Bauer AG — Annual Report 2013

Apr 11, 2014

The BAUER Group is an international construction and machinery manufacturing concern based in Schrobenhausen, Bavaria. 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 (restated)	2013	Change 2012/2013
	Total Group revenues	1,304.0	1,371.8	1,435.8	1,506.2	4.9 %
of which	Germany	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 %
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

• Management Board of the Company
• Foreword
• Milestones in the Company's History
• The World is our Market
• Highlights of 2013
• Mission and Strategie
• Combined Management Report
• The Bauer Share

• Corporate Governance Report

• Report of the Supervisory Board

• 91 Balance Sheet and Income Statement of BAUER Aktiengesellschaft in accordance with HGB
• Consolidated Financial Statements in accordance with IFRS
• Assurance by the Legal Representatives
• Auditors´ Report
• Glossary
• Imprint

Management Board of the Company

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

Professor Thomas Bauer (born 1955) heads the Participations 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 Munich, 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 Confederation of Bavarian Industry (vbw). He is an honorary professor of the Technical University in Munich.

Supervisory Board mandates:

• BAUER Spezialtiefbau GmbH, Schrobenhausen (Chairman) ¹
• BAUER Maschinen GmbH, Schrobenhausen (Chairman) ¹
• BAUER Resources GmbH, Schrobenhausen ¹
• SCHACHTBAU NORDHAUSEN GmbH, Nordhausen (Chairman) ¹
• BAUER EGYPT S.A.E., Cairo (Chairman) ¹

DIPL.-BETRIEBSWIRT (FH) HARTMUT BEUTLER

Hartmut Beutler (born 1957) is responsible for the Finance, Legal Affairs and Insurance, and Facility Management functions on the Management Board of BAUER Aktiengesellschaft.

He studied business economics (specializing in the construction 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

DIPL.-ING. HEINZ KALTENECKER

Heinz Kaltenecker (born 1951) is responsible for Participations in Subsidiaries as well as the Human Resources and Information Technology functions on the Management Board of BAUER Aktiengesellschaft. He is also the Labour 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.

Supervisory Board mandates:

• BAUER Spezialtiefbau GmbH, Schrobenhausen ¹
• BAUER Maschinen GmbH, Schrobenhausen ¹
• BAUER Resources GmbH, Schrobenhausen (Chairman) ¹
• SCHACHTBAU NORDHAUSEN GmbH, Nordhausen ¹

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)

¹ Internal Supervisory Board membership

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 coming 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 possible 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 countries. 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 economic 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 reasonable 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 clothing. 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

international trade overall. German companies are now relatively minor global players; they no longer have to generate international market shares of around 30 percent for example, but instead are able to achieve healthy utilization of production capacities 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 organization 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 operating 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 manufacturing 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

Milestones in the Company's History

1790

• Sebastian Bauer acquires a coppersmith's shop in the centre of Schrobenhausen; in the 19th century, subsequent Bauer generations were engaged in copper working, primarily for breweries and domestic households

1840

• Copper cladding for the steeple roof of St. Jakob's church in Schrobenhausen

1900

• Start of well drilling by Andreas Bauer

1790 – 1948 1956 – 1984

1902

• Drilling of an artesian well for the Schrobenhausen railway station

1928

• Dipl.-Ing. Karl Bauer constructs the Schrobenhausen water supply system; construction of wells and water pipes throughout Bavaria

1948

• First works on Wittelsbacherstrasse

1956

• Dr.-Ing. Karlheinz Bauer, a shareholder in the company since 1952, becomes sole managing director; Construction of a first office building in Wittelsbacherstrasse

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 the international stage, taking it into the field of specialist foundation engineering and launching equipment manufacturing operations. Prof. Dr. Dipl.-Kfm. Thomas Bauer shaped the current global Group, with a network of operations on every continent.

1958

• Invention of the injection anchor on the construction site 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, Saudi Arabia and the United Arab Emirates

1976

• First heavy-duty rotary drilling rig BG 7

1984

• Work complex West begins operations; Manufacture and deployment of the first trench cutter

1986

• Prof. Thomas Bauer becomes sole managing director of BAUER Spezialtiefbau GmbH and drives forward the international growth of the Group

1990

• Founding of BAUER und MOURIK Umwelttechnik GmbH and of SPESA Spezialtiefbau und Sanierung GmbH

1992

• Takeover of SCHACHTBAU NORDHAUSEN GmbH

1986 – 2006 2007 – 2013

1994

• Founding of BAUER Aktiengesellschaft

1998

• Takeover of KLEMM Bohrtechnik GmbH

2001

• BAUER Maschinen GmbH becomes independent company

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 Wassertechnik GmbH; PRAKLA Bohrtechnik GmbH; TracMec Srl, Imola, Italy; Pileco, Inc., Houston, Texas, USA

2006

• BAUER AG is listed on the stock market

2007

• Founding of BAUER Resources GmbH, entailing a restructuring of the mining and environmental business; market launch of the three new segments: Construction, Equipment and Resources

2008

• Expansion of machinery manufacturing capacities in Aresing and Nordhausen as well as in Tianjin and Shanghai, China

2009

• The BAUER Group concludes the largest capital investment programme in its history: new head office administration 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; construction of an underwater drilling rig and successful deployment of it for a tidal turbine off the coast of Scotland

2012

• During the year, the Group's global workforce topped the 10,000 mark for the first time

2013

• Bauma Innovation Prize for an underwater drilling technique; foundation works on the future tallest buildings in the world and in Europe respectively

The World is our Market

31 PRODUCTION FACILITIES

and many more service centres and construction yards

Highlights of 2013

Big construction sites in Germany

Germany – Between January and December 2013, BAUER Spezialtiefbau GmbH worked on three large-scale projects in Germany. The biggest is the "Schwabinger Tor" project. On the eastern side of Munich's Leopoldstrasse, a complex including a hotel, theatre, shops, doctors' practices and apartments is under construction. Residents and users of such a complex also need parking. Bauer is executing the 10.5 metre deep excavation pit for the complex's underground car park covering an area of 35,000 m2 in several phases. The demolition and foundation engineering works began in December 2012 and are scheduled for completion in July 2014.

The second large-scale project carried out by BAUER Spezialtiefbau GmbH in Germany was the Zerben lock on the Elbe-Havel canal located between the cities of Magdeburg and Brandenburg. A new larger lock basin, designed to handle Euro-size trains of barges, was constructed parallel to the existing lock.

For the new lock Bauer constructed a 265 metre long pit which is 22.5 metres wide in its narrow centre section

and up to 17 metres deep. The 10,000 m2 of diaphragm walling work began in late May and was completed at the end of September.

In the heart of Mannheim is the city's biggest construction site: a new urban quarter complete with a four-star hotel, wellness facilities, shops, offices, medical services, apartments and a capacious underground parking garage is being constructed in city quadrants Q6 and Q7, with completion scheduled for 2016. BAUER Spezialtiefbau GmbH was contracted to provide the enclosure wall for a 15 metre deep excavation pit as well as to install foundation piles and groundwater control over an area of 16,000 m2 . The demolition and foundation engineering works began in October 2012 and were completed in December 2013.

Bauma 2013

Munich, Germany – From April 11 to 17, BAUER Maschinen GmbH exhibited for the ninth time at the Bauma trade fair. At the very beginning of the event, BAUER Maschinen GmbH and BAUER Spezialtiefbau GmbH were jointly awarded the Bauma Innovation Prize in the Construction Engineering

Techniques category. The award was in recognition of a project in which Bauer Maschinen developed an entirely new underwater drilling rig within just a few months. Engineers from Bauer Spezialtiefbau then put the corresponding techniques into practice.

The outcome of the fair was positive all in all. Bauer attracted a great deal of attention especially with its RB-T 90 deep drilling rig, designed for mine rescue, and with the new flagship of the BG range, the BG 46, which is able to drill down to a depth of 102 metres with a 2.2 metre diameter. The stand welcomed and served as many as 10,000 visitors a day. A fleet of 10 heavy-duty transporters and 60 trucks was deployed to transport the rigs and stand materials from Schrobenhausen to Munich.

Projects for the automotive industry Wolfsburg/Ingolstadt, Germany – In 2013 BAUER Water GmbH completed projects for two German car-makers. At the VW site in Wolfsburg, it constructed a new water treatment plant to handle contaminated waste water from the press shop, car body shop, production, paint shop and final assembly departments. The plant is part of VW's wider programme to reduce the environmental impact of its factories. The waste water is pre-treated and pollutants selectively removed according to the constituent substances occurring. Then, in a downstream process stage, it is cleaned in an in-house treatment plant. The project at the VW facility was completed in April 2013.

In August 2013 a new washing and leak-testing plant was installed at the Audi factory in Ingolstadt – the second such facility following the installation of the first back in December 2012. The two plants now leak-test, wash and dry a total of more than 600 vehicles a day.

New plants

Singapore/Tianjin, China – In March 2013 the new BAUER Regional Service Center in Singapore was opened. With office facilities, warehousing and a workshop, it provides our customers with optimal service backup and is of key importance to our selling activities in South East Asia. The relocation became necessary owing to the expiration of a lease agreement – as was the case also with regard to the plant in Tianjin, China.

After a construction period of one and a half years, in October BAUER Tianjin Technologies Co. Ltd. was able to mark the opening of its new facility with a traditional Chinese ceremony. Highlights included the handover of a BG 26 rig to its customer and the announcement that the BG 25 had been recognized as one of the 10 best drilling rigs in all China. The subsequent in-house exhibition featured the BG Value Line and an RB-T 90 among other products.

Foundations for the tallest buildings

St. Petersburg, Russia/Jeddah, Saudi Arabia – In October 2012, Russian BAUER Spezialtiefbau GmbH subsidiary OOO BAUER Technologie was contracted to carry out the foundation works for the Lakhta Tower in St. Petersburg. On completion, the building, planned as the new headquarters of Gazprom, will be the tallest in Europe, reaching a total height of 462 metres. The works involved drilling down to a depth of 82 metres in the face of highly challenging geological conditions and winter temperatures down to -30°C. Three state-of-the-art BAUER BG 40 drilling rigs and a BG 28 were deployed to mount the structure on the 264 piles. The foundation works began in January and ended in July. The Lakhta Tower is scheduled to open in 2018.

Under construction on an extensive site in the north of Jeddah, Saudi Arabia, the Kingdom Tower will surpass all existing records to become the world's tallest building at above 1,000 metres. In executing the foundations for the structure, by December 2013 Bauer had installed a total of 270 piles in 1.5 and 1.8 metres diameter down to a depth of 109 metres. In addition to two BG 28 rigs, for the long piles two BG 40 drilling rigs modified specially for long kellys were also deployed.

Following on from the Burj Khalifa, for which Bauer executed the foundations back in 2004, the new tallest building in the world will once again be resting on Bauer piles.

More information: http://www.bauer.de/ en/bauer_group/world

Mission and Strategy

OUR MISSION

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

OUR STRATEGY

• The world is our market.

• World market leadership in specialist foundation technologies.

• Powerful development of drilling techniques and applications for related markets such as resources, water and energy.

• Optimization of worldwide organizational structures and of the Group's self-managed business units. >>> Annual growth from 3 to 8 percent.

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

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. >>>

Combined Management Report

I. THE GROUP

GROUP STRUCTURE

The products and services of the BAUER Group, based in the Bavarian town of Schrobenhausen, are focused on the ground and groundwater fields. The Group's three segments – Construction, Equipment and Resources – operate more than 110 subsidiary companies in some 70 countries worldwide.

The Construction segment carries out all the established methods and techniques of specialist foundation engineering all over the world. This includes executing complex excavation pits, foundations for large-scale infrastructure projects and buildings, cut-off walls and ground improvement. It also carries out other specialist construction activities, including civil engineering and remediation works.

The Equipment segment develops and produces construction machinery, equipment and tools for the specialist foundation engineering sector as well as for other underground drilling operations, such as for mines, water wells, geothermal energy sources, and oil and gas extraction. In addition to its headquarters in Schrobenhausen, the Equipment segment operates a global distribution network, as well as additional production facilities in Germany, China (Shanghai and Tianjin), Malaysia, Russia (at two locations), Italy and the USA, among other locations. With exports accounting for around 80 percent of its total sales, BAUER Maschinen GmbH is the world market leader in specialist foundation engineering equipment.

The Resources segment focuses on products and services in the fields of water, energy, mineral resources and environmental technology. BAUER Resources GmbH is the holding company of this most recently created segment, overseeing its three competence areas: Materials, Exploration and Mining Services, and Environment.

BAUER Aktiengesellschaft is the holding company of the Group, and is listed on the Frankfurt Stock Exchange. BAUER AG provides central management and service functions for its affiliates. These specifically include human resources, accounting, finance, legal and tax affairs, IT, fa cility management, and health, safety and environment (HSE).

CORPORATE GOVERNANCE AND CONTROL SYSTEM

The principal task of the Management Board of BAUER AG is the strategic management of a global group of companies. Beneath that level, the main companies in the three operating segments – Construction, Equipment and Resources – develop their own detailed strategies which are converged at holding company level and integrated into the strategic corporate planning process.

The development and implementation of a self-managing organizational structure with decentralized business units unburdened by complex decision-making hierarchies is the primary characteristic of corporate governance within the BAUER Group. The managers of those Group companies operate under their own responsibility, and are provided with a large degree of independence within the framework of the corporate strategy in determining how their business units progress.

The autonomous management of the individual operating business units is constrained by framework guidelines and standards laid down in the Group and subsidiary Corporate Management Manuals. The principles of proper conduct, including adherence to our ethical and moral standards, are defined by an ethics management and values programme covering all the companies of the BAUER Group, backed by corporate management guidelines and a code of conduct imposed on our employees, among other measures.

Systems and departments handling central functions assist in implementing standard processes and support the work of the operating units by providing the necessary backup services. The self-managing structure is linked to a centralized system of risk management and control, and to a central Group accounting function. Internal auditing systems monitor compliance with laws and standards across the Group.

Statements regarding the role of the Management Board and Supervisory Board and in relation to other issues of corporate governance are set out in the Declaration on Corporate Governance on pages 84 to 87 of this Annual Report, which is published on the Internet at http://www.bauer.de/en/investor_relations/reports/in the Investor Relations section under Reports & Accounts.

Financial performance indicators

The trend in total Group revenues is used as the fundamental and significant key financial performance indicator for the management of the Group. The total Group revenues represent the revenues of all the companies forming part of our Group. The difference between the consolidated revenues and the total Group revenues is derived from the revenues of the associated companies, from our subcontractor shares in joint ventures, and from the revenues of non-consolidated companies. The trend in total Group revenues and the contributions to them by the various segments are depicted in the Business Report and in the "Trend by Segment" section.

Alongside total Group revenues, earnings before interest and taxes (EBIT) and the net profit or loss for the period are used as key financial performance indicators for internal management. The Business Report and the "Trend by Segment" section detail the trends in EBIT and net profit or loss for the period and trends in the various segments.

A wide range of other financial performance indicators of comparatively minor significance to the medium- and longterm development of the Group are collated and integrated within the scope of internal Group management activities. They primarily include key performance indicators from the balance sheet and the income statement, as well as those relating to capital structure, profitability and liquidity.

Non-financial performance indicators

As part of a comprehensive reporting system, many nonfinancial indicators are measured in assessing the performance of the Group which, in isolation in terms of internal controls and beyond that scope, have no material significance. The reporting on trends in those performance indicators in the "Sustainability" section is primarily intended to convey an overall picture of the operations of the BAUER Group.

The indicators included originate, among other sources, from the Human Resources area, such as workforce numbers broken down by segment, employment terms and region. They also include performance indicators relating to training activities, such as budget committed, the number of employees attending the seminars on offer, and the number of seminars and conferences held. Reporting also covers performance indicators from the Research and Development area. They include the number of registered patents, expenditure on research and development, and the number of staff employed in those areas.

II. BUSINESS REPORT

MACRO-ECONOMIC TREND

Global economic trends remain marked by significant turbulence. Many events – and the effects of them – over the last two decades have resulted in sequences of reaction and counter-reaction in a wide variety of different areas, making the system as a whole subject to continual change like the cross-seas in an ocean. The following events are the most noteworthy in relation to trends on construction markets:

• The end of the communist and socialist economic systems some 20 years ago enabled countries such as China and India to grow their economies very rapidly, as has been seen in recent years. The biggest opportunities arising from this trend for established businesses are to be found in the sustained rapid growth of sales markets in the countries concerned. The German automotive industry, and many engineering sectors, are profiting greatly from this trend. It is countered by a number of risks, as many industries have seen heavy competitive pressures develop which, in view of the widely divergent cost base, are having some ruinous effects. As is often the case in relatively new market economies, market players tend to over-react to the new competitive environment, sometimes making it difficult for competitors from established markets to adjust to that situation. This behaviour also makes economic events more cyclic.
• The impact on markets of the financial crisis which began some six years ago remains heavy. It has, for a few years, been exacerbated by the euro crisis, driven by budget problems in a number of member states of the euro zone. In the construction sector especially, the financial constraints are causing considerable volatility on world markets. Some construction markets in Europe have almost entirely collapsed.
• The revolutions, government crises and civil wars in the Middle East have had further significant impact on markets, including the construction sector especially. The oil- and gas-rich countries in the region have the financial resources to sustain their ambitious development plans, but in view of the many crisis hotspots they do not have the courage to implement them with any impetus. In the countries which experienced the "Arab Spring", winter

returned some time ago. The countries in question are concerned primarily with domestic political issues, so the future of their infrastructure and building stock has been pushed into the background.

• A number of technical advances in recent decades have had an enormous influence on the global economy. The considerably faster and cheaper logistics systems have eliminated most regional advantages previously enjoyed by companies and provided a powerful boost to global competition. The effects of information and communications technologies are at least as significant. The rise of the Internet in particular, making any required information immediately available, has permanently altered the competitive situation. This trend will continue in the future.

These and other factors are making world markets more volatile than ever before. Such markets offer major opportunities, but also pose risks. Market players capable of always following the upward trends will profit. Those who are not, and who are more frequently confronted by downturns, will suffer.

Under such circumstances, it may be better for construction companies to operate on only a small number of markets as and when they are on an upswing. But if those markets decline again, such a strategy can very quickly lead to major problems. A business such as the BAUER Group, however, which operates on a very large number of markets, must expect to face a multitude of problems in volatile times. Nevertheless, a global presence does mean that there will always be rising markets available. We regard our strategy as the biggest advantage in terms of our ongoing development in that respect. As well as confronting country-specific problems, this also means that strategic options regularly open up, providing us with the opportunity to grow.

Looking at global construction markets within this context, the basic trend is positive. There is a huge pent-up demand for construction all around the world. For decades, much too little has been built in the established economies of Western Europe, the USA, Canada and Japan, for example. After the period of reconstruction following the Second World War, governments and the public at large took the view – some time around the mid-1970s – that everything which needed

to be built had been built. So budgets were cut back much too severely as a result. Now a sustained period of updating is required to upgrade infrastructure to a reasonable level once again.

Far too little was invested in developing countries over a period of many decades prior to the creation of market economies. The catch-up process urgently needed to help them develop further will keep construction companies busy for many years. So in the years ahead construction markets will tend to be on the brighter side of global economic trends.

The only inhibiting factor is the ability of countries to afford the building works. Pleasingly, however, there are many countries which have created a sound foundation to provide adequate budgets based on their positive growth over recent years. In the housing and commercial construction sector, prospects for procuring finance are likewise mostly good thanks to healthy economic trends.

Additionally, the trend towards urbanization will be sustained in many countries over the coming decades. This will require extensive investment in transport infrastructure. All the buildings will have to be constructed in the tightest of spaces, entailing an even greater demand for specialist foundation engineering services.

Construction market statistics for Germany – Change 2013 against 2012

in %	Germany overall	West Germany	East Germany
Sales	2.7	3.1	1.2
Hours worked	0.9	1.5	-1.5
Employees	1.4	2.0	-0.4
Orders received	3.7	4.8	-0.4

Source: Central Association of the German Construction Industry

Economic trends in Germany, especially in the construction sector, are somewhat better than in the other EU memberstates. The newly elected federal government has decided to promote infrastructure projects. The boom in the private construction sector continues, as people look to invest in bricks and mortar as the best home for their money given low interest rates and concerns about inflation. The healthy economic situation in the construction industry will be sustained for a number of years to come.

Against the background of that economic situation in the construction sector, we are convinced that the BAUER Group will again be able to achieve increasing orders so as to sustain healthy growth in the years ahead.

Sales of construction machinery are linked directly to the situation on construction markets, so healthy selling opportunities are also to be expected in that sector over the years ahead. Deep drilling markets will also grow, as future oil and gas exploration drilling will need to be carried out at ever shorter intervals, so entailing a rise in drilling capacity. In the offshore sector, drilling rigs will increasingly be needed to install foundations for energy-generating installations.

In parallel with the general trends, future trends on construction markets in the various regions around the world will vary in some cases:

Germany

The German construction market will see relatively positive growth over the coming years. The healthy general economic climate and the new federal government's policy of promoting infrastructure works offers bright prospects for construction companies.

The widely anticipated positive effects of the reversal of energy policy in Germany have not been realized to date. Only the onshore wind power sector is generating healthy orders. The necessary north-to-south power transfer lines are not currently being implemented, and the development of offshore wind power has largely come to a standstill. Even the urgently required growth in conventional power station capacity is not yet happening due to a lack of clear policy framing. Those statements do contain a positive aspect: once the works start, they will have to be completed rapidly.

Europe

Markets in Eastern Europe largely collapsed as a result of the financial crisis. There have recently been signs of a slight upturn, though at a very low level. There are large numbers of new construction projects currently in planning in Russia especially, as the country utilizes its enormous raw material

wealth to drive recovery more rapidly than in other countries in the region. The construction market in some regions, such as around St. Petersburg, is very active. The forecast for Eastern Europe overall is a generally positive trend. Unfortunately, however, setbacks are always likely to occur, as the example of Ukraine demonstrates.

We predict that growth on construction markets in Western Europe will be modest over the coming years. Many countries have had to impose strict budget constraints which will hamper the further development of their infrastructure. There are nevertheless a number of opportunities for us around the region, including in Switzerland. In France, a new metro ring planned for Paris will entail major construction work. Other cities are also planning to upgrade their infrastructure.

Middle East & Central Asia

The oil-rich and gas-rich countries of the Middle East, such as Abu Dhabi, Saudi Arabia and Qatar, have lots of largescale construction projects in the pipeline, and have sufficient financial resources to sustain their development plans strongly. In Qatar, major contracts were awarded in the first half of 2013 for underground railway construction works as well as for many other construction projects in preparation for the football World Cup. Unfortunately, events in Syria and the renewed discussions concerning the World Cup have again led to a slowdown. The confirmation by FIFA that the World Cup will indeed be hosted by Qatar, and the fact that the conflict in Syria has not spread, have recently offered brighter prospects for growth. These developments will entail good opportunities once again for our businesses.

In view of the turbulence on Arab markets, the positive trend in Dubai is the most surprising development. Few people would have thought even two years ago that the market could recover as it has. Property developers have now started marketing major housing projects again, and they are enjoying some very positive results.

Somewhat unexpectedly, Egypt last year experienced a second revolution, which has again impeded the country's economic growth. Our local subsidiary was severely affected too, as on many construction sites work came to a standstill for a number of weeks. A number of neighbouring countries are now attempting to help the country avoid economic

collapse by providing large-scale financial assistance. Those efforts are seeing numerous construction projects emerge onto the market once again. Our local business will be able to profit from them. Sales increased substantially last year, and prospects for 2014 give cause to expect further growth in revenues and earnings.

Asia-Pacific, Far East & Australia

Construction markets in the Far East remain pleasingly stable. Almost every country in the region is undertaking major infrastructure projects. In Hong Kong, construction sector capacities are being well utilized by extensive rail and road construction works. The same is true in Singapore and Malaysia. For example, new underground railway lines and urban motorways are being constructed in Singapore. The port – one of the most important and biggest in the world – is being relocated further away from the city centre. Economies such as Indonesia and the Philippines are also seeing healthy growth. By contrast, the Australian economy is no longer developing quite so positively. Trends on construction markets are somewhat slower.

America

The situation in the USA now appears to be improving after a number of weak years. A very high level of backlog demand has arisen in many infrastructure areas, due to a lack of adequate investment over recent decades. Major efforts will be made over the coming years to make good this deficit, and a positive side effect of this commitment will be a further boost to the economy. Overall, we regard the situation as stable, and offering good opportunities for further growth in both our Construction and Equipment segments. The construction market in Canada is likewise sound. Interesting projects are regularly arising in Central America.

Africa

In Africa, it will be worthwhile actively pursuing new business, even though the economic weakness of the countries concerned means the business generated will not make a major contribution to our total Group revenues overall. Some countries have very good chances of improving their prosperity based on their enormous raw material resources.

As a result of the issues described, a number of vitally important challenges which also need to be met have been pushed into the background. In Germany and many other countries, demographic trends are posing major economic challenges. Environmental problems, particularly air pollution, are rising. In this context, too, necessary policies are currently no longer being pursued with the same commitment as they were just a few years ago, when environmental issues were seen as the major risk to global economic development. Dialogue with major polluters, such as China, must be intensified. The financial burdens we face in dealing with this over the years ahead will be substantial. On the other hand, it does of course offer major opportunities for companies operating in the relevant fields.

These issues are opening up wide-ranging new opportunities for us too. In operation for several years now, our

Resources segment is focused on matters relating to the environment, water and natural resources. It has already achieved success in many countries around the world, and we believe that demand for these products and services will continue to grow strongly.

Global economic trends will stabilize again in the medium term. Some destabilizing factors will be eliminated entirely over the coming years. The currently still enormous cost differences and imbalances between many different countries will likewise reduce significantly. After all, people in China are also aware of the value of professional work in other countries, and will demand the same standards for themselves. There are already some signs of this happening: 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. >>>

similar pay structures to those in the old-established industrial nations for example. This will impact on all businesses, including our competitors.

The outcome of the global changes will be much larger markets, on which orders will again need to be fought for against a background of similar conditions. German companies will be able to focus on their specialities and enjoy healthy revenues on the larger market. The BAUER Group, too, will maintain that focus.

COURSE OF BUSINESS

The business of the BAUER Group in 2013 was overshadowed by a number of troublesome events which overall resulted in an after-tax loss while reaching the planned total Group revenues target. We began last year full of optimism based on the very healthy levels of our orders in hand and a number of large-scale projects which were about to be signed up. Unfortunately, those high expectations did not come to fruition.

At the start of the year, virtually all our large-scale construction projects were delayed for reasons beyond our control. Causes included specialists having problems entering the country, failures of developers to obtain construction permission, and late availability of the building land. Problems with our dam project in the USA relating to site set-up and detailed planning – some of them in this instance of our own making – likewise led to significant delays. Once the projects were fully operational, around the middle of the year, their technical and commercial performance levels were all very satisfactory. Nevertheless, our Construction segment was unable to compensate for the problems encountered during the start-up phase, and so did not achieve its planned earnings target. All in all, however, business in the Construction segment was healthy and stable, and we recorded a steady flow of incoming orders, providing us with a sound foundation for 2014.

Contrary to the trend seen in the previous year, the Equipment segment had a bad start to 2013. Orders received in the first three months were very unsatisfactory. Only following Bauma, the world's largest construction machinery trade fair held in Munich, was a substantially improved trend seen. The relatively weak order inflow for large and custom machinery over the entire year posed an additional burden.

Sales in that sector depend on whether there are enough large-scale projects, or applications of techniques requiring use of the equipment, around the world. This was – somewhat randomly – less frequently the case in the year under review. The deep drilling department was likewise restricted essentially to its fulfilment of the order for smaller rigs sold to China in 2012. This generally resulted in a decline in margins in the Equipment segment, thus also entailing a fall in the segment's net result for the period.

Market trends were pleasingly positive again in the last quarter of the year. Sales were highly satisfactory, and most of the machines ordered were also delivered. This led to a healthy increase in full-year sales revenues, demonstrating that we are generally on the right course despite the tough market conditions. We also believe our selling successes were the fruits of our substantial efforts in developing new products, improving our product quality and enhancing our service provision to customers.

Another influencing factor is the increased competition in the machinery manufacturing business. The market has changed substantially over the last ten years. The enormous construction boom in China doubled the global specialist foundation engineering equipment market. In view of that trend, many Chinese companies built up large capacities in order to gain a share of the market. Total capacities outstripped market demand however, causing major turmoil – and declines in margins – in recent years. Owing to the shifts on general construction machinery markets, other European vendors also began supporting their sales with specialist foundation engineering equipment.

These trends of course pose a major challenge to us, as we need to position ourselves on the markets even more clearly. We are doing so based on a number of strategies: by focusing on drilling techniques, we are able to distance ourselves clearly from European manufacturers. In combating Chinese competitors, we rely on the top quality, functionality and productivity of our equipment to provide us with a major edge. We also concentrate on the custom machinery needed particularly for large-scale specialist foundation engineering projects. We are building our opportunities for further sales growth with new products such as well drilling rigs, cranes specially designed for foundation engineering, deep drilling

Geographical breakdown of total Group revenues

in EUR million

Total 1,506

rigs and underwater drilling rigs. The general trend of the past year under review indicates to us that our efforts are resulting in our Equipment segment being well capable of meeting the challenges posed.

Our biggest single problem occurred in our Resources segment. The construction works on our well project in Jordan finished in 2013. Unfortunately, our outstanding claims could not be definitively clarified in negotiation with the developers, so the resultant write-off of receivables and its further consequential effects led to a significant loss. Owing to the highly complex conditions throughout the duration of the works, both we ourselves, and other parties involved, incurred

substantial additional expenditure on this project. We had to accept that we would not be able to pass all of that expenditure on to the developers, ultimately meaning that a loss was made. A pleasing fact is that the project is technically complete, so no further risks can arise.

Moreover, the Resources segment did not succeed in securing contracts for two very large projects which had been in the pipeline in the Middle East. Also, sales of well-engineering materials were weak, due to conditions on international markets and the ending of the project in Jordan. By contrast, 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 position established over past years. In Exploration and Mining Services, we need to make great efforts to attain the desired level once again.

Despite the setback, we still regard our overall strategy as being right. Our Resources segment is operating in one of the world's strongest growth markets. Even though such a setback is painful, we will succeed in turning our business around. A number of major project opportunities also give cause for hope of some special successes.

Although the general trend in 2013 was very unsatisfactory, the overall situation of the Group has not undergone a negative change. In the year under review we succeeded in increasing overall revenues slightly, and we acquired enough orders to again achieve a slight rise in total Group revenues this year. Markets are growing ever more stable in the wake of the financial crisis; construction demand is rising, and we are in a better position to fend off the new competition in

2013 forecast/actual comparison

in EUR million		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

the machinery business. These trends enable us to make a generally optimistic forecast.

As a result of the aforementioned problems, we were forced to adjust our forecast downwards twice in the course of 2013. In our 2012 Annual Report we predicted total Group revenues of over EUR 1.5 billion, EBIT around EUR 85 million, and profit after tax of above EUR 30 million.

In early August 2013 we had to issue an ad-hoc release adjusting our forecast due to delays on large-scale construction projects, the decline in margins in the Equipment segment and the weaker than expected performance of the Resources segment. With forecast total Group revenues remaining the same, we then predicted EBIT around EUR 70 million and profit after tax of around EUR 20 million.

At the end of October 2013 expectations were lowered again by negative one-off effects, primarily resulting from our well construction project in Jordan. We also re-evaluated earnings from the Equipment and Construction segments and took into account costs of restructuring. As a result, we were

forced to reduce our full-year forecast for total Group revenues to around EUR 1.5 billion and EBIT to around EUR 25 million, and predict a net loss of approximately EUR 20 million.

The final results for 2013 are now as follows: total Group revenues rose by 4.9 percent to EUR 1.51 billion. Sales revenues increased by 4.4 percent to EUR 1.40 billion. EBIT (earnings before interest and taxes) decreased to EUR 32.1 million (previous year: EUR 72.0 million). The net loss for the period was EUR 19.4 million (previous year: EUR 25.8 million profit).

Summary

All in all, we cannot be satisfied with our results for 2013. Owing to a major one-off effect, we returned a loss for the first time in 14 years. We nevertheless see business trends as continuing to develop positively, because in the past year we succeeded in increasing total Group revenues even in a tough climate. The financial year 2014 will build soundly on that foundation.

Breakdown of total Group revenues by subsegment

	in EUR million	2012 revenues	2013 revenues	Share 2013	Change against previous year	Orders 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 %	+
Construction	Subsidiaries, International	486.4	547.3	36.3 %	12.5 %	+
	BST Group total	694.3	758.7	50.4 %	9.3 %	+
	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 %	•
Equipment	BMA Group total	767.5	845.0	56.1 %	10.1 %	•
	SBN	53.0	62.3	4.1 %	17.5 %	•
	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 %	-
Resources	BRE Group total	273.6	203.2	13.5 %	-25.7 %	-
	SBN	25.9	20.4	1.4 %	-21.2 %	++
	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	Other subsidiaries	2.2	2.3	0.2 %	4.5 %
	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:

-- weak; - slightly weak; • adequate; + well adequate; ++ very well adequate; Percentages and totals are calculated on the basis of unrounded starting values

Breakdown Germany/international according to country in which accounting figures were allocated. For reasons 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. >>>

III. TREND BY SEGMENT

CONSTRUCTION SEGMENT

Construction segment key figures

in EUR '000	2012 (restated)	2013	Change
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 revenues in 2013 by a substantial 13.4 percent from EUR 655.2 million to EUR 742.7 million. Segment EBIT of EUR 22.8 million was slightly up on the previous year's level of EUR 22.0 million. The net profit for the period decreased from EUR 8.6 million to EUR 5.5 million. In the previous year the net result for the period was very positively influenced by the sale of a real estate project by a subsidiary, which was reflected in the result for investments accounted for using the equity method.

The major undertakings of 2013 were large-scale projects in Russia, Saudi Arabia, Hong Kong and the USA. They were key factors in the rise in revenues. However, delays on all projects in the first half of the year meant that the targeted net profit for the period could not be achieved. Results were additionally impacted by weather conditions in the first quarter, weakness on a number of markets, and political factors in some regions.

Germany

As in the previous year, our German construction business performed better than expected. Revenues were well ahead of plan. The contracts procured were spread very unevenly around the various regions however. Capacities in the South region were well utilized, while the North East and West regions failed to meet their planned targets. The planned earnings were achieved in total, and the planned revenues were well surpassed.

A particularly pleasing aspect was that large numbers of major projects were again acquired and successfully completed, including in Mannheim, in Munich, and at the Zerben lock. Orders in hand at the year-end were at a high level. A key factor in that achievement was the contract award in June 2013 to carry out the specialist foundation engineering works on the bypass rail link between Hanau and Nantenbach, worth some EUR 46 million in total. The works had started by the end of 2013.

The plan for German specialist foundation engineering operations in 2014 is to attain a slight rise in revenues and to improve earnings.

SCHACHTBAU NORDHAUSEN GmbH, which operates primarily in Germany, works on behalf of all three of the Group's segments. The company and its subsidiaries increased total revenues against the previous year's figure, but earnings were down against planned levels. An improvement is expected in 2014. As the company operates in all three segments, the effects of the individual divisions are detailed in the respective segment reports. The Construction division saw a slight decline in the past financial year. The Environmental Technology division, operating primarily in the biogas field and in the construction of treatment plants, is likewise assigned to the Construction segment. In difficult market conditions, its revenues and earnings fell substantially.

Geographical breakdown of total Group revenues – Construction segment

in EUR million (after deducting Consolidation)

Total 718

SPESA Spezialbau und Sanierung GmbH increased its revenues in the year under review, though earnings were down against planned levels. The company will in future be organizationally assigned to SCHACHTBAU NORD HAUSEN GmbH. This offers the opportunity to utilize synergies in project handling in some specific business fields, including renovation and reconstruction. The holding Wöhr + Bauer GmbH, which develops and implements city real estate projects such as office buildings and underground parking garages, was not able to sell any major projects in the year under review, so its earnings were well down against those of the previous year. Its much increased revenues stem from work in progress on new large-scale projects in Munich.

Europe

Trends on European construction markets remain regionally very variable. In Eastern Europe, revenues in Hungary increased, while Bulgaria, Georgia and Romania saw declines which in some instances were severe. Earnings were generally unsatisfactory. No rapid improvement is to be expected. By contrast, performance in Russia was very pleasing, primarily thanks to the successful execution of the Lakhta Tower project in St. Petersburg. The foundation works for what will be Europe's tallest building were completed successfully, and made a healthy contribution to earnings. We are at present installing the foundation piles for other buildings in the same complex. This prestige project will generate good prospects for future work.

The positive situation on markets in Western Europe was sustained. The subsidiary in the Netherlands achieved a slight rise in revenues. In Switzerland, though revenues were 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.

Middle East & Central Asia

Markets in the Middle East in the past year were characterized mainly by political factors, such as in Egypt and Syria. As a consequence, investment activity in the region was negatively impacted. In Lebanon and the United Arab Emirates revenues increased, though earnings declined. The construction market in Dubai is beginning to recover slightly. Construction projects in Qatar were postponed further due to the debate surrounding the 2022 football World Cup and because of the situation in Syria. Consequently, the revenues and earnings of our subsidiary fell back significantly.

The main focus of our work in the region was on the foundations for what will be the tallest building in the world, the Kingdom Tower in Saudi Arabia. After some initial delays, the project was completed very successfully and with a good result by the end of 2013. We expect to see an improvement in the situation in the region during 2014.

Asia-Pacific, Far East & Australia

Markets in the Far East again maintained their very healthy trends in the past financial year. Numerous projects were again acquired and successfully executed in Malaysia. Revenues were well above planned levels. Levels of orders in hand also remain very healthy. The subsidiary in Hong

Kong likewise achieved revenues in line with planned levels, with healthy contributions to earnings. The focus of operations was on the foundation works for a section of the Hong Kong-Zhuhai-Macau Bridge, which will also keep us busy in the current financial year.

We achieved very healthy increases in revenues and earnings in Indonesia and Thailand, as did our subsidiary in the Philippines. In Bhutan, we again acquired a contract to carry out diaphragm walling work on a dam, after having successfully completed an initial project in 2012. Revenues in Australia fell against the previous year, though earnings remained relatively stable.

We expect the region to see a generally positive ongoing trend in 2014. Orders in hand are at a high level, and opportunities to acquire new construction objects are continually arising.

America

Our subsidiary in the USA was kept busy through 2013 primarily by the large-scale Center Hill Dam project. There were few others. Revenues were well up on planned levels, but earnings performance was unsatisfactory due to lengthy on-site delays, as a result of which a notable loss was made for the full year 2013. The project is scheduled to run until 2015. As work is now progressing very well, this will have a positive effect on business overall. The trend in Canada was again very positive. Revenues were slightly down against the previous year, but earnings improved.

By contrast, the markets in South America were rather weak. Revenues and earnings in Panama were below our expectations. Rates of capacity utilization improved towards the year-end. Few projects were handled in the other markets, such as Columbia, Costa Rica and the Dominican Republic. Activities there will in future be largely discontinued, and capacities concentrated on Panama as the focus market.

We predict that revenues and earnings in both North and South America will improve in 2014.

Africa

The performance of our holding in Egypt during 2013 was more than pleasing. In the difficult prevailing conditions, it succeeded in closing the financial year with revenues well up on the previous year and healthy earnings. Prospects remain bright, thanks to additional order receipts. The other markets declined however. We will be downsizing our operations in Angola in line with market conditions, and will close the local subsidiary in Algeria.

Large-scale projects

During 2012 we succeeded in acquiring a number of largescale projects in all parts of the world. Some were completed during 2013, while some are continuing in 2014. We see further opportunities for acquiring interesting large-scale projects around the world in future too. Such projects are unfortunately often subject to political hurdles, so a uniform spread in the timing of orders received is not possible.

Outlook

The Construction segment achieved a healthy increase in revenues in the past financial year. It was unable to improve its net profit for the period owing to the factors outlined. After initial delays, we now see the large-scale projects in the USA and Hong Kong to be making good progress. We will be withdrawing from some weak markets where no improvement is to be expected, and conversely will be concentrating capacities on focus markets so as to utilize the opportunities they offer. Even though there are still many factors impeding progress in some regions, our worldwide presence enables us to predict a sustained positive trend in our construction business.

Even though some of the large-scale projects have been completed, orders in hand at the year-end were only slightly lower than at the end of 2012. Hence, we generally expect to see a slight increase in revenues and a strong improvement in earnings in 2014, thanks to globally healthy and very evenly spread orders in hand.

EQUIPMENT SEGMENT

Equipment segment key figures

in EUR '000	2012 (restated)	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 %

The Equipment segment increased its total Group revenues in the past financial year by a healthy 6.7 percent from EUR 589.1 million to EUR 628.6 million. The segment's sales revenues rose correspondingly by 7.9 percent from EUR 520.6 million to EUR 561.6 million. Segment EBIT declined somewhat, falling 5.2 percent from EUR 34.0 million to EUR 32.2 million. The net profit for the period deteriorated from EUR 8.9 million to EUR 5.1 million.

Although more machines were again sold in total in 2013 – reflected in the rise in sales revenues – earnings failed to meet expectations. This was mainly due to heavier competitive pressure, particularly from China. The unsatisfactory earnings performance also resulted from a number of weak markets – especially in India, China and South America – as well as losses made by some subsidiaries and the burden of fixed costs incurred as a result of some plants not yet making sufficient use of capacities.

Germany & Europe

Sales in Germany rose healthily against the previous year, and were above our expectations. The rental business and sales of drilling accessories also improved. The generally positive trend on the German construction market was key to this. Capacities of the plants at the home base location in Schrobenhausen were better utilized in 2013, as more machines were produced and special orders – including the production of six deep drilling rigs of the 100-tonne class for a Chinese customer – were also fulfilled.

In Western Europe and Scandinavia, planned sales targets were achieved and in part surpassed. Even in Italy – contrary to the general impression – we enjoyed good market conditions. By contrast, the markets in Spain and Portugal remained weak. Planned revenue targets in Eastern Europe were not met. Market conditions remained very weak. In Russia, though, sales were again very pleasing. Our two production facilities in Russia were also kept busy.

Middle East & Central Asia

The countries of the Middle East were again severely impacted by unrest and political instability during the past year. The situation in Syria, especially, had a major influence on markets in the region. In Qatar, numerous projects – particularly for the transport infrastructure – were postponed, and on some projects the construction methods were changed. By contrast, the United Arab Emirates saw a recovery. All in all, we substantially improved our sales in the region compared to the previous year, achieving revenues in line with planned levels. However, they were still markedly below the levels seen in the boom years prior to 2008 however.

We achieved good sales in Turkey and in Azerbaijan in 2013, both performing above expectations. Planned revenue targets in Kazakhstan and the other countries of Central Asia were not met. The past year in India was also disappointing, as no major construction projects were carried out. The country's construction market is generally suffering badly 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. >>>

Geographical breakdown of total Group revenues – Equipment segment

in EUR million (after deducting Consolidation)

Total 591

contract award procedures, as a consequence of which the machinery market is virtually stagnating. We improved our market share based on a low level of sales.

Asia-Pacific, Far East & Australia

Markets in the Far East were generally very positive. Numerous infrastructure projects were carried out in Malaysia, Singapore, Indonesia, Hong Kong and the Philippines. As a result, the sales trend in those countries was very positive, delivering healthy revenues with corresponding earnings being above planned levels. Our new plant in Malaysia, opened in 2012, acquired increased volumes of orders to overhaul older Bauer machines. We officially opened our new service centre in Singapore in 2013, following the expiration of the lease on the previous building.

The Chinese market remained very difficult. The construction market is still on comparatively low levels, so there is overcapacity on the machinery market. Our production facilities in China were nevertheless able to increase their revenues,

based on machinery exports to the other strong markets in Asia. The move to the new plant in Tianjin, built to replace the former site on which the lease had expired, was finalized in October with the official opening. The new plant provides an outstanding base for future development.

The market in Japan again performed better thanks to recent political developments, as a result of which our revenues were in line with planned levels. By contrast, the market in Australia was rather weak during the past financial year – among other factors due to the low level of activity in the mining sectors.

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.

Sales in South America were likewise rather disappointing. The political uncertainty in Brazil was the main factor, as it also had a negative effect on the other countries in the region.

Africa

On markets in Africa, after a rather slow year we were able to achieve planned revenues thanks to good performance towards the end of the year. In Botswana, where our joint venture manufactures blast-hole drilling rigs and well drilling rigs for southern Africa, production capacity was not yet adequately utilized due to variable market conditions after launch in 2012.

Parts & Service

The Parts & Service area again made very good progress in the past year. Parts & Service offers our customers optimum backup in supplying replacement and wearing parts and in carrying out maintenance and repair work. Alongside conventional selling channels, products can also be ordered through an online shop. The online shop can also be accessed from the optionally-installed tablet in our machines. Parts & Service made a healthy contribution to revenues and a positive contribution to earnings in the past financial

year. This illustrates the widespread usage of our equipment throughout the world. Parts & Service will continue to be of great importance to us in future.

Deep drilling

The Deep Drilling area had a disappointing year in 2013. It was not able to sell any of the larger rigs. An anticipated sale to a customer in Nigeria could not yet be fulfilled due to lack of financing.

The TBA 200 medium-sized rig was rented at the end of 2013 to a customer in Germany and successfully deployed in early 2014. The delivery of the six 100-tonne RB-T 90 rigs to China was pleasing. They are to be used as emergency mine rescue equipment in case of accidents.

The new TBA 440 M2 large-sized rig was presented at a customer day in October 2013. Its technical specifications and innovative features ideally meet customers' needs and wishes. Interest in the new development was very high, so we can expect to see an improved trend in the Deep Drilling area in 2014.

The demerger of deep drilling operations into the newly founded BAUER Deep Drilling GmbH aims to improve the ongoing development and sales of the rigs. Moreover, great efforts are underway to obtain API (American Petroleum Institute) certification. This will open up additional sales opportunities.

Products and subsidiaries

BAUER Maschinen GmbH manufactures rotary drilling rigs (the BG series), duty-cycle cranes (the MC series) and cutters (the BC series) at a number of plants. The BG series is the most important and extensive machine range, and is divided in two product lines: the ValueLine rigs are optimized for kelly drilling, while the PremiumLine rigs are multifunction units for a wide variety of specialist foundation engineering applications.

In 2012 and 2013 a number of new rigs were launched in both lines, and existing machines were upgraded to meet the latest demands. The reorganization of the two lines has proved successful, and the machines are well established on the market. It is pleasing to report that in 2013 production and sales of all product groups increased. However, heavier competitive pressures, the still inadequate utilization of our production capacity and the weaker market for large-sized rigs and cutters resulted in a decline in earnings.

Among the subsidiaries, a good year, with pleasing and positive earnings performance, was enjoyed especially by RTG Rammtechnik GmbH, with its pile-drivers and piling leaders; SPANTEC Spann- & Ankertechnik GmbH, which makes anchor products for foundation engineering applications; EURODRILL GmbH, which makes rotary drives; and PRAKLA Bohrtechnik GmbH, a specialist in well drilling rigs. Other subsidiaries were confronted by a range of problems and increased competitive pressures in the past financial year, meaning that some of them returned a loss.

The Equipment segment was generally faced by the challenge of increased competitive pressures and a number of weak markets in 2013, all of which had a marked impact on earnings. It is pleasing that more machines were sold again – as reflected in the improved sales revenues. This meant that the plants' capacities were better utilized, although not yet adequately overall in terms of fixed cost coverage.

Outlook

Orders in hand improved in the past year to regain higher levels than those seen in 2012, though business remains very heavily characterized by short lead times on customer orders. This remains a great challenge in terms of production planning, as procurement lead times have to be scheduled many months in advance. We are confident that we will be able to increase sales in all areas this financial year, and so achieve improved revenues and earnings.

RESOURCES SEGMENT

Resources segment key figures

in EUR '000	2012 (restated)	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 %

The total Group revenues of the Resources segment fell by a substantial 27.8 percent from EUR 262.8 million to EUR 189.9 million. Segment EBIT of EUR -23.6 million was well down against the previous year comparative (EUR 15.2 million). The net result for the period deteriorated from a net profit of EUR 5.7 million to a net loss of EUR 31.4 million.

The Resources segment was faced by wide-ranging negative effects and problems in financial 2013, which had a significant impact on the Group's performance. The substantial full-year loss was mainly due to the following reasons:

• The earnings forecast had to be adjusted downwards by some EUR 20 million following completion of the extensive well construction project executed by the segment in Jordan. The adjustment was made necessary by the complex conditions under which the project was operated, which substantially increased the costs of the construction companies involved. Moreover, the financial difficulties being experienced by Jordan meant that no mutually agreeable final settlement could be obtained. This adjustment triggered additional impairment losses.
• At the start of 2013, we were very much expecting up to two large-scale projects to be contracted. These did not come to fruition, resulting in an excessive fixed cost burden on the segment.
• Moreover, reduced demand meant that our companies manufacturing well engineering materials were not profitable. We also had generally higher expectations for our

companies in the Exploration and Mining Services and Environment areas.

Materials

The Materials area manufactures and sells products for the exploration, extraction and distribution of water, gas and geothermal energy worldwide.

The GWE Group was heavily impacted by postponements of major overseas projects and by customers' reluctance to invest during the past financial year. Although markets in Germany and the rest of Europe stabilized after a weak first half, and new products succeeded in gaining more market share, the missing sales could ultimately not be made good. As a result, GWE pumpenboese GmbH made a substantial loss in Germany.

The subsidiary in Poland made a small loss due to a weak first half of the year. Expectations for 2014 are positive however. The subsidiary in Hungary achieved a slight rise in revenues, but its earnings were somewhat down against planned levels. There, the situation should also improve in 2014. After a good start to 2013, the subsidiary in Chile was hit by the collapse in demand from the mining sector. The planned revenues were achieved, but earnings were below expectations. One-off costs of process optimization were also incurred there.

Sales in France delivered revenues that were above planned levels in a difficult market, mainly thanks to specialist products. Expected projects in Morocco could not yet be exe-

Geographical breakdown of total Group revenues – Resources segment

in EUR million (after deducting Consolidation)

Total 197

cuted, so planned revenues were not achieved. Prospects there remain positive however. The subsidiary in Spain could not achieve planned revenue and earnings targets. Many projects were continually postponed owing to the difficult economic conditions in the country.

Online sales of well engineering materials increased significantly compared to the previous year. Costs of marketing and developing the offer meant that a profit was not yet made.

Materials companies had a very unsatisfactory year overall. Revenues were well down against planned levels and the previous year, and an overall loss was made.

Exploration and Mining Services

Exploration and Mining Services bundles expertise in the exploration of deposits, production drilling for water, oil, gas and geothermal energy, and in a wide variety of open-cast and underground mining services.

The aforementioned large-scale Disi-Amman project handled by the Site Group for Services and Well Drilling Ltd. Co. in Jordan, involving the sinking of wells to supply water to the city of Amman, proved highly problematic and made a substantial loss. This additionally resulted in impairment losses. Complex conditions, major delays and significant additional work requirements overshadowed the project, which was completed in a technically flawless way by the end of 2013.

FORALITH Holding AG, a specialist in deep and extendedreach exploration drilling based in Switzerland, and BAUER Foralith GmbH were unable to achieve their planned revenues 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 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.

Exploration and Mining Services was generally impacted by the global decline in exploration drilling. Only towards the end of the year did the situation turn around on some markets. So, all in all, 2013 was extremely difficult, and was overshadowed especially by the loss made in Jordan.

The segment also incorporates the mining operations of SCHACHTBAU NORDHAUSEN GmbH. Revenues were somewhat down against planned levels, but were again up on the previous year. The division again made a good contribution to segment earnings.

Environment

The Environment area offers complete solutions relating to the remediation of polluted sites, the preparation and treatment of drinking water and process and waste water, as well as waste gases. It also manufactures plant for water treatment, drinking water preparation, clean-room media handling and brewing.

The full-year revenues of BAUER Umwelt GmbH were a little above planned levels, and were around the previous year's level. The planned earnings target was missed however. The order book situation was stable at the year-end. BAUER Water GmbH significantly increased its revenues over the previous year. However, its earnings were negative owing to problems in the execution of projects.

Esau & Hueber GmbH, a specialist in brewing and beverage technology and the life sciences industry, saw revenue below planned levels and down against the previous year. Earnings were negative owing to a number of difficult projects, with an unsatisfactory order book situation over long periods of time.

The international subsidiaries in Environment also had a difficult year. The market in Italy remained very weak. The company was unable to achieve its planned revenue target, and made a negative contribution to earnings. In Spain, the market has also been severely hit by the country's economic problems. Capacities there have been greatly reduced. Revenues in Great Britain likewise fell. In Hungary, after a weak year, two projects towards the end delivered a slight rise in revenues and ensured earnings were in line with planned levels. The subsidiary in Abu Dhabi was likewise unable to achieve its planned revenue and earnings targets.

BAUER Nimr LLC in Oman is operating a large-scale reedbed treatment plant to treat polluted water from the oil industry. Following the completion of phase II, the plant has been expanded to treat 95,000 m3 per day. The plant is unique worldwide in its scale and engineering. A minor upgrade to the plant was commissioned in the year under review and completed in early 2014. The expected contract for a further extensive upgrade of the existing plant did not come to

fruition in the past financial year. Earnings were nevertheless very satisfactory. All in all, though, revenues and earnings were below expectations.

Reorganization

The Resources segment faced a wide range of problems, difficult market conditions and one-off effects in 2013, all of which had a marked impact on the result of the Group as a whole.

These developments do, however, also provide the opportunity to undertake a fundamental reorganization in order to be fit for the future. A wide-ranging cost-cutting programme was launched during the past financial year. The costs incurred in implementing it are in part already reflected in the earnings. In future, the segment will move away from its structure with three areas and focus much more strongly on being a full-package vendor. The existing three areas – Materials, Exploration and Mining Services and Environment – were replaced at the beginning of 2014 by a regionalized structure. This essentially focuses on the markets in Europe, Africa and the Middle East. It provides the opportunity to offer all products and services within the individual subsidiaries directly on the local markets. This regional sales organization is backed by centres of competence providing advice and support on projects and focusing the know-how of the former areas.

In the course of this reorganization, some companies have been, and will be, merged, some locations closed, and cost structures at many points improved. As a result, the situation in the Resources segment is expected to improve substantially in 2014. The order book situation as per the end of 2013 provides a sound basis for that improvement.

OTHER / CONSOLIDATION SEGMENTS

The Other and Consolidation segments bundle the revenues and earnings of the Group which cannot be allocated to the operating segments. The Other segment essentially comprises the revenues of the parent company BAUER AG itself, generated from a wide variety of administrative services provided to Group subsidiaries.

The Other segment reports EBIT of EUR 5.1 million (previous year: EUR 12.1 million). This includes EUR 4.4 million of dividend payments by Group subsidiaries to the parent company. The net profit for the period of EUR 6.0 million

(previous year: EUR 13.7 million) includes EUR 1.4 million essentially comprising the net profit of BAUER AG disregarding the aforementioned payments. The segment's revenues are especially generated by intra-Group charges.

The Consolidation segment reflects the consolidation within the Group. The negative EBIT of EUR -4.5 million (previous year: EUR -11.3 million) almost matches the EUR 4.4 million of dividend payments by Group subsidiaries to parent company BAUER AG. The net loss for the period was EUR 4.5 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. >>>

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

Shareholdings < 50 % listed pro rata

in EUR million	2012 ** (restated)	2013
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 SCHACHTBAU NORDHAUSEN GmbH Group	597.2	674.4
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

** 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.

the Resources segment; the shares had not been legally transferred by the closing date.

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

Shareholdings < 50 % listed pro rata

in EUR million	2012 ** (restated)	2013
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. >>>

IV. EARNINGS, FINANCIAL AND NET ASSET POSITION

in EUR '000	2012			2013	Range of orders in hand
	In hand	Received	In hand	Received	based on 2013 total Group 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

Orders in hand / orders received by segment

TREND IN ORDERS

At the end of 2013, the BAUER Group held orders in hand totalling EUR 765.2 million, 2.5 percent below the previous year's level of EUR 785.0 million. Despite the slight fall, the level of orders in hand is very healthy overall.

The Construction segment last year had a number of very large orders on its books which have for the most part already been completed. In 2013 there were fewer orders of that magnitude on the market, but many small and medium-sized orders were acquired from all regions around the world, so orders in hand remained virtually stable compared to the 2012 year-end. The even regional spread around the world is also a very positive aspect. All in all, the levels of orders in hand provide a sound basis for achieving 2014 targets.

In the specialist foundation engineering field in Germany, a large-scale project was acquired with the rail bypass link between Hanau and Nantenbach, worth some EUR 46 million. Many smaller orders also provide us with a sound foundation to predict a very consistent course of business in Germany. Total orders in hand in this area have risen by 73.0 percent to EUR 94.9 million.

By contrast, orders in hand in the international specialist foundation engineering business fell by 15.9 percent to EUR 360.2 million owing to the completion of large-scale projects. The foundations for the tallest building in the world, the Kingdom Tower in Jeddah, Saudi Arabia, and the tallest building in Europe, the Lakhta Tower in St. Petersburg, Russia, were completed successfully. In St. Petersburg, a

follow-up contract was acquired relating to other buildings in the complex surrounding the Lakhta Tower. The work on the Hong Kong-Zhuhai-Macau Bridge and the diaphragm walling work on the Center Hill Dam in the USA will continue in full operation in 2014. An interesting project has been acquired on Mauritius. It involves the installation of a diaphragm wall for a large dam. It is pleasing that there is currently healthy demand from all regions around the world, providing us with plenty of work on many small and medium-sized projects in almost all areas. A particularly positive aspect is the situation of our subsidiary in Egypt which, despite the difficult situation in the country, has healthy levels of orders in hand for the current year, enabling us to predict an increase in its revenues.

The construction and environmental operations of SCHACHTBAU NORDHAUSEN GmbH have orders in hand totalling EUR 42.9 million, well up on the previous year's level. Efforts have been undertaken over the last two years to restructure this business in Germany. We also integrated SPESA Spezialbau und Sanierung GmbH into the organizational structure of this area of business in the past year. We believe that we will be able to build further on the successes already achieved.

Orders in hand in the Equipment segment of EUR 116.5 million are around the previous year's level of EUR 113.1 million. Trends in orders in hand in the past year varied widely: in the first three months our order intake was extremely weak. Construction companies in all markets were very hesitant, waiting to see how business would develop. From April onwards the order book situation improved very signifi cantly, 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

satisfactory. In the last quarter of the year order intake again increased substantially. Pleasingly, most of the machines ordered were delivered before the end of December. This meant that orders in hand at the 2013 year-end fell back to the 2012 level. The many efforts by our company to improve and specialize products and services are being welcomed by our customers, so we are confident of achieving the necessary order intake for the current year. Business continues to be extremely short-term in nature however. Our customers expect their machines to be delivered within just a few weeks of ordering. This poses major challenges for all the units of our machinery business, as we have to schedule the component supplies many months ahead of production. This entails holding increased stocks however.

In the Resources segment, orders in hand decreased slightly, by 5.5 percent, from EUR 158.8 million to EUR 150.0 million. Of that total, a significant proportion – worth EUR 45.5 million – was held by the Mining division of SCHACHTBAU NORDHAUSEN GmbH. We have interesting projects, in both Kazakhstan and Germany, which can provide us with work for years to come.

The orders in hand of the BAUER Resources Group itself have fallen slightly to EUR 104.5 million (previous year: EUR 110.9 million). In the Environment area, in particular, our levels of orders in hand are very healthy. Our large-scale project operating the reed-bed treatment plant in Oman will provide us with plenty of work well into the future. Our capacities are also being well utilized in Germany. Conversely, the wellengineering materials business is very short-term in nature, so there are never high levels of orders in hand. We expect these levels to remain consistent. The exploration and mining business is problematic at present for customers in many different countries around the world. Mine operators are again faced with economic problems, as a result of which very few contracts are being awarded. This business overall accounts for only a very small proportion of our total revenues however. Major projects are continually arising around the world for the segment to target. We therefore remain convinced that this business especially will continue to provide us with interesting opportunities in future.

With regard to the Group as a whole, orders in hand are in line with our forecast for growth in the current year.

GROUP EARNINGS POSITION

Group earnings in 2013 were significantly worse than in the previous year. A substantial loss was made overall, owing especially to major losses on our large-scale project in Jordan. The net result for the period deteriorated from a profit of EUR 25.8 million to a loss of EUR 19.4 million.

The ability of the Group to generate revenue did not fundamentally deteriorate in 2013 however. The loss was caused by a convergence of specific problems and issues: the main one was the Resources segment's aforementioned project in Jordan, along with the resulting impairment losses. Additional losses were incurred in particular due to start-up difficulties on the Center Hill Dam project in the USA.

EBIT (earnings before interest and taxes) decreased by 55.4 percent from EUR 72.0 million to EUR 32.1 million. EBITDA (earnings before interest, taxes, depreciation and amortization) fell by 23.1 percent from EUR 163.8 million to EUR 126.0 million, representing 8.7 percent (previous year: 11.9 percent) of consolidated revenues.

The pre-tax return on equity as the ratio of pre-tax profit to shareholders' equity (equity at the start of the period) deteriorated against the previous year from 8.4 percent to -1.3 percent. The return on equity after tax was -4.2 percent (previous year: 5.6 percent). The return on revenues after tax (relative to the consolidated income statement revenues) declined from 1.9 percent to -1.3 percent year-on-year. We expect to be able to increase our returns again in the coming years.

There have been substantial changes to some income statement items in the year under review. This is mainly attributable to the special losses described.

The previous year's income statement has been adjusted as follows: firstly, some reclassification has been undertaken among the "Other income" and "Other operating expenses" items. They relate to the reversal of provisions and value adjustments, which are now no longer stated as income, but are deducted from the "Other operating expenses", which has resulted in a reduction in consolidated revenues of EUR 9.8 million. Secondly, the effects of IAS 19 increased the net profit for the period by EUR 0.4 million.

The individual income statement items are summarized in the following.

Consolidated revenues rose by 5.3 percent against the previous year (EUR 1,376.1 million) to EUR 1,449.5 million.

Sales revenues increased at a slightly lesser rate than the consolidated revenues, rising 4.4 percent against the previous year's EUR 1,344.4 million to EUR 1,404.2 million. The main reason for the smaller increase was that the changes in inventories item was barely negative, at EUR -4.4 million compared to the previous year's EUR -22.4 million.

The other capitalized goods and services for own account item decreased by 20.8 percent from EUR 24.2 million to EUR 19.2 million.

Other income barely rose against the previous year, increasing from EUR 29.8 million to EUR 30.6 million. Key changes to this item related to realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts, which overall decreased by EUR 1.1 million to EUR 11.5 million compared to the previous year. Realized and unrealized foreign currency gains and losses as well as gains and losses from foreign exchange forward contracts result from our currency hedge management activities. Fluctuations in hedged and unhedged currencies can cause the corresponding income statement items to vary widely over the years depending on trends. The unbalanced statement of exchange rate shifts is in line with IFRS rules reflecting the practice that exchange rate hedging cannot always be set exactly against the underlying transactions, even though in operational reality they are aligned as closely as possible to each other. The Group's objective is to undertake exchange rate hedging which rules out the possibility of foreign currency gains or losses as far as possible. The countering item

in an amount of EUR 21.2 million (realized and unrealized foreign currency losses and losses from foreign exchange forward contracts) is entered under "Other operating expenses". The difference between the gains and losses shows that we suffered overall foreign currency losses of EUR 9.7 million in the year under review. The considerable fluctuations in exchange rates towards the end of the year, especially in "softer" currency countries, were the main causes of this displeasing result. The other major items under "Other income" are income from insurance refunds (EUR 3.0 million) and book profits on asset disposals (EUR 4.4 million).

Cost of materials increased by 10.1 percent in the year under review to EUR 755.9 million – a much greater rate of rise than in consolidated revenues. This is in part a consequence of the incurred losses, and in part due to the lower margins in the Equipment segment. Costs of materials on projects in the Construction segment vary widely, so comparisons between individual years are only possible to a very limited extent.

Personnel expenses increased by 5.5 percent to EUR 342.8 million – virtually at the same rate as the consolidated revenues. The somewhat higher increase is likewise explained by the weaker margins in the Equipment segment.

The rise in depreciation of fixed assets by 4.3 percent to EUR 79.7 million is mainly attributable to impairment adjustments and high depreciation of development costs.

Write-downs of inventories due to use reflect the use of rental equipment made available to our customers. This equipment does not form part of the fixed assets, but is recognized under inventories. The reason for this approach is that most of this equipment remains within the company only for a relatively short time. The aim of the rental operation is 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

agreement. As the equipment has to be financed correspondingly on the Equity and Liabilities side of the balance sheet, its depreciation forms part of the company's EBITDA. As a consequence of the financial crisis, our customers are increasingly entering into these rental transactions. Writedowns of inventories due to use decreased slightly in the year under review from the previous year's high figure, being reduced by 7.8 percent to EUR 14.2 million.

Other operating expenses rose 12.2 percent to EUR 224.8 million – a much greater rate of rise than in the consolidated revenues. This likewise reflects the problems during the year under review. The many individual components of this item develop in very different ways depending on the course of business and the mix of the order portfolio. This item includes the realized and unrealized foreign currency losses described under "Other income".

Financial income rose by 29.4 percent from EUR 6.0 million to EUR 7.7 million. The key change is attributable to gains from shifts in the market values of derivatives based on interest rate hedging transactions. Financial expenses rose by 2.0 percent from EUR 44.7 million to EUR 45.5 million.

The share of the profit or loss of associated companies accounted for using the equity method totalling EUR -0.2 million was EUR 5.8 million below the previous year. In 2012 this item included special income from the sale of a real estate development project in Germany. The negative contribution to earnings arose primarily due to our investment holding in Spain, which made a loss.

Income tax expense of EUR 13.5 million was down slightly, EUR 0.4 million below the previous year's level. The negative contributions to earnings by subsidiaries in individual

countries have had virtually no effect in reducing the Group's tax charge.

The minority interests in profit/loss item was negative in the year under review, at EUR -2.5 million. This essentially reflects a balance of the effects of the loss in Jordan against the profits made in Oman and Egypt.

The profit attributable to BAUER AG shareholders was EUR -16.9 million.

GROUP FINANCIAL AND NET ASSET POSITION

With consolidated revenues up 5.3 percent on the previous year, the Group's net assets rose 3.7 percent from EUR 1,529.4 million to EUR 1,585.2 million. The equity ratio of 26.5 percent is significantly lower than in the previous year (30.2 percent) in particular due to the loss made and the slight increase in net assets. Our aim generally is not to allow the equity ratio to fall below 30 percent. That aim was not met in the year under review. We will be working hard in the years ahead to get the equity ratio back well above 30 percent. All investment and growth plans of the business are aligned to this target.

The net debt of our business increased by 10.1 percent in the year under review. We will also be making great efforts in the years ahead to reduce this again. We must stress, however, that in view of the nature of our business and the current economic climate, that is only possible to a certain extent. The reasons for the considerable rise over recent years following the financial crisis are detailed below:

The level of net debt within the Group depends essentially on the working capital, as the intangible assets, the property, 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

largely covered by the shareholders' equity. The working capital of our businesses is inevitably relatively high due to the nature of our business model and the special market in which we operate. Our construction projects run for only comparatively short periods of time. As opposed to building construction contractors, who work on longer-running projects, we very rarely receive advance payments for the construction project in question or generate positive cash flow over the term of the project by billing high prices at the start and low prices at the end. Short-running construction contracts – such as we mostly carry out – require financing across the Group's many construction sites corresponding to roughly three months' sales of the Construction segment. All our billing therefore takes place after the works have been carried out. Moreover, we also have to finance retentions of payment as security.

The situation in the Equipment segment is similar. Production lead times for our specialist machinery are around 12 months. Since customers usually only order equipment once they have an actual contract to fulfil, and so expect short delivery lead times from us, we are forced to hold stocks of finished machinery. And since we also offer a very wide product range – as is likewise demanded by the market – our financing needs are increased correspondingly. The working capital also covers the machines we rent out to customers, or which are only bought by customers after a certain rental period based on a rental-purchase agreement. With worldwide inventories now extending to several thousand Bauer machines, many of our locations have to hold considerable stocks of spare parts in order to provide customers with the necessary service backup.

Nevertheless, we judge that the working capital of the BAUER Group is currently too high relative to our business volumes.

Our levels of inventories, finished goods and re ceivables have increased beyond the normal bounds. This is not good, but on the other hand is explainable, because we are aware of the reasons why it is so: they reflect market trends as well as a number of special effects. Substantial amounts are currently imposing an additional burden, as claims in respect of supplementary work on completed international construction projects are having to be asserted by legal action. Even though the amounts are recognized with due commercial caution in the accounts, they are nevertheless imposing a burden in terms of the indebtedness of the business.

We are aware that the Group's higher financing requirements place greater weight on the question of our in-house financing capabilities. Following the loss made in 2013, the 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 hidden reserves were included. Our financial reporting policy has always been to try to avoid impairment risk arising from goodwill on the balance sheet as far as possible. Our balance sheet assets include no goodwill. Since changing over to IFRS we have used the historical cost model to value land and buildings. With a carrying amount for the land and buildings of EUR 211.6 million, there is a considerable reserve here. Our construction machinery likewise represents another hidden reserve.

The net debt to EBITDA and EBITDA to net interest coverage ratios have worsened since the financial crisis, and especially as a result of the loss made in the 2013 financial year. The net debt to EBITDA ratio of 5.34 at the end of 2013 is significantly above the previous year's figure. The two other agreed covenant ratios – EBITDA to net interest coverage above 2.8 and equity ratio above 25 percent – are adequately within the agreed thresholds. The Group has entered into covenants in

1 EUR equals
	Average rate in 2012	Q1 2013	Q2 2013	Q3 2013	Q4 2013	Average rate in 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

Exchange rate development in 2013

respect of a number of long-term loans, which were valued as per the 2013 year-end at EUR 237.8 million. The covenants on them stipulate net debt to EBITDA ratio thresholds of 4.75 and 4.0 respectively. Those thresholds were exceeded due to the loss made in 2013. Some 80 percent of the creditors concerned affirmed to us even during 2013 that they will be maintaining their credit lines, at a slightly higher financing cost to us, despite the expected breaking of covenants.

Development of covenants

	2012 (restated)	2013
Net debt / EBITDA	3.73	5.34
EBITDA / net interest coverage	4.19	3.33
Equity ratio in %	30.2	26.5

In order to safeguard our financing for the years ahead, we will agree a syndicated loan with our bankers. Though this will impose additional interest costs on our business, it will enable us to grow on a stable financing base in the years ahead. We expect the new financing structure to be in place in the second quarter. We plan to comply with the covenants again in the years ahead.

With regard to the individual items on the balance sheet, the following key changes should be noted:

The revision of the chart of accounts and the revised categorization pursuant to the requirements of IAS 39 has improved transparency with regard to financial assets and liabilities, necessitating appropriate adjustments to the financial statements. Liabilities from outstanding invoices and projectrelated provisions have been transferred from "Other current liabilities" to "Trade payables". This increased the trade payables as per January 1, 2012 by EUR 32.6 million and as per December 31, 2012 by EUR 35.6 million.

As the former item "King piles, sheet piles" is no longer of major significance, it has been merged with the "Raw materials and supplies" item.

Material changes have occurred in relation to shareholders' equity and deferred taxes resulting from the first-time adoption of IAS 19 R (provisions for defined benefit plans). The

change also entailed an adjustment of the previous year's figures. As per January 1, 2012 the provisions for defined benefit plans had increased by EUR 13.1 million, and as per December 31, 2012 by EUR 28.5 million. As per December 31, 2012 the non-current provisions for defined benefit plans were EUR 80.4 million (previously: EUR 51.9 million).

The contra-items increasing the provisions for defined benefit plans related to deferred tax assets in amounts of EUR +3.6 million (January 1, 2012) and EUR +7.9 million (December 31, 2012) respectively; to the equity of BAUER AG shareholders in amounts of EUR -9.4 million and EUR -20.3 million respectively; and to minority interests in amounts of EUR -0.1 million and EUR -0.2 million respectively. The equity ratio as per December 31, 2012 decreased as a result of this matter from 31.8 percent to 30.2 percent. Net assets rose correspondingly as a result of the additional deferred tax assets by EUR 7.9 million. The company will experience a long-term effect from this change to the balance sheet. Our aim is to return to an equity ratio above 30 percent soon. All other disclosures relate to the adjusted balances.

On the Assets side:

• Intangible assets increased by EUR 0.8 million. Among them, capitalized development costs rose by EUR 4.3 million, concessions and industrial property rights decreased by EUR 1.2 million, and goodwill decreased by EUR 2.2 million.
• Land, land rights and buildings increased by EUR 8.7 million to EUR 211.6 million. The key change resulted from the completion of building work on our new machinery plants in Singapore and in Tianjin, China.
• Payments on account and assets in course of construction decreased by EUR 17.7 million. They related mainly to assets in course of construction totalling EUR 9.4 million and machinery and plant for a large construction site in the USA started in early 2013 totalling EUR 9.5 million.
• Technical equipment and machinery increased by EUR 3.8 million. The increase resulted mainly from the first-time consolidation of a Russian Construction segment subsidiary (EUR +6.2 million) and the equipment deployed in the year under review on a large construction site in the USA

Assets Equity and liabilities

(EUR +8.8 million). The principal contra-items were asset sales and depreciation and amortization in Hong Kong, the United Arab Emirates and Jordan totalling EUR 13.0 million. The shift in demand on international construction markets means that our construction works require increasingly large machinery and equipment. Consequently, small equipment is increasingly being replaced by much larger machinery, leading to a general increase in fixed assets. They were nevertheless reduced in the past financial year.

• Other equipment, factory and office equipment decreased by EUR 0.4 million to EUR 27.3 million.

Property, plant and equipment and investment property were reduced overall by EUR 5.8 million to EUR 459.5 million.

• Investments accounted for using the equity method decreased by EUR 3.2 million to EUR 10.0 million. The key change related to dividend payments by Wöhr + Bauer GmbH.
• Deferred tax assets decreased by EUR 1.9 million.
• Receivables from concession arrangements include the biological water treatment plant for the oil industry in Oman

which was financed by us and which we have been contracted to operate for a period of 20 years. The plant was financed partly by ourselves and partly by our customer. The balance sheet value is reduced each year through the payment of order-related costs, countered by interest income. It was EUR 36.8 million.

• Other non-current financial assets decreased by EUR 1.4 million to EUR 5.4 million.
• Raw materials and supplies were reduced by EUR 7.7 million against the previous year to EUR 146.7 million. Around 40 percent of this item relates to the Construction and Resources segments.
• Work in progress and finished goods and merchandise decreased by EUR 2.7 million to EUR 272.7 million. We aim to reduce inventories in the Equipment segment further.
• Receivables from construction contracts (PoC) increased by EUR 26.8 million to EUR 143.2 million. Changes in this item result from the random percentage of completion of our projects at the year-end.
• Trade receivables increased by EUR 50.6 million to EUR 323.0 million. They include the receivables from joint

52

ventures which at the year-end totalled EUR 19.7 million, up EUR 5.2 million against the previous year.

• Other current assets decreased by EUR 9.6 million to EUR 30.7 million.
• Other current financial assets increased from EUR 17.5 million to EUR 19.6 million.
• Cash and cash equivalents increased by EUR 12.0 million to EUR 57.2 million. Attempts are made to minimize this figure at the year-end by appropriate liquidity management. Those attempts were not sufficiently successful in the year under review. Some transfers from abroad could no longer be executed.

In assessing the Assets side of the consolidated balance sheet, it is important to note that this is composed of a Construction element (relating to the Construction and Resources segments) and an Equipment element (relating to machinery manufacturing operations). Some specific items relate primarily to the Construction segment, while others, in contrast, relate to the Equipment segment. The main items of such kinds are listed in the following:

• Within property, plant and equipment, well over two thirds of the land, land rights and buildings item relates to the Equipment segment, whereas around three quarters of the technical equipment and machinery item is attributable to the Construction segment.
• Some 60 percent of the raw materials and supplies item is linked to the machinery manufacturing operations of the Equipment segment.
• Some 90 percent of the work in progress and finished goods and merchandise item relates to the Equipment segment, with a small percentage attributable to the Construction and Resources segments. In the Equipment segment, it is essential to successful selling operations to maintain stocks of rental equipment as part of current assets, so that customers can try out the machinery before making their final purchasing decision. Equipment can also be drawn from the pool to cover short-term capacity bottlenecks on construction sites. The machinery in pro-

duction at the balance sheet date also represents a very substantial capital tie-up.

• Receivables from construction contracts (PoC) almost entirely relate to the Construction and Resources segments. The trade receivables item is broken down according to the respective segments' shares of total Group revenues.

These different weightings are barely relevant to inter-period balance sheet comparisons when the rate of growth – either positive or negative – of the business areas is roughly the same.

On the Equity and Liabilities side:

• Shareholders' equity decreased by EUR 43.1 million to EUR 419.4 million. The key changes reflect the loss for the period (EUR -19.4 million), changes in exchange rates (EUR -15.7 million), the first-time consolidation of a Construction segment subsidiary in Russia (EUR -2.9 million) and the 2013 dividend payment (EUR -6.6 million).
• Minority interests decreased by EUR 10.4 million to EUR 22.8 million. The minority interests of third-party shareholders in Jordan decreased as a result of a shareholder's capital contribution and the loss attributable to the minority interest. The equity of BAUER AG shareholders decreased by EUR 32.7 million as a result.
• The non-current portion of liabilities to banks decreased from EUR 426.2 million to EUR 247.8 million. The main factor in the reduction in this item is that a number of long-term loans are due for refinancing in 2014 and were transferred to the current liabilities to banks at the year-end. Owing to the expected failure to meet agreed covenants, we had already made an offer to the banks concerned at the end of 2013 to continue the loans against an appropriate additional payment. The loans on which no such agreement was obtained from the bank at the accounting date were likewise transferred to the current liabilities to banks.

• Non-current defined benefit liabilities increased by EUR 1.2 million to EUR 81.6 million.

• Deferred tax liabilities decreased by EUR 4.6 million.

• The current portion of liabilities to banks increased from EUR 168.1 million to EUR 427.6 million. The increase also relates to the effects described in relation to the "Non-current portion of liabilities to banks" item. Financing increased by EUR 81.1 million overall in terms of current and non-current liabilities to banks. Taking into account the increase in the "Cash and cash equivalents" item (EUR 12.0 million), the increase was EUR 69.1 million. The increase was necessary owing to the reduced shareholders' equity and the increase in net assets.
• Liabilities from construction contracts relate primarily to construction projects on which the payments received surpass the work carried out. They increased by EUR 2.9 million.
• Trade payables increased by EUR 21.8 million to EUR 194.5 million. This increase is partly coincidental. It does, however, also in part conform to our strategy of including our suppliers more closely in providing the increased up-front financing needed. By this practice we are able to make use of all discounting opportunities.
• Other current liabilities increased by EUR 9.4 million to EUR 69.9 million.
• Other current financial liabilities decreased by EUR 1.7 million to EUR 12.1 million.

The ratio of net assets to consolidated revenues decreased slightly from 111.1 percent to 109.4 percent.

Net cash from operating activities shown in the cash flow statement decreased substantially from EUR 165.7 million to EUR 38.4 million. The following factors contributed to this change:

• Owing to the effects set out under "Earnings", a pre-tax loss of EUR 6.0 million was made.
• Depreciation of fixed assets totalled EUR 79.7 million.
• The increase in trade receivables and in receivables from

construction contracts resulted in a capital tie-up of EUR -90.0 million.

• In addition to the unplanned write-downs of inventories due to use, negative exchange rate shifts also impacted on operating cash flow (EUR -22.7 million).
• Trade payables increased by EUR 20.5 million. The in crease was explained in the notes on the net asset position.

Cash flow from investment activities totalled EUR -67.2 million, decreasing to EUR 9.0 million below last year's figure, especially due to the reduced investment activity.

The inflow of funds from financing activities was EUR 43.6 million. A major factor in this was the new indebtedness to banks totalling EUR 111.7 million. This was partly compensated for by loan repayments totalling EUR 17.3 million and interest payments totalling EUR 39.3 million.

V. FINANCIAL STATEMENTS OF BAUER AKTIENGESELLSCHAFT

For the 2013 financial year we have, for the first time, combined the Group Management Report and the Management Report of parent company BAUER AG. Consequently, notes on the balance sheet and income statement of BAUER AG are presented at this point. They changed materially in the following items in the past financial year relative to the previous year.

Main changes to the balance sheet:

• Financial assets rose from EUR 105.7 million to EUR 115.7 million, mainly due to the EUR 10.0 million increase in shares in affiliated companies, specifically in BAUER Resources GmbH.
• Receivables and other assets increased by EUR 5.5 million. This is primarily down to the EUR 6.6 million increase in receivables from affiliated companies, which results from the issue of more loans to subsidiaries.
• Liabilities increased from EUR 122.2 million to EUR 137.1 million. The increase in liabilities to affiliated companies of

EUR 15.0 million is primarily due to the increased creation of credit balances with BAUER AG by subsidiaries.

Main changes to the income statement:

• Sales revenues, primarily related to charging of administrative services to subsidiaries, increased by EUR 1.7 million.
• EBIT fell by EUR 2.1 million to EUR -0.7 million, mainly due to the EUR 3.6 million rise in other operating expenses. Significantly higher expenses were incurred during the financial year in currency management. Moreover, special expenditure was incurred as a result of breaking agreed covenants on a number of long-term loans.
• The net profit for the year fell by EUR 8.3 million to EUR 5.1 million. In view of the difficult trading conditions in the various Group segments, dividend payments to BAUER AG by subsidiaries were reduced, so income from participations decreased by EUR 6.0 million. The lower EBIT additionally had an impact.

The payment of dividends to shareholders is based on the net earnings of BAUER AG as the parent company, taking

into account the Group's consolidated earnings. The dividend policy of BAUER AG is one of continuity, meaning that in principle a dividend should be paid even in difficult years, where financially justifiable. As the Group's holding company, BAUER AG is dependent on the earnings of its subsidiaries, and additionally provides financing to them.

The payment of a dividend this year would not be financially justifiable in view of the impact on the balance sheet of the past financial year, the decline in the Group's equity ratio and the loss made by the Group as a whole. The Management Board will therefore recommend to the Supervisory Board that it propose to the Annual General Meeting that no dividend be paid to shareholders on the net retained earnings totalling EUR 27,428,937.64. An amount of EUR 27,428,937.64 should therefore be carried forward.

As the Group's holding company, BAUER AG receives earnings in particular from its subsidiaries. In 2014 the dividends paid by the subsidiaries will be significantly lower than in the year under review, as the subsidiaries need the capital base on their own books. For that reason, and due to the higher financing costs, the financial statements of BAUER AG will show significantly lower earnings.

VI. SUSTAINABILITY

SUSTAINABILITY WITHIN THE BAUER GROUP

The BAUER Group has consolidated its key action areas under the maxim "BAUER's Triple A". The slogan is based on the top mark awarded by credit rating agencies. It flags the concerns regarded as being of particular importance within the Group as a whole. They include the area of health, safety and the environment (HSE), which has been substantially expanded in the last two years through an array of measures, with still more in the pipeline. Other key concerns are quality and ethics. We aim to provide our customers with top quality, and seek to act fairly and equitably in relations with all our stakeholders. The third 'A' relates to performance – that is to say, the commercial profitability of the business. The aim is to achieve the top mark in all three areas – triple A in fact.

The areas highlighted under BAUER's Triple A are also the core elements of our sustainability management practices. The main responsibility within the Group in terms of the sustainable development of the business and policies relating to matters of quality, health and safety and environmental protection lies with the Group Management Board and the directors of the holding companies. The joint monthly meetings also deal with the topics in question.

The Corporate Social Responsibility (CSR) Committee, which meets once a year and comprises the Group Management Board members together with representatives of the Human Resources, HSE, Training and Investor Relations departments/areas at BAUER AG, reviews the latest trends and developments and stipulates measures and goals. The annual Sustainability Report, which has been compiled in compliance 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 that fact, personnel development is of the highest priority to the management of the BAUER Group.

Employee-related data

The companies of the BAUER Group worldwide employed 10,264 people (previous year: 10,253) on average over the year. The workforce is broken down as follows:

Value added 2013

• Construction segment: 5,531 (previous year: 5,454)
• Equipment segment: 2,998 (previous year: 2,952)
• Resources segment: 1,449 (previous year: 1,578)
• BAUER AG and subsidiaries: 286 (previous year: 269)

The trend in workforce numbers within the Group was in line with our expectations. Changes to subsidiaries' workforce numbers were primarily recorded outside of Germany, linked to international construction projects. Individual contracts often facilitate major changes.

By the nature of its operations, the workforce of the Construction segment is subject to the greatest fluctuation dependent on the number of major projects being handled in specific countries. Consequently, the biggest growth was achieved by the subsidiaries in Indonesia (135 employees), the Philippines (60 employees) and in the USA (56 employees). In some countries, such as Vietnam and the United Arab Emirates, fewer people were employed in the year under review than in the previous year owing to the weaker state of the market. The generally healthy levels of orders in hand led to a slight increase in the Construction segment workforce overall.

Workforce numbers in the Equipment segment increased only marginally. Most of the small rise was attributable to recruitment of new staff at the production facilities in the Far East (17 employees) and the USA (15 employees). Workforce numbers in Germany remained virtually constant. One of our

12,000 10,000 8,000 6,000 4,000 2,000 0 2010 2,775 2,915 2,952 2,998 3,108 3,371 1,578 1,449 ²⁶⁴ 245 251 269 269 9,094 9,646 10,253 10,264

key goals is to retain the loyalty of our core permanent workforce, which we again succeeded in doing in the past year.

In the year under review the workforce of the Resources segment was reduced primarily in Jordan due to the conclusion of the major project carried out by the Site Group for Services and Well Drilling Ltd. Co.

Education

Bauer employed 240 apprentices in Germany in 2013. Most of them were training to become industrial mechanics, construction machinery operators, or clerical staff. We attach great importance to providing practically oriented training. Apprentice construction machinery operators, for example, have the opportunity while still in their apprenticeship period to gather some initial experience on our proving grounds and to participate in work on construction sites. On completing their apprenticeship, they have the chance to work on exciting construction projects in Germany and abroad.

For higher education students, we offer dual-study courses in engineering and information technology in cooperation with the Hochschule Ingolstadt technical college. Students can also establish initial links with our business through internships or by undertaking their Bachelor's or Master's thesis with us.

Training and development

The BAUER Training Center GmbH is the Group's in-house training facility, providing specially tailored courses both for

12,000 10,000 8,000 6,000 4,000 2,000 0 5,055 5,113 5,454 5,531 5,722 6,027 6,350 6,189 1,019 3,664 3,835 1,367 248 239 240 2011 2011 2012 2012 2013 2013 2010 Construction Equipment Resources Other Industrial Salaried staff Apprentices 9,094 9,646 10,253 10,264

Employees by segment Employees by employment relationship

our own staff and for external target groups. Its extensive programme of seminars and courses in a wide variety of fields covers many different subjects. In 2013 the BAUER Training Center GmbH had a budget of around EUR 2.3 million (previous year: EUR 2.1 million) for employee training and development. Almost 2,948 in-house staff (previous year: 2,817) attended the seminars. A total of 599 (previous year: 534) internal and external seminars and external conferences were attended.

We support our employees' career development through a system of reviews, coaching sessions and various mentoring programmes. We also conduct international training courses.

Diversity

The BAUER Group employs people of a wide variety of ethnic origins. The workforce comprises colleagues from 81 different countries, all working together to realize our projects. Mutual respect – regardless of religion, age, gender, ethnic origin or sexual orientation – is key. Diversity is an integral part of everyday life and work in our company.

We assume a high degree of responsibility when it comes to equality of opportunity. We assess our employees solely according to their performance and potential. Personal and professional suitability are the sole criteria which apply when we fill posts. We have taken it upon ourselves to raise awareness of equality issues.

Employees by region

In 2013, approximately 12 percent of the Group's workforce were women – a figure which essentially reflects the technical nature of our business and the small numbers of women who apply for such careers.

CAPITAL INVESTMENTS

In view of the general economic climate, we significantly reduced our capital investments compared to previous years in 2013. They were nevertheless still above our depreciation levels. The pace of technological progress in our business has become faster, so it is only possible to improve performance by increasing investment.

Construction of the new plants for the Equipment segment in China and Singapore was completed in 2013. Both investments had become necessary because the government agencies in the locations concerned had terminated the company's existing lease agreements in order to use the sites for other purposes. A positive outcome of this situation is that the new leases will run for much longer terms: 50 years in China, and 30 years in Singapore. The Chinese plant continues to produce our rotary drilling rigs for the local market. The plant in Singapore serves as a central warehouse facility, rental centre and service workshop for our equipment customers in the Far East. With the completion of the two plants, all major production facilities have now been made fit for the future, meaning significantly less capital investment will be necessary in the years ahead. Depreciation and amortization will enable us to reduce our fixed assets in the Equipment segment over the coming years.

Major investments were also made on behalf of the Resources segment in the past year. The upgrading of our plants that manufacture well engineering materials, especially, necessitated capital investment. New machinery was also purchased for drilling.

Further intensive investments were made in equipment, specifically in the Construction segment, in order to meet the market demand for ever more powerful machinery to handle specialist projects. We have for years now been seeing a trend towards ever larger volumes in international infrastructure projects, and we are increasingly needing ever larger machinery to carry out the associated specialist foundation

engineering works. This demands higher levels of investment, but also opens up new market opportunities for us.

In financial 2013 the BAUER Group invested a total of EUR 91.6 million (previous year: EUR 96.4 million) in property, plant and equipment. Depreciation of fixed assets across the Group totalled EUR 79.7 million (previous year: EUR 76.4 million). Write-downs of inventories due to use Group-wide totalled EUR 14.2 million (previous year: EUR 15.4 million).

Additions to the property, plant and equipment assets of BAUER AG in the 2013 financial year totalled EUR 1.7 million (previous year: EUR 2.1 million), against depreciation of EUR 1.4 million (previous year: EUR 1.4 million).

Ongoing capital investments were funded primarily by cash and cash equivalents from business operations and from financing. In 2014 we will be able to keep capital investments below depreciation, which will also help reduce balance sheet items.

RESEARCH AND DEVELOPMENT

The BAUER Group invested substantial sums in developing new construction methods and machinery in financial 2013. Key areas of focus were heavy-duty rotary drilling rigs; cranes for specialist foundation engineering applications; drilling tool technology; small boring equipment in the field of anchoring and high-pressure injection; diaphragm wall technology; deep drilling; underwater drilling; and measuring technology for quality control purposes. Many new electronic applications and techniques have been created or enhanced in order to optimize on-site processes.

The reorganization of research and development structures within BAUER Maschinen GmbH in 2011 has again proved very worthwhile, resulting in a marked enhancement of development work in the individual business units. The various machine groups have dedicated, product-specific departments with independently managed development capacity. This has brought the development, product management and sales functions much closer together, enabling faster development cycles as part of our efforts to build on our competitive edge on the market.

In the deep drilling field, our 100-tonne rig has been adapted to the needs of emergency rescue drilling and the six rigs

sold to China have been successfully delivered. In the largerig segment, the 440-tonne unit has been upgraded and equipped with a fully automatic rod handling and walking system.

In the underwater drilling rig segment we have opened up an entirely new field. Our existing rig is capable of executing large-diameter bores in hard rock to install piles for tidal turbines. Tidal turbines are feasible almost exclusively in ocean narrows, where the rock prevents the water from becoming deeper, so that strong currents can occur. By contrast, wind turbines are mostly installed out at sea. The beds vary widely, though with less rock, instead comprising mostly sediment of differing quality. To date, foundations for wind turbines are sunk primarily using driven piles. The major disadvantage of such methods is the enormous noise, which is very hazardous to marine animal life.

Drilling techniques in such environments is enormously complex, as bores are very difficult to stabilize under water. We have devised a drilling technique which, serving as a mixed-in-place technique, mixes the surrounding soils with cement suspension and at the same time installs a steel pile. We have subjected the new technique to extensive testing on land, and it exhibits a wide range of advantages over the conventional method. Whether such a technique will be able to establish itself on the market remains to be seen.

For many years now, our products and services have extended well beyond the bounds of specialist foundation engineering. The BAUER Group today is a machinery manufacturer and service provider in all fields relating to ground and groundwater. Pursuing that strategy, many units within the Group have been undertaking additional development work, such as to design new pipes for underground engineering installations, to advance water purification based on a wide variety of methods, and to produce modern materials for use in geotechnical applications. A state-of-the-art system of innovation management is practised with great intensity by all Group units.

In the Equipment segment we invest over 4.4 percent (including internal and project-related expenditure) of the corresponding portion of total Group revenues in research and development. A staff of some 190 people is involved in this field, as well as outside consulting engineers and interns. Research and development activities are routinely reviewed and maintained at a high level to keep pace with the ever increasing rate of change in market demands. We are continuing to expand our development departments outside of Germany, such as in India and China. This will enable us to benefit from the large numbers of highly trained engineers available on local labour markets.

Research and development expenditure in the Construction segment is 0.4 percent of total Group revenues, and in the Resources segment 1.9 percent. We invest further significant resources in the preparation and design of construction sites. Profitable construction contracts are very often obtained on the basis of special proposals on the market. Drawing up such special proposals is development work, and also provides a competitive edge for future projects on which the costs cannot be recorded separately from the general construction works.

Of the total research and development costs for 2013 of EUR 32.8, an amount of EUR 8.6 million was capitalized (capitalization rate: 26.1 percent). Depreciation of capitalized development costs and patents totalled EUR 5.2 million.

Our expenditure on research and development is reflected in 259 (previous year: 251) current patent series, including 1,473 (previous year: 1,340) patent applications, registered patents and utility models worldwide.

HEALTH SAFETY ENVIRONMENT (HSE)

For the BAUER Group, HSE is an integral element of everything we do in creating and developing all our products, specialist services, and business processes. The Group has therefore made significant efforts in recent years to strengthen its HSE policies and procedures. The HSE guidelines set out the procedures for planning, implementing and continuously monitoring the efficacy of Group-wide international health, safety and environmental standards. They represent the minimum requirements for all HSE systems across the BAUER Group, are applicable worldwide and are oriented to the ILO and OHSAS 18001 standards as well as to ISO 14001.

The guidelines are founded on the corporate HSE policy of the BAUER Group. By continually reviewing our performance and cross-checking it against set HSE standards and objectives, we are aiming to achieve the continuous improvement of our HSE system and so consistently minimize our accident and damage rates.

Health and safety

One of our key tasks is to protect the health of our employees and to ensure safe working conditions for everyone engaged in the business. Compliance with national and international standards is just one aspect which we expect from our business units. It is essential for a global Group to impose its own high standards, rules and procedures in relation to HSE, and to monitor and continuously improve their implementation.

Our employees are routinely trained in HSE matters. Weekly staff safety meetings are held on our construction sites and in all our production facilities. This helps raise awareness and acceptance of HSE standards and procedures among our workforce.

Research and development in the BAUER Group

		2012				2013
	Construction Equipment Resources			BAUER Group	Construction Equipment Resources			BAUER 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

Environment

The environmental management system of the BAUER Group applies throughout the Group. It defines environmental protection as an integral element of corporate HSE policy. The key factor in this is that environmental protection is at the forefront of awareness in everything we do in all phases, in all divisions and departments and in all aspects of business processes and procedures – particularly in production and on construction sites.

Many Group locations and companies – including the home base Schrobenhausen – already operate environmental management systems certified to standards such as EMAS. BAUER Spezialtiefbau GmbH was the first member of the BAUER Group to participate in the "Umweltpakt Bayern" eco-pact, an environmental initiative between the Bavarian state government and businesses in the state.

QUALITY

Despite the diversity of all the different countries and market segments in which we operate, quality remains a key customer requirement everywhere. We aim to satisfy our customers by delivering the products and services they need. We regard the durability of our products also as a contribution to sustainability.

For us, quality management means recording and measuring the individual processes, defining requirements for provision of the necessary personnel and material resources and developing procedures to ensure that all involved are kept upto-date at all times. It also includes ensuring the traceability of the product creation process and implementing preventive defect avoidance.

We see quality management as a dynamic system, in which audits are assessed by management and their results incorporated into new goal setting. Our employees contribute to this process with numerous suggestions for improvement. In some cases, these have led to products or innovations being registered as patents.

Our policy is to implement other management systems in the various Group companies alongside quality management to ISO 9001. We aim to assure customer satisfaction, in new business fields especially, by implementing industry-specific management systems, such as in conformance to API standards for companies with customers operating in the oil and gas sector.

VII. LEGAL DISCLOSURES

REMUNERATION REPORT

The Remuneration Report sets forth the system of remuneration paid to the members of the Management Board and the total amounts paid to them, and explains the underlying principles and amount with regard to the remuneration paid to the Supervisory Board.

Remuneration of the Management Board

The Management Board of BAUER AG, as previously, comprised three members in the year under review. The Supervisory Board sets the overall levels of remuneration paid to the individual members of the Management Board based on proposals submitted by the Presidial and Personnel Committee. The plenary Supervisory Board reviews and approves the remuneration system for the members of the Management Board following prior consultations in the Presidial and Personnel Committee.

The system of remuneration paid to the members of the Management Board did not change from the previous year. The overall levels of remuneration paid to the individual members are set on the basis of a performance assessment. This process assures that the overall remuneration is appropriate to the duties and performance of the Management Board member concerned and to the situation of the company. The remuneration paid to each Management Board member is composed of a fixed basic salary, paid in equal monthly instalments, and a variable annual bonus which is determined according to both short-term and long-term criteria at the discretion of the Supervisory Board. The short-term criteria applied in assessing levels of variable remuneration are weighted equally to the longterm criteria.

The criteria for setting the fixed remuneration to members of the Management Board are the assignment of duties, the performance of the respective Management Board member, the economic position of the Group and its profitability and ongoing future prospects.

Maximum limits are imposed on the total remuneration paid. The variable remuneration paid to each member of the Management Board is limited by an individually defined maximum bonus level. This maximum is the upper limit of potential bonus payment in the normal course of business, and is paid in full if all set goals are attained. If business performance is exceptionally good, the said levels may be surpassed by up to 1.8 times.

The short-term criteria applied in setting the variable remuneration elements are the performance of the respective Management Board members in the past financial year and the economic position of the Group in respect of attainment of budget targets in the year under review, particularly the attainment of profit and revenue targets, taking into account general economic trends.

The long-term criteria applied in setting the variable remuneration elements are the success and future prospects of the Group and the performance of the Management Board in respect of these criteria. This assessment judges the decision-making of the Management Board in terms of sustainable business development over the past three financial years and the effects of this decision-making in achieving long-term stability for the business. Criteria applied here are long-term profit and revenue prospects, sustainable personnel development in accordance with the future prospects of the Group, the development of the corporate culture, the development of intra-Group collaboration, the safeguarding of corporate harmony, strategic market and product development, long-term investment planning, risk and security management, long-term financial stability, and the quality of key financial indicators relative to the prevailing economic conditions.

In assessing the appropriateness of the remuneration paid to the Management Board, the variable remuneration is set and compared in proportion to the fixed basic salary. Furthermore, the fixed and variable portions respectively, and the overall remuneration paid, are compared against the normal levels of remuneration received by management board members of other stock market quoted companies, and other companies operating in the same sector, or companies similar in other ways, in Germany (horizontal comparison). A vertical comparison is carried out on two levels: firstly, the salaries of the Management Board members are compared against those of the directors of the major BAUER Group subsidiaries; secondly, they are assessed relative to salary grade A VIII stipulated in the collective pay agreement applicable within the Group within the industry-wide framework of salary and

training remuneration to salaried staff and foremen in the construction sector.

The remuneration is further set so as to remain competitive with that generally paid to highly qualified management staff on the market as a whole.

The Annual General Meeting held on June 30, 2011 resolved that the BAUER AG financial statements and the Group consolidated financial statements for the financial years 2011 to 2015 would contain no disclosures of the remuneration paid to individual Management Board members, thereby applying the legal authority assigned to it by section 286, subsection 5 and section 314, subsection 2 of the German Commercial Code (HGB).

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: EUR 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 accordance 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: EUR 3,596 thousand).

The contracts of Management Board members include individual severance clauses regulating the specific terms of premature termination, with settlements oriented to the length of service of the Management Board member concerned and gauged so as not to exceed an amount of two years'

remuneration for any one Management Board member. No provisions for compensation in the event of a takeover offer being made have been agreed with the members of the Management Board.

Remuneration of the Supervisory Board

The Supervisory Board of BAUER AG comprises 12 members. There was just one change to its composition in the year under review: Mr. Walter Sigl retired with effect from the middle of the year, to be succeeded by newly elected employee representative Mr. Stefan Reindl. Calculation of the remuneration paid to the members of the Supervisory Board is specified in detail in the Articles of Association of BAUER AG. Each member of the Supervisory Board receives a basic annual fee of EUR 18 thousand, payable in December of each financial year, plus reimbursement of out-of-pocket expenses and any sales tax (VAT) liability incurred in performing the duties of a Supervisory Board member. The Chairman of the Supervisory Board receives twice that amount of remuneration, and the Deputy Chairman 1.5 times the amount. The basic remuneration amounts are increased by 10 percent for each membership of a Supervisory Board committee, provided that the committee in question was convened at least twice in the financial year. Membership of the Mediation Committee is excluded from these remuneration provisions. Changes to the Supervisory Board and/or its committees are taken into account in the remuneration proportionate to the respective member's time in office, and rounded up or down to full months based on the standard commercial rule. The members of the Supervisory Board receive no performance-related pay.

The net remuneration paid to all the members of the Supervisory Board in the 2013 financial year totalled EUR 254 thousand (previous year: EUR 254 thousand).

Other

No loans or advances were paid to members of executive bodies of the company in the year under review, nor were any liabilities entered into in their favour. As a matter of principle, no securities-oriented incentive systems exist for members of the Management Board or Supervisory Board of BAUER AG, or for Group employees in Germany. BAUER AG provides D&O (Directors and Officers) group insurance cover

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	0	9
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 executive bodies of BAUER AG and of all affiliates in Germany and internationally in which a majority share is held. The D&O policy includes an appropriate excess for the insured parties. For the members of the Management Board, the minimum excess stipulated by law of 10 percent of the loss up to at least an amount representing one and a half times the fixed annual remuneration of the Management Board member concerned was agreed in the D&O insurance policy in the year under review.

The members of the Management Board are required to limit the extent to which they take on Supervisory Board mandates and other administrative or voluntary functions outside of the company. The members of the Management Board may not, without the consent of the Supervisory Board, carry out any trade or business or conduct, on their own or a third-party's account, any dealings in the sector in which the company operates. Further, they may not, without the

consent of the Supervisory Board, become a management board member, director or personally liable shareholder of any other trading company. This ensures that no conflict arises with the assigned duties of the Management Board member either in relation to time commitment or to remuneration received. No separate remuneration is paid for the assumption of executive or supervisory mandates on the boards of Group companies.

STATUTORY DISCLOSURES REGARDING TAKEOVERS

The following disclosures are made pursuant to section 315, subsection 4 and section 289, subsection 4 of the German Commercial Code (HGB) as per December 31, 2013.

Composition of subscribed capital

The subscribed capital (share capital) of BAUER AG remains unchanged at 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. 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. Six new Bauer family members joined the pool as a result of share transfers within the family during the year under review. The pool agreement provisions include binding voting commitments as well as restrictions on the transferability of pool members' shares. 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 have 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 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 materially 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' subscrip-

tion 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, subsection 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 treasury 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 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 authorizations 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.

Appointment and termination of appointment of Management Board members, amendments of the Articles of Association

The appointment and termination of appointment of members of the Management Board of BAUER AG is regulated by sections 84 and 85 of the German Stock Corporation Act (AktG) and sections 30 ff. of the German Co-determination Act (MitbestG) in conjunction with Articles 5 and 6 of the company's Articles of Association. Pursuant to the company's Articles of Association, the Management Board comprises at least two persons, who are appointed by the Supervisory Board for a maximum term of office of five years. At present, the Management Board comprises three members appointed by the Supervisory Board and a Chairman of the Management Board, as well as a Labour Director. It is permissible to re-appoint or extend the appointment of a member of the Management Board for a further maximum term of office of five years. Any appointment or re-appointment 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 termination of appointment of Management Board members and concerns itself with the long-term planning of successor members for appointment to the Management Board.

In accordance with section 119, subsection 1 clause 5 and

with section 179 AktG, the amendment of the Articles of Association is passed by the Annual General Meeting with a majority of at least three quarters of the share capital represented at the vote. Pursuant to Article 12 of the Articles of Association, the Supervisory Board is authorized to pass amendments to the Articles of Association which relate only to its wording. The Supervisory Board is further authorized to adapt the wording of Article 4 of the Articles of Association (amount and division of the share capital) following full or partial execution of the increase in share capital or on expiration of the authorization period according to the respective utilization of the authorized capital.

Change-of-control clauses

Several long-term loans with balances totalling EUR 222.8 million as per the balance sheet date, agreed by BAUER AG together with other Group companies as the borrower and guarantor, provide for a right of termination for cause by the lender in the event of a change of control in BAUER AG. A change of control is considered to have taken place where a third party, not forming part of the circle of existing main shareholders, directly or indirectly acquires control of at least 30 percent or the majority of voting shares in BAUER AG. Any loaned amounts would have to be repaid in the event of termination. The terminated credit line would no longer be available for new borrowing.

Additional short- and long-term loan agreements also exist within the Group which provide for a right of termination for cause, at market terms, in the event of a change of control.

VIII. FOLLOW-UP REPORT

No matters of special note occurred after the end of the financial year.

IX. RISK AND OPPORTUNITY REPORT

RISK REPORT

BASIC PRINCIPLE OF RISK MANAGEMENT

In our business operations we are exposed to risks inextricably linked to our commercial activities. All commercial business activities entail a degree of risk. Genuine risks result from unforeseeable events which may entail both risk and opportunity. In view of this, we regard risk management not merely as the reduction of risk, but also as incorporating the conscious handling of opportunities. The aims of risk management are to safeguard compliance with our corporate goals, to enhance the value of the business, and to reduce risk costs. The functions of risk management are to identify, analyze and evaluate existing and expected risk all along the value chain, to continuously monitor it, and to derive appropriate measures. This involves assessing external risks potentially impacting on our businesses, as well as risks arising internally. Our system of risk management is based on a fundamentally risk-averse approach, meaning that we aim primarily to safeguard against impending risks rather than to exploit opportunities for short-term gain. As a matter of basic policy, we do not take any risks which may endanger the existence of the business.

Risk management system

Our risk management system is based on the risk policy defined by the Management Board, and regulates the handling of risks within the BAUER Group. It defines a unified methodology applicable to all segments and their member companies. It is continually reviewed and adjusted as required.

Our risk management system is an integral element of our overall management system and, like all our management

systems, serves as an instrument of value- and successoriented corporate governance. Audits routinely verify its implementation, and management reviews continuously improve its efficacy. Moreover, our auditors review on an annual basis the extent to which our existential risk early-warning system is fit for purpose. Their suggestions are incorporated in order to improve the system. The process steps involved in risk management are: identification, assessment, control and monitoring.

For the identification of risk, risk categories are defined and assigned to specific areas of risk. This defines areas of focus. Risk categories defined by the BAUER Group are: strategic risks; market risks; financial market risks; political and legal risks; organizational and governance risks; risks arising from the value creation chain; and risks of the supporting processes. These risks are grouped as latent risks and managed in a unified process within the framework of our risk management system. Conversely, project risks are managed according to their nature and significance by an additional, independent process.

The process of identifying and assessing latent risks is reviewed twice yearly at management meetings within the relevant Group companies, and is implemented jointly by departmental and central function heads as well as through individual specialists. This process ensures that potential new risks and opportunities are submitted for review at management level, and are included in follow-up reporting if considered relevant. Structured risk identification is followed by risk assessment based on a scale of relevance.

Scale of relevance of the BAUER Group

Relevance	Extent of losses (in EUR '000)	Definition	Identified risks
1	up to 8,000	Insignificant to low risk	Risks of this relevance have been
2	up to 20,000	Moderate risk
3	up to 50,000	Significant risk
4	up to 100,000 Serious risk		We do not see risks of this relevance in our business.
5	over 100,000	Critical risk

Relevant risks above a certain threshold value are quantified based on scenarios. Planning risks are estimated on the basis of empirical values, applying standard deviations. Risks from within the subgroups are consolidated at Group level.

Following assessment, preventive and reactive risk-specific management measures are defined. Where possible and useful, we have taken out appropriate insurance cover in respect of potential damage and liability risk, in order to reduce our risk exposure and avoid, or at least minimize, potential losses. Responsibility for monitoring risk lies with the risk managers.

The effects of individual risks are aggregated in the context of corporate planning by means of risk simulation. This means that the income statement of a financial year is played through several thousand times in independent simulations based on random figures (Monte Carlo simulation).

Risk analysis is conducted on at least a half-yearly basis. Yearly reports are submitted to the Management Board and Supervisory Board. The system is continually being updated and continuously improved both qualitatively and structurally in terms of the integration of more Group companies. To communicate acute risks, the routine risk analysis is supplemented by immediate reporting. Our risk management system covers both risks and opportunities.

A key change to our risk management system relative to last year is that a new software solution has been implemented to handle risk. It has further improved the transparency and efficiency of our risk assessment and analysis procedures.

Handling of project risks

Project risks are the principal performance risks, and thus are an integral element in the work of the Construction and Resources segments, wherever construction work or plant assembly is carried out on the customer's premises. Associated risks, such as in relation to the ground and resulting from the individual character of each individual project – including contract, timetable and damage risks – can thus accumulate detrimentally in specific cases in such a way that they may threaten the existence, if not of the Group as a whole, at least potentially of smaller subsidiary companies. In respect of all relevant projects above low threshold values, prior to submission of quotes all conceivable risks and opportunities

are systematically identified, analyzed and assessed, and appropriate measures are defined to minimize risks and track opportunities.

Each project is assigned to a risk class and organizationally escalated according to its risk class, and is thus subject to a strict approval process. Risk classification is based, firstly, on clearly defined checklists applying the K.O. principle, in order to prevent inadvertent assignment to an inappropriately low risk class. Secondly, it is based on potential harm identified in relation to the project, with the worst-case outcome serving as the decisive factor. The risk classes defined by this process are incorporated at fixed cost surcharges to cover the identified risks.

The system has been developed over a number of years across the corporate units faced by the relevant project risks and expanded to apply to the relevant operations.

Risks

In the following we set forth potential risks, which may have a significant impact on our financial and earnings position as well as on our reputation, and provide an assessment of their relevance for our business. The breakdown follows the same risk categories as we apply in our risk management system. The areas of risk are aggregated. Unless otherwise specified, all risks set out in the following relate to all our segments.

STRATEGIC RISKS

Segmental structure

We counter the strategic risks arising from the segmental structure of the business by dividing it into separate Construction, Equipment and Resources segments, thereby pursuing the aim of greater independence from the eco nomic cycles of the construction industry.

Frequent acquisitions and new company start-ups in the Resources segment entail the risk of misjudgement of partners as well as difficulties in integrating the companies concerned into the BAUER Group. We counter this risk by employing thorough due diligence and intensive monitoring of the integration phase.

The Equipment segment's move into deep drilling and the manufacture of machinery for mining applications will also

further reduce its dependence on the Construction segment. We regard the structure of our segments as being medium risk.

Strategy development and implementation

The goals for the various strategic areas of action and the implementation of the resultant measures are reviewed at regular intervals. Consequently, we regard the risks relating to strategy development and implementation as low.

MARKET RISKS

Selling market risks

It has always been one of our key strategic principles to counter risks on our selling markets by means of a multi-segment organization. Whereas our machinery manufac turing business is still heavily influenced – if at a delay – by economic trends in the construction sector, the establishment of the Resources segment has enabled us to isolate part of our business from the effects of construction cycles much more effectively. Our strategy of spreading business in each segment across a large number of markets worldwide further reduces the overall risk, so that no serious risk is posed to the Group as a whole in the event of any weakening or collapse of individual regional markets. Moreover, in the event of a regional market downturn our network strategy in the Construction segment enables us to relocate our capacities rapidly to another country and continue operations at the new location. Our Resources segment has also already expanded on a broad international scale. We regard the selling market risks as medium.

Competitive environment

In the Equipment segment especially, we operate in highly competitive, price-sensitive markets. The Chinese construction market – and to an even greater extent in its wake, the construction machinery market – have seen highly dynamic growth in the past as a result of government policy. As a consequence, major production capacities for construction machinery were created. The repeated stagnation of the Chinese construction market since 2012 has seen demand for new machinery decline, in some cases dramatically. The resultant overcapacity in the country has placed prices and margins under heavy pressure at times. We have implemented intensive cost-cutting measures in order to lastingly improve our competitiveness in China. This has particularly involved implementing local production to a major extent.

Despite the overcapacity and associated pressure on margins in China, we have been able to maintain our market position based on the recognized high quality and still clear technical edge of our machinery. The lack of market experience of Chinese manufacturers and the much lower quality of their products have to date impeded exports of Chinese construction machinery to the markets of relevance to us. A number of smaller Chinese competitors have already been forced out of business as a result. This risk is rated as low in the short term, but medium in the medium term.

Macro-economic risks

High levels of public sector debt in the USA, as well as in some EU member-states, uncertainty as to the stability of markets in specific countries and the phases of significant downturn on the market in China influence the basic considerations underpinning our appraisal of the macro-economic situation. Ongoing political unrest in the Middle East is impeding willingness to invest in the countries immediately affected, and often beyond. This entails both exchange rate risks and demand-related risks in the markets concerned. By contrast, the macro-economic situation in the Far East is creating a structural dependence of the Group on that region.

The Group Management Board and the directors of the three operating segments routinely consider projections based on specific scenarios of the impact of any given risks on the company in question and on the Group as a whole. Any necessary and relevant countermeasures are derived from these analyses and implemented in full. We rate the macroeconomic risks as low.

Procurement market risks

We counter fluctuations on the procurement market by entering into long-term contracts. This risk is rated as insignificant.

FINANCIAL MARKET RISKS

Covenant risks

Several long-term loans are covered by covenants linked to pre-determined financial variables. These are primarily the ratio of net debt to EBITDA, the ratio of EBITDA to net interest coverage, and the equity ratio. The loss made in 2013 meant that the covenants agreed with banks in respect of promissory notes and some long-term loans could not be met.

In addition to the earnings situation of the Group as a whole, higher financing requirements in particular may pose an increased covenant risk. This applies, for example, to changes in inventories in the Equipment segment. In order to reduce that risk, active selling of surplus stocks is initiated and production volumes are reduced as necessary. A high level of outstanding receivables can likewise result in the inability to meet agreed covenants.

Based on forward-thinking planning and sound financial controlling, we are making every effort to keep within the – in part newly – agreed limits, so as to prevent recurrence of the covenant risk and the associated consequences. This risk is classed as medium.

Financial stability and liquidity

The risk of instability on international financial markets is countered by means of long-term credit agreements, so the risk can be rated as low. Based on available cash in hand and bank credit balances, and above all thanks to adequate lines of credit, the risk to the Group's liquidity is judged to be low.

Interest rate risks

We reduce the risks arising from fluctuations in interest rates to a low level by fixing rates and rate derivatives for as long as possible.

Foreign exchange risks

Where possible and available, we counter foreign exchange risks by financing our international holdings in their respective local currency so as to minimize the risk.

POLITICAL AND LEGAL RISKS

Compliance

For the BAUER Group, acting responsibly and in keeping with the law is a fundamental principle underpinning our commercial success, the quality of our products and services and our sustainable ongoing development. We place the utmost value in upholding social conventions and in complying with applicable laws and business standards, so as to minimize the risk of non-compliance. For us, compliance means observing all applicable laws, rules and regulations. Legally compliant, ethical and socially sustainable action is the cornerstone of our values management system.

This will be applied to ensure staff are aware of our fundamental values right from the recruitment stage. Special training courses enable them to extend their knowledge. A special software program ensures that we do not do business with any companies cited on an EU or US sanctions list.

A Group company is currently under investigation for breach of anti-trust laws relating to agreements in a tender process for the construction of a waste storage site. Internal investigations have been initiated in order to rule out or identify any misconduct by the Group company concerned.

In summary, we are of the opinion that our existing values management system provides us with an efficient means of keeping our compliance risks at a low level.

Political and legal environment

Owing to the broad spread of the Group's operations, and its restraint in investing in potentially unstable countries, the political risks in individual countries pose little risk to the Group as a whole. We therefore regard the risk as low.

Contract risks

Our Construction and Resources segments primarily provide construction, drilling and environmental services. The underlying projects are practically always prototypes executed in each case on the basis of customized contracts. The resultant risks are subject to stringent management routines, meaning that they can be rated as low.

Current legal cases

There is a risk that legal action may be taken against our company with the sole aim of hindering our business operations. This risk is rated as insignificant.

VALUE CREATION RISKS

Research and development risks

As a technology leader, particularly in our Equipment segment, we counter any possible weakening of our market position by means of continuous research and development. Although the booming markets in the Far East and the resultant new competitors are sharpening the innovative pressures, we have to date succeeded in maintaining the necessary edge as a technology leader.

Nevertheless, we are well aware that these pressures will continue to grow. That is one reason why we are also increasingly utilizing low-cost local development resources in India and China to provide a rapid, cost-effective boost to our rate of innovation.

Moreover, there is a risk of incurring additional costs in this context due to development and design mistakes necessitating modifications. This risk is minimized by a structured, multi-stage product creation process.

Thanks to our great innovative strength and transparent product creation process, we regard the risk in relation to research and development as medium.

Production and order fulfilment

Technical failures and technical errors such as miscalculation of statics can result in significant delays, both on the company's own construction projects and on our customers' projects. Risks arising from errors in design and statics calculations are part and parcel of the BAUER Group's business. A further risk in order fulfilment is entailed by the selection and application of drilling techniques. Misjudging ground conditions can likewise result in increased risk costs. Disturbances to the project timetable must be identified by the project manager and communicated at an early stage. The management is aware of these risks, and relies on experienced project and production managers in all segments.

A further risk in relation to production and order fulfilment is the rising cost of production in China, resulting among other factors from increasing rates of pay. The new plant in Tianjin is intended to generate synergies in production and optimize machine capacity utilization in future. The risks in production and order fulfilment are rated as medium.

Project risks

Project risks are essentially the principal performance risks in the Construction and Resources segments, especially as each project has its own individual characteristics. Although we work on the assumption that our projects are costed with due diligence – at present especially in view of the scale of the project in Hong Kong – the possibility cannot be definitively ruled out that, on finally billing the customer, lower earnings will ultimately be generated.

Earnings from our well drilling project in Jordan had to be adjusted downwards during 2013 due to unusually complex conditions and the difficult financial situation of the country. As this is a one-off extraordinary effect, no impact on future earning power can be inferred from it.

Supplements and claims management

Especially in respect of complex construction works, we are increasingly seeing parties resort to legal action when disputes arise in relation to contract interpretation, additional works and supplements. Clients' representatives are increasingly rarely authorized to resolve conflicts by mutual consent. As a result, final project settlement is increasingly being delayed by legal action, and additional costs are being incurred. We manage this risk by professional management of supplemental requirements in the course of the construction project, and based on full documentation of the work carried out. Despite all efforts, the outcomes of some negotiations on supplemental requirements pose a residual risk to the company. The risks arising from supplemental requirements are rated as medium.

Acquisition, sales and contract negotiations

The risks of miscalculating quotations and of warranting technical characteristics which cannot be fulfilled are minimized by the strict application of the two-person rule. The risks can be regarded as low.

Materials management and procurement

Thanks to our long-standing and successful policy in our machinery manufacturing operations of planning well ahead to safeguard supplies of components which may be subject to bottlenecks, and based on additional measures we have taken and on our ability to have time-critical components made within the Group in the event of a bottleneck, the risks in terms of procurement currently remain classed as low.

RISKS OF SUPPORTING PROCESSES

Debtor management

To limit our exposure to risk of payment default, in Germany we have at our disposal a tried and tested system comprising credit insurance, payment default guarantees, advance payments and – in special cases – also guarantees as security in respect of contracted works. As a result we rate this risk as low.

Quality risks

Great attention is paid to the quality of work done in all areas of the business. This is safeguarded by employing well-trained staff and by means of a long-established quality management system which has been in place for many years. All major Group companies are certified, and are audited on a regular basis. We therefore regard quality risks as low.

Personnel development and structure; key personnel

Our procedures for providing assistance and support to our employees, from the selection and recruitment stage, through induction, qualification and training, and incorporating ongoing support in personal development, have been continuously improved. Fluctuation rates have been low for

many years, and represent an affirmation of our personnel policy. We regard risks in the Human Resources area as low.

IT

Security to prevent data loss or unauthorized access, as well as to safeguard system and data availability, is ensured by means of state-of-the-art hardware and software and building services technology, resulting in risks in IT being classed as insignificant.

Accounting-related system of internal controls and risk management

Consolidated accounting risks comprise risks in respect of accounting, valuation and recognition. To counter them, elements 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. >>>

The accounting functions for the major subsidiaries in Germany are mainly managed centrally at Group headquarters in Schrobenhausen. This permits specialization in certain kinds of business operations, such as consortia, and means that transactions are all treated uniformly.

The accounting functions for the other subsidiaries – practically all international subsidiary companies outside of Germany and the main German subsidiaries – are usually managed by decentralized in-house commercial departments. In this, our international subsidiaries are assisted by external accountants and auditors as well as by our investment controllers, so as to ensure properly qualified financial reporting in accordance with local laws or conforming to International Financial Reporting Standards (IFRS). The financial statements of the major Group companies are additionally audited in accordance with IFRS. Audits are conducted in accordance with the International Standards on Auditing (ISA).

The procedures for monthly Group reporting, preparation of quarterly and annual financial statements and consolidation of the individual financial statements in accordance with IFRS are implemented using a Group-wide accounting guideline on the basis of a unified schedule of accounts by the subsidiaries, and by the Group Accounting function for the consolidated financial statements. Appropriate adjustments are made to adapt local accounts to IFRS.

At the major Group companies, the success of each individual department is mapped as a central management instrument by means of an expense distribution sheet. This reveals any non-conformance to annual budgets. At project level, a monthly reconciliation is carried out to cross-check the actual figures against the cost accounting and site management budgets. Our judgement and experience tells us that self-monitoring allied to mutual monitoring are the effective elements of our system of internal controls.

The individual Group companies and departments are monitored on a monthly basis by the central commercial departments in the respective segments and are then reviewed by Group Accounting, further reducing the accounting, valuation and reporting risks.

The consolidated figures are in turn checked on a monthly basis against the figures from the annual Group-wide planning process and analyzed on the basis of Group key performance indicators (KPIs). Any necessary correction of non-conformance to plan is implemented promptly by the managers of the units concerned.

The major Group company annual financial statements and the year-end consolidated financial statements are examined by auditors in accordance with the applicable legal requirements and standards, and are reviewed by the Supervisory Boards established in the various business units as part of their duty of supervision. The key figures and related information reports are submitted to the Management Board and the Supervisory Board of BAUER AG from the central accounting function on a monthly basis.

The IT systems employed in these procedures are protected by appropriate security systems against unauthorized access and data loss. Based on the systematic multi-segment structuring of the Group's accounting process, with its redundant control instances, we are able to classify the resultant risks as low.

OVERALL RISK

Despite the one-off special effects which resulted in a loss being made in the year under review, no single or aggregated risks are discernible which might cause significant lasting damage to the BAUER Group in the 2014 financial year. The management sees no change in the overall risk situation, in view of the business prospects among other factors.

OPPORTUNITY REPORT

The opportunities arising are classified in parallel with the detailing of risks. In this context, too, the areas of opportunity have been aggregated. Unless otherwise specified, all opportunities set out in the following relate to all our segments.

STRATEGIC OPPORTUNITIES

Over the years, our Group has repeatedly worked on single projects in marginal markets. This has led to the establishment of independently operating business units. One example of this is in our activities relating to environmental technology which, having begun over 20 years ago, have grown to become an international business area forming part of our Resources segment.

A similar development grew out of the first deployment of specialist foundation engineering equipment for diamond exploration, which has since become the Exploration and Mining Services competence field within the Resources segment.

Together with the 2007 acquisition of the GWE Group, specializing in the development, manufacture and sale of high-grade well engineering products and in close-to-thesurface geothermal energy extraction, we were able to merge the three businesses to create the Resources segment. This core business unit, established in 2007, is focused on areas relating to water, energy, mineral resources and the environment – some of the major issues of the 21st century. Moreover, the Resources segment is much less dependent on the economic cycles of our traditional Construction and Equipment segments.

In order to bring about a rapid internationalization of the Resources segment, we are utilizing the experience of our long-standing organizational units in the other two segments.

MARKET OPPORTUNITIES

Thanks to the rapid growth being seen in some emerging economies, and the expected increase in oil and gas extraction based on new techniques such as fracking, it is becoming increasingly more worthwhile to explore even difficult-to-access deposits which demand intensive drilling operations. Demand for deep drilling rigs will thus continue to rise. Consequently, the Equipment segment has expanded its portfolio to include deep drilling rigs capable of operating

down to depths of 5,000 metres for geothermal energy, oil and gas exploration and for production drilling.

Rigs designed specifically for emergency mine rescue have also been developed. The key feature of the RB T-90 deep drilling rig is its great mobility. Mounted on a truck trailer, it can be transported quickly to any location where it may be needed. We see good prospects for sales of our deep drilling rigs.

Further market opportunities are also arising in deep drilling services. We are capable of successfully carrying out exploration and production drilling for water, oil and gas, as well as for coal-gas and geothermal energy. Extensive areas across Australia, Africa and Indonesia are being staked out as claims for the extraction of coal-gas. Their seriousness in terms of mass extraction is being impressively reinforced by the planning and construction of large gas liquefaction plants.

The nuclear accident in Fukushima sparked a new debate on energy production which is bringing about far-reaching changes to energy policy. The most suitable future-proof alternatives to nuclear power are currently being sought. The BAUER Group has been contributing to this search by developing an underwater drilling rig, operated from on-board a ship, to sink foundations for tidal or wind turbines. This opens up an entirely new product area, with great future prospects, for both our Construction and Equipment segments.

By establishing new subsidiaries in the Resources segment, our environmental business has succeeded in moving out of its traditional, and limited, sphere of pollution remediation into industrial process water treatment, and thus into the oil and gas industry. The large quantities of industrial process waters occurring in oil production, against a background of ever more stringent environmental standards, offer additional outstanding market opportunities for our environmental business.

Dam remediation projects are much in demand worldwide, due to the fact that dam structures have been neglected for years. Based on our wealth of experience in the field, acquired through projects such as our current remediation of the Center Hill Dam in the USA and our dam remediation project in Bhutan, we see an outstanding market opportunity for our Construction segment.

VALUE CREATION OPPORTUNITIES

Development and innovation

Development and innovation are systematically integrated into many standard processes within the Group. Their efficiency is monitored as part of the quality management system and by way of the corporate controlling function. It is also ensured that customers' wishes are understood as being opportunities, and are translated into innovations for our products and services in a timely manner. The capacities of our engineering offices are systematically being strengthened by resources from countries with high levels of education allied to low labour costs, such as India.

Innovation is possible at practically every point within our business processes. Our employees are best placed to know where improvements are achievable in their particular sphere of work. In order to collate and make use of the suggestions which our employees submit, we have devised a system for the unbureaucratic recording, evaluation, implementation and rewarding of suggested improvements, which has been in turn rewarded by a number of good ideas.

Project opportunities

Regardless of national and global market cycles, projects often arise in otherwise weak markets which we as a corporation are extremely well equipped to handle thanks to the mix of our products and services portfolio. Examples of this are processes for retrofitting of core seals in earthwork dams, or for the long-term, environmentally compatible treatment and disposal of industrial process water from the oil industry.

The resultant projects in some cases entail very large lot units. When contracted, we are able to manage them

successfully by converging our global resources and based on our many years of experience in handling large-scale projects.

Supplements and claims management

The assertion of requirements and supplements does not only entail risks, but also the opportunity to achieve better earnings than originally specified in the contract based on changes to the ordered construction services or supplemental work ordered by the client. On projects involving high potential for changes, this can result in a substantial improvement in earnings. We attempt to exploit such opportunities by professional management of supplemental requirements in the course of the construction project.

OPPORTUNITIES BASED ON SUPPORTING PROCESSES

The Group responded to the displeasing year-end loss in 2013 by initiating a global cost-cutting programme which also entails discontinuing a number of minor, economically challenging areas of business. The object of the cost-cutting programme is to lastingly improve the cost structures of the BAUER Group and so improve the contribution margin.

OVERALL OPPORTUNITIES

We are seeing a steady improvement in our opportunities on global markets as our recently created Resources segment becomes increasingly well established. This is also being boosted by new, innovative products. Our strategy of systematically interlinking our mainly small and medium-sized globally operating units to create efficient networks is enabling us more and more effectively to generate speed and cost benefits from the associated economies of scale. All in all, we see the opportunities for our Group's worldwide business increasing in the 2014 financial year.

X. OUTLOOK

A number of factors are of key importance to our business and its future development, as detailed in the following.

Markets

As set out at the beginning in the Business Report, the markets for specialist foundation engineering services and the associated machinery can generally be rated as positive. There is substantial backlog demand for construction works all over the world. The infrastructure, especially, must be updated to meet the new needs of people and the demands of a globalized industrial society. Increasing urbanization in many countries is necessitating major efforts to upgrade city transport infrastructures. Underground construction, especially, provides a solution to the challenges we face. Many enquiries from all markets, and our healthy levels of orders in hand in the Construction segment in all regions of the world, affirm that judgement.

The work of our Resources segment meets the essential needs of our world, for which issues surrounding the environment and water will become key over the decades ahead. The availability of resources essential to industry will likewise remain a permanent and pressing challenge.

Competition

Competition in the construction industry has changed little overall in recent years. The construction market is, and will remain, a market with very large numbers of players. Our worldwide companies have established themselves firmly within that competitive environment, and on some markets – such as in Egypt – we have attained an outstanding position. On other markets, conversely, other construction companies play a predominant role. We regard this mix as positive, because it provides us with the opportunity to respond strategically to changes. Very many companies – including in the specialist foundation engineering sector – have withdrawn from the German market over the last two decades. As a result, there are today relatively few specialist foundation engineering contractors capable of handling large-scale projects. This opens up additional opportunities for our business in Germany.

The competitive situation in the machinery business has changed significantly over the past ten years. The enormous growth in construction in China made that country's market more important than all the others in the world put together for a number of years. Many Chinese companies started manufacturing specialist foundation engineering equipment, creating capacities to fully serve the needs of the Chinese market. Once the growth of the Chinese construction market had come to an end, machinery markets fell back dramatically too. As a consequence, competition has intensified markedly. Other European manufacturers of construction machinery are now also coming under pressure in their standard equipment sales, and so are trying to make up for them in the specialist foundation engineering business. This is not feasible, because the market is not big enough, though the trend will additionally impact on the competitive situation to which our business is subject for some time to come.

In this new competitive situation, our business will only be able to maintain its leading position by providing high-quality products and outstanding services. Concerted efforts have enabled us to build further on our competitive edge in that respect over recent years, as the increased sales figures for 2013 demonstrate. We are convinced that we will continue in future to achieve success and growth. We will also be in a position to improve our margins again, which will also be based on improved capacity utilization.

Bauer has to date played only a minor role on markets for deep drilling rigs. We have nevertheless succeeded in arousing customers' interest with our fully hydraulic rigs featuring state-of-the-art electronic control, paving the way for some pleasing successes in the near future. We will meet this challenge with the aid of a new and highly experienced management team in this area.

In the Resources segment, we have numerous individual competitors on the various markets. We regard it as a major advantage that we are the only company offering a full portfolio 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. >>>

one business segment, meaning that we are able to offer our customers a very wide range of products and services. This will pay off in future.

Products

By concentrating on products and services relating to ground and groundwater, we have the capability to be a tech nology leader in both our Construction and Equipment segments. The interaction between construction and machinery manufacture – the application of high-tech construction engineering techniques on the one hand, and the design and manufacture of high-grade machinery with state-of-the-art technology on the other – allows us to exploit wide-ranging synergies in our development work. This enables us to assume a pioneering role with our methods and techniques.

We have had to commit major efforts to our Equipment segment in recent years in response to changes on the market. A reorganization of our development activities enabled us to considerably further boost the dynamic process of product development. We have intensively utilized the possibilities of state-of-the-art electronic control to make our equipment even more versatile and reliable. Specifically, we have made great efforts to provide comprehensive performance verification based on the acquisition and evaluation of large volumes of data.

The product of machinery business is not just the machine itself. For our customers, supplies of replacement and wearing parts, and service backup for their equipment, are of increasing 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. >>>

areas through wide-ranging measures. All our worldwide warehouse facilities are electronically linked nowadays, greatly enhancing parts availability. We have established service centres in all regions of the world. The rapid-response backup they ensure is much appreciated by our customers. We believe that the improvements in sales performance recently are also closely linked to these factors. We are convinced that we have an outstanding product offer, and that it provides us with a sound basis for future success on the market.

In our Resources segment, we have repeatedly demonstrated over recent years that we offer a portfolio which attracts great interest on the market. Our environmental technology solutions especially, such as the reed-bed treatment plant for the treatment of oil-contaminated water in Oman, have attracted widespread public acclaim.

After a very difficult 2013, we begin the year ahead against the background of the situation as detailed. We see good markets, and our product range is structured to provide us with a healthy competitive edge. Nevertheless, we have just experienced a very unsatisfactory year, resulting in particular from a number of specific issues within our business.

The field of specialist foundation engineering and our other business fields are subject to higher risk than most other businesses, because they always entail an element which cannot be fully analyzed in advance – the building ground, or soil. Even after conducting the most extensive and detailed preliminary ground surveys, some factors which were not detectable will occur on a regular basis. They can impede construction works in a wide variety of ways, and in some cases also cause significant financial losses. Up to until a few years ago, it was common practice for such problems to be resolved by collaborative partnership between the developer and the construction contractor. It has recently become more common for such issues to be settled almost entirely by confrontation and legal action. There are no signs that this will change in the near future. Consequently, we are making great efforts, through even more improved risk analysis and based on legal safeguards, to minimize such risks. We will never be able to avoid them entirely however.

On the other hand, an opportunity can also arise if the ground has been assessed too negatively prior to starting construction works. Our construction sites can then also generate additional profit. Some years ago, we went through a phase when virtually no risks occurred and opportunities predominated on many construction sites. In view of the many projects which we handle, a reasonable average is naturally found, though outliers – both positive and negative – will regularly occur.

In summary, this is meant to demonstrate that a difficult year such as 2013 does not entail a deterioration of our business in its entirety. After such a year, we have the same opportunities as previously, and we must utilize them again through diligent, high-quality work.

The past year has unfortunately also imposed burdens upon us which we will have to work to eliminate in future. The breaking of covenants means that it is necessary to place part the financing of our business on a new footing. In consultation with our bankers, we are currently preparing to switch our financing to a syndicated loan basis. We expect that the new structure will be implemented in the second quarter of this year. The new financing structure will entail a higher interest charge than previously, which will impact on earnings. We must therefore ensure appropriate cost-cutting and revenue improvements in order to balance out the new burden.

We have implemented a cost-cutting programme in order to cushion the additional charges and attain our earnings targets. We will also undertake great efforts to reduce our working capital and net assets in total, which will reduce the financing expenditure accordingly. We are aided in those efforts by the fact that our recent programme of capital investments is now completed. All our plants have been upgraded to be state of the art, so we will need to commit little by way of investment over the years ahead. This will mean that capital investments will be around the level of the depreciation and amortization. In the years to come, all staff will again be able to focus fully on business.

Looking at the current year, the factors outlined as well as the experience gathered on our markets over recent months instill us with confidence that we will attain our goals. Orders in hand in our Construction segment are highly satisfactory in all regions of the world, making it very likely even now that we will surpass last year's revenues by a small margin.

Many markets are highly dynamic. We will be executing a large-scale project on Mauritius. In the Far East, we are already working on a number of large-scale projects. In the Middle East, past delays are beginning to clear. We have very healthy levels of orders in hand in Egypt; and in America, too, many opportunities exist.

Order intake in the Equipment segment over the last two months of 2013 was very positive, and the new year has likewise begun pleasingly. Sales staff in almost all regions around the world report lively demand, and we are seeing customers rate our products very positively in competitive comparisons. Our deep drilling rigs are also attracting great interest, leading us to expect success in that product segment too.

The Resources segment remains the focus of most concern. After the major setback last year, it is not entirely easy to turn the business around in an optimal manner. We nevertheless see some major opportunities, especially in the environmental field, and our project in Oman, which will keep us busy for another 20 years, provides us with a sound basis in overcoming the challenges ahead. We assume that the segment will be able to make a small profit in 2014. In the long term, we are convinced that it offers many opportunities.

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 convinced that we are now very well positioned. We have focused closely on international networking, so that today almost all subsidiaries worldwide are interconnected via a centralized IT network and share software platforms. This provides us with close control, delivering massive benefits in terms of logistics and parts supply especially. All major locations are equipped with state-of-the-art videoconferencing systems, saving a great deal on travel expenses. We have also made great progress with regard to our management systems. Lots of positive changes have been made in relation to HSE (Health Safety Environment), and these have been successfully spread internationally thanks to the global IT network.

All in all, we therefore believe that we are well set to meet the challenges of the future. We are working hard on our cost-cutting programme, and cost ratios will also improve as our capacity utilization grows. Although we still have some overcapacity, we need it in order to drive the new business fields in deep drilling and underwater drilling forward. In those areas especially, we will soon be in a position to provide a good contribution to future growth.

We see no need to change our strategic objectives at present. The strategy comprising the Construction, Equipment and Resources segments will continue to dictate the direction of the Group over the coming years. We are not planning any major acquisitions at present, as we are intending to strengthen our capital base especially over the years ahead.

Based on the information available to us at the time of completing this report, we forecast that total Group revenues for the 2014 financial year will be around EUR 1.55 billion. We forecast profit after tax of around EUR 20 to 25 million. In accounting terms, this will mean EBIT of around EUR 75 million.

Comparison: 2013 actual / 2014 forecast

in EUR million	2013 actual	2014 forecast
Total Group revenues	1,506.2	~1,550
EBIT	32.1	~75
Net profit or loss	-19.4	~20-25

We still expect to make a loss in the first quarter, in line with seasonal norms, though it will be balanced out over the following quarters. The trend over the full year will thus be in line with patterns in our business seen in earlier times. The reason for this is that fewer machines can be invoiced at the start of the year, because customers do not start buying equipment until the construction season gets underway. In the Construction segment, despite the milder weather conditions, the winter period has a heavy impact on a number of our markets.

Our balance sheet ratios have changed markedly over recent years. This is illustrated most clearly by the increase in working capital, which also resulted in a substantial increase in net debt. This trend was largely attributable to the normalization of our machinery business, in which inventories increased significantly due to the return of shorter lead times. The numbers of machines for which we provided up-front financing on behalf of our customers also increased in response to their needs. No significant change to the balance sheet structure is to be expected in the coming year, as our business model is tied to high levels of up-front financing. With stronger demand for machinery, however, the ratios will improve again. We will be making great efforts to increase our equity ratio back to around 33 percent.

We expect the Group to enjoy positive development through 2014 and 2015. We are planning for growth of between 3 and 8 percent, in line with our long-term plans. We predict that we will again be able to achieve an increase in earnings. The Group has largely adjusted to the changed market conditions, meaning it is able to return to a positive trend overall.

The Management Board will recommend to the Supervisory Board that it propose to the Annual General Meeting that no dividend be paid for the 2013 financial year. After a year such as 2013, it is urgently necessary that funds should be retained within the business. We plan to pay a dividend again once we return to making a healthy after-tax profit.

We do not see any existential risk or relevant risk to future progress in our trading environment. The global economy remains marked by great change, however, which may also have a negative impact on our situation again. We should point out that future forecasts are based on assumptions and estimates of the company management. Such assumptions and estimates always entail a degree of uncertainty and risk, which may mean that actual performance differs from that forecast.

Schrobenhausen, March 28, 2014 BAUER Aktiengesellschaft

Prof. Thomas Bauer Chairman of the Management Board

Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

The Bauer Share

European Central Bank's low interest rate policy

Europe remains in crisis mode. Overall, the eurozone experienced a 0.5 percent decrease in GDP (gross domestic product) in real terms in 2013. Greece, Portugal, Italy and Cyprus saw declines, in some cases significantly so. GDP is not predicted to rise again until 2014, by 1.2 percent.

The European Central Bank has maintained its attempts to support the countries in crisis by purchasing government bonds and by pursuing a very low interest rate policy. In May it lowered the base rate from 0.75 to 0.5 percent and in November to 0.25 percent. As a consequence, many classic investment opportunities became unprofitable. That primarily boosted stock markets, with many indices seeing major rises during 2013.

In the USA, the economy was impacted negatively by the budget dispute and associated financial problems. Growth of 1.9 percent was lower than in the previous year (2.2 percent). In China, the construction sector was particularly weak. GDP growth of 7.7 percent was slightly below the previous year's level.

Germany did at least achieve slight growth, of 0.4 percent, and was again the main driver of the European economy. The labour market continued to develop in a positive manner. Unemployment fell slightly, as the number of people in work rose. The construction market again made positive progress, driven primarily by housing.

Following the federal parliamentary elections, the CDU/CSU and SPD entered into a coalition agreement in November. How the planned reforms will affect the economy and the labour market remains to be seen. At present the German federal government and economic research institutes are forecasting growth of between 1.2 and 2.0 percent in 2014.

Negative business course impacts Bauer share

The Bauer share price was impacted by the negative course of business during 2013. Consequently, the share was unable to participate in the rally seen on the major German indices DAX (+25.5 percent), MDAX (+36.4 percent) and SDAX (+27.2 percent).

From its opening price of EUR 19.94, the share price initially performed positively, reaching EUR 23.05 by mid-February. This was to be the high for the year. By early April, following the weakening market trend, the share price had fallen back below EUR 19.

By mid-May it had recovered to above EUR 22, but the weak performance reported at the end of the first quarter initiated a sustained downward trend to EUR 18.18 by mid-July.

After a slight recovery, the first adjustment of forecasts prior to publication of the half-year interim report saw the share price fall back significantly again. On August 5 it reached its low for the year of EUR 17.33.

Development of the Bauer share price in 2013

in % Bauer DAX MDAX SDAX

The share price slowly recovered through to mid-October, even briefly rising to almost EUR 22, but the ad-hoc release revealing the forecast full-year loss saw it fall back again to well below EUR 18.

Through to the year-end the share enjoyed a slight upward trend, closing 5.7 percent down against its opening price at EUR 18.81.

Continuous capital market communication

A total of 10 analysts – one fewer than last year – published research reports on BAUER AG in 2013. By the end of the year there were two positive, five neutral and three negative recommendations about the share. The average target share price quoted was EUR 18.61.

Participation in roadshows, including Scandinavia, London, Frankfurt and Zurich, as well as in the major stock market conferences, forms an integral part of the continuous capital market communication strategy of the Management Board and Investor Relations.

With the BAUER app and the newsletter BAUERcompact, both launched in 2013, we are endeavouring to enhance the flow of information to our private shareholders and other stakeholders.

The main focus of our information policy remains the Annual General Meeting held at the company's home base in Schrobenhausen. The event was attended by some 600 shareholders and guests, with Professor Bauer once again reporting on the current business situation.

Share information

DE0005168108 / 516810
B5A
Frankfurt, Prime Standard
SDAX, CDAX, GEX, DAXPlus Family Classic All Share, Prime All Share
No-nominal-value individual bearer shares
EUR 73,001,420.45
17,131,000
Bauer family 48.19 %, free fl oat 51.81 %

Dividend policy

Our dividend strategy is fundamentally oriented to the goals of providing shareholders with an appropriate and fair participation in the success of the business, maintaining continuity, and safeguarding the equity ratio.

In view of the loss made in financial 2013, resulting in a decrease in equity ratio from 30.2 to 26.5 percent, our focus over the coming years will be on increasing the equity ratio substantially again.

Consequently, the Management Board and Supervisory Board will propose to the Annual General Meeting on June 26, 2014 that no dividend be paid.

More information: http://ir.bauer.de

KEY FIGURES	2010	2011	2012 (restated)	2013
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

Corporate Governance Report

AND DECLARATION ON CORPORATE GOVERNANCE

The Management Board, also on behalf of the Supervisory Board, submits the following report on the company's corporate governance in accordance with Article 3.10 of the German Corporate Governance Code. The Corporate Governance Report also includes the Declaration on Corporate Governance pursuant to Article 289a of the German Commercial Code (HGB), which forms part of the Management Report for the 2013 financial year.

Declaration of conformity 2013

In the year under review, based on preliminary work by the Presidial and Personnel Committee, the Management Board and Supervisory Board reviewed the company's compliance with the German Corporate Governance Code. On December 5, 2013 the Management Board and Supervisory Board passed the following declaration of conformity:

"Since the last declaration in December 2012 the company has complied with, and currently complies with, each of the recommendations of the "Government Commission of the German Corporate Governance Code" as published by the German Federal Ministry of Justice in the official section of the electronic version of the German Federal Gazette ("Bundesanzeiger"), with the following exceptions:

• 1. Contrary to Article 3.8 an excess of at least 10 percent of the loss up to at least an amount representing one and a half times the fixed annual remuneration of Supervisory Board members is not agreed for D&O insurance for the Supervisory Board. As a result of the moderate remuneration provisions for the Supervisory Board in the Articles of Association, a corresponding excess for the Supervisory Board is not approved. Even without a corresponding excess, the Supervisory Board members will perform their duties responsibly.
• 1. Contrary to Article 4.1.5, Article 5.1.2 and Article 5.4.1 there is no appropriate inclusion or participation of women arranged for in the filling of management positions or in the composition of the Management Board and the Supervisory Board. In particular, the introduction of a quota for women is not supported in order to ensure equal opportunities. These positions should be filled regardless of gender so that neither the female gender nor the male gender is favoured or discriminated against. In addition, a candidate

should not suffer any disadvantage on the grounds of racial or ethnic origin, religion or belief.

• 1. The individualized disclosures of the benefits, the remuneration and the pension benefits awarded to each member of the Management Board are not individualized for each member of the Management Board in the remuneration report as the General Meeting dated June 30, 2011 resolved on the omission of the disclosures according to section 285, no. 9, letter a, sentences 5 to 8, section 315a subsection 1 and section 314, subsection 1, no. 6, letter a, sentences 5 to 8 of the German Commercial Code (HGB) and therefore the disclosures required under Article 4.2.5 would contradict such Shareholder resolution.
• 1. Contrary to Articles 5.1.2 and 5.4.1, no age limit is specified for members of the Management Board or Supervisory Board. Expertise and performance cannot be determined on the basis of rigid age limits. Upon the appointment of new Management Board and Supervisory Board members, the persons who bear responsibility for selecting suitable members will take account of the age of the chosen person when reaching their decision, alongside assessing their skills. If a Management Board or Supervisory Board member should become no longer sufficiently capable of holding office on the grounds of age during their term of office, the common sense of the persons involved is to be trusted.
• 1. Contrary to Article 7.1.2, the consolidated financial statements at December 31, 2012 were made public within 101 days rather than 90 days of the end of the financial year. As a result of the international structure of the Group, the completion and consolidation of the separate financial statements takes a considerable amount of time. In the interests of conscientious accounting processes, efforts to improve the accounting procedures continue.

Furthermore, BAUER Aktiengesellschaft already conforms largely to the additional suggestions of the Government Commission of the German Corporate Governance Code."

Contrary to the recommendation of the German Corporate Governance Code, the company does not as yet enable shareholders to follow events at the Annual General Meeting via state-of-the-art communications media (such as the Internet), as the Annual General Meeting is by its nature a physically attended event, and in particular transmission of the verbal contributions made by individual shareholders, as well as the additional costs incurred, are considered as critical factors counteracting any expected benefit.

Roles of the Management Board and Supervisory Board

BAUER AG is a stock corporation established pursuant to German law. German company law prescribes a dual system of management for the company, characterized by a strict separation of personnel between the Management Board as the executive management body and the Supervisory Board as the supervising body. Moreover, the company's Articles of Association and the rules of procedure governing the work of the Supervisory Board and of the Management Board also lay down the basic structures of their collaboration.

The Management Board of BAUER AG currently comprises three members. They are assigned independent responsibility for managing the Group and the holding company. The members of the Management Board work together on a collegiate basis. Notwithstanding the joint overall responsibility of the Management Board, each member of the Board Management acts on his or her own responsibility within his or her assigned portfolio of functions. The Chairman of the Management Board coordinates the work of the Management Board. The Management Board members report on a regular basis to the Chairman of the Management Board in respect of all material matters and on the course of business within their assigned functions. Matters subject to the decision-making authority of the full Management Board are laid down in the rules of procedure governing the Management Board. The Management Board defines the corporate strategy, agrees it in consultation with the Supervisory Board, and ensures that it is implemented. In fulfilling that role, the Management Board must ensure compliance with all legal requirements and internal corporate guidelines, and acts to ensure that the Group's member companies comply in like manner.

The Management Board provides the Supervisory Board and its subcommittees with regular, detailed information, in written form by way of monthly reports, by conference calls and at routine meetings, as well as at extraordinary meetings held as and when required, in respect of all matters of planning, business development, finance and earnings, risk, risk management, internal auditing and compliance of relevance to the company. Any non-conformance to budgets and performance targets is disclosed and reasons for it are presented. The Supervisory Board appoints the Management Board. In doing so, it considers not only the relevant professional qualification of its members but also – given the international nature of the business – the diversity of its composition. The Supervisory Board also sets the overall level of remuneration paid to the Management Board, regularly reviews remuneration levels, and specifies the remuneration paid to individual members of the Management Board. It appoints, supervises and advises the Management Board, and participates in decisions of fundamental significance to the company. The company's Articles of Association stipulate relevant transactions and undertakings which require the consent of the Supervisory Board. Duties of the Supervisory Board include reviewing the annual financial statements of the company, the consolidated financial statements and the parent company and Group Management Report, as well as proposals for the appropriation of net earnings available for distribution. The Chairman of the Supervisory Board coordinates the work of the Supervisory Board, chairs its meetings and represents the Supervisory Board externally. The Supervisory Board regularly reviews the efficacy of its activities.

Composition of the Supervisory Board

The Supervisory Board of BAUER AG comprises a total of 12 members. Six of its members are elected by the employees at the Group's locations in Germany, with the other six members being elected by the Annual General Meeting to represent the shareholders. The Supervisory Board includes a sufficient number of independent members who have no business or personal links to the company, to its executive bodies, to any controlling shareholder or to any company associated with any such shareholder which may give grounds for a material and not merely temporary conflict of interests. Moreover, all members of the Supervisory Board are obligated to immediately disclose to the Supervisory Board any conflicts of interest as and when they arise. No conflicts of interest were disclosed to the Supervisory Board by any of its members during the year under review.

Objectives of the Supervisory Board with regard to its composition

The following objectives must be taken into account by the Nominations Committee and by the Supervisory Board when proposing candidates for election to the Supervisory Board at the Annual General Meeting:

• The Supervisory Board shall be composed such that its members collectively possess the necessary skills, knowledge and professional experience to carry out its assigned role in a correct and proper manner.
• The appointment of shareholders' representatives to the Supervisory Board shall take due account of the Group's fundamental character as a family business, giving due consideration to the implications of that character in terms of the corporate culture, whereby two members shall be appointed from the Bauer family, provided the candidates are suitable.
• At least two of the shareholders' representatives on the Supervisory Board shall have substantial experience in the management of construction and/or construction machinery manufacturing companies.
• At least one of the shareholders' representatives on the Supervisory Board shall possess specialist skills and experience in the application of financial reporting standards and the implementation of internal control procedures.
• The employees' representatives on the Supervisory Board will be elected in accordance with the provisions of the German Employees' Co-Determination Act.
• The Supervisory Board shall include not more than four members in total who have business or personal links to BAUER AG, to its executive bodies, to any controlling shareholder or to any company associated with any such shareholder which may give grounds for a material and not merely temporary conflict of interests.
• Supervisory Board posts shall be filled on merit, regardless of gender so that neither men nor women are preferred or disadvantaged. Moreover, when appointments are made to the Supervisory Board, a candidate shall not be disadvantaged for reason of race, ethnic origin, religion or world view.

The objectives are fully embodied in the current composition of the Supervisory Board.

Composition and roles of the subcommittees

The Supervisory Board has established four standing committees constituted from among its members in order to support its plenary work. The Supervisory Board subcommittees and their roles and procedures are laid down in the rules of procedure governing the Supervisory Board. The committee chairmen report to the plenary Supervisory Board on a regular basis with regard to the work of their respective committees, and prepare the way for plenary Supervisory Board decisions within their specific remits.

The Presidial and Personnel Committee comprises the Chairman of the Supervisory Board as well as one Supervisory Board member elected by the shareholder representatives and one by the employee representatives respectively. Its role includes preparing the way for Supervisory Board decisions relating to the setting of overall remuneration to individual Management Board members and to the remuneration system for the Management Board in general, as well as responsibility for establishing, amending and terminating service contracts with the members of the Management Board. It also concerns itself with matters relating to corporate governance.

The Audit Committee comprises three members. Pursuant to the requirements of the German Corporate Governance Code, its chairman possesses specific knowledge and experience in the application of accounting policies and internal control procedures, and is neither a former member of the company's Management Board nor the Chairman of the Supervisory Board. The role of the Audit Committee is in particular to monitor accounting procedures and to review the efficiency of the system of internal controls, the risk management system and the internal auditing system. In the year under review the committee additionally scrutinized audit procedures in relation to corporate compliance. The Audit Committee prepares the proposal of the Supervisory Board to the Annual General Meeting concerning the appointment of auditors, obtaining an Independence Confirmation from the auditors in advance of each Annual General Meeting. It undertakes a preliminary review of the annual financial statements of the parent company and the consolidated financial statements of the Group together with the Combined Management Report, as well as preparing the proposal on appropriation of net earnings available for distribution and consulting on the audit reports with the auditors. It also reviews the quarterly

financial reports. The Nominations Committee comprises three shareholder representative members of the Supervisory Board. The task of the Nominations Committee is to submit to the Supervisory Board proposals of suitable candidates to be put forward to the Annual General Meeting for election to the Supervisory Board. The Mediation Committee, constituted pursuant to the German Co-Determination Act, comprises two shareholder representative and two employee representative members respectively. The Mediation Committee is only convened if a proposed candidate for appointment as a member of the Management Board has not obtained the majority vote required by the German Co-Determination Act.

In his report to the Annual General Meeting, the Chairman of the Supervisory Board summarizes the work of the Supervisory Board and its subcommittees over the past financial year. The Report of the Supervisory Board for the 2013 financial year is published on pages 88 to 89 of the company's Annual Report. This report is thereby quoted by way of reference.

Corporate governance and compliance

The company's system of corporate governance is based on German law, specifically on legislation governing public limited companies, corporate co-determination and capital markets, as well as on the company's Articles of Association. The company's Articles of Association are published on the company website at www.bauer.de, in the "Investor Relations" section under "Corporate Governance". The Management Board employs the Corporate Management Manual implemented throughout the Group as its central instrument of management. The Corporate Management Manual also sets out framework policy guidelines covering the entire Group, and lays down the principles of corporate governance and the programme of basic values which dictate the ethical and moral conduct of the company's employees in carrying out the business of the company. An appropriate system of risk management and of internal controls is established within the company. The essential features of the risk management and control system are set out in the Risk Report forming part of the Combined Management Report. The established risk management system supports Group-wide control and monitoring procedures. Internal auditing systems monitor compliance with laws and standards across the Group. The Management Board regularly updates the Supervisory Board on existing risks and risk trends, as well as on internal auditing procedures.

Shareholders and transparency

All documents and information resources relating to the Annual General Meeting are made available to shareholders on our website well in advance. The shareholders were assisted in exercising their voting rights by the facility to assign power of attorney to nominees and by the appointment of a company proxy to vote in accordance with the shareholders' instructions. An electronic transfer facility is also provided for the submission of powers of attorney. No company share option schemes or similar stock incentive programmes existed during the past financial year.

The company provides regular and timely information relating to the position of the company and in respect of material changes to the business. Extensive documentation and information resources are provided on the company's website. In addition, electronic distribution systems and the electronic version of the German Federal Gazette ("Bundesanzeiger") are used to ensure timely communication with our shareholders and with the public at large.

Four times a year, BAUER AG publishes updates on the course of its business in the form of quarterly interim financial reports, the half-year interim financial report and the annual financial statements. Notifications relating to voting rights as well as items of insider information relating directly to the company are disclosed by the Management Board immediately. The Annual General Meeting passed a resolution, with the necessary three-quarters majority, stipulating that the remuneration paid to members of the Management Board shall not be disclosed individually. Consequently, as has been the policy to date, only the remuneration paid to the Management Board in total and the structure of the remuneration system are disclosed in the Remuneration Report on pages 61 to 63 of the company's Annual Report.

Shareholdings of the Management Board and Supervisory Board

Members of the Management Board at the year-end held a total of 1,741,022 (previous year: 2,676,016) shares in the company as per December 31, 2013. This corresponded to 10.16 % (previous year: 15.62 %) of the share capital of BAUER AG. At the same date members of the Supervisory Board held a total of 1,310,431 (previous year: 2,492,299) Bauer shares, corresponding to 7.65 % (previous year: 14.55 %) of the company's share capital.

Report of the Supervisory Board 2013

In the 2013 financial year, the Supervisory Board fulfilled the duties incumbent upon it in accordance with the law and the Articles of Association of the company. The Supervisory Board routinely provided the Management Board with advice and support on the conduct of business and monitored its management of the company, giving intensive consideration to the situation and prospects of the business.

The Supervisory Board participated directly in decisions of fundamental significance to the company. The Management Board provided the Supervisory Board with written and verbal reports on the course of business, the position of the parent company and the Group as well as on corporate strategy and planning. Between the meetings, the Management Board submitted monthly written reports on all important business transactions as well as on trends in key financial indicators of the Group and the parent company. The Chairman of the Supervisory Board was also in regular contact with the Management Board, and gathered information as appropriate relating to the course of business and key transactions. In addition, the Chairman of the Supervisory Board visited Group companies outside of Germany accompanied by the Chairman of the Management Board, during which he was likewise able to gather information relating to the course of business locally. In their subcommittees and plenary sessions, the Supervisory Board members had plenty of opportunity to scrutinize the reports and proposals submitted by the Management Board and to set forth their own suggestions.

The Supervisory Board reviewed performance trends on specific large-scale projects on several occasions in the course of the past year, and also gave consideration to the introduction of a cost-cutting programme and assessed the liquidity situation. The Supervisory Board reviewed the actions of the Management Board in dealing with the aforementioned issues as well as the strategy being pursued by the Group, providing the Management Board with advice and support to ensure that an appropriate approach was employed. There were no indications of conflicts of interest among members of the Management Board or Supervisory Board requiring immediate notification of the Supervisory Board and disclosure to the Annual General Meeting.

There was only one change of personnel on the Supervisory Board in the past financial year. Following Mr. Walter Sigl's

retirement from the BAUER Group, Mr. Stefan Reindl was elected as a new employee representative member of the Supervisory Board in July.

Main focus of consultations in Supervisory Board meetings Four routine plenary meetings and one extraordinary meeting

of the Supervisory Board were held in the year under review. Apart from two meetings at which one member was absent in each instance, the meetings of the Supervisory Board were attended by all members.

At the annual accounts review meeting relating to the annual parent company and Group consolidated financial statements for the 2012 financial year, also attended by the auditors, a detailed review was undertaken of the respective financial statements and associated management and audit reports, taking into due consideration the report from the Audit Committee, and the proposal of the Management Board with regard to the appropriation of earnings. Other key topics discussed at the meeting were the trend in earnings performance and the execution status of specific major projects, the preparations for the upcoming Annual General Meeting, the competitive situation in the Equipment segment, the system of remuneration and the remuneration paid to the members of the Management Board. Additionally, the Management Board contract of service of Mr. Hartmut Beutler was extended for a further five years. At its second meeting of the financial year, the Supervisory Board considered matters including the interim report on the first quarter of 2013, the development of the Group's earnings and course of business in the current year, as well as the marketing of deep drilling rigs by the Equipment segment. September's meeting was held at the premises of a subsidiary company in Nordhausen. Alongside the trend in earnings from large-scale projects being carried out by the Construction and Resources segments, it reviewed compliance with financial performance targets in financing agreements and approved a cost-cutting programme presented to it. It also approved the medium-term plan with regard to the consolidated balance sheet. In late October of last year an extraordinary teleconference was held during which the preparation of the latest quarterly financial report was considered and project earnings were assessed, including a review of their effects on financing agreements and the adjustment of the full-year earnings forecast. At the Supervisory Board's last session of the year in December, the focus was on the financing situation, as well as on the costcutting programme. An updated declaration of conformity to the German Corporate Governance Code was passed, and approval was given to the plans for financial 2014 as well as to the employee bonus framework.

Work carried out by the subcommittees

In the 2013 financial year there were four committees of the Supervisory Board. The Mediation Committee and the Nominations Committee were not required to convene. The chairmen of the various committees submitted regular reports on their work to the plenary Supervisory Board meetings. The meetings of the various subcommittees of the Supervisory Board in the financial year were attended by all the respective members.

Two meetings of the Presidial and Personnel Committee were convened. At those meetings, preparations were made for the decision of the Supervisory Board relating to the setting of the salaries and performance bonuses of the members of the Management Board and to the structuring of its remuneration system, as well as to the performance bonus framework. Consideration was also given to the declaration of conformity to the German Corporate Governance Code, as well as to the extension of the contract of service of Management Board member Mr. Hartmut Beutler.

The Audit Committee held four conference calls and two meetings in the financial year. The committee reviewed the audit of the interim reports and, in the presence of the auditors, the audit of the annual financial statements of the parent company and the consolidated financial statements of the Group. It also scrutinized the Management Board's proposal regarding the appropriation of earnings. The Audit Committee also made preparations for the appointment of the auditors, including scrutinizing their independence. The Audit Committee further reviewed the status and considered the required level of write-down on the large-scale project in Jordan, as well as reviewing the status of other large-scale projects being carried out by the Construction and Resources segments. The Group's financing situation and the management of agreed financial performance indicators were reviewed, and advice was given on the introduction of a cost-cutting programme. A dedicated meeting reviewed the risk management system's compliance with applicable laws and standards, as well as the audit activities of the Internal Auditing function.

Auditing of 2013 annual and consolidated financial statements

The annual financial statements of BAUER AG to December 31, 2013 and the consolidated financial statements of the Group, as well as the Combined Management Reports, including the Group accounts, were audited by the auditors elected by the Annual General Meeting and duly appointed by the Supervisory Board, PricewaterhouseCoopers Aktiengesellschaft und Wirtschaftsprüfungsgesellschaft, Stuttgart. The accounts were certified by the auditors without reservation. The Audit Committee subjected the audit documentation and reports to thorough scrutiny. The Committee reported on its review to the Supervisory Board. The auditors attended the relevant meetings of the Audit Committee as well as the annual financial review meeting of the plenary Supervisory Board.

The audit documentation and reports from the auditors were provided to all members of the Supervisory Board in good time for scrutiny. The Supervisory Board duly noted and concurred with the findings of the auditors' review of the parent company and Group consolidated financial statements and the Combined Management Report. On conclusion of the Supervisory Board's review, no objections were raised. The financial statements of BAUER AG and the consolidated financial statements of the Group were approved by the Supervisory Board at its annual review meeting on April 9, 2014. The annual financial statements of BAUER AG were thereby confirmed. Following prior consultations by the Audit Committee, the Supervisory Board concurred with the proposal of the Management Board regarding the appropriation of net profit available for distribution.

On behalf of the Supervisory Board, I would like to thank the members of the Management Board, all the Group's employees and the employee representatives within all Group companies for their great effort and commitment throughout the past financial year.

Schrobenhausen, April 2014 The Supervisory Board

Dr. Klaus Reinhardt Chairman of the Supervisory Board

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

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		-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

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 (of which receivables from affiliated companies)	168,523 (166,063)	174,049 (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

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 (of which provisions for defined benefit plans)	6,158 (4,913)	6,716 (5,575)
C.	Liabilities (of which liabilities payable to affiliated companies)	122,181 (38,833)	137,051 (53,830)
		283,669	299,078

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

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. >>>

Income Statement and Statement of Comprehensive Income of the BAUER Group

Income Statement

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

in EUR		01.01. - 31.12.2012 (restated)	01.01. - 31.12.2013
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 (restated)	01.01. - 31.12.2013
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 after termination of employment	-15,986	970
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 Included in profit and loss Deferred taxes on financial instruments with no effect on profit and loss	-2,299 -6 516	2,094 -310 -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

Cash Flow Statement of the BAUER Group

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

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

Assets

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

Equity and Liabilities

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

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

in EUR '000					Other revenues and net earnings available for distribution
	Subscribed capital	Capital reserve	Revenue reserves	Currency translation reserve	Reconciling item, IFRS	Hedging transactions reserve	Minority 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

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, Equipment and Resources.

BAUER AG has been listed on the SDAX stock market index since September 2006. Between September 2008 and September 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) affecting 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 thousands 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 parent 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 convertible 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 company 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 quantitative 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

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 constructions, 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.

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 consolidation 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 company 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 recognition 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 creating 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:

• 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.

• 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 Improvements 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.

• 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.

• 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.

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 expenditure/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.

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 transparency 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".

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

	in EUR '000	01.01. - 31.12.2012 (as reported)	Restatements Other	Restatements IAS 19 R	01.01. - 31.12.2012 (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 (as reported)	Restatements Other	Restatements IAS 19 R	01.01. - 31.12.2012 (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. - 31.12.2012 (as reported)	Restatements Other	Restatements IAS 19 R	01.01. - 31.12.2012 (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 Included in profit and loss Deferred taxes on financial instruments with no effect on profit and loss	-1,839 -466 516	-460 460		-2,299 -6 516
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

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

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

	in EUR '000	01.01.2012 (as reported)	Restate ments Other	Restate ment IAS 19 R	01.01.2012 (restated)	31.12.2012 (as reported)	Restate ments Other	Restate ment IAS 19 R	31.12.2012 (restated)
	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 which the company has participating interests	87			87	344			0 344
	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

Equity and liabilities

	in EUR '000	01.01.2012 (as reported)	Restate ments Other	Restate ment IAS 19 R	01.01.2012 (restated)	31.12.2012 (as reported)	Restate ments Other	Restate ment IAS 19 R	31.12.2012 (restated)
	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
	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.

1 EUR equals			Yearly average values		Balance sheet date
		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

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

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 impairment-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 associated company is included in the carrying amount of investments in associated companies and consequently is not impairment-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 accordance 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.

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 recognized 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.

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 acquisition 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 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 installations. 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 control. 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 companies include the goodwill created by the acquisition (less cumulative impairment).

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 encompass 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 allocated 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.

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 financial 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 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.

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 calculated 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 applicable 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.

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 adjustments 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 payments 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.

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 interest 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.

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 recognized 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.

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 recognized 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.

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 uncertain 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 in %	Share of the contract in EUR '000	Realized revenue in the 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 (restated)	2013
Income from other capitalized goods and services for own account	24,249	19,196

7. OTHER INCOME

in EUR '000	2012 (restated)	2013
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

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 foreign 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 (restated)	2013
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 (restated)	2013
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 (restated)	2013
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.

12. OTHER OPERATING EXPENSES

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

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 thousand (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:

2012 (restated)	2013
10,520	15,705
2,575	-2,231
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:

in EUR '000	2012 (restated)	2013
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 average number of ordinary shares outstanding. The earnings per share amount to the following values:

	2012 (restated)	2013
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

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
Cost of purchase/cost of manufacturing	Licences, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized devel 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 Licences, software and similar rights and values Internally generated intangible assets Accumulated depreciation Goodwill Capitalized software costs Capitalized development 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
Cost of purchase/cost of manufacturing	Licences, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized devel 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

in EUR '000				Internally generated intangible assets
Accumulated depreciation	and similar rights and values	Licences, software Goodwill		Capitalized Capitalized devel software costs opment costs
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 (restated)	2013
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

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).

17.2 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY

in EUR '000				Other equipment,	Payments on
Cost of purchase/ cost of manufacturing	Land and buildings	Investment property	Technical equipment and Equipment	factory and office equipment office equipment	account and assets in course 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			Technical	Other equipment, factory and office	Payments on account and
Accumulated depreciation	Land and buildings	Investment property	equipment and Equipment	equipment office equipment	assets in course 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, factory and office	Payments on account and
Cost of purchase/ cost of manufacturing	Land and buildings	Investment property	Technical equipment and Equipment	equipment office equipment	assets in course 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

in EUR '000	Land and	Investment	Technical equipment and	Other equipment, factory and office equipment office	Payments on account and 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 exercised. 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:

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 charges 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).

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

in EUR '000	Investments ac counted for using	Participations	Total
Cost of purchase/cost of manufacturing 01.01.2012	the equity method 8,803	4,443	13,246
Additions	0	33	33
Disposals	426	0	426
Profit share	5,549	0	5,549
Dividend payment	-796	0	-796
Transfers	0	-22	-22
Currency adjustment	3	0	3
31.12.2012	13,133	4,454	17,587

in EUR '000	Investments ac counted for using
Accumulated depreciation	the equity method	Participations	Total
01.01.2012	0	816	816
Additions	0	0	0
Disposals	0	0	0
Transfers	0	0	0
Currency adjustments	0	0	0
31.12.2012	0	816	816
Carrying amount 31.12.2012	13,133	3,638	16,771

in EUR '000	Investments ac 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	1	25	26
Profit share	-226	0	-226
Dividend payment	-2.951	0	-2.951
Transfers	0	0	0
Currency adjustments	0	0	0
31.12.2013	9,972	4,429	14,401

in EUR '000 Accumulated depreciation	Investments ac counted for using the equity method	Participations	Total
01.01.2013	0	816	816
Additions	0	0	0
Disposals	0	0	0
Transfers	0	0	0
Currency adjustments	0	0	0
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
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 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013
		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

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 accounting. 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 thousand) 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 contract 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 supplies 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.

The receivables from concession arrangements developed as follows:

in EUR '000	31.12.2012 (restated)	31.12.2013
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 thousand) 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:

in EUR '000	31.12.2012 (restated)	31.12.2013
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 thousand 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.

21. OTHER NON-CURRENT FINANCIAL ASSETS

The other non-current financial assets comprise the following:

in EUR '000	Remaining term 31.12.2012			Remaining term 31.12.2013
	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 (restated)	31.12.2013
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 (restated)	31.12.2013
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"):

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 realizable 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
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 (restated)	31.12.2013
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

Development of receivables and other assets

The receivables and other assets comprise the following:

in EUR '000	31.12.2012 (restated)	31.12.2013
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 (restated)	31.12.2013
Value adjustments at start of financial year	68,184	63,504
Change in scope of consolidation	0	14
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 thousand) 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 considerations 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).

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

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 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

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 materially 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, subsection 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 treasury 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

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 authorizations 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:

in EUR '000	31.12.2012 (restated)	31.12.2013
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.

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 shareholders 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 (restated)	31.12.2013
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.

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 (restated)	Remaining term 31.12.2013
	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

in EUR '000		Fair value	Interest rate margin
	31.12.2012 (restated)	31.12.2013	31.12.2012	31.12.2013
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 %
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 contribution assessment limit in the statutory pension fund, 0.375 percent plus 0.125 percent for each pensionable year of service

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.

2013 CONSOLIDATED FINANCIAL STATEMENTS

The amount of the provisions recognized on the balance sheet for pensions and similar obligations was determined as follows:

in EUR '000	31.12.2012 (restated)	31.12.2013
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

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

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

The defined benefit obligation and the plan assets developed as follows during the financial year:

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

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

in EUR '000	31.12.2012 (restated)	31.12.2013
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, expected 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 assumption	Increase in assumption	Decrease in 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 assumption by 1 year	Decrease in assumption by 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.

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

in EUR '000		31.12.2012 (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

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 thousand 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

CURRENT LIABILITIES

28. CURRENT LIABILITIES

in EUR '000	31.12.2012 (restated)	31.12.2013
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	0	0
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

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 foundation 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
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 essentially 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

in EUR '000			Remaining term
		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

The operating leases relate mainly to mutual agreements about factory and office equipment, as well as to technical equipment 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 Supervisory 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 foundation 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 engineering, 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 manufactured. 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 remediation 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 and drilling of wells and geothermal energy sources. This segment also includes companies which manufacture and sell materials 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 inhouse 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 adjusted 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 consolidated revenues and the total Group revenues is derived from the revenues of the associated companies, from our subcontractor shares in consortia, and from the revenues of non-consolidated companies.

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.

Segment Reporting of the BAUER Group

	Construction	Equipment
2012 (restated)	2013	2012 (restated)	2013
655,165	742,662	589,093	628,612
579,069	659,063	520,576	561,615
15,351	15,660	54,828	47,928
-3,024	-172	-23,180	-4,184
677	486	6,548	6,955
13,248	16,809	12,238	10,117
605,321	691,846	571,010	622,431
22,025	22,816	33,977	32,223
2,207	2,989	2,697	2,562
-15,258	-13,389	-23,024	-22,196
			1
-5,660	-6,469	-4,773	-7,535
8,586	5,472	8,897	5,055
	5,272	-475	20

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

Resources		Other			Consolidation	Group
2012 (restated)	2013	2012 (restated)	2013	2012	2013	2012 (restated)	2013
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	0	0	0	0	-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
257	248	0	0	0	0	5,549	-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

283,996	265,613	298,535	303,121	-357,445	-353,249	1,529,415	1,585,218
354	484	0	0	0	0	13,133	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
0	0	0	0	0	0	-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

Middle East and Central Asia		Asia-Pacific Far East and Australia			America		Africa		Group
	2012 (restated)	2013	2012 (restated)	2013	2012 (restated)	2013	2012 (restated)	2013	2012 (restated)	2013
	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

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 execution 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 currency 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 shortterm 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.

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. 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 recognized 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

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 activities 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 31.12.2012 (restated)	Cash flows 2013	Cash flows 2014 to 2017	Cash flows 2018 ff.
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 31.12.2013	Cash flows 2014	Cash flows 2015 to 2018	Cash flows 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.

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

The due dates of derivative financial instruments based on outflow and inflow of cash and cash equivalents are as follows:

in EUR '000 at 31.12.2013	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
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 instruments 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 instruments 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.

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.

in EUR '000	Nominal volume				Market value
	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

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

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 (restated)	31.12.2013
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

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 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)

There were no transfers between the levels during the year. If circumstances arise necessitating a reclassification, it is undertaken 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 accounting, 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 latest. 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 recognized financial assets	Gross amount of recognized financial liabilities offset on the balance sheet	Net amount of financial assets recognized on the balance sheet	Financial instruments	Cash securities 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

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

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
	Valuation standard	Carrying amount			Loans and receivables/ other financial liabilities
		31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013
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

	Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category
Available for Sale		Liabilities Held for Trading	Financial Assets and		Derivatives in hedge accounting	valuation as per IAS 17	Balance sheet		Fair value as per IFRS 7 and IFRS 13	Valuation level as per IFRS 13
31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013
3,638	3,613	0	0	0	0	0	0	n/a	n/a
0	0	0	0	0	0	0	0	47,464	40,449	2
0	0	6	127	0	10	0	0	6	137	2
0	0	0	0	0	0	0	0	163	1,214	2
6,676	3,958	0	0	0	0	0	0	n/a	n/a
0	0	0	0	0	0	0	0	n/a	n/a
0	0	0	0	0	0	0	0	116,398	143,234	2
0	0	0	0	0	0	0	0	272,443	322,161	2
0	0	0	0	0	0	0	0	344	444	2
0	0	396	1,199	1,197	1,970	0	0	1,593	3,169	2
0	0	0	0	0	0	0	0	15,894	16,382	2
0	0	0	0	0	0	0	0	45,232	57,217	2
10,314	7,571	402	1,326	1,197	1,980	0	0	499,537	584,407

in EUR '000
	Valuation standard		Carrying amount		Loans and receivables/ other financial liabilities
		31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013
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

Balance sheet valuation as per IAS 39				Not allocated to any IAS 39 category
Available for Sale		Liabilities Held for Trading	Financial Assets and		Derivatives in hedge accounting		Balance sheet valuation as per IAS 17	Fair value as per IFRS 7 and IFRS 13		Valuation level as per IFRS 13
31.12.2012 (restated)		31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013	31.12.2012 (restated)	31.12.2013
0		0	0	0	0	0	0	0	434,092	256,361	2
0		0	0	0	0	0	16,187	17,265	16,187	17,265	2
0		0	6,052	4,270	5,575	2,246	0	0	11,627	6,516	2
0		0	0	0	0	0	0	0	13,784	8,880	2
0		0	0	0	0	0	0	0	168,090	427,589	2
0		0	0	0	0	0	8,789	10,185	8,789	10,185	2
0		0	0	0	0	0	0	0	29,982	32,839	2
0		0	0	0	0	0	0	0	172,713	194,471	2
0		0	0	0	0	0	0	0	173	219	2
0		0	112	321	530	694	0	0	642	1,015	2
0		0	0	0	0	0	0	0	13,141	11,087	2
0		0	6,164	4,591	6,105	2,940	24,976	27,450	869,220	966,427

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

• 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 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 performancerelated. 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 accordance 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.

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	0	9
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 significant 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.

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:

in EUR '000		Associates companies	Non-consolidated companies
	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.

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	4	2
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	0	0
Fees for tax advice	8	7
Fees for other services	0	0
Total	44	41

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 shareholders 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).

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

Chairman of the Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

Major participations of the BAUER Group at December 31, 2013

	NAME AND REGISTERED OFFICE OF COMPANY		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

	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
	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

	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), USD Amman, Jordan		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

Africa BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt BAUER Technologies South Africa (PTY) Ltd - (subsidiary consolidated financial statements), Johannesburg, South Africa	EGP ZAR	55.75
		100.00
	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
Associates and joint ventures Germany
		33.33
		100.00
		100.00
		80.00
		100.00
		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
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
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
Enterprises in which the company has participating interests Germany
TMG Tiefbaumaterial GmbH, Emmering, Germany		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
International OAO Mostostrojindustria, Moscow, Russian Federation	RUB	15.00
	MINERAL BULK SAMPLING NAMIBIA (PTY) LTD, Windhuk, Namibia Wöhr + Bauer GmbH - (subsidiary consolidated financial statements), Munich, Germany Wöhr + Bauer Angerhof GmbH & Co. KG, Munich, Germany Wöhr + Bauer Angerhof Verwaltungs GmbH, Munich, Germany WÖHR + BAUER PARKING GmbH, Ettlingen, Germany Wöhr + Bauer H2O Verwaltungs GmbH, Munich, Germany Wöhr + Bauer H2O GmbH & Co. KG, Munich, Germany	EUR EUR EUR EUR EUR EUR EUR

* Commercial ownership is 100 percent

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

Chairman of the Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

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. (paragraph) 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 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

Auditor Auditor

Klaus Neubarth ppa. Dagmar Liphardt

Glossary

A

ASSOCIATED COMPANIES | Associated companies are those over which a major but not controlling influence can be exerted. The shareholding is usually between 20 and 50 percent. Such holdings are valued at equity.

AT EQUITY | "At equity" is the method by which shares in associated companies are valued in the Group's financial statements. The carrying amount of the investment is adjusted according to the trend of the percentage equity held in the entity concerned.

C

CASH FLOW | This figure indicates the amount of money which a business entity generates by its own efforts and is able to use for its own purposes. It essentially comprises profit, depreciation and amortization and increases in provisions.

CONSOLIDATED REVENUES | Consolidated revenues are disclosed in the income statement. They comprise the output of the companies fully consolidated into the Group's consolidated annual financial statements.

D

DEEP DRILLING RIG (TBA) | This equipment series was developed specially to drill for particularly deep-lying raw material resources. The rigs can drill down to depths of more than 5,000 metres, and are used to extract oil, gas, water and geothermal energy.

E

EBIT | Earnings before interest and taxes.

EBIT MARGIN | The EBIT margin is a profitability indicator, describing the ratio of EBIT to the entity's sales revenues.

EBITDA | Earnings before interest, taxes, depreciation and amortization (on property, plant and equipment and intangible assets).

F

FINANCIAL COVENANTS | Some loan agreements include clauses stipulating adherence to threshold values for predefined key financial performance indicators.

FINANCIAL INSTRUMENT | Any transaction which results in a financial asset for one entity and a financial liability (or an equity instrument) for the other.

G

GROSS DOMESTIC PRODUCT (GDP) | Gross domestic product corresponds to the total value of all goods and services for consumption produced by an economy in one year. GDP is a measure of the performance (output) of an economy.

H

I

HGB FINANCIAL STATEMENTS | The German Commercial Code (Handelsgesetzbuch; HGB) imposes financial reporting rules on incorporated entities in Germany.

IFRS FINANCIAL STATEMENTS | International Financial Reporting Standards (IFRS) are applicable to stock market listed companies. The standards are issued by the International Accounting Standards Board (IASB). Their aim is to ensure the international comparability of corporate financial reporting. The BAUER Group has been preparing financial statements in accordance with IFRS since 2004.

N

NET PROFIT OR LOSS FOR THE PERIOD | The net profit or loss for the period – also referred to as the profit after tax – is the profit earned or loss made in a given period.

O

ORDERS IN HAND | Indicates the volume of orders held by a business entity at the reporting date.

ORDERS RECEIVED | Corresponds to the sum of all orders received in a specific reporting period. Orders received are an indicator of future order volumes.

P

PERCENTAGE OF COMPLETION (POC) METHOD |

This method is applied to measure and report the profit realized on contracts extending over a protracted period of time according to their degree of completion based on the associated costs and revenues (actual and forecast).

PREMIUMLINE | The PremiumLine comprises the multifunction rotary drilling rigs of the BG series designed to handle a wide variety of foundation engineering applications. Deep vibrators or trench cutters can also be mounted on them.

R

ROTARY DRILLING RIG (BG) | BAUER Maschinen GmbH specializes in the development and manufacture of rotary drilling rigs. The machines are produced and marketed in two product lines: Premium and Value. They are able to carry out a wide variety of foundation engineering tasks.

S

SALES REVENUES | As opposed to the output, which comprises the value of all goods produced, the sales revenues disclosed in the income statement relate to all products and services definitively sold and billed within a period. The difference between the two values essentially stems from changes in work in progress, inventories and other income.

SEGMENTS | The BAUER Group's segments are its operating 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.

SINKING | The term describes the execution of shafts or bore holes to mine mineral deposits or to extract resources.

widely. STAKEHOLDERS | The term refers to individuals or groups who have a justified interest in the fortunes of a business entity. The interests of the various stakeholders may vary

T

TOTAL GROUP REVENUES | In addition to the output of the consolidated companies, total Group revenues include the proportionate outputs of associated companies as well as the outputs of non-consolidated subsidiaries and joint ventures.

V

VALUE ADDED | Value added is the contribution made by a business entity to the wider society at large. Value added reflects how the output of a business is distributed across the wide variety of stakeholder groups.

VALUELINE | The ValueLine includes the rotary drilling rigs of the BG series which are optimized for the kelly drilling process.

W

WORKING CAPITAL | The working capital is the portion of the current assets which is tied up by the operational production process and by the process of selling products and services (such as receivables).

IMPRINT

Published by BAUER Aktiengesellschaft BAUER-Strasse 1 86529 Schrobenhausen, Germany www.bauer.de

Registered place of business 86529 Schrobenhausen, Germany

Registered at the District Court of Ingolstadt under HRB 101375

Photos

BAUER Group Sydney Aerial Photography (p. 90)

HOW TO CONTACT US

Contact

Investor Relations BAUER Aktiengesellschaft BAUER-Strasse 1 86529 Schrobenhausen, Germany Phone: +49 8252 97-1215 Fax: +49 8252 97-2900 investor.relations@bauer.de

Print

Kastner AG – das medienhaus, Wolnzach

http://www.bauer.de/en/ investor_relations

http://www.youtube.com/ 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).

Construction Equipment Resources

BAUER Spezialtiefbau GmbH, the original parent company of the BAUER Group, has been a major driving force in the development of specialist foundation engineering, and carries out projects all over the world. Bauer Spezialtiefbau is organized on a regional basis in Germany, and operates on all the world's continents with over 50 subsidiaries and branch offices. Market trends have meant that most of the company's revenues are now generated outside of Germany. Bauer has major subsidiaries and branch offices in the United Arab Emirates, Malaysia, Egypt and the USA among other locations. Bauer Spezialtiefbau has built up networks in numerous regions across the world, enabling it to acquire and execute contracts both in the countries in which it is represented and in neighbouring countries, using its own machinery and inhouse engineering consultancy. In addition to the predominant field of specialist foundation engineering, Group companies SCHACHTBAU NORDHAUSEN GmbH, SPESA Spezialbau und Sanierung GmbH and Wöhr + Bauer GmbH also carry out general construction activities such as civil engineering, environmental engineering and project development.

The BAUER Maschinen Group is the world market leader in the development and manufacture of specialist foundation engineering equipment. BAUER Maschinen GmbH – the holding company for a number of subsidiaries – designs and builds heavy-duty drilling rigs, trench cutters, grab systems, vibrators and deep drilling rigs, as well as the related tooling, at its plants in Schrobenhausen, Aresing and Edelshausen. The company also operates manufacturing facilities in the USA, Russia, China, Malaysia, Italy, Singapore, Turkey and Sweden. It is supplied with components from within the BAUER Group by Schachtbau Nordhausen and Olbersdorfer Guß. The BAUER Maschinen Group operates a global sales and service network.

The Resources segment focuses on products and services in the fields of water, energy, mineral resources and environmental technology. BAUER Resources GmbH is the holding company of this most recently created segment, overseeing its three competence areas: Materials, Exploration and Mining Services, and Environment.

Income Statement of the BAUER Group

in EUR '000	2012 (restated)	2013	Change
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 (restated)	31.12.2013	Change
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 (restated)	31.12.2013	Change
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