Bauer AG — Annual Report 2014

Apr 10, 2015

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 2014 the companies of the BAUER Group employed some 10,400 people in around 70 countries and achieved total Group revenues of EUR 1.56 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 2011 – 2014

IFRS in EUR million		2011	2012	2013 **	2014	Change 2013/2014
	Total Group revenues	1,371.8	1,435.8	1,504.2	1,560.2	3.7 %
of which	Germany	370.3	378.6	410.4	440.2	7.3 %
	International	1,001.5	1,057.2	1,093.8	1,120.0	2.4 %
	International in %	73.0	73.6	72.7	71.8	n/a
of which	Construction	606.6	655.2	741.7	713.0	-3.9 %
	Equipment	636.5	589.1	628.6	651.8	3.7 %
	Resources	211.5	262.8	188.9	252.8	33.9 %
	Other/Consolidation	-82.8	-71.3	-55.0	-57.4	n/a
	Consolidated revenues	1,327.1	1,376.1	1,447.5	1,506.0	4.0 %
Sales revenues		1,219.6	1,344.4	1,402.2	1,375.7	-1.9 %
Orders received		1,506.9	1,470.8	1,484.5	1,557.7	4.9 %
Orders in hand		750.0	785.0	765.2	762.7	-0.3 %
EBITDA		164.5	163.8	124.0	171.0	37.9 %
EBITDA margin in % (of sales revenues)		13.5	12.2	8.8	12.4	n/a
EBIT		82.3	72.0	30.1	76.4	n/a
	EBIT margin in % (of sales revenues)	6.7	5.4	2.1	5.6	n/a
Net profit or loss		34.1	25.8	-19.4	15.7	n/a
	Capital investment in property, plant and equipment	96.6	96.4	91,9	64.1	-30.3 %
	Shareholders' equity	461.0	462.5	419.8	418.9	-0.2 %
Equity ratio in %		30.9	30.2	26.5	26.6	n/a
Net assets		1,491.1	1,529.4	1,585.8	1,575.1	-0.7 %
	Earnings per share	1.86	1.44	-0.99	0.85	n/a
Distribution		8.57	5.14	0.00	2.57*	n/a
	Dividend per share in EUR	0.50	0.30	0.00	0.15*	n/a
	Return on equity after tax in %	7.7	5.6	-4.2	3.7	n/a
	Employees (on average over the year)	9,646	10,253	10,264	10,405	1.4 %
of which	Germany	4,065	4,090	4,144	4,158	0.3 %
	International	5,581	6,163	6,120	6,247	2.1 %

* Proposed; subject to the consent of the Annual General Meeting to be held on June 25, 2015

** Previous year adjusted; see notes on page 106

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
2011				1,372
2012				1,436
2013				1,504
2014				1,560

CONSTRUCTION SEGMENT KEY FIGURES
in EUR '000	2013 *	2014	Change
Total Group revenues	741,673	713,005	-3.9 %
Sales revenues	657,456	634,096	-3.6 %
Orders received	727,287	665,244	-8.5 %
Orders in hand	498,701	450,940	-9.6 %
EBIT	21,209	25,068	18.2 %
Net profit or loss	5,472	1,858	-66.0 %
Employees (on average over the year)	5,531	5,675	2.6 %

EQUIPMENT SEGMENT KEY FIGURES
in EUR '000	2013 *	2014	Change
Total Group revenues	628,612	651,772	3.7 %
Sales revenues	561,615	545,223	-2.9 %
Orders received	632,053	693,967	9.8 %
Orders in hand	116,525	158,720	36.2 %
EBIT	32,223	36,917	14.6 %
Net profit or loss	5,055	9,513	88.2 %
Employees (on average over the year)	2,998	3,038	1.3 %

RESOURCES SEGMENT KEY FIGURES
in EUR '000	2013 *	2014	Change
Total Group revenues	188,861	252,830	33.9 %
Sales revenues	182,579	195,860	7.3 %
Orders received	180,054	255,837	42.1 %
Orders in hand	150,020	153,027	2.0 %
EBIT	-23,965	15,932	n/a
Net profit or loss	-31,444	4,347	n/a
Employees (on average over the year)	1,449	1,400	-3.4 %

* Previous year adjusted; see notes on page 106

>>>

BAUER Aktiengesellschaft Annual Report 2014

4	Foreword
6	Milestones in the Company's History
8	The World is our Market
10	Highlights 2014
12	Mission and Strategy
15	Combined Management Report
82	The Bauer Share
84	Corporate Governance Report

2 Management Board of the Company

• 88 Report of the Supervisory Board
• 91 Balance Sheet and Income Statement of BAUER Aktiengesellschaft in accordance with HGB
• 95 Consolidated Financial Statements in accordance with IFRS
• 180 Assurance by the legal representatives
• 181 Auditors' Report
• 182 Glossary
• 184 Imprint

Management Board of the Company

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

Prof. Thomas Bauer (born 1955) heads the Participations in Subsidiaries, Financial Reporting, Planning and Controlling functions on the Management Board of BAUER Aktien gesellschaft.

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) − the Bavarian business association. 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

¹ Supervisory Board mandate within the Group

² Membership of Supervisory Boards or comparable controlling committees of businesses in Germany and abroad according to Section 285 No. 10 of the German Commercial Code (HGB)

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 Aktien gesellschaft.

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 Labor 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

Foreword

Dear Shareholders, Partners and Friends of our company, Ladies and Gentlemen,

In 2014 despite a great deal of turbulence in our markets, we succeeded in achieving our revenue targets. With total Group revenues of EUR 1.56 billion, we exceeded the previous year's value by 3.7 %. This was not an easy matter, given the numerous disturbances to our business. We are all the more grateful to our employees for their magnificent work which enabled us to meet this target.

Over the past decades, our Group has pursued a strategy of increasing internationalization, thereby creating a significant advantage for itself: we are at home throughout the world. In this way, we can compensate for fluctuations in construction markets, which are frequently volatile, and develop the Group in a steady manner. Unfortunately, it is sometimes the case that problems concentrate in different regions to such an extent that we are excessively impacted for a period of time. In that case, our broad base may also have a detrimental effect temporarily. Nevertheless, we remain totally convinced that our international presence represents a major advantage in the medium and long terms.

What were the turbulent influences last year? First and foremost, we should identify the conflict in Ukraine that has triggered a new misunderstanding between Russia and the Western world. The events in eastern Ukraine, sanctions and counter-sanctions have imposed significant restrictions on business relationships. For our company, that means a severe decline in demand for our machines especially in Russia.

In Syria and Iraq the Islamic State terrorist group has expanded. For a time, it seemed that the Western world would not be able to overcome this threat. This situation triggered uncertainty in the neighboring countries, placing further obstacles in the path of their development. There is no prospect for improvement anytime soon, as a result of which individual markets have been lost as far as our construction activities are concerned.

From mid-2014 onwards, the oil price came under significant pressure. This will pose problems to Germany as an industrial location. Although people will be able to fill their fuel tanks for less money, the growth in consumption thus triggered is unlikely to be able to compensate for expected sales problems to the oil-producing states which are affected by the price drop. The business prospects for German industrial companies such as ours would worsen if fewer investments were made in these countries.

In China, the market for construction machinery has slipped totally out of kilter in recent years. As a result of exaggerated growth expectations for the construction market there, local manufacturers of construction machinery built up enormous surplus capacity. The equipment produced was then dumped on the markets by means of questionable financing solutions. Many construction companies could no longer afford the payments, as a result of which large stocks of returned machines have built up. On the other hand, we were satisfied with our production and sales in China, as we concentrated on large and special machinery.

It is pleasing to see that many markets are still positive, such as the Far East, or have come back again, such as in the Middle East. As a result, we succeeded in increasing our revenues in spite of the difficulties.

However, we were unable to achieve the targets for profit after tax that we set in April 2014. In the USA, we did not succeed in achieving the expected improvement in the major Center Hill Dam project. We had to report significant losses again as a result of further delays. In the Resources segment, we reorganized the structures and some subsidiaries, as well as closing

sites and terminating business. This had an additional detrimental effect on our results. In addition to these factors, one of our large subsidiaries was fined by the Federal Cartel Office. All in all, this produced a significantly negative result. By means of a non-operative one-time income, the last predicted profit after tax was able to be achieved nevertheless, with EUR 15.7 million. The one-time income derives from the sale of shares in our subsidiary in Oman that was built up over recent years and is active with long-term projects in the environmental area.

In addition to making significant efforts to deal with all these topics, we also devoted a great deal of work during the past year to preparing the company to face the future even more effectively. A cost-cutting program was implemented in all parts of the company, which will continue to have positive effects in the future as well. All major investments in our plants were able to be completed, as a result of which the full attention of our management team is concentrated on markets, products and commercial processes. This will give us stability for the future in a continuing volatile environment.

The successes of the past year mean that we are looking to the future with confidence. In the area of deep drilling rigs, the engineering contract agreed in May 2014 with Saxon Energy Services Inc. resulted in the order of two 375 ton rigs in December. This will present great opportunities in the future as well. Additionally, a sales contract was signed for two already completed rigs. In the Construction segment, we successfully completed some unique reference projects in the form of the foundation work for what will be the tallest buildings in the world and Europe, as well as a section of the bridge between Hong Kong and Macau. In Equipment, many new and continuing developments are improving our chances of selling machines.

Without doubt, years such as 2013 and 2014 are by no means simple for a company and its workforce. Nevertheless, we are aware of our strengths that will allow us to make significant progress in future. The successes we were able to achieve last year in spite of great turbulence have confirmed our confidence in our plans for the future. Our company is firmly embedded in the market of more than 70 countries in the world. The construction processes, equipment and many other activities are excellently developed, and our company infrastructure has been expanded to a very high level. All stores and service centers worldwide are networked with one another, and with their functions and flexibility they can meet the complex demands of our construction operations and our machine customers with outstanding effectiveness.

The current significant fluctuations in markets are not very pleasant for us. However, we can compensate for them well with our worldwide presence, giving us the opportunity to carry out interesting projects time and time again in diverse regions. Overall, we see many opportunities in the market, as a result we are planning further growth for 2015.

It is important for us to express our thanks to all our employees, shareholders, customers and partners for the loyalty and support they provided during the past year. 2014 was characterized not only by successes but also many disappointments, specifically the development in our share price. We are making intensive efforts to grow the value of the company again. Our employees in about 80 countries of the world and the entire management team are working with total commitment on bringing the full strength of the company to bear again.

Sincerely,

Prof. Thomas Bauer

Milestones in the Company's History

1790

• Sebastian Bauer acquires a coppersmith's shop in the center 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 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 (center) 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 Spezialbau und Sanierung GmbH

1992

• Takeover of SCHACHTBAU NORDHAUSEN GmbH

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 completed the largest investment program in the company's history: new administration building in Schrobenhausen, Edelshausen plant, 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

1986 – 2006 2007 – 2014

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

2014

• Execution of the Schwarzkopf Tunnel bypass railway project in Lower Franconia, the largest project signed in Germany to date

28 PRODUCTION FACILITIES

and many other service centers and construction yards

Highlights 2014

Schwarzkopf Tunnel bypass

Heigenbrücken/Hain i. Spessart, Germany – In the middle of the Spessart hills, BAUER Spezialtiefbau GmbH worked on its biggest ever construction site in Germany from January to December 2014. In a joint venture, it carried out the special foundation work for a new section of the railway line between Würzburg and Frankfurt.

As part of this, the existing passage through the Schwarzkopf Tunnel is to be replaced.

This Schwarzkopf Tunnel is 160 years old, and is showing its age. ICE trains can only pass through it at a maximum speed of 70 km/h. Freight traffic even requires a second locomotive due to the steep gradient. As a result, the line is now being leveled, and this requires construction of four new tunnels.

The work by Bauer Spezialtiefbau on the order worth about EUR 43 million includes the portion of the tunneling that is not done by mining methods, but using the open construction method in several sections over a length of 2,800 m. In order to prepare for the mining tunnel work, Bauer excavated portal pits and shotcrete walls with a height of up to 30 meters for a total of ten tunnel entrances and exits. In addition, there is work such as soil nailing along the existing tracks or pile foundations for railway embankments. Several BG 28 and BG 40 rigs, as well as anchor drilling rigs are being employed. The main part of Bauer Spezialtiefbau's work will be completed in fall 2015.

Longest sea bridge in the world

Hong Kong, China – The special foundation work subsidiary BAUER Hong Kong Ltd. was involved in construction of the Hong Kong-Zhuhai-Macau bridge from April 2013 to December 2014. It is the world's longest bridge over open water, and is currently being built in the Pearl Delta. The 50 km long connection between the cities of Hong Kong, Macau and Zhuhai completes the southern ring section of a gigantic infrastructure measure.

Bauer Hong Kong was contracted by the joint venture, Dragages-China

Harbour-VSL, to manufacture offshore bored piles for the Hong Kong Link Road, a ten km long section from the border between China and Hong Kong as far as Hong Kong International Airport. The piles with 2,300 and 2,500 mm diameter are up to 115 m long, and have been embedded into the rock to a depth of two to five meters.

Bauer Hong Kong had to undertake all the work for the EUR 72 million project from the water – a particular challenge. Five BG 40 rotary drilling rigs were used – four of them were custom-built with an extended mast and larger main winches. They were transported by ship to steel platforms, each of which is just large enough for one rig. In addition, there were pontoons for four bentonite plants, 300 ton cranes and accessories.

Replacement bore in Coswig

Coswig, Germany – BAUER Umwelt GmbH carried out a replacement bore for a customer in Coswig near to Dresden, from November 2013 to May 2014. Severe contamination of the ground and groundwater had been identified on the site of a former tarpaper factory.

The contaminated soil excavated using the large bore hole method was placed in gas-tight containers for transport to the Hirschfeld soil treatment center and to disposal sites. A total of about 45,000 tons of soil material were disposed of. In addition, the water pumped out was treated in a specially installed water treatment plant.

A BG 40 rig with a large bore diameter of 2,000 mm was used. More than 400 bores were drilled down to a drilling depth of 17 m.

The large bore hole method is practically vibration-free, which means it can be employed in the immediate vicinity of sensitive buildings. This fact, combined with the short construction period, offered the advantage that production by the company on site as well as at neighboring companies was only inconvenienced to a minor extent.

In-house exhibition 2014

Schrobenhausen, Germany – The in-house exhibition held from 10 to 13 May in Schrobenhausen proved to be a veritable highlight. Over four days, more than 1,700 guests from over 70 countries visited the event to find out about the innovations and equipment from BAUER Maschinen GmbH and its subsidiaries.

The large machines were presented in the courtyard of the head office: the PremiumLine of the heavy-duty rotary drilling rigs was represented by three

BG's and the ValueLine by the bestseller BG 26 as well as by a new BG 11 H. With its compact dimensions and low weight, it permits easy transport which makes it particularly appealing for the oil and gas industry. Bauer Maschinen presented its 100th MC duty-cycle crane in the form of the MC 96 – in combination with a massive Leffer VRM 3000 casing oscillator. The subsidiaries were also represented by many interesting innovations.

In the "Old Welding Shop", visitors were able to find out about further offers and services. The live presentations on the plant premises in Aresing proved to be a particular draw. It was possible to observe tried-and-tested machine technology and new developments in application. Once again on

this occasion, the Bavarian evening proved to be a highlight and has been appreciated by customers from far-off countries for several years now.

Deep drilling rigs sold

Edelshausen, Germany – BAUER Deep Drilling GmbH, the subsidiary of the BAUER Group that is specialized in

deep drilling, signed an agreement with Saxon Energy Services Inc. in December 2014 for the manufacture and sale of two ATD 750 deep drilling rigs.

Saxon Energy Services Inc. is an international drilling company and is a fully owned subsidiary of Schlumberger, the world's largest oilfield service com-

pany. The rigs are the result of a joint development process for a new series of deep drilling rigs, which began in May 2014 on the basis of an engineering contract signed at the time.

Additionally, a sales contract was signed for the two already completed TBA 300/440 M1 and TBA 440 M2 deep drilling rigs. Already in 2009, BAUER Maschinen GmbH decided to open up a new business area with the deep drilling division. In 2011, the first TBA 300 deep drilling rig was delivered to a customer in Venezuela. This product range has already been expanded with several developments.

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 environment, water and natural resources
• >>> 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
19	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
49		Group financial and net asset position
54	V.	Financial Statements of BAUER Aktiengesellschaft
55	VI.	Sustainability
55		Sustainability within the BAUER Group
55		Employees
57		Capital Investments
58		Research and Development
60		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.	Forecast Report

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. These include creating complex excavation pits, foundations for large infrastructure projects and buildings, cut-off walls and ground improvements. It also carries out other specialist construction activities, including civil engineering and remediation works.

The Equipment segment develops and produces equipment, tools and machines for specialist foundation engineering and other underground drilling operations, such as mines, wells, geothermal energy, oil and gas. 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, Turkey 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 is focused on products and services in the areas of water, environment and natural resources. BAUER Resources GmbH is the holding company of the business segment, under the umbrella of which the subsidiaries operate as full-service providers with their focus on environmental technology, water and natural resources for industrial customers.

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, facility 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. As part of central strategies, goals and regulations, 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 program 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/inves-

In the middle of the Spessart region, BAUER Spezialtiefbau GmbH will be working on its largest German construction site so far – the Schwarzkopf Tunnel bypass – until autumn 2015. Several BG 28 and BG 40 rigs, as well as anchor drilling rigs are being employed.

tor_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, which are of comparatively minor significance to the mediumand long-term development of the Group, are collated and

integrated within the scope of internal Group management activities. They primarily comprise balance sheet and income statement figures and indicators of capital structure, profitability and liquidity derived from them.

Non-financial performance indicators

As part of a comprehensive reporting system, many nonfinancial indicators are measured in assessing the performance of the Group which individually, 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 function, such as workforce numbers – categorized by segment, employment type and region. Furthermore, continuing and further education indicators are included in the reporting, such as the budget applied, the number of employees attending the seminars offered, and the number of seminars and conferences held. Reporting also covers performance indicators from the Research and Development function. 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

Germany is doing well – to judge from the raw data. Tax revenues are booming, the economy is growing and the government is not planning to assume any new borrowing. However, a less cursory glance at the situation reveals that there are many problems in the world, the dark clouds of which are casting their shadow over Germany as well.

The repercussions of the financial crisis and the credit crunch suffered by many European countries mean that the overall system still cannot settle on an even keel. Germany is part of this system, and due to its presumed strength has to bear a considerable share of the burden.

In addition to the familiar problem areas, new crisis hot-spots have also arisen; these will also have significant effects on the economic development of countries and regions in the world.

• • Russia and Ukraine are not regarded as the most important countries for Germany's export business. This fact perhaps made it easier for the politicians to impose sanctions on Russia in the wake of the events in the Crimea – in the hope of inducing a change of policy. Unfortunately, past experience shows that punitive measures such as these take a long time to bear fruit, and can even lead to a hardening of attitudes and tit-for-tat countermeasures. The conflict is lodged in a spiral of this kind, while hopes for a rapid resolution are evanescent. This will have a greater impact on the German economy than many people appreciate. Russia is highly important for Germany – more so than is indicated by the raw data.
• Scarcely anyone would have imagined that a group of extremists could have taken over and terrorized large areas of Iraq and Syria within a matter of weeks. For some months, it seemed that the western world was incapable of reversing the advance of the Islamic State, at least to a certain extent. At present, it appears that the threat posed to the Arab world will continue for some time yet. Economically, it is spreading great uncertainty. Neighboring countries such as Jordan, Lebanon and Turkey will thus have more limited opportunities to develop their economies on a stable basis. This fragile situation could deteriorate at any time, and this is noticeably curtailing the opportunities offered to western companies. At least many

of the countries in the region are sticking to their construction projects, something which represents a positive sign.

• • At first sight, it appears logical to draw the conclusion that the drop in the oil price will have a positive effect on the German economy. Thanks to the lower price of fuel, the general public will have more money to spend on other consumer goods. However, this upside will by no means compensate for the drop in orders placed with German companies. Although the order books of construction firms in the Arab world are currently full, it remains unclear which projects might be delayed as a result of the low oil price. And it is not only Arab countries that are affected. Malaysia, Mexico, Brazil, Russia, Angola, Venezuela and Azerbaijan are dependent on oil. This also affects conglomerates that earn their money with oil. As a result, the situation cannot be said to be positive.
• • Over recent years, China has acted as a powerhouse for the global economy, but is now displaying some weaknesses. Many companies nowadays are heavily dependent on the market there. These include the major German car companies as well as their components suppliers and many capital goods manufacturers. In the engineering business, we can already see what problems can arise in this country. The construction equipment business in China grew many times over, on the back of the building boom. It was clear that the bubble in the sector would burst once the construction market had normalized. Chinese machinery manufacturers did not see this coming, as a result of which the factories' production is going straight to stock, and the majority of the equipment is being dumped on the market through reckless financing models. Now, however, these machines are being returned because many construction companies overextended themselves with these investments. Our strategy of concentrating on large and special machines in China does add up, on the other hand. We are satisfied with our success.
• • The countries in the eurozone are making strenuous efforts to get a grip on their economic problems, but there is not yet any prospect of achieving stability any time soon. Many companies are no longer able to compensate for volatility in the foreign exchange markets. What is needed is a reliable policy in order to return to a steady course of

development. However, there is no sign of this happening at the moment.

The considerable number of crises and problematic areas will represent threats for years to come. Rarely has there been such an accumulation of issues facing the world as is the case today. Fortunately, there have also been some very positive developments. The most important of these is, without doubt, the upswing in the US economy. The United States has once again assumed its role as the driving force in the global economy. Many countries of the Far East are also enjoying highly dynamic growth, such as Indonesia, Malaysia and the Philippines. What is more, many markets are highly stable and are well placed to face the future.

The construction sector in Germany is one such market that is developing very well. Sustained low interest rates and the positive economic situation are inducing people to invest in real estate. Also, the government is finally setting about making good the huge deficiencies in Germany's infrastructure. For this reason, the favorable situation is set to continue for a few years more.

Construction statistics Germany – Change 2014/2013

in %	Germany overall	West Germany	East Germany
Sales	4.4	5.0	2.1
Hours worked	4.6	5.2	2.8
Employees	1.1	1.5	-0.1
Orders received	-0.5	-0.6	-0.1

Source: Central Federation of the German Construction Industry

There is also a very pressing necessity and demand for construction activities internationally. Everywhere, there are huge deficiencies when it comes to refurbishing infrastructure and constructing new transport arteries and supply systems. Also, commercial companies and residential building operations have a great demand for construction services. Once again, the crises and problems existing in the world represent the greatest stumbling block, however.

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. As soon as 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.

Against the background of this 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, in spite of the disruptions.

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 again, 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 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 continue to see positive growth over the coming years. Residential construction is being buoyed up, above all because of the low interest rates. Public-sector construction is benefiting from an enormous backlog of infrastructure work, something which governments now have much more money at their disposal to pay for. The development of commercial construction will depend on industry's future prospects.

The widely anticipated positive effects of the reversal of energy policy in Germany to favor renewable energies have not been realized, however. Only the onshore wind power sector is still generating strong order flow. 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

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 nonetheless a number of opportunities for us in Europe, especially in Switzerland. In France, a new circular metro line is being built around Paris, and is requiring extensive construction activities. Other cities are also planning to upgrade their infrastructure.

Smaller 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.

The crisis embroiling Russia and Ukraine is currently imposing an enormous burden on these countries' development. Ukraine is practically no longer capable of maintaining a construction sector – due to lack of funds. Although Russia is attempting to keep finance flowing into its building sector, the financial deficits brought about by sanctions and the low oil price are forcing the country to pursue a policy of extreme frugality. Commercial construction has almost shut down entirely. It can be assumed that Russia will suffer from the consequences of the crisis for years to come – even if the conflict were to be resolved rapidly. As a result, the equipment sales business will also decline significantly.

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 large-scale construction projects in the pipeline and being carried out. Metro systems are being constructed in Doha and in Riyadh, while intensive extensions to railway lines are in progress throughout the entire region. The football World Cup in Qatar will trigger additional building volumes. Construction has also bounced back in Dubai in a big way.

Conditions are highly problematic in Iraq and in Syria, however. Armed conflict with the Islamic State has almost brought economic development and specifically the construction

sector to a halt. The neighboring states such as Jordan and Lebanon are also hamstrung by the situation, as a result of which economic development has significantly abated there.

Further developments in the Arab countries, which were characterized by revolutionary political upheavals in the past years, remain uncertain. Many clashes are still taking place in Libya and Egypt, with repeated incidents of rioting. Nevertheless, the construction sector in Egypt is currently experiencing an astonishing upturn. The expansion to the Suez Canal that got underway within an extremely short time will require considerable building activities. In Cairo, work will get underway within the next few years to expand the metro network. Our local subsidiary has already landed considerable orders, and will be able to increase its sales significantly given this market situation.

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. 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 in this construction market are somewhat slower.

Americas

The USA's economy is returning to its role as the driver of global growth. 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. Trends in the Canadian construction market are likewise favorable. Interesting projects are regularly seen 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. Some countries have very good chances of improving their prosperity based on their enormous raw material resources.

As a result of the described political risks and economic issues, 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. Dialog 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. We have already achieved success in many countries around the world, and we believe that demand for these products and services will continue to grow strongly.

The north of Munich will be getting a significantly new look with the "Schwabinger Tor" project. BAUER Spezialtiefbau GmbH excavated the up to 12 m deep pit, which has an area of 35,000 m². >>>

Global economic trends will stabilize again in the medium term. The current causes of destabilization will fall away again over coming years. The currently still enormous cost differences and imbalances in many 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 several signs of this happening: good equipment operators in most countries now have similar pay levels 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 specialties and enjoy healthy revenues on the larger market. The BAUER Group, too, will maintain that focus.

COURSE OF BUSINESS

In 2014, the BAUER Group was hit by some problems with a major financial impact and also faced some difficult market conditions. On the other hand, we have also achieved some pleasing successes. Overall, however, we were only able to post a positive profit after tax by means of a one-time income item.

In the Construction segment, we are well established in all international markets. Specifically in Germany, our specialist foundation engineering business was able to contribute with a positive development. The numerous disturbances in the world meant it was necessary to respond to changes quickly. Nevertheless, our business was effectively distributed over the regions of the world. Revenues declined slightly compared to the previous year because a relatively large number of very large projects were carried out the year before. During the year under review, it was rather the small and medium projects which characterized our revenues.

The factor which affected us most was the development in our dam remediation project at Center Hill dam in the USA. We had already been obliged to post a loss in the previous year. Significant problems arose during the site mobilization and the technical preparation work for the project, leading to a considerable delay. However, from the end of 2013 onwards, the diaphragm walling works proceeded along

excellent lines; consequently, in early 2014, we assumed it would be possible to conduct the remainder of the project on a much better basis. Unfortunately, this expectation turned out to be over-optimistic. During the second cutting of the wall in the dam area, drilling progress returned to a lower level. The concrete mixture used proved to be excessively hard for the planned progress to be achieved. Also, many other procedures on the site, such as permanent monitoring of quality, took longer than planned, as a result of which the construction time and thus the costs significantly exceeded the expected amounts. This meant the project delivered a loss in 2014, which reached the low double digit million range. The project will be completed in the second quarter of 2015 with an outstanding technical achievement.

Business in Russia, Egypt, Indonesia, Hong Kong and Thailand was very pleasing. In Hong Kong, the major project involving foundation works for a section of the new bridge between Hong Kong and Macau was completed in early 2015.

The Equipment segment had to cope with significant market upheavals once again during the reporting period. The greatest problems were the behavior of Chinese manufacturers which continued to produce with significant overcapacity, and the methods they employed of dumping their equipment onto the market via risky financing schemes. Our European competitors were also affected by the situation. Our strategy of concentrating on special equipment of the highest quality and providing perfect customer support meant that we were able to expand our sales further in spite of the significant competition. In 2014, we succeeded in selling more large machines once again.

Developments in Russia and Ukraine proved problematical for us. In Russia, orders tailed off almost entirely as a result of the sanctions and the economic problems these triggered towards the end of the year. This represents the loss of an important market for our companies. In 2014, we had planned sales of about EUR 80 million for the Group in Russia and Ukraine, but we were only able to achieve about half of this figure. We are expecting even lower sales in future. As a result, we need to look to compensate for this, a task which will not be easy.

Geographical breakdown of total Group revenues

in EUR million

Total 1.560

Our deep drilling business achieved very satisfactory development in 2014. In May, the agreement was signed to develop a new deep drilling rig for Saxon Energy Services Inc. Following joint development work, we received the order to manufacture two rigs at the end of the year. Additionally, a sales contract was signed in December for two already completed deep drilling rigs.

In the Resources segment, the environmental business continued to develop very well. There were many attractive projects, especially in Germany. Our subsidiary in Oman enjoyed a successful year, with many appealing new opportunities for the future. One-time income was

generated by selling 21 percent of the shares in this company.

The companies in the segment which manufacture well engineering materials were reorganized following a difficult previous year. Once again, a loss was reported in 2014. We are confident that business will now develop better. The year was highly unsatisfactory for our exploration companies. Following the end of the major project in Jordan, we had hoped it would be possible to relocate the capacity becoming available to other regions without interruption. However, weakness in the mining market during the previous year meant that exploration drilling ceased almost entirely. As a result of political upheavals in the region, it also proved impossible to attract an adequate number of orders for other work. Consequently, we had to accept significant losses resulting from the overcapacities.

Many re-organizational measures were undertaken in the Resources segment. Activities were merged or, in some cases, terminated. We have withdrawn from many regions. All of these issues led to a financial cost. Consequently, a loss in the segment could only be avoided by one-time income from the sale of shares mentioned previously.

2014 was an extremely challenging year. We had to deal with markets changing at breakneck pace, at the same time as correcting our own mistakes and aligning internal structures better to face the future again. The cost reduction program amounting to about EUR 20 million was implemented successfully in order to safeguard overall profits, and will be continued in the coming year as well. The positive effects will bear fruit for years to come.

Another important goal for the year was to comply with the financial covenants of our financing agreements with

Forecast/actual comparison 2014

in EUR million		Forecasts
	11.04.2014	14.08.2014	14.11.2014	Actual 2014
Total Group revenues	~ 1,550	~ 1,550	~ 1,550	1,560
EBIT	~ 75	~ 75	~ 75	76.4
Net profit or loss	~ 20 - 25	~ 15 - 20	~ 15 - 20	15.7

Total 1,560

slightly increased revenue. Furthermore, we aim to achieve a long-term improvement in key financial figures. Although we still have some work to do to achieve this, we were able to meet the target. The net debt to EBITDA ratio has returned below 4.0. The EBITDA to net interest coverage ratio was also improved.

As a result of the aforementioned problems, we were regrettably forced to adjust our forecast downwards once in the course of 2014. In our 2013 Annual Report we predicted total Group revenues of about EUR 1.55 billion, EBIT around EUR 75 million, and profit after tax of about EUR 20 to 25 million.

As a result of special effects, including above all our dam project in USA which burdened us with a significant loss, we were obliged to adjust our forecast for profit after tax in the half-year report to about EUR 15 to 20 million.

In the nine-month interim report, the forecast for the profit after tax was concretized, with an unchanged outlook with

regard to total Group revenues and EBIT. At the 2014 year-end, this is expected to be towards the bottom end of the range from about EUR 15 to 20 million.

The final results for 2014 are now as follows: total Group revenues rose by 3.7 percent to EUR 1.56 billion. Sales revenues fell slightly by 1.9 percent to EUR 1.38 billion. EBIT came to EUR 76.4 million (previous year: EUR 30.1 million). The net profit for the period was EUR 15.7 million (previous year: EUR -19.4 million).

Summary

All in all, we cannot be satisfied with our results for 2014. We were only able to achieve a positive result due to the one-time income from the sale of shares in Oman. We regard the business trend as continuing positive, because even in tricky circumstances we once again succeeded in increasing total Group revenues slightly. The financial year 2015 will build on that foundation.

Geographical breakdown of total Group revenues

in EUR million (segments after deducting Other/Consolidation)

Breakdown of total Group revenues by subsegment

	in EUR million	2013 Revenues *	2014 Revenues	Share Year 2014	Change against previous year	Orders in hand
	BAUER Spezialtiefbau GmbH (BST)
	BST, Germany	119.4	133.2	8.6 %	11.6 %	+
	Subsidiaries, Germany	24.0	16.7	1.1 %	-30.4 %	+
	BST, international	67.3	98.9	6.3 %	47.0 %	•
Construction	Subsidiaries, international	547.3	502.5	32.2 %	-8.2 %	•
	BST Group total	758.0	751.3	48.2 %	-0.9 %	•
	SCHACHTBAU NORDHAUSEN GmbH Subsidiaries (SBN)	73.9	66.1	4.2 %	-10.6 %	•
	less intra-Group revenues and IFRS adjustments	-90.2	-104.4	-6.7 %
	Construction total	741.7	713.0	45.7 %	-3.9 %	•
	BAUER Maschinen GmbH (BMA)	391.7	383.3	24.6 %	-2.1 %	•
	Equipment subsidiaries	453.3	468.7	30.0 %	3.4 %	•
Equipment	BMA Group total	845.0	852.0	54.6 %	0.8 %	•
	SBN	62.3	62.0	4.0 %	-0.5 %	•
	less intra-Group revenues and IFRS adjustments	-278.7	-262.2	-16.8 %
	Equipment total	628.6	651.8	41.8 %	3.7 %	•
	BAUER Resources GmbH (BRE)	9.6	29.5	1.9 %	n/a
	Resources subsidiaries	193.2	231.1	14.8 %	19.6 %	-
Resources	BRE Group total	202.8	260.6	16.7 %	28.5 %	-
	SBN	19.8	33.9	2.2 %	71.2 %	++
	less intra-Group revenues and IFRS adjustments	-33.7	-41.7	-2.7 %
	Resources total	188.9	252.8	16.2 %	33.9 %	•
	BAUER Aktiengesellschaft (BAG)	37.0	37.1	2.4 %	0.3 %
Other	Other subsidiaries	2.3	2.3	0.1 %
	Total Other/services	39.3	39.4	2.5 %	0.3 %
	less intra-Group revenues and IFRS adjustments	-94.3	-96.8	-6.2 %
	Group total (including non-controlling interests)	1,504.2	1,560.2	100.0 %	3.7 %	•
	of which: Germany	410,4	440,2	28.2 %	7.3 %
	International	1,093.8	1,120.0	71.8 %	2.4 %

Notes on the table:

List also includes non-consolidated holdings

Evaluation of orders in hand in relation to planned revenues:

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

* Previous year adjusted; see notes on page 106

Breakdown Germany/international according to country in which accounting figures were allocated. For reasons of complexity the figures are not absolutely precise.

Our customer Ammico Contracting Co. W.L.L. was involved in the construction of a large commercial complex on the artifi cial island "The Pearl", which is just off the east coast of Qatar. A cut-off wall up to 700 m long and 8 m deep was built using the cuttersoil-mixing-method. They used a BG 28 with a BCM 5 mixing head.

III. TREND BY SEGMENT

CONSTRUCTION SEGMENT

Construction key figures

in EUR '000	2013 *	2014	Change
Total Group revenues	741,673	713,005	-3.9 %
Sales revenues	657,456	634,096	-3.6 %
Orders received	727,287	665,244	-8.5 %
Orders in hand	498,701	450,940	-9.6 %
EBIT	21,209	25,068	18.2 %
Net profit or loss	5,472	1.858	-66.0 %
Employees (on average over the year)	5,531	5,675	2.6 %

* Previous year adjusted; see notes on page 106

In the 2014 business year, the Construction segment earned total Group revenues of EUR 713.0 million, down slightly on the previous year's value of EUR 741.7 million by -3.9 percent. The reason for this is that more major projects were handled in the year before than in 2014 itself. Segment EBIT of EUR 25.1 million was slightly up on the previous year's level of EUR 21.2 million. The net profit for the period decreased markedly from EUR 5.5 million to EUR 1.9 million. The decline in the net profit for the period is chiefly due to economic problems with our dam project at Center Hill in Tennessee, USA. It was not possible to offset the loss incurred in the project against any deferred tax assets, as a result of which the income tax expense increased significantly compared to the previous year.

2014 was characterized by good conditions overall in the world construction market, which proved to have a positive effect on our companies in Germany and the Far East above all. Furthermore, the markets in the Middle East once again showed significant signs of life. The business situation was good on the whole, but was negatively affected by the problems with the Center Hill dam project to such an extent that we failed to achieve our earnings targets markedly.

Germany

As in the previous years, our German construction business performed better than expected once again. Revenues and results were significantly above expectations. The contracts procured were spread very unevenly around the various regions however. Capacities in the South region were very well utilized, and well utilized in the North East region. The

West Region, however, failed to achieve its targets, attracting only a few orders. However, the planned earnings and the planned revenues were well surpassed.

The major project at the Schwarzkopf Tunnel should be highlighted in particular. This involves extensive special foundation engineering for the bypass rail link between Hanau and Nantenbach, with a total volume of above EUR 40 million. We still have significant work to accomplish on the project until autumn 2015. In addition to this, the major project at the Zerben lock was completed successfully in November.

Next year, we are expecting a decline in revenues for the German specialist foundation engineering business, because there are fewer major projects on the market overall.

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 2015. As the company operates in all three segments, the effects of the individual divisions are detailed in the respective segment reports. The Construction division achieved revenues on the same level as the previous 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. Although it was able to increase revenues, the negative result remained at the previous year's level. SPESA Spezialbau und Sanierung GmbH, which is allocated to

In Jeddah, Saudi Arabia, what will soon be the tallest building in the world is under construction – the Kingdom Tower. Bauer drilled 70 piles – with up to 109 m they are extremely long – with diameters of 1,500 and 1,800 mm. Another 200 piles with lengths up to 90 m were also installed.

Geographical breakdown of total Group revenues Construction segment

in EUR million (after deduction of Consolidation)

Total 699

Schachtbau in the organizational structure, succeeded in improving its result during the reporting year although with a slight decline in revenues.

The holding Wöhr + Bauer GmbH, which develops and builds urban real estate such as office buildings and parking garages, was able to complete a large number of relatively large projects during the reporting year, as well as starting new ones.

Europe

Trends on European construction markets remain regionally very variable. In Eastern Europe, revenues in Hungary, Georgia and Bulgaria increased, while Romania underperformed slightly. Overall, perspectives have improved again somewhat following a few weak years. Azerbaijan is also offering us good opportunities for new projects. In Russia, work was completed on the Lakhta Tower in St. Petersburg, which is set to be Europe's tallest building; subsequent to this, we carried out some add-on and follow-up order. Revenues and earnings were on a good level overall.

We are expecting the business situation to be significantly less favorable in 2015 because of sanctions.

The situation in the markets of Western Europe was also highly differentiated. Our subsidiary in the Netherlands failed to meet expectations in terms of revenues and earnings. Last year was very poor in the UK. Following major underground railway orders in previous years, there were scarcely any projects on the market in the business year just finished. Consequently, the planned revenue target was missed by a wide mark, and the result is negative. There are signs of an improvement in 2015. In Switzerland, revenues increased thanks to a good market position. Our subsidiary in Austria failed to meet its targets because of a dearth of projects in the summer months. On the whole, markets in Southern Europe remain weak.

Middle East & Central Asia

Following political unrest in the markets of the Middle East over recent years, the construction sector once again enjoyed a significant upswing in the course of 2014. Our companies in the United Arab Emirates, above all Abu Dhabi and Dubai, are once again operating at full capacity and were able to increase revenues and earnings significantly; the situation is similar in Qatar where work started on several orders particularly in the second half of 2014. Our subsidiary in Lebanon was also largely on target in terms of revenues and earnings.

Revenues declined in Saudi Arabia, above all because of the completion of the major project at the Kingdom Tower, involving the foundation work for what will be in future the tallest building in the world. Order books remain buoyant here, and upcoming major projects – especially for the metro system in the capital city Riyadh – mean that prospects are bright. Overall, we believe the region is once again on an upward trend.

Asia-Pacific, Far East & Australia

The construction sector in the markets of the Far East continues to deliver pleasing performance. Our subsidiaries in Indonesia and Thailand benefited from very full order books with pleasing results. Prospects remain highly positive. Hong Kong was characterized by the foundation works for a section of the Hong Kong-Zhuhai-Macau bridge that were completed in early 2015. The project was able to be concluded successfully.

In Malaysia, there were somewhat fewer orders than expected, as a result of which revenues were somewhat lower than planned even though they attained a very high level in total. In the Philippines, project delays represented somewhat of a hindrance to revenues, although the situation with orders in hand is good on the whole. The market in Vietnam is displaying the first signs of a recovery following weakness during previous years.

In 2014, extensive diaphragm walling works were constructed for several dams in Bhutan as well as on Mauritius. The work will continue into the current business year as well. The projects are proceeding very pleasingly. The market in Australia in 2014 was very slow. We expect this to continue in 2015 as well.

Overall, we are expecting continued good development for the region in the current business year.

Americas

Our subsidiary in the USA was kept busy through 2014 primarily by the large-scale Center Hill dam project. The difficulties getting the project off the ground led to a backlog of work. At the start of the year, we had expected to make good this deficit, at least in part, by increasing performance. Unfortunately, this proved to be impossible because of further delays and problems that arose during the course of the year, as a result of which a significant loss was once again incurred. From a technical perspective, the project has been carried out to an excellent standard. The work will be concluded in the second quarter of 2015. As well as this, a larger number of different specialist foundation engineering orders were handled in the USA. There were only a few orders available on the Canadian market during the year, as a result of which revenues declined here. The prospects are looking brighter again for the current year.

In Latin America, we are focusing our activities on Panama above all else. Our subsidiary's performance was somewhat below expectations during the past business year. Individual orders are being carried out in the other markets – such as

the Dominican Republic. We are expecting the situation to improve in the region during the current year.

Africa

Once again in 2014, the performance of our holding in Egypt was more than pleasing. In the difficult prevailing conditions, it succeeded in closing the financial year with revenues up on the previous year and healthy earnings. Order levels continue to be very high, because numerous construction projects are being carried out. For example, extensive work is being conducted on the metro system in Cairo. We assume that we will be able to increase our revenues further in the current year. There are individual project opportunities available from time to time in other countries as well.

Outlook

Revenues in the Construction segment declined slightly during the completed business year. Above all, this was because some major projects were processed and concluded during the previous year. In some regions, we merged capacities to a greater extent and ceased our activities in some countries – such as Algeria. The trend in the segment was positive, apart from the losses incurred by the major project at Center Hill dam, representing a significant negative influence.

Overall, the regions of the world continue to perform positively, in spite of all the existing political and economic disruptions. Our global presence provides us with an excellent opportunity to exploit opportunities in regions with a favorable trend in their construction sectors, thereby making up for weaker markets. Overall, orders in hand have declined in relation to the previous year, this being due to the situation that there are currently more small and medium projects available on the market. The major projects have been completed during the past two years.

We are expecting our revenues to be slightly higher than those of the previous year in 2015. As far as EBIT is concerned, we are expecting a slight improvement, while the improvement in profit after tax should be considerable.

EQUIPMENT SEGMENT

Equipment key figures

in EUR '000	2013	2014	Change
Total Group revenues	628,612	651.772	3.7 %
Sales revenues	561,615	545,223	-2.9 %
Orders received	632,053	693,967	9.8 %
Orders in hand	116,525	158,720	36.2 %
EBIT	32,223	36.917	14.6 %
Net profit or loss	5,055	9,513	88.2 %
Employees (on average over the year)	2,998	3,038	1.3 %

In the past business year, total Group revenues in the Equipment segment increased slightly by 3.7 percent, from EUR 628.6 million to EUR 651.8 million. Sales revenues, on the other hand, fell back by 2.9 percent from EUR 561.6 million to EUR 545.2 million. Segment EBIT increased sharply by 14.6 percent from EUR 32.2 million to EUR 36.9 million. The net profit for the period increased markedly from EUR 5.1 million to EUR 9.5 million.

In 2014, in spite of fierce competition, we succeeded in maintaining sales volume at approximately the same level as the previous year. The markets of the Middle and Far East enjoyed particularly positive development, as did sales of large machinery and cutters. This led to an increased result, and further benefited from the trend in the US dollar. The still too low capacity utilization of the plants and losses at individual subsidiaries hampered a greater increase.

Germany & Europe

Sales in Germany were slightly below the previous year, in line with our expectations. In 2014, like in the previous year, the plants at our headquarters in Schrobenhausen had adequate capacity utilization. We are expecting an improvement during the current year because of production of two deep drilling rigs for Saxon Energy Services Inc.

Sales volumes in Western and Southern Europe were above planned values. Alongside good market conditions in Italy, we were above all able to sell some machinery to France, including several cutters for the expansion of the metro in

Paris. We were also able to achieve good sales in the Baltic states, although the markets in Eastern Europe continue to be at a low level. There is a lack of funding for major investments. Spain and Portugal continued to perform weakly.

In Russia, sales up to the middle of 2014 were completely according to plan. During the second half of the year, however, first sanctions and then the significant decline in the value of the ruble exerted an influence on the market. At the start of the embargo, it was questionable whether we would be able to deliver several items of machinery to Russia, although the situation was resolved within a few weeks. However, demand collapsed markedly in the second half of the year. In the current business year, we are expecting to see a further noticeable decline in sales volume compared to 2014.

Middle East & Central Asia

The markets of the Middle East developed significantly better than in the year before. In spite of continuing uncertainties in the region, demand increased noticeably because of a greater number of infrastructure projects being implemented. Our sales were significantly above the planned targets, delivering a pleasing contribution to earnings. In the United Arab Emirates, including Dubai, there was a reinvigoration of the construction market. Numerous infrastructure projects got under way in Qatar. In Saudi Arabia, additional machinery was required in particular for the expansion of the Holy Mosque in Mecca. Sales in Iraq, however, were weak. Overall, the perspectives for the markets in the region are once again good.

A highlight was the in-house exhibition, which took place in Schrobenhausen in May 2014. Over four days, more than 1,700 guests from over 70 countries visited the event to fi nd out about the innovations and equipment from BAUER Maschinen GmbH and its subsidiaries.

Geographical breakdown of total Group revenues Equipment segment

in EUR million (after deduction of Consolidation)

Total 612

As a result of delays in major projects, we suffered a decline in sales compared to the previous year in Turkey and Azerbaijan. The other countries of Central Asia such as Kazakhstan were influenced by the uncertainty generated by the Russia/Ukraine crisis. Here, our sales were below the expected levels. As in the previous years, the Indian market was weak.

Asia-Pacific, Far East & Australia

Markets in the Far East continued to be very positive. We were able to increase our sales volumes somewhat once again, achieving a good contribution to earnings. Hong Kong has become an excellent market for our duty-cycle crane series. We were also able to achieve good sales volumes in Malaysia, as in Singapore. Here, we were able to sell some machines in particular which will be used in the extensive expansion of Changi Airport. The Philippines and Indonesia continue to develop along positive lines.

As before, the Chinese market is characterized by significant overcapacity, meaning that the competitive situation remains tight. In spite of these difficult conditions, we succeeded in achieving a satisfactory contribution to earnings. The smooth relocation to the new plant in Tianjin contributed to this, and was completed by October 2013. The new plant's capacity was already utilized to a significant extent in 2014, with scope for further growth.

The market in Japan was satisfactory overall. There are once again major infrastructure projects in the pipeline, which represent interesting opportunities. Australia proved to be rather weak, this being a corollary of the weak demand from the mining industry.

Americas

Although the market situation in the USA improved in 2014, we were unable to meet our targets entirely despite achieving slight improvements in sales and earnings compared to the previous year. In the USA, the business is predominantly characterized by renting equipment to customers. We took an important step in setting the course for the future by merging locations of BAUER-Pileco Inc. and BAUER Manufacturing Inc. at our site in Conroe, near to Houston. We are expecting this to deliver synergy effects which will lead to significant cost savings. We were also able to reduce our rental fleet by selling equipment. Production capacity in Conroe was not yet adequately utilized in 2014, as a result of which we still recorded a relatively small loss.

In South America, our sales volumes were at a similar level to those of the previous year. The market in Brazil continued to perform weakly. Many projects have been postponed here.

Africa

In Africa, we were not quite able to match our sales in the previous year. Egypt enjoyed positive development because of the growth in the construction market. The remaining countries of Africa, however, were weak. There was significant reluctance to invest in West Africa, as a result of Ebola, and the mining industry displayed hardly any demand for equipment. Production in Botswana, where our joint venture manufactures blast-hole drilling rigs and well drilling rigs for Southern Africa, failed to meet our expectations in 2014 because of weak markets.

Parts & Service

The Parts & Service business has continued to develop steadily over recent years, delivering a good contribution to revenues and earnings in the past business year. The spare parts business continues to be positive, whereas demand for drilling tools and add-on units was somewhat weaker. Consequently, revenues and earnings were somewhat down on the previous year.

Deep drilling

In May 2014, BAUER Deep Drilling GmbH and Saxon Energy Services Inc. concluded an engineering contract for development and manufacturing of onshore deep drilling rigs with a hook load of 375 metric tons. Saxon Energy Services Inc. is a subsidiary of Schlumberger, the worlds's largest oilfield service company. Following joint development work, the order for production and sale of two rigs, designation ATD 750, was signed in December. These will be manufactured in the BAUER Maschinen GmbH plants in Germany and also partially assembled in the US plant in Conroe, near Houston. As a result, we are expecting that capacity utilization, in particular of the plants at our Schrobenhausen headquarters, will be increased during the current year.

Additionally, a sales contract was signed at the end of 2014 for the two already completed TBA 300/440 M1 and TBA 440 M2 rigs. A 100 metric ton rig will also be delivered to China in 2015.

As a result, the Deep Drilling business has taken a major step forward. Work is in progress towards certification by the American Petroleum Institute (API), and is expected to be completed in 2015. This would open up new sales opportunities.

Products & 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. During 2014, an increasing volume of large machine sales was achieved, as well as better sales of cutters, leading to increased earnings for the segment.

Some subsidiaries delivered unsatisfactory performance in the past financial year. PRAKLA Bohrtechnik GmbH, a specialist for well drilling rigs, was confronted by very weak demand, leading to a significant decline in revenues and a negative result. MAT Mischanlagentechnik GmbH, a manufacturer of products for mixing and separating technology, also recorded a negative result due to poor demand.

In contrast, a good business year with very positive results was experienced by RTG Rammtechnik GmbH, with its piledrivers and piling leaders, SPANTEC Spann- & Ankertechnik GmbH, which makes anchor products for foundation engineering applications and EURODRILL GmbH, which makes rotary drives and hydraulic hammers. KLEMM Bohrtechnik GmbH, a manufacturer of anchor drilling technology, once again slightly increased its revenues in 2014.

Outlook

Overall, the Equipment segment was able to perform positively in 2014 amongst conditions characterized by fierce competition and some difficult markets. The nearly stable sales volume with an increase in earnings as well as the trends in Deep Drilling were very pleasing. On the other hand, the results recorded by some subsidiaries as well as capacity utilization at the plants, which is still too low, imposed a burden.

The business remains significantly affected by short-term customer orders, representing a major challenge for production planning which has to look many months ahead as a result of delivery lead times for purchasing. The markets in the Middle East should post a continued rising trend and increased demand, whereas the Russian market will tail off markedly. For 2015, we are expecting that revenues, EBIT and profit after tax will be slightly up on the previous year.

RESOURCES SEGMENT

Resources key figures

in EUR '000	2013 *	2014	Change
Total Group revenues	188,861	252,830	33.9 %
Sales revenues	182,579	195,860	7.3 %
Orders received	180,054	255,837	42.1 %
Orders in hand	150,020	153,027	2.0 %
EBIT	-23,965	15,932	n/a
Net profit or loss	-31,444	4,347	n/a
Employees (on average over the year)	1,449	1,400	-3.4 %

* Previous year adjusted; see notes on page 106

Total Group revenues in the Resources segment grew significantly by 33.9 percent from EUR 188.9 million to EUR 252.8 million. Sales revenues grew by 7.3 percent from EUR 182.6 million to EUR 195.9 million. Segment EBIT was once again significantly positive following the loss made during the previous year (EUR -24.0 million), at EUR 15.9 million. The net profit for the period was EUR 4.3 million (previous year: EUR -31.4 million).

The key results of the segment were significantly influenced by a one-time income. The increase in total Group revenues contains an income item from sale and consolidation amounting to EUR 36.5 million resulting from the sale of 21 percent of the shares in our subsidiary BAUER Nimr LLC in Oman. The shareholding up to that point was 70 percent. The company's principal activity involves operating the largescale reed-bed treatment plant under an operating contract set to last a further 15 years. Without sale of these shares, the EBIT and the net profit for the period would have been in the red as a result of negative earnings contributions – specifically from the subsidiaries in the area of exploration and mining services – and as a result of expenditure for the reorganization of the segment.

The Resources segment is undergoing reorganization and adjustment to the changed market situation following the loss it suffered in 2013. The loss was above all due to a major project in Jordan, as well as weak demand for well construction materials and from the mining area. The significant increase in revenues during 2014, even without taking account of the sale of shares, is above all due to good order levels in the areas of environment and water treatment. Reorganization of the Resources segment proceeded intensively in 2014. The previous split into the business areas Materials, Exploration & Mining Services and Environment has been replaced by a regional sales organization which is functionally supported by competence centers. In the regions of America, Europe and Africa as well as the Middle East & Asia, the subsidiaries now operate as full-line providers of all products and services offered by the Resources segment. The competence centers of Water Treatment, Process and Biotechnology, Environmental Rehabilitation and Waste Management, Drilling Technologies as well as Well Drilling and Geothermal pool their expertise and support the subsidiaries in carrying out projects.

Germany & Europe

The GWE Group offers solutions for well-drilling and geothermal, for which purpose it manufactures products for development, delivery and distribution of water and geothermal energy. Following weak performance in the previous year, some restructuring measures were initiated and are still in progress. These measures, as well as stagnating markets in Europe, had an impact on results which remained negative. Above all because of growth in Germany, Austria, Switzerland and new customers in the energy sector, it proved possible to increase revenues slightly. Business improved on the whole, but work is continuing on optimizing costs.

The Polish subsidiary, which produces and sells well construction materials, was able to increase revenues slightly year-on-year despite operating in a stagnating market

BAUER Umwelt GmbH conducted replacement drilling for a customer in Coswig, near Dresden. A total of about 45,000 t of soil material were disposed of. A BG 40 rig with a large bore diameter of 2,000 mm was used. More than 400 bores were drilled down to a drilling depth of 17 m.

Geographical breakdown of total Group revenues Resources segment

in EUR million (after deduction of Consolidation)

Total 249

environment, and consequently also improved its result. In Hungary, revenues and earnings were on target, at the level of the previous year. The sales company in France increased its revenues and earnings despite a difficult market situation, but nevertheless failed to meet its targets.

BAUER Umwelt GmbH is a central provider of products and services for environmental technology in Germany. In 2014, it was able to increase its revenues significantly, thereby exceeding the planned goals. The result was also improved, with a healthy positive performance. It was possible to carry out numerous projects, above all in the areas of remediation of polluted sites and waste mangement. Orders in hand continued to be at a high level, as a result of which further positive development is expected.

BAUER Water GmbH plans, builds and installs water treatment plants for customers all over the world. Following a weak first half of 2014, revenues were significantly increased in the second half. The result improved markedly following a loss in the previous year, and is now showing a surplus. Over recent years, it has been possible to expand projects with customers from the automotive industry in particular, which were handled successfully. There are still good prospects for the future here.

In 2014, Esau & Hueber GmbH, a specialist for brewery, beverage and biotechnology, achieved revenues which were both above target and higher than the previous year thanks to good demand for brewery technology and systems for the pharmaceuticals industry. The result was also significantly improved. An expansion to capacity has already been completed, and will result in further improvements in production.

The order books of our foreign subsidiaries reveal a highly diverse situation. In Italy, revenues were at the level of the previous year in spite of project delays. The result improved. Two Resources companies in Spain were merged. There has been a slight uptick in the market for environment and water there. Some activities, including those in Hungary, will not be continued as a result of unsatisfactory developments.

FORALITH Drilling Support AG, a specialist for deep and extended-reach exploration drilling based in Switzerland, was able to carry out some projects successfully in Europe during the past business year; as a result, it improved its revenues and earnings. BAUER Foralith GmbH had to absorb significant burdens due to drilling rigs with underused capacity. In future, the activities of both companies will be more closely meshed, so that synergy and cost effects can be leveraged more effectively.

The Resources segment also incorporates the Mining division of SCHACHTBAU NORDHAUSEN GmbH. It proved possible to increase revenues once again as a result of the very vigorous market. Alongside many projects in Germany, a considerable order is being handled in Kazakhstan. In spite of a fine that imposed a significant burden on the area, it was possible to report a positive result.

Middle East & Asia

The Site Group for Services and Well Drilling Ltd. Co. in Jordan is still undergoing reorganization following the loss incurred during the major Disi-Amman project in 2013. Following completion of this project, it did not prove possible to find another use for the drilling rigs used there because the decisions on some very interesting projects were postponed due to the political situation in the region. As a result, revenues and earnings were significantly below the planned targets. We are expecting new projects and better capacity utilization for the current year.

The subsidiary in the United Arab Emirates is active above all in the environmental sector. It developed pleasingly and is handling an increased number of projects for the oil and gas industries. Revenues were up on the previous year. In Saudi-Arabia, activities are still at the beginning, but this market does offer good opportunities. Drilling activities in Australia have been brought to a close.

The operative business of BAUER Nimr LLC in Oman focused primarily on operation of the large-scale reed-bed treatment plant which processes water contaminated with oil for the local oil company. Following an expansion last year, 115,000 m3 of water is being purified there every day. At the end of 2014, 21 percent of the shares in the BAUER Nimr LLC subsidiary in Oman were sold. This led to a high one-off income for the Resources segment in the Group's consolidated financial statements.

Africa

The mining markets have been weak for quite a long time, and there has been little demand for exploration work; as a result of this, 2014 was unsatisfactory for our drilling companies. A slight upturn only became apparent at the end of the year. In Africa, as a result, our activities were restructured and a new strategy was initiated for operating in the markets.

In Morocco, our subsidiary has specialized in undertaking irrigation projects which allowed it to improve its revenues year-on-year. Further opportunities are apparent in this area. Earnings failed to meet expectations.

In South Africa, revenues were significantly down on the previous year, and earnings were negative as a result. In future, activities in Senegal will be looked after from Ghana. As a result of favorable orders at the end of the year, our

subsidiary in Ghana was able to increase its revenues year-on-year; it also improved its result.

Americas

Our subsidiary, which produces and sells well construction materials in Chile, suffered from weak demand from the mining sector. Revenues were down on the previous year, and the result was slightly negative.

Activities in Peru were terminated and the subsidiaries in Canada closed.

Reorganization

The reorganization of the segment that was started in 2014 entailed some fundamental changes. In future, we will pursue the strategy of concentrating even more on core competences at the same time as focusing on the greatest potential markets. This goes hand-in-hand with a consolidation and cessation of some businesses and subsidiaries. The restructured regional sales organization – supported by competence centers described above – is intended to push ahead with this strategy rapidly.

By the time the reorganization is finished, Resources should have become a full-service provider focusing on environmental technology, water and natural resources for industrial customers, predominantly from the oil, gas and mining industries.

Outlook

The extensive reorganization of the segment will continue until the end of 2015. We are expecting the situation to improve for our drilling companies during the current year. We continue to see significant opportunities in the environmental field, as well as in water treatment. For 2015, we are assuming that revenues will be well above the level of the previous year. The absence of the one-off income for 2014 deriving from the sale of shares as well as charges incurred during the reorganization mean that the EBIT should be slightly in the positive area, whereas it is currently expected that the profit after tax will be slightly negative.

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 3.3 million (previous year: EUR 5.1 million). This includes EUR 5.0 million of dividend payments by Group subsidiaries to the parent company. Part of the fine resulting from proceedings against one of our companies has also been posted here. The net

profit for the period of EUR 4.9 million (previous year: EUR 6.0 million) includes EUR 1.6 million 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 -4.8 million (previous year: EUR -4.5 million) largely matches the EUR 5.0 million of dividend payments by Group subsidiaries to BAUER AG. The net loss for the period was EUR -4.9 million (previous year: EUR -4.5 million).

SPESA Spezialbau und Sanierung GmbH did remediation work on a ski jump in Oberhof in Thuringia for the first time. To secure the slope of the main jump against sliding, a shotcrete plate was installed at an inclination of approximately 37 degrees and deep-anchored with 36 soil nails. >>>

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

Shareholdings < 50 % are listed with their revenue share

in EUR million	2013 *	2014
BAUER Spezialtiefbau GmbH - Group
BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany (BST)	186.7	232.1
Wöhr + Bauer GmbH, Munich, Germany (33 % share) – (sub-group consolidated financial statements)	17.5	14.5
BAUER Funderingstechniek B.V., Mijdrecht, Netherlands	4.8	4.7
BAUER Technologies Limited, Bishops Stortford, UK	43.2	2.6
BAUER Spezialtiefbau Schweiz AG, Baden-Dättwil, Switzerland	15.2	28.6
TERRABAUER, S.L., Madrid, Spain (30 % share)	1.0	0.4
BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary	6.0	7.7
BAUER ROMANIA S.R.L., Bucarest, Rumania	1.9	2.1
BAUER BULGARIA EOOD, Sofia, Bulgaria	1.8	4.5
BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria	15.0	14.4
OOO BAUER Technologie, Moscow, Russian Federation	36.7	31.3
BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt	20.8	22.9
BAUER LEBANON FOUNDATION SPECIALIST S.a.r.l., Beirut, Lebanon	11.3	16.5
BAUER Georgia Foundation Specialists LCC, Batumi, Georgia	3.0	3.3
BAUER International FZE, Dubai, United Arab Emirates	35.5	37.0
BAUER Geotechnical Specialized Foundation LLC, Abu Dhabi, United Arab Emirates	8.3	20.7
BAUER International Qatar LLC, Doha, Qatar	8.0	13.8
Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia	25.3	10.8
BAUER (MALAYSIA) SDN. BHD., Petaling Jaya, Malaysia - (sub-group consolidated financial statements)	95.4	84.7
BAUER Hong Kong Limited, Hong Kong, People's Republic of China	41.6	45.3
BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam	3.1	2.9
BAUER Foundations Philippines, Inc., Quezon City, Philippines	15.9	10.2
P.T. BAUER Pratama Indonesia, Jakarta, Indonesia	26.0	30.2
Thai BAUER Co. Ltd., Bangkok, Thailand	17.6	21.2
BAUER Foundation Australia Pty Ltd., Brisbane, Australia	13.8	6.7
BAUER FOUNDATION CORP., Odessa, Florida, USA	48.9	42.2
BAUER Foundations Canada Inc., Calgary, Canada	19.1	9.1
BAUER FUNDACIONES PANAMÁ S.A., Panama City, Panama	11.9	11.7
Other BST shareholdings	16.3	17.2
Joint ventures, Germany - (BST share only)	6.4	2.0
Intra-Group sales	-84.3	-93.9
BST Group total SCHACHTBAU NORDHAUSEN GmbH - Group	673.7	657.4
SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany (SBN)	102.1	107.3
SBN participations	30.1	33.8
Joint ventures SCHACHTBAU NORDHAUSEN GmbH - (SBN share only)	1.7	0.0
SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany	17.0	14.2
Joint ventures SPESA - (SPESA share only)	5.1	6.7
Intra-Group sales	-61.3	-59.0
SBN Group total BAUER Maschinen GmbH - Group	94.7	103.0
BAUER Maschinen GmbH, Schrobenhausen, Germany (BMA)	391.7	383.3
KLEMM Bohrtechnik GmbH, Drolshagen, Germany	39.9	42.9
EURODRILL GmbH, Drolshagen, Germany	13.1	12.4
RTG Rammtechnik GmbH, Schrobenhausen, Germany	28.4	26.4

Compared to the breakdown of total Group revenues by segment, in the breakdown of total Group revenues by company the total of the individual groups is shown after consolidation.

* Previous year adjusted; see notes on page 106

Continued: Breakdown of total Group revenues across the companies of the BAUER Group

Shareholdings < 50 % are listed with their revenue share

in EUR million	2013 *	2014
BAUER Maschinen GmbH - Group
MAT Mischanlagentechnik GmbH, Immenstadt, Germany	12.3	11.8
PRAKLA Bohrtechnik GmbH, Peine, Germany	27.9	13.0
Olbersdorfer Guß GmbH, Olbersdorf, Germany	7.4	7.9
SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany	18.5	21.5
BAUER Deep Drilling GmbH, Schrobenhausen, Germany	0.0	1.3
TracMec Srl, Mordano, Italy	12.1	11.4
BAUER EQUIPMENT UK LIMITED Rotherham, UK	7.9	7.4
BAUER Macchine Italia Srl, Mordano, Italy	8.3	13.1
OOO BAUER Maschinen Russland, Moscow, Russian Federation	15.5	7.8
OOO BAUER Maschinen - Kurgan, Kurgan, Russian Federation	7.8	5.6
OOO BG-TOOLS-MSI, Lyubertsy, Russian Federation	2.9	1.6
BAUER Equipment Gulf FZE, Dubai, United Arab Emirates	5.5	8.4
BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey	5.5	3.9
BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana	2.6	2.1
BAUER Technologies Far East Pte. Ltd., Singapore, Singapore - (sub-group consolidated financial statements)	120.9	152.9
NIPPON BAUER Y.K., Tokyo, Japan	7.9	7.3
BAUER-Pileco Inc., Conroe, Texas, United States of America	68.9	76.3
BAUER Manufacturing Inc., Conroe, United States of America	22.9	22.2
Other BMA participations	17.1	11.5
Intra-Group sales	-229.2	-220.5
BMA Group total	615.8	631.5
BAUER Resources GmbH - Group
BAUER Resources GmbH, Schrobenhausen, Germany (BRE)	9.6	29.6
GWE pumpenboese GmbH, Peine, Germany	51.0	56.0
GWE Prakla Services GmbH - merged with GWE pumpenboese GmbH	2.2	0,0
BAUER Umwelt GmbH, Schrobenhausen, Germany (BMU)	42.7	54.8
BAUER Water GmbH, Dunningen, Germany	13.5	13.5
Esau & Hueber GmbH, Schrobenhausen, Germany	11.5	15.4
BAUER Foralith GmbH, Schrobenhausen, Germany	5.9	5.1
GWE POL-Bud Sp.z.o.o, Lodz, Poland	2.9	3.1
FORALITH Drilling Support AG, St. Gallen, Switzerland	2.9	5.1
BAUER Ambiente S.r.l., Milan, Italy	1.4	1.4
GWE Budafilter Kft., Mezöfalva, Hungary	3.1	3.2
BAUER Resources GmbH / Jordan Ltd. Co., Amman, Jordan - (sub-group consolidated financial statements)	20.7	29.9
BAUER Nimr LLC, Maskat-Al Mina, Sultanate of Oman	11.8	17.4
BAUER Emirates Environment Technologies & Services LLC, Abu Dhabi, United Arab Emirates BAUER Technologies South Africa (PTY) Ltd., Johannesburg, South Africa -	3.3 4.2	4.8 2.4
(sub-group consolidated financial statements)
BAUER RESOURCES GHANA LIMITED, Accra, Ghana	1.4	2.5
GWE Tubomin S.A., City of Santiago, Chile	3.5	3.3
BAUER Resources Canada Ltd., Edmonton, Canada - (sub-group financial statements)	3.1	1.2
Other participations of BRE	8.1	7.3
Joint ventures BAUER Umwelt GmbH - (BMU share only)	0.0	4.6
Intra-Group sales	-27.9	-34.9
BRE Group total	174.9	225.7
BAUER Aktiengesellschaft, Schrobenhausen, Germany (BAG)	37.0	37.1
Other participations of BAG	2.3	2.3
Intra-Group sales	-94.2	-96.8
GROUP TOTAL	1,504.2	1,560.2

* Previous year adjusted; see notes on page 106

The Magdeburg Waterway Construction Authority is conducting remediation work on the Zerben lock on the Mittelland Canal. Since March 2013, Bauer has carried out 10,000 m² of diaphragm wall, 20,000 m² of sheet pile walls, 930 buoyancy piles and 505 ground anchors as part of a joint venture. The work was concluded in November 2014.

IV. EARNINGS, FINANCIAL AND NET ASSET POSITION

Orders in hand/orders received by segment

in EUR '000	2013			2014	Backlog of orders in hand in
	In hand	Received	In hand	Received	months in relation to total Group revenues 2014
Construction	498,701	727,287	450,940	665,244	7.6
Equipment	116,525	632,053	158,720	693,967	2.9
Resources	150,020	180,054	153,027	255,837	7.3
Intra-Group revenues and IFRS adjustments	0 -54,915		0	-57,387	---
Total	765,246	1,484,479	762,687	1,557,661	5.9

TREND IN ORDERS

At the end of 2014, the BAUER Group held orders in hand totaling EUR 762.7 million, which is approximately at the previous year's level of EUR 765.2 million. On the whole, orders in hand remain at a good level overall but some events in 2014 have also had a negative effect on this. There would have been more orders in hand by the end of the year had it not been for the crisis involving Russia and Ukraine, uncertainties in Iraq resulting from the Islamic State terror organization and the drop in the oil price.

The Construction segment had orders of big projects on its books last year. These have now been finished. Consequently, orders in hand declined significantly by 9.6 percent from EUR 498.7 million to EUR 450.9 million. In 2014, there were hardly any major orders on the market, whereas many small and medium projects were picked up in all regions of the world. The homogeneous regional distribution over the world is positive, and so this represents a good basis for reaching the objectives for 2015.

In Germany, specialist foundation engineering business has experienced a significant decline in its orders in hand following processing of the major project for the bypass rail link between Hanau and Nantenbach. At present, there are hardly any major projects on the market even in Germany. Nevertheless, the overall environment continues to be positive, as a result of which it has been possible to occupy capacity with a large number of small and medium projects. Total orders in hand in this area have fallen by 34.5 percent to EUR 62.2 million.

Orders in hand in the international specialist foundation engineering business fell by 24.8 percent to EUR 271.0 million owing to the completion of large-scale projects. The foundations of the bridge between Hong Kong and Macau, and further work on the building complexes adjoining what will soon be Europe's tallest building, the Lakhta Tower in St. Petersburg, Russia, have been completed successfully. The diaphragm walling works on the Center Hill dam in the USA will be completed in the second quarter of 2015. A major diaphragm walling project on Mauritius has reached a very advanced stage, and it will be possible to complete it towards the middle of 2015. A particularly positive aspect is the situation of our subsidiary in Egypt which, despite the difficult situation in the country, has been able to attract some very interesting, large-scale projects, enabling us to predict an increase in its revenues.

The Construction and Environmental Technology divisions of SCHACHTBAU NORDHAUSEN GmbH have orders in hand totaling EUR 47.5 million, 10.5 percent up on the previous year's level. Business operations are currently benefiting from the generally favorable development in the construction market in Germany.

Orders in hand in the Equipment segment of EUR 158.7 million are 36.2 percent up on the previous year's level of EUR 116.5 million. BAUER Maschinen GmbH itself produces and sells large machines, and delivered a large proportion of its orders by the end of the year; orders in hand fell from EUR 50.1 million to EUR 37.2 million in consequence of this. The business remains very short-term in nature. The majority of

machines are delivered within one month of being ordered. As a result, it is necessary to keep a stock of machines available, so as to meet customers' expectations for rapid delivery.

However, the subsidiaries in the segment recorded significant growth. BAUER Deep Drilling GmbH sells deep drilling rigs and succeeded in growing its orders in hand by EUR 53.7 million thanks to orders received in December. It is very pleasing that we have managed to make a significant breakthrough here. In spite of turbulence in the oil markets, we are assuming that we will be able to build on this success in coming years. Overall, 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.

In the Resources segment, orders in hand increased slightly, by 2.0 percent, from EUR 150.0 million to EUR 153.0 million. Of that total, a significant proportion – worth EUR 40.9 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 increased by 7.3 percent to EUR 112.1 million. In Environmental Technology, in particular, our levels of orders in hand are very healthy. We are still involved in our largescale project of operating the reed-bed treatment plant in Oman, and it will provide us with plenty of work for years to come. Our capacities are also being well utilized in Germany. Conversely, the well-engineering 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 for our customers remains problematic in many different countries around the world. Mine operators are faced with economic problems, as a result of which very few contracts are being awarded. That business accounts for only a very small proportion of our total revenues however. Major projects are continually arising around the world for the Resources 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 slight growth in the current year.

GROUP EARNINGS POSITION

The Group earnings position in 2014 was influenced by contradictory developments compared to the previous year. Our construction subsidiary, BAUER Foundation Corp. in the USA, recorded significant losses amounting to EUR 19.0 million. These arose from the major Center Hill dam project and due to the lack of capacity utilization, because that project meant it was not possible to process sufficient other orders. Furthermore, weak order levels in the UK as well as inadequate utilization of our drilling capacity in the Resources segment – especially in Jordan – negatively influenced the earnings position. Furthermore, our worldwide activities were burdened by restructuring measures in many areas. However, there were also many positive developments, especially the construction business in Germany, Russia, the United Arab Emirates, Saudi Arabia, Indonesia and Thailand. In the Equipment segment, we were able to achieve better margins once again due to increased sales of large and special rigs. The Environment area was also highly positive.

Overall, the positive overall result could only be posted because we compensated for special losses during the year by means of a one-off income item amounting to EUR 36.5 million. The one-off income item was derived from the sale of 21 percent of the shares in our subsidiary in Oman. As a result of the sale, our holding fell to 49 percent; this triggered de-consolidation and the investment therefore had to be posted at the year end at-equity in relation to the fair value. The company had undergone excellent development in recent years, and its future prospects are very bright. The reduction to a 49 percent shareholding is a sensible measure, because majority locally owned companies in Oman have better chances of winning orders.

As a result of the one-off income item, it was possible to improve the results figures compared to 2013. In consequence, the net profit for the period increased compared to the previous year from EUR -19.4 million to EUR 15.7 million.

EBIT increased from EUR 30.1 million to EUR 76.4 million. EBITDA increased by 37.9 percent from EUR 124.0 million to EUR 171.0 million, representing 11.4 percent (previous year: 8.6 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) improved against the previous year from -1.3 percent to 9.0 percent. The return on equity after tax was 3.7 percent (previous year: -4.2 percent). The return on sales after tax (relative to the consolidated income statement revenues) improved from -1.3 percent to 1.0 percent year-on-year. We expect to be able to improve our returns further in the coming years.

There have been substantial changes to some income statement items in the year under review. This is largely a consequence of the negative result in the previous year and the special influences in the financial year.

The individual income statement items are summarized in the following.

Consolidated revenues rose by 4.0 percent against the previous year (EUR 1,447.5 million) to EUR 1,506.0 million. This includes a sale and consolidation income from the atequity balancing of BAUER Nimr LLC in Oman with EUR 36.5 million. Without this special effect, consolidated revenues would have grown by 1.5 percent.

Sales revenues were down slightly by 1.9 percent compared to the previous year (EUR 1,402.2 million) at EUR 1,375.7 million.

The other capitalized goods and services for own account item decreased by 23.4 percent from EUR 19.2 million to EUR 14.7 million. The reduction is due to our restrained investment policy in 2014.

Other income rose very significantly against the previous year, from EUR 30.6 million to EUR 89.0 million. The main change in other income is due to the overall effect of selling 21 percent of the shares in BAUER Nimr LLC amounting to EUR 36.5 million and the associated fair-value reporting of the remaining shares. Other key changes to this item related to realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts, which overall increased by EUR 23.1 million to EUR 34.6 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 results from the situation 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 29.8 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 experienced overall foreign currency gains of EUR 4.8 million in the year under review. The considerable fluctuations in exchange rates towards the end of the year were the main cause of this positive result. The other major items under "Other income" are income from insurance refunds (EUR 1.8 million), book profits on asset disposals (EUR 5.4 million) and other operating income distributed amongst the companies.

Trend in total Group revenues by quarter

in EUR million	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Full year 2014
BAUER Group	378.076	371.139	413.948	397.057	1,560.220
Construction	176.504	174.944	181.805	179.752	713.005
Equipment	165.806	155.534	186.148	144.284	651.772
Resources	48.409	52.547	59.615	92.259	252.830
Other/Consolidation	-12.643	-11.886	-13.620	-19.238	-57.387

Costs of materials hardly changed during the year under review at EUR 749.2 million. 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 3.6 percent to EUR 355.3 million – a slightly lower rate than the consolidated revenues. The rise is largely explained by higher personnel expenses for our major projects in Hong Kong, the USA and Switzerland.

The decline in depreciation of fixed assets by 1.2 percent to EUR 78.8 million is due to the absence of write-downs of goodwill and a slight increase in write-downs of development costs and properties and buildings.

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 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 changes in the market following the financial crisis, our customers are increasingly entering into these rental transactions. The write-downs due to use increased by 11.2 percent to EUR 15.8 million during the year under review.

Other operating expenses rose by 2.5 percent to EUR 230.5 million. 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", which contributed to an increase in the item at EUR 8.6 million.

Financial income fell by 8.2 percent from EUR 7.7 million to EUR 7.1 million. Financial expenses fell by 0.9 percent from EUR 45.5 million to EUR 45.1 million. The slightly higher conditions from the syndicated loan concluded in April 2014 were able to be compensated by slightly lower utilization of the other lines during the course of the year, as well as by some interest rate reductions.

The share of the profit or loss of associated companies accounted for using the equity method is EUR 2.3 million below the previous year at EUR -0.6 million, largely due to a write-down of the investment in Spain (EUR -2.3 million).

Income tax expense of EUR 22.1 million was EUR 8.6 million above the previous year's level. The main reason for the significant rise is a consequence of the loss incurred on the Center Hill dam project in the USA. In this case, it was not possible to report corresponding deferred tax assets, because from the current perspective there is no reason to expect that the loss can be compensated within a reasonable period of time by profits earned locally. Negative result contributions from subsidiaries in individual countries only have the effect of reducing the tax burden on the Group if it has been possible to establish deferred tax assets on the basis of positive tax-related earnings planning. In future, we once again expect an income tax burden of between 30 and 40 percent.

The non-controlling interests in profit/loss item was EUR 1.2 million (previous year: EUR -2.5 million). The companies in Oman and Egypt contributed significantly.

The profit attributable to BAUER AG shareholders was EUR 14.5 million.

EBIT trend by quarter

in EUR million	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Full year 2014
BAUER Group	4.919	8.684	24.689	38.134	76.426
Construction	1.418	6.000	12.900	4.750	25.068
Equipment	5.647	7.527	12.720	11.023	36.917
Resources	-2.118	-1.163	-2.378	21.591	15.932
Other/Consolidation	-0.028	-3.680	1.447	0.770	-1.491

GROUP FINANCIAL AND NET ASSET POSITION

With consolidated revenues up 4.0 percent on the previous year, the Group's net assets fell 0.7 percent from EUR 1,585.8 million to EUR 1,575.1 million. The equity ratio of 26.6 percent was slightly up on the previous year (25.5 percent). The loss in 2013 meant that the equity ratio fell below 30 percent in the previous year. The significant effects from the interest-related increase in defined benefit plans impacted equity and meant we were unable to increase our equity ratio further in 2014. We are aiming to achieve a value in excess of 30 percent in coming years. All investment and growth plans of the business are aligned to this target.

The net debt of our business decreased by 3.9 percent in the year under review. In the coming years, we will continue to work intensively on reducing net debt in relation to net assets. 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 as well as the property, plant and equipment and the investment property are very largely covered by the shareholders' equity and defined benefit plans. 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 only sometimes receive advance payments for the construction project in question to generate a positive cash flow over the term of the project. 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. So we are always billing after carrying out the works. Moreover, we also have to finance retentions of payment as safety.

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 in relation to our business volumes. Our levels of inventories, finished goods and receivables 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. Furthermore, substantial amounts are imposing a 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.

Exchange rate trend 2014

1 EUR corresponds to	Average rate 2013	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Average rate 2014
USD	1.3301	1.3782	1.3692	1.2632	1.2166	1.3219
GBP	0.8497	0.8266	0.8008	0.7792	0.7818	0.8028
RUB	42.5912	48.4270	46.5654	50.0110	67.5895	51.5000
CNY	8.1686	8.5735	8.4918	7.7596	7.5550	8.1575

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. 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 206.6 million, there is a considerable reserve here.

The net debt to EBITDA and EBITDA to net interest coverage ratios agreed with lenders as covenants have worsened since the financial crisis, and especially as a result of the loss made in the 2013 financial year. In 2014, it was possible to move the net debt to EBITDA ratio to an acceptable level at 3.78, representing a significant improvement compared to the previous year (5.42). The two other agreed covenant ratios – EBITDA to net interest coverage and equity ratio – are adequately within the agreed thresholds. The Group has entered into covenants in respect of a number of long-term loans, which were valued as per the 2014 year-end at EUR 156.0 million. The covenants on them stipulate net debt to EBITDA ratio thresholds between 4.0 and 5.0.

Covenants trend

	2013	2014
Net debt/EBITDA	5.42	3.78
EBITDA/net interest coverage	3.28	4.49
Equity ratio in %	26.5	26.6

In April 2014, we agreed a three-year syndicated loan with a consortium of the company's main banks providing a EUR 450 million credit facility. This also includes threshold values for the net debt to EBITDA and the EBITDA to net interest coverage ratios and for the equity ratio. This provided the firm a new financing structure which will form the basis for planning going forward. The syndicated loan also replaced loans affected by the breaking of covenants in the previous year. The new financing structure imposes slightly higher financing costs on the Group.

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

On the Assets side:

• Intangible assets declined by EUR 0.9 million. At the same time, concessions and industrial property rights fell by EUR 0.9 million.
• Land, land rights and buildings declined by EUR 5.0 million to EUR 206.6 million. Only small building projects were undertaken during the financial year. In the USA, the premises of BAUER-Pileco Inc. were sold and the company relocated to the works of BAUER Manufacturing Inc. in Conroe near Houston. A hall and an office were set up there for this purpose.
• Payments on account and assets in course of construction increased by EUR 2.9 million. The increase should be seen in connection with the land, land rights and buildings item, because some of the structures had not been finished at the year-end.
• Technical equipment and machinery decreased by EUR 8.3 million to EUR 206.2 million. This is a consequence of the cautious investment strategy we are currently pursuing. Basically, however, 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 2.2 million to EUR 25.1 million.

Property, plant and equipment and investment property were reduced overall by EUR 12.6 million to EUR 446.9 million.

• Investments accounted for using the equity method increased by EUR 29.7 million to EUR 42.9 million. The main changes involved the increase in investments in joint ventures by EUR 0.9 million, the write-down on a Spanish investment amounting to EUR 2.3 million and the new at-equity balancing of BAUER Nimr LLC in Oman at EUR 31.1 million.

Assets Equity and liabilities

Shareholders' equity EUR 418.9 million (26.6 %)

Non-current assets EUR 594.8 million (37.8 %) (2013: EUR 587.8 million (37.1 %))

Current assets EUR 938.5 million (59.6 %) (2013: EUR 940.8 million (59.3 %))

Liquid funds EUR 41.8 million (2.6 %) (2013: EUR 57.2 million (3.6 %))

EUR 1,575.1 million EUR 1,575.1 million

• Deferred tax assets increased by EUR 4.7 million to EUR 31.0 million. The greatest change in this context arose from the interest-related revaluation of defined benefit plans, leading to additional deferred tax assets amounting to EUR 9.0 million.
• Receivables from concession arrangements have been omitted due to the explained sale of shares in BAUER Nimr LLC as at 31 December 2014.
• Other non-current financial assets increased by EUR 23.0 million to EUR 28.4 million. The main change here concerns a loan by BAUER Resources GmbH to BAUER Nimr LLC amounting to EUR 9.4 million for financing the water treatment plant in Oman as well as the outstanding purchase price receivable from the sale of the shares in BAUER Nimr LLC amounting to EUR 13.3 million.
• Raw materials and supplies increased 5.9 percent compared to the previous year, by EUR 8.7 million to EUR 155.3 million. Around 40 percent of this item relates to the Construction and Resources segments.
• Work in progress and finished goods and merchandise increased 4.1 percent from EUR 272.7 million to EUR 283.9 million. During the financial year, it was not possible to reduce inventories further in the Equipment

(2013: EUR 419.8 million (26.5 %)) Non-current liabilities

EUR 523.3 million (33.2 %) (2013: EUR 382.5 million (24.1 %))

Current liabilities EUR 632.9 million (40.2 %) (2013: EUR 783.5 million (49.4 %))

segment, due among other factors to a somewhat weaker year-end business in the Equipment segment. However, we will continue to work diligently on reducing this item.

• Receivables from construction contracts (PoC) decreased by EUR 11.0 million to EUR 132.2 million. Changes in this item result from the percentage of completion of our projects at the year-end closing date.
• Trade receivables increased by EUR 8.9 million to EUR 311.4 million.
• Other current assets decreased by EUR 2.1 million to EUR 28.6 million.
• Other current financial assets increased by EUR 0.5 million to EUR 20.1 million.
• Cash and cash equivalents decreased by EUR 15.4 million to EUR 41.8 million. Attempts are made to minimize this figure at the year-end by appropriate liquidity management.

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 element, while others, in contrast, relate to the Equipment element. 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. On the other hand, about 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 production at the balance sheet date also represents a very substantial capital tie-up.
• Receivables from construction contracts (PoC) are attributable 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 slightly by EUR 0.9 million to EUR 418.9 million. Factors contributing to this change were the net profit for the period (EUR 15.7 million), currency fluctuations (EUR 10.5 million) and the interest-related adaptation in defined benefit plans

netted against the associated deferred tax assets (EUR -23.2 million).

• Non-controlling interests decreased by EUR 3.2 million to EUR 19.6 million, chiefly due to the de-consolidation of BAUER Nimr LLC.
• The non-current portion of liabilities to banks increased from EUR 247.8 million to EUR 364.8 million. The increase is largely due to drawings on the agreed syndicated loan.
• Non-current defined benefit plans increased by EUR 34.7 million to EUR 116.4 million. The increase is largely due to the lower discount rate, which is now 2.0 percent. The annual injection from ongoing pension commitments only contributed to the increase to a small extent. Overall, this has a negative effect on the equity ratio.
• Deferred tax liabilities decreased by EUR 1.8 million.
• The current portion of liabilities to banks declined from EUR 427.6 million to EUR 266.5 million as a result of the increase in non-current financing and the lower utilization of financing overall. Financing decreased by EUR 44.1 million overall in terms of current and non-current liabilities to banks. Taking into account the decrease in the "Cash and cash equivalents" item (EUR 15.4 million), the decrease was EUR 28.7 million. It was possible to reduce indebtedness in spite of the difficult market environment.
• Liabilities from construction contracts relate primarily to construction projects on which the payments received surpass the work carried out. They increased by EUR 15.6 million to EUR 48.5 million.
• Trade payables decreased by EUR 25.5 million to EUR 169.0 million. By this practice we are able to make use of all discounting opportunities.
• Other current liabilities decreased by EUR 1.2 million to EUR 68.6 million.

53

• Other current financial liabilities increased by EUR 13.6 million to EUR 25.7 million. This is chiefly due to liabilities from forward exchange transactions, an increasing number of which were concluded at the year-end as a result of currency fluctuations.

The ratio of net assets to consolidated revenues decreased from 109.6 percent to 104.6 percent.

Net cash from operating activities shown in the cash flow statement increased substantially from EUR 38.4 million to EUR 115.4 million. The following factors contributed to this change:

• Owing to the effects set out under "Earnings", a pre-tax profit of EUR 37.8 million was made compared to a loss of EUR 6.0 million in the previous year.

• Depreciation on fixed assets decreased slightly by EUR 0.9 million, and contributed EUR 78.8 million to the inflow of funds from ongoing business activity.

• The decrease in trade receivables and in receivables from construction contracts resulted in a release of funds totaling EUR 44.9 million in contrast to a capital tie-up of EUR 87.3 million in total in the previous year.

• The increase in inventories impacted on operating cash flow in the amount of EUR 37.3 million.

Cash flow from investment activities totaled EUR -47.5 million, decreasing by EUR 19.7 million below last year's figure, especially due to the reduced investment activity.

The outflow of funds from financing activities was EUR -86.9 million. The main factors influencing this were loan repayments amounting to EUR 237.8 million and interest payments of EUR 43.0 as well as new indebtedness to banks in the amount of EUR 202.3 million.

V. FINANCIAL STATEMENTS OF BAUER AKTIENGESELLSCHAFT

The annual report combines the Group management report and the management report of BAUER AG as the parent company. Consequently, notes on the balance sheet and income statement of BAUER AG (acc. to German Commercial Code, HGB) 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:

• Receivables and other assets increased by EUR 31.9 million. This is primarily down to the EUR 32.0 million increase in receivables from affiliated companies, which results from the issue of more loans to subsidiaries.
• Shareholders' equity increased from EUR 155.3 million to EUR 161.2 million. The reason for this was the net earnings available for distribution, being EUR 5.9 million higher than in the previous year.
• Liabilities increased from EUR 137.1 million to EUR 161.9 million. The main factor responsible for this was the growth in liabilities to banks by EUR 43.5 million, which chiefly resulted from the new syndicated loan. On the other hand, liabilities to affiliated companies declined by EUR 18.9 million.

Main changes to the income statement:

• Sales revenues, primarily related to charging of administrative services to subsidiaries, decreased slightly by EUR 0.5 million. On the other hand, other income increased markedly by EUR 3.6 million, chiefly due to income from forward exchange transactions.

• Other operating expenses rose by EUR 2.9 million. Significantly higher expenses were incurred during the financial year in currency management. In addition, there were special expenses as a result of the syndicated loan.

• The operating result improved by EUR 0.5 million to EUR -0.2 million.

• The net profit for the year is EUR 5.9 million, EUR 0.8 million up on the previous year. No dividend was paid in the 2014 financial year, as a result of which the net earnings available for distribution increased significantly from EUR 27.4 million to EUR 33.3 million.

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.

Following a difficult financial year, the planned after-tax result in the Group could only be achieved by means of a one-off income. We believe it is appropriate to allow our shareholders to participate in this, so we intend to pay a small dividend again. At the same time, we are still intensively pursuing the objective of improving the equity ratio. The Management Board will therefore recommend to the Supervisory Board that it propose to the Annual General Meeting that a dividend of EUR 0.15 be paid to shareholders on the net earnings available for distribution totaling EUR 33,349,700.22. An amount of EUR 30,780,050.22 should therefore be carried forward.

As the Group's holding company, BAUER AG receives earnings in particular from its subsidiaries. In 2015, dividend payments from the subsidiaries will be somewhat lower than in the year under review. The intention is to reduce the burden on the subsidiaries' capital base. For this reason, the result in the financial statements for BAUER AG will be somewhat decreased.

VI. SUSTAINABILITY

SUSTAINABILITY WITHIN THE BAUER GROUP

The BAUER Group has combined its most important action areas under the maxim "BAUER's Triple A". The slogan is based on the highest grade given by rating agencies when evaluating the strength of a company. It is used to reflect the areas of utmost concern with the Group. The first of these is Health, Safety and Environment, which has grown significantly in recent years through various measures and should continue to be expanded. The second area is Quality and Ethics. We want to offer our customers the highest quality possible and treat our stakeholders with fairness. The third A stands for performance thus the company's financial success. The goal is to earn the highest grades – all A's – in each area.

The actions areas defined under BAUER's Triple A also represent the core aspects of sustainability management. The Group Management Board and the Managing Directors of the holding companies have the main responsibility for the long-term development of the company as well as its direction with regard to quality, safety, health and environmental protection. These topics are also discussed during monthly group meetings.

At the meeting of the Corporate Social Responsibility (CSR) Committee, the Executive Board and representatives of Human Resources, HSE, Training and Corporate Communications departments of BAUER AG come together once a year to discuss current developments and define actions and goals. The annually published Sustainability Report, which since 2011 meets the requirements of the Global Reporting Initiative (GRI), provides in-depth information about these actions and goals.

EMPLOYEES

Every single employee is extremely important in reaching the common goals of the BAUER Group. Thanks to their commitment and experience, in 2015 we can look back on a successful history that spans 225 years. That's precisely why developing and supporting our staff is our top priority.

Employee-related data

The companies of the BAUER Group worldwide employed 10,405 people (previous year: 10,264) on average over the year. They are broken down as follows:

Value added 2014

Construction segment: 5,675 (previous year: 5,531) Equipment segment: 3,038 (previous year: 2,998) Resources segment: 1,400 (previous year: 1,449) BAUER AG and subsidiaries: 292 (previous year: 286)

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 Egypt (124 employees), Indonesia (104 employees) and the United Arab Emirates (44 employees). In some countries, such as Malaysia or Algeria, fewer people were employed in the year under review than in the previous year owing to the weaker state of the market. The good overall level of orders in hand led to a slight increase in workforce in Construction, while the growth above all related to staff recruited for specific projects.

Workforce numbers in the Equipment segment increased only slightly. Most of the small rise was attributable to recruitment of new staff at the production facilities in the Far East (17 employees) and Botswana (12 employees). In total, the

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

The workforce of the Resources segment was reduced due to some restructuring measures, the reorganization and as a result of weakness in the mining sector. The subsidiaries in Jordan (35 employees) and South Africa (30 employees) played a significant part in the reduction during the year under review.

Education

At Bauer, we care about inspiring young people to work for our company and maximize their potential. That's why we offer a variety of opportunities for getting to know the company better as a potential employer and gaining insight into our business activities. In 2014, Bauer employed 248 apprentices in Germany. Most of them were learning to become industrial mechanics, construction machinery operators, or clerical staff.

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.

Employees by segment Employees by employment type

Training and development

The BAUER Training Center GmbH is the Group's in-house training facility, providing specially tailored courses both for our own staff and for external target groups. Its extensive program of seminars and courses in a wide variety of fields covers many different subjects. In 2014 the BAUER Training Center GmbH had a budget of around EUR 2.1 million (previous year: EUR 2.3 million) for employee training and development. Almost 2,717 in-house staff (previous year: 2,948) attended the seminars. A total of 475 (previous year: 599) 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 programs. We also conduct international training courses.

Diversity

In 2014, the BAUER Group employed people from 76 different nations. Our presence on worldwide markets has brought together people from a wide variety of cultures as part of our company. Our cooperation is characterized by mutual respect. Discrimination, particularly on grounds of religion, age, gender, race or sexual orientation, has no place in our company. That's why promoting diversity is an integral part of our corporate culture.

We offer all our employees the same opportunities. In both hiring and development, we place great emphasis on

12,000 10,000 8,000 6,000 4,000 2,000 0 2011 2012 2013 2014 1,891 1,658 630 478 924 9,646 4,065 2,061 542 965 10,253 4,090 726 1,869 2,212 2,290 612 586 950 1,018 10,264 10,405 4,144 4,158 762 752 1,584 1,601

Germany Europe (other) Middle East & Central Asia Far East & Australia Americas Africa

personality and skills-based assessment. With this in mind, we work specifically to attract more young women and girls to technical professions and promote their advancement in this area.

In 2014, approximately 11 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 reduced our capital investments compared to previous years in 2014. For the first time in years, they were once again below the level of amortizations. This was possible thanks to extensive investments made in our plants over previous years. The pace of technological progress in our business has become faster, however, so it will only be possible to improve performance in the future by increasing investments again.

For Equipment, our US plant in Conroe near Houston was expanded in 2014 to allow our subsidiary BAUER-Pileco Inc. to move there with all its activities in the areas of service, sales and spare parts supply. The old site in Houston was sold, thereby allowing the new construction to be financed from the proceeds of the sale. Furthermore, the production capacity for our anchor production in Edelshausen was expanded in response to the urgent need for greater capacity as a result of very good development in the business. All further investments were chiefly channeled into modernizing the equipment available to the production sites.

Investments in the Resources segment in 2014 were also at a low level. A small hall was built in Schrobenhausen for stainless steel production to be used in water treatment and brewery systems. Further investments went into the modernization of existing production systems.

Further 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

Employees by region

machinery to carry out the associated specialist foundation engineering works. This demands higher levels of individual investment, but also opens up new market opportunities for us.

In financial 2014 the BAUER Group invested a total of EUR 72.7 million (previous year: EUR 103.4 million) in intangible assets and property, plant and equipment. Depreciation of fixed assets across the Group totaled EUR 78.8 million (previous year: EUR 79.7 million). Write-downs of inventories due to use Group-wide totaled EUR 15.8 million (previous year: EUR 14.2 million).

Additions to the property, plant and equipment assets of BAUER AG in the 2014 financial year totaled EUR 2.3 million (previous year: EUR 3.5 million), against depreciation of EUR 2.9 million (previous year: EUR 3.3 million).

Ongoing capital investments were funded primarily by cash and cash equivalents from business operations and from financing. In 2015 too, we will keep investments in balance with amortizations.

RESEARCH AND DEVELOPMENT

The BAUER Group invested substantial sums in developing new construction methods and machinery in financial 2014. 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 electronic applications and techniques have been created or enhanced in order to optimize on-site processes.

Research and development work in the BAUER Group is organized on a decentralized basis. In the companies that belong to BAUER Maschinen GmbH, there is a separate development area in each major product group which concentrates entirely on the corresponding equipment such as rotary drilling rigs or cranes. The central development department develops the technologies and components of a machine that are used in several product groups. Thus, on the one hand, the greatest level of standardization amongst components is achieved, while on the other hand synergy

effects are derived with regard to their further development. These central components include the hydraulics and drive technology, electronics and machine software as well as gearboxes. Basic research work is also situated in the central development department.

Development work at the subsidiaries of BAUER Maschinen GmbH comes under the described system, in which case each subsidiary is individually responsible for its specific product group. Our international production sites also have development areas which concentrate on the needs of our customers locally, as well as on special machines that are manufactured in that location. A development office in India provides support for all development groups if required.

Our construction areas also have their own development capacities. Specifically, BAUER Spezialtiefbau GmbH operates a department for construction technology which develops new methods and conducts fundamental research.

With regard to research activities that might be of Groupwide importance, internal and external orders are placed for research work via the BAUER Forschungsgemeinschaft (research community). This gives a chance for blue-skies thinking to be investigated with regard to its practical applicability. Sometimes, this gives rise to outstanding new techniques that help our companies to achieve technological advances.

This type of overall organization for research and development work has proven highly effective. Rapid decisions and great flexibility allow all products to be kept at the cutting edge, while new ideas and market requirements can be implemented quickly.

There were some outstanding development projects in 2014 as well. For example, Deep Drilling developed a completely new deep drilling rig in the 375 metric ton class together with our client, Saxon Energy Services Inc. Two rigs were ordered at the end of the year. Our underwater drilling machines for the foundations of wind turbines and underwater turbines also underwent intensive further development. Unfortunately, we are still waiting for orders to be placed for equipment of this kind because of sluggish development in the projects in question. However, we are convinced that the significant

advantages offered by our machines, particularly with regard to noise emissions and their ability to work under the influence of powerful currents, mean they have excellent chances.

In the area of Premium and ValueLine drilling rigs, parts of the equipment range have been relaunched and a new uppercarriage platform developed. Consistent modularization of the products meant that significant advantages were achieved with regard to production, scheduling and streamlined global spare parts stocking.

Insights gained from a research project bore fruit during the previous year in an optional energy efficiency package for our rotary drilling rigs which reached market readiness. This is highly appreciated by customers all over the world.

Further developments during the year concerned new well drilling rigs, components for deep drilling rigs, improvements to diaphragm wall machines, machines and processes for soil remediation work with restricted overhead height, improvements to the duty-cycle cranes to reduce noise levels and a hydraulic hammer for ramming in piles with increased frequency.

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 dealing with 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 practiced with great intensity by all Group units.

In the Equipment segment we invest a good 3.8 percent (including internal and project-related expenditure) of the corresponding portion of total Group revenues in research and development. A staff of 183 people are 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 also 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 labor markets.

Research and development expenditure in the Construction segment is 0.4 percent of total Group revenues, and in the Resources segment 0.8 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 2014 of EUR 27.9 million, an amount of EUR 6.2 million was capitalized (capitalization rate: 22.2 percent). Depreciation of capitalized development costs and patents totaled EUR 6.5 million.

Research and development in the BAUER Group

		2013				2014
	Construction Equipment		Resources	BAUER Group	Construction Equipment		Resources	BAUER Group
Total Group Revenues (in EUR million)	717.3	590.5	196.4	1,504.2	699.0	612.6	248.6	1,560.2
Expenses for R&D (in EUR million)	3.1	26.0	3.7	32.8	2.9	23.1	1.9	27.9
as % of total Group revenues	0.4	4.4	1.9	2.2	0.4	3.8	0.8	1.8
Group employees	5,531	2,998	1,449	10,264	5,675	3,038	1,400	10,405
R&D employees	45	190	33	268	41	183	22	246
Patent series	-	-	-	259	-	-	-	260
Patent applications, registered patents, etc.	-	-	-	1,473	-	-	-	1,480

Our expenditure on research and development is reflected in 244 (previous year: 259) current patent series, including 1,392 (previous year: 1,473) 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. In 2011, we introduced global standards in the area of Health, Safety & Environment (HSE), thus creating a uniform HSE management system for all companies of the BAUER Group. By constantly reviewing our performance and comparing it against our set goals and parameters, we seek to continuously improve our HSE system and thus consistently minimize our accident and damage rates. The managerial staff is primarily responsible for compliance and execution of the guidelines.

We take great care to educate our staff on the topic of workplace safety. That's why we conduct regular training on HSE. Weekly safety meetings are held at our construction sites and all our production facilities. This ensures a better understanding and greater acceptance of safety guidelines among our staff.

Regular reviews and audits confirm the consistent implementation of our safety standards. Through certifications such as OHRIS, OHSAS, AMS-Bau and SCC, we ensure that our safety policies meet the requirements of the International Labour Organization (ILO). We are working on obtaining certification for other companies in the Group.

Environmental management is integrated within the overarching HSE policy. Here, standards and guidelines have been defined which apply to all companies in the Group; we continuously check that they are being implemented and complied with.

Some 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

Quality is one of the fundamental concerns of top management in our companies. We must do everything in our power to maintain and, where possible, further develop our customers' trust in our companies and the quality of our products, services and equipment, earned over many years. We work hard to understand the needs and expectations of our customers so we can then meet them quickly, reliably and cost-effectively. Ethics, health and safety, environmental friendliness, efficiency and sustainability are all very important factors in meeting these needs.

Bauer has had a traditional staff suggestion system in place for decades. Recently, an intensively expanded system in the Continuous Improvement Process (CIP) has also been a source of new ideas.

Our quality management system is based on ISO 9001 as well other applicable government and industry standards. We conduct regular audits and benchmark reviews to make sure we are meeting our planned quality goals. The findings from these audits and reviews are incorporated into our regular training programs. We motivate our staff by demonstrating our own commitment to quality, setting challenging goals for them, giving them adequate responsibility and recognizing good performance. Active cooperation is essential to meeting our goals in a timely manner.

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 gas and oil 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 non-performance-related components, chiefly a fixed basic salary, paid in equal monthly installments, and a performance-related component in the form of a variable annual bonus. This is set by the Supervisory Board on the basis of short and long-term evaluation criteria, in which case the short-term evaluation criteria are equally weighted with the long-term ones when setting the variable remuneration.

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, 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 1,150 thousand (previous year: EUR 1,361 thousand). Of that total, EUR 1,090 thousand (previous year: 1,056 thousand) was not performance-related and EUR 60 thousand (previous year: 305 thousand) was performance-related. The total remuneration includes benefits in kind arising from the private use of a company car and reimbursement of expenses for each member of the Management Board, as well as group accident insurance premiums and employer's liability insurance association contributions.

The company pension scheme for Management Board members incurred pension service costs totaling EUR 159 thousand (previous year: EUR 118 thousand). The baseline salary defined for calculating retirement benefits is significantly lower in all contracts than the basic salary. 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 5,531 thousand (previous year: EUR 3,868 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. 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 2014 financial year totaled 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 favor. 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 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.

in EUR '000 2013 2014 Remuneration Supervisory Board (not including sales tax proportion and reimbursement of expenses)

38	38
27	27
20	20
18	18
18	18
20	20
20	20
20	20
9	18
18	18
20	20
9	0
18	18
254	254

* As a result of rounding to EUR thousands, there was a rounding difference of EUR thousand in 2013 and 2014.

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, 2014.

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 the BAUER Stiftung, Schrobenhausen, 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 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 Board states that the Man-agement 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-nominalvalue bearer shares against cash and/or non-cash contributions. 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 26, 2014, the company was authorized to acquire treasury stock, over a limited period up to June 25, 2019, 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 stock market price of shares of the company carrying the same rights at the time of the sale 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 boughtback 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 Labor 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

BAUER AG, together with other Group companies, has concluded a syndicated loan agreement providing a credit line of up to EUR 450 million; this contains provision for the lender to terminate its loan commitments in the event of a change of control or if control is gained by a third party. As defined by this syndicated loan agreement, a change of control is defined as a situation in which the total shareholding held by the pooled members of the Bauer family directly amounts to less than 40 percent of the capital shares or voting rights in BAUER AG. A third party gains control if, overall, more than 50 percent of the capital shares or voting rights in BAUER AG is held directly or indirectly by one or more persons acting jointly (with the exception of the pooled members of the Bauer family).

Furthermore, several long-term loans with balances totaling EUR 146.0 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

As part of our business activities, we are exposed to risks inherent to our operations. Running a business requires taking risks. True risks result from unforeseeable events that can bring both hazards and opportunities along with them. Therefore, at Bauer, risk management means not just reducing the hazards but also knowing how to take advantage of the opportunities. The purpose of risk management is to protect our business objectives, increase the value of our company and reduce the costs of risk. Risk management involves identifying, analyzing, evaluation and monitoring existing and anticipated risks along the entire value chain and devising actions to deal with them. 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 general rule, we do not take risks that threaten the existence of the company.

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 earlywarning 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 of measures 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 once 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.

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.

Relevance scale of the BAUER Group

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

Our customer Jafec – Japan Foundation Engineering Co., Ltd. – produced 120 piles for the construction of a 14-story hospital with two basement levels. A BG 28 and a BG 30 were used for the work.

Following assessment, 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 for a given 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 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.

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 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 taken into account 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 risks which may have a significant impact on our financial and earnings position and on our reputation, and assess the relevance to 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 Group by dividing it into separate Construction, Equipment and Resources segments, thereby pursuing the aim of greater independence from the economic cycles of the construction industry.

Frequent acquisitions and new company start-ups in the Resources segment entail the risk of misjudgment 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 during 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 class the risks associated with the structure of our business as medium.

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 manufacturing 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. This strategy has proven effective during various regional crisis situations in the past, in which it compensated for or cushioned negative impacts on the overall result. Our Resources segment has also already expanded on a broad international scale. We rate risks associated with our selling markets 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 Chinese 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 disproportionately 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. For example, production above all as well as sourcing has been localized to a significant extent, and the level of professionalism increased while retaining the familiar high quality standards. Furthermore, the after-sales service has been expanded further in all markets as a stabilizing factor for new business.

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, combined with the facts that the quality of their products remains significantly lower and their after-sales service is generally of a less developed nature, has to date impeded exports of Chinese construction machinery on a grand scale to the markets of relevance to us. A number of smaller Chinese competitors have already been forced out of market 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, significant interventions by some central banks as well as uncertainty as to the stability of markets in specific countries and the phases of significant downturn on the market in China and the other BRIC nations influence our appraisals 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.

The significant drop in the oil price may well be easing pressure on importing countries' balances of trade, but in the long term it will restrict the purchasing power and investment appetite of the oil producing countries in the Middle East and Russia. If the oil price remains low for a long period, this could have a negative effect on demand for deep drilling rigs and services for the oil industry. As a result of the significantly reduced oil price and the tense situation in the east of Ukraine, leading to sanctions against Russia, there was a significant drop in value of the Russian ruble against the euro towards the end of 2014. This creates obstacles for our equipment sales business to Russia, and is currently regarded as a medium risk.

These issues entail both exchange rate risks and demandrelated risks in the markets concerned. By contrast, the overall positive macro-economic situation in the Far East is creating a structurally greater 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 measures are derived from these analyses and implemented in full. However, we rate the overall macro-economic 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 key figures agreed for the promissory notes and the syndicated loan concluded in 2014 were met by the year end.

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 agreed limits. This risk is classed as medium.

Financial stability and liquidity

The risk of financial instability and supply shortages on international financial markets was countered last year by concluding a syndicated loan agreement. This agreement, with a three-year term, ensures the medium-term liquidity supply for the Group of companies, and is an important tool for alleviating major risks on the financial markets.

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. Transaction risks (foreign currency risks arising from the current cash flow) are minimized in all business divisions by means of suitable rate hedging instruments. The remaining currency risks are evaluated as low.

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 as soon as they are hired. 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.

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

Political and legal environment

However, 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 rate the risk as low.

Contract risks

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

Current legal cases

Legal disputes arise almost exclusively from our provision of services, in particular in the project business. Judicial disputes exist with regard to clients, suppliers and business partners, and in the majority of cases relate to remuneration, claimed deficiencies in performance or delays in completing a project. By their very nature, it is impossible to say for certain how the court or arbitration proceedings we are involved in will turn out. Nevertheless, following careful examination, we assume that adequate provision has been made in the balance sheet for all legal disputes.

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, multistage product creation process.

Thanks to our great innovative strength and transparent product creation process, we rate the risks in relation to research and development as being currently medium.

Production and order fulfillment

Technical failures arising from design errors or miscalculations of statics in the project business can result in significant delays, both on the company's own construction projects and on our customers' projects. In the BAUER Group, the risks resulting from this represent an inherent component of our project business. Consequently, designs and statics are predominantly produced in our own design bureaus by experienced employees. Consequently, we can assess the risks resulting from this as low.

A further risk in order fulfillment 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. All the listed risks are subjected to a threat and opportunity analysis at project level in the Construction and Resources segments.

A further risk in relation to production and order fulfillment 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 fulfillment 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, the possibility cannot be definitively ruled out that, on finally billing the customer, lower earnings will ultimately be generated. As a result of the trend for projects to increase in size and complexity, the resulting risks must be evaluated as of a medium level.

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 as well as 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 dual-control principle, and can basically 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, so 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 rate 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 very low for many years, and represent an affirmation of our personnel policy. We rate risks relating to personnel as insignificant.

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, so IT risks are 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 counteract them, 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 joint ventures, 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 judgment 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 and controlled 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 audited 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 multisegment structuring of the Group's accounting process, with its redundant control instances, we are able to classify the resultant risks as low.

OVERALL RISK

At present, no individual or aggregated risks can be detected that could threaten the existence of the BAUER Group in the 2015 financial year. The management sees no change in the overall risk situation, in view of future 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 competence center Drilling Technologies 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-tothe-surface 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, environment and natural resources – some of the major issues of the 21st century. Moreover, the Resources segment is 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, a trend can be observed for even difficult-to-access deposits, demanding intensive drilling operations, to be exploited. This is a trend that will continue, even if it is exposed to the influences of oil price fluctuations over and over again. Demand for modern deep drilling rigs will thus continue to rise in the medium and long-term. Consequently, the Equipment segment has

expanded its portfolio with deep drilling rigs capable of operating down to depths of 6,000 meters for geothermal energy, oil and gas exploration and for production drilling.

Opportunities in Deep Drilling have improved further with the signature of the contract between our subsidiary BAUER Deep Drilling GmbH and Saxon Energy Services Inc. for delivery of two 375 metric ton rigs. There is an opportunity for Deep Drilling to make an important overall positive contribution to our results in future. 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 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 underwater drilling rigs that can be operated from on-board a ship, to sink foundations for tidal or wind turbines. This opens up an entirely new product area, with great prospects for long-term success, 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 remediations are much in demand worldwide, due to the fact that dam structures have been neglected for years. Our depth of experience in this area, which we have been able to acquire in various dam remediation projects, means that we regard this as 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 labor 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 many good 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 entails 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 has initiated a worldwide cost-cutting program in response to the displeasing loss recorded at the end of 2013. As well as abandoning some smaller, financially problematical businesses in 2014, this included in particular the sustained implementation of numerous individual projects such as reducing personnel costs by process optimization, reducing material costs by specific negotiations with A-suppliers, reducing wear costs by technical improvements and cost reductions through changes of rules and behavior. The projects are defined in the course of planning and subjected to monthly checks. The object of the cost-cutting program 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 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 further in 2015.

X. FORECAST REPORT

A number of factors are of key importance to our companies and their 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 inquiries from all markets, and our healthy levels of orders in hand in the Construction segment in the regions of the world, affirm that judgment.

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 some 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. However, 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 revenues for 2014 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. The successes achieved in 2014 deliver precisely the confirmation we are looking for with regard to the efforts we have made.

In the Resources segment, we have numerous 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 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 technology 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. The decentralized organization of our development activities close to the plant floor has enabled us to considerably 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 areas through wide-ranging measures. All our worldwide warehouse facilities are electronically linked, allowing us to achieve a high level of parts availability. We have established service centers in all regions of the world. The rapid-response backup they ensure is much appreciated by our customers.

Demler Spezialtiefbau located in Netphen in North Rhine-Westphalia sunk 158 foundation piles and a piled wall in Halle with three different drilling rigs in an extremely restricted space. >>>

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The excellent sales successes we have recorded despite difficult market conditions are strongly linked to these efforts. 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.

Once again, 2015 will be a year with many challenges. The world's construction markets are fundamentally on course for growth. We are also expecting the Chinese competitors of our Equipment segment to behave more reasonably than in the past, since they will also be obliged to fall in line with the rules of the market.

In spite of the overall positive expectations, the risks posed in the markets should not be overlooked. They can influence our companies to differing extents, depending on how the issues pan out. This includes the current problems in Russia and Ukraine as well as the Islamic State terror organization in Syria and in Iraq. It is also very difficult to predict whether the efforts made to achieve political stability in the countries of North Africa will bear fruit, or if new unrest will confront the markets with further challenges. The economic problems facing some countries, such as Greece, are by no means resolved either.

In view of the general conditions, it is our opinion that our business model will prove robust in 2015 as well. In our planning, we have attempted to evaluate all known threats and opportunities, thinking through both positive and negative scenarios as effectively as possible. Ultimately, we are convinced that our planning for 2015 is realistic. This applies to all segments and to the Group overall.

Nevertheless, we are obliged to point out that specialist foundation engineering and our other businesses are exposed to greater risk than the business activities undertaken by most other companies. Our activity always contains a factor that cannot be perfectly analyzed in advance – the subsoil or the ground itself. 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. We are working hard to optimize even further our behavior with regard to risk, in order to avoid issues such as we have encountered in the last two years in future.

Of course, 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.

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 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 thanks to the global IT network, our efforts to internationalize the company have been successful.

All in all, we therefore believe that we are well set to meet the challenges of the future. We are continuing to work hard on our cost-cutting program, 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 2015 financial year will be around EUR 1.6 billion. We forecast profit after tax of around EUR 18 to 23 million. In accounting terms, this will mean EBIT of around EUR 75 million.

Comparison: 2014 actual/2015 forecast

in EUR million	Actual 2014	Forecast 2015
Total Group revenues	1,560	~ 1,600
EBIT	76.4	~ 75
Net profit or loss	15.7	~ 18 - 23

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 good weather conditions in some countries, 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. No significant change to the balance sheet structure is to be

In the Kingdom of Bhutan, approximately 80 km east of the capital city Thimphu, a 1.200 MW diversion hydroelectric power plant, the "Punatsangchhu-I" is being built. To lower the water level, Bauer is sealing the upstream cofferdam with a cut diaphragm wall that is up to 90 m deep. >>>

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. Over the coming years, we will be making great efforts to increase our equity ratio back to more than 30 percent.

We expect the Group to enjoy positive development through 2015 and 2016. We are planning for growth of between 3 and 8 percent, in line with our long-term plans. We also predict that we can 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 a dividend of EUR 0.15 per share should be paid for the 2014 financial year. Despite the fact that the result in 2014

could only be achieved by means of a one-time income, we nevertheless intend for our shareholders to participate in this. As a result, we would like to pay a dividend again – although admittedly at a low level. In the medium term, the dividend quota should be about 25 to 30 percent of the reported profit after tax.

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, 31 March 2015 BAUER Aktiengesellschaft

Prof. Thomas Bauer

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

The Bauer Share

Falling interests rates and new crisis areas

Although many problems remain in 2014 – the situation in Spain, Portugal or Greece has hardly changed – the Eurozone economy did return to slight growth with 0.8 %.

The European Central Bank cut its key interest rate, first in June 2014 from 0.25 % to 0.15 % and then again in September to a mere 0.05 %, in an effort to stave off deflation. The ECB introduced penalty interest rates on bank deposits in order to motivate the banks to increase lending. This policy boosted in particular the stock markets in 2014. In January 2015, the ECB decided to purchase government bonds (quantitative easing) as a further measure against the low inflation rate.

Overall, the global economy improved in 2014. The gross domestic product of the USA grew by 2.2 %. China, on the other hand, missed its own growth target with 7.4 %.

The German economy managed growth of 1.4 %. The good level of employment, growth in incomes and low inflation meant that economic growth was promoted by domestic demand in particular.

However, problematic areas also developed in 2014 again. In spring, the Russia/Ukraine conflict intensified. Europe introduced sanctions which had an effect on the European and the Russian economies. The ruble lost one third of its value against the euro over the course of the year. In addition, the oil price collapsed by about 50 % during the year. It is

probable that the definitive outcomes of these developments will only come to light in 2015.

The Bauer Share lost significantly in value

The Bauer share underwent a marked drop in value in 2014. Whereas the benchmark indexes, the DAX (+5.1 %) and SDAX (+4.3 %), grew, the Bauer share lost 28.8 % of its value by the end of the year.

The first days of trading in 2014 were positive, and saw the share increase from its opening price of EUR 18.81 to its high-point for the year in mid-January, at EUR 20.04. As the first quarter continued, the share price continued relatively unchanged in line with the German indexes, with slight upward and downward movements.

Following publication of the annual report on April 11 as well as the interim report on the first quarter on May 14, the share price dropped to EUR 18.12, while the markets recorded modest growth.

The Bauer share was able to recover slightly by the end of June before dropping markedly in relation to the slightly downward trend of the stock markets. An initial interim low point was reached on August 8, at EUR 14.44.

The Bauer share came under significant pressure following publication of the first half-year's figures on August 14 with the associated slight downgrade to the earnings forecast for the complete year, combined with further stock market

Performance of the Bauer Share 2014

weakness; by October 16, it had reached the low for the year at EUR 11.75.

As the markets recovered, the price rose slightly and topped the EUR 14 mark for a period in November. On the last trading day of the year, the share price was EUR 13.35.

During the first quarter of 2015, the share price increased significantly, reaching EUR 17.91 by the end of March.

Continuous dialog with shareholders

It is the objective of the Management Board and Investor Relations to keep shareholders comprehensively and continuously informed about the course of business. In addition to the financial reports, the BAUERcompact newsletter offers news and topics relating to the BAUER Group. With the BAUER app, it is possible to call up all messages, the share price and much else besides on a mobile device.

The Management Board uses roadshows in Scandinavia, the USA or Germany as well as participating in capital market conferences to inform German and international investors alike about the position of the business.

Furthermore, there is an intensive exchange with analysts. Overall, seven analysts reported on BAUER AG in 2014 with their research. At the end of the year, there were six neutral and one negative share recommendations. The average target share price quoted was EUR 14.36.

The Annual General Meeting in June was attended by about 450 shareholders and guests who came to the headquarters in Schrobenhausen to be informed by Prof. Bauer about the course of business.

Share information

ISIN / WKN	DE0005168108 / 516810
Trading symbol	B5A
Trading segment	Frankfurt, Prime Standard
Share indexes	SDAX, CDAX, GEX, DAXPlus Family Classic All Share, Prime All Share
Class of share	No-nominal-value individual bearer shares
Share capital	EUR 73,001,420.45
Number of shares	17,131,000
Shareholder structure	Bauer family 48.19 %, free float 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.

Following a difficult financial year, the planned after-tax result could only be achieved by means of a one-off gain. We believe it is appropriate to allow our shareholders to participate in this, so we intend to pay a small dividend again. At the same time, we are still intensively pursuing the objective of improving the equity ratio.

Consequently, the Management Board and Supervisory Board will propose to the Annual General Meeting on June 25, 2015 that a dividend of EUR 0.15 should be paid per share.

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

KEY FIGURES	2011	2012	2013	2014
Earnings per share (in EUR)	1.86	1.44	-0.99	0.85
Dividend per share (in EUR)	0.50	0.30	0	0.15 *
Dividend total (in EUR '000)	8,566	5,139	0	2,570 *
Year-end price (in EUR)	21.10	19.32	18.81	13.35
Annual high (in EUR)	38.49	26.50	23.05	20.04
Annual low (in EUR)	16.04	16.13	17.33	11.75
Market capitalization at year-end (in EUR '000)	361,464	330,971	322,234	228,699
Average daily trading volume (units)	65,885	48,584	39,017	26,984

* Proposed; subject to the consent of the Annual General Meeting to be held on June 25, 2015

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 2014 financial year.

Declaration of Conformity 2014

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, 2014 the Management Board and Supervisory Board passed the following declaration of conformity:

"Since the last declaration in December 2013 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 favored 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, 2013 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.

BAUER AG already conforms largely to the suggestions of the German Corporate Governance Code Commission."

Roles of the Management Board and Supervisory Board

German company law prescribes a dual system of management for BAUER AG, characterized by a strict separation of personnel between the Management Board as the executive management body and the Supervisory Board as the super vising 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 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. Measures and transactions of a division of the Management Board that are of extraordinary importance for the company or a business unit, or which are associated with an extraordinary financial risk, require the prior approval of the entire Management Board. 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. A member of the Management Board has been appointed Labor Director, and is responsible to an increased extent for human resources and social policy topics in the company. The Management Board defines the corporate strategy, agrees it in consultation with the Supervisory Board, and ensures that it is implemented. 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.

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. Furthermore, it deals with questions of corporate governance and is authorized to pass amendments to the Articles of Association which relate only to its wording.

The Audit Committee comprises three members elected by the Supervisory Board by a majority of the votes cast, with two members proposed by the Supervisory Board members of the shareholders and one member proposed by the Supervisory Board member of the employees. The Chairman of the Audit Committee is elected by the Supervisory Board at the suggestion of the shareholders' representatives. The Chairman of this committee 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 including 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 Chairman and the Deputy Chairman of the Nominations Committee are proposed and elected by the Supervisory Board members of the shareholders. 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 2014 financial year is published in the company's Annual Report on pages 88 to 89. 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 program of basic values which dictate the ethical and moral conduct of the company's employees in carrying out the business of the company. A Code of Conduct defining correct behavior of employees in the BAUER Group, dealing in particular with the topics of anti-corruption, competition and cartel law, health, safety & environment (HSE) as well as dealing with business partners, has additionally been published on the company's website.

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 the company's 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 programs 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 1,742,022 (previous year: 1,741,022) shares in the company as per December 31, 2014. This corresponded to 10.17 % (previous year: 10.16 %) of the share capital of BAUER AG. At the same date members of the Supervisory Board held a total of 1,310,531 (previous year: 1,310,431) Bauer shares, corresponding to 7.65 % (previous year: 7.65 %) of the company's share capital.

Report of the Supervisory Board 2014

The Supervisory Board regularly monitored the work of the Management Board during the 2014 financial year on the basis of the detailed reports provided by the Management Board in written and verbal form, and provided support in the form of advice. The Management Board discharged its duties to provide the Supervisory Board with regular, prompt and comprehensive information about all questions of strategy, planning, company development, risk development and compliance that are relevant to the company and the Group. Between the meetings, the Management Board submitted monthly written reports on all important business transactions and financial indicators of the Group and the 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 their subcommittees and plenary sessions, the Supervisory Board members always had the opportunity to scrutinize the reports and proposals submitted by the Management Board and to set forth their own suggestions. In particular, the Supervisory Board intensively discussed all business transactions important for the company on the basis of written and verbal reports from the Management Board, and examined them with regard to plausibility.

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 were no changes of personnel on the Supervisory Board in the past financial year.

Main focus of consultations in Supervisory Board meetings

Four regular plenary meetings were held during the reporting year. Apart from two meetings at which one member was absent in each instance, the meetings of the Supervisory Board were attended by all members.

The Supervisory Board reviewed performance trends on large-scale projects on several occasions in the course of the past year, and also gave consideration to the status of a cost-cutting program and assessed the liquidity planning. 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. The current business development in the Construction, Equipment and Resources segments was discussed in all Supervisory Board meetings.

At the annual accounts review meeting in April relating to the annual parent company and Group consolidated financial statements for the 2013 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. Furthermore, the Supervisory Board dealt with compliance with the financing covenants in this meeting, as well as the preparations for a syndicated loan. Current legal cases, the remuneration of the Management Board and extension of the term in office for the member of Management Board Heinz Kaltenecker were discussed

In the second meeting of the financial year, the Supervisory Board dealt with, amongst other matters, the interim report for the first quarter of 2014, the Group's financing situation including the cost-cutting program and the segments' order situation.

In conjunction with the September meeting, the Supervisory Board obtained information about the handling of a construction site at a major project. The meeting focused on the expected development of earnings, the liquidity required in major projects, the debt situation in the Group as well as compliance topics. It also approved the medium-term plan with regard to the consolidated balance sheet.

In the last meeting of the Supervisory Board in December of the year under review, the expected development of earnings and planning for the 2015 financial year were discussed in particular. An updated declaration of conformity to the German Corporate Governance Code was passed, and approval was given to the employee bonus framework.

Work carried out by the subcommittees

In the 2014 financial year there were four committees of the Supervisory Board. The Mediation Committee and the Nominations Committee were not required to convene. The chairpersons submitted regular reports on the main content of the subcommittee meetings 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 Heinz Kaltenecker.

The Audit Committee held one conference call and four 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 prepared the appointment of the auditor, taking account of the examination into the latter's impartiality. Furthermore, the forecast reporting, liquidity commitment and enforcement of supplements in major projects were examined, as were the financing of the Group of companies and the sale of a participation. 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 2014 annual and consolidated financial statements

The annual financial statements of BAUER AG to December 31, 2014 and the consolidated financial statements of the Group, as well as the Combined Management Report, including the Group accounts, were audited by the auditors elected by the Annual General Meeting and duly appointed by

the Supervisory Board, PricewaterhouseCoopers AG 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 8, 2015. 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 commitment throughout the past financial year.

Schrobenhausen, April 2015 The Supervisory Board

Dr. Klaus Reinhardt Chairman of the Supervisory Board

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

• Income Statement of BAUER Aktiengesellschaft 92
• Balance sheet of BAUER Aktiengesellschaft as at December 31, 2014 93

Our customer Stefanutti Stocks Geotechnical employed a BG 28 in the construction work on the Simon Vermooten Bridge in Pretoria, South Africa. Drilling cased piles with a diameter of 1,250 mm were produced in depths of up to 30 m, including 3 m rock socketing.

Income Statement of BAUER Aktiengesellschaft

	in EUR '000	01.01. - 31.12.2013	01.01. - 31.12.2014
1.	Sales revenues	30,495	30,046
2.	Other capitalized goods and services for own account	0	8
3.	Other operating income	2,124	5,749
		32,619	35,803
4.	Cost of materials	-1,733	-1,052
5.	Staff costs	-14,613	-15,450
6.	Amortization of intangible assets and depreciation of property, plant and equipment	-3,191	-2,874
7.	Other operating expenses	-13,776	-16,667
		-33,313	-36,043
	Operating result	-694	-240
8.	Income from participations	4,356	4,950
9.	Other interest and similar income	7,029	7,950
10.	Interest and similar expenses	-4,804	-5,914
	Financial result	6,581	6,986
	Result from operating activities	5,887	6,746
11.	Extraordinary expenses	-141	-141
12.	Income tax expense	-609	-666
13.	Other taxes	-17	-18
14.	Net profit for the year	5,120	5,921
15.	Profit carryforward	22,309	27,429
16.	Net earnings available for distribution	27,429	33,350

Balance sheet of BAUER Aktiengesellschaft as at December 31, 2014

Assets

	in EUR '000	31.12.2013	31.12.2014
A.	Fixed assets
I.	Intangible assets	2,982	2,616
II.	Property, plant and equipment	3,822	3,557
III.	Financial assets	115,696	116,646
		122,500	122,819
B.	Current assets
I.	Inventories Raw materials and supplies	74	71
II.	Receivables and other assets (of which receivables from affiliated companies)	174,049 (172,622)	205,920 (204,598)
III.	Cash at banks	1,517	960
		175,640	206,951
C.	Prepayments and deferred charges	586	641
D.	Deferred tax assets	352	603
		299,078	331,014

Equity and liabilities

	in EUR '000	31.12.2013	31.12.2014
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 (off which profit carryforward EUR 27,429 thousand; previous year EUR 22,309 thousand)	27,429	33,350
		155,311	161,232
B.	Provisions (of which provisions for defined benefit plans)	6,716 (5,575)	7,841 (6,600)
C.	Liabilities (of which liabilities payable to affiliated companies)	137,051 (53,830)	161,941 (34,942)
		299,078	331,014

Consolidated Financial Statements in accordance with IFRS

• Consolidated statement of profit or loss 96
• Consolidated statement of comprehensive income 96
• Consolidated cash flow statement 97
• Consolidated balance sheet as at December 31, 2014 98
• Consolidated statement of chances in equity 100
• Notes of the consolidated financial statement 101
• Assurance by the Legal Representatives 180
• Auditor's Report 181

2014

Consolidated statement of profit or loss and Consolidated statement of comprehensive income

Income Statement

	in EUR '000		Appendix 01.01. - 31.12.2013 *	01.01. - 31.12.2014
1.	Sales revenues	(6)	1,402,173	1,375,679
2.	Changes in inventories		-4,423	26,622
3.	Other capitalized goods and services for own account	(7)	19,196	14,696
4.	Other income	(8)	30,579	89,022
	CONSOLIDATED REVENUES		1,447,525	1,506,019
5.	Cost of materials	(9)	-755,906	-749,247
6.	Staff costs	(10)	-342,815	-355,250
7.	Depreciation and amortization a) Depreciation of fixed assets	(11)	-79,696	-78,781
	b) Write-downs of inventories due to use	(12)	-14,196	-15,789
8.	Other operating expenses	(13)	-224,827	-230,526
	OPERATING RESULT		30,085	76,426
9.	Financial income	(14)	7,729	7,096
10.	Financial expenses	(15)	-45,541	-45,149
11.	Share of the profit or loss of associated companies accounted for using the equity method		1,770	-572
	PROFIT BEFORE TAX		-5,957	37,801
12.	Income tax expense	(16)	-13,474	-22,075
	NET PROFIT OR LOSS		-19,431	15,726
	of which attributable to shareholders of BAUER AG		-16,927	14,481
	of which attributable to non-controlling interests		-2,504	1,245

in EUR		01.01. - 31.12.2013	01.01. - 31.12.2014
Basic earnings per share	(17)	-0.99	0.85
Diluted earnings per share	(17)	-0.99	0.85
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. - 31.12.2013	01.01. - 31.12.2014
Net profit or loss	-19,431	15,726
Income and expenses which will not be subsequently reclassified to profit and loss
Revaluation of commitments arising from employee benefits after termination of employment	970	-32,264
Deferred taxes on that revaluation with no effect on profit and loss	-226	9,046
Income and expenses which will not be subsequently reclassified to profit and loss
Market valuation of derivative financial instruments	2,094	-5,323
Included in profit and loss	-310	6,497
Deferred taxes on financial instruments with no effect on profit and loss	-642	54
Differences from currency translation	-15,678	10,545
Other result after tax	-13,792	-11,445
Total Comprehensive income for the year	-33,223	4,281
of which attributable to shareholders of BAUER AG	-28,924	2,360
of which attributable to non-controlling interests	-4,299	1,921

* Previous year adjusted; see notes on page 106

Consolidated cash flow statement

in EUR '000	01.01. - 31.12.2013 *	01.01. - 31.12.2014
Cash flows from operational activities:
Profit before tax	-5,957	37,801
Depreciation of fixed assets	79,696	78,781
Write-downs of inventories due to use	14,196	15,789
Financial income received	-4,610	-4,463
Financial expenses paid	39,358	40,567
Other non-cash transactions	6,088	-49,476
Dividends received	2,951	450
Result from the disposal of fixed assets	-3,175	-4,773
Change in provisions	-3,029	314
Change in trade receivables	-55,342	20,634
Change in receivables from construction contracts	-31,950	24,309
Change in receivables from concession arrangements	2,279	2,309
Change in other assets and in prepayments and deferred charges	7,717	-10,506
Change in inventories	-22,687	-37,316
Change in trade payables	20,451	-21,114
Change in liabilities from construction contracts	4,424	18,551
Change in other current and non-current liabilities	-4,968	22,776
Cash and cash equivalents generated from day-to-day business operations	45,442	134,633
Income tax paid	-7,026	-19,235
Net cash from operating activities	38,416	115,398
Cash flows from investment activities:
Acquisition of property, plant and equipment and intangible assets	-89,240	-69,119
Proceeds from sale of fixed assets	22,053	26,854
Consolidation scope-related change in financial resources	34	-5,187
Net cash used in investing activities	-67,153	-47,452
Cash flows from financing activities:
Raising of loans and liabilities to banks	111,650	202,306
Repayment of loans and liabilities to banks	-17,317	-237,761
Repayment of liabilities from finance lease agreements	-11,012	-11,074
Dividends paid	-6,589	-2,872
Interest paid	-39,342	-42,952
Interest received	6,186	5,462
Net cash used in financing activities	43,576	-86,891
Changes in liquid funds affecting payments	14,839	-18,945
Influence of exchange rate movements on cash	-2,854	3,563
Total change in liquid funds	11,985	-15,382
Cash and cash equivalents at beginning of reporting period	45,232	57,217
Cash and cash equivalents at end of reporting period	57,217	41,835
Change in cash and cash equivalents	11,985	-15,382

* Previous year adjusted; see notes on page 106

Consolidated balance sheet as at December 31, 2014

Assets

	in EUR '000	Appendix	31.12.2013 *	31.12.2014
A.	NON-CURRENT ASSETS
I.	Intangible assets	(18)
	1. Concessions, industrial property rights and similar rights and values as well as licenses to such rights and values		11,038	10,156
	2. Capitalized software costs		90	39
	3. Capitalized development costs		24,260	24,245
			35,388	34,440
II.	Property, plant and equipment and investment property	(18)
	1. Land, land rights and buildings		211,577	206,576
	2. Investment property		863	804
	3. Technical equipment and machinery		214,496	206,209
	4. Other equipment, factory and office equipment		27,319	25,107
	5. Payments on account and assets in course of construction		5,282	8,213
			459,537	446,909
III.	Investments accounted for using the equity method		13,249	42,906
IV.	Participations		3,613	3,613
V.	Deferred tax assets	(19)	26,299	30,973
VI.	Receivables from concession arrangements	(20)	36,762	0
VII.	Other non-current assets	(21)	7,564	7,492
	VIII. Other non-current financial assets	(22)	5,420	28,420
			587,832	594,753
B.	CURRENT ASSETS
I.	Inventories	(23)
	1. Raw materials and supplies		146,666	155,334
	2. Finished goods and work in progress and stock for trade		272,686	283,850
			419,352	439,184
II.	Receivables and other assets	(24)
	1. Receivables from construction contracts (PoC)		143,234	132,159
	2. Trade receivables		320,301	311,417
	3. Receivables from enterprises in which the company has participating interests		444	67
	4. Payments on account		3,725	4,304
	5. Other current assets		30,695	28,603
	6. Other current financial assets		19,551	20,100
			517,950	496,650
III.	Effective income tax refund claims		3,437	2,661
IV.	Cash and cash equivalents	(25)	57,217	41,835
			997,956	980,330
			1,585,788	1,575,083

Equity and liabilities

	in EUR '000 Appendix	31.12.2013 *	31.12.2014
A.	SHAREHOLDERS' EQUITY (26)
I.	Subscribed capital	73,001	73,001
II.	Capital reserve	38,404	38,404
III.	Other revenue reserves and net earnings available for distribution	285,601	287,903
	Equity of BAUER AG shareholders	397,006	399,308
IV.	Non-controlling interests	22,809	19,617
		419,815	418,925
B.	NON-CURRENT LIABILITIES (27)
I.	Liabilities to banks	247,775	364,771
II.	Liabilities from finance lease agreements	17,265	13,032
III.	Defined benefit plans (28)	81,637	116,358
IV.	Other non-current liabilities	6,483	5,959
V.	Other non-current financial liabilities	14,397	10,013
VI.	Deferred tax liabilities (19)	14,954	13,123
		382,511	523,256
C.	CURRENT LIABILITIES (29)
I.	Liabilities
	1. Liabilities to banks	427,589	266,533
	2. Liabilities from finance lease agreements	10,185	7,453
	3. Advances received for orders	9,801	19,579
	4. Liabilities from construction contracts (PoC)	32,839	48,471
	5. Trade payables	194,471	168,974
	6. Receivables from enterprises in which the company has participating interests	219	205
	7. Other current liabilities	69,873	68,632
	8. Other current financial liabilities	12,102	25,712
		757,079	605,559
II.	Provisions
	1. Effective income tax obligations	9,606	9,317
	2. Provisions (30)	14,809	15,880
	3. Current portion of defined benefit plans (28)	1,968	2,146
		26,383	27,343
		783,462	632,902
		1,585,788	1,575,083

* Previous year adjusted; see notes on page 106

Consolidated statement of chances in equity

Other revenue reserves and net earnings in EUR '000 available for distribution
	Subscribed capital	Capital reserve	Revenue reserves	Currency translation reserve	Reconciling item, IFRS	Hedging transactions reserve	Non controlling interests	Total
As at 01.01.2013	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 employ ment	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	4,621	0	0	0	-4,647	-26
As at 31.12.2013	73,001	38,404	284,299	-6,492	10,387	-2,593	22,809	419,815
As at 01.01.2014	73,001	38,404	284,299	-6,492	10,387	-2,593	22,809	419,815
Net profit or loss	0	0	14,481	0	0	0	1,245	15,726
Differences from currency translation	0	0	0	9,641	0	0	904	10,545
Revaluation of commitments arising from employee benefits after termination of employ ment	0	0	-31,956	0	0	0	-308	-32,264
Market valuation of derivative financial instruments	0	0	0	0	0	1,184	-10	1,174
Deferred taxes with no effect on profit and loss	0	0	8,959	0	0	51	90	9,100
Total Comprehensive income for the year	0	0	-8,516	9,641	0	1,235	1,921	4,281
Changes in scope of consolidation	0	0	0	0	0	0	-3,199	-3,199
Dividend payments	0	0	0	0	0	0	-2,872	-2,872
Other changes	0	0	-58	0	0	0	958	900
As at 31.12.2014	73,001	38,404	275,725	3,149	10,387	-1,358	19,617	418,925

* Previous year adjusted; there was a non-signifi cant change in value in the course of calculating the share of joint ventures according to IFRS 11 and the retrospectively changed balance sheet disclosure (see page 106)

2014

Notes of the consolidated financial statement

GENERAL NOTES

GENERAL INFORMATION ABOUT 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, equipment and products dealing with 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 %. When assessing whether control is exerted, the existence and effect of potential voting rights currently exercisable or convertible are considered.

The consolidated financial statements 2014 include 120 companies (previous year: 122). Of these, 0 (previous year: 3) were included in the scope of consolidation for the first time. Since the start of 2014, 4 (previous year: 2) companies have been removed from the scope of consolidation due to merger and sale. Consortia have not been included in the number of companies included in the scope of consolidation, because of the short-term nature of the projects involved. Also, non-significant joint ventures have not been considered in the stated number of included companies.

	Main business	Head quarters		Number of wholly-owned subsidiaries		Number of non-wholly-owned subsidiaries		Number of associated companies		Total
			31.12. 2013	31.12. 2014	31.12. 2013	31.12. 2014	31.12. 2013	31.12. 2014	31.12. 2013	31.12. 2014
Construction segment	Special foundation engineering, mining, project development	Worldwide	30	30	5	5	11	12	46	47
Equipment segment	Machine manufacturing and sale	Worldwide	26	25	8	9	1	1	35	35
Resources segment	Environment and environmental technology	Worldwide	28	26	9	7	1	2	38	35
'Other' segment	Central services	Worldwide	3	3	0	0	0	0	3	3
Total			87	84	22	21	13	15	122	120

The following overview shows the number of subsidiaries broken down by segment:

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 % 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 % of their voting rights. This is the result of state restrictions which stipulate that foreign investors may not hold more than 50 % of the voting rights in domestic companies. In such cases BAUER AG makes use of so-called agency constructions, whereby more than 50 % 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. 16 (previous year: 15) companies were affected by this as at 31 December. The consolidated subgroup of Wöhr + Bauer GmbH was disclosed as one company in the previous year. All companies of the subgroup were listed in the financial year. The previous year's figure was changed accordingly. Joint ventures were also consolidated according to the equity method.

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 consolidated balance sheet date. NuBa Equipment Ltd., Canada, prepares its annual financial statements as at 30 September, because Nuna Logistics Limited, Edmonton, Canada, as another shareholder, also prepares its annual financial statements as at 30 September. BAUER Corporate Services Private Limited, India, prepares its financial statements as at 31 March due to local statutory requirements.

2014

Changes at subsidiaries Equipment segment Purchases

With effect from April 30, 2014, Celler Brunnenbau Holding GmbH, Celle, contributed assets with a fair value of EUR 900 thousand to PRAKLA Bohrtechnik GmbH as part of an asset deal. The fair value was certified by an external auditor. In return, linked to a capital increase by PRAKLA Bohrtechnik GmbH, Peine, a capital share (10 %, or EUR 114 thousand) determined by the DCF method was allotted. The asset deal also entailed a premium of EUR 786 thousand.

The assets contributed are linked to the business unit involved in the production of drilling rigs, casing oscillators and grip heads, as well as spare parts in particular for water extraction, subgrade and constructional engineering works, and geological drilling and exploration.

Amounts recorded at time of acquisition:

0
900
900
900
0
900
0
0
0
900
900

As this is a change in equity at a subsidiary as a result of which the Group's share in equity is reduced or increased without loss of control, the change is recognized as a transaction between equity investors not affecting profit and loss.

No goodwill was created by the asset deal.

Resources segment

Mergers

On August 25, 2014, GWE Prakla Services GmbH, Peine, Germany and on August 29, 2014, GWE GF-Tec GmbH, Rödermark, Germany were merged into GWE pumpenboese GmbH, Peine, Germany retrospectively with effect from January 1, 2014.

On October 30, 2014, PESA ENGINEERING S.A., Madrid, Spain and BAUER Ingeneria Medioambiental S.A., Madrid, Spain were merged and the company name changed to BAUER RESOURCES SPAIN S.A., Madrid, Spain.

Divestments

BAUER Resources GmbH sold 21 % of its shares in BAUER Nimr LLC on November 19, 2014. The effects of the divestment are presented below:

a) Consideration received

in EUR '000	19.11.2014
Consideration received	13,324

b) Assets and liabilities disposed of due to the loss of control

in EUR '000	19.11.2014
Non-current assets
Intangible assets	11
Property, plant and equipment and investment property	2,042
Receivables from concession arrangements	38,290
Other non-current assets	11
Current assets
Receivables and other assets	7.997
Cash and cash equivalents	5,187
Non-current liabilities
Liabilities to banks	−24,103
Other non-current liabilities	−435
Other non-current financial liabilities	−12,290
Deferred tax liabilities	−200
Current liabilities
Liabilities to banks	0
Liabilities from construction contracts (PoC)	−2,046
Trade payables	−2,937
Other current liabilities	−265
Effective income tax obligations	−181
Divested net assets	11,081

c) Overall effect of the proportional sale of BAUER Nimr LLC

in EUR '000	19.11.2014
Considerations received	13,324
Relinquished net assets	−11,081
Non-controlling interests	3,199
Fair value of retained at-equity interest of 49 %	31,089
Overall effect of the proportional sale	36,531

The overall effect is included in Other income and is stated separately in item 8.

d) Net cash outflow from the proportional sale of BAUER Nimr LLC

in EUR '000	19.11.2014
Selling price settled with cash and cash equivalents	0
Net of cash or cash equivalents divested as part of the transaction	-5,187
The net cash outflow from the sale	-5,187

The retained at-equity interest was valued at its fair value as a result of the proportional sale of BAUER Nimr LLC. The fair value was calculated from the discounted transaction price for the sold shares at the time of the divestment. This procedure falls within Level 3 of the IFRS 13 measurement hierarchy. The complete effect of this measurement is explained on page 104.

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.

Non-controlling interests represent the proportion of the result and the net worth which is not to be attributed to the Group. The result attributable to these interests is stated in the income statement as follows, separately from the proportion of the result to be allocated to the shareholders of the parent company. It is stated in the balance sheet within shareholders' equity, separately from the shareholders' equity attributable to shareholders of the parent company. The purchase of non-controlling investments and changes in the investment quota of the parent company in a subsidiary which do not lead to a loss of control are stated in the balance sheet as equity transactions.

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:

• 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 do not have any 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 Accounting and Auditing Board of the Institute of German Certified Public Accountants (IDW) takes the view that the typical German construction consortium meets the preconditions for classification as a joint venture.

As previously mentioned, IFRS 11 stipulates that shares in joint ventures are to be valued according to the equity method. In the BAUER Group, the changes relate to the statement in the balance sheet and the income statement. Proportionate results are no longer stated under receivables from joint ventures and sales revenues with consortia as used to be the case, but under investments accounted for using the equity method as well as in the result from investments accounted for using the equity method. The previous year's figures have been adjusted for greater comparability.

The effects of IFRS 11 do not have any significant influence on the consolidated financial statements of BAUER AG, with the exception of changes in recognition of items.

• 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, associated companies, joint arrangements and non-consolidated structured entities (special-purpose entities).

The effects of IFRS 12 are presented in the notes to the consolidated financial statements of BAUER AG.

• IAS 27 – financial statements (revised 2011)

The new regulations included in IFRS 10, consolidated financial statements, have replaced the consolidation guidelines contained in the former IAS 27, consolidated and financial statements, as well as SIC-12, consolidation – special purpose

vehicles. Now, IAS 27 only contains the regulations that are to be applied to separate financial statements, as a result of which the standard has been renamed as IAS 27, financial statements (revised 2011). The effects of IAS 27 (revised 2011) do not have any significant influence on the consolidated financial statements of BAUER AG.

• 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: Representation

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 do not have any 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 do not have any significant influence on the consolidated financial statements of BAUER AG.

• IFRS 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 do not have any 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 of this do not have any 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 do not have any significant influence on the consolidated financial statements of BAUER AG.

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 2014. The BAUER Group had not implemented early application of these standards by December 31, 2014.

Standard/interpretation/amendments	Applicable from the financial year	Adoption by EU
Amendment to IAS 19, defined benefit plans: employee contributions	2015	Yes
Annual improvements in IFRS (cycle 2010 - 2012)	2015	Yes
Annual improvements in IFRS (cycle 2011 - 2013)	2015	Yes
Amendment to IFRS 11, purchase of interests in a joint activity	2016	No
Amendment to IAS 16 and IAS 38, clarification of acceptable depreciation methods	2016	No
Amendment to IAS 16 and IAS 41, agriculture: producing plants	2016	No
IFRS 15, sales revenues from customer contracts	2017	No
Amendment to IAS 27, financial statements (equity method)	2016	No
Amendment to IFRS 10 and IAS 28, disposal of an investor's assets in or application to the investor's associated company or joint venture	2016	No
Annual improvements in IFRS (cycle 2012-2014)	-	No
Amendment to IFRS 10, IFRS 12 and IAS 28, investment companies − application of the consolidation exception	2016	No
Amendment to IAS 1, disclosure initiative	2016	No
IFRS 14, regulatory deferrals and accruals	2016	No
IFRS 9, financial instruments	2018	No

Initial application of the standards is planned as from the point they are recognized and adopted by the EU.

Possible effects of the first use of IFRS 15, sales revenues from customer contracts, cannot be ultimately assessed at the present time. BAUER AG does not expect any significant effect on the consolidated financial statements to result from any of the other standards.

4.2. Accounting and valuation methods within the Group

Currency translation reserve

Currency translation reserve 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 corresponds to			Yearly average value	Balance sheet date
		2013	2014	2013	2014
Singapore	SGD	1.6661	1.6778	1.7392	1.6074
Thailand	THB	41.0558	42.9860	45.2177	40.0245
Mexico	MXP	17.1181	17.6560	18.0282	17.9234
Chile	CLP	664.3491	757.8911	724.4884	736.1344
Argentina	ARS	7.3833	10.8648	8.9744	10.4039
Peru	PEN	3.6211	3.7598	3.8506	3.6351
Japan	JPY	130.3063	140.5059	144.5122	145,2439
United States of America	USD	1.3301	1.3219	1.3767	1.2166
South Africa	ZAR	12.9709	14.3577	14.5035	14.0575
UK	GBP	0.8497	0.8028	0.8331	0.7818
Malaysia	MYR	4.2178	4.3329	4.5204	4.2622
Saudi Arabia	SAR	4.9982	4.9585	5.1632	4.5653
Lebanon	LBP	2,005.2622	1,995.3273	2,068.4917	1,838.8153
Egypt	EGP	9.1766	9.3713	9.5661	8.6984
Indonesia	IDR	14,047.7904	15,669.6389	16,754.4389	15,139.9647
Hungary	HUF	298.0405	309.9893	297.0230	314.9587
Romania	RON	4.4164	4.4386	4.4739	4.4845
United Arab Emirates	AED	4.8855	4.8553	5.0565	4.4685
Philippines	PHP	56.7348	58.7377	61.1186	54.4041
New Zealand	NZD	1.6295	1.6001	1.6747	1.5506
Taiwan	TWD	39.6265	40.1344	41.0539	38.5999
Hong Kong	HKD	10.3173	10.2525	10.6753	9.4373
China	CNY	8.1686	8.1575	8.3314	7.5550
Switzerland	CHF	1.2288	1.2124	1.2267	1.2024
Australia	AUD	1.3937	1.4708	1.5396	1.4841
Canada	CAD	1.3759	1.4634	1.4636	1.4117
Russia	RUB	42.5912	51.5000	45.2582	67.5895
India	INR	78.5205	80.7777	85.2246	77.4729
Bulgaria	BGL	1.9558	1.9559	1.9560	1.9559
Sweden	SEK	8.6664	9.1184	8.8263	9.4275
Poland	PLN	4.2159	4.1955	4.1508	4.2902
Panama	PAB	1.3301	1.3219	1.3767	1.2166
Qatar	QAR	4.8418	4.8133	5.0133	4.4307
Turkey	TRY	2.5646	2.8937	2.9450	2.8327
Vietnam	VND	27,999.3993	28,039.4804	29,062.1368	26,031.7369
Jordan	JOD	0.9421	0.9357	0.9753	0.8611
Oman	OMR	0.5121	0.5090	0.5301	0.4684
Ghana	GHS	2.7791	4.0594	3.2559	3.9112
Georgia	GEL	2.2134	2.3352	2.3887	2.2604

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 impairmenttested 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 impairmenttested 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 object	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 installment 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 installment 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.

2014

Government grants

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

Business combinations

Acquisitions of subsidiaries are accounted for in accordance with IFRS 3 based on the acquisition method. The cost of the acquisition corresponds to the fair value of the assets contributed, the equity instruments issued and the liabilities created and/or transferred at the transaction date. Assets, liabilities and contingent liabilities identifiable in the course of a business combination are measured on initial consolidation at their fair values at the acquisition date. The amount by which the 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. No borrowing costs were capitalized in the financial year. The finance cost rate in the previous year was between 6.76 and 8.0 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 valuation takes place by deriving current market prices of comparable real estate. This procedure falls within Level 2 of the IFRS 13 measurement hierarchy.

Investments accounted for using the equity method

Associated companies

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 ventures

Joint ventures are joint arrangements in which the parties with shared controlling interests hold rights to the net assets of the agreement. Joint control is the contractually agreed, jointly exercised management of the agreement. This is only provided if decisions relating to significant activities require the unanimous approval of the parties involved in the joint control. Joint ventures stated in the balance sheet using the at-equity method also include the consortia which are typical features of the German economy, in which case provision consortia should be distinguished from umbrella consortia.

In provision consortia, assets are provided to the consortium in the form of personnel, material or equipment, and are invoiced. Results earned by the consortium are stated according to the equity method in accordance with IAS 28. Accordingly, this is disclosed in the balance sheet under investments accounted for using the equity method and in the income statement under the share of the profit or loss of associated companies accounted for using the equity method.

The BAUER Group accounts for consortia in compliance with IFRS 11 as follows: BAUER as a partner in a consortium 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. The umbrella consortium, on the other hand, always operates without effect on net income. The remuneration claims between the umbrella consortium and the client are identical to the remuneration claims of the individual lots towards the umbrella consortium. All payments received from the client are passed onto the individual lots in full by the umbrella consortium.

Current settlements of and towards consortia are stated under the receivable from or liabilities to consortia.

Joint operations

Joint operations are joint arrangements in which the parties exercising joint control possess rights to the assets and liabilities for the debts of the arrangement. Joint control is the contractually agreed, jointly exercised control of the arrangement. This is only provided if decisions relating to significant activities require the unanimous approval of the parties involved in the joint control.

If the BAUER Group carries out activities in the course of a joint operation, the Group discloses the following items as a joint operator in conjunction with its share of the joint operation:

• 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 or services of the joint operation
• Its share of the income from the sale of the products or services of the joint operation and
• Its expenses, including its share in any expenses jointly entered into

In transactions such as the purchase of assets by a Group company, profits and losses are stated to the extent of the Group's share in the joint operation only when assets are sold on to third parties.

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 are repaid or if the obligation has expired. 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 a contract in the area of application of IAS 39 which cumulatively fulfills the following three criteria:

• 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 2014.

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 floating 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.

2014

Receivables from joint ventures also include the pro rata result from the contract. Expected losses are covered by writedowns 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 carryforward, 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 % (previous year: 27.82 % and 30.92 %). Outside Germany, tax rates of between 0.00 % and 38.15 % are applied (previous year: 0.00 % and 39.00 %).

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 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 result" 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 "Financial 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.

5. CONSOLIDATED 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 and liabilities and 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.

Other

The Other segment comprises the central services (accounting, human resources, IT etc.) provided by BAUER AG to the Group companies as well as other units not assignable to the separately listed segments, providing services such as in-house and external education and training and centralized research and development.

Consolidation

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 atequity 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 joint ventures, 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 % 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.

Consolidated segment reporting

SEGMENT REPORT BY BUSINESS SEGMENTS		Construction	Equipment
in EUR '000	2013 *	2014	2013	2014
Total revenues (Group)	741,673	713,005	628,612	651,772
Sales revenues with third parties	657,456	634,096	561,615	545,223
Sales revenues between business segments	15,660	16,327	47,928	42,831
Changes in inventories	-172	-105	-4,184	27,898
Other capitalized goods and services for own account	486	407	6,955	6,234
Other income	16,809	24,861	10,117	21.724
CONSOLIDATED REVENUES	690,239	675,586	622,431	643,910
OPERATING RESULT	21,209	25,068	32,223	36,917
Financial income	2,989	2,993	2,562	1,882
Financial expenses	-13,389	-15,875	-22,196	-21,153
Share of the profit or loss of associated companies accounted for using the equity method	1,132	-1,330	1	-57
Income tax expense	-6,469	-8,998	-7,535	-8,076
NET PROFIT OR LOSS	5,472	1,858	5,055	9,513
ADDITIONAL INFORMATION ON THE INCOME STATEMENT
Depreciation and amortization

Depreciation of fixed assets	-47,504	-46,098	-17,266	-19,259
of which impairment losses on fixed assets	-526	0	-996	-1,768
Write-downs of inventories due to use	0	0	-14,196	-15,789
Major non-cash segment items
Impairment losses on financial assets	-40	-631	0	-9
Impairment losses on inventories	-112	-282	-3,808	-8,052
Allocation of impairment of receivables	-26,876	-10,597	-4,671	-4,611
Reversal of impairment of receivables	31,227	14,726	3,396	3,881

ADDITIONAL INFORMATION ON THE BALANCE SHEET

SEGMENT ASSETS 31.12.	566,816	577,401	803,467	768,487
of which shares in associated companies accounted for using the equity method	10,898	10,687	99	42
of which investments in fixed assets	48,168	40,837	40,166	20,904
SEGMENT LIABILITIES 31.12.	444,775	450,582	579,077	551,054

SEGMENT REPORT BY REGIONS	Germany		Europe (other)		Europe excluding EU
in EUR '000	2013 *	2014	2013 *	2014	2013	2014
Total revenues (Group)	410,390	440,205	167,830	151,958	155,028	124,886
Sales revenues with third parties	355,289	367,779	163,143	140,534	145,381	127,782
Non-current assets 31.12.	255,613	244,151	21,414	18,132	19,578	16,383

* Previous year adjusted; see notes on page 106

	Resources	Other		Consolidation			Group
2013 *	2014	2013	2014	2013	2014	2013 *	2014
188,861	252,830	39,319	39,407	-94,234	-96,794	1,504,231	1,560,220
182,579	195,860	523	500	0	0	1,402,173	1,375,679
2,413	3,141	31,146	30,729	-97,147	-93,028	0	0
-67	-1,171	0	0	0	0	-4,423	26,622
1,548	1,606	0	9	10,207	6,440	19,196	14,696
2,910	41,968	6,624	7,028	-5,881	-6,559	30,579	89,022
189,383	241,404	38,293	38,266	-92,821	-93,147	1,447,525	1,506,019
-23,965	15,932	5,117	3,326	-4,499	-4,817	30,085	76,426
2,268	2,159	7,044	13,702	-7,134	-13,640	7,729	7,096
-11,885	-10,518	-5,205	-11,243	7,134	13,640	-45,541	-45,149
637	815	0	0	0	0	1,770	-572
1,501	-4,041	-961	-886	-10	-74	-13,474	-22,075
-31,444	4,347	5,995	4,899	-4,509	-4,891	-19,431	15,726

-11,940	-10,885	-3,371	-3,023	385	484	-79,696	-78,781
-2,191	-7	0	0	0	0	-3,713	-1,775
0	0	0	0	0	0	-14,196	-15,789
-2,546	-65	0	0	0	0	-2,586	-705
-4,329	-263	0	0	0	0	-8,249	-8,597
-6,651	-5,360	0	0	0	0	-38,198	-20,568
495	950	0	0	0	0	35,118	19,557

265,633	264,276	303,121	338,993	-353,249	-374,074	1,585,788	1,575,083
2,252	32,177	0	0	0	0	13,249	42,906
11,539	8,885	13,552	2,555	-10,000	-485	103,425	72,696
226,675	226,217	149,980	182,939	-234,700	-254,634	1,165,807	1,156,158

	Middle East and Central Asia		Asia-Pacific Far East and Australia		America Africa			Group
2013	2014	2013	2014	2013	2014	2013	2014	2013 *	2014
163,036	232,037	363,305	376,645	186,392	172,288	58,250	62,201	1,504,231	1,560,220
158,749	180,313	356,877	337,587	170,648	158,411	52,086	63,273	1,402,173	1,375,679
52,630	56,025	82,364	86,106	56,751	53,259	6,575	7,293	494,925	481,349

NOTES ON THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS

6. SALES REVENUES

The sales revenue totaling EUR 1,375,679 thousand (previous year: 1,402,173 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 totaled EUR 649,625 thousand (previous year: 680,963 thousand).

Sales revenues from the hire of equipment and accessories in the financial year totaled EUR 29,428 thousand (previous year: 26,031 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 5).

The sales revenues include a net value adjustment of EUR 5,381 thousand (previous year: 7,393 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".

7. OTHER CAPITALIZED GOODS AND SERVICES FOR OWN ACCOUNT

in EUR '000	2013	2014
Income from other capitalized goods and services for own account	19,196	14,696

8. OTHER INCOME

in EUR '000	2013	2014
Income from disposal of property, plant and equipment	4,435	5,447
Realized and unrealized foreign currency gains	8,682	32,097
Income from insurance refunds	2,958	1,849
Other income from rentals	373	272
Income from changes in fair values of foreign exchange forward contracts	2,818	2,548
Overall effect of the proportional sale	0	36,531
Other operating income	11,313	10,278
Total	30,579	89,022

The realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts stated under "Other income" totaling EUR 34,645 thousand (previous year: 11,500 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 totaling EUR 29,767 thousand (previous year: 21,194 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.

9. COST OF MATERIALS

in EUR '000	2013	2014
Expenses for raw materials and supplies and purchased goods	511,419	504,877
Expenses for purchased services	244,487	244,370
Total	755,906	749,247

10. 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".

2013	2014
289,944	299,785
47,654	49,632
5,217	5,833
342,815	355,250

The employer's pension contributions in the financial year totaled EUR 20,653 thousand (previous year: 18,926 thousand). These are contribution-based schemes, as explained under 4.2 Accounting and valuation methods in the consolidated financial statements. Of that total, EUR 17,411 thousand (previous year: 16,801 thousand) relate to Germany and EUR 3,242 thousand (previous year: 2,125 thousand) to Group companies outside of Germany. The wages and salaries include severance payments in the amount of EUR 735 thousand (previous year: 1,019 thousand).

11. DEPRECIATION OF FIXED ASSETS

The depreciation is broken down as follows:

in EUR '000	2013	2014
Depreciation of intangible assets	11,290	9,956
Depreciation of property, plant and equipment	68,406	68,825
Total	79,696	78,781

The impairment losses on fixed assets are explained under item 18.2, Property, plant and equipment and investment property.

12. WRITE-DOWNS OF INVENTORIES DUE TO USE

Write-downs of inventories due to use Group-wide totaled EUR 15,789 thousand in the financial year (previous year: 14,196 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 2014 financial year are included in these figures.

13. OTHER OPERATING EXPENSES

in EUR '000	2013	2014
Losses from disposal of property, plant and equipment	1,260	675
Rents and leases	18,187	21,360
Energy, heating, water	8,295	6,291
Vehicle costs	6,360	6,755
Property, motor and transport insurance	9,658	10,096
Other operating expenses	34,675	35,766
Administrative expenses	40,991	41,513
Distribution costs	37,221	33,304
Other employee-related expenses	17,396	17,208
Realized and unrealized foreign currency losses	18,941	19,948
Impairment of receivables	-794	6,392
Bank charges	2,827	3,284
Duties	3,930	3,411
Additional other operating expenses	25,880	24,523
Total	224,827	230,526

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

14. FINANCIAL INCOME

The financial income is broken down as follows:

in EUR '000	2013	2014
Income from operating investments	26	14
Other interest and similar income	5,418	5,287
Income from changes in fair values of interest rate swaps	2,285	1,795
Total	7,729	7,096

15. FINANCIAL EXPENSES

The financial expenses are broken down as follows:

in EUR '000	2013	2014
Interest and similar expenses	41,944	41,273
Losses from changes in fair values of interest rate swaps	656	796
Interest portions of allocations to provisions for defined benefit plans and similar obligations	2,941	3,080
Total	45,541	45,149

The interest from finance leases included under "Interest and similar expenses" in the financial year totaled EUR 988 thousand (previous year: 1,122 thousand). The financial result includes interest income from financial assets in an amount of EUR 5,278 thousand (previous year: 5,410 thousand) and interest expenses from financial liabilities in an amount of EUR 40,285 thousand (previous year: 40,822 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 705 thousand (previous year: 2,586 thousand). Of that total, EUR 631 thousand (previous year: 40 thousand) is attributable to the Construction segment, EUR 9 thousand (previous year: 0) to the Equipment segment and EUR 65 thousand (previous year: 2,546 thousand) to the Resources segment.

16. INCOME TAX EXPENSE

The income tax expense is broken down as follows:

in EUR '000	2013	2014
Actual taxes	15,705	19,721
Deferred taxes	-2,231	2,354
Total	13,474	22,075

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

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	2013	2014
Profit before income tax	-5,957	37,801
Theoretical tax expenditure 28.08 % (previous year: 28.08 %)	-1,673	10,615
Differences in tax rate	714	-1,534
Taxation effects of non-deductible expenses and tax-free income	10,022	-4,869
Effects of variations in the tax calculation base	2,054	2,000
At-equity valuation of associated companies	-63	160
Out-of-period tax payments/refunds for previous years	-273	-68
Effects of deferred tax assets in respect of losses carryforward and temporary differences	2,675	15,701
Other	18	70
Income tax expense	13,474	22,075

Internal disbursements result in taxation effects after December 31, 2014 totaling EUR 39 thousand (previous year: 34 thousand).

17. 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:

	2013	2014
Profit attributable to the shareholders of BAUER AG, in EUR '000	-16,927	14,481
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	-0.99	0.85
Diluted earnings per share in EUR	-0.99	0.85

CONSOLIDATED FINANCIAL STATEMENTS

2014

NOTES ON THE CONSOLIDATED 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

18. FIXED ASSETS

18.1 Intangible assets

in EUR '000			Internally generated intangible assets
Cost of purchase/cost of manufacturing	Licenses, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized development costs	Total
01.01.2013 *	30,725	2,203	589	30,148	63,665
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	33,078	2,186	357	39,354	74,975

in EUR '000			Internally generated intangible assets
Accumulated depreciation	Licenses, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized development costs	Total
01.01.2013 *	18,474	0	415	10,209	29,098
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	22,040	2,186	267	15,094	39,587
Carrying amount 31.12.2013	11,038	0	90	24,260	35,388

in EUR '000			Internally generated intangible assets
Cost of purchase/cost of manufacturing	Licenses, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized development costs	Total
01.01.2014	33,078	2,186	357	39,354	74,975
Change in scope of consolidation	-17	0	0	0	-17
Additions	2,422	0	0	6,186	8,608
Disposals	2,392	0	68	0	2,460
Transfers	-6	0	0	22	16
Currency adjustment	452	0	0	6	458
31.12.2014	33,537	2,186	289	45,568	81,580

* Previous year's fi gures changed; this involves a correction to the balances carryforward due to the system

in EUR '000			Internally generated intangible assets
Accumulated depreciation	Licenses, software and similar rights and values	Goodwill	Capitalized software costs	Capitalized development costs	Total
01.01.2014	22,040	2,186	267	15,094	39,587
Change in scope of consolidation	-6	0	0	0	-6
Additions	3,681	0	51	6,224	9,956
Disposals	2,619	0	68	0	2,687
Transfers	4	0	0	0	4
Currency adjustment	281	0	0	5	286
31.12.2014	23,381	2,186	250	21,323	47,140
Carrying amount 31.12.2014	10,156	0	39	24,245	34,440

Of the total research and development costs and patent costs incurred in 2014, EUR 6,247 thousand (previous year:

8,594 thousand) met the IFRS capitalization criteria. The following amounts were recognized in net income:

in EUR '000	2013	2014
Research costs and uncapitalized development costs	20,900	18,567
Amortization of development costs and patents	5,212	6,473
Research and development costs recognized in net income	26,202	25,040

18.2 Property, plant and equipment and investment property

in EUR '000				Other	Payments on
Cost of purchase/ cost of manufacturing	Land and buildings	Investment property	Technical equipment and machinery	equipment, factory and office equipment	account and assets in course of construction	Total
01.01.2013 *	287,311	1,882	468,428	68,995	23,014	849,630
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	488,855	73,032	5,282	871,216

in EUR '000				Other	Payments on
Accumulated depreciation	Land and buildings	Investment property	Technical equipment and machinery	equipment, factory and office equipment	account and assets in course of construction	Total
01.01.2013 *	84,396	921	257,736	41,261	0	384,314
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	274,359	45,713	0	411,679
Carrying amount 31.12.2013	211,577	863	214,496	27,319	5,282	459,537
of which financing leasing Carrying amount 31.12.2013	3,194	0	22,574	5,246	0	31,014

in EUR '000			Technical	Other equipment,	Payments on account and
Cost of purchase/ cost of manufacturing	Land and buildings	Investment property	equipment and machinery	factory and office equipment	assets in course of construction	Total
01.01.2014	302,284	1,763	488,855	73,032	5,282	871,216
Change in scope of consolidation	-563	0	-2,063	-678	0	-3,304
Additions	3,926	6	43,524	7,310	9,322	64,088
Disposals	6,022	0	49,712	6,374	193	62,301
Transfers	765	-35	5,255	-112	-5,889	-16
Currency adjustment	5,802	0	27,331	2,119	-309	34,943
31.12.2014	306,192	1,734	513,190	75,297	8,213	904,626

* Previous year's fi gures changed; this involves a correction to the balances carryforward due to the system

in EUR '000	Land and	Investment	Technical equipment and	Other equipment, factory and	Payments on account and assets in course
Accumulated depreciation	buildings	property	machinery	office equipment	of construction	Total
01.01.2014	90,707	900	274,359	45,713	0	411,679
Change in scope of consolidation	-5	0	-773	-485	0	-1,263
Additions	10,042	36	49,829	8,918	0	68,825
Disposals	2,000	0	32,386	5,366	0	39,752
Transfers	6	-6	168	-172	0	-4
Currency adjustment	866	0	15,784	1,582	0	18,232
31.12.2014	99,616	930	306,981	50,190	0	457,717
Carrying amount 31.12.2014	206,576	804	206,209	25,107	8,213	446,909
of which financing leasing Carrying amount 31.12.2014	2,935	0	19,150	5,122	0	27,207

The changes to the scope of consolidation comprise assets arising from the deconsolidation of BAUER Nimr LLC, Muscat – Al Mina. Of these, EUR −2,041 thousand relate exclusively to property, plant and equipment.

In respect of buildings and equipment leased by way of finance lease agreements purchase options exist for the most part, which will be exercised. The interest rates applied to the leases vary, according to the market and date of signing, between 2.38 % and 7.89 % (previous year: 2.31 % and 8.13 %). The future lease payments due at their present values are shown in the following table:

in EUR '000	Remaining term 2013				Remaining term 2014
	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	11,182	18,779	0	29,961	8,470	13,707	0	22,177
Interest portions	997	1,514	0	2,511	1,017	675	0	1,692
Present value	10,185	17,265	0	27,450	7,453	13,032	0	20,485

The investment property has a fair value of EUR 804 thousand (previous year: 1,143 thousand) and in 2014 were all rented out. This 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 valuation was derived from current market prices. This procedure falls within Level 2 of the IFRS 13 measurement hierarchy.

In the period under review rental income in the amount of EUR 60 thousand (previous year: 62 thousand) was generated, to which direct operating expenses totaling EUR 23 thousand (previous year: 19 thousand) are attributable.

Property, plant and equipment with a carrying amount of EUR 105,811 thousand (previous year: 133,191 thousand) is subject to charges in the form of land charges and assignment. In addition, the usual commercial restrictions on right of disposal existing respect of leased assets, attributable to the Group in accordance with IAS 17 (finance lease agreements), totaling EUR 27,207 thousand (previous year: 31,014 thousand).

In the financial year, investment grants for the extension of manufacturing facilities were awarded to Olbersdorfer Guß GmbH in an amount of EUR 13 thousand (previous year: 42 thousand). All conditions necessary for allocation of the investment subsidies were met on the balance sheet date.

No borrowing costs were capitalized in the financial year (previous year: 520). The finance cost rate in the previous year was between 6.76 and 8.0 %.

Total impairment losses on fixed assets in the financial year were EUR 1,775 thousand (previous year: 3,713 thousand). Of that figure, EUR 0 thousand (previous year: 526 thousand) was attributable to the Construction segment, EUR 1,768 thousand (previous year: 996 thousand) to the Equipment segment and EUR 7 thousand (previous year: 2,191 thousand) to the Resources segment. Of the total, intangible assets accounted for EUR 942 thousand (previous year: 3,184 thousand) and property, plant and equipment accounted for EUR 833 thousand (previous year: 529 thousand). Most of the impairment losses on intangible assets relate to capitalized development costs amounting to EUR 520 thousand at Klemm Bohrtechnik GmbH in the Equipment segment. Future expected market development for various machines developed in-house was decisive in this respect. Also in the Equipment segment, the carrying amounts of BAUER Pileco Inc., Houston, Texas in land and buildings amounting to EUR 794 thousand were written down to their fair value. Impairment losses were realized on the basis of the achievable amount. In the regular way, these corresponded to the fair value less costs of sale. This procedure falls within Level 1 of the IFRS 13 measurement hierarchy.

18.3 Investments accounted for using the equity method and participations

The balance sheet valuations of the joint ventures and associated companies have developed as follows:

31.12.2013	31.12.2014
3,302	4,175
9,947	38,731
13,249	42,906

The following table provides an overview of the change in the shares measured at equity:

in EUR '000	Associated companies		Joint ventures
Cost of purchase/cost of manufacturing	2013	2014	2013 *	2014
01.01.	13,133	9,947	3,277	3,302
Additions	0	31,089	17	662
Disposals	1	0	0	479
Profit share	−234	330	8	690
Dividend payments	−2,951	−450	0	0
Transfers	0	0	0	0
Currency adjustment	0	0	0	0
31.12.	9,947	40,916	3,302	4,175

in EUR '000	Associated companies		Joint ventures
Accumulated depreciation	2013	2014	2013	2014
01.01.	0	0	0	0
Additions	0	2,185	0	0
Disposals	0	0	0	0
Transfers	0	0	0	0
Currency adjustment	0	0	0	0
31.12.	0	2,185	0	0
Carrying amount 31.12.	9,947	38,731	3,302	4,175

* Previous year adjusted, see notes on page 106

a) Joint ventures

The financial information presented for the joint ventures are amounts that are derived from financial statements prepared according to local legislation, corrected to take account of any adaptations to IFRS.

Combined financial information about the immaterial joint ventures (before consolidations):

BALANCE SHEET	Joint ventures
in EUR '000	31.12.2013	31.12.2014
Non-current assets	180	317
Current assets	65,022	63,796
of which cash and cash equivalents	3.089	2,445
Total assets	65,202	64,113
Non-current liabilities	0	0
of which non-current financial liabilities	0	0
Current liabilities	58,758	55,646
of which current financial liabilities	33,782	43,607
Total liabilities	58,758	55,646

The non-current and current financial liabilities do not contain any trade liabilities and provisions.

INCOME STATEMENT	Joint ventures
in EUR '000	31.12.2013	31.12.2014
Sales revenues	48,996	41,008
Scheduled depreciation	-234	-373
Operating result	2,700	3,529
Interest income	40	1
Interest expenditure	-3	-4
Income tax expense	0	0
Net profit or loss	2,737	3,526
Dividends paid to the BAUER Group	10	0

Reconciliation of the combined financial information for joint ventures

The pro rata carrying value of the joint ventures can be reconciled as follows:

in EUR '000	31.12.2013	31.12.2014
Net assets of joint ventures	6,444	8,467
Interest in joint venture according to investment quota	3,302	4,175
Goodwill and other adaptations	0	0
Carrying value disclosed within the balance sheet	3,302	4,175

The fair value has not been stated, because there is no quoted market price available for our joint ventures (generally construction consortia).

The risk arising from joint and several liability on failure of a partner is hedged within the joint venture by mutual guarantees. There are no further obligations and significant restrictions beyond that.

b) Associated companies

The financial information presented for the associated companies are amounts that are derived from financial statements prepared according to local legislation, corrected to take account of any adaptations to IFRS.

The main associated companies are as follows:

2013 financial year:

Name	Activity of the company	Headquarters	Capital share in %
Wöhr + Bauer GmbH	Project development	Munich, Germany	33.33 %
NDH Entsorgungsbetreibergesellschaft mbH	Disposal	Bleicherode, Germany	25.00 %
TERRABAUER S. L.	Specialist foundation engineering	Madrid, Spain	30.00 %

2014 financial year:

Name	Activity of the company	Headquarters	Capital share in %
Wöhr + Bauer GmbH	Project development	Munich, Germany	33.33 %
NDH Entsorgungsbetreibergesellschaft mbH	Disposal	Bleicherode, Germany	25.00 %
TERRABAUER S. L.	Specialist foundation engineering	Madrid, Spain	30.00 %
BAUER Nimr LLC	Water treatment and soil remediation	Muscat – Al Mina, Sultanate of Oman	49.00 %

Combined financial information for each significant associated company (amounts before consolidations):

BALANCE SHEET		Wöhr + Bauer GmbH NDH Entsorgungsbetreiber TERRABAUER S. L. gesellschaft mbH							BAUER Nimr LLC
in EUR '000	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Non-current assets	60,472	60,132	19,090	18,288	5,338	-	0	41,102
Current assets	43,209	48,073	25,869	26,857	7,357	-	0	13,187
of which cash and cash equivalents	8,309	526	21,936	23,060	125	-	0	5,019
Total assets	103,681	108,205	44,959	45,145	12,695	-	0	54,289
Non-current liabilities	10,816	22,279	0	0	1,800	-	0	35,421
of which non-current financial liabilities	10,685	21,897	0	0	665	-	0	34,968
Current liabilities	74,556	66,775	40,065	40,225	3,327	-	0	7,299
of which current financial liabilities	8,803	0	3,375	3,225	1,390	-	0	2,327
Total liabilities	85,372	89,054	40,065	40,225	5,127	-	0	42,720

* These are extrapolated values; fi nancial information was not available at the balance sheet date

INCOME STATEMENT	Wöhr + Bauer GmbH		NDH Entsorgungsbetreiber gesellschaft mbH		TERRABAUER S. L.				BAUER Nimr LLC
in EUR '000	2013	2014	2013	2014	2013	2014 *	2013	2014
Sales revenues	50,865	21,531	22,952	22,736	3,452	-	0	1,528
Scheduled depreciation	-1,170	-1,774	-2,744	-2,956	-676	-	0	-367
Operating result	1,330	2,550	1,624	1,522	-1,832	-	0	281
Interest income	261	15	98	238	0	-	0	6
Interest expenditure	-503	-414	-287	-262	-310	-	0	-244
Income tax expense	-587	-667	-474	-509	0	-	0	0
Net profit or loss	501	1,484	961	989	-2,142	-1,090	0	43
Net profit or loss according to interest	167	494	240	247	-643	-327	0	21
Dividends paid to the BAUER Group	2,640	210	135	240	166	0	0	4,598

* These are extrapolated values; fi nancial information was not available at the balance sheet date

Combined financial information for associated companies that are, taken individually, non-significant (amounts before consolidations):

BALANCE SHEET	Associated companies
in EUR '000	31.12.2013	31.12.2014
Non-current assets	90	67
Current assets	245	239
of which cash and cash equivalents	47	33
Total assets	335	306
Non-current liabilities	26	22
of which non-current financial liabilities	26	22
Current liabilities	135	132
of which current financial liabilities	0	0
Total liabilities	161	154

INCOME STATEMENT		Associated companies
in EUR '000	31.12.2013	31.12.2014
Sales revenues	853	825
Scheduled depreciation	-33	-29
Operating result	6	-22
Interest income	0	0
Interest expenditure	-1	-1
Income tax expense	-2	0
Net profit or loss	3	-23
Net profit or loss according to interest	1	-7
Dividends paid to the BAUER Group	10	0

Reconciliation of the combined financial information for associated companies

The pro rata carrying value of the associated companies can be reconciled as follows:

in EUR '000	31.12.2013	31.12.2014
Net assets of associated companies	30,945	35,792
Interest in associated companies according to investment quota	9,651	13,331
Goodwill and other adaptations	296	16,908
Cash value of the concession agreement	0	8,709
Currency adjustment	0	-217
Carrying value disclosed within the balance sheet	9,947	38,731

The other adaptations relate to temporary posting differences.

The market value of BAUER Nimr LLC as at December 31, 2014 is EUR 63,447 thousand. The market values of the other significant associated companies were not available as at the balance sheet date.

There were no obligations, significant restrictions or risks relating to the shares in associated companies as at the balance sheet date.

c) Participations

in EUR '000		Participations
Cost of purchase/cost of manufacturing	2013	2014
01.01.	4,454	4,429
Additions	0	0
Disposals	25	0
Profit share	0	0
Dividend payments	0	0
Transfers	0	0
Currency adjustment	0	0
31.12.	4,429	4,429

in EUR '000 Accumulated depreciation		Participations
		2014
01.01.	816	816
Additions	0	0
Disposals	0	0
Transfers	0	0
Currency adjustment	0	0
31.12.	816	816
Carrying amount 31.12.	3,613	3,613

19. DEFERRED TAXES

The deferred tax assets and liabilities are distributed across the following balance sheet items:

in EUR '000	31.12.2013	31.12.2014	31.12.2013 *	31.12.2014
	Deferred tax assets		Deferred tax liabilities
Intangible assets	33	401	6,437	7,202
Property, plant and equipment	324	119	9,468	13,926
Inventories	2,509	3,763	2,424	2,498
Receivables and other assets	1,228	1,474	2,093	1,410
Defined benefit plans	10,275	19,652	4	208
Liabilities	9,811	10,201	5,937	4,800
Tax losses carryforward	14,560	12,559	0	0
Consolidation	4,841	3,999	5,873	4,274
Offsetting	-17,282	-21,195	-17,282	-21,195
Net amount	26,299	30,973	14,954	13,123

* Previous year adjusted; see notes on page 106

In the above table, the liabilities include deferred tax assets totaling EUR 2,025 thousand (previous year: 835 thousand) and deferred tax liabilities totaling EUR 1,708 thousand (previous year: 8 thousand) which are part of the hedge accounting. Also, the provisions for defined benefit plans include deferred tax assets totaling EUR 16,772 thousand (previous year: 7,889 thousand) and deferred tax liabilities totaling EUR 4 thousand (previous year: 4) in respect of the actuarial gains and losses recognized in the shareholders' equity.

Current deferred tax assets excluding losses carryforward totaled EUR 10,039 thousand (previous year: 9,080 thousand); deferred tax liabilities totaled EUR 7,280 thousand (previous year: 9,585 thousand).

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

in EUR '000	31.12.2013	31.12.2014
Domestic losses (corporation tax)	76,262	75,553
Foreign losses	31,758	46,953
Total	108,020	122,506
Of which losses carryforward deductible for limited periods	21,069	25,461

Based on our medium-term earnings planning, losses carryforward totaling EUR 78,059 thousand (previous year: 47,672 thousand) were not usable for tax purposes.

Current deferred tax assets against losses carryforward in the financial year totaled EUR 1,028 thousand (previous year: 1,708 thousand).

In connection with interests in subsidiaries, temporary differences totaling EUR 1,170 thousand (previous year: 1,172 thousand) exist for which no deferred tax liabilities were recognized.

20. 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 5 years. Bauer is entitled to cancel the contract at any time by means of written notice to the customer. If the contract is canceled 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.

2014

The receivables from concession arrangements developed as follows:

in EUR '000	31.12.2013	31.12.2014
As at 01.01.	40,770	36,762
Interest income from financial assets	1,931	1,721
Currency adjustment	-1,581	3,886
Payment of contract costs	-4,358	-4,079
Disposal	0	-38,290
As at 31.12.	36,762	0
of which with a remaining term of 1 to 5 years	9,122	0
of which with a remaining term of over 5 years	27,640	0

21 % of the shares in BAUER Nimr LLC were sold on November 19, 2014. Refer to page 104 in this regard.

The short-term portion of the receivables from concession arrangements is EUR 0 (previous year: 2,280 thousand) following the divestment. The short-term portion was previously stated under "Other current financial assets".

The financial income from concession arrangements in the financial year totaled EUR 1,721 thousand (previous year:

1,931 thousand). The discount rate in the past financial year was 4.26 % (previous year: 4.67 %).

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

21. OTHER NON-CURRENT ASSETS

The other non-current assets comprise the following items:

in EUR '000	31.12.2013	31.12.2014
Claims from backup insurance	4,743	4,787
Sundry other non-current assets	2,821	2,705
Total	7,564	7,492

The sundry other non-current assets were not subject to interest in the past financial year, as in the previous year. The previous year's figure has been adapted.

They also include assets arising from continuing involvements totaling EUR 1,068 thousand (previous year: 1,170 thousand). As in the previous year, the other non-current assets were neither impaired nor overdue in the year under review.

The BAUER Group sold trade receivables as well as services totaling EUR 18,425 thousand (previous year: 17,378 thousand) to third parties as part of receivables sale agreements. It comprises the maximum amount of the remaining risks which the BAUER Group would have to pay to the buyer.

The corresponding liability amounts to EUR 1,175 thousand (previous year: 1,287), 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.

2014

22. OTHER NON-CURRENT FINANCIAL ASSETS

The other non-current financial assets comprise the following:

in EUR '000	Remaining term 31.12.2013			Remaining term 31.12.2014
	1 to 5 years	over 5 years	1 to 5 years	over 5 years
Sundry other non-current financial assets	5,420	0	28,420	0
Total	5,420	0	28,420	0

The sundry other non-current assets contain receivables from derivatives as well as other non-current financial assets. The derivatives are presented in item 36 under "Other disclosures". Financial 2014 also includes a receivable item from the purchase price payment and loan to BAUER Nimr LLC amounting to EUR 20,059 thousand (previous year: 0). As in the previous year, the other non-current financial assets were neither impaired nor overdue in the year under review.

CURRENT ASSETS

23. INVENTORIES

The inventories comprise the following items:

in EUR '000	31.12.2013	31.12.2014
Raw materials and supplies	146,666	155,334
Finished goods and work in progress and stock for trade	272,866	283,850
Total	419,352	439,184

Of the inventories, EUR 121,319 thousand (previous year: 116,787 thousand) are stated at net realizable value. The impairment losses on inventories against the net realizable value affecting net expenditure in the financial year totaled EUR 24,386 thousand (previous year: 22,445 thousand).

They are broken down as follows:

in EUR '000	31.12.2013	31.12.2014
Write-downs of inventories due to use	14,196	15,789
Impairment losses on inventories	8,249	8,597
Total	22,445	24.386

The rate of hire was higher than last year, above all at BAUER Maschinen GmbH. Write-downs of used machinery due to use therefore increased from EUR 14,196 thousand to EUR 15,789 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. Impairment losses were realized on the basis of the achievable amount. In the regular way, these corresponded to the fair value less costs of sale.

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	31.12.2013	31.12.2014
Carrying value of the used machine	94,392	86,744
of which hired out	33,588	32,236
of which not hired out	60,804	54,508

In the financial year, apart from the usual retentions of title, inventories totaling EUR 119 thousand (previous year: 2,507 thousand) were provided as security for loans with a term until 2016. The securities provided can only be claimed by the lending banks in the event of definitive failure to fulfill contractual obligations, such as defaulting on interest and loan payments or failure to meet agreed financial targets. No claims on securities provided are foreseeable.

24. RECEIVABLES AND OTHER ASSETS

Construction contracts

The construction contracts measured according to the percentage of completion method developed as follows:

in EUR '000	31.12.2013	31.12.2014
Contract costs incurred (plus profits, less losses) for projects not yet completed	493,944	674,169
less down-payments	383,549	590,481
Balance	110,395	83,688
of which: Receivables from construction contracts (PoC)	143,234	132,159
of which: Liabilities from construction contracts (PoC)	32,839	48,471

Development of receivables and other assets

The receivables and other assets comprise the following:

in EUR '000	31.12.2013	31.12.2014
Receivables from construction contracts (PoC)	143,234	132,159
Trade receivables *	320,301	311,417
Receivables from enterprises in which the company has participating interests	444	67
Payments on account	3,725	4,304
Other current assets	30,695	28,603
Other current financial assets	19,551	20,100
Total *	517,950	496,650

* Previous year adjusted; see notes on page 106

The "Trade receivables" balance sheet item includes long-term receivables totaling EUR 10,504 thousand (previous year: 15,077 thousand).

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

in EUR '000	31.12.2013	31.12.2014
Value adjustments at start of financial year	63,504	59,938
Change in scope of consolidation	14	0
Currency adjustment	−353	842
Allocation	32,207	20,568
Reversal	34,003	19,557
Consumption	1,431	7,815
Value adjustments at end of financial year	59,938	53,976

The value adjustment for foreseeably uncollectable trade receivables of EUR 53,976 thousand (previous year: 59,938 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 % 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 totaling EUR 3,993 thousand (previous year: 2,998 thousand) and other current assets totaling EUR 0 thousand (previous year: 2,993) were subject to impairment.

2014

in EUR '000	Carrying amount 31.12.2013 *	Carrying amount 31.12.2014
Trade receivables (gross carrying amount)	382,946	365,393
Value adjustments in respect of trade receivables	59,938	53,976
Trade receivables (net carrying amount) of which neither impaired nor overdue at closing date of which not impaired at closing date and overdue in the following time bands:	320,301 114,938 205,363	311,417 110,640 200,777
- less than 30 days	68,462	75,046
- between 30 and 60 days	27,881	13,599
- between 60 and 90 days	10,627	10,886
- more than 90 days	98,393	101,246

The following table presents an analysis of the due dates of gross carrying amounts of trade receivables:

* Previous year adapted; part of the overdue receivables of SCHACHTBAU NORDHAUSEN GmbH has not been included

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 fulfill 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.

As in the previous year, the other current assets were neither impaired nor overdue in the year under review (previous year: EUR 2,993 thousand). 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 6,846 thousand (previous year: 15,400 thousand) in monetary assets were pledged as securities for potential future guarantees during the financial year. The current portion of the receivables from foreign exchange forward contracts included in the current financial assets in the financial year totaled EUR 141 thousand (previous year: 3,169 thousand).

The payments on account for intangible assets shown under "Other current assets" totaled EUR 0 (previous year: 4 thousand) in the year under review. In the 2014 financial year, impairment totaled EUR 20,568 thousand (previous year: 38,198 thousand).

2014

25. CASH AND CASH EQUIVALENTS

The cash and cash equivalents totaling EUR 41,835 thousand (previous year: 57,217 thousand) include credit balances at banks and petty cash stocks.

26. SHAREHOLDERS' EQUITY

The shareholder structure of BAUER AG is as follows:

in EUR '000	31.12.2013		31.12.2014
	%	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, 2014 published in the German Federal Gazette ("Bundesanzeiger").

Composition of subscribed capital

The subscribed and fully paid-up 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. 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 % 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 % 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 % 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 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 % 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 % limit;

• to balance out fractional amounts.

By resolution of the Ordinary Annual General Meeting held on June 26, 2014, the company was authorized to acquire treasury stock, over a limited period up to June 25, 2019, representing up to a total of 10 % 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 % above or 20 % 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. that 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 % above or 20 % below the average of the closing prices per share in the company in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange 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 stock market price of shares of the company carrying the same rights at the time of the sale in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange. The shares may also be sold to third parties, 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. With regard to use of the bought-back shares, the authorization provides, in specific cases, for legal rights of subscription of shareholders to be excluded. The facility to acquire treasury stock has not been utilized to date.

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

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

31.12.2013	31.12.2014
38,404	38,404
285,601	287,903
324,005	326,307
22,809	19,617
346,814	345,924

In the financial year, a dividend amounting to EUR 0.00 (previous year: EUR 0.30) per share was paid to the shareholders.

26.1 Non-controlling interests

a) Details of the non-wholly-owned subsidiaries in which significant non-controlling interests exist

The non-controlling interests which are significant in the BAUER Group are as follows:

in EUR '000			31.12.2013		31.12.2014
Group company	Non-controlling interests	Capital share in %	Capital share in EUR '000	Profit share in EUR '000	Capital share in %	Capital share in EUR '000	Profit share in EUR '000
BAUER Maschinen GmbH, Schrobenhausen, Germany	BAUER Anteilspool GbR	1.00	1,855	74	1.00	2,014	122
BAUER EGYPT S.A.E, Cairo, Egypt	Various natural persons	44.25	9,827	671	44.25	11,268	939
OOO BAUER Maschinen – Kurgan, Russian Federation	Paryscheva Valentina, Kokota Ivan	35.00	1,556	37	35.00	841	-372
BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey	Emiroglu Makina	40.00	1,102	359	40.00	1,185	184
BAUER Nimr LLC, Muscat – Al Mina, Sultanate of Oman *	Synergy Petroleum International LLC, Merit International LLC	30.00	4,201	852	-	-	939
Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan	Oweis family	16.70	-558	-4,048	16.70	-183	104
Individual non-significant subsidiaries with non-controlling interests			4,826	-449		4,492	-671
Total			22,809	-2,504		19,617	1,245

Combined financial information is presented below for each Group company with significant non-controlling interests, and corresponds to the amounts before intra-Group eliminations:

BALANCE SHEET	BAUER Maschinen GmbH			BAUER EGYPT S.A.E		OOO BAUER Maschinen – Kurgan
in EUR '000	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Non-current assets	144,774	156,332	2,776	4,339	1,961	3,089
Current assets	290,197	317,141	23,673	26,326	7,636	5,732
Non-current liabilities	118,848	198,527	144	0	3,314	4,967
Current liabilities	172,740	133,321	6,192	6,827	2,549	2,164

BALANCE SHEET	BAUER Casings		BAUER Nimr LLC			Site Group
in EUR '000	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Non-current assets	598	579	38,396	0	35,238	38,003
Current assets	3,306	3,052	15,783	0	48,737	50,833
Non-current liabilities	19	4	33,460	0	0	0
Current liabilities	1,115	649	6,585	0	86,022	90,767

* up to November 19, 2014; see notes on page 104

INCOME STATEMENT	BAUER Maschinen GmbH			BAUER EGYPT S.A.E	OOO BAUER Maschinen – Kurgan
in EUR '000	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Sales revenues	393,011	357,925	20,084	22,758	6,663	7,567
Operating result	19,129	23,788	2,468	3,064	564	-818
Profit before tax	9,759	15,819	2,773	3,559	161	-1,316
Net profit or loss	7,426	12,165	1,696	2,122	105	-1,063
Profit share of non-controlling interests	74	122	671	939	37	372
Profit share of shareholders of BAUER AG	7,352	12,043	1,025	1,183	68	-691
Dividends paid to minority shareholders	-40	-50	-69	-227	0	0

INCOME STATEMENT	BAUER Casings			BAUER Nimr LLC		Site Group
in EUR '000	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Sales revenues	5,250	3,687	11,745	16,616	20,750	11,224
Operating result	1,122	575	3,514	3,819	-20,314	5,027
Profit before tax	1,123	575	2,840	3,131	-23,908	503
Net profit or loss	898	460	2,840	3,131	-24,007	355
Profit share of non-controlling interests	359	184	852	939	-4,048	104
Profit share of shareholders of BAUER AG	539	276	1,988	2,192	-19,959	251
Dividends paid to minority shareholders	0	-146	-1,182	-2,364	0	0

CASH FLOW STATEMENT	BAUER Maschinen GmbH BAUER EGYPT S.A.E			OOO BAUER Maschinen – Kurgan
in EUR '000	2013	2014	2013	2014	2013	2014
Cash flows from operational activities	5,614	15,001	3,007	4,636	3,354	1,968
Cash flows from investment activities	-9,398	-16,205	-406	-2,929	-1,097	-1,607
Cash flows from financing activities	6,995	-1,631	144	-19	-2,396	-478
Influence of exchange rate movements on cash	0	0	-993	1,117	-61	155
Net change in liquid funds	3,211	-2,835	1,752	2,805	-200	38

CASH FLOW STATEMENT	BAUER Casings			BAUER Nimr LLC	Site Group
in EUR '000	2013	2014	2013	2014 *	2013	2014
Cash flows from operational activities	438	537	11,114	10,352	-8,890	11,519
Cash flows from investment activities	-242	-74	-376	-607	8,878	-4,191
Cash flows from financing activities	33	-375	-6,373	-9,735	-2,349	-7,791
Influence of exchange rate movements on cash	-145	12	49	26	443	516
Net change in liquid funds	84	100	4,414	36	-1,918	53

* up to November 19, 2014; see notes on page 104

b) Changes to the investment quota of subsidiaries of the Group

In financial 2013, BAUER Resources GmbH/Jordan Ltd. Co. purchased 23.3 % of the shares in Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan for a purchase price of USD 1. As a result, the proportion increased to 83.30 %. In this, proportions totaling EUR 4,647 thousand in value (proportion of the carrying value of the net assets of the Site Group) have been transferred to BAUER Resources GmbH/Jordan Ltd. Co. The transferred proportions have been reported under revenue reserves.

With effect from April 30, 2014, Celler Brunnenbau Holding GmbH, Celle, contributed assets with a fair value of EUR 900 thousand to PRAKLA Bohrtechnik GmbH as part of an asset deal. The fair value was certified by an external auditor. In return, linked to a capital increase by PRAKLA Bohrtechnik GmbH, Peine, a capital share (10 %, or EUR 114 thousand) determined by the DCF method was allotted. The asset deal also entailed a premium of EUR 786 thousand. The asset deal reduced the investment in PRAKLA Bohrtechnik GmbH to 90 %, while the proportion of the minority shareholders increased by EUR 900 thousand due to the asset deal.

ADDITIONAL INFORMATION ABOUT CAPITAL MANAGEMENT

The object of Bauer's capital management is to safeguard a strong financial profile. In particular, capital servicing is to be assured for suitable dividend payments for the shareholders as well as for the external capital providers. 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	31.12.2013	31.12.2014
Shareholders' equity *	419,815	418,925
Equity ratio	26.5 %	26.6 %
Net profit or loss	-19,431	15,726
Net debt	672,096	645,679
Financial indebtedness	729,313	687,514
Liquid funds	57,217	41,835
Net debt / EBITDA *	5.42	3.78
EBITDA / net interest coverage *	3.28	4.49

* Previous year adjusted; there was a non-signifi cant change in value in the course of calculating the share of joint ventures according to IFRS 11 and the retrospectively changed balance sheet disclosure (see page 106)

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. All externally imposed capital requirements (covenants) were complied with during the year under review.

NON-CURRENT LIABILITIES

27. NON-CURRENT LIABILITIES

The non-current portions of the liabilities comprise the following:

in EUR '000	Remaining term 31.12.2013		Remaining term 31.12.2014
	1 to 5 years	over 5 years	1 to 5 years	over 5 years
Liabilities to banks	247,775	0	364,771	0
Liabilities from finance lease agreements	17,265	0	13,032	0
Other non-current liabilities	6,483	0	5,959	0
Other non-current financial liabilities	14,397	0	10,013	0
Total	285,920	0	393,775	0

in EUR '000	Fair value		Interest rate margin
	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Liabilities to banks	256,361	378,016	0.50 - 9.12 %	0.50 - 11.2 %
Liabilities from finance lease agreements	17,265	13,032	2.38 - 7.75 %	2.38 - 7.89 %
Other non-current financial liabilities	15,396	9,904	1.59 - 9.21 %	0.85 - 12.5 %
Total	289,022	400,952	-	-

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).

28. PROVISIONS FOR 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 (96 %) 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 dependents 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 % of the employee's pensionable earnings for each pensionable year of service, plus 0.075 % 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 % plus 0.125 % 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): The pension payable amounts to 0.3 % of the employee's pensionable earnings for each pensionable year of service, plus 0.1 % 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 % plus 0.1 % for each pensionable year of service completed before January 1, 1999.

The widow's/widower's pension amounts to 50 % of the attained entitlement. Benefits are also promised to surviving dependent 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 %	31.12.2013
	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	-	-	-

in %	31.12.2014
	Germany	Indonesia	Philippines	Taiwan
Interest rate	2.0	8.0	7.8	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.

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

in EUR '000	31.12.2013	31.12.2014
Present value of commitments financed by a fund	2,688	3,801
Fair value of plan assets	-504	-657
Plan deficit	2,184	3,144
Present value of commitments not financed by a fund	81.421	115,360
Total deficit of define benefit pension plans	83,605	118,504
Effect of asset ceiling	-	-
Recognized provision	83,605	118,504

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

in EUR '000	Present value of commitment	Fair value of plan assets	Total	Effect of asset ceiling	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
Revaluation:
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 rate movements	-272	61	-211	-	-211
Contributions:
Employer	-	-88	-88	-	-88
Beneficiary employee	-	-	-	-	-
Payments from the plan:
Ongoing 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 defined benefit obligation and the plan assets developed as follows during the financial year:

in EUR '000	Present value of commitment	Fair value of plan assets	Total	Effect of asset ceiling	Total
As at: January 1, 2014	84,109	-504	83,605	-	83,605
Current service costs	1,817	-	1,817	-	1,817
Interest expense/income	3,080	-32	3,048	-	3,048
Post-employment expenditure, gains and losses from payment in lieu	-	-	-	-	-
Total	89,006	-536	88,470	-	88,470

Revaluation:

Return on plan assets excluding amounts included in the above interest	-	18	18	-	18
Actuarial gains and losses arising from adjustments to demographic assumptions	-	-	-	-	-
Actuarial gains and losses arising from adjustments to financial assumptions	32,274	-	32,274	-	32,274
Empirical value-based adjustments	-6	-	-6	-	-6
Changes in asset ceiling, excluding amounts included in the interest	-	-	-	-	-
Total	32,268	18	32,286	-	32,286
Exchange rate movements	140	-52	88	-	88
Contributions:
Employer	-	-89	-89	-	-89
Beneficiary employee	-	-	-	-	-
Payments from the plan:
Ongoing payments	-	2	2	-	2
Benefits (not fund-financed)	-2,253	-	-2,253	-	-2,253
Other effects	-	-	-	-	-
As at: December 31, 2014	119,161	-657	118,504	-	118,504

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

in EUR '000	31.12.2013	31.12.2014
Qualifying insurance contracts	223	235
Money market fund and pension fund	252	390
Cash and cash equivalents	29	32
Total	504	657

No market price quotations exist for the qualifying insurance contracts.

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

The sensitivity of the overall pension commitment 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 %	107,354	131,121
Future salary increases	+/- 0.5 %	122,313	114,726
Future pension increase	+/- 0.5 %	125,835	110,971
		Increase in assumption by 1 year	Decrease in assumption by 1 year
Probability of death		124,321	114,007

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 commitments and plan assets by country are as follows:

in EUR '000		31.12.2013
	Germany	Indonesia	Philippines	Taiwan	Total
Present value of commitments	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
Effect of asset ceiling	-	-	-	-	-
Total	82,839	456	175	135	83,605

in EUR '000	31.12.2014
	Germany	Indonesia	Philippines	Taiwan	Total
Present value of commitments	117,773	1,027	223	138	119,161
Fair value of plan assets	-235	-390	0	-32	-657
Total	117,538	637	223	106	118,504
Effect of asset ceiling	-	-	-	-	-
Total	117,538	637	223	106	118,504

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

in EUR '000	31.12.2013	31.12.2014
Active scheme members	49,949	75,169
Deferred beneficiaries	4,630	6,522
Pensioners	29,530	37,470
Total	84,109	119,161

The weighted average term of the defined benefit plans is 20.2 years.

For the 2015 financial year, pension payments totaling EUR 2,314 thousand (previous year: 2,242 thousand) are expected. Of that total, EUR 2,314 thousand (previous year: 2,242 thousand) is projected to be contributed by the employer. Contributions to the external plan assets totaling EUR 89 thousand (previous year: 84 thousand) are expected for 2015.

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	31.12.2014 Total
Pension payments	2,314	11,736	26,181	40,231

CURRENT LIABILITIES

29. CURRENT LIABILITIES

in EUR '000	31.12.2013	31.12.2014
Liabilities to banks	427,589	266,533
Liabilities from finance lease agreements	10,185	7,453
Advances received for orders	9,801	19,579
Liabilities from construction contracts (PoC)	32,839	48,471
Trade payables	194,471	168,974
Liabilities to enterprises in which the company has participating interests	219	205
Other current liabilities	69,873	68,632
Other current financial liabilities	12,102	25,712
Total	757,079	605,559

The "Trade liabilities" balance sheet item includes long-term liabilities totaling EUR 979 thousand (previous year: 949 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 0.75 to 11.20 % (previous year: 1.10 to 9.60 %).

30. OTHER PROVISIONS

The other provisions have developed as follows in the financial year:

in EUR '000	31.12.2013	31.12.2014
As at 01.01.	14,893	14,809
Change in scope of consolidation	0	0
Currency adjustment	-33	153
Allocation	6,461	6,633
Reversal	3,454	3,432
Consumption	3,058	2,283
As at 31.12.	14,809	15,880

The other provisions comprise the following:

in EUR '000	31.12.2013	31.12.2014
Risk from contract processing and warranties	14,605	14,670
Litigation	204	1,210
Total	14,809	15,880

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 majority of the provisions for risks arising from contract processing and warranties and provisions for litigation are predicted to be used up during 2015. Provisions for litigation amounting to EUR 427 thousand (previous year: 0) is predicted to be used up during 2017.

31. 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	31.12.2013	31.12.2014
Liabilities from guarantees	4,386	5,112

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.

For reasons of practicality, no information has been provided about the due dates of outflows from contingent liabilities.

32. OTHER FINANCIAL OBLIGATIONS

in EUR '000	Remaining term
	under 1 year		1 to 5 years		over 5 years
	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014
Minimum lease payments from operating leases	15,139	9,663	15,688	22,048	89	77
Other financial obligations	8,616	6,715	4,893	3,677	5,724	6,749

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 totaling monthly EUR 685 thousand (previous year: 1,686 thousand). The other financial obligations mainly include limited-term property rentals and leases.

33. DISCONTINUED OPERATIONS

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

34. EVENTS AFTER THE BALANCE SHEET DATE

No events subject to mandatory reporting in accordance with IAS 10 occurred after December 31, 2014.

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 As 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 EUR '000 As at 31.12.2014		RUB	CAD
Overall effect of +10 % on OCI	10,653	137	0
Overall effect of −10 % on OCI	-13,021	-167	0
Overall effect of +10 % on income statement	8,055	64	-99
Overall effect of −10 % on income statement	-6,181	-78	122

In 2014, 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		31.12.2014
Overall effect of +100 base points on OCI	2,076	732
Overall effect of −100 base points on OCI		-393
Overall effect of +100 base points on income statement	2,494	4,080
Overall effect of −100 base points on income statement	-2,298	-3,474

A drop in the variable interest rate below 0 % was ruled out when calculating the interest sensitivity.

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.

2014

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 31.12.2013	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 (without derivatives)	18,968	11,088	6,416	3,537
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

in EUR '000	Carrying amount 31.12.2014	Cash flows 2015	Cash flows 2016 to 2019	Cash flows 2020 ff.
Liabilities to banks	631,304	276,146	393,705	10,816
Liabilities from finance lease agreements	20,485	8,201	13,712	20
Other liabilities	74,591	68,632	2,898	3,062
Other financial liabilities (without derivatives)	17,623	11,981	5,997	0
Liabilities from construction contracts (PoC)	48,471	48,471	0	0
Trade payables	168,974	167,995	979	0
Liabilities to enterprises in which the company has participating interests	205	205	0	0

There were no instances of defaulting on interest payments or capital repayments in the period under review. Furthermore, all externally imposed capital requirements (covenants) for the loan agreements were met, see also page 148 "Additional information about 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 As at 31.12.2013	Carrying amount	2014	2015 to 2018	from 2019
Liabilities from foreign exchange forward contracts	491	-382	-150	0
Outflow of cash and cash equivalents *	-	-41,399	-9.159	0
Inflow of cash and cash equivalents *	-	41,017	9,009	0
Liabilities from interest rate swaps	6,846	-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	194	-122	-95	0
Outflow of cash and cash equivalents	-	-239	-186	0
Inflow of cash and cash equivalents	-	117	91	0

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

* Previous year's fi gure adapted

In EUR '000 As at 31.12.2014	Carrying amount	2015	2016 to 2019	from 2020
Liabilities from foreign exchange forward contracts	12,926	-12,804	-279	0
Outflow of cash and cash equivalents	-	-228,410	-8,220	0
Inflow of cash and cash equivalents	-	215,606	7,941	0
Liabilities from interest rate swaps	5,176	-2,598	-2,341	-29
Outflow of cash and cash equivalents	-	-2,598	-2,341	-29
Inflow of cash and cash equivalents	-	0	0	0
Liabilities from cross currency swaps	0	0	0	0
Outflow of cash and cash equivalents	-	0	0	0
Inflow of cash and cash equivalents	-	0	0	0

To calculate the cash inflows from interest rate swaps the conditions as per December 31, 2014 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 financial service companies. Only 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 166. 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 % 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 installments. The first two installments were paid in 2013, in the amount of EGP 3,000,000, and in 2014, in the amount of EGP 4,000,000; the remaining installment 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, 2014 amounts to EUR 0 (previous year: 144 thousand).

The applicable fair value of the equity component recognized in the non-controlling interests as at December 31, 2014 EUR 116 thousand (previous year: 324 thousand).

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		Fair value
	31.12.2013	31.12.2014	31.12.2013		31.12.2014
			Positive	Negative	Positive	Negative
Interest rate swaps
of which in hedge accounting	125,464	64,571	0	−2,765	0	−1,354
of which not in hedge accounting	45,550	67,350	0	−4,081	0	−3,822
Foreign exchange forward contracts
of which in hedge accounting	74,931	119,546	1,980	−133	988	−7,640
of which not in hedge accounting	84,712	145,022	1,211	−358	426	−5,286
Foreign exchange forward options
of which in hedge accounting	0	0	0	0	0	0
of which not in hedge accounting	6,556	0	115	0	0	0
Cross-currency swaps
of which in hedge accounting	1,605	1,419	0	−42	69	0
of which not in hedge accounting	3,314	2,578	0	−152	60	0

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	31.12.2013	31.12.2014
Loans and receivables	8,471	982
Financial liabilities measured at amortized cost	-38,691	-39,075
Available-for-sale financial assets	-2,586	-705
Held for Trading	2,465	-7,875
Total	-30,341	-46,673

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. Furthermore, the valuation category of "Loans and Receivables" was extended in 2014 to include the results from bank fees amounting to EUR −3,284 thousand (previous year: −2,827 thousand) and value reductions on irrecoverable receivables in the amount of EUR −411 thousand (previous year: −72 thousand).

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 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 2014 financial year, changes in shareholders' equity from cash flow hedges in an amount of EUR 1,184 thousand (previous year: 1,767 thousand) before tax and EUR 1,235 thousand (previous year: 1,129 thousand) after tax were recognized in the shareholders' equity as a hedge reserve with no effect on profit and loss. An amount of EUR 6,497 thousand (previous year: 310) was recognized as affecting expenditure from the hedge reserve created with no effect on net income in the shareholders' equity. Fair value changes in the shareholders' equity (reducing equity) amounting to EUR -5,313 thousand were reported from the derivative financial instruments held as at December 31, 2014. Moreover, the changes in deferred taxes in the amount of EUR 51 thousand were reported in the shareholders' equity with no effect on net income. Future transactions in foreign currencies secured by hedging and hedged changes in market interest rates are expected to be realized by 2020 at the latest. Gains and losses on future contracts in foreign currency and interest rates at December 31, 2014 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		Gross amount of recognized financial assets offset on the balance sheet		Related amounts not offset on the balance sheet
	Gross amount of recognized financial liabilities		Net amount of financial liabilities recognized on the financial balance sheet	Financial instruments	Cash securities paid	Net amount
Status: 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

Status: December 31, 2014

Total	43,378	0	43,378	-5,886	-	37,492
Cash and cash equivalents	41,835	0	41,835	-4,402	-	37,433
Derivative financial assets	1,543	0	1,543	-1,484	-	59

b) Financial liabilities

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

in EUR '000					Related amounts not offset on the balance sheet
	Gross amount of recognized financial liabilities	Gross amount of recognized financial assets offset on the balance sheet	Net amount of financial liabilities recognized on the financial balance sheet	Financial instruments	Cash securities paid	Net amount
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
As at: December 31, 2014
Derivative financial liabilities	18,102	0	18,102	-1,484	-	16,618
Current-account overdrafts	188,709	0	188,709	-4,402	-	184,307
Total	206,811	0	206,811	-5,886	-	200,925

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. No fair value is stated for current financial instruments or financial instruments reported at acquisition cost in the balance sheet, according to IFRS 7.29. The following table presents a progression 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
		31.12.2013	31.12.2014	31.12.2013	31.12.2014
NON-CURRENT ASSETS
Participations	at cost	3,613	3,613	0	0
Receivables from concession arrangements	at amortized cost	36,762	0	36,762	0
Other non-current financial assets		5,420	28,420
	at fair value	137	1,402	0	0
	at amortized cost	1,325	22,671	1,325	22,671
	at cost	3,958	4,347	0	0
CURRENT ASSETS
Receivables from construction contracts	at amortized cost	143,234	132,159	143,234	132,159
Trade receivables	at amortized cost	320,301	311,417	320,301	311,417
Receivables from enterprises
in which the company has participating interests	at amortized cost	444	67	444	67
Other current financial assets		19,551	20,100
	at fair value	3,169	141	0	0
	at amortized cost	16,382	19,959	16,382	19,959
Cash and cash equivalents		57,217	41,835	57,217	41,835
Total financial assets		586,542	537,611	575,665	528,108

		Balance sheet valuation as per IAS 39			Not assigned to any IAS 39 category
Available for sale			Financial assets and liabilities held for trading		Derivatives in hedge accounting	as per IAS 17	Balance sheet valuation		Fair Value as per IFRS 7 and IFRS 13	Valuation level according to
31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	IFRS 13
3,613	3,613	0	0	0	0	0	0	n/a	n/a
0	0	0	0	0	0	0	0	40,449	0	2
0	0	127	349	10	1,053	0	0	137	1,402	2
0	0	0	0	0	0	0	0	1,214	22,224	2
3,958	4,347	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	0	0	319,454	310,972	2
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	1,199	136	1,970	5	0	0	3,169	141	2
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	0	0	n/a	n/a	n/a
7,571	7,960	1,326	485	1,980	1,058	0	0	364,423	334,739

in EUR '000
	Valuation standard		Carrying amount		Loans and receivables/ other financial liabilities
		31.12.2013	31.12.2014	31.12.2013	31.12.2014
NON-CURRENT LIABILITIES
Liabilities to banks	at amortized cost	247,775	364,771	247,775	364,771
Liabilities from finance lease agreements	at fair value	17,265	13,032	0	0
Other non-current financial liabilities		14,397	10,013
	at fair value	6,516	4,371	0	0
	at amortized cost	7,881	5,642	7,881	5,642
CURRENT LIABILITIES
Liabilities to banks	at amortized cost	427,589	266,533	427,589	266,533
Liabilities from finance lease agreements	at fair value	10,185	7,453	0	0
Liabilities from construction contracts	at amortized cost	32,839	48,471	32,839	48,471
Trade payables	at amortized cost	194,471	168,974	194,471	168,974
Liabilities to enterprises
in which the company has participating interests	at amortized cost	219	205	219	205
Other current financial liabilities		12,102	25,712
	at fair value	1,015	13,731	0	0
	at amortized cost	11,087	11,981	11,087	11,981
Total financial liabilities		956,842	905,164	921,861	866,577

	Balance sheet valuation as per IAS 39		Not allocated to any IAS 39 category
	Available for Sale		Financial assets and liabilities held for trading		Derivatives in hedge accounting		Balance sheet valuation as per IAS 17		Fair Value as per IFRS 7 and IFRS 13
31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	31.12.2013	31.12.2014	according to IFRS 13
0	0	0	0	0	0	0	0	256,361	378,016	2
0	0	0	0	0	0	17,265	13,032	17,265	13,032	n/a
0	0	4,270	3,648	2,246	723	0	0	6,516	4,371	2
0	0	0	0	0	0	0	0	8,880	5,533	2
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	10,185	7,453	10,185	7,453	n/a
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	321	5,460	694	8,271	0	0	1,015	13,731	2
0	0	0	0	0	0	0	0	n/a	n/a	n/a
0	0	4,591	9,108	2,940	8,994	27,450	20,485	300,222	422,136

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 (up to May 7, 2014) 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 Retired construction engineer
• Dipl.-Ing. (FH) Elisabeth Teschemacher, née Bauer, Schrobenhausen 1st Chair of Caritasverband Neuburg-Schrobenhausen e.V.
• Gerardus N. G. Wirken, Breda, Netherlands Freelance consultant on strategy, controlling and accounting 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 (to July 1, 2014) Supervisory Board, Egeria Investments B.V., Amsterdam/Netherlands, Chairman (to July 1, 2014) Member of the Board of Rabobank Pensioenfonds, Utrecht/Netherlands (to 1 July 1, 2014)
• 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

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 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

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 • 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 1,150 thousand (previous year: EUR 1,361 thousand). Of that total, EUR 1,090 thousand (previous year: 1,056 thousand) was not performance-related and EUR 60 thousand (previous year: 305 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 totaling EUR 159 thousand (previous year: 118 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 5,531 thousand (previous year: EUR 3,868 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 2014 financial year totaled EUR 254 thousand (previous year: 254 thousand) and was distributed as follows:

in EUR '000	2013	2014
Chairman
Dr. Klaus Reinhardt	38	38
Deputy CEO
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	9	18
Regina Andel	18	18
Dipl.-Ing. Gerold Schwab	20	20
Dipl.-Ing. (FH) Walter Sigl	9	0
Reinhard Irrenhauser	18	18
Total *	254	254

* As a result of rounding to the nearest thousand euros, there was a rounding difference of EUR 1,000 in 2013 and 2014

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. Supervisory Board received pensions totaling EUR 55 thousand (previous year: 54 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 totaling EUR 468 thousand (previous year: 503 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 879 thousand (previous year: 945 thousand) was paid.

Loan commitments to the BAUER Foundation existed totaling 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	Associated companies		Non-consolidated companies Joint ventures
	2013	2014	2013	2014	2013	2014
Income	2,063	1,990	16,457	14,651	9,965	11,812
Purchased services	312	172	6,915	2,875	0	0
Receivables and other assets (31.12.)	444	0	25,893	18,863	31,661	24,738
Liabilities (31.12.)	133	125	1,775	2,538	0	0
Impairment of receivables	0	0	4,035	891	21,802	16,790

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.

39. JOINT OPERATIONS

The main joint operations are listed below:

2013 financial year:

Project	Activity of the company	Headquarters	Shareholding
Bangaroo Project	Specialist foundation engineering	Sydney, Australia	60 %
Sebuku Island	Specialist foundation engineering	South Kalimantan, Indonesia	35 %
Deep-Bauer Foundation Inc.	Specialist foundation engineering	Calgary, Canada	50 %

2014 financial year:

Project	Activity Headquarters of the company		Shareholding
Bangaroo Project	Specialist foundation engineering	Sydney, Australia	60 %
Sebuku Island	Specialist foundation engineering	South Kalimantan, Indonesia	35 %
Deep-Bauer Foundation Inc.	Specialist foundation engineering	Calgary, Canada	50 %

40. 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	2013	2014
Fees for auditing services	593	668
Fees for other certification	2	5
Fees for tax advice	74	21
Fees for other services	76	45
Total	745	739

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	2013	2014
Auditing fees	34	37
Fees for other certification	0	0
Fees for tax advice	7	7
Fees for other services	0	0
Total	41	44

41. 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, 2014 and published it in a form permanently accessible to shareholders on the company's website at www.bauer.de.

42. AVERAGE NUMBER OF EMPLOYEES

	2013	2014
Salaried staff	3,835	3,948
Germany	1,957	1,984
International	1,878	1,964
Industrial & trades	6,189	6,209
Germany	1,947	1,926
International	4,242	4,283
Apprentices	240	248
Total number of employees	10,264	10,405

43. 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 8, 2015).

44. PROPOSAL ON APPROPRIATION OF NET EARNINGS AVAILABLE FOR DISTRIBUTION

The Management Board and Supervisory Board submit the proposal for decision that a dividend should be paid from the net earnings available for distribution of BAUER Aktiengesellschaft for the 2014 financial year, amounting to EUR 33,349,700.22 EUR; it is proposed that the dividend should be EUR 0.15 per bearer share entitled to participate in the dividend, which given 17,131,000 bearer shares entitled to the dividend, represents an amount of EUR 2,569,650, leaving the remaining net earnings available for distribution, namely EUR 30,780,050.22, to be carryforward as profit. Any apportionment to bearer shares not entitled to participate in the dividend will also be carryforward to the next accounting period.

Schrobenhausen, March 31, 2015

The Management Board

Chairman of the Management Board

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

Principal investments of the BAUER Group as at December 31, 2014

	NAME OF COMPANY AND REGISTERED PLACE OF BUSINESS	Currency	Capital share in %
1.	Fully consolidated companies
	BAUER Aktiengesellschaft	EUR
A.	Germany
	BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany	EUR	99.00
	BAUER Maschinen GmbH, Schrobenhausen, Germany	EUR	99.00
	SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany	EUR	99.00
	SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany	EUR	99.00
	BAUER Resources GmbH, Schrobenhausen, Germany	EUR	99.00
	BAUER Training Center GmbH, Schrobenhausen, Germany	EUR	100.00
	BAUER Designware GmbH, Schrobenhausen, Germany	EUR	100.00
	BAUER Umwelt GmbH, Schrobenhausen, Germany	EUR	100.00
	KLEMM Bohrtechnik GmbH, Drolshagen, Germany	EUR	100.00
	EURODRILL GmbH, Drolshagen, Germany	EUR	100.00
	BAUER Mietpool GmbH, Schrobenhausen, Germany	EUR	100.00
	RTG Rammtechnik GmbH, Schrobenhausen, Germany	EUR	100.00
	MAT Mischanlagentechnik GmbH, Immenstadt, Germany	EUR	90.00
	PRAKLA Bohrtechnik GmbH, Peine, Germany	EUR	90.00
	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
	Esau & Hueber GmbH, Schrobenhausen, Germany	EUR	75.50
	hydesco24 GmbH, Hamburg, Germany	EUR	60.00
	BAUER Deep Drilling GmbH, Schrobenhausen, Germany	EUR	100.00

	NAME OF COMPANY AND REGISTERED PLACE OF BUSINESS	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, UK	GBP	100.00
	BAUER RENEWABLES LIMITED, Bishops Stortford, UK	GBP	100.00
	BAUER EQUIPMENT UK LIMITED, Rotherham, Great Britain	GBP	100.00
	BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary	HUF	100.00
	BAUER ROMANIA S.R.L., Bucarest, Rumania	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, Łódz, Poland	PLN	100.00
	BAUER RESOURCES SPAIN S.A., Leganes, Spain	EUR	100.00
	BAUER Resources UK Ltd., Wigan, Great Britain	GBP	100.00
C.	Europe (other)
	BAUER Spezialtiefbau Schweiz AG, Baden-Dättwil, 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 & 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	QAR	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 *

	NAME OF COMPANY AND REGISTERED PLACE OF BUSINESS	Currency	Capital share in %
	Middle East & Central Asia (continued)
	BAUER Resources GmbH / Jordan Ltd. Co. – (sub-group consolidated financial statements), Amman, Jordan	USD	100.00
	Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan	USD	83.30
	Site Group for Services and Well Drilling Ltd. Co., Ramallah, Palestine	USD	100.00
	Site Drilling Ltd. Co., Limassol, 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. – (sub-group 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 Ltd., 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. – (sub-group 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.	Americas
	BAUER FUNDACIONES PANAMÁ 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., Conroe, Texas, USA	USD	100.00
	BAUER Manufacturing Inc., Conroe, United States of America	USD	100.00
	BAUER FOUNDATION CORP., Odessa, Florida, USA	USD	100.00
	BAUER Resources Chile Limitada – (sub-group financial statements), Santiago de Chile, Chile	CLP	100.00
	GWE Tubomin S.A., Santiago de Chile, Chile	CLP	60.00

	NAME OF COMPANY AND REGISTERED PLACE OF BUSINESS	Currency	Capital share in %
G.	Africa
	BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt	EGP	55.75
	BAUER Technologies South Africa (PTY) Ltd – (sub-group financial statements), Johannesburg, South Africa	ZAR	100.00
	MINERAL BULK SAMPLING NAMIBIA (PTY) LTD, Windhoek, Namibia	NAD	100.00
	MINERAL BULK SAMPLING SOUTH AFRICA (PTY) LTD, Cape Town, South Africa	ZAR	100.00
	BAUER RESOURCES GHANA LIMITED, Accra, Ghana	GHS	100.00
	BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana	BWP	51.00
2. A.	Associates and joint ventures Germany
	Wöhr + Bauer GmbH – (sub-group financial statements), Munich, Germany Wöhr + Bauer Angerhof GmbH & Co. KG, Munich, Germany	EUR EUR	33.33 100.00
	Wöhr + Bauer Angerhof Verwaltungs GmbH, Munich, Germany	EUR	100.00
	WÖHR + BAUER PARKING GmbH, Munich, Germany	EUR	100.00
	Wöhr + Bauer H2O Verwaltungs GmbH, Munich, Germany	EUR	100.00
	Wöhr + Bauer H2O GmbH & Co. KG, Munich, Germany	EUR	100.00
	Wöhr + Bauer Projekt HTW Verwaltungs GmbH, Munich, Germany	EUR	100.00
	Wöhr + Bauer Projekt HTW GmbH & Co. KG, Munich, Germany	EUR	100.00
	WÖHR + BAUER Tower Riem Verwaltungs GmbH, Munich, Germany	EUR	100.00
	WÖHR + BAUER Tower Riem GmbH & Co. KG, Munich, Germany	EUR	100.00
	Riem Vermietungs GmbH, Munich, Germany	EUR	100.00
	NDH Entsorgungsbetreibergesellschaft mbH, Bleicherode, Germany	EUR	25.00
	Grunau und Schröder Maschinentechnik GmbH, Drolshagen, Germany	EUR	30.00
B.	International
	TERRABAUER S. L., Madrid, Spain	EUR	30.00
	NuBa Equipment Ltd., Edmonton, Canada	CAD	50.00
	Bauer + Moosleitner Entsorgungstechnik GmbH, Salzburg, Austria	EUR	50.00
	BAUER Nimr LLC, Muscat – Al Mina, Sultanate of Oman	OMR	49.00
3. A.	Enterprises in which the company has participating interests Germany
	TMG Tiefbaumaterial GmbH, Emmering, Germany	EUR	33.33
	Nordhäuser Bauprüfinstitut GmbH, Nordhausen, Germany	EUR	20.00
	Harz Hotel Grimmelallee Nordhausen Beteiligungsgesellschaft mbH, Nordhausen, Germany	EUR	20.00
	Harz Hotel Grimmelallee Nordhausen GmbH & Co. KG, Nordhausen, Germany	EUR	20.00
	Stadtmarketing Schrobenhausen e.G., Schrobenhausen, Germany	EUR	4.18
B.	International
	OAO Mostostrojindustria, Moscow, Russian Federation	RUB	15.00

* Benefi cial ownership is 100 %

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 31, 2015

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, 2014. 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, Section 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 31, 2015

Klaus Neubarth ppa. Dagmar Liphardt Auditor Auditor

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 %. 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 meters, and are used to extract oil, gas, water and geothermal energy.

E

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

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

EBIT | Earnings before interest and taxes.

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 METHOD (POC) |

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 NORDHAUSEN 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.

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 widely.

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

T

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

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

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HOW TO CONTACT US

Contact

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

Registered place of business

86529 Schrobenhausen, Germany Registered at the District Court of Ingolstadt under HRB 101375

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This Annual Report is published in German and English.

The 2014 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 and Turkey. 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 is focused on products and services in the areas of water, environment and natural resources. BAUER Resources GmbH is the holding company, under the umbrella of which the subsidiaries operate as full-service providers. The competence centers of Water Treatment, Process and Biotechnology, Environmental Rehabilitation and Waste Management, Drilling Technologies as well as Well Drilling and Geothermal pool their expertise and support the subsidiaries in carrying out projects.

>>>

Income statement of the BAUER Group

in EUR '000	2013 *	2014	Change
SALES REVENUES	1,402,173	1,375,679	-1.89 %
Changes in inventories	-4,423	26,622	n/a
Other capitalized goods and services for own account	19,196	14,696	-23.44 %
Other income	30,579	89,022	n/a
CONSOLIDATED REVENUES	1,447,525	1,506,019	4.04 %
Cost of materials	-755,906	-749,247	-0.88 %
Staff costs	-342,815	-355,250	3.63 %
Depreciation of fixed assets	-79,696	-78,781	-1.15 %
Write-downs of inventories due to use	-14,196	-15,789	11.22 %
Other operating expenses	-224,827	-230,526	2.53 %
OPERATING RESULT	30,085	76,426	n/a
Financial income	7,729	7,096	-8.19 %
Financial expenses	-45,541	-45,149	-0.86 %
Share of the profit or loss of associated companies accounted for using the equity method	1,770	-572	n/a
PROFIT BEFORE TAX	-5,957	37.801	n/a
Income tax expense	-13,474	-22,075	63.84 %
NET PROFIT OR LOSS	-19,431	15,726	n/a

Balance Sheet of the BAUER Group

ASSETS in EUR '000	31.12.2013 *	31.12.2014	Change
NON-CURRENT ASSETS
Intangible assets	35,388	34,440	-2.68 %
Property, plant and equipment and investment property	459,537	446,909	-2.75 %
Investments accounted for using the equity method	13,249	42,906	n/a
Participations	3,613	3,613	0.00 %
Deferred tax assets	26,299	30,973	17.77 %
Receivables from concession arrangements	36,762	0	-100.00 %
Other non-current assets	7,564	7,492	-0.95 %
Other non-current financial assets	5,420	28,420	n/a
	587,832	594,753	1.18 %
CURRENT ASSETS
Inventories	419,352	439,184	4.73 %
Receivables and other assets	517,950	496,650	-4.11 %
Effective income tax refund claims	3,437	2,661	-22.58 %
Cash and cash equivalents	57,217	41,835	-26.88 %
	997,956	980,330	-1.77 %
	1,585,788	1,575,083	-0.68 %

EQUITY AND LIABILITIES in EUR '000	31.12.2013 *	31.12.2014	Change
SHAREHOLDERS' EQUITY
Group shares	397,006	399,308	0.58 %
Minority interests	22,809	19,617	-13.99 %
	419,815	418,925	-0.21 %
NON-CURRENT LIABILITIES
Defined benefit plans	81,637	116,358	42.53 %
Financial liabilities	279,437	387,816	38.78 %
Other liabilities	6,483	5,959	-8.08 %
Deferred tax liabilities	14,954	13,123	-12.24 %
	382,511	523,256	36.80 %
CURRENT LIABILITIES
Financial liabilities	449,876	299,698	-33.38 %
Other liabilities	307,203	305,861	-0.44 %
Effective income tax obligations	9,606	9,317	-3.01 %
Provisions	16,777	18,026	7.44 %
	783,462	632,902	-19.22 %
	1,585,788	1,575,083	-0.68 %

In the "Change" column, there may be differences from the Group key figures as a result of roundings and a different representation between thousands of EUR and millions of EUR.

* Previous year adjusted; see notes on page 106

Financial calendar 2015

April 10, 2015	Publication of Annual Report 2014 Annual Press Conference Analysts' Conference
May 13, 2015	Interim Report March 31, 2015
June 25, 2015	Annual General Meeting
August 14, 2015	Half-Year Interim Report June 30, 2015
November 13, 2015	Interim Report September 30, 2015

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