-of-the-art system of ments with independently managed development capacity. innovation management is practised with great intensity by This has brought the development, product management all Group units. and sales functions much closer together, enabling faster development cycles as part of our efforts to build on our In the Equipment segment we invest over 4.4 percent competitive edge on the market. (including internal and project-related expenditure) of the corresponding portion of total Group revenues in research In the deep drilling field, our 100-tonne rig has been adapted and development. A staff of some 190 people is involved in to the needs of emergency rescue drilling and the six rigs this field, as well as outside consulting engineers and interns. COMBINED MANAGEMENT REPORT 59 Sustainability

Research and development activities are routinely reviewed therefore made significant efforts in recent years to strength- and maintained at a high level to keep pace with the ever en its HSE policies and procedures. The HSE guidelines set increasing rate of change in market demands. We are con- out the procedures for planning, implementing and contin- tinuing to expand our development departments outside of uously monitoring the efficacy of Group-wide international Germany, such as in India and China. This will enable us to health, safety and environmental standards. They represent benefit from the large numbers of highly trained engineers the minimum requirements for all HSE systems across the available on local labour markets. BAUER Group, are applicable worldwide and are oriented to the ILO and OHSAS 18001 standards as well as to ISO Research and development expenditure in the Construction 14001. segment is 0.4 percent of total Group revenues, and in the Resources segment 1.9 percent. We invest further significant The guidelines are founded on the corporate HSE policy of resources in the preparation and design of construction sites. the BAUER Group. By continually reviewing our performance Profitable construction contracts are very often obtained and cross-checking it against set HSE standards and objec- on the basis of special proposals on the market. Drawing tives, we are aiming to achieve the continuous improvement up such special proposals is development work, and also of our HSE system and so consistently minimize our accident provides a competitive edge for future projects on which and damage rates. the costs cannot be recorded separately from the general construction works. Health and safety One of our key tasks is to protect the health of our employ- Of the total research and development costs for 2013 of ees and to ensure safe working conditions for everyone EUR 32.8, an amount of EUR 8.6 million was capitalized engaged in the business. Compliance with national and (capitalization rate: 26.1 percent). Depreciation of capitalized international standards is just one aspect which we expect development costs and patents totalled EUR 5.2 million. from our business units. It is essential for a global Group to impose its own high standards, rules and procedures in Our expenditure on research and development is reflected relation to HSE, and to monitor and continuously improve in 259 (previous year: 251) current patent series, including their implementation. 1,473 (previous year: 1,340) patent applications, registered patents and utility models worldwide. Our employees are routinely trained in HSE matters. Weekly staff safety meetings are held on our construction sites and HEALTH SAFETY ENVIRONMENT (HSE) in all our production facilities. This helps raise awareness and For the BAUER Group, HSE is an integral element of every- acceptance of HSE standards and procedures among our thing we do in creating and developing all our products, workforce. specialist services, and business processes. The Group has

Research and development in the BAUER Group

2012 2013

BAUER BAUER Construction Equipment Resources Construction Equipment Resources Group Group

Total Group revenues (in EUR million) 640.8 536.2 258.8 1,435.8 718.3 590.2 197.7 1,506.2 Expenses for R&D (in EUR million) 3.1 20.0 2.6 25.7 3.1 26.0 3.7 32.8 in % of total Group revenues 0.5 3.7 1.0 1.8 0.4 4.4 1.9 2.0 Group employees 5,454 2,952 1,578 10,253 5,531 2,998 1,449 10,264 Employees in R&D 44 184 34 262 45 190 33 268 Patent series - - - 251 - - - 259 Patent applications, registered patents, etc. - - - 1,340 - - - 1,473 60 COMBINED MANAGEMENT REPORT Sustainability

Environment For us, quality management means recording and measuring The environmental management system of the BAUER the individual processes, defining requirements for provision Group applies throughout the Group. It defines environmental of the necessary personnel and material resources and de- protection as an integral element of corporate HSE policy. veloping procedures to ensure that all involved are kept up- The key factor in this is that environmental protection is at the to-date at all times. It also includes ensuring the traceability forefront of awareness in everything we do in all phases, in of the product creation process and implementing preventive all divisions and departments and in all aspects of business defect avoidance. processes and procedures – particularly in production and on construction sites. We see quality management as a dynamic system, in which audits are assessed by management and their results incor- Many Group locations and companies – including the home porated into new goal setting. Our employees contribute to base Schrobenhausen – already operate environmental this process with numerous suggestions for improvement. In management systems certified to standards such as EMAS. some cases, these have led to products or innovations being BAUER Spezialtiefbau GmbH was the first member of the registered as patents. BAUER Group to participate in the "Umweltpakt Bayern" eco-pact, an environmental initiative between the Bavarian Our policy is to implement other management systems in the state government and businesses in the state. various Group companies alongside quality management to ISO 9001. We aim to assure customer satisfaction, in new QUALITY business fields especially, by implementing industry-specific Despite the diversity of all the different countries and mar- management systems, such as in conformance to API stand- ket segments in which we operate, quality remains a key ards for companies with customers operating in the oil and customer requirement everywhere. We aim to satisfy our cus- gas sector. tomers by delivering the products and services they need. We regard the durability of our products also as a contribu- tion to sustainability. COMBINED MANAGEMENT REPORT 61 Legal Disclosures

VII. LEGAL DISCLOSURES

REMUNERATION REPORT in full if all set goals are attained. If business performance is The Remuneration Report sets forth the system of remuner- exceptionally good, the said levels may be surpassed by up ation paid to the members of the Management Board and to 1.8 times. the total amounts paid to them, and explains the underlying principles and amount with regard to the remuneration paid The short-term criteria applied in setting the variable remu- to the Supervisory Board. neration elements are the performance of the respective Management Board members in the past financial year and Remuneration of the Management Board the economic position of the Group in respect of attainment The Management Board of BAUER AG, as previously, com- of budget targets in the year under review, particularly the prised three members in the year under review. The Super- attainment of profit and revenue targets, taking into account visory Board sets the overall levels of remuneration paid to general economic trends. the individual members of the Management Board based on proposals submitted by the Presidial and Personnel Com- The long-term criteria applied in setting the variable remu- mittee. The plenary Supervisory Board reviews and approves neration elements are the success and future prospects the remuneration system for the members of the Manage- of the Group and the performance of the Management ment Board following prior consultations in the Presidial and Board in respect of these criteria. This assessment judges Personnel Committee. the decision-making of the Management Board in terms of sustainable business development over the past three The system of remuneration paid to the members of the financial years and the effects of this decision-making in Management Board did not change from the previous year. achieving long-term stability for the business. Criteria applied The overall levels of remuneration paid to the individual here are long-term profit and revenue prospects, sustain- members are set on the basis of a performance assess- able personnel development in accordance with the future ment. This process assures that the overall remuneration prospects of the Group, the development of the corporate is appropriate to the duties and performance of the Man- culture, the development of intra-Group collaboration, the agement Board member concerned and to the situation safeguarding of corporate harmony, strategic market and of the company. The remuneration paid to each Manage- product development, long-term investment planning, risk ment Board member is composed of a fixed basic salary, and security management, long-term financial stability, and paid in equal monthly instalments, and a variable annual the quality of key financial indicators relative to the prevailing bonus which is determined according to both short-term economic conditions. and long-term criteria at the discretion of the Supervisory Board. The short-term criteria applied in assessing levels In assessing the appropriateness of the remuneration paid of variable remuneration are weighted equally to the long- to the Management Board, the variable remuneration is set term criteria. and compared in proportion to the fixed basic salary. Further- more, the fixed and variable portions respectively, and the The criteria for setting the fixed remuneration to members overall remuneration paid, are compared against the normal of the Management Board are the assignment of duties, the levels of remuneration received by management board mem- performance of the respective Management Board member, bers of other stock market quoted companies, and other the economic position of the Group and its profitability and companies operating in the same sector, or companies simi- ongoing future prospects. lar in other ways, in Germany (horizontal comparison). A verti- cal comparison is carried out on two levels: firstly, the salaries Maximum limits are imposed on the total remuneration paid. of the Management Board members are compared against The variable remuneration paid to each member of the Man- those of the directors of the major BAUER Group subsidiar- agement Board is limited by an individually defined maximum ies; secondly, they are assessed relative to salary grade A VIII bonus level. This maximum is the upper limit of potential stipulated in the collective pay agreement applicable within bonus payment in the normal course of business, and is paid the Group within the industry-wide framework of salary and 62 COMBINED MANAGEMENT REPORT Legal Disclosures

training remuneration to salaried staff and foremen in the remuneration for any one Management Board member. No construction sector. provisions for compensation in the event of a takeover offer being made have been agreed with the members of the The remuneration is further set so as to remain competitive Management Board. with that generally paid to highly qualified management staff on the market as a whole. Remuneration of the Supervisory Board The Supervisory Board of BAUER AG comprises 12 mem- The Annual General Meeting held on June 30, 2011 resolved bers. There was just one change to its composition in the that the BAUER AG financial statements and the Group con- year under review: Mr. Walter Sigl retired with effect from the solidated financial statements for the financial years 2011 to middle of the year, to be succeeded by newly elected em- 2015 would contain no disclosures of the remuneration paid ployee representative Mr. Stefan Reindl. Calculation of the to individual Management Board members, thereby applying remuneration paid to the members of the Supervisory Board the legal authority assigned to it by section 286, subsection is specified in detail in the Articles of Association of BAUER 5 and section 314, subsection 2 of the German Commercial AG. Each member of the Supervisory Board receives a basic Code (HGB). annual fee of EUR 18 thousand, payable in December of each financial year, plus reimbursement of out-of-pocket The total remuneration paid to members of the Management expenses and any sales tax (VAT) liability incurred in perform- Board in the year under review, excluding allocations to pro- ing the duties of a Supervisory Board member. The Chair- visions for defined benefit plans, was EUR 1,361 thousand man of the Supervisory Board receives twice that amount (previous year: EUR 1,389 thousand). Of that total, EUR of remuneration, and the Deputy Chairman 1.5 times the 1,056 thousand (previous year: 1,019 thousand) was not amount. The basic remuneration amounts are increased by performance-related and EUR 305 thousand (previous year: 10 percent for each membership of a Supervisory Board 370 thousand) was performance-related. The total remuner- committee, provided that the committee in question was ation includes benefits in kind arising from the private use of convened at least twice in the financial year. Membership of a company car and reimbursement of travel expenses for the Mediation Committee is excluded from these remuner- each member of the Management Board, as well as pro rata ation provisions. Changes to the Supervisory Board and/or group accident insurance premiums and employer's liability its committees are taken into account in the remuneration insurance association contributions. proportionate to the respective member's time in office, and rounded up or down to full months based on the standard The company pension scheme for Management Board commercial rule. The members of the Supervisory Board members incurred pension service costs totalling EUR 118 receive no performance-related pay. thousand (previous year: 114 thousand). The pensionable earnings serving as the basis for calculating pension levels The net remuneration paid to all the members of the are significantly lower than the basic salary in all contracts. Supervisory Board in the 2013 financial year totalled EUR Calculated in accordance with IAS 19, the defined benefit 254 thousand (previous year: EUR 254 thousand). obligation entailed by all pension commitments to members of the Management Board at the year-end was EUR 3,868 Other thousand (previous year: EUR 3,596 thousand). No loans or advances were paid to members of executive bodies of the company in the year under review, nor were The contracts of Management Board members include indi- any liabilities entered into in their favour. As a matter of vidual severance clauses regulating the specific terms of pre- principle, no securities-oriented incentive systems exist for mature termination, with settlements oriented to the length members of the Management Board or Supervisory Board of of service of the Management Board member concerned BAUER AG, or for Group employees in Germany. BAUER AG and gauged so as not to exceed an amount of two years' provides D&O (Directors and Officers) group insurance cover COMBINED MANAGEMENT REPORT 63 Legal Disclosures

Remuneration Supervisory Board (excluding sales tax and expenses) in EUR '000 2012 2013

Chairman

Dr. Klaus Reinhardt 38 38 Deputy Chairman

Robert Feiger 27 27 Employer representatives

Dr.-Ing. Johannes Bauer 20 20 Dipl.-Ing. (FH) Rainer Schuster 18 18 Dipl.-Ing. (FH) Elisabeth Teschemacher 18 18 Gerardus N. G. Wirken 20 20 Prof. Dr. Manfred Nußbaumer 20 20 Employee representatives

Dipl.-Volkswirt Norbert Ewald 20 20 Dipl.-Kfm. (FH) Stefan Reindl 09 Regina Andel 18 18 Dipl.-Ing. Gerold Schwab 20 20 Dipl.-Ing. (FH) Walter Sigl 18 9 Reinhard Irrenhauser 18 18 Total * 254 254

* Rounding to thousands of EUR resulted in a rounding difference of EUR 1 thousand in 2012 and 2013.

in respect of liability for economic loss to the members of consent of the Supervisory Board, become a management executive bodies of BAUER AG and of all affiliates in Germa- board member, director or personally liable shareholder of ny and internationally in which a majority share is held. The any other trading company. This ensures that no conflict D&O policy includes an appropriate excess for the insured arises with the assigned duties of the Management Board parties. For the members of the Management Board, the member either in relation to time commitment or to remu- minimum excess stipulated by law of 10 percent of the loss neration received. No separate remuneration is paid for the up to at least an amount representing one and a half times assumption of executive or supervisory mandates on the the fixed annual remuneration of the Management Board boards of Group companies. member concerned was agreed in the D&O insurance policy in the year under review. STATUTORY DISCLOSURES REGARDING TAKEOVERS The following disclosures are made pursuant to section 315, The members of the Management Board are required to limit subsection 4 and section 289, subsection 4 of the German the extent to which they take on Supervisory Board man- Commercial Code (HGB) as per December 31, 2013. dates and other administrative or voluntary functions outside of the company. The members of the Management Board Composition of subscribed capital may not, without the consent of the Supervisory Board, The subscribed capital (share capital) of BAUER AG remains carry out any trade or business or conduct, on their own or unchanged at EUR 73,001,420.45 and is divided into a third-party's account, any dealings in the sector in which 17,131,000 no-nominal-value bearer shares, representing the company operates. Further, they may not, without the a pro rata amount of approximately EUR 4.26 per share of 64 COMBINED MANAGEMENT REPORT Legal Disclosures

the total share capital. Each share entails equal rights, and tion rights pursuant to section 186, subsection 3, clause entitles the holder to one vote at the Annual General Meeting, 4 AktG do not in total exceed 10 percent of the existing with the exception of share categories precluded from voting share capital either at the time this authority takes effect or by law pursuant to section 136 of the German Stock Cor- at the time of exercising this authority. Shares which have poration Act (AktG) and section 28 of the German Securities been or are to be sold or issued in direct or corresponding Trading Act (WpHG). application of section 186, subsection 3, clause 4 AktG while this authority is in place until such time as it is exer- As in the previous year, 51.81 percent of the shares were in cised, pursuant to other authorities, excluding subscription free float. The members of the Bauer family and a charitable rights, are to be set off against the said 10 percent limit; foundation own a total of 8,256,246 no-nominal-value shares in BAUER AG on the basis of a pool agreement, representing • to balance out fractional amounts. a 48.19 percent share in the company. Six new Bauer family members joined the pool as a result of share transfers within By resolution of the Ordinary Annual General Meeting held the family during the year under review. The pool agreement on June 24, 2010, the company was authorized to acquire provisions include binding voting commitments as well as re- treasury stock, over a limited period up to June 23, 2015, strictions on the transferability of pool members' shares. No representing up to a total of 10 percent of the company's other direct or indirect holdings of BAUER AG share capital share capital at the time the resolution was passed. The exceeding 10 percent of the voting rights are known to the shares shall be acquired at the discretion of the Manage- company. ment Board by means of a public tender offer or by way of the stock market. If the acquisition is effected by way of the None of the shareholders have special rights entailing con- stock market, the acquisition price (excluding ancillary costs) trolling powers. Nor does any voting rights control exist on may be no more than 10 percent above or 20 percent below the part of the employees holding shares in the capital. the price determined by the opening auction on the trading day for shares in the company in Xetra trading (or a compa- Authority of the Management Board to issue or buy rable successor system) on the Frankfurt Stock Exchange. back shares If the acquisition is effected by means of a public tender Article 4, paragraph 4 of the company's Articles of Associ- offer, the purchase price or the limits of the purchase price ation states that the Management Board is authorized, with span per share (excluding ancillary costs) may be no more the consent of the Supervisory Board, to increase the share than 10 percent above or 20 percent below the average of capital once or more than once up to June 27, 2017 by up the closing prices per share in the company in Xetra trading to a total of EUR 7.3 million by the issue of new no-nom- (or a comparable successor system) on the three trading inal-value bearer shares against cash and/or non-cash days prior to the day of issue of the public tender offer. If not contributions (2012 authorized capital). To that end, the insignificant variations of the decisive share price occur after Management Board is authorized, with the consent of the the day of issue of the public tender offer, the purchase price Supervisory Board, to exclude the legal subscription rights may be adjusted. of shareholders in the following cases: The Management Board shall be authorized to appropriate • in the event of capital increases against non-cash contribu- shares in the company acquired pursuant to the above tions; authorizations for all legally admissible purposes. Conse- quently, the acquired shares may also in particular be sold by • in the event of capital increases against cash contributions means other than by way of the stock market or by means where the issue amount of the new shares issued is not of an offer to the shareholders, if the shares are sold for cash materially below the market price of the already quoted at a price (excluding ancillary costs) not materially below the shares at the time of definitive setting of the issue price price determined by the opening auction on the trading day and the shares issued excluding shareholders' subscrip- for shares in the company in Xetra trading (or a comparable COMBINED MANAGEMENT REPORT 65 Follow-up Report

successor system). The shares may also be sold in return for with section 179 AktG, the amendment of the Articles of non-cash payment, provided this is done for the purpose of Association is passed by the Annual General Meeting with effecting company mergers or acquiring companies, parts a majority of at least three quarters of the share capital of companies, shareholdings in companies or other assets. represented at the vote. Pursuant to Article 12 of the Articles The aforementioned shares may be redeemed without need of Association, the Supervisory Board is authorized to pass of a further Annual General Meeting in order to approve amendments to the Articles of Association which relate only the redemption or its execution. With regard to use of the to its wording. The Supervisory Board is further authorized to bought-back shares, the authorization provides, in specific adapt the wording of Article 4 of the Articles of Association cases, for legal rights of subscription of shareholders to be (amount and division of the share capital) following full or excluded. The facility to acquire treasury stock has not been partial execution of the increase in share capital or on expi- utilized to date. ration of the authorization period according to the respective utilization of the authorized capital. Appointment and termination of appointment of Management Board members, amendments of the Change-of-control clauses Articles of Association Several long-term loans with balances totalling EUR 222.8 The appointment and termination of appointment of mem- million as per the balance sheet date, agreed by BAUER AG bers of the Management Board of BAUER AG is regulated together with other Group companies as the borrower and by sections 84 and 85 of the German Stock Corporation guarantor, provide for a right of termination for cause by the Act (AktG) and sections 30 ff. of the German Co-determi- lender in the event of a change of control in BAUER AG. nation Act (MitbestG) in conjunction with Articles 5 and 6 A change of control is considered to have taken place where of the company's Articles of Association. Pursuant to the a third party, not forming part of the circle of existing main company's Articles of Association, the Management Board shareholders, directly or indirectly acquires control of at least comprises at least two persons, who are appointed by the 30 percent or the majority of voting shares in BAUER AG. Supervisory Board for a maximum term of office of five years. Any loaned amounts would have to be repaid in the event of At present, the Management Board comprises three mem- termination. The terminated credit line would no longer be bers appointed by the Supervisory Board and a Chairman available for new borrowing. of the Management Board, as well as a Labour Director. It is permissible to re-appoint or extend the appointment of a Additional short- and long-term loan agreements also exist member of the Management Board for a further maximum within the Group which provide for a right of termination for term of office of five years. Any appointment or re-appoint- cause, at market terms, in the event of a change of control. ment requires a decision by the Supervisory Board, which may be taken no earlier than one year prior to the end of the relevant term of office. The Supervisory Board may rescind an appointment to the Management Board or an appointment as Chairman for good cause. The Presidial and Personnel Committee of the Supervisory Board prepares the Supervisory Board's decisions on the appointment and VIII. FOLLOW-UP REPORT termination of appointment of Management Board members and concerns itself with the long-term planning of successor No matters of special note occurred after the end of the members for appointment to the Management Board. financial year.

In accordance with section 119, subsection 1 clause 5 and

COMBINED MANAGEMENT REPORT 67 Risk and Opportunity Report

IX. RISK AND OPPORTUNITY REPORT

RISK REPORT

BASIC PRINCIPLE OF RISK MANAGEMENT systems, serves as an instrument of value- and success- In our business operations we are exposed to risks inex- oriented corporate governance. Audits routinely verify its tricably linked to our commercial activities. All commercial implementation, and management reviews continuously im- business activities entail a degree of risk. Genuine risks result prove its efficacy. Moreover, our auditors review on an annual from unforeseeable events which may entail both risk and basis the extent to which our existential risk early-warning opportunity. In view of this, we regard risk management not system is fit for purpose. Their suggestions are incorporated merely as the reduction of risk, but also as incorporating in order to improve the system. The process steps involved the conscious handling of opportunities. The aims of risk in risk management are: identification, assessment, control management are to safeguard compliance with our corporate and monitoring. goals, to enhance the value of the business, and to reduce risk costs. The functions of risk management are to identify, For the identification of risk, risk categories are defined and analyze and evaluate existing and expected risk all along assigned to specific areas of risk. This defines areas of focus. the value chain, to continuously monitor it, and to derive Risk categories defined by the BAUER Group are: strategic appropriate measures. This involves assessing external risks risks; market risks; financial market risks; political and legal potentially impacting on our businesses, as well as risks risks; organizational and governance risks; risks arising from arising internally. Our system of risk management is based the value creation chain; and risks of the supporting process- on a fundamentally risk-averse approach, meaning that we es. These risks are grouped as latent risks and managed in a aim primarily to safeguard against impending risks rather unified process within the framework of our risk management than to exploit opportunities for short-term gain. As a matter system. Conversely, project risks are managed according to of basic policy, we do not take any risks which may endanger their nature and significance by an additional, independent the existence of the business. process.

Risk management system The process of identifying and assessing latent risks is Our risk management system is based on the risk policy de- reviewed twice yearly at management meetings within the fined by the Management Board, and regulates the handling relevant Group companies, and is implemented jointly by of risks within the BAUER Group. It defines a unified method- departmental and central function heads as well as through ology applicable to all segments and their member compa- individual specialists. This process ensures that potential nies. It is continually reviewed and adjusted as required. new risks and opportunities are submitted for review at management level, and are included in follow-up reporting if Our risk management system is an integral element of our considered relevant. Structured risk identification is followed overall management system and, like all our management by risk assessment based on a scale of relevance.

Scale of relevance of the BAUER Group

Extent of losses Relevance Definition Identified risks (in EUR '000)

1 up to 8,000 Insignificant to low risk Risks of this relevance have been 2 up to 20,000 Moderate risk identified in our business. 3 up to 50,000 Significant risk We do not see risks of this 4 up to 100,000 Serious risk relevance in our business. 5 over 100,000 Critical risk

> > > BAUER Maschinen GmbH supplied a new PremiumLine BG 46 rotary drilling rig to Singapore. It is being used by our customer on the Marina South peninsula to sink bores in diameters of up to 2,000 mm at depths down to 100 m. 68 COMBINED MANAGEMENT REPORT Risk and Opportunity Report

Relevant risks above a certain threshold value are quantified are systematically identified, analyzed and assessed, and based on scenarios. Planning risks are estimated on the appropriate measures are defined to minimize risks and track basis of empirical values, applying standard deviations. Risks opportunities. from within the subgroups are consolidated at Group level. Each project is assigned to a risk class and organizationally Following assessment, preventive and reactive risk-specific escalated according to its risk class, and is thus subject to a management measures are defined. Where possible and use- strict approval process. Risk classification is based, firstly, on ful, we have taken out appropriate insurance cover in respect clearly defined checklists applying the K.O. principle, in order of potential damage and liability risk, in order to reduce our to prevent inadvertent assignment to an inappropriately low risk exposure and avoid, or at least minimize, potential losses. risk class. Secondly, it is based on potential harm identified in Responsibility for monitoring risk lies with the risk managers. relation to the project, with the worst-case outcome serving as the decisive factor. The risk classes defined by this pro- The effects of individual risks are aggregated in the con- cess are incorporated at fixed cost surcharges to cover the text of corporate planning by means of risk simulation. This identified risks. means that the income statement of a financial year is played through several thousand times in independent simulations The system has been developed over a number of years based on random figures (Monte Carlo simulation). across the corporate units faced by the relevant project risks and expanded to apply to the relevant operations. Risk analysis is conducted on at least a half-yearly basis. Yearly reports are submitted to the Management Board and Risks Supervisory Board. The system is continually being updated In the following we set forth potential risks, which may have and continuously improved both qualitatively and structur- a significant impact on our financial and earnings position as ally in terms of the integration of more Group companies. well as on our reputation, and provide an assessment of their To communicate acute risks, the routine risk analysis is relevance for our business. The breakdown follows the same supplemented by immediate reporting. Our risk management risk categories as we apply in our risk management system. system covers both risks and opportunities. The areas of risk are aggregated. Unless otherwise specified, all risks set out in the following relate to all our segments. A key change to our risk management system relative to last year is that a new software solution has been implemented STRATEGIC RISKS to handle risk. It has further improved the transparency and Segmental structure efficiency of our risk assessment and analysis procedures. We counter the strategic risks arising from the segmental structure of the business by dividing it into separate Con- Handling of project risks struction, Equipment and Resources segments, thereby Project risks are the principal performance risks, and thus are pursuing the aim of greater independence from the eco- an integral element in the work of the Construction and Re- nomic cycles of the construction industry. sources segments, wherever construction work or plant as- sembly is carried out on the customer's premises. Associat- Frequent acquisitions and new company start-ups in the ed risks, such as in relation to the ground and resulting from Resources segment entail the risk of misjudgement of the individual character of each individual project – including partners as well as difficulties in integrating the companies contract, timetable and damage risks – can thus accumulate concerned into the BAUER Group. We counter this risk by detrimentally in specific cases in such a way that they may employing thorough due diligence and intensive monitoring threaten the existence, if not of the Group as a whole, at of the integration phase. least potentially of smaller subsidiary companies. In respect of all relevant projects above low threshold values, prior to The Equipment segment's move into deep drilling and the submission of quotes all conceivable risks and opportunities manufacture of machinery for mining applications will also COMBINED MANAGEMENT REPORT 69 Risk and Opportunity Report

further reduce its dependence on the Construction segment. Despite the overcapacity and associated pressure on mar- We regard the structure of our segments as being medium gins in China, we have been able to maintain our market risk. position based on the recognized high quality and still clear technical edge of our machinery. The lack of market experi- Strategy development and implementation ence of Chinese manufacturers and the much lower quality The goals for the various strategic areas of action and the of their products have to date impeded exports of Chinese implementation of the resultant measures are reviewed at construction machinery to the markets of relevance to us. regular intervals. Consequently, we regard the risks relating A number of smaller Chinese competitors have already been to strategy development and implementation as low. forced out of business as a result. This risk is rated as low in the short term, but medium in the medium term. MARKET RISKS Selling market risks Macro-economic risks It has always been one of our key strategic principles to coun- High levels of public sector debt in the USA, as well as in ter risks on our selling markets by means of a multi-segment some EU member-states, uncertainty as to the stability organization. Whereas our machinery manufacturing business of markets in specific countries and the phases of signifi- is still heavily influenced – if at a delay – by economic trends cant downturn on the market in China influence the basic in the construction sector, the establishment of the Resources considerations underpinning our appraisal of the macro-eco- segment has enabled us to isolate part of our business from nomic situation. Ongoing political unrest in the Middle East the effects of construction cycles much more effectively. Our is impeding willingness to invest in the countries immediately strategy of spreading business in each segment across a affected, and often beyond. This entails both exchange rate large number of markets worldwide further reduces the overall risks and demand-related risks in the markets concerned. risk, so that no serious risk is posed to the Group as a whole By contrast, the macro-economic situation in the Far East is in the event of any weakening or collapse of individual regional creating a structural dependence of the Group on that region. markets. Moreover, in the event of a regional market down- turn our network strategy in the Construction segment en- The Group Management Board and the directors of the three ables us to relocate our capacities rapidly to another country operating segments routinely consider projections based and continue operations at the new location. Our Resources on specific scenarios of the impact of any given risks on segment has also already expanded on a broad international the company in question and on the Group as a whole. Any scale. We regard the selling market risks as medium. necessary and relevant countermeasures are derived from these analyses and implemented in full. We rate the macro- Competitive environment economic risks as low. In the Equipment segment especially, we operate in highly competitive, price-sensitive markets. The Chinese construc- Procurement market risks tion market – and to an even greater extent in its wake, the We counter fluctuations on the procurement market by enter- construction machinery market – have seen highly dynamic ing into long-term contracts. This risk is rated as insignificant. growth in the past as a result of government policy. As a consequence, major production capacities for construction FINANCIAL MARKET RISKS machinery were created. The repeated stagnation of the Covenant risks Chinese construction market since 2012 has seen demand Several long-term loans are covered by covenants linked to for new machinery decline, in some cases dramatically. The pre-determined financial variables. These are primarily the resultant overcapacity in the country has placed prices and ratio of net debt to EBITDA, the ratio of EBITDA to net inter- margins under heavy pressure at times. We have imple- est coverage, and the equity ratio. The loss made in 2013 mented intensive cost-cutting measures in order to lastingly meant that the covenants agreed with banks in respect of improve our competitiveness in China. This has particularly promissory notes and some long-term loans could not be involved implementing local production to a major extent. met. 70 COMBINED MANAGEMENT REPORT Risk and Opportunity Report

In addition to the earnings situation of the Group as a whole, This will be applied to ensure staff are aware of our fundamen- higher financing requirements in particular may pose an in- tal values right from the recruitment stage. Special training creased covenant risk. This applies, for example, to changes courses enable them to extend their knowledge. A special in inventories in the Equipment segment. In order to reduce software program ensures that we do not do business with that risk, active selling of surplus stocks is initiated and any companies cited on an EU or US sanctions list. production volumes are reduced as necessary. A high level of outstanding receivables can likewise result in the inability A Group company is currently under investigation for breach to meet agreed covenants. of anti-trust laws relating to agreements in a tender process for the construction of a waste storage site. Internal investi- Based on forward-thinking planning and sound financial gations have been initiated in order to rule out or identify any controlling, we are making every effort to keep within the – in misconduct by the Group company concerned. part newly – agreed limits, so as to prevent recurrence of the covenant risk and the associated consequences. This risk is In summary, we are of the opinion that our existing values classed as medium. management system provides us with an efficient means of keeping our compliance risks at a low level. Financial stability and liquidity The risk of instability on international financial markets is Political and legal environment countered by means of long-term credit agreements, so the Owing to the broad spread of the Group's operations, and its risk can be rated as low. Based on available cash in hand restraint in investing in potentially unstable countries, the po- and bank credit balances, and above all thanks to adequate litical risks in individual countries pose little risk to the Group lines of credit, the risk to the Group's liquidity is judged to be as a whole. We therefore regard the risk as low. low. Contract risks Interest rate risks Our Construction and Resources segments primarily provide We reduce the risks arising from fluctuations in interest rates construction, drilling and environmental services. The un- to a low level by fixing rates and rate derivatives for as long derlying projects are practically always prototypes executed as possible. in each case on the basis of customized contracts. The resultant risks are subject to stringent management routines, Foreign exchange risks meaning that they can be rated as low. Where possible and available, we counter foreign exchange risks by financing our international holdings in their respective Current legal cases local currency so as to minimize the risk. There is a risk that legal action may be taken against our company with the sole aim of hindering our business opera- POLITICAL AND LEGAL RISKS tions. This risk is rated as insignificant. Compliance For the BAUER Group, acting responsibly and in keeping VALUE CREATION RISKS with the law is a fundamental principle underpinning our Research and development risks commercial success, the quality of our products and services As a technology leader, particularly in our Equipment seg- and our sustainable ongoing development. We place the ment, we counter any possible weakening of our market utmost value in upholding social conventions and in com- position by means of continuous research and develop- plying with applicable laws and business standards, so as ment. Although the booming markets in the Far East and to minimize the risk of non-compliance. For us, compliance the resultant new competitors are sharpening the innovative means observing all applicable laws, rules and regulations. pressures, we have to date succeeded in maintaining the Legally compliant, ethical and socially sustainable action is necessary edge as a technology leader. the cornerstone of our values management system. COMBINED MANAGEMENT REPORT 71 Risk and Opportunity Report

Nevertheless, we are well aware that these pressures will Earnings from our well drilling project in Jordan had to be continue to grow. That is one reason why we are also adjusted downwards during 2013 due to unusually complex increasingly utilizing low-cost local development resources conditions and the difficult financial situation of the country. in India and China to provide a rapid, cost-effective boost As this is a one-off extraordinary effect, no impact on future to our rate of innovation. earning power can be inferred from it.

Moreover, there is a risk of incurring additional costs in this Supplements and claims management context due to development and design mistakes necessi- Especially in respect of complex construction works, we tating modifications. This risk is minimized by a structured, are increasingly seeing parties resort to legal action when multi-stage product creation process. disputes arise in relation to contract interpretation, additional works and supplements. Clients' representatives are increas- Thanks to our great innovative strength and transparent ingly rarely authorized to resolve conflicts by mutual consent. product creation process, we regard the risk in relation to As a result, final project settlement is increasingly being research and development as medium. delayed by legal action, and additional costs are being in- curred. We manage this risk by professional management of Production and order fulfilment supplemental requirements in the course of the construction Technical failures and technical errors such as miscalcula- project, and based on full documentation of the work carried tion of statics can result in significant delays, both on the out. Despite all efforts, the outcomes of some negotiations company's own construction projects and on our custom- on supplemental requirements pose a residual risk to the ers' projects. Risks arising from errors in design and statics company. The risks arising from supplemental requirements calculations are part and parcel of the BAUER Group's are rated as medium. business. A further risk in order fulfilment is entailed by the selection and application of drilling techniques. Misjudging Acquisition, sales and contract negotiations ground conditions can likewise result in increased risk costs. The risks of miscalculating quotations and of warranting Disturbances to the project timetable must be identified by technical characteristics which cannot be fulfilled are mini- the project manager and communicated at an early stage. mized by the strict application of the two-person rule. The The management is aware of these risks, and relies on expe- risks can be regarded as low. rienced project and production managers in all segments. Materials management and procurement A further risk in relation to production and order fulfilment is Thanks to our long-standing and successful policy in our the rising cost of production in China, resulting among other machinery manufacturing operations of planning well ahead factors from increasing rates of pay. The new plant in Tianjin to safeguard supplies of components which may be subject is intended to generate synergies in production and optimize to bottlenecks, and based on additional measures we have machine capacity utilization in future. The risks in production taken and on our ability to have time-critical components and order fulfilment are rated as medium. made within the Group in the event of a bottleneck, the risks in terms of procurement currently remain classed as low. Project risks Project risks are essentially the principal performance risks RISKS OF SUPPORTING PROCESSES in the Construction and Resources segments, especially as Debtor management each project has its own individual characteristics. Although To limit our exposure to risk of payment default, in Germany we work on the assumption that our projects are costed we have at our disposal a tried and tested system compris- with due diligence – at present especially in view of the ing credit insurance, payment default guarantees, advance scale of the project in Hong Kong – the possibility cannot be payments and – in special cases – also guarantees as definitively ruled out that, on finally billing the customer, lower security in respect of contracted works. As a result we rate earnings will ultimately be generated. this risk as low. 72 COMBINED MANAGEMENT REPORT Risk and Opportunity Report

Quality risks many years, and represent an affirmation of our personnel Great attention is paid to the quality of work done in all policy. We regard risks in the Human Resources area as low. areas of the business. This is safeguarded by employing well-trained staff and by means of a long-established quality IT management system which has been in place for many Security to prevent data loss or unauthorized access, as well years. All major Group companies are certified, and are as to safeguard system and data availability, is ensured by audited on a regular basis. We therefore regard quality risks means of state-of-the-art hardware and software and build- as low. ing services technology, resulting in risks in IT being classed as insignificant. Personnel development and structure; key personnel Our procedures for providing assistance and support to Accounting-related system of internal controls and our employees, from the selection and recruitment stage, risk management through induction, qualification and training, and incorpo- Consolidated accounting risks comprise risks in respect of rating ongoing support in personal development, have been accounting, valuation and recognition. To counter them, ele- continuously improved. Fluctuation rates have been low for ments of the risk management system have been integrated into the consolidated financial reporting process.

> BAUER Maschinen GmbH supplied an MC 96 duty-cycle crane with a BC 32 cutter as well as various cranes and base carrier units to Istanbul, Turkey, where our customer deployed them to work on the Bosporus bridge linking the European and Asian parts of the city. COMBINED MANAGEMENT REPORT 73 Risk and Opportunity Report

The accounting functions for the major subsidiaries in Ger- The individual Group companies and departments are moni- many are mainly managed centrally at Group headquarters tored on a monthly basis by the central commercial depart- in Schrobenhausen. This permits specialization in certain ments in the respective segments and are then reviewed by kinds of business operations, such as consortia, and means Group Accounting, further reducing the accounting, valuation that transactions are all treated uniformly. and reporting risks.

The accounting functions for the other subsidiaries – prac- The consolidated figures are in turn checked on a month- tically all international subsidiary companies outside of Ger- ly basis against the figures from the annual Group-wide many and the main German subsidiaries – are usually man- planning process and analyzed on the basis of Group key aged by decentralized in-house commercial departments. performance indicators (KPIs). Any necessary correction of In this, our international subsidiaries are assisted by external non-conformance to plan is implemented promptly by the accountants and auditors as well as by our investment con- managers of the units concerned. trollers, so as to ensure properly qualified financial reporting in accordance with local laws or conforming to International The major Group company annual financial statements and Financial Reporting Standards (IFRS). The financial state- the year-end consolidated financial statements are examined ments of the major Group companies are additionally audited by auditors in accordance with the applicable legal require- in accordance with IFRS. Audits are conducted in accord- ments and standards, and are reviewed by the Supervisory ance with the International Standards on Auditing (ISA). Boards established in the various business units as part of their duty of supervision. The key figures and related informa- The procedures for monthly Group reporting, preparation of tion reports are submitted to the Management Board and the quarterly and annual financial statements and consolidation Supervisory Board of BAUER AG from the central accounting of the individual financial statements in accordance with IFRS function on a monthly basis. are implemented using a Group-wide accounting guide- line on the basis of a unified schedule of accounts by the The IT systems employed in these procedures are protect- subsidiaries, and by the Group Accounting function for the ed by appropriate security systems against unauthorized consolidated financial statements. Appropriate adjustments access and data loss. Based on the systematic multi-seg- are made to adapt local accounts to IFRS. ment structuring of the Group's accounting process, with its redundant control instances, we are able to classify the At the major Group companies, the success of each indivi- resultant risks as low. dual department is mapped as a central management instru- ment by means of an expense distribution sheet. This reveals OVERALL RISK any non-conformance to annual budgets. At project level, Despite the one-off special effects which resulted in a loss a monthly reconciliation is carried out to cross-check the being made in the year under review, no single or aggregated actual figures against the cost accounting and site manage- risks are discernible which might cause significant lasting ment budgets. Our judgement and experience tells us that damage to the BAUER Group in the 2014 financial year. The self-monitoring allied to mutual monitoring are the effective management sees no change in the overall risk situation, in elements of our system of internal controls. view of the business prospects among other factors. 74 COMBINED MANAGEMENT REPORT Risk and Opportunity Report

OPPORTUNITY REPORT

The opportunities arising are classified in parallel with the down to depths of 5,000 metres for geothermal energy, oil detailing of risks. In this context, too, the areas of opportunity and gas exploration and for production drilling. have been aggregated. Unless otherwise specified, all oppor- tunities set out in the following relate to all our segments. Rigs designed specifically for emergency mine rescue have also been developed. The key feature of the RB T-90 deep STRATEGIC OPPORTUNITIES drilling rig is its great mobility. Mounted on a truck trailer, it can Over the years, our Group has repeatedly worked on single be transported quickly to any location where it may be need- projects in marginal markets. This has led to the estab- ed. We see good prospects for sales of our deep drilling rigs. lishment of independently operating business units. One example of this is in our activities relating to environmental Further market opportunities are also arising in deep drilling technology which, having begun over 20 years ago, have services. We are capable of successfully carrying out explo- grown to become an international business area forming part ration and production drilling for water, oil and gas, as well as of our Resources segment. for coal-gas and geothermal energy. Extensive areas across Australia, Africa and Indonesia are being staked out as claims A similar development grew out of the first deployment of for the extraction of coal-gas. Their seriousness in terms of specialist foundation engineering equipment for diamond mass extraction is being impressively reinforced by the plan- exploration, which has since become the Exploration and ning and construction of large gas liquefaction plants. Mining Services competence field within the Resources segment. The nuclear accident in Fukushima sparked a new debate on energy production which is bringing about far-reaching Together with the 2007 acquisition of the GWE Group, changes to energy policy. The most suitable future-proof specializing in the development, manufacture and sale of alternatives to nuclear power are currently being sought. The high-grade well engineering products and in close-to-the- BAUER Group has been contributing to this search by de- surface geothermal energy extraction, we were able to merge veloping an underwater drilling rig, operated from on-board a the three businesses to create the Resources segment. ship, to sink foundations for tidal or wind turbines. This opens This core business unit, established in 2007, is focused on up an entirely new product area, with great future prospects, areas relating to water, energy, mineral resources and the for both our Construction and Equipment segments. environment – some of the major issues of the 21st century. Moreover, the Resources segment is much less dependent By establishing new subsidiaries in the Resources segment, on the economic cycles of our traditional Construction and our environmental business has succeeded in moving out Equipment segments. of its traditional, and limited, sphere of pollution remediation into industrial process water treatment, and thus into the oil In order to bring about a rapid internationalization of the and gas industry. The large quantities of industrial process Resources segment, we are utilizing the experience of our waters occurring in oil production, against a background of long-standing organizational units in the other two segments. ever more stringent environmental standards, offer addition- al outstanding market opportunities for our environmental MARKET OPPORTUNITIES business. Thanks to the rapid growth being seen in some emerg- ing economies, and the expected increase in oil and gas Dam remediation projects are much in demand worldwide, extraction based on new techniques such as fracking, it due to the fact that dam structures have been neglected is becoming increasingly more worthwhile to explore even for years. Based on our wealth of experience in the field, difficult-to-access deposits which demand intensive drilling acquired through projects such as our current remediation operations. Demand for deep drilling rigs will thus continue of the Center Hill Dam in the USA and our dam remediation to rise. Consequently, the Equipment segment has expanded project in Bhutan, we see an outstanding market opportunity its portfolio to include deep drilling rigs capable of operating for our Construction segment. COMBINED MANAGEMENT REPORT 75 Risk and Opportunity Report

VALUE CREATION OPPORTUNITIES successfully by converging our global resources and based Development and innovation on our many years of experience in handling large-scale Development and innovation are systematically integrat- projects. ed into many standard processes within the Group. Their efficiency is monitored as part of the quality management Supplements and claims management system and by way of the corporate controlling function. It is The assertion of requirements and supplements does not also ensured that customers' wishes are understood as be- only entail risks, but also the opportunity to achieve better ing opportunities, and are translated into innovations for our earnings than originally specified in the contract based on products and services in a timely manner. The capacities of changes to the ordered construction services or supple- our engineering offices are systematically being strengthened mental work ordered by the client. On projects involving high by resources from countries with high levels of education potential for changes, this can result in a substantial improve- allied to low labour costs, such as India. ment in earnings. We attempt to exploit such opportunities by professional management of supplemental requirements Innovation is possible at practically every point within our in the course of the construction project. business processes. Our employees are best placed to know where improvements are achievable in their particular sphere OPPORTUNITIES BASED ON SUPPORTING PROCESSES of work. In order to collate and make use of the suggestions The Group responded to the displeasing year-end loss in which our employees submit, we have devised a system for 2013 by initiating a global cost-cutting programme which the unbureaucratic recording, evaluation, implementation and also entails discontinuing a number of minor, economically rewarding of suggested improvements, which has been in challenging areas of business. The object of the cost-cutting turn rewarded by a number of good ideas. programme is to lastingly improve the cost structures of the BAUER Group and so improve the contribution margin. Project opportunities Regardless of national and global market cycles, projects OVERALL OPPORTUNITIES often arise in otherwise weak markets which we as a cor- We are seeing a steady improvement in our opportuni- poration are extremely well equipped to handle thanks to ties on global markets as our recently created Resources the mix of our products and services portfolio. Examples of segment becomes increasingly well established. This is also this are processes for retrofitting of core seals in earthwork being boosted by new, innovative products. Our strategy dams, or for the long-term, environmentally compatible of systematically interlinking our mainly small and medi- treatment and disposal of industrial process water from the um-sized globally operating units to create efficient networks oil industry. is enabling us more and more effectively to generate speed and cost benefits from the associated economies of scale. The resultant projects in some cases entail very large lot All in all, we see the opportunities for our Group's worldwide units. When contracted, we are able to manage them business increasing in the 2014 financial year. 76 KONZERNLAGEBERICHT Risiko- und Chancenbericht COMBINED MANAGEMENT REPORT 77 Outlook

X. OUTLOOK

A number of factors are of key importance to our business The competitive situation in the machinery business has and its future development, as detailed in the following. changed significantly over the past ten years. The enormous growth in construction in China made that country's market Markets more important than all the others in the world put together As set out at the beginning in the Business Report, the for a number of years. Many Chinese companies started markets for specialist foundation engineering services and manufacturing specialist foundation engineering equipment, the associated machinery can generally be rated as positive. creating capacities to fully serve the needs of the Chinese There is substantial backlog demand for construction works market. Once the growth of the Chinese construction market all over the world. The infrastructure, especially, must be had come to an end, machinery markets fell back dramat- updated to meet the new needs of people and the demands ically too. As a consequence, competition has intensified of a globalized industrial society. Increasing urbanization in markedly. Other European manufacturers of construction many countries is necessitating major efforts to upgrade city machinery are now also coming under pressure in their transport infrastructures. Underground construction, espe- standard equipment sales, and so are trying to make up cially, provides a solution to the challenges we face. Many for them in the specialist foundation engineering business. enquiries from all markets, and our healthy levels of orders in This is not feasible, because the market is not big enough, hand in the Construction segment in all regions of the world, though the trend will additionally impact on the competitive affirm that judgement. situation to which our business is subject for some time to come. The work of our Resources segment meets the essential needs of our world, for which issues surrounding the en- In this new competitive situation, our business will only be vironment and water will become key over the decades able to maintain its leading position by providing high-quality ahead. The availability of resources essential to industry will products and outstanding services. Concerted efforts have likewise remain a permanent and pressing challenge. enabled us to build further on our competitive edge in that respect over recent years, as the increased sales figures for Competition 2013 demonstrate. We are convinced that we will continue Competition in the construction industry has changed little in future to achieve success and growth. We will also be in overall in recent years. The construction market is, and will a position to improve our margins again, which will also be remain, a market with very large numbers of players. Our based on improved capacity utilization. worldwide companies have established themselves firmly within that competitive environment, and on some markets – Bauer has to date played only a minor role on markets such as in Egypt – we have attained an outstanding position. for deep drilling rigs. We have nevertheless succeeded in On other markets, conversely, other construction companies arousing customers' interest with our fully hydraulic rigs play a predominant role. We regard this mix as positive, featuring state-of-the-art electronic control, paving the way because it provides us with the opportunity to respond stra- for some pleasing successes in the near future. We will meet tegically to changes. Very many companies – including in the this challenge with the aid of a new and highly experienced specialist foundation engineering sector – have withdrawn management team in this area. from the German market over the last two decades. As a result, there are today relatively few specialist foundation In the Resources segment, we have numerous individual engineering contractors capable of handling large-scale pro- competitors on the various markets. We regard it as a major jects. This opens up additional opportunities for our business advantage that we are the only company offering a full port- in Germany. folio relating to water and other resources bundled within

> > > In Tennessee, USA, BAUER Foundation Corp. is handling the remediation of the Center Hill Dam. Using a BC 50 cutter mounted on an MC 128 duty-cycle crane, a diaphragm wall grab on an MC 96 and a BG 50 rig, work is being carried out on the 280 m long retaining wall at depths down to 100 metres. 78 COMBINED MANAGEMENT REPORT Outlook

one business segment, meaning that we are able to offer We have had to commit major efforts to our Equipment seg- our customers a very wide range of products and services. ment in recent years in response to changes on the market. This will pay off in future. A reorganization of our development activities enabled us to considerably further boost the dynamic process of product Products development. We have intensively utilized the possibilities By concentrating on products and services relating to ground of state-of-the-art electronic control to make our equipment and groundwater, we have the capability to be a tech nology even more versatile and reliable. Specifically, we have made leader in both our Construction and Equipment segments. great efforts to provide comprehensive performance verifica- The interaction between construction and machinery manu- tion based on the acquisition and evaluation of large volumes facture – the application of high-tech construction engi- of data. neering techniques on the one hand, and the design and manufacture of high-grade machinery with state-of-the-art The product of machinery business is not just the machine it- technology on the other – allows us to exploit wide-ranging self. For our customers, supplies of replacement and wearing synergies in our development work. This enables us to as- parts, and service backup for their equipment, are of increas- sume a pioneering role with our methods and techniques. ing importance. We have greatly expanded our offer in those

> An additional basin is being constructed for the Trier lock. BAUER Spezialtiefbau GmbH executed 260 running metres of secant pile wall down to a depth of 12 m for the lower-level outer harbour. The piled wall was tied back with 225 micropiles in lengths of up to 20 m. COMBINED MANAGEMENT REPORT 79 Outlook

areas through wide-ranging measures. All our worldwide construction works. Our construction sites can then also warehouse facilities are electronically linked nowadays, great- generate additional profit. Some years ago, we went through ly enhancing parts availability. We have established service a phase when virtually no risks occurred and opportunities centres in all regions of the world. The rapid-response back- predominated on many construction sites. In view of the up they ensure is much appreciated by our customers. We many projects which we handle, a reasonable average is believe that the improvements in sales performance recently naturally found, though outliers – both positive and negative – are also closely linked to these factors. We are convinced that will regularly occur. we have an outstanding product offer, and that it provides us with a sound basis for future success on the market. In summary, this is meant to demonstrate that a difficult year such as 2013 does not entail a deterioration of our business In our Resources segment, we have repeatedly demonstrat- in its entirety. After such a year, we have the same opportu- ed over recent years that we offer a portfolio which attracts nities as previously, and we must utilize them again through great interest on the market. Our environmental technology diligent, high-quality work. solutions especially, such as the reed-bed treatment plant for the treatment of oil-contaminated water in Oman, have The past year has unfortunately also imposed burdens upon attracted widespread public acclaim. us which we will have to work to eliminate in future. The breaking of covenants means that it is necessary to place After a very difficult 2013, we begin the year ahead against part the financing of our business on a new footing. In consul- the background of the situation as detailed. We see good tation with our bankers, we are currently preparing to switch markets, and our product range is structured to provide us our financing to a syndicated loan basis. We expect that the with a healthy competitive edge. Nevertheless, we have just new structure will be implemented in the second quarter of experienced a very unsatisfactory year, resulting in particular this year. The new financing structure will entail a higher inter- from a number of specific issues within our business. est charge than previously, which will impact on earnings. We must therefore ensure appropriate cost-cutting and revenue The field of specialist foundation engineering and our other improvements in order to balance out the new burden. business fields are subject to higher risk than most other businesses, because they always entail an element which We have implemented a cost-cutting programme in order cannot be fully analyzed in advance – the building ground, to cushion the additional charges and attain our earnings or soil. Even after conducting the most extensive and de- targets. We will also undertake great efforts to reduce our tailed preliminary ground surveys, some factors which were working capital and net assets in total, which will reduce not detectable will occur on a regular basis. They can impede the financing expenditure accordingly. We are aided in those construction works in a wide variety of ways, and in some efforts by the fact that our recent programme of capital cases also cause significant financial losses. Up to until a few investments is now completed. All our plants have been years ago, it was common practice for such problems to be upgraded to be state of the art, so we will need to commit resolved by collaborative partnership between the develop- little by way of investment over the years ahead. This will er and the construction contractor. It has recently become mean that capital investments will be around the level of the more common for such issues to be settled almost entirely depreciation and amortization. In the years to come, all staff by confrontation and legal action. There are no signs that this will again be able to focus fully on business. will change in the near future. Consequently, we are making great efforts, through even more improved risk analysis and Looking at the current year, the factors outlined as well as based on legal safeguards, to minimize such risks. We will the experience gathered on our markets over recent months never be able to avoid them entirely however. instill us with confidence that we will attain our goals. Orders in hand in our Construction segment are highly satisfactory On the other hand, an opportunity can also arise if the in all regions of the world, making it very likely even now ground has been assessed too negatively prior to starting that we will surpass last year's revenues by a small margin. 80 COMBINED MANAGEMENT REPORT Outlook

Many markets are highly dynamic. We will be executing our capacity utilization grows. Although we still have some a large-scale project on Mauritius. In the Far East, we are overcapacity, we need it in order to drive the new business already working on a number of large-scale projects. In the fields in deep drilling and underwater drilling forward. In those Middle East, past delays are beginning to clear. We have very areas especially, we will soon be in a position to provide a healthy levels of orders in hand in Egypt; and in America, too, good contribution to future growth. many opportunities exist. We see no need to change our strategic objectives at pres- Order intake in the Equipment segment over the last two ent. The strategy comprising the Construction, Equipment months of 2013 was very positive, and the new year has like- and Resources segments will continue to dictate the direc- wise begun pleasingly. Sales staff in almost all regions around tion of the Group over the coming years. We are not planning the world report lively demand, and we are seeing customers any major acquisitions at present, as we are intending to rate our products very positively in competitive comparisons. strengthen our capital base especially over the years ahead. Our deep drilling rigs are also attracting great interest, leading us to expect success in that product segment too. Based on the information available to us at the time of com- pleting this report, we forecast that total Group revenues The Resources segment remains the focus of most concern. for the 2014 financial year will be around EUR 1.55 billion. After the major setback last year, it is not entirely easy to turn We forecast profit after tax of around EUR 20 to 25 million. the business around in an optimal manner. We nevertheless In accounting terms, this will mean EBIT of around EUR 75 see some major opportunities, especially in the environmental million. field, and our project in Oman, which will keep us busy for another 20 years, provides us with a sound basis in over- Comparison: 2013 actual / 2014 forecast coming the challenges ahead. We assume that the segment in EUR million 2013 actual 2014 forecast will be able to make a small profit in 2014. In the long term, Total Group revenues 1,506.2 1,550 we are convinced that it offers many opportunities. ~ EBIT 32.1 ~75 Net profit or loss -19.4 20-25 Achieving success within a major corporation is also heavily ~ linked to its basic organizational structure. We have been working hard on that aspect in recent years, and we are We still expect to make a loss in the first quarter, in line with convinced that we are now very well positioned. We have seasonal norms, though it will be balanced out over the focused closely on international networking, so that today following quarters. The trend over the full year will thus be in almost all subsidiaries worldwide are interconnected via a line with patterns in our business seen in earlier times. The centralized IT network and share software platforms. This reason for this is that fewer machines can be invoiced at provides us with close control, delivering massive benefits the start of the year, because customers do not start buying in terms of logistics and parts supply especially. All major equipment until the construction season gets underway. In locations are equipped with state-of-the-art videoconfer- the Construction segment, despite the milder weather con- encing systems, saving a great deal on travel expenses. We ditions, the winter period has a heavy impact on a number of have also made great progress with regard to our manage- our markets. ment systems. Lots of positive changes have been made in relation to HSE (Health Safety Environment), and these have Our balance sheet ratios have changed markedly over recent been successfully spread internationally thanks to the global years. This is illustrated most clearly by the increase in work- IT network. ing capital, which also resulted in a substantial increase in net debt. This trend was largely attributable to the normalization All in all, we therefore believe that we are well set to meet of our machinery business, in which inventories increased the challenges of the future. We are working hard on our significantly due to the return of shorter lead times. The num- cost-cutting programme, and cost ratios will also improve as bers of machines for which we provided up-front financing on COMBINED MANAGEMENT REPORT 81 Outlook

behalf of our customers also increased in response to their The Management Board will recommend to the Supervisory needs. No significant change to the balance sheet structure Board that it propose to the Annual General Meeting that is to be expected in the coming year, as our business model no dividend be paid for the 2013 financial year. After a year is tied to high levels of up-front financing. With stronger de- such as 2013, it is urgently necessary that funds should be mand for machinery, however, the ratios will improve again. retained within the business. We plan to pay a dividend again We will be making great efforts to increase our equity ratio once we return to making a healthy after-tax profit. back to around 33 percent. We do not see any existential risk or relevant risk to future We expect the Group to enjoy positive development through progress in our trading environment. The global economy 2014 and 2015. We are planning for growth of between 3 remains marked by great change, however, which may also and 8 percent, in line with our long-term plans. We predict have a negative impact on our situation again. We should that we will again be able to achieve an increase in earn- point out that future forecasts are based on assumptions and ings. The Group has largely adjusted to the changed market estimates of the company management. Such assumptions conditions, meaning it is able to return to a positive trend and estimates always entail a degree of uncertainty and risk, overall. which may mean that actual performance differs from that forecast.

Schrobenhausen, March 28, 2014 BAUER Aktiengesellschaft

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker Chairman of the Management Board 82

The Bauer Share

European Central Bank's low interest rate policy Following the federal parliamentary elections, the CDU/CSU Europe remains in crisis mode. Overall, the eurozone and SPD entered into a coalition agreement in November. experienced a 0.5 percent decrease in GDP (gross domestic How the planned reforms will affect the economy and the product) in real terms in 2013. Greece, Portugal, Italy and labour market remains to be seen. At present the German Cyprus saw declines, in some cases significantly so. GDP federal government and economic research institutes are is not predicted to rise again until 2014, by 1.2 percent. forecasting growth of between 1.2 and 2.0 percent in 2014.

The European Central Bank has maintained its attempts to Negative business course impacts Bauer share support the countries in crisis by purchasing government The Bauer share price was impacted by the negative course bonds and by pursuing a very low interest rate policy. In of business during 2013. Consequently, the share was May it lowered the base rate from 0.75 to 0.5 percent and in unable to participate in the rally seen on the major German November to 0.25 percent. As a consequence, many classic indices DAX (+25.5 percent), MDAX (+36.4 percent) and investment opportunities became unprofitable. That primarily SDAX (+27.2 percent). boosted stock markets, with many indices seeing major rises during 2013. From its opening price of EUR 19.94, the share price initially performed positively, reaching EUR 23.05 by mid-February. In the USA, the economy was impacted negatively by the This was to be the high for the year. By early April, following budget dispute and associated financial problems. Growth of the weakening market trend, the share price had fallen back 1.9 percent was lower than in the previous year (2.2 percent). below EUR 19. In China, the construction sector was particularly weak. GDP growth of 7.7 percent was slightly below the previous year's By mid-May it had recovered to above EUR 22, but the weak level. performance reported at the end of the first quarter initiated a sustained downward trend to EUR 18.18 by mid-July. Germany did at least achieve slight growth, of 0.4 percent, and was again the main driver of the European economy. After a slight recovery, the first adjustment of forecasts prior The labour market continued to develop in a positive manner. to publication of the half-year interim report saw the share Unemployment fell slightly, as the number of people in work price fall back significantly again. On August 5 it reached its rose. The construction market again made positive progress, low for the year of EUR 17.33. driven primarily by housing.

Development of the Bauer share price in 2013

in % Bauer DAX MDAX SDAX

50

40

30

20

10

0

(10)

(20)

(30) 01.01.2013 01.07.2013 31.12.2013 31.03.2014 THE BAUER SHARE 83

The share price slowly recovered through to mid-October, Share information even briefly rising to almost EUR 22, but the ad-hoc release ISIN / WKN DE0005168108 / 516810 revealing the forecast full-year loss saw it fall back again to Trading symbol B5A well below EUR 18. Trading segment Frankfurt, Prime Standard

SDAX, CDAX, GEX, DAXPlus Family Share indices Through to the year-end the share enjoyed a slight upward Classic All Share, Prime All Share trend, closing 5.7 percent down against its opening price at Share category No-nominal-value individual bearer shares EUR 18.81. Share capital EUR 73,001,420.45 Number of shares 17,131,000

Continuous capital market communication Shareholder Bauer family 48.19 %, A total of 10 analysts – one fewer than last year – published structure free fl oat 51.81 % research reports on BAUER AG in 2013. By the end of the year there were two positive, five neutral and three negative Dividend policy recommendations about the share. The average target share Our dividend strategy is fundamentally oriented to the goals price quoted was EUR 18.61. of providing shareholders with an appropriate and fair partici- pation in the success of the business, maintaining continuity, Participation in roadshows, including Scandinavia, London, and safeguarding the equity ratio. Frankfurt and Zurich, as well as in the major stock market conferences, forms an integral part of the continuous capital In view of the loss made in financial 2013, resulting in a market communication strategy of the Management Board decrease in equity ratio from 30.2 to 26.5 percent, our focus and Investor Relations. over the coming years will be on increasing the equity ratio substantially again. With the BAUER app and the newsletter BAUERcompact, both launched in 2013, we are endeavouring to enhance Consequently, the Management Board and Supervisory the flow of information to our private shareholders and other Board will propose to the Annual General Meeting on stakeholders. June 26, 2014 that no dividend be paid.

The main focus of our information policy remains the An- nual General Meeting held at the company's home base in More information: Schrobenhausen. The event was attended by some 600 http://ir.bauer.de shareholders and guests, with Professor Bauer once again reporting on the current business situation.

KEY FIGURES 2010 2011 2012 2013 (restated)

Earnings per share (in EUR) 2.04 1.86 1.44 -0,99

Dividend per share (in EUR) 0.60 0.50 0.30 0 *

Dividend total (in EUR '000) 10,279 8,566 5,139 0 *

Year closing price (in EUR) 35.30 21.10 19.32 18.81

Year high (in EUR) 36.81 38.49 26.50 23.05

Year low (in EUR) 27.38 16.04 16.13 17.33

Market capitalization at year-end (in EUR '000) 604,724 361,464 330,971 322,234

Average daily trading volume (number of shares) 46,084 65,885 48,584 39,017

* Proposed; subject to the consent of the Annual General Meeting to be held on June 26, 2014 84

Corporate Governance Report

AND DECLARATION ON CORPORATE GOVERNANCE

The Management Board, also on behalf of the Supervisory should not suffer any disadvantage on the grounds of Board, submits the following report on the company's racial or ethnic origin, religion or belief. corporate governance in accordance with Article 3.10 of the German Corporate Governance Code. The Corporate 3. The individualized disclosures of the benefits, the remuner- Governance Report also includes the Declaration on Cor- ation and the pension benefits awarded to each member porate Governance pursuant to Article 289a of the German of the Management Board are not individualized for each Commercial Code (HGB), which forms part of the Manage- member of the Management Board in the remuneration ment Report for the 2013 financial year. report as the General Meeting dated June 30, 2011 re- solved on the omission of the disclosures according to Declaration of conformity 2013 section 285, no. 9, letter a, sentences 5 to 8, section 315a In the year under review, based on preliminary work by the subsection 1 and section 314, subsection 1, no. 6, letter a, Presidial and Personnel Committee, the Management Board sentences 5 to 8 of the German Commercial Code (HGB) and Supervisory Board reviewed the company's compliance and therefore the disclosures required under Article 4.2.5 with the German Corporate Governance Code. On Decem- would contradict such Shareholder resolution. ber 5, 2013 the Management Board and Supervisory Board passed the following declaration of conformity: 4. Contrary to Articles 5.1.2 and 5.4.1, no age limit is speci- fied for members of the Management Board or Supervisory "Since the last declaration in December 2012 the company Board. Expertise and performance cannot be determined has complied with, and currently complies with, each of the on the basis of rigid age limits. Upon the appointment of recommendations of the "Government Commission of the new Management Board and Supervisory Board members, German Corporate Governance Code" as published by the the persons who bear responsibility for selecting suitable German Federal Ministry of Justice in the official section members will take account of the age of the chosen person of the electronic version of the German Federal Gazette when reaching their decision, alongside assessing their ("Bundesanzeiger"), with the following exceptions: skills. If a Management Board or Supervisory Board mem- ber should become no longer sufficiently capable of holding 1. Contrary to Article 3.8 an excess of at least 10 percent of office on the grounds of age during their term of office, the the loss up to at least an amount representing one and common sense of the persons involved is to be trusted. a half times the fixed annual remuneration of Supervisory Board members is not agreed for D&O insurance for the 5. Contrary to Article 7.1.2, the consolidated financial state- Supervisory Board. As a result of the moderate remunera- ments at December 31, 2012 were made public within tion provisions for the Supervisory Board in the Articles of 101 days rather than 90 days of the end of the financial Association, a corresponding excess for the Supervisory year. As a result of the international structure of the Group, Board is not approved. Even without a corresponding the completion and consolidation of the separate financial excess, the Supervisory Board members will perform their statements takes a considerable amount of time. In the duties responsibly. interests of conscientious accounting processes, efforts to improve the accounting procedures continue. 2. Contrary to Article 4.1.5, Article 5.1.2 and Article 5.4.1 there is no appropriate inclusion or participation of women Furthermore, BAUER Aktiengesellschaft already conforms arranged for in the filling of management positions or in the largely to the additional suggestions of the Government composition of the Management Board and the Super- Commission of the German Corporate Governance Code.” visory Board. In particular, the introduction of a quota for women is not supported in order to ensure equal opportu- Contrary to the recommendation of the German Corporate nities. These positions should be filled regardless of gender Governance Code, the company does not as yet enable so that neither the female gender nor the male gender is shareholders to follow events at the Annual General Meet- favoured or discriminated against. In addition, a candidate ing via state-of-the-art communications media (such as the CORPORATE GOVERNANCE REPORT 85

Internet), as the Annual General Meeting is by its nature a ment, internal auditing and compliance of relevance to the physically attended event, and in particular transmission of company. Any non-conformance to budgets and performance the verbal contributions made by individual shareholders, as targets is disclosed and reasons for it are presented. The well as the additional costs incurred, are considered as criti- Supervisory Board appoints the Management Board. In doing cal factors counteracting any expected benefit. so, it considers not only the relevant professional qualification of its members but also – given the international nature of the Roles of the Management Board and Supervisory Board business – the diversity of its composition. The Supervisory BAUER AG is a stock corporation established pursuant to Board also sets the overall level of remuneration paid to the German law. German company law prescribes a dual system Management Board, regularly reviews remuneration levels, of management for the company, characterized by a strict and specifies the remuneration paid to individual members of separation of personnel between the Management Board as the Management Board. It appoints, supervises and advises the executive management body and the Supervisory Board the Management Board, and participates in decisions of fun- as the supervising body. Moreover, the company's Articles of damental significance to the company. The company's Articles Association and the rules of procedure governing the work of Association stipulate relevant transactions and undertak- of the Supervisory Board and of the Management Board also ings which require the consent of the Supervisory Board. lay down the basic structures of their collaboration. Duties of the Supervisory Board include reviewing the annual financial statements of the company, the consolidated financial The Management Board of BAUER AG currently comprises statements and the parent company and Group Management three members. They are assigned independent responsibility Report, as well as proposals for the appropriation of net earn- for managing the Group and the holding company. The mem- ings available for distribution. The Chairman of the Supervisory bers of the Management Board work together on a collegiate Board coordinates the work of the Supervisory Board, chairs its basis. Notwithstanding the joint overall responsibility of the meetings and represents the Supervisory Board externally. The Management Board, each member of the Board Manage- Supervisory Board regularly reviews the efficacy of its activities. ment acts on his or her own responsibility within his or her assigned portfolio of functions. The Chairman of the Manage- Composition of the Supervisory Board ment Board coordinates the work of the Management Board. The Supervisory Board of BAUER AG comprises a total of The Management Board members report on a regular basis 12 members. Six of its members are elected by the employ- to the Chairman of the Management Board in respect of all ees at the Group's locations in Germany, with the other six material matters and on the course of business within their members being elected by the Annual General Meeting to assigned functions. Matters subject to the decision-making represent the shareholders. The Supervisory Board includes authority of the full Management Board are laid down in the a sufficient number of independent members who have no rules of procedure governing the Management Board. The business or personal links to the company, to its executive Management Board defines the corporate strategy, agrees it bodies, to any controlling shareholder or to any company as- in consultation with the Supervisory Board, and ensures that sociated with any such shareholder which may give grounds it is implemented. In fulfilling that role, the Management Board for a material and not merely temporary conflict of interests. must ensure compliance with all legal requirements and inter- Moreover, all members of the Supervisory Board are obli- nal corporate guidelines, and acts to ensure that the Group's gated to immediately disclose to the Supervisory Board any member companies comply in like manner. conflicts of interest as and when they arise. No conflicts of interest were disclosed to the Supervisory Board by any of The Management Board provides the Supervisory Board and its members during the year under review. its subcommittees with regular, detailed information, in written form by way of monthly reports, by conference calls and at Objectives of the Supervisory Board with regard to its routine meetings, as well as at extraordinary meetings held as composition and when required, in respect of all matters of planning, busi- The following objectives must be taken into account by the ness development, finance and earnings, risk, risk manage- Nominations Committee and by the Supervisory Board when 86 CORPORATE GOVERNANCE REPORT

proposing candidates for election to the Supervisory Board Composition and roles of the subcommittees at the Annual General Meeting: The Supervisory Board has established four standing com- mittees constituted from among its members in order to • The Supervisory Board shall be composed such that its support its plenary work. The Supervisory Board subcom- members collectively possess the necessary skills, knowl- mittees and their roles and procedures are laid down in the edge and professional experience to carry out its assigned rules of procedure governing the Supervisory Board. The role in a correct and proper manner. committee chairmen report to the plenary Supervisory Board on a regular basis with regard to the work of their respective • The appointment of shareholders' representatives to the committees, and prepare the way for plenary Supervisory Supervisory Board shall take due account of the Group's Board decisions within their specific remits. fundamental character as a family business, giving due consideration to the implications of that character in terms The Presidial and Personnel Committee comprises the Chair- of the corporate culture, whereby two members shall be man of the Supervisory Board as well as one Supervisory appointed from the Bauer family, provided the candidates Board member elected by the shareholder representatives are suitable. and one by the employee representatives respectively. Its role includes preparing the way for Supervisory Board decisions • At least two of the shareholders' representatives on the relating to the setting of overall remuneration to individual Supervisory Board shall have substantial experience in the Management Board members and to the remuneration management of construction and/or construction machin- system for the Management Board in general, as well as re- ery manufacturing companies. sponsibility for establishing, amending and terminating service contracts with the members of the Management Board. It also • At least one of the shareholders' representatives on the concerns itself with matters relating to corporate governance. Supervisory Board shall possess specialist skills and ex- perience in the application of financial reporting standards The Audit Committee comprises three members. Pursu- and the implementation of internal control procedures. ant to the requirements of the German Corporate Gover- nance Code, its chairman possesses specific knowledge • The employees' representatives on the Supervisory Board and experience in the application of accounting policies and will be elected in accordance with the provisions of the internal control procedures, and is neither a former member German Employees' Co-Determination Act. of the company's Management Board nor the Chairman of the Supervisory Board. The role of the Audit Committee is in • The Supervisory Board shall include not more than four particular to monitor accounting procedures and to review the members in total who have business or personal links efficiency of the system of internal controls, the risk manage- to BAUER AG, to its executive bodies, to any controlling ment system and the internal auditing system. In the year shareholder or to any company associated with any such under review the committee additionally scrutinized audit shareholder which may give grounds for a material and not procedures in relation to corporate compliance. The Audit merely temporary conflict of interests. Committee prepares the proposal of the Supervisory Board to the Annual General Meeting concerning the appointment • Supervisory Board posts shall be filled on merit, regardless of auditors, obtaining an Independence Confirmation from the of gender so that neither men nor women are preferred or auditors in advance of each Annual General Meeting. It under- disadvantaged. Moreover, when appointments are made to takes a preliminary review of the annual financial statements the Supervisory Board, a candidate shall not be disadvan- of the parent company and the consolidated financial state- taged for reason of race, ethnic origin, religion or world view. ments of the Group together with the Combined Management Report, as well as preparing the proposal on appropriation of The objectives are fully embodied in the current composition net earnings available for distribution and consulting on the of the Supervisory Board. audit reports with the auditors. It also reviews the quarterly CORPORATE GOVERNANCE REPORT 87

financial reports. The Nominations Committee comprises Shareholders and transparency three shareholder representative members of the Supervisory All documents and information resources relating to the Board. The task of the Nominations Committee is to submit Annual General Meeting are made available to shareholders to the Supervisory Board proposals of suitable candidates to on our website well in advance. The shareholders were as- be put forward to the Annual General Meeting for election to sisted in exercising their voting rights by the facility to assign the Supervisory Board. The Mediation Committee, constituted power of attorney to nominees and by the appointment of a pursuant to the German Co-Determination Act, comprises company proxy to vote in accordance with the shareholders' two shareholder representative and two employee repre- instructions. An electronic transfer facility is also provided for sentative members respectively. The Mediation Committee is the submission of powers of attorney. No company share op- only convened if a proposed candidate for appointment as tion schemes or similar stock incentive programmes existed a member of the Management Board has not obtained the during the past financial year. majority vote required by the German Co-Determination Act. The company provides regular and timely information relating In his report to the Annual General Meeting, the Chairman of to the position of the company and in respect of material the Supervisory Board summarizes the work of the Supervi- changes to the business. Extensive documentation and in- sory Board and its subcommittees over the past financial year. formation resources are provided on the company's website. The Report of the Supervisory Board for the 2013 financial In addition, electronic distribution systems and the electronic year is published on pages 88 to 89 of the company's Annual version of the German Federal Gazette ("Bundesanzeiger") are Report. This report is thereby quoted by way of reference. used to ensure timely communication with our shareholders and with the public at large. Corporate governance and compliance The company's system of corporate governance is based on Four times a year, BAUER AG publishes updates on the German law, specifically on legislation governing public limited course of its business in the form of quarterly interim financial companies, corporate co-determination and capital markets, reports, the half-year interim financial report and the annual as well as on the company's Articles of Association. The com- financial statements. Notifications relating to voting rights pany's Articles of Association are published on the company as well as items of insider information relating directly to the website at www.bauer.de, in the "Investor Relations" section company are disclosed by the Management Board immedi- under "Corporate Governance". The Management Board ately. The Annual General Meeting passed a resolution, with employs the Corporate Management Manual implemented the necessary three-quarters majority, stipulating that the re- throughout the Group as its central instrument of management. muneration paid to members of the Management Board shall The Corporate Management Manual also sets out framework not be disclosed individually. Consequently, as has been the policy guidelines covering the entire Group, and lays down policy to date, only the remuneration paid to the Management the principles of corporate governance and the programme Board in total and the structure of the remuneration system of basic values which dictate the ethical and moral conduct are disclosed in the Remuneration Report on pages 61 to 63 of the company's employees in carrying out the business of of the company's Annual Report. the company. An appropriate system of risk management and of internal controls is established within the company. The Shareholdings of the Management Board and Super- essential features of the risk management and control system visory Board are set out in the Risk Report forming part of the Combined Members of the Management Board at the year-end held a Management Report. The established risk management sys- total of 1,741,022 (previous year: 2,676,016) shares in the tem supports Group-wide control and monitoring procedures. company as per December 31, 2013. This corresponded Internal auditing systems monitor compliance with laws and to 10.16 % (previous year: 15.62 %) of the share capital of standards across the Group. The Management Board regu- BAUER AG. At the same date members of the Supervisory larly updates the Supervisory Board on existing risks and risk Board held a total of 1,310,431 (previous year: 2,492,299) trends, as well as on internal auditing procedures. Bauer shares, corresponding to 7.65 % (previous year: 14.55 %) of the company's share capital. 88

Report of the Supervisory Board 2013

In the 2013 financial year, the Supervisory Board fulfilled the retirement from the BAUER Group, Mr. Stefan Reindl was duties incumbent upon it in accordance with the law and elected as a new employee representative member of the the Articles of Association of the company. The Supervisory Supervisory Board in July. Board routinely provided the Management Board with advice and support on the conduct of business and monitored its Main focus of consultations in Supervisory Board meetings management of the company, giving intensive consideration Four routine plenary meetings and one extraordinary meeting to the situation and prospects of the business. of the Supervisory Board were held in the year under review. Apart from two meetings at which one member was absent The Supervisory Board participated directly in decisions of in each instance, the meetings of the Supervisory Board were fundamental significance to the company. The Management attended by all members. Board provided the Supervisory Board with written and verbal reports on the course of business, the position of the parent At the annual accounts review meeting relating to the annual company and the Group as well as on corporate strategy and parent company and Group consolidated financial statements planning. Between the meetings, the Management Board for the 2012 financial year, also attended by the auditors, a submitted monthly written reports on all important business detailed review was undertaken of the respective financial transactions as well as on trends in key financial indicators of statements and associated management and audit reports, the Group and the parent company. The Chairman of the Su- taking into due consideration the report from the Audit Com- pervisory Board was also in regular contact with the Manage- mittee, and the proposal of the Management Board with ment Board, and gathered information as appropriate relating regard to the appropriation of earnings. Other key topics to the course of business and key transactions. In addition, the discussed at the meeting were the trend in earnings perfor- Chairman of the Supervisory Board visited Group companies mance and the execution status of specific major projects, outside of Germany accompanied by the Chairman of the the preparations for the upcoming Annual General Meeting, Management Board, during which he was likewise able to the competitive situation in the Equipment segment, the sys- gather information relating to the course of business locally. tem of remuneration and the remuneration paid to the mem- In their subcommittees and plenary sessions, the Supervisory bers of the Management Board. Additionally, the Manage- Board members had plenty of opportunity to scrutinize the ment Board contract of service of Mr. Hartmut Beutler was reports and proposals submitted by the Management Board extended for a further five years. At its second meeting of and to set forth their own suggestions. the financial year, the Supervisory Board considered matters including the interim report on the first quarter of 2013, the The Supervisory Board reviewed performance trends on spe- development of the Group's earnings and course of business cific large-scale projects on several occasions in the course in the current year, as well as the marketing of deep drilling of the past year, and also gave consideration to the introduc- rigs by the Equipment segment. September's meeting was tion of a cost-cutting programme and assessed the liquidity held at the premises of a subsidiary company in Nordhausen. situation. The Supervisory Board reviewed the actions of Alongside the trend in earnings from large-scale projects be- the Management Board in dealing with the aforementioned ing carried out by the Construction and Resources segments, issues as well as the strategy being pursued by the Group, it reviewed compliance with financial performance targets in providing the Management Board with advice and support to financing agreements and approved a cost-cutting pro- ensure that an appropriate approach was employed. There gramme presented to it. It also approved the medium-term were no indications of conflicts of interest among members plan with regard to the consolidated balance sheet. In late of the Management Board or Supervisory Board requiring im- October of last year an extraordinary teleconference was held mediate notification of the Supervisory Board and disclosure during which the preparation of the latest quarterly financial to the Annual General Meeting. report was considered and project earnings were assessed, including a review of their effects on financing agreements There was only one change of personnel on the Supervisory and the adjustment of the full-year earnings forecast. At the Board in the past financial year. Following Mr. Walter Sigl's Supervisory Board's last session of the year in December, the REPORT OF THE SUPERVISORY BOARD 89

focus was on the financing situation, as well as on the cost- Auditing of 2013 annual and consolidated financial cutting programme. An updated declaration of conformity to statements the German Corporate Governance Code was passed, and The annual financial statements of BAUER AG to Decem- approval was given to the plans for financial 2014 as well as ber 31, 2013 and the consolidated financial statements of to the employee bonus framework. the Group, as well as the Combined Management Reports, including the Group accounts, were audited by the auditors Work carried out by the subcommittees elected by the Annual General Meeting and duly appointed by In the 2013 financial year there were four committees of the the Supervisory Board, PricewaterhouseCoopers Aktienge- Supervisory Board. The Mediation Committee and the Nomina- sellschaft und Wirtschaftsprüfungsgesellschaft, Stuttgart. The tions Committee were not required to convene. The chairmen accounts were certified by the auditors without reservation. of the various committees submitted regular reports on their The Audit Committee subjected the audit documentation and work to the plenary Supervisory Board meetings. The meetings reports to thorough scrutiny. The Committee reported on its of the various subcommittees of the Supervisory Board in the review to the Supervisory Board. The auditors attended the financial year were attended by all the respective members. relevant meetings of the Audit Committee as well as the annu- al financial review meeting of the plenary Supervisory Board. Two meetings of the Presidial and Personnel Committee were convened. At those meetings, preparations were made for The audit documentation and reports from the auditors were the decision of the Supervisory Board relating to the setting provided to all members of the Supervisory Board in good of the salaries and performance bonuses of the members of time for scrutiny. The Supervisory Board duly noted and the Management Board and to the structuring of its remuner- concurred with the findings of the auditors' review of the par- ation system, as well as to the performance bonus frame- ent company and Group consolidated financial statements work. Consideration was also given to the declaration of and the Combined Management Report. On conclusion of conformity to the German Corporate Governance Code, as the Supervisory Board's review, no objections were raised. well as to the extension of the contract of service of Manage- The financial statements of BAUER AG and the consolidated ment Board member Mr. Hartmut Beutler. financial statements of the Group were approved by the Su- pervisory Board at its annual review meeting on April 9, 2014. The Audit Committee held four conference calls and two The annual financial statements of BAUER AG were thereby meetings in the financial year. The committee reviewed the confirmed. Following prior consultations by the Audit Com- audit of the interim reports and, in the presence of the audi- mittee, the Supervisory Board concurred with the proposal tors, the audit of the annual financial statements of the parent of the Management Board regarding the appropriation of net company and the consolidated financial statements of the profit available for distribution. Group. It also scrutinized the Management Board's proposal regarding the appropriation of earnings. The Audit Committee On behalf of the Supervisory Board, I would like to thank also made preparations for the appointment of the auditors, the members of the Management Board, all the Group's including scrutinizing their independence. The Audit Commit- employees and the employee representatives within all Group tee further reviewed the status and considered the required companies for their great effort and commitment throughout level of write-down on the large-scale project in Jordan, as the past financial year. well as reviewing the status of other large-scale projects being carried out by the Construction and Resources segments. Schrobenhausen, April 2014 The Group's financing situation and the management of The Supervisory Board agreed financial performance indicators were reviewed, and advice was given on the introduction of a cost-cutting pro- gramme. A dedicated meeting reviewed the risk management system's compliance with applicable laws and standards, as Dr. Klaus Reinhardt well as the audit activities of the Internal Auditing function. Chairman of the Supervisory Board 90 ANHANG 2013 DES BAUER KONZERNS

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Balance Sheet and Income Statement of BAUER Aktiengesellschaft in accordance with HGB

92 Income Statement of BAUER Aktiengesellschaft

93 Balance Sheet of BAUER Aktiengesellschaft as at December 31, 2013 2013 CONSOLIDATED FINANCIAL STATEMENTS

> > > In Sydney, a new business quarter is being created on the site of a former container port. Bauer carried out the foundation works, installing more than 1,000 bored piles at a depth of 35 m and diameters up to 2.4 m. 92

Income Statement of BAUER Aktiengesellschaft

in EUR '000 01.01. - 31.12.2012 01.01. - 31.12.2013

1. Sales revenues 28,752 30,495

2. Other operating income 861 2,124

29,613 32,619

3. Cost of materials -1,202 -1,733

4. Staff costs -13,833 -14,613

5. Amortization of intangible assets and depreciation of property, plant and equipment -2,990 -3,191

6. Other operating expenses -10,150 -13,776

-28,175 -33,313

Operating result 1,438 -694

7. Income from participations 10,296 4,356

8. Other interest and similar income 8,056 7,029

9. Interest and similar expenses -4,532 -4,804

Financial result 13,820 6,581

10. Result from operating activities 15,258 5,887

11. Extraordinary expenses -140 -141

12. Income tax expense -1,674 -609

13. Other taxes -21 -17

14. Net profit for the year 13,423 5,120

15. Profit carried forward 14,025 22,309

16. Net earnings available for distribution 27,448 27,429 93

Balance Sheet of BAUER Aktiengesellschaft as at December 31, 2013

Assets in EUR '000 31.12.2012 31.12.2013

A. Fixed assets

I. Intangible assets 3,012 2,982

II. Property, plant and equipment 3,556 3,822

III. Financial assets 105,696 115,696

112,264 122,500

B. Current assets

I. Inventories Raw materials and supplies 27 74

II. Receivables and other assets 168,523 174,049 (of which receivables from affiliated companies) (166,063) (172,622)

III. Cash at banks 1,629 1,517

170,179 175,640

C. Prepayments and deferred charges 1,008 586

D. Deferred tax assets 218 352

283,669 299,078 2013 CONSOLIDATED FINANCIAL STATEMENTS

Equity and Liabilities in EUR '000 31.12.2012 31.12.2013

A. Shareholders' equity

I. Subscribed capital 73,001 73,001

II. Capital reserve 39,781 39,781

III. Revenue reserves 15,100 15,100

IV. Net earnings available for distribution (of which profit carried forward EUR 22,309 thousand; previous year EUR 14,025 thousand) 27,448 27,429

155,330 155,311

B. Provisions 6,158 6,716 (of which provisions for defined benefit plans) (4,913) (5,575)

C. Liabilities 122,181 137,051 (of which liabilities payable to affiliated companies) (38,833) (53,830)

283,669 299,078 94 ANHANG 2013 DES BAUER KONZERNS

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Consolidated Financial Statements in accordance with IFRS

96 Income Statement of the BAUER Group

96 Statement of Comprehensive Income of the BAUER Group

97 Cash Flow Statement of the BAUER Group

98 Balance Sheet of the BAUER Group as at December 31, 2013

100 Statement of Changes in Equity of the BAUER Group

1 0 1 Notes to the Consolidated Financial Statements of the BAUER Group

176 Assurance by the Legal Representatives

177 Auditors' Report 2013 CONSOLIDATED FINANCIAL STATEMENTS

> > > A new basin is being constructed for the Zerben lock on the Elbe-Havel canal. BAUER Spezialtiefbau GmbH executed the excavation pit for the project between May and September 2013. As well as an 11,900 m2 grab-excavated diaphragm wall, the works included reinforcements and 980 injection-grouted piles for uplift retention of the underwater concrete base. 96

Income Statement and Statement of Comprehensive Income of the BAUER Group

Income Statement

in EUR '000 Notes 01.01. - 31.12.2012 01.01. - 31.12.2013 (restated)

1. Sales revenues (5) 1,344,421 1,404,169 2. Changes in inventories -22,355 -4,423 3. Other capitalized goods and services for own account (6) 24,249 19,196 4. Other income (7) 29,763 30,579 CONSOLIDATED REVENUES 1,376,078 1,449,521

5. Cost of materials (8) -686,834 -755,906 6. Staff costs (9) -324,989 -342,815 7. Depreciation and amortization a) Depreciation of fixed assets (10) -76,403 -79,696 b) Write-downs of inventories due to use (11) -15,392 -14,196 8. Other operating expenses (12) -200,456 -224,827 OPERATING RESULT 72,004 32,081

9. Financial income (13) 5,972 7,729 10. Financial expenses (14) -44,657 -45,541 11. Share of the profit or loss of associated companies accounted for using the equity method 5,549 -226 PROFIT BEFORE TAX 38,868 -5,957

12. Income tax expenses (15) -13,095 -13,474 NET PROFIT OR LOSS 25,773 -19,431

of which attributable to shareholders of BAUER AG 24,739 -16,927 of which attributable to minority interests 1,034 -2,504

01.01. - 31.12.2012 01.01. - 31.12.2013 in EUR (restated)

Basic earnings per share (16) 1.44 -0.99 Diluted earnings per share (16) 1.44 -0.99 Average number of shares in circulation (basic) 17,131,000 17,131,000 Average number of shares in circulation (diluted) 17,131,000 17,131,000

Statement of Comprehensive Income

in EUR '000 01.01. - 31.12.2012 01.01. - 31.12.2013 (restated)

Net profit or loss 25,773 -19,431

Income and expenses which will not be subsequently reclassified to profit and loss Revaluation of commitments arising from employee benefits -15,986 970 after termination of employment Deferred taxes on that revaluation with no effect on profit and loss 4,470 -226

Income and expenses which will be subsequently reclassified to profit and loss Market valuation of derivative financial instruments -2,299 2,094 Included in profit and loss -6 -310 Deferred taxes on financial instruments with no effect on profit and loss 516 -642 Differences from currency translation -3,625 -15,678 Other result after tax -16,930 -13,792 Total Comprehensive income for the year 8,843 -33,223

of which attributable to shareholders of BAUER AG 8,902 -28,924 of which attributable to minority interests -59 -4,299 97

Cash Flow Statement of the BAUER Group

in EUR '000 01.01. - 31.12.2012 01.01. - 31.12.2013 (restated)

Cash flows from operating activities:

Profit before tax 38,868 -5,957 Depreciation of fixed assets 76,403 79,696 Write-downs of inventories due to use 15,392 14,196 Financial income received -4,573 -4,610 Financial expenses paid 40,080 39,358 Other non-cash transactions -6,547 8,795 Dividends received 796 2,951 Result from the disposal of fixed assets -2,624 -3,175 Change in provisions 2,878 -3,029 Change in trade receivables -12,422 -58,049 Change in receivables from construction contracts -26,153 -31,950 Change in receivables from concession arrangements 4,027 2,279 Change in other assets and in prepayments and deferred charges -1,743 7,717 Change in inventories 18,193 -22,687 Change in trade payables 14,855 20,451 Change in liabilities from construction contracts 16,274 4,424 Change in other current and non-current liabilities -2,088 -4,968

Cash and cash equivalents generated from day-to-day business operations 171,616 45,442 2013 CONSOLIDATED FINANCIAL STATEMENTS

Income tax paid -5,903 -7,026 Net cash from operating activities 165,713 38,416

Cash flow from investing activities:

Acquisition of consolidated companies less net cash and cash equivalents procured -1,282 0 Acquisition of property, plant and equipment and intangible assets -100,907 -89,240 Proceeds from sale of fixed assets 25,592 22,053 Consolidation scope-related change in financial resources 443 34 Acquisition of financial assets (participations) -33 0 Net cash used in investing activities -76,187 -67,153

Cash flows from financing activities:

Raising of loans and liabilities to banks 56,551 111,650 Repayment of loans and liabilities to banks -71,369 -17,317 Repayment of liabilities from finance lease agreements -6,256 -11,012 Dividend paid -9,950 -6,589 Interest paid -40,029 -39,342 Interest received 3,045 6,186 Net cash used in financing activities -68,008 43,576

Changes in liquid funds affecting payments 21,518 14,839

Influence of exchange rate movements on cash -1,233 -2,854 Total change in liquid funds 20,285 11,985

Cash and cash equivalents at beginning of reporting period 24,947 45,232 Cash and cash equivalents at end of reporting period 45,232 57,217 Change in cash and cash equivalents 20,285 11,985 98

Balance Sheet of the BAUER Group as at December 31, 2013

Assets

in EUR '000 Notes 01.01.2012 31.12.2012 31.12.2013 (restated) (restated)

A. NON-CURRENT ASSETS

I. Intangible assets (17)

1. Concessions, industrial property rights and similar rights and values and licences to such rights and values 10,395 12,251 11,038

2. Goodwill 2,031 2,203 0 3. Capitalized software costs 298 174 90 4. Capitalized development costs 17,579 19,939 24,260 30,303 34,567 35,388

II. Property, plant and equipment and investment property (17) 1. Land, land rights and buildings 205,851 202,915 211,577 2. Investment property 998 961 863 3. Technical equipment and machinery 216,947 210,692 214,496 4. Other equipment, factory and office equipment 29,118 27,734 27,319 5. Payments on account and assets in course of construction 5,658 23,014 5,282 458,572 465,316 459,537

III. Investments accounted for using the equity method 8,803 13,133 9,972 IV. Participations 3,627 3,638 3,613 V. Deferred tax assets (18) 19,629 28,172 26,299 VI. Receivables from concession arrangements (19) 43,975 40,770 36,762 VII. Other non-current assets (20) 8,717 7,627 7,564 VIII. Other non-current financial assets (21) 6,205 6,846 5,420 579,831 600,069 584,555 B. CURRENT ASSETS

I. Inventories (22) 1. Raw materials and supplies 154,991 154,399 146,666 2. Finished goods and work in progress and stock for trade 312,148 275,395 272,686 467,139 429,794 419,352

II. Receivables and other assets (23) 1. Receivables from construction contracts (PoC) 89,501 116,398 143,234 2. Receivables from joint ventures 263,190 272,443 323,008

3. Receivables from enterprises in which the company has participating interests 87 344 444

4. Payment on account 3,507 2,825 3,725 5. Other current assets 47,774 40,309 30,695 6. Other current financial assets 10,330 17,487 19,551 414,389 449,806 520,657

III. Effective income tax refund claims 4,786 4,514 3,437 IV. Cash and cash equivalents (24) 24,947 45,232 57,217 911,261 929,346 1,000,663 1,491,092 1,529,415 1,585,218 99

Equity and Liabilities in EUR '000 Notes 01.01.2012 31.12.2012 31.12.2013 (restated) (restated)

A. SHAREHOLDERS' EQUITY (25) I. Subscribed capital 73,001 73,001 73,001 II. Capital reserve 38,404 38,404 38,404 III. Other revenue reserves and net earnings available for distribution 315,939 317,930 285,197 IV. Minority interests 33,637 33,205 22,809 460,981 462,540 419,411

B. NON-CURRENT LIABILITIES (26) I. Liabilities to banks 355,171 426,186 247,775 II. Liabilities from finance lease agreements 17,661 16,187 17,265 III. Defined benefit plans (27) 63,931 80,439 81,637 IV. Other non-current liabilities 10,274 7,427 6,483 V. Other non-current financial liabilities 14,769 22,712 14,397 VI. Deferred tax liabilities (18) 12,962 19,397 14,788 474,768 572,348 382,345

C. CURRENT LIABILITIES (28) I. Liabilities 1. Liabilities to banks 251,567 168,090 427,589 2013 CONSOLIDATED FINANCIAL STATEMENTS 2. Liabilities from finance lease agreements 8,321 8,789 10,185 3. Advances received for orders 14,292 18,898 9,801 4. Liabilities from construction contracts (PoC) 13,613 29,982 32,839 5. Trade payables 160,156 172,713 194,471 6. Liabilities to enterprises in which the company has participating interests 195 173 219 7. Other current liabilities 60,575 60,514 69,873 8. Other current financial liabilities 22,185 13,783 12,102 530,904 472,942 757,079 II. Provisions

1. Effective income tax obligations 5,733 4,808 9,606 2. Provisions (29) 16,903 14,893 14,809 3. Current portion of defined benefit plans (27) 1,803 1,884 1,968 24,439 21,585 26,383 555,343 494,527 783,462 1,491,092 1,529,415 1,585,218 100

Statement of Changes in Equity of the BAUER Group from January 1, 2012 to December 31, 2013

Other revenues and net earnings available for distribution in EUR '000 Currency Hedging Subscribed Capital Revenue translation Reconciling transactions Minority capital reserve reserves reserve item, IFRS reserve interests Total As at 01.01.2012 73,001 38,404 306,836 10,019 10,387 -1,933 33,720 470,434 First-time adoption of IAS 19 R -9,370 -83 -9,453 As at 01.01.2012 (restated) 73,001 38,404 297,466 10,019 10,387 -1,933 33,637 460,981

Net profit or loss 0 0 24,739 0 0 0 1,034 25,773 Differences from currency translation 0 0 0 -2,646 0 0 -979 -3,625

Revaluation of commitments arising from employee benefits after termination of employment 0 0 -15,829 0 0 0 -157 -15,986

Market valuation of derivative financial instruments 0 0 0 0 0 -2,305 0 -2,305

Deferred taxes with no effect on profit and loss 0 0 4,427 0 0 516 43 4,986 Total comprehensive income for the year 0 0 13,337 -2,646 0 -1,789 -59 8,843

Changes in scope of consolidation 0 0 1,816 0 0 0 850 2,666 Dividend payments 0 0 -8,565 0 0 0 -1,385 -9,950 Other changes 0 0 -162 0 0 0 162 0 As at 31.12.2012 73,001 38,404 303,892 7,373 10,387 -3,722 33,205 462,540 As at 01.01.2013 (restated) 73,001 38,404 303,892 7,373 10,387 -3,722 33,205 462,540

Net profit or loss 0 0 -16,927 0 0 0 -2,504 -19,431 Differences from currency translation 0 0 0 -13,865 0 0 -1,813 -15,678

Revaluation of commitments arising from employee benefits after termination of employment 0 0 964 0 0 0 6 970

Market valuation of derivative financial instruments 0 0 0 0 0 1,767 17 1,784

Deferred taxes with no effect on profit and loss 0 0 -225 0 0 -638 -5 -868 Total comprehensive income for the year 0 0 -16,188 -13,865 0 1,129 -4,299 -33,223

Changes in scope of consolidation 0 0 -2,887 0 0 0 0 -2,887 Dividend payments 0 0 -5,139 0 0 0 -1,450 -6,589 Other changes 0 0 4,217 0 0 0 -4,647 -430 As at 31.12.2013 73,001 38,404 283,895 -6,492 10,387 -2,593 22,809 419,411 101

Notes to the Consolidated Financial Statements of the BAUER Group

GENERAL NOTES

GENERAL DISCLOSURES RELATING TO THE GROUP

BAUER Aktiengesellschaft, Schrobenhausen (referred to in the following as BAUER AG) is a stock corporation under German law. Its registered office is at BAUER-Strasse in Schrobenhausen, and the company is entered in the Register of Companies of Ingolstadt under file reference HRB 101375.

The BAUER Group is a provider of services, machinery and ancillary products for ground and groundwater. The Group markets its products and services all over the world. The operations of the Group are divided into three segments: Construction, Equip- ment and Resources. BAUER AG has been listed on the SDAX stock market index since September 2006. Between September 2008 and Septem- ber 2010, BAUER AG was also listed on the MDAX index.

1. BASES FOR COMPILING THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of BAUER AG were prepared applying section 315a of the German Commercial Code (HGB) in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU. The consolidated financial statements were prepared on the basis of historical cost, limited by the market-value valuation of available-for-sale financial assets and by the fair-value valuation of financial assets and liabilities (including derivative financial instruments) af- fecting net income. The previous year's figures have been determined according to the same principles. The BAUER Group's financial year is the calendar year.

The consolidated financial statements were prepared in euros. Unless otherwise specified, all amounts are quoted in thou- 2013 CONSOLIDATED FINANCIAL STATEMENTS sands of euros (EUR '000).

The income statement was prepared according to the nature of expenses method.

2. SCOPE OF CONSOLIDATION AND CONSOLIDATION PRINCIPLES Scope of consolidation The scope of consolidation includes BAUER AG and all major subsidiaries. Subsidiaries are all companies over which the par- ent has control in terms of financial and corporate policy. This is routinely accompanied by a voting share of over 50 percent. When assessing whether control is exerted, the existence and effect of potential voting rights currently exercisable or convert- ible are considered.

Subsidiary companies are not included in the consolidated financial statements if they are not material from the viewpoint of an operating segment or of the Group based on the following assessment: If the sum of all subsidiaries not included in the consolidated financial statements accounts for more than 1 percent of the Group's total net assets, consolidated revenues or net profit for the period, an assessment is undertaken as to which com- pany should be included in the consolidated financial statements taking into account sustainability and consolidation effects. The assessment criteria for materiality in respect of associated companies are restricted to annual earnings. Alongside quan- titative criteria, qualitative criteria are also applied in assessing the materiality of a company with regard to its inclusion in the scope of consolidation. Consequently, the non-inclusion of any one company must not result in material changes to segment or Group annual earnings, nor must it mask any other materially relevant trends. In a small number of cases, companies are fully consolidated into the financial statements of BAUER AG even though that company holds less than 50 percent of their 102 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

voting rights. This is the result of state restrictions which stipulate that foreign investors may not hold more than 50 percent of the voting rights in domestic companies. In such cases BAUER AG makes use of so-called agency , whereby more than 50 percent of the voting rights are commercially held in the company concerned, thus allowing for full consolidation.

Subsidiaries are included in the consolidated financial statements (fully consolidated) from the point at which control is transferred to the Group. They are de-consolidated at the point when control ends. Companies of which BAUER AG is able, directly or indirectly, to exercise a significant influence on the said companies' financial and operating policy decisions (associated companies) are consolidated according to the equity method. Joint ventures are likewise consolidated using the equity method. This related to six companies as at December 31st (in the previous year: five companies). The main subgroups and companies included in the consolidated financial statements are listed in the Major Participations section. The disclosures in accordance with Section 313, Subsection 2 HGB are grouped in a separate list of holdings. This will be published as part of the Notes to the financial statements of BAUER Aktiengesellschaft in the electronic version of the official Gazette ("Bundesanzeiger") of the Federal Republic of Germany. Subsidiaries with differing balance sheet dates compile interim financial statements as per the Group balance sheet date. NuBa Equipment Ltd., Canada, prepares its annual financial statements to September 30th. BAUER Corporate Services Private Limited., India, prepares its financial statements to March 31st.

Construction segment OOO BAUER Technologie, Moscow, Russia, was consolidated for the first time on June 30, 2013. OOO BAUER Technologie was previously not consolidated owing to its minor importance.

On August 27, 2013, SPESA Korrosionsschutz und Beschichtungen GmbH, Nordhausen, Germany was merged into SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany retrospectively with effect from January 1, 2013.

Equipment segment On September 12, 2013, Hausherr System Bohrtechnik GmbH, Unna, Germany and ABS Trenchless GmbH, Olpe, Germany were merged into KLEMM Bohrtechnik GmbH, Drolshagen, Germany retrospectively with effect from January 1, 2013. ABS Trenchless GmbH was previously not consolidated owing to its minor importance.

BAUER Deep Drilling GmbH, Schrobenhausen, Germany was consolidated for the first time with effect from September 30, 2013. The company is newly established.

Resources segment Bauer + Moosleitner Entsorgungstechnik GmbH, Salzburg, Austria, was consolidated for the first time with effect from March 31, 2013. It is a newly established joint venture company, incorporated into the BAUER Group applying the equity method.

No further changes have occurred to the scope of consolidation since December 31, 2013.

Consolidation principles The assets and liabilities of the German and foreign companies included in the consolidated financial statements are stated according to the uniform accounting and valuation methods applicable throughout the BAUER Group. Mutual receivables and liabilities as well as expenses and income between consolidated companies are eliminated. Consolidated inventories and fixed assets are adjusted by existing intra-Group balances. Consolidation affecting net income is subject to deferral of taxes, with deferred tax assets and liabilities being offset against each other provided the payment period and tax creditor are the same. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 103

In respect of subsidiaries consolidated for the first time, the identifiable assets, liabilities and contingent liabilities of the acquired companies were recorded at their applicable fair values at the time of acquisition. Goodwill occurring on initial con- solidation is capitalized and subjected to a yearly impairment test; an excess of the net fair value of the acquired net assets over cost is recognized in the income statement immediately at the time of initial consolidation in accordance with IFRS 3. Consolidation according to the equity method is subject to the same principles. If the pro rata loss in an associated com- pany is equal to or greater than the carrying amount of the participating interest, no further losses are recognized, unless a consolidated Group company has entered into obligations or made payments on behalf of the associated company.

3. KEY ASSUMPTIONS AND ESTIMATES In the consolidated financial statements, assumptions and estimates must be made which influence the amounts and recog- nition of assets and liabilities, income and expenses recorded, as well as contingent liabilities. The main areas of application of assumptions and estimates are in specifying the useful lives of fixed assets, determining discounted cash flows within the framework of impairment tests, assessing the realizability of deferred tax assets and the collectability of receivables, estimating the percentage of completion of construction contracts, establishing the fair value of some financial instruments and in creat- ing provisions for legal actions, pensions and other benefit commitments, taxes, warranties and guarantees. The actual values may differ from the estimates made.

4. GENERAL ACCOUNTING AND VALUATION METHODS 4.1. General changes to accounting and valuation methods Application of the following standards and interpretations was mandatory for the first time in the financial year: 2013 CONSOLIDATED FINANCIAL STATEMENTS

• IAS 1 – Presentation of Financial Statements Clarification regarding presentation of items of Other Comprehensive Income (OCI).

• IAS 12 – Income Taxes Addition of an exemption relating to the valuation of deferred tax debts or deferred tax claims arising from investment properties recognized as financial investments and measured at fair value.

• IAS 19 – Employee Benefits Amendment regarding the recognition and measurement of expenses for defined benefit plans, accounting for benefits relating to the termination of employment, and associated duties of disclosure.

• IFRS 1 – First-time Adoption of International Financial Reporting Standards Addition of an exemption in case of severe hyperinflation and removal of fixed dates for first-time adopters and clarification regarding accounting for government loans at non-market interest rates.

• IFRS 7 – Financial Instruments: Disclosures Amendments to the duties of disclosure relating to financial instruments recognized on the balance sheet which are offset in accordance with IAS 32.

• IFRS 13 – Fair Value Measurement Consolidation of the bases for measurement of fair value within IFRS and extension of fair value disclosure requirements. 104 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

• IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine Explanatory notes to the accounting for costs incurred during stripping.

In May 2012, the International Accounting Standards Board (IASB) published a new amendment as part of its Annual Im- provements cycle for standards and interpretations. The amendments are bindingly applicable for the first time to financial years beginning on or after January 1, 2013.

The standards and interpretations bindingly applicable for the first time in financial 2013 have no significant effects on the net asset, financial and earnings position of BAUER AG, with the exception of the effects of IAS 19 R.

Moreover, the IASB and the IFRIC have adopted further standards, interpretations and amendments, as listed below, which were not yet bindingly applicable, or had not yet been recognized by the EU, in financial 2013. The BAUER Group had not implemented early application of these standards by December 31, 2013. Initial application of the standards is planned as from the point they are recognized and adopted by the EU.

• IAS 27 – Separate Financial Statements IAS 27 Separate Financial Statements replaces IAS 27 Consolidated and Separate Financial Statements and is now only relevant to single-entity financial statements, as the provisions in IFRS 10 relating to consolidated financial statements have been revised.

• IAS 28 – Investments in Associates and Joint Ventures This amendment replaces IAS 28 - Investments in Associates - and stipulates the preconditions for application of the equity method by associates and joint ventures.

• IAS 32 – Financial Instruments: Presentation The amendment essentially involves clarification of a number of rules for the offsetting of financial assets and liabilities. A financial asset may only be set off against a financial liability if the claim is current - that is to say, it must not be dependent on a future event. Additionally, the amendments clarify that gross offsetting mechanisms (such as through clearing), which both eliminate credit and liquidity risks and process receivables and liabilities in a single accounting process, must be treated as equivalent to net offsetting. The effects of IAS 32 are likely to have no significant influence on the consolidated financial statements of BAUER AG.

• IAS 36 – Impairment of Assets Pursuant to the amendment to IFRS 13 Fair Value Measurement, a number of disclosure rules in IAS 36 Impairment of Assets regarding measurement of the achievable amount of asset impairment have been changed. The effects of IAS 36 are likely to have no significant influence on the consolidated financial statements of BAUER AG.

• IAS 39 – Financial Instruments: Recognition and Measurement With the amendment to IAS 39, it is possible to retain hedge accounting for derivatives if the contract party changes. This possibility is only allowable under certain preconditions. The effects of IAS 39 are likely to have no significant influence on the consolidated financial statements of BAUER AG. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 105

• IFRS 10 – Consolidated Financial Statements IFRS 10 modifies the term "control" such that the same criteria are applied to all entities in assessing a control relationship. This definition is backed by wide-ranging application examples illustrating various kinds of control. The effects of IFRS 10 are likely to have no significant influence on the consolidated financial statements of BAUER AG.

• IFRS 11 – Joint Arrangements As a result of the changes to definitions in IFRS 11, there are now two kinds of joint arrangement: joint operation and joint venture. Moreover, the option of proportionate consolidation of jointly controlled entities has been abolished. Parties to a joint venture are obligated to recognize their share on the balance sheet applying the equity method in accordance with IAS 28 " Investments in Associates and Joint Ventures". Parties to a joint operation recognize their shares proportionate to their share of the assets and liabilities of the joint operation. Consequently, a party to a joint operation includes the following items in its consolidated financial statements:

- Its assets, including its share in jointly held assets - Its liabilities, including its share in jointly incurred liabilities - Its income from the sale of its share in the products of the joint operation - Its share in income from the sale of products by the joint operation - Its expenses, including its share in any jointly incurred expenses

The effects of IFRS 11 are likely to have no significant influence on the consolidated financial statements of BAUER AG. 2013 CONSOLIDATED FINANCIAL STATEMENTS

• IFRS 12 – Disclosure of Interests in Other Entities IFRS 12 requires disclosures which enable readers of financial statements to assess the nature, risks and financial effects linked to interests in subsidiaries, associates, joint arrangements and non-consolidated structured entities (special-purpose entities). The effects of IFRS 12 are likely to have no significant influence on the consolidated financial statements of BAUER AG.

• Amendments to IFRS 10, IFRS 12 and IAS 27 The IASB project resulting in the amendments to IFRS 10, IFRS 12 and IAS 27 emerged from the consultation process relating to the publication of IFRS 10 Consolidated Financial Statements. The effects are likely to have no significant influence on the consolidated financial statements of BAUER AG.

• Amendments to IFRS 10, IFRS 11 and IFRS 12 The collective amendment to IFRS 10, IFRS 11 and IFRS 12 clarifies their transitional provisions. Early adoption is allowable only in respect of all standards together.

• IFRIC 21 – Levies IFRIC 21 regulates accounting for government levies not covered by IAS 12. It stipulates when such an obligation is to be recognized as a liability. The effects of IFRIC 21 are likely to have no significant influence on the consolidated financial statements of BAUER AG.

Additionally, in the course of the annual update to IFRS in December 2013 a further amendment was published which is not likely to have any significant influence on the consolidated financial statements of BAUER AG. 106 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

4.2. Restatement in accordance with IAS 8 a) Adoption of IAS 19 The amendment to the standard concerning employee benefits entails changes to the recognition, measurement, disclosure and presentation of defined benefit plan commitments. The standard additionally stipulates calculation of net interest expendi- ture/income as the product of the assets/liabilities deriving from defined benefit plans (net) and the discount interest rate as determined at the start of the year. The effect of this is to eliminate the previous concept of statement of expected returns on plan assets. IAS 19 R has been applied retrospectively in accordance with the transitional rules.

The first-time adoption of IAS 19 R had the following effects on the period result, profit attributable to minority interests, the Group's equity and the consolidated cash flow statement:

Net profit or loss: Staff costs in the 2012 financial year decreased by the previously included expenses from the amortization of actuarial gains and losses in an amount of EUR 605 thousand. Of that total, EUR 171 thousand was income tax expense, resulting in a EUR 434 thousand effect on the period result. Of that amount, EUR 430 thousand is profit attributable to the shareholders of BAUER AG and EUR 4 thousand is attributable to minority interests.

Group equity and provisions for defined benefit plans: The setting-off of actuarial gains and losses increased provisions for defined benefit plans by EUR 28,476 thousand as per December 31, 2012 (January 1, 2012: EUR 13,095 thousand). Of that total, EUR 7,941 thousand (January 1, 2012: EUR 3,642 thousand) are deferred taxes, which reduced the Group's equity by EUR 20,535 thousand (January 1, 2012: EUR 9,453 thousand). Of that decrease, an amount of EUR -20,776 thousand (January 1, 2012: EUR -9,370 thousand) related to the other revenue reserves; EUR 434 thousand to the net earnings; and EUR -193 thousand (January 1, 2012: EUR -83 thousand) to minority interests. The changes relative to the figures previously stated in our quarterly reports reflect new data from the subsidiaries in Indonesia and Taiwan. The provisions for defined benefit plans of those companies were previously measured according to local laws.

Consolidated cash flow statement: The EUR 605 thousand decrease in staff costs was reflected in the consolidated cash flow statement in the profit before tax, which after adjustment totalled EUR 38,868 thousand. The change in provisions included in the cash flow from operating activities was increased by EUR 15,210 thousand as a result of the first-time adoption of IAS 19 R and the change in other assets and prepayments and deferred charges decreased by EUR -4,299 thousand. These figures respectively include the income tax expense amounting to EUR 171 thousand. The contra-items are the non-cash transactions totalling EUR -11,516 thousand. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 107

b) Restatement of previous year figures The revision of the chart of accounts and the assignment of accounts to the categories in IAS 39 has improved the trans- parency of the balance sheet with regard to financial assets and liabilities. The provisions for outstanding invoices previously stated under "Other current liabilities" has been reassigned to the trade payables. Additionally, the "King piles, sheet piles" item has been consolidated with the "Raw materials and supplies" item, and the receivables from joint ventures with the trade receivables, thereby adapting to internal reporting practices. In the income statement, the income from the reversal of provisions and the income from the reversal of reductions for impairment of receivables from the Construction, Equipment and Resources segments have been reassigned from the "Other income" item to the"Other operating expenses" item. The previous year's figures have been adjusted accordingly. The changes are presented in the following tables as "Other Restatements". 2013 CONSOLIDATED FINANCIAL STATEMENTS 108 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Restatement of the income statement for the period January 1 to December 31, 2012

in EUR '000 01.01. - 31.12.2012 Restatements Restatements 01.01. - 31.12.2012 (as reported) Other IAS 19 R (restated)

1. Sales revenues 1,344,421 1,344,421 2. Changes in inventories -22,355 -22,355 3. Other capitalized goods and services for own account 24,249 24,249 4. Other income 39,547 -9,784 29,763 CONSOLIDATED REVENUES 1,385,862 -9,784 1,376,078

5. Cost of materials -686,834 -686,834 6. Staff costs -325,594 605 -324,989 7. Depreciation and amortization a) Depreciation of fixed assets -76,403 -76,403 b) Write-downs of inventories due to use -15,392 -15,392 8. Other operating expenses -210,240 9,784 -200,456 OPERATING RESULT 71,399 0 605 72,004

9. Financial income 5,972 5,972 10. Financial expenses -44,657 -44,657 11. Share of the profit or loss of associated companies accounted for using the equity method 5,549 5,549 PROFIT BEFORE TAX 38,263 605 38,868

12. Income tax expense -12,924 -171 -13,095 NET PROFIT OR LOSS 25,339 434 25,773

of which attributable to shareholders of BAUER AG 24,309 430 24,739 of which attributable to minority interests 1,030 4 1,034

in EUR 01.01. - 31.12.2012 Restatements Restatements 01.01. - 31.12.2012 (as reported) Other IAS 19 R (restated)

Basic earnings per share 1.42 0.02 1.44 Diluted earnings per share 1.42 0.02 1.44 Average number of shares in circulation (basic) 17,131,000 17,131,000 Average number of shares in circulation (diluted) 17,131,000 17,131,000

Restatement of the statement of comprehensive income for the period January 1 to December 31, 2012

in EUR '000 01.01. - Restatements Restatements 01.01. - 31.12.2012 Other IAS 19 R 31.12.2012 (as reported) (restated)

Net profit or loss 25,339 434 25,773

Income and expenses which will not be subsequently reclassified to profit and loss Revaluation of commitments arising from employee benefits after termination of employment 0 -15,986 -15,986 Deferred taxes on that revaluation with no effect on profit and loss 0 4,470 4,470

Income and expenses which will be subsequently reclassified to profit and loss Market valuation of derivative financial instruments -1,839 -460 -2,299 Included in profit and loss -466 460 -6 Deferred taxes on financial instruments with no effect on profit and loss 516 516 Differences from currency translation -3,625 -3,625 Other result after tax -5,414 0 -11,516 -16,930 Total Comprehensive income for the year 19,925 -11,082 8,843

of which attributable to shareholders of BAUER AG 19,874 -10,972 8,902 of which attributable to minority interests 51 -110 -59 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 109

Restatement of the consolidated cash flow statement for the period January 1 to December 31, 2012 in EUR '000 01.01. - 31.12.2012 Restatements Restatements 01.01. - 31.12.2012 (as reported) Other IAS 19 R (restated)

Cash flows from operating activities:

Profit before tax 38,263 605 38,868 Impairment losses/reversals of impairment on fixed assets 76,403 76,403 Write-downs of inventories due to use 15,392 15,392 Financial income received -4,573 -4,573 Financial expenses paid 40,080 40,080 Other non-cash transactions 5,765 -796 -11,516 -6,547 Dividends received 0 796 796 Result from the disposal of fixed assets -2,624 -2,624 Change in provisions -12,332 15,210 2,878 Change in trade receivables -12,283 -139 -12,422 Change in receivables from construction contracts -26,153 -26,153 Change in receivables from concession arrangements 4,027 4,027 Change in other assets and in prepayments and deferred charges 2,417 139 -4,299 -1,743 Change in inventories 18,193 18,193 Change in trade payables 11,767 3,088 14,855 Change in liabilities from construction contracts 16,274 16,274

Change in other current and non-current liabilities 1,000 -3,088 -2,088 2013 CONSOLIDATED FINANCIAL STATEMENTS Cash and cash equivalents generated from day-to-day business operations 171,616 0 0 171,616

Income tax paid -5,903 -5,903 Net cash from operating activities 165,713 165,713

Cash flows from investing activities:

Acquisition of consolidated companies less net cash and cash equivalents procured -1,282 -1,282 Acquisition of property, plant and equipment and intangible assets -100,907 -100,907 Proceeds from sale of fixed assets 25,592 25,592 Consolidation scope-related change in financial resources 443 443 Acquisition of financial assets (participations) -33 -33 Net cash used in investing activities -76,187 -76,187

Cash flows from financing activities:

Raising of loans and liabilities to banks 56,551 56,551 Repayment of loans and liabilities to banks -71,369 -71,369 Repayment of liabilities from finance lease agreements -6,256 -6,256 Dividends paid -9,950 -9,950 Interest paid -40,029 -40,029 Interest received 3,045 3,045 Net cash used in financing activities -68,008 -68,008

Changes in liquid funds affecting payments 21,518 21,518

Influence of exchange rate movements on cash -1,233 -1,233 Total change in liquid funds 20,285 20,285

Cash and cash equivalents at beginning of reporting period 24,947 24,947 Cash and cash equivalents at end of reporting period 45,232 45,232 Change in cash and cash equivalents 20,285 20,285 110 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Restatement Of Consolidated Balance Sheet As At December 31, 2012 Assets

in EUR '000 01.01.2012 Restate- Restate- 01.01.2012 31.12.2012 Restate- Restate- 31.12.2012 (as ments ment (restated) (as ments ment (restated) reported) Other IAS 19 R reported) Other IAS 19 R A. NON-CURRENT ASSETS I. Intangible assets 1. Concessions, industrial property rights and similar rights and values and licences to such rights and values 10,395 10,395 12,251 12,251 2. Goodwill 2,031 2,031 2,203 2,203 3. Capitalized software costs 298 298 174 174 4. Capitalized development costs 17,579 17,579 19,939 19,939 30,303 30,303 34,567 34,567 II. Property, plant and equipment and investment property 1. Land, land rights and buildings 205,851 205,851 202,915 202,915 2. Investment Property 998 998 961 961 3. Technical equipment and machinery 216,947 216,947 210,692 210,692 4. Other equipment, factory and office equipment 29,118 29,118 27,734 27,734 5. Payments on account and assets in course of construction 5,658 5,658 23,014 23,014 458,572 458,572 465,316 465,316 III. Investments accounted for using the equity method 8,803 8,803 13,133 13,133 IV. Participations 3,627 3,627 3,638 3,638 V. Deferred tax assets 15,987 3,642 19,629 20,231 7,941 28,172 VI. Receivables from concession arrangements 43,975 43,975 40,770 40,770 VII. Other non-current assets 10,298 -1,581 8,717 8,597 -970 7,627 VIII. Other non-current financial assets 6,205 6,205 6,846 6,846 577,770 -1,581 3,642 579,831 593,098 -970 7,941 600,069 B. CURRENT ASSETS I. Inventories 1. Raw materials and supplies 153,244 1,747 154,991 152,782 1,617 154,399 2. King piles and sheet piles 1,747 -1,747 0 1,617 -1,617 0 3. Finished goods and work in progress and stock for trade 312,148 312,148 275,395 275,395 467,139 0 467,139 429,794 0 429,794 II. Receivables and other assets 1. Receivables from construction contracts (PoC) 89,501 89,501 116,398 116,398 2. Trade receivables 255,102 8,088 263,190 264,216 8,227 272,443 3. Receivables from joint ventures 2,240 -2,240 0 4,922 -4,922 0 4. Receivables from enterprises in 0 which the company has participating interests 87 87 344 344 5. Payments on account 3,507 3,507 2,825 2,825 6. Other current assets 56,098 -8,324 47,774 47,719 -7,410 40,309 7. Other current financial assets 6,273 4,057 10,330 12,412 5,075 17,487 412,808 1,581 414,389 448,836 970 449,806 III. Effective income tax refund claims 4,786 4,786 4,514 4,514 IV. Cash and cash equivalents 24,947 24,947 45,232 45,232 909,680 1,581 911,261 928,376 970 929,346 1,487,450 0 3,642 1,491,092 1,521,474 0 7,941 1,529,415 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 111

Equity and liabilities in EUR '000 01.01.2012 Restate- Restate- 01.01.2012 31.12.2012 Restate- Restate- 31.12.2012 (as ments ment (restated) (as ments ment (restated) reported) Other IAS 19 R reported) Other IAS 19 R A. SHAREHOLDERS' EQUITY I. Subscribed capital 73,001 73,001 73,001 73,001 II. Capital reserve 38,404 38,404 38,404 38,404 III. Other revenue reserves and net earnings available for distribution 325,309 -9,370 315,939 338,272 -20,342 317,930 IV. Minority interests 33,720 -83 33,637 33,398 -193 33,205 470,434 -9,453 460,981 483,075 -20,535 462,540 B. NON-CURRENT LIABILITIES I. Liabilities to banks 355,171 355,171 426,186 426,186 II. Liabilities from finance lease agreements 17,661 17,661 16,187 16,187 III. Defined benefit plans 50,732 104 13,095 63,931 51,859 104 28,476 80,439 IV. Other non-current liabilities 11,590 -1,316 10,274 8,674 -1,247 7,427 V. Other non-current financial liabilities 14,769 14,769 22,712 22,712 VI. Deferred tax liabilities 12,962 12,962 19,397 19,397 462,885 -1,212 13,095 474,768 545,015 -1,143 28,476 572,348 C. CURRENT LIABILITIES I. Liabilities 1. Liabilities to banks 251,567 251,567 168,090 168,090 2. Liabilities from finance lease

agreements 8,321 8,321 8,789 8,789 2013 CONSOLIDATED FINANCIAL STATEMENTS 3. Advances received for orders 14,292 14,292 18,898 18,898 4. Liabilities from construction contracts (PoC) 13,613 13,613 29,982 29,982 5. Trade payables 127,597 32,559 160,156 137,066 35,647 172,713 6. Liabilities to enterprises in which the company has participating interests 195 195 173 173 7. Other current liabilities 92,012 -31,437 60,575 95,138 -34,624 60,514 8. Other current financial liabilities 22,095 90 22,185 13,663 120 13,783 529,692 1,212 530,904 471,799 1,143 472,942 II. Provisions 1. Effective income tax obligations 5,733 5,733 4,808 4,808 2. Provisions 16,903 16,903 14,893 14,893 3. Current portion of defined benefit plans 1,803 1,803 1,884 1,884 24,439 24,439 21,585 21,585 554,131 1,212 555,343 493,384 1,143 494,527 1,487,450 0 3,642 1,491,092 1,521,474 0 7,941 1,529,415

4.3. Accounting and valuation methods within the Group Foreign currency translation Foreign currency transactions are translated in the financial statements of BAUER AG and the consolidated subsidiaries at the rates applying on the dates of the transactions. The financial statements of the foreign companies belonging to the BAUER Group are translated into euros according to the functional currency concept. Accordingly, assets and liabilities are translated at the rate applying on the balance sheet date and the income statement items at the average rate. The differences arising from currency translation are recognized in the currency translation reserve as part of the shareholders' equity, without affecting net income. 112 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The rates used for translation are based on the following table:

Yearly average values Balance sheet date 1 EUR equals 2012 2013 2012 2013

Singapore SGD 1.6072 1.6661 1.6116 1.7392 Thailand THB 40.0346 41.0558 40.3532 45.2177 Mexico MXP 16.9761 17.1181 17.1986 18.0282 Chile CLP 629.0114 664.3491 631.2020 724.4884 Argentina ARS 5.9082 7.3833 6.4742 8.9744 Peru PEN 3.4027 3.6211 3.3650 3.8506 Japan JPY 103.4106 130.3063 113.6111 144.5122 United States of America USD 1.2918 1.3301 1.3183 1.3767 South Africa ZAR 10.5824 12.9709 11.1897 14.5035 Great Britain GBP 0.8113 0.8497 0.8154 0.8331 Malaysia MYR 3.9774 4.2178 4.0333 4.5204 Saudi Arabia SAR 4.8445 4.9982 4.9444 5.1632 Lebanon LBP 1,943.0039 2,005.2622 1,984.7007 2,068.4917 Egypt EGP 7.8699 9.1766 8.3908 9.5661 Indonesia IDR 12,191.3441 14,047.7904 12,972.0720 16,754.4389 Hungary HUF 288.2774 298.0405 292.8406 297.0230 Romania RON 4.4612 4.4164 4.4392 4.4739 United Arab Emirates AED 4.7446 4.8855 4.8420 5.0565 Philippines PHP 54.3570 56.7348 54.1162 61.1186 New Zealand NZD 1.5864 1.6295 1.6035 1.6747 Taiwan TWD 38.1055 39.6265 38.2874 41.0539 Hong Kong HKD 10.0184 10.3173 10.2188 10.6753 China CNY 8.1397 8.1686 8.2117 8.3314 Switzerland CHF 1.2039 1.2288 1.2072 1.2267 Australia AUD 1.2445 1.3937 1.2712 1.5396 Canada CAD 1.2905 1.3759 1.3114 1.4636 Russia RUB 40.0461 42.5912 40.1982 45.2582 India INR 69.0521 78.5205 72.2231 85.2246 Bulgaria BGL 1.9559 1.9558 1.9559 1.9560 Sweden SEK 8.6823 8.6664 8.5842 8.8263 Poland PLN 4.1714 4.2159 4.0929 4.1508 Panama PAB 1.2918 1.3301 1.3183 1.3767 Qatar QAR 4.7019 4.8418 4.7986 5.0133 Turkey TRY 2.3141 2.5646 2.3557 2.9450 Vietnam VND 26,963.1058 27,999.3993 27,474.6903 29,062.1368 Jordan JOD 0.9152 0.9421 0.9363 0.9753 Oman OMR 0.4976 0.5121 0.5076 0.5301 Ghana GHS 2.4023 2.7791 2.5147 3.2559 Georgia GEL 2.1360 2.2134 2.1861 2.3887 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 113

Intangible assets Intangible assets are capitalized at cost and amortized according to the straight-line method over the projected useful life of 3 to 10 years. Assets which have an indefinite useful life, such as goodwill, are not subjected to scheduled amortization but are impair- ment-tested each year, or when relevant indications arise. The goodwill is the amount by which the acquisition cost of the acquisition exceeds the fair value of the Group's shares in the net assets of the acquired entity at the date of acquisition. Goodwill created by acquisition is recognized under "Intangible assets". Goodwill resulting from the acquisition of an associ- ated company is included in the carrying amount of investments in associated companies and consequently is not impair- ment-tested separately, but within the overall carrying amount. The recognized goodwill is subjected to an annual value retention test and valued at its original acquisition cost less cumulative impairment. Value recovery adjustments are not permitted. Gains and losses from the disposal of an entity include the carrying amount of the goodwill assigned to the entity being sold. Assets which are subject to scheduled amortization are impairment-tested if relevant events or changes in circumstances indicate that the carrying amount may no longer be attainable.

Impairment in the amount of the carrying amount exceeding the attainable amount is recognized. The attainable amount is the higher amount of the applicable fair value of the asset less selling costs and the value in use. For the impairment test, assets are grouped at the lowest level for which cash flows can be separately identified (cash-generating units). With the exception of goodwill, a test is performed on each balance sheet date in respect of non-cash assets for which in the past an impairment was recognized as to whether a value recovery adjustment is required.

Research and development costs are generally charged as expenditure in the financial year in which they occurred, in accord- 2013 CONSOLIDATED FINANCIAL STATEMENTS ance with IAS 38. Exceptions to this are certain development costs which are capitalized where it is probable that a future economic benefit will be drawn from the development project and the costs incurred can be measured reliably. In addition, the following criteria in accordance with IAS 38.57 must be met:

• Technical feasibility of completion of the intangible asset so that it will be available for use or sale • Intention to complete the intangible asset and to use or sell it • Ability to use or sell the intangible asset • Evidence of how the intangible asset will generate probable future economic benefits • The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset • The ability to measure reliably the expenditure attributable to the intangible asset during its development

The cost of manufacture includes all costs directly attributable to the development process as well as appropriate portions of development-related overheads. The assets in development are subjected to an annual impairment test and valued at their original cost less cumulative depreciation. Amortization is undertaken according to the straight-line method as from start of production over the intended term of the developed models. The projected useful life is between 3 and 6 years. Impairment losses on intangible assets are recognized to the higher of the value in use or net realizable value. If the preconditions for an impairment no longer exist, reversals of impairment – except for goodwill – are undertaken. 114 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Property, plant and equipment According to IAS 16, property, plant and equipment is valued at cost, less scheduled straight-line depreciation based on the pro rata temporis method, unless in exceptional cases some other method of depreciation more effectively reflects the usage. The following table provides an overview of the useful lives:

Asset Economic life

Buildings and other structures 3 to 60 years Technical equipment and machinery 3 to 21 years Other equipment, factory and office equipment 2 to 21 years

Impairment losses on property, plant and equipment are recognized in accordance with IAS 36 where the value in use or fair value less cost to sell of the asset concerned has fallen below the carrying amount. If the reasons for an impairment recog- nized in previous years no longer exist, a corresponding reversal of impairment is applied. Both impairment losses and scheduled depreciation are recognized under the "Depreciation of fixed assets" item. The level of impairment losses is explained in accordance with IAS 36 under "Non-current assets".

Leasing The BAUER Group acts as both a lessee and a lessor. Leasing relationships are classified according to IAS 17 based on the distribution of opportunity and risk between the lessor and lessee. Leasing relationships in which most of the opportunity and risk linked to ownership of the leased item remains with the lessor are classified as operating leases. Where the lessee has most of the opportunity and risk, the agreement is classified as a finance lease.

a) Accounting for lessee transactions Payments made in connection with an operating lease (net after taking into account incentive payments by the lessor) are recognized in the income statement by straight-line depreciation over the term of the lease. Assets from finance leases are capitalized at the start of the lease term at the lower of the fair value of the leased item and the present value of the minimum lease payments. A leasing liability is recognized under "Current and non-current liabilities". Each lease instalment is split into an interest and a repayment portion, so that the leasing liability is subject to a consistent interest rate. The interest portion of the lease instalment is recognized as affecting expenditure in the income statement. The property, plant and equipment asset held under a finance lease is written down over the shorter of the economic life of the asset or the lease term.

b) Accounting for lessor transactions A lease is an agreement whereby the lessor assigns to the lessee the right to use an asset for a specific period of time against a payment or series of payments. Assets leased by the customer in the form of operating leases are assigned on the balance sheet according to their nature. Income from leases is recognized by the straight-line method over the term of the agreement. In the BAUER Group, mainly operating leases are entered into as the lessor. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 115

Government grants Government grants for assets including non-monetary benefits at fair value are recognized on the balance sheet as accruals on the Equity and Liabilities side (Investment allowance) or, on determining the carrying amount of the asset, are deducted from the Assets side (Invest subsidy).

Business combinations Acquisitions of subsidiaries are accounted for in accordance with IFRS 3 based on the acquisition method. The cost of the acquisition corresponds to the fair value of the assets contributed, the equity instruments issued and the liabilities created and/or transferred at the transaction date. Assets, liabilities and contingent liabilities identifiable in the course of a business combination are measured on initial consolidation at their fair values at the acquisition date. The amount by which the acquisi- tion cost exceeds the Group's share of the net assets measured at their fair value is stated as goodwill. The non-controlling interests are valued either at cost (Partial Goodwill method) or at fair value (Full Goodwill method). The available option can be exercised on a case-by-case basis. BAUER Group policy is to apply the Partial Goodwill method. If the acquisition cost is less than the net assets of the acquired subsidiary measured at their fair value, the difference is recognized directly in the income statement. Transaction costs directly linked to a business combination are recognized in the income statement. In the event of successive acquisitions, the differences between the carrying amount and the applicable fair value of the shares previously held are recognized as affecting net income at the time of acquisition. Existing contracts with the acquired entity at the time of acquisition, except those under the terms of IAS 17 and IFRIC 4, are analyzed and reclassified where appropriate.

Borrowing costs

Borrowing costs linked directly to the acquisition, construction or production of qualifying assets in accordance with IAS 23 2013 CONSOLIDATED FINANCIAL STATEMENTS are included in the cost of the asset in question for the period until start of use of the asset. The underlying finance cost rate in the past financial year was between 6.76 percent and 8 percent (previous year: 2 percent and 6.76 percent). Testing as to whether an asset is a qualifying asset is carried out according to internally stipulated materiality limits for projects and instal- lations. If the said materiality limits are exceeded, borrowing costs for qualified assets are capitalized. Other financing costs are recognized as ongoing expenditure under "Financial expenses".

Investment property Land and buildings maintained in order to generate rental income are accounted for at amortized cost in accordance with IAS 40, with the useful lives applied for depreciation (straight-line according to the pro rata temporis method) corresponding to those of the property, plant and equipment used by the company itself. The market values are determined mainly by external valuers.

Investments accounted for using the equity method According to IAS 28, an associated company is any entity over which the investor has significant influence, though not con- trol. This routinely means voting shares of between 20 and 50 percent. Shares in associated companies are valued at-equity and recognized initially at cost. The Group's shares in associated compa- nies include the goodwill created by the acquisition (less cumulative impairment). 116 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The Group's share in the profits and losses of associated companies is reported in the income statement as from the time of acquisition. The share in changes in reserves is recorded in the Group reserves. The cumulative changes after acquisition are set off against the carrying amount of the investment. If the Group's share in the losses of an associated company is equal to or more than the Group's shareholding in the said associate, including other unsecured claims, the Group recognizes no additional losses, unless it has entered into obligations or made payments on behalf of the associated company. Non-realized gains from transactions between Group companies and associated companies are eliminated according to the Group's share in the associated company. Non-realized losses are likewise eliminated, unless the transaction implies an impairment of the transferred asset.

Joint entities are a subgroup of joint ventures. Joint ventures are contractual agreements whereby two or more parties carry out an economic activity under a common management. Alongside joint entities valued at equity, joint ventures also encom- pass the activities jointly carried out and consortia. The BAUER Group accounts for joint ventures in compliance with IAS 31 as follows: BAUER as a partner in a joint venture accounts for the assets at its disposal and the liabilities it itself incurs, as well as its own expenditures, and recognizes the income from such activities on a pro rata basis in its sales revenues. Assets and liabilities of the joint ventures themselves produce pro rata results which are accounted for analagously to the at-equity method, and are stated under "Receivables from joint ventures" or "Liabilities to joint ventures" as appropriate.

Financial instruments a) Primary financial instruments In the BAUER Group, primary financial instruments are assigned as financial assets to the following categories: • Loans and Receivables (LaR) • Available-for-Sale (AfS)

The "Loans and Receivables" category includes current and non-current financial assets. The "Available-for-Sale" category includes marketable securities as well as equity portions which are not consolidated or not recognized by the equity method. For those equity portions there is no active market, and no fair value can be reliably determined for them, so the shares are valued at cost. We have no intention of selling them. Available-for-sale financial assets are non-derivative financial assets which are classified as available for sale and are not allo- cated to one of the other categories of financial asset specified. They are recognized at fair value both when initially entered and in the subsequent periods. Assets classified as held for sale are impairment-tested at each balance sheet date in relation to objective criteria (such as significant financial difficulties of the debtor, high probability of insolvency proceedings being initiated against the debtor, loss of an active market in the financial assets). Any impairment expenditure incurred because a fair value is less than the carrying amount is recognized affecting net income. Where impairment of the fair values of assets held for sale was previously stated not affecting net profit in the shareholders' equity, it must be eliminated from the shareholders' equity up to the amount of the measured impairment and recognized in the income statement. If subsequent valuation reveals that the fair value has objectively increased due to events occurring after entry, the impairment is reversed in the corresponding amount. Recovery in the value of debt instruments is recognized in the income statement. Impairment affecting equity instruments held for sale and recognized at cost must not be reversed. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 117

Primary financial instruments as financial liabilities are assigned to the following category: • Financial Liabilities Measured at Amortized Cost (FLAC) or Other Financial Liabilities

The "Financial Liabilities Measured at Amortized Cost" category includes liabilities to banks, trade payables as well as other current and non-current liabilities and current and non-current financial liabilities.

Receivables and liabilities in the "Financial Liabilities Measured at Amortized Cost" and "Loans and Receivables" categories are initially recognized at the applicable fair value, including transaction costs directly attributable to acquisition of the finan- cial asset or incurring of the financial liability, and subsequently measured at amortized cost, applying the effective interest rate method. The amortized cost of a financial asset or liability is calculated, applying the effective interest rate method, from the historical cost less the repayments made, plus or less the cumulative amortization of any difference between the original amount and the amount repayable at the final due date, and also less depreciation and impairment or plus appreciation and value recovery adjustment.

In the case of current receivables and liabilities, the amortized cost always corresponds to the nominal amount, or the amount repayable. Cash and cash equivalents comprise credit balances with banks as well as petty cash stocks, and are valued at amortized cost. In the case of financial assets or liabilities recognized in the income statement at fair value, the initial fair-value valuation excludes the transaction costs. Financial liabilities are derecognized when they have been paid or the obligation has been extinguished. Items are initially recorded on the performance date. In the case of financial assets, derecognition of potential default risks is effected by value adjustments in separate value adjustment accounts. Financial assets are derecognized if the 2013 CONSOLIDATED FINANCIAL STATEMENTS rights to payments from the financial assets have expired or been transferred, and the Group has essentially transferred all risks and opportunities associated with ownership, or the essential opportunities and risks have neither been transferred nor retained, but right of disposal has been transferred. If there are doubts as to the collectability of receivables, they are valued at amortized cost less appropriate single valuation allowances or a flat-rate allowance. Impairment of trade receivables is recognized when there are objective signs (such as disputed contract variations, missed payments or insolvencies) indicating that the amounts due will not be collectable in full. The impairment is recognized in the income statement by way of a value adjustment account. All other impairments are written off directly and likewise recognized in the income statement. Group directives stipulate that impairment of receivables must always be recorded in separate value adjustment accounts. They are derecognized at the same time as the corresponding impaired receivable. The fair value option provided by IAS 39 was not exercised. b) Derivative financial instruments A derivative is a financial instrument or other contract, • which varies in value based on changes in a specific interest rate, price of a financial instrument, commodity price, exchange rate, price or interest rate index, credit rating or credit index, or some similar variable, provided in the case of a non-financial variable the variable is not specific to one party to the contract; • which requires no payment in return for acquisition, or one which, compared to other forms of contract expected to react similarly to changes in market conditions, is lower; • or which is settled at a later date. 118 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

In the BAUER Group, free-standing derivative financial instruments are assigned as financial assets to the following category: • Financial Assets Held for Trading (FAHfT) Free-standing derivative financial instruments as financial liabilities are assigned to the following category: • Financial Liabilities Held for Trading (FLHfT)

Changes in value of derivatives not forming part of a cash flow hedge are stated under other operating income or expenses in the case of foreign exchange forward contracts or options or, in the case of interest-rate swaps, are recognized in the income statement under financial expenses or income. The applicable fair values of the level 2 financial instruments are cal- culated on the basis of the conditions prevailing at the balance sheet date, such as interest or exchange rates, and applying recognized models, such as discount cash flow or option price models.

The free-standing derivative financial instruments of the "Financial Assets Held for Trading“ and "Financial Liabilities Held for Trading" categories include fair values of interest rate swaps, foreign exchange options, cross-currency swaps and foreign exchange forward contracts not included in hedge accounting or not meeting the hedge accounting conditions.

In the BAUER Group, derivative financial instruments (interest rate swaps, foreign exchange options, cross-currency swaps and foreign exchange forward contracts) are entered into solely to hedge against interest rate and currency risks. No deals are made without an underlying transaction.

In the case of derivatives included in hedge accounting, when hedging expected future transactions (cash flow hedges) the effective portion of the gain or loss from a hedging instrument is initially recognized in the shareholders' equity, taking into account deferred taxes, and is only recognized in the income statement when the underlying hedged transaction is realized. The ineffective portion of the hedge transaction is recognized in the income statement immediately. The derivative financial instruments are stated at their fair values as assets or liabilities. The fair values of the foreign exchange forward contracts are defined on the basis of current reference prices, taking into account forward premiums and discounts. The fair values of the interest rate swaps are determined on the basis of discounted future payment flows, applying the market interest rates ap- plicable to the respective residual terms of the derivatives. Items are initially recorded on the trading date. Hedge accounting was applied in financial 2013.

Inventories Inventories of finished goods and work in progress as well as merchandise and raw materials and supplies, are measured at acquisition cost or cost of manufacture or at the lower net realizable value on the balance sheet date, in accordance with IAS 2. The net realizable value is the estimated achievable selling price in the ordinary course of business less the estimated costs through to completion and the estimated necessary selling costs. Raw materials and supplies are valued mainly at weighted average cost. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 119

Where the machinery and accessories classified as finished goods and stock for trade and primarily held for sale, are hired out for a short period as a secondary sales promotion measure, the following factors are considered in determining their net realizable values: • Hire period • Useful life of the machines • Damage and inoperability Where the net realizable value of previously written-down inventories has increased, corresponding value recovery adjust- ments are made. The cost of manufacture includes all direct costs of the manufacturing process. The level of impairment losses on inventories is explained in accordance with IAS 2 under "Inventories".

Construction contracts Construction contracts are accounted for by the percentage of completion method in accordance with IAS 11. The sales are recognized according to the progress of work based on the percentage of completion method. The applicable percentage of completion is determined according to the costs incurred (cost-to-cost method). Where the cumulative return (contract costs and pro rata result) exceeds the payments on account in individual cases, the construction contracts are recognized as assets under "Receivables from construction contracts (PoC)". If a negative balance remains after deduction of the pay- ments on account, it is recognized as a liability under "Liabilities from construction contracts (PoC)". Expected losses on a contract are accounted for in full at the time they are identified, by adjustments to the valuation of any existing receivables or by the creation of a provision. Construction contracts undertaken in joint ventures are valued according to the percentage of completion method. Receivables from joint ventures also include the pro rata result from the contract. Expected losses are covered by write-downs or liabilities as appropriate, and are taken into account in the contract result. 2013 CONSOLIDATED FINANCIAL STATEMENTS

Service concession arrangements Service concession arrangements entailing an unconditional contractual right to receive a payment in accordance with IFRIC 12 are recognized separately under "Receivables from concession arrangements". The short-term portions of the receivables from concession arrangements are stated under "Other current financial assets". The receivables are allocated to the "Loans and Receivables" category and recognized at the present value of the remuneration payable. The annual inter- est due according to the effective interest rate method is recorded in the financial income.

Cash and cash equivalents Cash and cash equivalents comprise cash and sight deposits with an original term of no more than three months.

Deferred taxes In accordance with IAS 12, deferred taxes are taken into account in respect of variations between the valuations of assets and liabilities according to IFRS and their corresponding tax bases in the amount of the projected future tax charge or relief. In addition, deferred tax assets are recognized for future advantages arising from tax losses carried forward, provided it is probable that they will be realized. Deferred taxes arising from temporary differences in connection with investments in subsidiaries and associated companies are recognized, unless the date of reversal of the temporary differences can be determined by the Group and it is likely that the temporary differences will not be reversed again in the foreseeable future because of this effect. 120 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

According to IAS 12.74, deferred tax assets and liabilities are to be offset if a legally enforceable right to set off current tax assets against current tax liabilities exists. Offsetting should also be carried out if the deferred tax assets and liabilities relate to income taxes levied by the same tax authority in respect of: • either the same taxable entity or • different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. The tax expenditure for the period comprises current and deferred taxes. Taxes are reported in the income statement, unless they relate to items recognized directly in the shareholders' equity or in the other result. In this case, the taxes are likewise recognized in the shareholders' equity or in the other result.

In Germany, deferred taxes are stated on the basis of corporation tax, the "solidarity surcharge" and trade tax, in a range of 27.82 to 30.92 percent (previous year: 27.50 percent and 31.60 percent). Outside Germany, tax rates of between 0.00 percent and 39.00 percent are applied (previous year: 0.00 percent and 41.00 percent).

Provisions a) Defined benefit plans The BAUER Group operates a number of defined benefit plans in Germany and internationally. Typically, such plans define an amount of pension benefit which employees will receive on retirement and which is normally dependent on one or more factors (such as age, years of service and salary). The provision for defined benefit plans on the balance sheet corresponds to the cash value of the defined benefit obligation (DBO) at the balance sheet date, less the fair value of the plan assets. The DBO is calculated annually by an independent actuary applying the projected unit credit method. The cash value of the DBO is calculated by discounting the expected future inflow of funds at the interest rate of industrial bonds of the highest credit rating. The industrial bonds are denominated in the currency of the disbursements and allocate corresponding terms to the pension commitments. In countries where the market in such bonds is insufficiently developed, government bonds are applied.

Actuarial gains and losses based on experience-related adjustments to actuarial assumptions are recognized in the "Other comprehensive income" in the shareholders' equity in the period in which they occur. Post-employment expenditure is rec- ognized in the staff costs, and the interest expenses of the allocation to provisions in the financial expenses.

Under the contribution-based defined benefit plans, the entity concerned makes payments to pension institutions which are stated in the staff costs.

b) Provisions for tax purposes Tax provisions include liabilities from current income taxes. Income tax provisions are balanced against corresponding tax refund claims, provided they arise in the same tax territory and are identical in nature and in terms of due date. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 121

c) Other provisions The other provisions are created in accordance with IAS 37 where a present obligation arises from a past event, a relevant claim is more likely than unlikely, and the amount of the claim can be reliably estimated. The provisions are stated at their performance amount, and are not netted against profit contributions. Long-term provisions are recognized at present value. Provisions are created only for legal or constructive obligations to third parties.

Income and expenses Sales revenues and other incomes are realized in accordance with IAS 18 on performance of the supply or service or on transfer of risk to the customer, as appropriate. Dividend income is recognized at the date on which the right to receipt of payment is created. Dividends received are rec- ognized as income from operating investments under "Other income". Operating expenses are recognized as affecting net income when the supply or service is claimed or at the time they are caused, as appropriate. Financial income and expenses are recognized when incurred. Income from service contracts is recognized according to the degree of completion. 2013 CONSOLIDATED FINANCIAL STATEMENTS 122 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

NOTES TO THE INCOME STATEMENT

5. SALES REVENUES The sales revenue totalling EUR 1,404,169 thousand (previous year: 1,344,421 thousand) include revenues based on application of the percentage of completion method, trade revenues from consortia, as well as pro rata earnings from consortia and revenues from the sale and hire of equipment and accessories. Sales revenues based on application of the percentage of completion method in the financial year totalled EUR 680,963 thousand (previous year: 684,530 thousand). Sales revenues from the hire of equipment and accessories in the financial year totalled EUR 26,031 thousand (previous year: 17.860 thousand). With regard to the presentation and breakdown of sales revenues by operating segment and region, please refer to the notes on segment reporting (see item 34).

The sales revenues include a net value adjustment of EUR 7,393 thousand (previous year: -6,270 thousand). The net value adjustment is attributable to the Construction segment, where final invoices, for example, may include supplementary items which have not yet been finally negotiated with the customer and ordered. These may prove uncertain. Value adjustments (reductions for impairment) are made in respect of uncertain receivables and recorded under "Sales revenues". If the uncer- tain receivable is realized, the reduction for impairment is reversed. The reversal is likewise recorded under "Sales revenues". The net balance of the application and reversal of reductions for impairment in respect of uncertain receivables produces the aforementioned net value adjustment. The application and reversal of reductions for impairment by the other segments is stated under "Other operating expenses" (see section 4.2 Restatements in accordance with IAS 8).

The main joint ventures relate to the following projects:

Project BAUER share Share of the contract in Realized revenue in the in % EUR '000 financial year in EUR '000

Schwarzkopf tunnel bypass, Hanau-Nantenbach, Germany 21 % 46,115 1,846 ETS Konrad mine, Salzgitter, Germany 50 % 20,578 4,833 Bangaroo project, Sydney, Australia 60 % 18,026 8,566 Zerben lock, Zerben, Germany 27 % 13,769 8,646 Schwabinger Tor, Munich, Germany 67 % 6,879 5,340 Oberau pollution remediation consortium, Oberau, Germany 50 % 5,751 3,036 Sebuku Island, South Kalimantan, Indonesia 35 % 3,169 2,964

6. OTHER CAPITALIZED GOODS AND SERVICES FOR OWN ACCOUNT

in EUR '000 2012 2013 (restated)

Income from other capitalized goods and services for own account 24,249 19,196

7. OTHER INCOME

in EUR '000 2012 2013 (restated)

Income from disposal of property, plant and equipment 3,716 4,435 Realized and unrealized foreign currency gains 9,412 8,682 Income from insurance refunds 2,812 2,958 Other income from rentals 601 373 Income from changes in fair values of foreign exchange forward contracts 1,017 2,818 Other operating income 12,205 11,313 Total 29,763 30,579 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 123

The realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts stated under "Other income" totalling EUR 11,500 thousand (previous year: 10,429 thousand) arose in connection with the global currency hedging strategy and the underlying currency postings. In this context, the income is countered by realized and unrealized for- eign currency losses as well as losses from foreign exchange forward contracts totalling EUR 21,194 thousand (previous year: 11,506 thousand), stated under "Other operating expenses". Additionally, the other operating income mainly comprises income from benefits in money's worth, other reimbursements of expenditure as well as other income spread across the consolidated companies which is of minor importance in the individual instances.

8. COST OF MATERIALS in EUR '000 2012 2013 (restated)

Expenses for raw materials and supplies and purchased goods 439,929 511,419 Expenses for purchased services 246,905 244,487 Total 686,834 755,906

9. STAFF COSTS The expenses for retirement benefits include the expenditure on benefits as well as the allocations to provisions for defined benefit plans excluding the interest portion, which is stated under "Interest and similar expenses". in EUR '000 2012 2013 (restated) 2013 CONSOLIDATED FINANCIAL STATEMENTS Wages and salaries 274,968 289,944 Social security contributions 46,644 47,654 Expenses for retirement benefits 3,377 5,217 Total 324,989 342,815

The employer's pension contributions in the financial year totalled EUR 18,926 thousand (previous year: 19,158 thousand). These are contribution-based schemes, as explained under 4.3 Accounting and valuation methods in the consolidated financial statements. Of that total, EUR 16,801 thousand (previous year: 16,097 thousand) relate to Germany and EUR 2,125 thousand (previous year: 3,061 thousand) to Group companies outside of Germany. The wages and salaries include severance payments in the amount of EUR 1,019 thousand (previous year: 721 thousand).

10. DEPRECIATION OF FIXED ASSETS The depreciation is broken down as follows: in EUR '000 2012 2013 (restated)

Depreciation of intangible assets 7,818 11,290 Depreciation of property, plant and equipment 68,585 68,406 Total 76,403 79,696

The impairment losses on fixed assets are explained under item 17.2, Property, plant and equipment and investment property.

11. WRITE-DOWNS OF INVENTORIES DUE TO USE Write-downs of inventories due to use in the financial year totalled EUR 14,196 thousand (previous year: 15,392 thousand). This related to write-downs of used machinery temporarily hired out to customers as sales promotion measures. Write-downs of used machinery disposed of in the 2013 financial year are included in these figures. 124 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

12. OTHER OPERATING EXPENSES

in EUR '000 2012 2013 (restated)

Losses from disposal of property, plant and equipment 1,093 1,260 Rents and leases 17,702 18,187 Energy, heating, water 8,861 8,295 Vehicle costs 5,558 6,360 Property, motor and transport insurance 9,450 9,658 Other operating expenses 30,262 34,675 Administrative expenses 31,715 40,991 Distribution costs 42,625 37,221 Other employee-related expenses 18,793 17,396 Realized and unrealized foreign currency losses 11,393 18,941 Impairment of receivables -917 -794 Bank charges 3,235 2,827 Duties 2,948 3,930 Additional other operating expenses 17,738 25,880 Total 200,456 224,827

The "Additional other operating expenses" mainly comprise allocations to and reversal of provisions affecting net income, losses from foreign exchange forward contracts as well as additional other operating expenses spread across the consolidated companies which are of minor importance in the individual instances. The other employee-related ex- penses include education and training costs, grants and gifts, travel and relocation expenses, and other project-specific personnel costs.

FINANCIAL RESULT

13. FINANCIAL INCOME The financial income is broken down as follows:

in EUR '000 2012 2013 (restated)

Income from operating investments 435 26 Other interest and similar income 5,484 5,418 Income from changes in fair values of interest rate swaps 53 2,285 Total 5,972 7,729

14. FINANCIAL EXPENSES The financial expenses are broken down as follows:

in EUR '000 2012 2013 (restated)

Interest and similar expenses 40,085 41,944 Losses from changes in fair values of interest rate swaps 1,464 656 Interest portions of allocations to provisions for defined benefit plans and similar obligations 3,108 2,941 Total 44,657 45,541 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 125

The interest from finance leases included under "Interest and similar expenses" in the financial year totalled EUR 1,122 thousand (previous year: 1,255 thousand). The financial result includes interest income from financial assets in an amount of EUR 5,410 thousand (previous year: 5,481 thousand) and interest expenses from financial liabilities in an amount of EUR 40,822 thou- sand (previous year: 38,830 thousand) which were not measured at fair value affecting profit and loss. The interest and similar expenses include impairment losses on financial assets held for sale in an amount of EUR 2,586 thousand (previous year: 0). Of that total, EUR 40 thousand is attributable to the Construction segment and EUR 2,546 thousand to the Resources segment.

15. INCOME TAX EXPENSE The income tax expense is broken down as follows: in EUR '000 2012 2013 (restated)

Actual taxes 10,520 15,705 Deferred taxes 2,575 -2,231 Total 13,095 13,474

The theoretical tax rate is 28.08 percent (previous year: 28.08 percent).

Reconciliation from expected to actual income tax expenditure The expected tax expenditure is below (previous year: below) the recorded tax expenditure. The reasons for the difference between the expected and recorded tax expenditure are as follows: 2013 CONSOLIDATED FINANCIAL STATEMENTS in EUR '000 2012 2013 (restated)

Profi t before income tax 38,868 -5,957 Theoretical tax expenditure 28.08 percent (previous year: 28.08 percent) 10,914 -1,673 Differences in tax rate -5,247 714 Taxation effects of non-deductible expenses and tax-free income 3,829 10,022 Effects of variations in the tax calculation base 3,116 2,054 At-equity valuation of associated companies -1,558 -63 Out-of-period tax payments/refunds for previous years 967 -273 Effects of deferred tax assets in respect of losses carried forward and temporary differences 1,089 2,675 Other -15 18 Income tax expense 13,095 13,474

Internal disbursements result in taxation effects after December 31, 2013 totalling EUR 34 thousand (previous year: 81 thousand).

16. EARNINGS PER SHARE The earnings per share are calculated by dividing the profit attributable to the shareholders of BAUER AG by the weighted aver- age number of ordinary shares outstanding. The earnings per share amount to the following values:

2012 2013 (restated)

Profit attributable to the shareholders of BAUER AG, in EUR '000 24,739 -16,927

Number of shares from 01.01. to 31.12. 17,131,000 17,131,000 Weighted average number of shares in circulation in financial year (basic) 17,131,000 17,131,000 Weighted average number of shares in circulation in financial year (diluted) 17,131,000 17,131,000 Basic earnings per share in EUR 1.44 -0.99 Diluted earnings per share in EUR 1.44 -0.99 126 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

NOTES TO THE BALANCE SHEET

The breakdown of the fixed asset items summarized on the balance sheet and their development is presented in the fixed asset movement schedule on the following pages.

NON-CURRENT ASSETS

17. FIXED ASSETS

17.1 INTANGIBLE ASSETS

in EUR '000 Internally generated intangible assets Licences, software and similar rights Capitalized Capitalized devel- Cost of purchase/cost of manufacturing and values Goodwill software costs opment costs Total 01.01.2012 22,870 2,031 874 23,891 49,666

Change in scope of consolidation 0 0 2 0 2 Additions 5,000 157 0 6,227 11,384 Disposals 1,074 0 285 3 1,362 Transfers 706 0 -2 34 738 Currency adjustment -87 15 0 -1 -73 31.12.2012 27,415 2,203 589 30,148 60,355

in EUR '000 Internally generated intangible assets Licences, software and similar rights Capitalized Capitalized devel- Accumulated depreciation and values Goodwill software costs opment costs Total 01.01.2012 12,475 0 576 6,312 19,363

Change in scope of consolidation 0 0 0 0 0 Additions 3,780 0 124 3,914 7,818 Disposals 1,070 0 285 0 1,355 Transfers 17 0 0 -17 0 Currency adjustment -38 0 0 0 -38 31.12.2012 15,164 0 415 10,209 25,788 Carrying amount 31.12.2012 12,251 2,203 174 19,939 34,567

in EUR '000 Internally generated intangible assets Licences, software and similar rights Capitalized Capitalized devel- Cost of purchase/cost of manufacturing and values Goodwill software costs opment costs Total 01.01.2013 27,415 2,203 589 30,148 60,355

Change in scope of consolidation 220 0 0 377 597 Additions 3,124 0 0 8,395 11,519 Disposals 453 0 232 72 757 Transfers -9 0 0 516 507 Currency adjustment -529 -17 0 -10 -556 31.12.2013 29,768 2,186 357 39,354 71,665 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 127

in EUR '000 Internally generated intangible assets Licences, software and similar rights Capitalized Capitalized devel- Accumulated depreciation and values Goodwill software costs opment costs Total 01.01.2013 15,164 0 415 10,209 25,788

Change in scope of consolidation 100 0 0 14 114 Additions 4,046 2,186 84 4,974 11,290 Disposals 442 0 232 72 746 Transfers 21 0 0 -21 0 Currency adjustment -159 0 0 -10 -169 31.12.2013 18,730 2,186 267 15,094 36,277 Carrying amount 31.12.2013 11,038 0 90 24,260 35,388

Of the total research and development costs and patent costs incurred in 2013, EUR 8,594 thousand (previous year: 6,558 thousand) met the IFRS capitalization criteria. The following amounts were recognized in net income: in EUR '000 2012 2013 (restated)

Research costs and uncapitalized development costs 19,160 20,990 Amortization of development costs and patents 4,164 5,212 Research and development costs recognized in net income 23,324 26,202 2013 CONSOLIDATED FINANCIAL STATEMENTS

The Resources segment made a net loss on a well drilling project in Jordan during the reporting period. The goodwill allocated to the BAUER Resources Group CGU is impairment-tested each year.

A comparison of the value in use of the CGU against the corresponding carrying amount, including goodwill, revealed the need to undertake a write-down in an amount of EUR 2,186 thousand, attributable in full to the goodwill of the BAUER Resources Group CGU. The impairment was recorded under "Depreciation of losses on intangible assets".

The values applicable to the BAUER Resources Group CGU at the balance sheet date corresponds to the values in use resulting from the discounted future cash flows. They are determined on the basis of planning calculations approved by the management over a five-year period.

For the period of perpetual annuity the cash flows are updated with a growth rate of 1.0 percent (2012: 1.0 percent). The discount rate for the future cash flows corresponds to the weighted average cost of capital rate (WACC). The discount rate after tax for the BAUER Resources Group is 8.4 percent (2012: 8.2 percent); the pre-tax rate applied is 11.1 percent (2012: 11.0 percent).

As a supplementary measure to the impairment test, a number of appropriate stress tests were carried out. If the WACC had been 1 percentage point higher on the valuation date, or if no growth had been assumed for the period of perpetual annuity, the accumulation of the two alternatives would have resulted in an additional need for a write-down in an amount of EUR 31,819 thousand (previous year: 13,772 thousand). 128 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

17.2 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY

in EUR '000 Other equipment, Payments on Technical factory and office account and Cost of purchase/ Land and Investment equipment and equipment office assets in course cost of manufacturing buildings property Equipment equipment of constuction Total 01.01.2012 281,558 1,874 441,518 66,050 5,658 796,658

Change in scope of consolidation 0 0 4,985 78 0 5,063 Additions 4,671 1 53,344 9,193 29,181 96,390 Disposals 5,192 0 31,866 5,871 377 43,306 Transfers 6,639 5 4,221 2 -11,606 -739 Currency adjustment -365 2 -3,612 -408 158 -4,225 31.12.2012 287,311 1,882 468,590 69,044 23,014 849,841

in EUR '000 Other equipment, Payments on Technical factory and office account and Land and Investment equipment and equipment office assets in course Accumulated depreciation buildings property Equipment equipment of constuction Total

01.01.2012 75,707 876 224,571 36,932 0 338,086

Change in scope of consolidation 0 0 1,331 49 0 1,380 Additions 9,091 44 49,856 9,594 0 68,585 Additions 301 0 15,001 5,088 0 20,390 Transfers 1 0 -95 94 0 0 Currency adjustment -102 1 -2,764 -271 0 -3,136 31.12.2012 84,396 921 257,898 41,310 0 384,525 Carrying amount 31.12.2012 202,915 961 210,692 27,734 23,014 465,316

of which finance lease, carrying amount 31.12.2012 3,483 0 18,359 3,893 0 25,735

in EUR '000 Other equipment, Payments on Technical factory and office account and Cost of purchase/ Land and Investment equipment and equipment office assets in course cost of manufacturing buildings property Equipment equipment of constuction Total 01.01.2013 287,311 1,882 468,590 69,044 23,014 849,841

Change in scope of consolidation 0 0 9,689 376 42 10,107 Additions 3,179 13 65,050 10,565 13,099 91,906 Disposals 2,853 118 41,512 5,248 557 50,288 Transfers 17,692 0 11,319 142 -29,661 -508 Currency adjustment -3,045 -14 -24,119 -1,798 -655 -29,631 31.12.2013 302,284 1,763 489,017 73,081 5,282 871,427 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 129

in EUR '000 Other equipment, Payments on Technical factory and office account and Land and Investment equipment and equipment office assets in course Accumulated depreciation buildings property Equipment equipment of constuction Total

01.01.2013 84,396 921 257,898 41,310 0 384,525

Change in scope of consolidation 0 0 4,235 225 0 4,460 Additions 9,080 40 49,440 9,846 0 68,406 Disposals 2,399 54 22,491 4,372 0 29,316 Transfers 0 0 -11 11 0 0 Currency adjustment -370 -7 -14,550 -1,258 0 -16,185 31.12.2013 90,707 900 274,521 45,762 0 411,890 Carrying amount 31.12.2013 211,577 863 214,496 27,319 5,282 459,537 of which finance lease, carrying amount 31.12.2013 3,194 0 22,574 5,246 0 31,014

The changes to the scope of consolidation mainly comprise assets arising from the first-time consolidation of OOO BAUER Technologie, Moscow. Of the total, EUR 5,581 thousand is solely property, plant and equipment.

In respect of buildings and equipment leased by way of finance lease agreements purchase options exist, which will be exer- cised. The interest rates applied to the leases vary, according to the market and date of signing, between 2.31 percent and 8.13 percent (previous year: 2.46 percent and 8.13 percent). The future lease payments due at their present values are shown in the following table: 2013 CONSOLIDATED FINANCIAL STATEMENTS in EUR '000 Remaining term 2012 Remaining term 2013 under 1 year 1 to 5 years over 5 years Total under 1 year 1 to 5 years over 5 years Total

Minimum lease payments 10,043 17,998 0 28,041 11,182 18,779 0 29,961 Interest portions 1,254 1,811 0 3,065 997 1,514 0 2,511 Present value 8,789 16,187 0 24,976 10,185 17,265 0 27,450

The investment properties have a fair value of EUR 1,143 thousand (previous year: 1,217 thousand) and in 2013 were all rented out. This primarily relates to a hotel owned by SCHACHTBAU NORDHAUSEN GmbH which is rented out to third parties and is being written down over a period of 48 years. SCHACHTBAU NORDHAUSEN GmbH is also committed to a maintenance contract in respect of the property. The asset value is recognized based on external valuation. This procedure falls within Level 3 of the IFRS 13 measurement hierarchy.

In the period under review rental income in the amount of EUR 62 thousand (previous year: 60 thousand) was generated, to which direct operating expenses totalling EUR 19 thousand (previous year: 15 thousand) are attributable. Property, plant and equipment with a carrying amount of EUR 133,191 thousand (previous year: 181,657 thousand) is subject to charges in the form of land charg- es and assignment. In addition, the usual commercial restrictions on right of disposal exist in respect of leased assets, attributable to the Group in accordance with IAS 17 (finance lease agreements), totalling EUR 31,014 thousand (previous year: 25,735 thousand). In the financial year, investment grants for the extension of manufacturing facilities were awarded to Olbersdorfer Guß GmbH in an amount of EUR 42 thousand (previous year: 83 thousand) and to GWE pumpenboese GmbH in an amount of EUR 0 (previous year: 224 thousand). All conditions necessary for allocation of the investment subsidies were met on the balance sheet date.

Borrowing costs totalling EUR 520 thousand (previous year: 151 thousand) were capitalized as property, plant and equipment in the financial year. The underlying finance cost rate in the past financial year was between 6.76 percent and 8.0 percent (previous year: 2.0 percent and 6.76 percent). 130 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Total impairment losses on fixed assets in the financial year were EUR 3,713 thousand (previous year: 706 thousand). Of that figure, EUR 526 thousand (previous year: 33 thousand) was attributable to the Construction segment, EUR 996 thousand (previous year: 525 thousand) to the Equipment segment and EUR 2,191 thousand (previous year: 148 thousand) to the Resources segment. Of the total, intangible assets accounted for EUR 3,184 thousand (previous year: 525 thousand) and property, plant and equipment accounted for EUR 529 thousand (previous year: 181 thousand). Most of the impairment losses on intangible assets relate to the goodwill of the BAUER Resources Group CGU amounting to EUR 2,186 thousand as well as capitalized development costs totalling EUR 880 thousand for the TBA 200. Impairment was charged against design work on the TBA 200 deep drilling rig because it became necessary to advance its development relaunch owing to a shift on its target market. In the Construction segment, an impairment loss of EUR 525 thousand in respect of technical equipment and machinery was recorded on the underwater drilling rig BSD 3000. The BSD 3000 is an asset forming part of the property, plant and equipment with a limited useful life. The impairment is based on a permanent value reduction resulting from the fact that the write-down so far unusually does not correspond to the actual reduction in value.

Investments accounted for using the equity method and participations

Investments ac- in EUR '000 counted for using Cost of purchase/cost of manufacturing the equity method Participations Total 01.01.2012 8,803 4,443 13,246

Additions 03333 Disposals 426 0 426 Profit share 5,549 0 5,549 Dividend payment -796 0 -796 Transfers 0 -22 -22 Currency adjustment 303 31.12.2012 13,133 4,454 17,587

Investments ac- in EUR '000 counted for using Accumulated depreciation the equity method Participations Total 01.01.2012 0 816 816

Additions 000 Disposals 000 Transfers 000 Currency adjustments 000 31.12.2012 0 816 816 Carrying amount 31.12.2012 13,133 3,638 16,771

Investments ac- in EUR '000 counted for using Cost of purchase/cost of manufacturing the equity method Participations Total 01.01.2013 13,133 4,454 17,587

Additions 17 0 17 Disposals 12526 Profit share -226 0 -226 Dividend payment -2.951 0 -2.951 Transfers 000 Currency adjustments 000 31.12.2013 9,972 4,429 14,401 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 131

Investments ac- in EUR '000 counted for using Accumulated depreciation the equity method Participations Total 01.01.2013 0 816 816

Additions 000 Disposals 000 Transfers 000 Currency adjustments 000 31.12.2013 0 816 816 Carrying amount 31.12.2013 9,972 3,613 13,585

The following table presents aggregated data relating to the associated companies included in the consolidated financial statements based on the equity method. The balance sheet figures do not relate to the shares attributable to the BAUER Group, but rather reflect a notional 100 percent shareholding.

Aggregated data relating to associated companies consolidated at equity:

in EUR '000 2012 2013

Assets (31.12.) 172,749 161,657 Shareholders' equity (31.12.) 40,447 30,932 Liabilities (31.12.) 132,302 130,725 2013 CONSOLIDATED FINANCIAL STATEMENTS in EUR '000 2012 2013

Sales revenues 23,986 24,523 Net profit for year 5,561 -234

Disclosures relating to joint ventures were omitted owing to their minor importance.

18. DEFERRED TAXES The deferred tax assets and liabilities are distributed across the following balance sheet items: in EUR '000 31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated) (restated)

Deferred tax assets Deferred tax liabilities

Intangible assets 12 33 7,846 6,437 Property, plant and equipment 228 324 8,917 9,468 Inventories 1,671 2,509 1,425 2,424 Receivables and other assets 536 1,228 925 1,927 Defined benefit plans 10,578 10,275 29 4 Liabilities 7,677 9,811 5,365 5,937 Tax losses carried forward 14,118 14,560 0 0 Consolidation 3,762 4,841 5,300 5,873 Offsetting -10,410 -17,282 -10,410 -17,282 Net amount 28,172 26,299 19,397 14,788 132 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

In the above table, the liabilities include deferred tax assets totalling EUR 835 thousand (previous year: 1,515 thousand) and deferred tax liabilities totalling EUR 8 thousand (previous year: 523 thousand) which are part of the hedge account- ing. Also, the provisions for defined benefit plans include deferred tax assets totalling EUR 7,889 thousand (previous year: 7,941 thousand) and deferred tax liabilities totalling EUR 4 thousand (previous year: 0) in respect of the actuarial gains and losses recognized in the shareholders' equity.

Current deferred tax assets excluding losses carried forward totalled EUR 9,080 thousand (previous year: 5,760 thousand); deferred tax liabilities totalled EUR 9,419 thousand (previous year: 6,362 thousand).

The tax losses carried forward at the year-end are broken down as follows:

in EUR '000 31.12.2012 31.12.2013

Domestic losses (corporation tax) 65,975 76,262 Foreign losses 21,507 22,699 Total 87,482 98,961

Of which losses carried forward deductible for limited periods 10,557 12,010

Based on our medium-term earnings planning, losses carried forward totalling EUR 43,319 thousand (previous year: 36,122 thousand) were not usable for tax purposes. Current deferred tax assets against losses carried forward in the financial year totalled EUR 1,708 thousand (previous year: 1,664 thousand).

In connection with interests in subsidiaries, temporary differences totalling EUR 1,172 thousand (previous year: 1,497 thou- sand) exist for which no deferred tax liabilities were recognized.

19. RECEIVABLES FROM CONCESSION ARRANGEMENTS BAUER Nimr LLC ("Bauer") signed a contract with Petroleum Development Oman LLC ("the customer") on November 28, 2008 relating to water treatment ("the service"). In performance of the service, Bauer is constructing a plant which it will subsequently operate. Bauer will receive a fixed agreed unit price per cbm for operation of the plant. This price includes a variable component to compensate for price rises during the contract term. According to the agreement, Bauer is obligated to comply with the general standards applicable in the oil and gas industry in constructing and operating the plant, unless otherwise stipulated in the contract. Bauer is further obligated to allow the customer to conduct any necessary inspection and testing. The costs of this are to be borne by the customer. At the end of the service performance period, Bauer is required by the customer to dismantle the plant and recultivate the site (for a fee). The agreement also provides the customer with a purchase option at a price yet to be agreed. The contract runs for a term of 20 years, with an option to extend by a further five years. Bauer is entitled to cancel the con- tract at any time by means of written notice to the customer. If the contract is cancelled by the customer before the agreed term expires – provided the cancellation is not as a result of bad or failed performance, or insolvency of the operator – the customer is obligated to pay compensation. The customer undertakes to supply Bauer with a daily minimum of 45,000 m³ of water for treatment. If the customer sup- plies less water, Bauer receives a compensation payment, which may be offset by over-supply quantities in the subsequent months.

On May 10, 2011, Bauer signed a contract extension with the customer providing for an increase in the customer's supplies of water for treatment by 45,000 m³. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 133

The receivables from concession arrangements developed as follows: in EUR '000 31.12.2012 31.12.2013 (restated)

At 01.01. 43,975 40,770

Interest income from financial asset 2,231 1,931 Currency adjustment -873 -1,581 Payment of contract costs -4,563 -4,358 At 31.12. 40,770 36,762 of which with a remaining term of 1 to 5 years 9,525 9,122 of which with a remaining term of over 5 years 31,245 27,640

The short-term portion of the receivables from concession arrangements is EUR 2,280 thousand (previous year: 2,381 thou- sand) and is stated under "Other current financial assets". The financial income from concession arrangements in the financial year totalled EUR 1,931 thousand (previous year: 2,231 thousand). The discount rate in the past financial year was 4.67 percent (previous year: 4,80 percent).

The financial income is included in the interest income from financial assets.

20. OTHER NON-CURRENT ASSETS The other non-current assets comprise the following items: 2013 CONSOLIDATED FINANCIAL STATEMENTS in EUR '000 31.12.2012 31.12.2013 (restated)

Claims from backup insurance 4,862 4,743 Sundry other non-current assets 2,765 2,821 Total 7,627 7,564

The sundry other non-current assets were recognized at an effective interest rate in a span of 4.30 to 8.25 percent (previous year: 5 to 8.25 percent). They also include assets arising from continuing involvements totalling EUR 1,170 thousand (previous year: 1,552 thousand). As in the previous year, the other non-current assets were neither impaired nor overdue in the year under review.

In financial 2011, BAUER Maschinen GmbH sold export receivables covered by credit insurance totalling EUR 18,717 thou- sand to third parties as part of a forfaiting agreement. BAUER Maschinen GmbH retained the late-payment risk and – to a minor extent – the default and exchange rate risk arising from the sale. The remaining risk is to be accounted for as "Continuing involvement" in accordance with IAS 39. The continuing involvement as per the balance sheet date was EUR 1,170 thousand (previous year: 1,552), and is stated under "Other non-current assets". It comprises the maximum amount of the remaining risk which BAUER Maschinen GmbH would have to pay to the buyer. The corresponding liability amounts to EUR 1,287 thousand (previous year: 1,707), and is stated under "Other non-current liabilities". The difference reflects the fair value of the guarantees resulting from the remaining risk and the servicing, and is recognized in net income. 134 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

21. OTHER NON-CURRENT FINANCIAL ASSETS The other non-current financial assets comprise the following:

Remaining term 31.12.2012 Remaining term 31.12.2013 in EUR '000 1 to 5 years over 5 years 1 to 5 years over 5 years

Sundry other non-current financial assets 6,846 0 5,420 0 Total 6,846 0 5,420 0

The derivatives are presented in item 36 under "Other disclosures". As in the previous year, the other non-current financial assets were neither impaired nor overdue in the year under review.

CURRENT ASSETS

22. INVENTORIES The inventories comprise the following items:

in EUR '000 31.12.2012 31.12.2013 (restated)

Raw materials and supplies 154,399 146,666 Finished goods and work in progress and stock for trade 275,395 272,686 Total 429,794 419,352

Of the inventories, EUR 116,787 thousand (previous year: 135,182 thousand) are stated at net realizable value. The impairment losses on inventories against the net realizable value affecting net expenditure in the financial year totalled EUR 22,445 thousand (previous year: 21,460 thousand).

They are broken down as follows:

in EUR '000 31.12.2012 31.12.2013 (restated)

Write-downs of inventories due to use 15,392 14,196 Impairment losses on inventories 6,068 8,249 Total 21,460 22,445

The rate of hire was relatively low within the year and rose again as the balance sheet date approached. Write-downs of used machinery due to use therefore decreased from EUR 15,392 thousand to EUR 14,196 thousand.

The impairment losses on inventories include both impairment losses on new and used machinery (stated under "Changes in inventories") and on warehouse inventories (stated under "Cost of materials"). Most of the impairment losses relate to the machinery which was not hired out, and are attributable to the Equipment segment.

The finished goods and merchandise include machinery and accessories produced internally by the Equipment segment and intended primarily for sale.

We differentiate essentially between two forms of machinery and accessories (referred to in the following as "machinery"): NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 135

New machines These are machines manufactured in the financial year or in earlier years which are available for sale but have not yet been hired out. These machines are valued at manufacturing cost or at the lower net realizable value on the balance sheet date.

Used machines Used machines are machines which are primarily up for sale and which have been temporarily hired out as a secondary sales promotion measure during the financial year or in earlier years. New machines automatically become used machines the first time they are hired out. When hiring out machinery, the net realizable value is determined from the manufacturing cost less the write-downs due to use and impairment losses on inventories.

In the case of a new machine, or a used machine which has not been hired out, the reduction in value against the net realiz- able value is recognized by means of an impairment loss.

The sale and hire of machinery relates solely to the Equipment segment.

The following chart sets out the carrying amount before impairment of the used machinery and accessories along with the rate of hire status on the balance sheet date:

in EUR '000 31.12.2012 31.12.2013 2013 CONSOLIDATED FINANCIAL STATEMENTS

Carrying amount of used machines 85,748 94,392 of which hired out 31,489 33,588 of which not hired out 54,259 60,804

In the financial year, apart from the usual retentions of title, inventories totalling EUR 2,507 thousand (previous year: 5,393 thousand) were provided as security for loans. The securities provided can only be claimed by the lending banks in the event of definitive failure to fulfil contractual obligations, such as defaulting on interest and loan payments or failure to meet agreed financial targets. No claims on securities provided are foreseeable.

23. RECEIVABLES AND OTHER ASSETS Construction contracts The construction contracts measured according to the percentage of completion method developed as follows: in EUR '000 31.12.2012 31.12.2013 (restated)

Contract costs incurred (plus profits, less losses) for projects not yet completed 461,434 493,944 less down-payments 375,018 383,549 Balance 86,416 110,395 of which: Receivables from construction contracts (PoC) 116,398 143,234 of which: Liabilities from construction contracts (PoC) 29,982 32,839 136 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Development of receivables and other assets The receivables and other assets comprise the following:

in EUR '000 31.12.2012 31.12.2013 (restated)

Receivables from construction contracts (PoC) 116,398 143,234 Trade receivables 272,443 323,008 Receivables from enterprises in which the company has participating interests 344 444 Payments on account 2,825 3,725 Other current assets 40,309 30,695 Other current financial assets 17,487 19,551 Total 449,806 520,657

The "Trade receivables" balance sheet item includes long-term receivables totalling EUR 15,077 thousand (previous year: 970 thousand).

The following table presents the changes in value adjustments to current receivables:

in EUR '000 31.12.2012 31.12.2013 (restated)

Value adjustments at start of financial year 68,184 63,504 Change in scope of consolidation 014 Currency adjustment -124 -353 Allocation 19,556 32,207 Reversal 17,166 34,003 Consumption 6,946 1,431 Value adjustments at end of financial year 63,504 59,938

The value adjustment for foreseeably uncollectable trade receivables of EUR 59,938 thousand (previous year: 63,504 thou- sand) was calculated taking into account individual risks and on the basis of past experience in relation to payment default. Value adjustments were applied in respect of individual claims as well as on a portfolio flat-rate basis. The individual value adjustments were translated into flat-rate percentages spread across the age structure of the receivables. Within the individual value adjustments, 100 percent of the claim receivable was usually adjusted. The calculation of value adjustments in respect of uncertain receivables is based to a large extent on estimates and assessments of individual claims, incorporating consid- erations of the creditworthiness and late-payment record of the customer concerned as well as current economic trends and historical experience in relation to default.

In the financial year, receivables from construction contracts totalling EUR 2,998 thousand (previous year: 3,216 thousand) and other current assets totalling EUR 2,993 thousand (previous year: 0) were subject to impairment. The value adjustments at the end of the financial year include adjustments in respect of late-payment interest amounting to EUR 3,049 thousand (previous year: 0), set against income amounting to EUR 4,047 thousand (previous year: 0). NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 137

The following table presents an analysis of the due dates of gross carrying amounts of trade receivables: in EUR '000 Carrying amount Carrying amount 31.12.2012 31.12.2013 (restated)

Trade receivables (gross carrying amount) 335,947 382,946 Value adjustments in respect of trade receivables 63,504 59,938

Trade receivables (net carrying amount) 272,443 323,008 of which neither impaired nor overdue at closing date 107,399 131,901 of which not impaired at closing date and overdue in the following time bands: 165,044 191,107 - less than 30 days 35,345 66,396 - between 30 and 60 days 35,286 27,881 - between 60 and 90 days 14,466 10,627 - more than 90 days 79,947 86,203

The above table includes trade receivables as well as receivables from joint ventures. With regard to the trade receivables which were neither impaired nor delayed in payment, there were no indications at the balance sheet date that the debtors concerned will not fulfil their payment obligations. Credit ratings are derived from an active system of claims management with reference to the relevant credit history and from continuous monitoring of the creditworthiness of our customers based on information obtained from both internal and external sources. In the financial year the other current assets of EUR 2,993 thousand (previous year: 0) were impaired but not overdue. In the previous year they were neither impaired nor overdue. The other current assets mainly comprise miscellaneous tax refund 2013 CONSOLIDATED FINANCIAL STATEMENTS claims and claims against employees and against welfare benefit funds as well as accrued interest and insurance premiums and other prepayments and deferred charges. A total of EUR 15,400 thousand (previous year: 2,279 thousand) in monetary assets were pledged as securities against loans. These related to assignment of property. The current portion of the receivables from foreign exchange forward contracts included in the current financial assets in the financial year totalled EUR 3,169 thousand (previous year: 1,593 thousand).

The payments on account for intangible assets shown under "Other current assets" totalled EUR 4 thousand (previous year: 0) in the year under review. In the 2013 financial year, impairment totalled EUR 38,198 thousand (previous year: 22,772 thousand).

24. CASH AND CASH EQUIVALENTS The cash and cash equivalents totalling EUR 57,217 thousand (previous year: 45,232 thousand) include credit balances at banks and petty cash stocks.

25. SHAREHOLDERS' EQUITY The shareholder structure of BAUER AG is as follows: in EUR '000 31.12.2012 31.12.2013

% EUR '000 % EUR '000

Bauer family 48.19 35,182 48.19 35,182 Free float 51.81 37,819 51.81 37,819 Total 100.00 73,001 100.00 73,001 138 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

With regard to the disclosures relating to shares held in BAUER AG, refer to the Notes to the annual financial statements of BAUER AG as per December 31, 2013 published in the German Federal Gazette ("Bundesanzeiger").

Composition of subscribed capital The subscribed and fully paid-up capital (share capital) of BAUER AG totals EUR 73,001,420.45 and is divided into 17,131,000 no-nominal-value bearer shares, representing a pro rata amount of approximately EUR 4.26 per share of the total share capital. The shares have no nominal value. Each share entails equal rights, and entitles the holder to one vote at the Annual General Meeting, with the exception of share categories precluded from voting by law pursuant to section 136 of the German Stock Corporation Act (AktG) and section 28 of the German Securities Trading Act (WpHG).

As in the previous year, 51.81 percent of the shares were in free float. The members of the Bauer family and a charitable foundation own a total of 8,256,246 no-nominal-value shares in BAUER AG on the basis of a pool agreement, representing a 48.19 percent share in the company. The pool agreement provisions include binding voting commitments as well as a right of pre-emption of pool participants if any member of the pool sells shares to third parties. No other direct or indirect holdings of BAUER AG share capital exceeding 10 percent of the voting rights are known to the company.

None of the shareholders has special rights entailing controlling powers. Nor does any voting rights control exist on the part of the employees holding shares in the capital.

Authority of the Management Board to issue or buy back shares Article 4, paragraph 4 of the company’s Articles of Association Board states that the Management Board is authorized, with the consent of the Supervisory Board, to increase the share capital once or more than once up to June 27, 2017 by up to a total of EUR 7.3 million by the issue of new no-nominal-value bearer shares against cash and/or non-cash contributions (2012 authorized capital). To that end, the Management Board is authorized, with the consent of the Supervisory Board, to exclude the legal subscription rights of shareholders in the following cases:

• in the event of capital increases against non-cash contributions; • in the event of capital increases against cash contributions where the issue amount of the new shares issued is not materi- ally below the market price of the already quoted shares at the time of definitive setting of the issue price and the shares issued excluding shareholders’ subscription rights pursuant to section 186, subsection 3, clause 4 AktG do not in total exceed 10 percent of the existing share capital either at the time this authority takes effect or at the time of exercising this authority. Shares which have been or are to be sold or issued in direct or corresponding application of section 186, subsec- tion 3, clause 4 AktG while this authority is in place until such time as it is exercised, pursuant to other authorities, excluding subscription rights, are to be set off against the said 10 percent limit; • to balance out fractional amounts.

By resolution of the Ordinary Annual General Meeting held on June 24, 2010, the company was authorized to acquire treas- ury stock, over a limited period up to June 23, 2015, representing up to a total of 10 percent of the company’s share capital at the time the resolution was passed. The shares shall be acquired at the discretion of the Management Board by means of a public tender offer or by way of the stock market. If the acquisition is effected by way of the stock market, the acquisition price (excluding ancillary costs) may be no more than 10 percent above or 20 percent below the price determined by the opening auction on the trading day for shares in the company in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange. If the acquisition is effected by means of a public tender offer, the purchase price or the limits of the purchase price span per share (excluding ancillary costs) may be no more than 10 percent above or 20 percent below NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 139

the average of the closing prices per share in the company in Xetra trading (or a comparable successor system) on the three trading days prior to the day of issue of the public tender offer. If not insignificant variations of the decisive share price occur after the day of issue of the public tender offer, the purchase price may be adjusted.

The Management Board shall be authorized to appropriate shares in the company acquired pursuant to the above authoriza- tions for all legally admissible purposes. Consequently, the acquired shares may also in particular be sold by means other than by way of the stock market or by means of an offer to the shareholders, if the shares are sold for cash at a price (excluding ancillary costs) not materially below the price determined by the opening auction on the trading day for shares in the company in Xetra trading (or a comparable successor system). The shares may also be sold in return for non-cash payment, provided this is done for the purpose of effecting company mergers or acquiring companies, parts of companies, shareholdings in companies or other assets. The aforementioned shares may be redeemed without need of a further Annual General Meeting in order to approve the redemption or its execution. With regard to use of the bought-back shares, the authorization provides, in specific cases, for legal rights of subscription of shareholders to be excluded. The facility to acquire treasury stock has not been utilized to date.

The Supervisory Board is authorized to amend Article 4 of the Articles of Association accordingly following complete or partial execution of the increase in share capital or on expiration of the period of authority.

The remaining shareholders' equity of the BAUER Group developed as follows:

31.12.2012 31.12.2013 in EUR '000 2013 CONSOLIDATED FINANCIAL STATEMENTS (restated)

I. Capital reserve 38,404 38,404 II. Other revenue reserves and net earnings available for distribution 317,930 285,197 356,334 323,601

III. Minority interests 33,205 22,809 Total 389,539 346,410

In the financial year a dividend of EUR 0.30 (previous year: EUR 0.50) per share was paid to the shareholders. 140 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

ADDITIONAL DISCLOSURES REGARDING CAPITAL MANAGEMENT

The object of Bauer's capital management is to safeguard a strong financial profile. In particular, it aims to provide share- holders with appropriate dividend payments and to safeguard servicing of capital on behalf of lenders. We also aim to provide ourselves with adequate financial resources to sustain our growth strategy. The risk profile is actively managed and monitored. This is focused primarily on key indicators such as the equity ratio, net debt and net profit or loss for the period.

The key indicators are presented below:

in EUR '000 31.12.2012 31.12.2013 (restated)

Shareholders' equity 462,540 419,411 Equity ratio 30.2 % 26.5 % Net profit or loss 25,773 -19,431 Net debt 610,515 672,096 Financial indebtedness 655,747 729,313 Liquid funds 45,232 57,217 Net debt/EBITDA 3.73 5.34 EBITDA/net interest coverage 4.19 3.33

As part of the capital management strategy covering the subsidiaries of the BAUER Group, it is ensured that member companies are provided with an equity base in line with local requirements. Our aim in doing this is to provide the necessary flexibility in terms of finance and liquidity. In the year under review, all externally imposed capital covenants were fulfilled with the exception of the net debt/EBITDA ratio.

The debt underlying this ratio, comprising promissory notes and other long-term loans, has a total nominal value of EUR 237,777 thousand. The carrying amount is EUR 237,484 thousand.

As soon as the likelihood of breaking the covenant became apparent, the Management Board offered the lenders a one-off special payment in return for their waiving the resultant right of cancellation.

The acceptances of the company's offer received by the balance sheet date represent an amount of EUR 187,277 thousand (78.8 percent). In respect of EUR 50,500 thousand, either consent was not given or no reply was received. It is assumed that, after formal establishment of the covenant break, those amounts will become due for repayment in second quarter 2014. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 141

NON-CURRENT LIABILITIES

26. NON-CURRENT LIABILITIES The non-current portions of the liabilities comprise the following: in EUR '000 Remaining term 31.12.2012 Remaining term 31.12.2013 (restated)

1 to 5 years over 5 years 1 to 5 years over 5 years

Liabilities to banks 370,608 55,578 247,775 0 Liabilities from finance lease agreements 16,187 0 17,265 0 Other non-current liabilities 7,427 0 6,483 0 Other non-current financial liabilities 15,542 7,170 14,397 0 Total 409,764 62,748 285,920 0

Fair value Interest rate margin in EUR '000 31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated)

Liabilities to banks 434,092 256,361 0.90 − 7.86 % 0.50 – 9.12 % Liabilities from finance lease agreements 16,187 17,265 2.46 − 8.13 % 2.38 – 7.75 % Other non-current financial liabilities 25,411 15,396 1.70 − 7.50 % 1.59 – 9.21 % 2013 CONSOLIDATED FINANCIAL STATEMENTS Total 475,690 289,022 - -

The other non-current liabilities include non-current portions of liabilities from obligations in respect of part-time retirement and service anniversary payments, trade payables, and liabilities from continuing involvements.

The other non-current financial liabilities mainly comprise the fair values of the derivatives as well as other liabilities to finance companies and convertible bonds (see the Notes to the financial instruments in section 36).

27. DEFINED BENEFIT PLANS The BAUER Group operates a number of defined benefit plans in Germany and internationally. The provisions for defined benefit plans of the companies in Schrobenhausen recognized on the consolidated balance sheet cover most (94 %) of the balance sheet value. Those companies are governed by the occupational pension scheme of BAUER Spezialtiefbau GmbH constituted on July 1, 1992 as amended by the in-company agreement dated November 18, 1998. In it, the company grants all employees who joined by March 31, 1998 and their surviving dependants a retirement pension and invalidity benefit as well as a widow's/widower's pension. Employees qualify for the retirement pension on reaching the standard retirement age, or on prior qualification for a pension from the statutory pension fund. The pension payable amounts to 0.225 percent of the employee's pensionable earnings for each pensionable year of service, plus 0.075 percent of pensionable earnings for each pensionable year of service completed before January 1, 1999; plus, for the portion of pensionable earnings above the contri- bution assessment limit in the statutory pension fund, 0.375 percent plus 0.125 percent for each pensionable year of service 142 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

completed before January 1, 1999. In the case of scheme members who are not members of the Zusatzversorgungskasse des Baugewerbes (construction industry ancillary benefits fund): For each pensionable year of service, 0.3 percent of the employee's pensionable earnings plus 0.1 percent of pensionable earnings for each pensionable year of service completed before January 1, 1999; plus, for the portion of pensionable earnings above the contribution assessment limit in the statutory pension fund, 0.3 percent plus 0.1 percent for each pensionable year of service completed before January 1, 1999. The widow's/widower's pension amounts to 50 percent of the attained entitlement. Benefits are also promised to surviving dependant children in various forms. Vesting and transitional arrangements are also in place. The risks entailed by the pension schemes are mainly those commonly associated with defined benefit plans in terms of potential variations in the discount interest rate and, to a lesser extent, inflation trends as well as longevity.

The calculations are based on the following actuarial assumptions:

in % 31.12.2012 (restated)

Germany Indonesia Philippines Taiwan

Interest rate 3.6 5.6 7.8 1.8 Future salary increases 3.0 10.0 3.0 4.0 Future pension increases 2.0 - - -

in % 31.12.2013

Germany Indonesia Philippines Taiwan

Interest rate 3.7 8.8 4.7 2.0 Future salary increases 3.0 10.0 3.0 3.0 Future pension increases 2.0 - - -

Defined benefit plans in Germany are calculated biometrically applying the 2005 G Graduated Life Tables compiled by Klaus Heubeck. The discount interest rate applied to future pension payment commitments by most Group companies is derived from the Mercer Yield Curve. Outside of Germany, the underlying biometric probability of death is based on published national statistics and empirical data. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 143

The amount of the provisions recognized on the balance sheet for pensions and similar obligations was determined as fol- lows: in EUR '000 31.12.2012 31.12.2013 (restated)

Present value of funded obligations 2,620 2,688 Fair value of plan assets -502 -504 Deficit of funded plans 2,118 2,184

Present value of unfunded obligations 80,205 81,421 Total deficit of define benefit pension plans 82,323 83,605

Impact of minimum funding requirement/asset ceiling - - Liability in the blance sheet 82,323 83,605 2013 CONSOLIDATED FINANCIAL STATEMENTS 144 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The defined benefit obligation and the plan assets developed as follows in the previous year:

in EUR '000 Present value Fair value of Impact of of obligation plan assets Total asset celling Total

As at: January 1, 2012 (restated) 66,124 -370 65,754 - 65,754 Current service costs 1,499 - 1,499 - 1,499 Interest expense/income 3,151 -22 3,129 - 3,129

Post-employment expenditure, gains and losses from payment in lieu -1,897 - -1,897 - -1,897 Total 68,877 -392 68,485 - 68,485

Remeasurements:

Return on plan assets excluding amounts included in the above interest - 2 2 - 2

Actuarial gains and losses arising from adjustments to demographic assumptions - - - - -

Actuarial gains and losses arising from adjustments to financial assumptions 14,763 - 14,763 - 14,763

Empirical value-based adjustments 1,221 - 1,221 - 1,221

Changes in asset ceiling, excluding amounts included in the interest - - - - - Total 15,984 2 15,986 - 15,986

Exchange differences -67 7 -60 - -60 Contributions: Employer - -124 -124 - -124 Plan participants - - - - - Payments from the plan: Benefit payments 5 5 - 5 Benefits (not fund-financed) -1,970 -1,970 - -1,970 Other effects 1 1 - 1 As at: December 31, 2012 (restated) 82,825 -502 82,323 - 82,323 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 145

The defined benefit obligation and the plan assets developed as follows during the financial year: in EUR '000 Present value Fair value of Impact of of obligation plan assets Total asset celling Total

As at: January 1, 2013 82,825 -502 82,323 - 82,323 Current service costs 1,850 - 1,850 - 1,850 Interest expense/income 2,933 -21 2,912 - 2,912

Post-employment expenditure, gains and losses from payment in lieu - - - - - Total 87,608 -523 87,085 - 87,085

Remeasurements:

Return on plan assets excluding amounts included in the above interest - 35 35 - 35

Actuarial gains and losses arising from adjustments to demographic assumptions - - - - -

Actuarial gains and losses arising from adjustments to financial assumptions -1,410 - -1,410 - -1,410

Empirical value-based adjustments 405 - 405 - 405

Changes in asset ceiling, excluding amounts included in the interest - - - - - Total -1,005 35 -970 - -970 2013 CONSOLIDATED FINANCIAL STATEMENTS Exchange differences -272 61 -211 - -211 Contributions: Employer - -88 -88 - -88 Plan participants - - - - - Payments from the plan: Benefit payments - 11 11 - 11 Benefits (not fund-financed) -2,222 - -2,222 - -2,222 Other effects - - - - - As at: December 31, 2013 84,109 -504 83,605 - 83,605 146 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The fair value of the plan assets can be allocated to the following categories:

in EUR '000 31.12.2012 31.12.2013 (restated)

Qualifying insurance contracts 212 223 Money market fund and pension fund 262 252 Cash and cash equivalents 28 29 Total 502 504

No market price quotations exist for the qualifying insurance contracts.

The key actuarial assumptions applied in determining the defined benefit plan obligation are the discount interest rate, ex- pected salary increases and expected pension increases.

The sensitivity of the overall pension obligation to variations in the weighted primary assumptions is:

in EUR '000 Effect on obligation

Variation in Increase in Decrease in assumption assumption assumption

Discount interest rate +/- 0.5 % 76,483 91,140 Future salary increases +/- 0.5 % 85,622 81,191 Future pension increase +/- 0.5 % 87,944 78,460

Increase in Decrease in assumption by assumption by 1 year 1 year

Probability of death 87,152 80,967

The above sensitivity analysis is based on a variation in one assumption while all other assumptions remain constant. It is unlikely that this will occur in reality, and variations in some assumptions may correlate. In calculating the sensitivity of the defined benefit plan obligation to variations in actuarial assumptions, the same method was applied as that used to measure the provisions for defined benefit plans on the balance sheet. The present value of the defined benefit plan obligations was calculated by the projected unit credit method as at the end of the reporting period.

The methods and categories of assumption applied in preparing the sensitivity analysis have not changed relative to the prior period except for the probability of death. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 147

The defined benefit plan obligations and plan assets are composed by country as follows:

31.12.2012 in EUR '000 (restated)

Germany Indonesia Philippines Taiwan Total

Present value of obligations 81,315 1,126 190 194 82,825 Fair value of plan assets -212 -262 0 -28 -502 Total 81,103 864 190 166 82,323

Impact of asset ceiling - - - - - Total 81,103 864 190 166 82,323

in EUR '000 31.12.2013

Germany Indonesia Philippines Taiwan Total

Present value of obligations 83,062 708 175 164 84,109 Fair value of plan assets -223 -252 0 -29 -504 Total 82,839 456 175 135 83,605

Impact of asset ceiling - - - - - Total 82,839 456 175 135 83,605 2013 CONSOLIDATED FINANCIAL STATEMENTS

The present value of the defined benefit plan obligation is distributed as follows among the plan members:

in EUR '000 31.12.2012 31.12.2013

Active scheme members 48,830 49,949 Deferred beneficiaries 4,670 4,630 Pensioners 29,325 29,530 Total 82,825 84,109

The weighted average term of the defined benefit plans is 17.7 years. For the 2014 financial year, pension payments totalling EUR 2,242 thousand are expected. Of that total, EUR 2,242 thou- sand is projected to be contributed by the employer. Contributions to the external plan assets totalling EUR 84 thousand are expected for 2014.

The following table provides an overview of the due dates of the undiscounted pension payments: in EUR '000 under 1 year 1 to 5 years 6 to 10 years 31.12.2013 Total

Pension payments 2,242 11,009 24,099 37,350 148 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

CURRENT LIABILITIES

28. CURRENT LIABILITIES

in EUR '000 31.12.2012 31.12.2013 (restated)

Liabilities to banks 168,090 427,589 Liabilities from finance lease agreements 8,789 10,185 Advances received for orders 18,898 9,801 Liabilities from construction contracts (PoC) 29,982 32,839 Trade payables 172,713 194,471 Liabilities to enterprises in which the company has participating interests 173 219 Other current liabilities 60,514 69,873 Other current financial liabilities 13,783 12,102 Total 472,942 757,079

The "Trade payables" balance sheet item includes long-term payables totalling EUR 949 thousand (previous year: 1,247 thousand).

The other current liabilities mainly comprise obligations in respect of outstanding invoices, flexitime and holiday credits, employer's liability insurance associations, the compensation levy for the shortfall in handicapped employees, performance bonuses as well as other tax liabilities and liabilities in respect of social security.

The other current financial liabilities mainly comprise obligations to leasing and finance companies. The fair values virtually match the carrying amounts. The interest rate margin on current liabilities to banks is 1.10 to 9.60 percent (previous year: 3.65 to 8.25 percent).

29. OTHER PROVISIONS The other provisions have developed as follows in the financial year:

in EUR '000 31.12.2012 31.12.2013

At 01.01 16,903 14,893

Change in scope of consolidation 00 Currency adjustment -31 -33 Allocation 6,437 6,461 Reversal 2,962 3,454 Consumption 5,454 3,058 At 31.12 14,893 14,809 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 149

The other provisions comprise the following:

in EUR '000 31.12.2012 31.12.2013

Risk from contract processing and warranties 13,496 14,605 Litigation 1,397 204 Total 14,893 14,809

The provisions for risk from contract processing and warranties include all risks arising from carrying out specialist founda- tion engineering work and from the sale of machinery, equipment and tools for specialist foundation engineering, with the associated services. These primarily relate to warranty obligations and to other uncertain commitments. The risk from contract processing and warranties is determined specific to project/construction site.

The provisions for risks arising from contract processing and warranties and provisions for litigation are predicted to be used up during 2014.

30. CONTINGENT LIABILITIES Contingent liabilities are liabilities not yet recognized in the financial statements, which are recognized in the amount of the maximum possible exposure on the balance sheet date.

in EUR '000 31.12.2012 31.12.2013 2013 CONSOLIDATED FINANCIAL STATEMENTS

Liabilities from guarantees 4,452 4,386

In the construction industry, it is common and essential practice to issue various guarantees to secure obligations arising from construction contracts. These guarantees are usually issued by banks or credit insurance companies (guarantors), and essen- tially guarantee quotations, contract performance, prepayments and warranty commitments. In the event of a guarantee being given, the guarantors have a right of recourse against the Group. A risk of a guarantee being implemented exists only when the underlying contractual obligations are not duly met.

The contingent liabilities were mainly in relation to the securing of contract performance, to warranty obligations and to advance payments. Liabilities from guarantees exist to third parties. In addition, we are subject to joint and several liability in respect of all joint ventures in which we participate.

31. OTHER FINANCIAL OBLIGATIONS

Remaining term in EUR '000 under 1 year 1 to 5 years over 5 years

31.12.12 31.12.13 31.12.12 31.12.13 31.12.12 31.12.13

Minimum lease payments from operating leases 13,268 15,139 14,145 15,688 376 89 Other financial obligations 7,860 8,616 6,869 4,893 5,290 5,724 150 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The operating leases relate mainly to mutual agreements about factory and office equipment, as well as to technical equip- ment and machinery which were added in the financial year and are classified as operating leases. The BAUER Group is committed to rental agreements of unlimited term totalling monthly EUR 1,686 thousand (previous year: 989 thousand). The other financial obligations mainly include limited-term property rentals and leases.

32. DISCONTINUED OPERATIONS There no plans to discontinue business operations under the terms of IFRS 5.

33. EVENTS AFTER THE BALANCE SHEET DATE No events subject to mandatory reporting in accordance with IAS 10 occurred after December 31, 2013.

34. SEGMENT REPORTING Reporting on the segments of the BAUER Group was implemented in accordance with IFRS 8, as in the previous year. The internal organizational and management structure and the internal system of reporting to the Management Board and Super- visory Board dictate the segmentation employed by the BAUER Group.

The BAUER Group comprises the Construction, Equipment and Resources segments. Transactions between the segments are conducted at market prices. SCHACHTBAU NORDHAUSEN GmbH is the only Group company to operate in all three segments. The assets, liabilities, total Group revenues, sales revenues with third parties and other income statement items of SCHACHTBAU NORDHAUSEN GmbH are assigned to the relevant segments.

Construction The core business of the Construction segment is specialist foundation engineering. Complete excavation pits and founda- tion works, often in difficult subgrade conditions, are carried out for major infrastructure projects and buildings. In order to offer customers a full range of services, the companies of the BAUER Group additionally offer other construction services, often involving a major specialist foundation engineering element. Examples of this include bridges, environmental engi- neering, remediation and building renovation projects. The Construction segment is founded on the close interlinking of all construction activities.

Equipment In the Equipment segment, machinery for all specialist foundation engineering processes and for deep drilling is developed and manufactured for worldwide distribution. The specialist foundation engineering equipment can be employed to produce large-diameter and small-diameter bores for piles, diaphragm walls, anchors, injections and wells. The deep drilling equipment can be employed to drill for geothermal energy, oil and gas. Equipment for ramming and ground improvement is also manu- factured. The range is supplemented by a wide selection of add-on units and ancillary equipment, covering all the processes involved in specialist foundation engineering.

Resources The Resources segment brings together all the Group companies providing products and services relating to the remedia- tion and extraction of natural resources essential to human life. They include environmental technology companies involved in the treatment of ground and groundwater as well as companies involved in exploratory drilling and mining of raw materials NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 151

and drilling of wells and geothermal energy sources. This segment also includes companies which manufacture and sell mate- rials for the engineering of bore holes, specifically for wells and geothermal energy sources.

The Other segment segment comprises the central services (accounting, human resources, IT etc.) provided by BAUER AG to the Group companies as well as other units not assignable to the separately listed segments, providing services such as in- house and external education and training and centralized research and development. The intersegmental consolidation effects are grouped here under Consolidation. This includes offsetting of intra-Group sales between the segments as well as income and expenses and interim results. The intersegmental consolidation effects are ad- justed within the respective segments. The segment result for the period reflects the financial income and expenses as well as the net earnings of shares valued at-equity and the income tax expenditure. The segments' assets and liabilities incorporate all the assets and liabilities of the Group.

The non-current assets stated in the segment report by region comprise intangible assets, property, plant and equipment and investment property.

Total Group revenues, consolidated revenues and sales revenues with third parties The consolidated revenues reflect the performance of all the companies included in the scope of consolidation. The total Group revenues represent the revenues of all the companies forming part of our Group. The difference between the consoli- dated revenues and the total Group revenues is derived from the revenues of the associated companies, from our subcontrac- tor shares in consortia, and from the revenues of non-consolidated companies. 2013 CONSOLIDATED FINANCIAL STATEMENTS

The sales revenues with third parties are allocated to the business segments according to the customer's location. No one customer accounts for more than 10 percent of total sales.

No breakdown of sales revenues by product and service, or by groups of comparable products and services, was available as per the balance sheet date. 152

Segment Reporting of the BAUER Group

SEGMENT REPORT BY BUSINESS SEGMENT Construction Equipment

in EUR '000 2012 2013 2012 2013 (restated) (restated)

Total revenues (Group) 655,165 742,662 589,093 628,612

Sales revenues with third parties 579,069 659,063 520,576 561,615

Sales revenues between business segments 15,351 15,660 54,828 47,928

Changes in inventories -3,024 -172 -23,180 -4,184

Other capitalized goods and services for own account 677 486 6,548 6,955

Other income 13,248 16,809 12,238 10,117 CONSOLIDATED REVENUES 605,321 691,846 571,010 622,431

OPERATING RESULT 22,025 22,816 33,977 32,223

Financial income 2,207 2,989 2,697 2,562

Financial expenses -15,258 -13,389 -23,024 -22,196

Share of the profit or loss of associated companies accounted for using the equity method 5,272 -475 20 1

Income tax expense -5,660 -6,469 -4,773 -7,535 NET PROFIT OR LOSS 8,586 5,472 8,897 5,055

ADDITIONAL INFORMATION ON THE BALANCE SHEET

SEGMENT ASSETS 31.12. 555,983 566,266 748,346 803,467

of which shares in associated companies accounted for using the equity method 12,671 9,389 108 99

of which capital investments in fixed assets 51,577 48,168 34,693 40,166 SEGMENT LIABILITIES 31.12. 408,198 444,775 540,300 579,077

ADDITIONAL INFORMATION ON THE INCOME STATEMENT

Depreciation and amortization

Impairment losses on fixed assets -42,487 -47,504 -20,275 -17,266

of which impairment losses on fixed assets -33 -526 -525 -996

Write-downs of inventories due to use 0 0 -15,392 -14,196 Major non-cash segment items

Impairment losses on financial assets 0 -40 0 0

Impairment losses on inventories -390 -112 -4,844 -3,808

Allocation to value adjustments on receivables and other assets -20,178 -26,876 -1,977 -4,671

Reversal of value adjustments on receivables and other assets 13,908 31,227 2,830 3,396

SEGMENT REPORT BY REGION Germany Europe (other) Europe excluding EU

in EUR '000 2012 2013 2012 2013 2012 2013 (restated) (restated) (restated)

Total revenues (Group) 379,521 412,150 142,672 168,066 128,399 155,028

Sales revenues with third parties 329,951 357,048 142,102 163,380 115,414 145,381

Non-current assets 256,369 255,613 19,501 21,414 15,140 19,578 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 153

Resources Other Consolidation Group

2012 2013 2012 2013 2012 2013 2012 2013 (restated) (restated) (restated)

262,848 189,868 42,652 39,319 -113,951 -94,234 1,435,807 1,506,227

244,273 182,968 503 523 0 0 1,344,421 1,404,169

3,578 2,413 29,576 31,146 -103,333 -97,147 0 0

3,849 -67 0000-22,355 -4,423

949 1,548 0 0 16,075 10,207 24,249 19,196

3,647 2,910 11,715 6,624 -11,085 -5,881 29,763 30,579 256,296 189,772 41,794 38,293 -98,343 -92,821 1,376,078 1,449,521

15,196 -23,576 12,130 5,117 -11,324 -4,499 72,004 32,081

2,436 2,268 8,118 7,044 -9,486 -7,134 5,972 7,729

-11,123 -11,885 -4,738 -5,205 9,486 7,134 -44,657 -45,541

25724800005,549 -226

-1,102 1,501 -1,795 -961 235 -10 -13,095 -13,474 5,664 -31,444 13,715 5,995 -11,089 -4,509 25,773 -19,431 2013 KONZERNABSCHLUSS CONSOLIDATED FINANCIAL STATEMENTS

283,996 265,613 298,535 303,121 -357,445 -353,249 1,529,415 1,585,218

354484000013,133 9,972

17,393 11,539 4,111 13,552 0 -10,000 107,774 103,425 221,257 226,675 146,169 149,980 -249,049 -234,700 1,066,875 1,165,807

-10,446 -11,940 -3,195 -3,371 0 385 -76,403 -79,696

-148 -2,191 0 0 0 0 -706 -3,713

000000-15,392 -14,196

0 -2,546 0 0 0 0 0 -2,586

-834 -4,329 0 0 0 0 -6,068 -8,249

-617 -6,651 0 0 0 0 -22,772 -38,198

428 495 0 0 0 0 17,166 35,118

Asia-Pacific Middle East and Central Asia America Africa Group Far East and Australia

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 (restated) (restated) (restated) (restated) (restated)

197,178 163,036 326,250 363,305 201,770 186,392 60,017 58,250 1,435,807 1,506,227

189,969 158,749 301,782 356,877 216,739 170,648 48,464 52,086 1,344,421 1,404,169

58,836 52,630 77,856 82,364 64,256 56,751 7,925 6,575 499,883 494,925 154 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

OTHER DISCLOSURES

35. CASH FLOW STATEMENT The funds shown in the cash flow statement comprise only the cash and cash equivalents stated on the balance sheet. The cash flow statement details payment flows, broken down by inflow and outflow of funds from operating activities and from investing and financing activities. The cash flow from operating activities is derived indirectly from the pre-tax profit. The pre-tax profit is adjusted by non-cash transactions. The cash flow from operating activities is produced taking account of the changes in working capital. Investing activities include additions to property, plant and equipment and to financial assets and intangible assets, as well as income from the sale of assets. Financing activities include outflows of cash and cash equivalents arising from dividend payments as well as the change in other financial indebtedness. The changes in balance sheet items applied for the preparation of the cash flow statement are not directly derivable from the balance sheet, as the effects of currency translation and changes in the scope of consolidation, as well as the allocation and elimination of value adjustments on trade receivables, do not affect payments and are stripped out.

36. FINANCIAL INSTRUMENTS In its business operations and financing activities the BAUER Group is subject in particular to fluctuations in exchange rates and interest rates. It is the company's policy to exclude, or at least limit, these risks by entering into hedge transactions. All hedging measures are managed centrally by BAUER AG. Application of the segregation-of-duties approach ensures that there is an adequate split between the trading and execu- tion functions. The segregation-of-duties approach is implemented by spreading functions across the Management Board (financial reporting) and the corporate departments (operational handling). All derivatives transactions are entered into only with banks of the highest credit rating.

MARKET RISKS

Foreign exchange rate risks Foreign exchange rate risks under the terms of IFRS 7 are created by financial instruments which are denominated in a cur- rency different to the functional currency and are of a monetary nature. Exchange rate-related differences when converting financial statements into the Group currency are ignored. All non-functional currencies in which the BAUER Group enters into financial instruments are classed, as a matter of principle, as relevant risk variables. The existing foreign exchange forward contracts, foreign exchange options and cross-currency swaps safeguard our currency hedging strategy. Within the BAUER Group, the primary monetary financial instruments are either denominated directly in functional currency or are largely transferred into the functional currency by means of derivatives. In view of the usually short- term maturity of the instruments too, possible changes in exchange rates have only very minor effects on earnings or equity. For the purposes of sensitivity analysis, foreign exchange rate risks arising from monetary financial instruments which were not concluded in the functional currencies of the individual member companies of the BAUER Group are included in the analysis. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 155

Quantification of foreign exchange risk in case of exchange rate shifts of +/- 10 %:

in EUR '000 at 31.12.2012 USD RUB CAD

Overall effect of +10 % on OCI 6,737 131 0 Overall effect of -10 % on OCI -8,207 -140 0 Overall effect of +10 % on income statement 2,600 0 -69 Overall effect of -10 % on income statement -2,843 0 84

in EUR '000 at 31.12.2013 USD RUB CAD

Overall effect of +10 % on OCI 5,572 255 0 Overall effect of -10 % on OCI -6,838 -309 0 Overall effect of +10 % on income statement 2,713 49 -367 Overall effect of -10 % on income statement -2,654 -58 449

In 2013, the sensitivity effects mainly related to the US Dollar, Russian Ruble and Canadian Dollar. No concentrations of risk exist.

Interest rate risks The existing interest rate swaps serve to safeguard our financing and interest rate hedging strategy. Agreements exist in respect of swaps from variable to fixed interest rates in order to exclude the risk of fluctuation in market interest rates. 2013 CONSOLIDATED FINANCIAL STATEMENTS Changes in market interest rates affect the interest results of variable-rate primary financial instruments of which the interest payments are not hedged by derivatives, and consequently are included in the calculation of earnings-related sensitivity. Changes in market interest rates of interest rate derivatives (interest rate swaps, interest rate/currency swaps) which are not embedded in a hedging relationship pursuant to IAS 39 have effects on financial income and expenses (net valuation based on adjustment of financial assets to applicable fair value) and so are included in the calculation of earnings-related sensitivity. The effects of changes in market interest rates of interest rate derivatives to which hedge accounting is applied are recog- nized in the OCI.

Quantification of risk of change in interest rate in case of interest rate shifts of +/- 100 base points:

in EUR '000 31.12.2012 31.12.2013

Overall effect of +100 base points on OCI 3,268 2,076 Overall effect of -100 base points on OCI -2,543 -1,806 Overall effect of +100 base points on income statement 2,836 2,494 Overall effect of -100 base points on income statement -2,315 -2,298 156 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Raw material risks Raw material risks to which the BAUER Group is exposed in respect of availability and potential fluctuations in price on the market are excluded, or limited, by means of supply promises and fixed pricing agreements entered into with suppliers prior to execution of contracts. The raw material risk relates mainly to steel.

Liquidity risks The liquidity risk is managed by means of business planning, which ensures that the necessary funds to finance operating ac- tivities and current and future capital investments are made available at the appropriate time, in the required currency, and at optimum cost, in all Group companies. In liquidity risk management, the liquidity requirement arising from operating activities, from investment activities and from other financial measures is determined in the form of a banking report and a liquidity plan. Liquidity is guaranteed at all times by means of a liquidity forecast focused on a fixed planning horizon and by unused lines of credit and guarantee facilities.

The following tables present the contractually agreed and discounted interest payments and capital repayments in respect of primary financial liabilities and derivative financial instruments of the BAUER Group:

in EUR '000 Carrying amount Cash flows Cash flows Cash flows 31.12.2012 2013 2014 to 2017 2018 ff. (restated)

Liabilities to banks 594,276 178,821 385,984 48,108 Liabilities from finance lease agreements 24,976 9,507 17,986 0 Other liabilities 67,941 60,514 7,427 0 Other financial liabilities 36,495 18,851 17,761 4,484 of which derivatives 12,269 5,709 8,466 567 Liabilities from construction contracts (PoC) 29,982 29,982 0 0 Trade payables 172,713 171,466 1,247 0 Liabilities to enterprises in which the company has participating interests 173 173 0 0

in EUR '000 Carrying amount Cash flows Cash flows Cash flows 31.12.2013 2014 2015 to 2018 2019 ff.

Liabilities to banks 675,364 443,095 239,939 30,423 Liabilities from finance lease agreements 27,450 11,070 18,324 0 Other liabilities 76,356 69,873 6,483 0 Other financial liabilities 26,499 14,747 11,162 3,727 of which derivatives 7,531 3,659 4,746 190 Liabilities from construction contracts (PoC) 32,839 32,839 0 0 Trade payables 194,471 193,522 949 0 Liabilities to enterprises in which the company has participating interests 219 219 0 0

There were no instances of defaulting on interest payments or capital repayments in the period under review. Furthermore, all externally imposed capital covenants were fulfilled with the exception of the net debt/EBITDA ratio (see also page 140 "Additional disclosures regarding capital management"). No concentrations of risk exist. It is not to be expected that liabilities arising from sureties (contingent liabilities) will result in significant actual liabilities, and thus in significant cash flows, for which no provisions have yet been made. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 157

The due dates of derivative financial instruments based on outflow and inflow of cash and cash equivalents are as follows: in EUR '000 at 31.12.2012 2013 2014 to 2017 from 2018

Liabilities from foreign exchange forward contracts -642 -436 0

Outflow of cash and cash equivalents -25,049 -10,705 0 Inflow of cash and cash equivalents 24,407 10,269 0 Liabilities from interest rate swaps -4,988 -7,931 -567

Outflow of cash and cash equivalents -4,988 -7,931 -567 Inflow of cash and cash equivalents 0 0 0 Liabilities from cross currency swaps -79 -99 0

Outflow of cash and cash equivalents -152 -190 0 Inflow of cash and cash equivalents 73 91 0

in EUR '000 at 31.12.2013 2014 2015 to 2018 from 2019

Liabilities from foreign exchange forward contracts -404 -138 0

Outflow of cash and cash equivalents -43,454 7,294 0 Inflow of cash and cash equivalents 43,050 -7,432 0 Liabilities from interest rate swaps -3,132 -4,513 -190

Outflow of cash and cash equivalents -3,132 -4,513 -190 2013 CONSOLIDATED FINANCIAL STATEMENTS Inflow of cash and cash equivalents 0 0 0 Liabilities from cross currency swaps -122 -95 0

Outflow of cash and cash equivalents -239 -186 0 Inflow of cash and cash equivalents 117 91 0

To calculate the cash inflows from interest rate swaps the conditions as per December 31, 2013 were applied.

Risk of default The risk of default is managed at Group level. Default risks arise from cash and cash equivalents, derivative financial instru- ments and deposits at banks and other financial service companies. Only those banks and financial services companies with high credit ratings are selected as partners. No credit limit was exceeded in the reporting period. The management expects no defaults on the part of these business partners.

The risk of default on financial assets exists in terms of the risk of failure of a contract party and thus to a maximum in the amount of the carrying amount of the exposure to the said party. A presentation of the carrying amounts and the resultant maximum risk of default per category is given in the table starting on page 162. The risk arising from primary financial instru- ments is countered by means of value adjustments for bad debt, and in Germany also by means of credit insurance cover. As derivative financial instruments are entered into only with banks with high credit ratings, and the risk management system sets limits for each party, the actual risk of default is negligible. No concentrations of risk exist. 158 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Other disclosures relating to financial instruments On October 2, 2001, BAUER EGYPT S.A.E. issued an 11 percent convertible bond with a face value of EGP 10,000,000. The term of the convertible bond was originally 6 years, and was again extended for a further 3 years in 2010. On expiry of the convertible bond, the holder did not exercise the option to exchange it for 200,000 shares at EGP 50 each. Repayment of the convertible bond was agreed in three instalments. The first instalment of EGP 3,000,000 was paid in 2013; a further instalment of EGP 4,000,000 will be paid in 2014; and the remainder of EGP 3,000,000 will be paid in 2015. The applicable fair value of the liability component and of the equity conversion component was set as per the issue date of the convertible bond. The applicable fair value of the debt component recognized in the non-current financial liabilities as at December 31, 2013 amounts to EUR 144 thousand (previous year: 548 thousand). The applicable fair value of the equity component recognized in the minority interests as at December 31, 2013 amounts to EUR 324 thousand (previous year: 324).

The Group has taken up loans with variable interest rates and hedged against its interest rate-related cash flow risk by means of swaps. Such interest rate swaps have the commercial effect of converting variable-interest loans into fixed-interest loans. In these interest rate swaps, the Group agrees with other parties to swap the difference between the fixed and variable interest rates derived from the agreed nominal amounts at regular intervals.

The nominal volumes and market values of the derivative financial instruments are as follows:

Nominal volume Market value in EUR '000 31.12.12 31.12.13 31.12.12 31.12.13

Positive Negative Positive Negative

Interest rate swaps of which in hedge accounting 130,571 125,464 0 -4,973 0 -2,765 of which not in hedge accounting 47,750 45,550 0 -6,044 0 -4,081

Foreign exchange forward contracts of which in hedge accounting 74,558 74,931 1,197 -959 1,980 -133 of which not in hedge accounting 31,352 84,712 402 -120 1,211 -358

Foreign exchange forward options of which in hedge accounting 0 0 0 0 0 0 of which not in hedge accounting 0 6,556 0 0 115 0

Cross currency swaps of which in hedge accounting 1,628 1,605 0 -173 0 -42 of which not in hedge accounting 0 3,314 0 0 0 -152

Net result by valuation category The following table sets out the net profits and losses (before tax) on financial instruments stated in the income statement, broken down by valuation category as per IAS 39:

in EUR '000 31.12.2012 31.12.2013 (restated)

Loans and receivables -127 11,370 Financial liabilities measured at amortised cost -38,824 -38,233 Available-for-sale financial assets -111 -2,586 Held for Trading -1,820 2,465 Total -40,882 -26,984 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 159

The net result of the "Loans and Receivables" category includes results from the creation and reversal of value adjustments in respect of trade receivables as well as interest income.

The net result of the "Financial Liabilities Measured at Amortized Cost" category includes the result from interest expenditure to third parties, for current and non-current loans as well as guaranty commissions.

The net result of the "Available-for-Sale Financial Assets" category includes gains and losses from marketable securities as well as impairment of financial assets. Equity shares in companies are valued at cost and are not included.

The net result of the "Financial Assets and Liabilities Held for Trading" category includes results from foreign exchange forward contracts and options, as well as results from changes to the fair values of interest rate swaps.

Carrying amounts and fair values The fair value of a financial instrument is the consideration for which an asset might be exchanged, or a debt paid, between informed, willing and mutually independent parties. Where financial instruments are quoted on an active market – such as in particular shares held and bonds issued – the price quoted on the market in question is the fair value. If no active market exists, the fair value is determined by financial valuation methods. For securities (AfS) the BAUER Group has at its disposal the prices quoted on an active market.

The fair values of foreign exchange forward contracts and cross-currency swaps are measured separately at their respective forward prices and discounted to the reference date based on the corresponding interest rate curve. The market prices of 2013 CONSOLIDATED FINANCIAL STATEMENTS foreign exchange forward options are determined by recognized option models. The fair values of the interest rate swaps correspond to the respective market value as determined by appropriate financial valuation methods, such as by discounting expected future cash flows.

For cash and cash equivalents, current trade receivables and other current assets, current trade payables and other current liabilities, owing to their short remaining terms the carrying amount should be adopted as a realistic estimate of the fair value.

The fair values of non-current financial assets and of other non-current financial liabilities correspond to the cash values of the payment flows linked to the assets, taking into account the applicable interest rate parameters, which reflect changes in the terms and expectations of the market and of the respective parties.

The fair values of financial instruments are determined on the basis of one of the methods set out on the three following levels:

• Level 1: Quoted prices (adopted unchanged) on active markets for identical assets and liabilities • Level 2: Directly or indirectly observable input data for the asset or liability other than quoted prices as per level 1 • Level 3: Applied input data which does not originate from observable market data for measurement of the asset and liability (non-observable input data) 160 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

There were no transfers between the levels during the year. If circumstances arise necessitating a reclassification, it is under- taken at the end of the reporting period.

Other disclosures relating to hedging transactions In the 2013 financial year, unrealized results from the market valuation of interest rate swaps, cross-currency swaps and foreign exchange forward contracts in an amount of EUR 1,767 thousand (previous year: -2,305 thousand) before tax and EUR 1,129 (previous year: -1.789) after tax were recognized in the shareholders' equity as a hedge reserve (hedge account- ing, cash flow hedge) with no effect on profit and loss. Hedging instruments were always linked to an underlying transaction. In this period, the ineffective portion in an amount of EUR 0 thousand (previous year: 0 thousand) after tax was assigned to the financial expenses. An amount of EUR -310 thousand (previous year: -6) was recycled from the hedge reserve created with no effect on net income in the shareholders' equity. Transactions in foreign currencies secured by hedging and changes in market interest rates with a high probability of occurrence are expected to be realized at different times by 2020 at the lat- est. Gains and losses on future contracts in foreign currency and interest rates at December 31, 2013 included in the hedge reserve in the OCI are recognized in the income statement in the period in which the hedged planned transaction impacts on the income statement. The prospective effectiveness is measured according to the Critical Term Match method and the retrospective effectiveness according to the Dollar Offset method based on the Hypothetical Derivatives method.

Offsetting Financial Assets and Financial Liabilities a) Financial assets The following financial assets are subject to offsetting, enforceable master-netting arrangements or similar arrangements.

in EUR '000 Related amounts not offset on the balance sheet

Gross amount of Net amount of Gross amount recognized financial financial assets of recognized liabilities offset on recognized on the Financial Cash securities financial assets the balance sheet balance sheet instruments received Net amount

As at: December 31, 2012

Derivative financial assets 1,599 0 1,599 -1,229 - 370 Cash and cash equivalents 45,232 0 45,232 -3,332 - 41,900 Total 46,831 0 46,831 -4,561 - 42,270

As at: December 31, 2013

Derivative financial assets 3,306 0 3,306 -859 - 2,447 Cash and cash equivalents 57,217 0 57,217 -3,400 - 53,817 Total 60,523 0 60,523 -4,259 - 56,264 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 161

b) Financial liabilities The following financial liabilities are subject to offsetting, enforceable master-netting arrangements or similar arrangements.

in EUR '000 Related amounts not offset on the balance sheet

Gross amount of Net amount of Gross amount recognized financial financial liabilities of recognized assets offset on the recognized on the Financial Cash securities financial liabilities balance sheet balance sheet instruments received Net amount

As at: December 31, 2012

Derivative financial liabilities 12,269 0 12,269 -1,229 - 11,040

Current-account overdrafts 148,579 0 148,579 -3,332 - 145,247 Total 160,848 0 160,848 -4,561 - 156,287

As at: December 31, 2013

Derivative financial liabilities 7,531 0 7,531 -859 - 6,672

Current-account overdrafts 255,605 0 255,605 -3,400 - 252,205 Total 263,136 0 263,136 -4,259 - 258,877

The "Financial instruments" column lists the amounts which are subject to master-netting arrangements but are not netted 2013 CONSOLIDATED FINANCIAL STATEMENTS on the balance sheet because the preconditions for offsetting are not met. The "Cash securities received" column lists the amounts of cash and financial instrument securities received relative to the sum total of assets and liabilities which do not meet the criteria for netting on the balance sheet. 162 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

Within the Group, financial instruments are classified in the same way as the respective balance sheet items. The following table presents a reconciliation of the classes to the categories of IAS 39 and the respective market values:

in EUR '000

Loans and receivables/ Valuation standard Carrying amount other financial liabilities

31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated) (restated)

NON-CURRENT ASSETS

Participations at cost 3,638 3,613 0 0

Receivables from concession arrangements at amortized cost 40,770 36,762 40,770 36,762

Other non-current financial assets 6,846 5,420

at fair value 6 137 0 0

at amortized cost 163 1,325 163 1,325

at cost 6,676 3,958 0 0

not IFRS 7 1 0 0 0

CURRENT ASSETS

Receivables from construction contracts at amortized cost 116,398 143,234 116,398 143,234

Trade receivables at amortized cost 272,443 323,008 272,443 323,008

Receivables from enterprises

in which the company has participating interests at amortized cost 344 444 344 444

Other current financial assets 17,487 19,551

at fair value 1,593 3,169 0 0

at amortized cost 15,894 16,382 15,894 16,382

Cash and cash equivalents 45,232 57,217 45,232 57,217

Total financial assets 503,158 589,249 491,244 578,372 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 163

Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category

Financial Assets and Derivatives in Balance sheet Fair value Valuation Available for Sale Liabilities Held for Trading hedge accounting valuation as per IAS 17 as per IFRS 7 and IFRS 13 level as per IFRS 13 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated) (restated) (restated) (restated) (restated)

3,638 3,613 000000n/an/a

0000000047,464 40,449 2

0061270100061372

000000001631,214 2

6,676 3,958 000000n/an/a

00000000n/an/a 2013 CONSOLIDATED FINANCIAL STATEMENTS 00000000116,398 143,234 2

00000000272,443 322,161 2

000000003444442

0 0 396 1,199 1,197 1,970 0 0 1,593 3,169 2

0000000015,894 16,382 2

0000000045,232 57,217 2

10,314 7,571 402 1,326 1,197 1,980 0 0 499,537 584,407 164 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

in EUR '000

Loans and receivables/ Valuation standard Carrying amount other financial liabilities

31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated) (restated)

NON-CURRENT LIABILITIES

Liabilities to banks at amortized cost 426,186 247,775 426,186 247,775

Liabilities from finance lease agreements at amortized cost 16,187 17,265 0 0

Other non-current financial liabilities 22,712 14,397

at fair value 11,627 6,516 0 0

at amortized cost 11,085 7,881 11,085 7,881

CURRENT LIABILITIES

Liabilities to banks at amortized cost 168,090 427,589 168,090 427,589

Liabilities from finance lease agreements at amortized cost 8,789 10,185 0 0

Liabilities from construction contracts at amortized cost 29,982 32,839 29,982 32,839

Trade payables at amortized cost 172,713 194,471 172,713 194,471

Liabilities to enterprises

in which the company has participating interests at amortized cost 173 219 173 219

Other current financial liabilities 13,783 12,102

at fair value 642 1,015 0 0

at amortized cost 13,141 11,087 13,141 11,087

Total financial liabilities 858,615 956,842 821,370 921,861 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 165

Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category

Financial Assets and Derivatives in Balance sheet Fair value Valuation Available for Sale Liabilities Held for Trading hedge accounting valuation as per IAS 17 as per IFRS 7 and IFRS 13 level as per IFRS 13 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 31.12.2012 31.12.2013 (restated) (restated) (restated) (restated) (restated)

00000000434,092 256,361 2

00000016,187 17,265 16,187 17,265 2

0 0 6,052 4,270 5,575 2,246 0 0 11,627 6,516 2

0000000013,784 8,880 2

00000000168,090 427,589 2

0000008,789 10,185 8,789 10,185 2

0000000029,982 32,839 2 2013 CONSOLIDATED FINANCIAL STATEMENTS 00000000172,713 194,471 2

000000001732192

0 0 112 321 530 694 0 0 642 1,015 2

0000000013,141 11,087 2

0 0 6,164 4,591 6,105 2,940 24,976 27,450 869,220 966,427 166 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

37. EXECUTIVE BODIES In the year under review the Supervisory Board comprised the following members:

Chairman • Dr. Klaus Reinhardt, General (retd.), Starnberg

Deputy Chairman • Robert Feiger, Neusäss Chairman of the Federal Executive Committee of the IG Bauen-Agrar-Umwelt trade union, Frankfurt am Main Supervisory Board, HeidelbergCement AG, Heidelberg, Member Supervisory Board, Zusatzversorgungskasse des Baugewerbes AG, Wiesbaden, Member Supervisory Board, Zusatzversorgungskasse Gerüstbaugewerbe VVaG, Wiesbaden, Chairman

Employer representatives • Dr.-Ing. Johannes Bauer, Schrobenhausen Construction engineer with BAUER Designware GmbH, Schrobenhausen • Dipl.-Ing. (FH) Rainer Schuster, Freising Retired construction engineer • Dipl.-Ing. (FH) Elisabeth Teschemacher, née Bauer, Schrobenhausen 1. Chair of Caritasverband Neuburg-Schrobenhausen e.V. (since 13.11.2013) • Gerardus N. G. Wirken, Breda, Netherlands Freelance consultant on strategy, controlling and accounting Supervisory Board Batenburg, Techniek N.V., Rotterdam/Netherlands, Member (to 26.04.2013) Supervisory Board, Vendor Beheer B.V., Tilburg/Netherlands, Chairman Supervisory Board, Winters Bouw- en Ontwikkeling B.V., Breda/Netherlands, Chairman Supervisory Board, Rabobank Breda, Breda/Netherlands, Chairman Supervisory Board, Egeria Investments B.V., Amsterdam/Netherlands, Chairman Supervisory Board, Holonite B.V., Tholen/Netherlands, Chairman (to 29.03.2013) Member of the Board of Rabobank Pensioenfonds, Utrecht/Netherlands Supervisory Board, ICTS Europe Holdings B.V., Amsterdam/Netherlands, Chairman (to 12.03.2013) • Prof. Dr.-Ing. E.h. Manfred Nußbaumer M.Sc, Munich Retired construction engineer Supervisory Board, Leonhardt, Andrä und Partner Beratende Ingenieure VBI AG, Stuttgart, Member (from 30.01.2013)

Employee representatives • Regina Andel, Ellrich Chair of the Works Council, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen • Dipl.-Volkswirt Norbert Ewald, Bad Vilbel Member of the Management Board, Zusatzversorgungskasse des Steinmetz- und Steinbildhauerhandwerks VVaG, Wiesbaden • Reinhard Irrenhauser, Schrobenhausen Chairman of the Works Council, BAUER Maschinen GmbH, Schrobenhausen • Dipl.-Kfm. (FH) Stefan Reindl, Schrobenhausen (since 27.06.2013) Human Resources Director of BAUER Aktiengesellschaft, Schrobenhausen Advisory Board, BAUER Training Center GmbH, Schrobenhausen, Chairman NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 167

• Dipl.-Ing. Gerold Schwab, Kernen Construction Engineer in the Technical Division of BAUER Spezialtiefbau GmbH, Schrobenhausen • Dipl.-Ing. (FH) Walter Sigl, Waidhofen (to 27.06.2013) Member of the Management Board of BAUER Maschinen GmbH, Schrobenhausen

Management Board • Prof. Dr.-Ing. E.h. Dipl.-Kfm. Thomas Bauer, Schrobenhausen, Chairman, Functions: Participations in Subsidiaries, Accounting, Planning, Advertising, Controlling Supervisory Board, BAUER Spezialtiefbau GmbH, Schrobenhausen, Chairman Supervisory Board, BAUER Maschinen GmbH, Schrobenhausen, Chairman Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Deputy Chairman Supervisory Board, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Chairman Supervisory Board, BAUER EGYPT S.A.E., Cairo, Chairman Supervisory Board, BAUER FOUNDATION CORP., Odessa, Chairman (to 09.05.2013) Supervisory Board, Mannheimer AG Holding, Mannheim, Member (to 11.03.2013) • Dipl.-Betriebswirt (FH) Hartmut Beutler, Schrobenhausen, Functions: Finance, Legal Affairs and Insurance, Investor Relations, Facility Management Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Member Supervisory Board, Schrobenhausener Bank e.G., Schrobenhausen, Chairman • Dipl.-Ing. Heinz Kaltenecker, Schrobenhausen, Functions: Participations in Subsidiaries, Information Technology,

Human Resources, Quality Management, Risk Management, Health Safety Environment 2013 CONSOLIDATED FINANCIAL STATEMENTS Supervisory Board, BAUER Spezialtiefbau GmbH, Schrobenhausen, Deputy Chairman Supervisory Board, BAUER Maschinen GmbH, Schrobenhausen, Deputy Chairman Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Chairman Supervisory Board, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Deputy Chairman

The total remuneration paid to members of the Management Board in the year under review, excluding allocations to provisions for defined benefit plans, was EUR 1,361 thousand (previous year: 1,389 thousand). Of that total, EUR 1,056 thousand (previous year: 1,019 thousand) was not performance-related and EUR 305 thousand (previous year: 370 thousand) was performance- related. The total remuneration includes benefits in kind arising from the private use of a company car and reimbursement of travel expenses for each member of the Management Board, as well as pro rata group accident insurance premiums and employer's liability insurance association contributions. The company pension scheme for Management Board members incurred pension service costs totalling EUR 118 thousand (previous year: 114 thousand). The pensionable earnings serving as the basis for calculating pension levels are significantly lower than the basic salary in all contracts. Calculated in accord- ance with IAS 19, the defined benefit obligation entailed by all pension commitments to members of the Management Board at the year-end was EUR 3,868 thousand (previous year: 3,596 thousand). Former members of the management bodies of the parent company received total remuneration of EUR 0 thousand (previous year: 0) in return for duties performed on behalf of the parent company. 168 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

The remuneration paid to the Supervisory Board for the 2013 financial year totalled EUR 254 thousand (previous year: 254 thousand) and was distributed as follows:

in EUR '000 2012 2013

Chairman

Dr. Klaus Reinhardt 38 38 Deputy Chairman

Robert Feiger 27 27 Employer representatives

Dr.-Ing. Johannes Bauer 20 20 Dipl.-Ing. (FH) Rainer Schuster 18 18 Dipl.-Ing. (FH) Elisabeth Teschemacher 18 18 Gerardus N. G. Wirken 20 20 Prof. Dr. Manfred Nußbaumer 20 20 Employee representatives

Dipl.-Volkswirt Norbert Ewald 20 20 Dipl.-Kfm. (FH) Stefan Reindl 09 Regina Andel 18 18 Dipl.-Ing. Gerold Schwab 20 20 Dipl.-Ing. (FH) Walter Sigl 18 9 Reinhard Irrenhauser 18 18 Total * 254 254

* Rounding to thousands of EUR resulted in a rounding difference of EUR 1 thousand in 2012 and 2013.

38. RELATED PARTY DISCLOSURES Related parties under the terms of IAS 24 are parties that the reporting enterprise has the ability to control or exercise signifi- cant influence over, or parties that have the ability to control or exercise significant influence over the reporting enterprise. Transactions with related parties are defined as the transfer of resources, services or obligations between the reporting entity and a related party, regardless of whether an invoice is issued in respect of the transaction or not. Members of the Management Board of BAUER AG are members of Supervisory Boards and Management Boards of other companies with which BAUER AG maintains relations in the course of its ordinary business operations. Members of the Supervisory Board received pensions totalling EUR 54 thousand (previous year: 52 thousand) in respect of former employment within the BAUER Group. The members of the Supervisory Board, by virtue of their role as employees, received remuneration totalling EUR 503 thousand (previous year: 481 thousand). Lease and service contracts and contracts of employment (except for the remuneration to members of the Management Board disclosed) exist with members of the Management Board, including close family, in respect of which remuneration to an amount of EUR 945 thousand (previous year: 1,291 thousand) was paid. NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 169

Loan commitments to the BAUER Foundation existed totalling EUR 1,000 thousand (previous year: 1,000 thousand), for which interest amounting to EUR 55 thousand (previous year: 55 thousand) was paid. At the end of the financial year, no loan commitments existed to shareholders of BAUER AG. The key relationships between fully consolidated Group companies and related parties are set out in the following table:

Associates companies Non-consolidated companies in EUR '000 2012 2013 2012 2013

Income 2,318 2,063 24,034 16,457 Purchased services 452 312 3,835 6,915 Receivables and other assets (31.12.) 282 444 22,748 25,893 Liabilities (31.12.) 95 133 3,165 1,775 Impairment of receivables 0 0 2,892 4,035

The purchased services essentially comprise all expenses incurred with related parties during the financial year.

Transactions with related parties are conducted at standard market terms.

The receivables and other assets include uncollectable receivables as well as financial assets in respect of related parties.

Disclosures relating to joint ventures were omitted owing to their minor importance. 2013 CONSOLIDATED FINANCIAL STATEMENTS

39. FEES AND SERVICES OF THE AUDITORS The fee paid to the auditors and recorded as expenditure in the financial year is broken down as follows:

PricewaterhouseCoopers AG:

in EUR '000 2012 2013

Fees for auditing services 605 593 Fees for other certification 42 Fees for tax advice 96 74 Fees for other services 84 76 Total 789 745

In addition, Roland Jehle GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft was engaged to audit the major German capital corporations included in the Group's consolidated financial statements.

The fees for this recognized in the financial year are broken down in accordance with Section 285, Paragraph 17 and Section 314, Subsection 1, Paragraph 9 HGB as follows: in EUR '000 2012 2013

Auditing fees 36 34 Fees for other certification 00 Fees for tax advice 87 Fees for other services 00 Total 44 41 170 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

40. DECLARATION OF CONFORMITY TO THE GERMAN CORPORATE GOVERNANCE CODE The Management Board and Supervisory Board of BAUER AG issued their declaration in accordance with Section 161 of the German Stock Corporation Act (AktG) on December 5, 2013 and published it in a form permanently accessible to share- holders on the company's website at www.bauer.de.

41. AVERAGE NUMBER OF EMPLOYEES

2012 2013

Salaried staff 3,664 3,835

Germany 1,897 1,957 International 1,767 1,878 Industrial & trades 6,350 6,189

Germany 1,954 1,947 International 4,396 4,242 Apprentices 239 240 Total number of employees 10,253 10,264

42. AUTHORIZATION FOR ISSUE OF THE CONSOLIDATED FINANCIAL STATEMENTS The Management Board has submitted the consolidated financial statements to the Supervisory Board for authorization for issue (the Supervisory Board meeting is scheduled for April 9, 2014). NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 171

43. PROPOSAL ON APPROPRIATION OF NET EARNINGS AVAILABLE FOR DISTRIBUTION BAUER AG made a net profit available for distribution of EUR 27,428,937.64 in the financial year under review. The Management Board and Supervisory Board have allocated no amounts from the net profit to the revenue reserves in accordance with Article 22, paragraph 1 of the company's Articles of Association. The Management Board and Supervisory Board propose appropriation of the net earnings of BAUER Aktiengesellschaft for the 2013 financial year totalling EUR 27,428,937.64 as profit carried forward in an amount of EUR 27,428,937.64.

Schrobenhausen, March 28, 2014

The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker Chairman of the Management Board 2013 CONSOLIDATED FINANCIAL STATEMENTS 172

Major participations of the BAUER Group at December 31, 2013

NAME AND REGISTERED OFFICE OF COMPANY Currency Capital share in %

1. Fully consolidated companies BAUER Aktiengesellschaft EUR

A. Germany BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Maschinen GmbH, Schrobenhausen, Germany EUR 99.00

SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany EUR 99.00

SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Resources GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Training Center GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Designware GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Umwelt GmbH, Schrobenhausen, Germany EUR 100.00

KLEMM Bohrtechnik GmbH, Drolshagen, Germany EUR 100.00

EURODRILL GmbH, Drolshagen, Germany EUR 100.00

BAUER Mietpool GmbH, Schrobenhausen, Germany EUR 100.00

RTG Rammtechnik GmbH, Schrobenhausen, Germany EUR 100.00

MAT Mischanlagentechnik GmbH, Immenstadt, Germany EUR 90.00

PRAKLA Bohrtechnik GmbH, Peine, Germany EUR 100.00

Olbersdorfer Guß GmbH, Olbersdorf, Germany EUR 75.00

SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany EUR 90.00

SCHACHTBAU NORDHAUSEN Bau GmbH, Nordhausen, Germany EUR 100.00

MMG Mitteldeutsche MONTAN GmbH, Nordhausen, Germany EUR 100.00

HGC Hydro-Geo-Consult GmbH, Freiberg, Germany EUR 100.00

BAUER Water GmbH, Dunningen, Germany EUR 100.00

PURE Umwelttechnik GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Foralith GmbH, Schrobenhausen, Germany EUR 100.00

GWE pumpenboese GmbH, Peine, Germany EUR 100.00

GWE Prakla Services GmbH, Peine-Stederdorf, Germany EUR 100.00

Esau & Hueber GmbH, Schrobenhausen, Germany EUR 75.50

GWE GF-Tec GmbH, Rödermark, Germany EUR 80.00

hydesco24 GmbH, Berlin, Germany EUR 60.00

BAUER Deep Drilling GmbH, Schrobenhausen, Germany EUR 100.00 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 173

NAME AND REGISTERED OFFICE OF COMPANY Currency Capital share in %

B. EU excluding Germany BAUER Resources Hungary Kft., Budapest, Hungary HUF 100.00

GWE Budafilter Kft., Mezöfalva, Hungary HUF 100.00

BAUER Ambiente S.r.l., Milan, Italy EUR 100.00

BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria EUR 100.00

BAUER Technologies Limited, Bishops Stortford, Great Britain GBP 100.00

BAUER RENEWABLES LIMITED, Bishops Stortford, Great Britain GBP 100.00

BAUER EQUIPMENT UK LIMITED, Rotherham, Great Britain GBP 100.00

BAUER Magyarorszàg Speciális Mélyépitö Kft., Budapest, Hungary HUF 100.00

BAUER ROMANIA S.R.L., Bucharest, Romania RON 100.00

BAUER BULGARIA EOOD, Sofia, Bulgaria BGN 100.00

BAUER Funderingstechniek B.V., Mijdrecht, Netherlands EUR 100.00

BAUER Foundations (IRL) Ltd., Dublin, Ireland EUR 100.00

GWE France S.A.S., Aspiran, France EUR 100.00

BAUER Cimentaciones Y Equipos, S.A., Madrid, Spain EUR 100.00

TracMec Srl, Mordano, Italy EUR 100.00

BAUER Macchine Italia Srl, Mordano, Italy EUR 100.00 2013 CONSOLIDATED FINANCIAL STATEMENTS

FAMBO Sweden AB, Eslöv, Sweden SEK 100.00

GWE Pol-Bud Sp.z.o.o, Lodz, Poland PLN 100.00

PESA ENGINEERING, S.A., Madrid, Spain EUR 100.00

BAUER Ingeneria Medioambiental S.A., Madrid, Spain EUR 100.00

BAUER Resources UK Ltd., Wigan, Great Britain EUR 100.00

C. Europe (other) BAUER Spezialtiefbau Schweiz AG, Baden, Switzerland CHF 100.00

FORALITH Drilling Support AG, St. Gallen, Switzerland CHF 100.00

OOO BAUER Maschinen - Kurgan, Kurgan, Russian Federation RUB 65.00

OOO BAUER Maschinen SPb, St. Petersburg, Russian Federation RUB 100.00

OOO BG-TOOLS-MSI, Ljuberzy, Russian Federation RUB 55.00

OOO BAUER Maschinen Russia, Moscow, Russian Federation RUB 100.00

OOO BAUER Technologie, Moscow, Russian Federation RUB 100.00

BAUER Georgia Foundation Specialists LCC, Batumi, Georgia GEL 100.00

D. Middle East and Central Asia Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia SAR 100.00

BAUER LEBANON FOUNDATION SPECIALISTS S.a.r.L., Beirut, Lebanon USD 100.00

BAUER International FZE, Dubai, United Arab Emirates AED 100.00

BAUER International Qatar LLC, Doha, Qatar AED 49.00 *

BAUER Equipment Gulf FZE, Dubai, United Arab Emirates AED 100.00

BAUER Emirates Environment Technologies & Services LLC, Abu Dhabi, United Arab Emirates AED 49.00 *

BAUER Nimr LLC, Maskat - Al Mina, Sultanate of Oman OMR 70.00 174 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP

NAME AND REGISTERED OFFICE OF COMPANY Currency Capital share in %

Middle East and Central Asia (continued) BAUER Resources GmbH / Jordan Ltd. Co. - (subsidiary consolidated financial statements), Amman, Jordan USD 100.00

Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan USD 83.30

Site Group for Services and Well Drilling Ltd. Co., Ramallah, Palestine USD 100.00

Site Drilling Ltd. Co., Nicosia, Cyprus USD 100.00

BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey TRY 60.00

BAUER Corporate Services Private Limited, Mumbai, India INR 100.00

BAUER Geotechnical Specialized Foundation LLC, Abu Dhabi, United Arab Emirates AED 100.00

E. Asia-Pacific, Far East and Australia BAUER (MALAYSIA) SDN. BHD. - (subsidiary consolidated financial statements), Petaling Jaya, Malaysia MYR 100.00

BAUER Foundations Australia Pty Ltd, Brisbane, Australia AUD 100.00

BAUER (NEW ZEALAND) LIMITED, Auckland, New Zealand NZD 100.00

BAUER Resources Australia Pty Limited, Sydney, Australia AUD 100.00

P.T. BAUER Pratama Indonesia, Jakarta, Indonesia IDR 100.00

BAUER Services Singapore Pte Ltd, Singapore, Singapore EUR 100.00

BAUER Hong Kong Limited, Hong Kong, People's Republic of China HKD 100.00

BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam VND 100.00

BAUER Foundations Philippines, Inc., Quezon City, Philippines PHP 100.00

BAUER Technologies Far East Pte. Ltd. - (subsidiary consolidated financial statements), Singapore, Singapore EUR 100.00

BAUER EQUIPMENT SOUTH ASIA PTE. LTD., Singapore EUR 100.00

BAUER Technologies Taiwan Ltd., Taipei, Taiwan TWD 99.88

BAUER Tianjin Technologies Co. Ltd., Tianjin, People's Republic of China CNY 100.00

BAUER Equipment Hong Kong Ltd., Hong Kong, People's Republic of China HKD 100.00

BAUER Equipment (Malaysia) Sdn. Bhd., Shah Alam, Malaysia MYR 100.00

Shanghai BAUER Technologies Co. Ltd., Shanghai, People's Republic of China CNY 100.00

BAUER Equipment (Shanghai) Co. Ltd., Shanghai, People's Republic of China CNY 100.00

NIPPON BAUER Y.K., Tokyo, Japan JPY 100.00

Inner City (Thailand) Company Limited, Bangkok, Thailand THB 49.00 *

Thai BAUER Co. Ltd., Bangkok, Thailand THB 73.99

F. America BAUER FUNDACIONES PANAMÀ S.A., Panama City, Panama USD 100.00

BAUER MEXICO, S.A. DE C.V., Mexico City, Mexico MXP 100.00

BAUER Resources Canada Ltd., Edmonton, Canada CAD 100.00

BAUER Foundations Canada Inc., Calgary, Canada CAD 100.00

BAUER-Pileco Inc., Houston, United States of America USD 100.00

BAUER Manufacturing Inc., Conroe, United States of America USD 100.00

BAUER FOUNDATION CORP., Odessa, United States of America USD 100.00

BAUER Resources Chile Limitada - (subsidiary consolidated financial statements), Santiago de Chile, Chile CLP 100.00

GWE Tubomin S.A., Santiago de Chile, Chile CLP 60.00 NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS OF THE BAUER GROUP 175

NAME AND REGISTERED OFFICE OF COMPANY Currency Capital share in %

G. Africa BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt EGP 55.75

BAUER Technologies South Africa (PTY) Ltd - (subsidiary consolidated financial statements), Johannesburg, South Africa ZAR 100.00

MINERAL BULK SAMPLING NAMIBIA (PTY) LTD, Windhuk, Namibia NAD 100.00

MINERAL BULK SAMPLING SOUTH AFRICA (PTY) LTD, Cape Town, South Africa ZAR 100.00

BAUER RESOURCES GHANA LIMITED, Accra, Ghana GHS 100.00

BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana BWP 51.00

2. Associates and joint ventures A. Germany Wöhr + Bauer GmbH - (subsidiary consolidated financial statements), Munich, Germany EUR 33.33

Wöhr + Bauer Angerhof GmbH & Co. KG, Munich, Germany EUR 100.00

Wöhr + Bauer Angerhof Verwaltungs GmbH, Munich, Germany EUR 100.00

WÖHR + BAUER PARKING GmbH, Ettlingen, Germany EUR 80.00

Wöhr + Bauer H2O Verwaltungs GmbH, Munich, Germany EUR 100.00

Wöhr + Bauer H2O GmbH & Co. KG, Munich, Germany EUR 100.00

Wöhr + Bauer Projekt HTW Verwaltungs GmbH, Munich, Germany EUR 100.00

Wöhr + Bauer Projekt HTW GmbH & Co. KG, Munich, Germany EUR 100.00 2013 CONSOLIDATED FINANCIAL STATEMENTS

WÖHR + BAUER Tower Riem Verwaltungs GmbH, Munich, Germany EUR 100.00

WÖHR + BAUER Tower Riem GmbH & Co. KG, Munich, Germany EUR 100.00

NDH Entsorgungsbetreibergesellschaft mbH, Bleicherode, Germany EUR 25.00

Grunau und Schröder Maschinentechnik GmbH, Drolshagen, Germany EUR 30.00

B. International TERRABAUER S. L., Madrid, Spain EUR 30.00

NuBa Equipment Ltd., Edmonton, Canada CAD 50.00

Bauer + Moosleitner Entsorgungstechnik GmbH, Salzburg, Austria EUR 50.00

3. Enterprises in which the company has participating interests A. Germany TMG Tiefbaumaterial GmbH, Emmering, Germany EUR 33.33

Nordhäuser Bauprüfinstitut GmbH, Nordhausen, Germany EUR 20.00

Harz Hotel Grimmelallee Nordhausen Beteiligungsgesellschaft mbH, Nordhausen, Germany EUR 20.00

Harz Hotel Grimmelallee Nordhausen GmbH & Co. KG, Nordhausen, Germany EUR 20.00

Stadtmarketing Schrobenhausen e.G., Schrobenhausen, Germany EUR 4.38

B. International OAO Mostostrojindustria, Moscow, Russian Federation RUB 15.00

* Commercial ownership is 100 percent 176

Assurance by the Legal Representatives

We hereby assure that, to the best of our knowledge, the consolidated financial statements give a true and fair view of the net assets, financial position and earnings of the company in accordance with the accounting principles applicable to financial reporting, and that the Combined Management Report depicts the course of business, including the earnings and overall situation of the Group, in such a way that a true and fair view is conveyed and the material opportunities and risks of the foreseeable development of the Group are set out.

Schrobenhausen, March 28, 2014

The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker Chairman of the Management Board 177

Auditor's Report

"We have audited the consolidated financial statements prepared by BAUER Aktiengesellschaft, Schrobenhausen, comprising the balance sheet, the income statement and statement of comprehensive income, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the Group management report, which is combined with the company management report, for the business year from January 1 to December 31, 2013. The preparation of the consolidated financial statements and the combined management report in accordance with the IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § (Article) 315a, Abs. (para- graph) 1 HGB ("Handelsgesetzbuch" - German Commercial Code) are the responsibility of the parent company's Management Board. Our responsibility is to express an opinion on the consolidated financial statements and the combined management report, based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and the generally accepted German standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the combined management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the combined management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made 2013 CONSOLIDATED FINANCIAL STATEMENTS by the company's Management Board, as well as evaluating the overall presentation of the consolidated financial statements and the combined management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements comply with the IFRS as adopted by the EU and the additional requirements of German commercial law pursuant to § 315a, Abs.1 HGB, and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The combined management report is consistent with the consolidated financial statements, and as a whole provides a suitable view of the Group's position, and suitably presents the opportunities and risks of future development."

Stuttgart, March 28, 2014

Klaus Neubarth ppa. Dagmar Liphardt Auditor Auditor 178

Glossary

A F

ASSOCIATED COMPANIES | Associated companies FINANCIAL COVENANTS | Some loan agreements include are those over which a major but not controlling influence clauses stipulating adherence to threshold values for pre- can be exerted. The shareholding is usually between defined key financial performance indicators. 20 and 50 percent. Such holdings are valued at equity. FINANCIAL INSTRUMENT | Any transaction which results AT EQUITY | "At equity" is the method by which shares in in a financial asset for one entity and a financial liability (or an associated companies are valued in the Group's financial equity instrument) for the other. statements. The carrying amount of the investment is ad- justed according to the trend of the percentage equity held G in the entity concerned. GROSS DOMESTIC PRODUCT (GDP) | Gross domestic C product corresponds to the total value of all goods and services for consumption produced by an economy in one CASH FLOW | This figure indicates the amount of money year. GDP is a measure of the performance (output) of an which a business entity generates by its own efforts and is economy. able to use for its own purposes. It essentially comprises profit, depreciation and amortization and increases in provi- H sions. HGB FINANCIAL STATEMENTS | The German Commercial CONSOLIDATED REVENUES | Consolidated revenues are Code (Handelsgesetzbuch; HGB) imposes financial reporting disclosed in the income statement. They comprise the output rules on incorporated entities in Germany. of the companies fully consolidated into the Group's consoli- dated annual financial statements. I

D IFRS FINANCIAL STATEMENTS | International Financial Reporting Standards (IFRS) are applicable to stock market DEEP DRILLING RIG (TBA) | This equipment series was listed companies. The standards are issued by the Interna- developed specially to drill for particularly deep-lying raw tional Accounting Standards Board (IASB). Their aim is to material resources. The rigs can drill down to depths of more ensure the international comparability of corporate financial than 5,000 metres, and are used to extract oil, gas, water reporting. The BAUER Group has been preparing financial and geothermal energy. statements in accordance with IFRS since 2004.

E N

EBIT | Earnings before interest and taxes. NET PROFIT OR LOSS FOR THE PERIOD | The net profit or loss for the period – also referred to as the profit after tax – EBIT MARGIN | The EBIT margin is a profitability indicator, is the profit earned or loss made in a given period. describing the ratio of EBIT to the entity's sales revenues. O EBITDA | Earnings before interest, taxes, depreciation and amortization (on property, plant and equipment and intangible ORDERS IN HAND | Indicates the volume of orders held by assets). a business entity at the reporting date. GLOSSARY 179

ORDERS RECEIVED | Corresponds to the sum of all orders SINKING | The term describes the execution of shafts received in a specific reporting period. Orders received are or bore holes to mine mineral deposits or to extract an indicator of future order volumes. resources.

P STAKEHOLDERS | The term refers to individuals or groups who have a justified interest in the fortunes of a business PERCENTAGE OF COMPLETION (POC) METHOD | entity. The interests of the various stakeholders may vary This method is applied to measure and report the profit widely. realized on contracts extending over a protracted period of time according to their degree of completion based on the T associated costs and revenues (actual and forecast). TOTAL GROUP REVENUES | In addition to the output of PREMIUMLINE | The PremiumLine comprises the multi- the consolidated companies, total Group revenues include function rotary drilling rigs of the BG series designed to the proportionate outputs of associated companies as well handle a wide variety of foundation engineering applications. as the outputs of non-consolidated subsidiaries and joint Deep vibrators or trench cutters can also be mounted on ventures. them. V R VALUE ADDED | Value added is the contribution made by

ROTARY DRILLING RIG (BG) | BAUER Maschinen GmbH a business entity to the wider society at large. Value added 2013 CONSOLIDATED FINANCIAL STATEMENTS specializes in the development and manufacture of rotary reflects how the output of a business is distributed across drilling rigs. The machines are produced and marketed in the wide variety of stakeholder groups. two product lines: Premium and Value. They are able to carry out a wide variety of foundation engineering tasks. VALUELINE | The ValueLine includes the rotary drilling rigs of the BG series which are optimized for the kelly drilling S process.

SALES REVENUES | As opposed to the output, which com- W prises the value of all goods produced, the sales revenues disclosed in the income statement relate to all products and WORKING CAPITAL | The working capital is the portion services definitively sold and billed within a period. The differ- of the current assets which is tied up by the operational pro- ence between the two values essentially stems from changes duction process and by the process of selling products and in work in progress, inventories and other income. services (such as receivables).

SEGMENTS | The BAUER Group's segments are its operat- ing divisions: Construction, Equipment and Resources. Each segment comprises a holding company with subsidiaries beneath it, all of which have the same portfolio of products and services. Within the Group, only SCHACHTBAU NORD- HAUSEN GmbH operates in all three segments. 180

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HOW TO CONTACT US

Contact Investor Relations BAUER Aktiengesellschaft http://www.bauer.de/en/ BAUER-Strasse 1 investor_relations 86529 Schrobenhausen, Germany Phone: +49 8252 97-1215 Fax: +49 8252 97-2900 http://www.youtube.com/ [email protected] BAUERGruppe

This Annual Report is published in German and English.

The 2013 Annual Report is printed on environmentally friendly paper conforming to the standards of the Forest Stewardship Council (FSC). GROUP KEY FIGURES: INCOME STATEMENT AND BALANCE SHEET > engineering andproject development. tivities suchascivilengineering,environmental GmbH alsocarryoutgeneralconstructionac- und SanierungGmbHandWöhr+Bauer NORDHAUSEN GmbH,SPESASpezialbau engineering, Group companies SCHACHTBAU the predominant fieldofspecialist foundation house engineeringconsultancy. Inadditionto countries, usingitsownmachineryandin- which itisrepresented andinneighbouring execute contractsbothinthecountries across theworld,enabling ittoacquire and has builtupnetworksinnumerous regions among otherlocations.BauerSpezialtiefbau Arab Emirates,Malaysia,EgyptandtheUSA subsidiaries andbranchoffices intheUnited erated outsideofGermany. Bauerhasmajor most ofthecompany’s revenues are nowgen- branch offices. Markettrends havemeantthat continents withover50subsidiariesand in Germany, andoperatesonalltheworld's Spezialtiefbau isorganizedonaregional basis carries outprojects allovertheworld.Bauer of specialistfoundationengineering,and been amajordrivingforce inthedevelopment parent companyoftheBAUERGroup, has BAUER SpezialtiefbauGmbH,theoriginal Construction a globalsalesandservicenetwork. Guß. TheBAUERMaschinenGroup operates Schachtbau Nordhausen andOlbersdorfer ponents from Turkey andSweden.Itissuppliedwithcom- Russia, China,Malaysia,Italy, Singapore, operates manufacturingfacilitiesintheUSA, Aresing andEdelshausen. The companyalso tooling, atitsplantsinSchrobenhausen, and deepdrillingrigs,aswelltherelated rigs, trench cutters,grabsystems,vibrators ies –designsandbuildsheavy-dutydrilling holding companyforanumberofsubsidiar- equipment. BAUERMaschinenGmbH–the facture ofspecialistfoundationengineering market leaderinthedevelopmentandmanu- The BAUERMaschinenGroup istheworld Equipment within theBAUERGroup by and Environment. Materials, ExplorationandMiningServices, ment, overseeingitsthree competenceareas: company ofthismostrecently created seg- ogy. BAUERResources GmbHistheholding mineral resources andenvironmental technol- and servicesinthefieldsofwater, energy, The Resources segmentfocusesonproducts Resources Income Statement of the BAUER Group in EUR '000 2012 2013 Change (restated) SALES REVENUES 1,344,421 1,404,169 4.44 % Changes in inventories -22,355 -4,423 -80.21 % Other capitalized goods and services for own account 24,249 19,196 -20.84 % Other income 29,763 30,579 2.74 % CONSOLIDATED REVENUES 1,376,078 1,449,521 5.34 % Cost of materials -686,834 -755,906 10.06 % Staff costs -324,989 -342,815 5.49 % Depreciation of fixed assets -76,403 -79,696 4.31 % Write-down of inventories due to use -15,392 -14,196 -7.77 % Other operating expenses -200,456 -224,827 12.16 % OPERATING RESULT 72,004 32,081 -55.45 % Financial income 5,972 7,729 29.42 % Financial expenses -44,657 -45,541 1.98 % Share of the profit or loss of associated companies accounted for using the equity method 5,549 -226 n/a PROFIT BEFORE TAX 38,868 -5,957 n/a Income tax expense -13,095 -13,474 2.89 % NET PROFIT OR LOSS 25,773 -19,431 n/a

Balance Sheet of the BAUER Group

ASSETS in EUR '000 31.12.2012 31.12.2013 Change (restated) NON-CURRENT ASSETS Intangible assets 34,567 35,388 2.38 % Property, plant and equipment and investment property 465,316 459,537 -1.24 % Investment accounted for using the equity method 13,133 9,972 -24.07 % Participations 3,638 3,613 -0.69 % Deferred tax assets 28,172 26,299 -6.65 % Receivables from concession arrangments 40,770 36,762 -9.83 % Other non-current assets 7,627 7,564 -0.83 % Other non-current financial assets 6,846 5,420 -20.83 % 600,069 584,555 -2.59 % CURRENT ASSETS Inventories 429,794 419,352 -2.43 % Receivables and other assets 449,806 520,657 15.75 % Effective income tax refund claims 4,514 3,437 -23.86 % Cash and cash equivalents 45,232 57,217 26.50 % 929,346 1,000,663 7.67 % 1,529,415 1,585,218 3.65 %

EQUITY AND LIABILITIES in EUR '000 31.12.2012 31.12.2013 Change (restated) SHAREHOLDERS' EQUITY Group shares 429,335 396,602 -7.62 % Minority interests 33,205 22,809 -31.31 % 462,540 419,411 9.32 % NON-CURRENT LIABILITIES Defined benefit plans 80,439 81,637 1.49 % Financial liabilities 465,085 279,437 -39.92 % Other liabilities 7,427 6,483 -12.71 % Deferred tax liabilities 19,397 14,788 -23.76 % 572,348 382,345 -33.20 % CURRENT LIABILITIES Financial liabilities 190,662 449,876 n/a Other liabilities 282,280 307,203 8.83 % Effective income tax obligations 4,808 9,606 99.79 % Provisions 16,777 16,777 0.00 % 494,527 783,462 58.43 % 1,529,415 1,585,218 3.65 %

In the "Change" column, variations from the Group consolidated figures may occur as a result of rounding and differing presentation in EUR thousand and EUR million. Financial Calender 2014

April 11, 2014 Publication of 2013 Annual Report Annual Press Conference Analysts' Conference

May 14, 2014 Interim Report to March 31, 2014

June 26, 2014 Annual General Meeting

August 14, 2014 Half-Year Interim Report to June 30, 2014

November 14, 2014 Interim Report to September 30, 2014 BAUER Aktiengesellschaft BAUER-Strasse 1 86529 Schrobenhausen, Germany www.bauer.de