Progress-Werk Oberkirch AG — Annual Report 2012

Apr 17, 2013

The Human Touch of Automotive Technology

Annual Report 2012

Group Five Year Overview of Key Figures (IFRS)

Income Statement (EURk)	2008	2009	2010	2011	2012
Revenue	260,356	206,371	264,195	331,080	358,072
Total output	264,810	206,752	270,714	328,832	366,624
Cost of materials	149,306	112,067	140,828	179,707	197,958
Staff costs	70,652	67,065	77,023	87,962	97,680
EBITDA	24,184	12,179	33,050	35,828	39,813
EBIT	7,715	-4,949	16,007	19,161	20,878
EBT	2,616	-10,450	9,803	12,880	14,552
Net income for the period	1,351	-8,949	6,459	9,016	10,159
Balance Sheet (EURk)
Total assets	205,123	204,664	223,459	240,735	275,534
Non-current assets	112,346	110,215	116,422	129,438	151,149
Current assets	92,777	94,449	107,037	111,297	124,385
thereof cash and cash equivalents	2 ,265	7,704	7,290	4,580	7,810
Equity	67,980	61,465	68,971	74,784	104,802
Interest-bearing borrowings	69,451	86,792	87,147	94,830	98,263
Other liabilities	67,692	56,407	67,341	71,121	72,469
Return on Equity in % (based on EBT)	3.8	negative	14.2	17.2	13.9
Return on Equity in % (based on net income for the period)	2.0	negative	9.4	12,1	9.7
Net debt as % of equity	99	129	116	121	86
Equity ratio in %	33.1	30.0	30.9	31.1	38.0
Cash Flow (EURk)
Cash flow from operating activities	25,031	6,008	24,840	25,547	26,617
Cash flow from investing activities	-33,937	-12,658	-16,849	-26,412	-33,262
Interest paid and received	-3,092	-3,748	-4,594	-4,716	-4,537
Free cash flow	-11,998	-10,398	3,397	-5,581	-11,182
Dividends paid	-3,250	-1,375	0	-2,500	-3,500
Other cash flow from financing activities	19,839	15,981	-2,461	1,429	19,888
Net change in cash and cash equivalents in the period	4,591	4,208	936	-6,652	5,206
Numbers per share (EUR)
Weighted average number of shares (in million)	2.50	2.50	2.50	2.50	2.89
Earnings per share (diluted = basic)	0.58	-3.58	2.58	3.61	3.52
Dividend per share	0.55	0.00	1.00	1.40	1.60*
XETRA share price, year-end	16.48	20.00	35.50	31.34	28.20
Employees (as of December 31)
PWO Group (incl. part-timers)	2,086	2,046	2,288	2,664	2,916
thereof in Germany	1,127	1,116	1,209	1,340	1,393
thereof in international locations	834	781	954	1,174	1,356
thereof trainees	125	149	125	150	167

* Proposal to the 90th Annual General Meeting

Performance.

PWO is excellently positioned as one of the global leading developers and manufacturers of sophisticated metal components and subsystems for automotive safety and comfort. As an automotive supplier, our sole focus is those product areas in which our comprehensive know-how in the forming and joining techniques of steel, stainless steel, and aluminum, can be fully utilized.

PWO produces high-tech components, modules, and systems, in unit numbers reaching the millions and with highest efficiency. This includes mechanical components for the electrical/electronic applications, safety components for airbags, seats, and steering components, and structural components and subsystems for vehicle bodies and chassis. Through this product mix, we are profiting tremendously from the trend toward a higher penetration of equipment in vehicles in the areas of safety and comfort as well as from the trends toward lightweight construction and e-mobility.

We have ground-breaking solutions in sheet metal forming and in components out of stressoptimized, high-strength steel and aluminum. PWO is the only supplier worldwide that through its broad range of products covers the entire value chain from product and process development to tool-making and series production.

Continuous product and process innovation are the key success factors in maintaining and expanding our competitive position. At the same time, high product quality cements our customer relationships and strengthens our earnings power.

We have managed to build a diversified, international customer base. We are increasingly profiting from growth markets such as those of Eastern Europe, North, Central, and South America, Asia, and particularly China via our international production sites and our global delivery capabilities.

We are optimally equipped for further growth. With our business model, our innovative strength, and our operating efficiency we are achieving a high level of performance which secures our market leadership and provides us with sustainable growth.

The PWO Locations

PWO UNITOOLS CZ a.s., Valašské Mezirící

Germany

Progress-Werk Oberkirch AG, Oberkirch

PWO Product Areas

As a leading global developer and manufacturer of sophisticated metal components and subsystems for automobiles, PWO focusses on three strategic product areas which provide safety and comfort. Both of these areas contribute almost equally to Group revenues.

Precision motor housings for ABS and ESP systems, fan drives, windshield wipers and power windows, housings for electronic controls and components for electric drive systems are all included in the product area of mechanical components for electrical and electronic applications. The second product area encompasses safety components for airbags and steering systems as well as seat structures, seat adjusters, and seat locking mechanisms. The third product area includes vehicle body components, heat shields, cross members, as well as chassis components and pressure accumulators for air suspension systems.

With a range of more than 1,000 products, we are the only supplier worldwide which covers the entire value chain from product and process development, and tool design from small series to large series production in unit numbers reaching into the millions.

Mechanical Components For Electrical And Electronic Applications

Structural components for vehicle bodies and chassis

Safety components for airbags, seats, and steering

Overview

42 Management Report for the PWO Group and PWO AG

Consolidated Financial Statements of the PWO Group

134 Further Information

84

8

Table of Contents

• Letter of the Management Board 12
• Report of the Supervisory Board 18
• Corporate Governance Report 24
• PWO Shares 32
• Company Profile 44
• Strategy and Control 46
• The Economic Environment 48
• Net Assets, Financial Position and Results of Operations 50
• Order Situation 57
• General Statement on the Economic Situation of the Group 58
• Employees 59
• Additional Information 60
• Risk Report 62
• Remuneration Report 68
• Changes in the Governing Bodies 72
• Corporate Governance Statement pursuant to Section 289a of the German Commercial Code 72
• 01 Disclosures Required pursuant to Section 289 (4) and Section 315 (4) of the German Commercial Code 72
• Significant Events Subsequent to the End of the Financial Year 74
• Dependency Report 74
• Outlook 74
• Management Report for the PWO AG 78
• Consolidated Income Statement 86
• Consolidated Statement of Comprehensive Income 87
• Consolidated Balance Sheet 88
• Consolidated Statement of Changes in Equity 90
• Consolidated Statement of Cash Flows 91
• Notes to the Consolidated Financial Statements 92
• Audit Opinion 128
• Responsibility Statement 129
• Governing Bodies 136
• Proposal for the Appropriation of Profits 138

Performance. Sustainably strong performance.

We safeguard PWO Group's high-margin growth by concentrating on core competencies, having a high level of innovation, covering the complete value chain, and possessing a diversified international customer base.

The Management Board

Bernd Bartmann Member of the Management Board Administration and Finance

Karl M. Schmidhuber Chairman of the Management Board Market and Technology

Dr. Winfried Blümel Member of the Management Board Production and Materials

"We are financing our further growth with our own resources. By way of a capital increase, we placed 625,000 new PWO shares on the capital market at a ratio of 4:1. Thus, our shareholders could participate in the further financing of their company. Our growing profitability and our shareholder-friendly dividend policy ensure our shareholders a sustainable increase in value of their investment".

"Innovative production solutions in the highest quality and precision prove our competitive strength. We use our room to manoeuver in modern product design and, as a result, achieve cost benefits and weight reduction. With production sites in Europe, Asia, and America, which we expand or add to when necessary, we are globally present, in close proximity to our customers, and profit from the opportunities provided by the international growth markets".

"We reduce the complexity of components in modern automobiles and produce large series extremely cost efficiently. We lead globally with our expertise in metal forming and processing methods for stress-optimized, high-strength steels. Our recent capacity expansion at the Oberkirch site will enable us to produce even prototypes and small series very efficiently".

Letter of the Management Board

Dear Shareholders,

The PWO Group significantly increased its revenues and earnings again in fiscal year 2012. Revenues rose 8.2 percent to EUR 358.1 million compared with the previous year, and total output increased 11.5 percent to EUR 366.6 million. Earnings before interest and taxes rose 9.0 percent to approximately EUR 20.9 million. When adjusted for currency effects, earnings even increased at an above-average rate of 17.0 percent.

However, in the course of the year this overall favorable business development was influenced by different factors effecting single product areas and locations. There was a significant decline in the sales of high-volume standard products in Europe which had accelerated in the course of the fiscal year. In contrast, the products in the premium segment experienced higher demand in the third quarter, particularly at our location in Oberkirch. In part, this caused us to exceed our capacity limits and resulted in significant additional expenses whereas, in the fourth quarter, call orders experienced a marked decline. We were also faced with ample burdens at our location in Puebla, Mexico. This was the result of a strong increase in call orders in the second half of the year and the fact that we grew our business by over 60 percent as compared to the prior year clearly exceeding our budget. In China however, there were noticeable reductions in volumes due to customer delays in their scheduled series start-ups. With revenue growth of just 40 percent these delays had led to considerably lower growth rates than planned.

The large increase in expenses was caused by a high level of volatility in call orders in the second half of the year in connection with the notable weakness in the European market. This had an appreciable effect on our earnings development and as a result we were not able to fully meet our initial expectations. However, the measures implemented in the second half of the year in order to safeguard earnings made a considerable contribution to the improvement in our earnings situation.

Dear shareholders, at this point the Management Board would like to thank you once again for the confidence you have shown us through your participation in the capital increase in May 2012. This additional capital placed the PWO Group in a position to further expand its already strong market position. Rest assured that we will diligently use the new funds to finance our future growth.

The high volume of new business which we had acquired once again in fiscal year 2012 sent a clear signal: With over EUR 350 million in new orders, we have greatly exceeded the volume of EUR 300 million in the previous year. All of our locations will profit from this new business. In addition to adding further volume to our fast-growing international locations, we were also able to win substantial new orders for our location in Oberkirch.

These new orders are evenly spread across our entire product range and concern different platforms and different vehicle models from a variety of manufacturers. This will allow us to remain broadly diversified in the future and will allow us to continue to minimize individual risks.

We have a cautiously optimistic outlook for the 2013 automotive year. Europe is expected to experience a renewed decline in total volume. This contrasts with the robust demand expected in North America and China. In view of the high level of orders on hand, we expect revenues to grow around 8 percent to approximately EUR 390 million in fiscal year 2013.

Letter of the Management Board

We do not foresee any of the individual charges which had occurred in fiscal year 2012 to reoccur to the same extent in the current year, despite the continued expectations for higher volatility in the market and call orders. From an operating standpoint, we expect another above-average increase in EBIT.

Annual revenue growth in 2014 and 2015 should be at a similar level as in the current fiscal year and the EBIT margin should successively improve. To a large extent, the necessary capacity for this growth is already available. However, in some cases diverse structural expansions will be necessary. In summary, we expect declining rates of investment for 2013 and in the two years thereafter.

Dear shareholders, the Management Board would like to express its appreciation for your trust and commitment this past year. We invite you to join the Company on its future path and to continue to take part in our success.

Karl M. Schmidhuber Bernd Bartmann Dr. Winfried Blümel (Chairman)

Innovation makes use of leeway in design and reduces complexity.

Component and system development takes place at the beginning of the value chain of an automobile. Automotive suppliers shape an automobile's advancement in several technical details. A distinct integration expertise is becoming increasingly important since the requirements are leaning more toward the supply of complete modules and systems.

Demands for higher safety, more comfort, better driving performance, and lower emissions step up the requirements for the development of automobiles. These demands are met through an optimal use of installation space, innovative material concepts, and component construction.

At PWO, innovation is not random. It is the result of our constant striving for improvement in all areas. The passion to always offer our customers the best solution is what drives us to peak performance. We are able to regularly exceed our customers' expectations in terms of function, precision, and weight, at an excellent price-performance ratio. We do this through creativity in product design and in the production processes.

Today, the ever increasing demand for lightweight construction leads in many cases to a substitution of production processes such as casting, forging, sintering, or extrusion. With our globally leading expertise in sheet metal forming, we profit tremendously from this trend. Our sheet metal forming solutions achieve far-reaching cost savings and weight reduction. With the most modern simulation, calculation, and testing methods, we not only define standards in sheet metal forming but we also extend its limits with our complex forming processes.

Using our precision cold forming of sheet steel, we consistently produce high value products. Moreover, we have perfected the deep-drawing process for components with large height and diameter changes. This includes high quality steel joining technologies, which broaden the scope of application in lightweight construction with stress-optimized single components.

The trend in raw materials is clearly going in the direction of high-strength steel qualities. We also welcome this trend because it requires special processing experience. We saw the opportunities in high-strength steels early on and incorporated this potential into our development work. As a result, we have an advantage in terms of know-how. Deep-drawing components made of steel or aluminum are also increasingly being used in the area of e-mobility with battery housings and components for electric engines.

Steel forming is an international growth market. Numerous areas offer a variety of additional possibilities. We want to exploit these possibilities and expand our market share even further.

The idea and the time factor.

PWO has gathered a clear competitive advantage with its very high expertise in metal forming. The requirements for precision and durability have been particularly on the rise in the last several years. A large number of new tailor-made methods and technologies have evolved, which are designed for special requirements and whose application demand extensive expertise.

A reduction in complexity represents a key element of creative product design. We reduce the number of processing steps necessary by, for example, rendering weld seams superfluous, or by simplifying the use of materials, replacing the previously necessary installation of a cast part with a simple but innovative forming process on the same part. This allows us to extend our added value with ready-to-assemble subsystems or full-service support and at the same time, reduce the production complexity for the customer – all with zero-defect quality.

Together with our customers and in collaboration with our suppliers, we develop new products with simultaneous engineering. Modern simulation, calculation, and testing methods as well as the complex and consistent use of all available data within the entire processing chain, accelerate the processes and increase our development quality.

This is the reason we have greatly expanded and centralized our capacity in a new hall – the Technikum – at our location in Oberkirch for the production of prototypes and small series. What is being created in the Technikum and PWO's development department is the high technology for the vehicles of the future. Through realistic simulation methods PWO is extending the boundaries of practical technology. Five presses as well as various welding robots have been available since mid-2012 for the construction of prototypes, components, and modules. This enables the production of innovative samples and prototypes in series quality and within a very short period of time.

Dieter Maier (Chairman)

Report of the Supervisory Board

In the following, the Supervisory Board of Progress Werk Oberkirch Aktiengesellschaft ("the Company") is reporting on its activities during the 2012 fiscal year. The focus of this report is the collaboration of the Supervisory Board and the Management Board and the key issues addressed in the Supervisory Board meetings. Furthermore, the Supervisory Board reports on the work of its committees.

In fiscal year 2012, the Supervisory Board had carried out its duties and responsibilities as defined by the law and the Company's Articles of Association and its Rules of Procedure. To this end, the Supervisory Board and the Management Board had continually cooperated and had maintained a close dialogue. The dialogue with the Management Board had also included all other major issues concerning the development of the Company and the Group. The Supervisory Board advised the Management Board on a regular basis and monitored the Company's management in the aspects of legality, expediency, and efficiency. The Management Board had directly involved the Supervisory Board in the decisions of fundamental importance for the Company or the Group. Above all, both the Management Board and the Supervisory Board had coordinated closely in matters relating to the strategic direction of the Group.

The Supervisory Board was kept fully informed by the Management Board in a timely and comprehensive manner on the basis of detailed verbal and written reports. This communication addressed, in depth, all significant issues regarding market trends of relevance to the Company and the Group, the current state of business, as well as the position of the Company and the Group. Short-term and long-term corporate planning, on-going development projects, investments, and the further strategic development of the Group, were all discussed in detail. In this context, the preparation, the conditioning, and the execution of the planned capital increase from authorized capital in the reporting year was discussed in detail and approved by the Supervisory Board.

Moreover, the liquidity and risk situation as well as the Group-wide risk management system were topics arising from information made available by the Management Board. All deviations from the forecasts and targets occurring in the course of business were discussed in detail by the Management Board and were reviewed by the Supervisory Board, particularly the adjustments to the previously published forecasts which became visible in the second half of the fiscal year and the measures to counteract them.

The Management Board's reports were critically reviewed by the Supervisory Board with regard to their plausibility. The Supervisory Board confirmed that the subject and the scope of the Management Board's reporting fully met the requirements of the Supervisory Board. After a thorough examination and discussion, the Supervisory Board approved the reports and proposals of the Management Board to the extent required by the legal and statutory provisions. Matters requiring the Supervisory Board's approval were submitted for resolution by the Management Board and in a timely manner.

The Chairman of the Supervisory Board was in regular close personal contact with the Management Board, particularly with its Chairman – also outside of the Supervisory Board meetings. He advised the Management Board in questions concerning strategy, planning, business development, the risk situation, risk management, as well as in Company compliance issues. The Chairman of the Supervisory Board was continually informed of all material business occurrences. He also briefed the other Supervisory Board members outside of the meetings and discussed current developments with them.

Continuous information of the Chairman of the Supervisory Board was provided regarding special business transactions which were deemed vital to the assessment of the situation and development, as well as for the management of the Company and Group. He was kept informed on a timely basis by the Management Board either verbally or via written reports. No events had occurred in the reporting period which could be classified as unusual or problematic. Therefore, it was not necessary to call an extraordinary meeting of the Supervisory Board in this reporting year.

Conflicts of interest involving members of the Management Board and those of the Supervisory Board, which would require immediate disclosure to the Supervisory Board as well notification to the Annual General Meeting, did not occur in fiscal year 2012. The Supervisory Board approved the mandate awarded by the administration to the law firm Gleiss Lutz, at which the Supervisory Board member, Dr. Gerhard Wirth is a partner.

The work of the plenary

In fiscal year 2012, the plenary met on five occasions: March 26; May 24; July 24; September 28; and December 11, 2012.

In addition, on May 15, 2012, the Supervisory Board made a resolution by telephone – due to its urgency – regarding decisions made that day on the capital increase from authorized capital in May 2012. The Supervisory Board resolved a change to Section 4 (1) and (3) of the Articles of Association due to the partial use of authorized capital I/2010 and the change in Section 3 (1) of the Company's Articles of Association in relation to the Company's announcement in the Federal Gazette. This was based on information contained in Section 10 (9) of the Articles of Association. All Supervisory Board members took part in this conference call and the decision was unanimous on all points..

Except on one occasion, all of the Supervisory Board meetings took place at the Company's headquarters. On September 28, 2012, the Supervisory Board met at the premises of the subsidiary in China and took the opportunity to view that location. There were no Supervisory Board members with an unexcused absence at any of the meetings. None of the Supervisory Board members took part in less than half of the meetings. Except on one occasion, all members were present at the meetings.

The Supervisory Board regularly and closely concerns itself with the Company's strategy, current market conditions, on-going development projects, and the state of investments. In all meetings, the Supervisory Board also discussed the respective situation and earnings reports of the Management Board with respect to the economic and operational environment. Furthermore, topics discussed included the Annual General Meeting, questions concerning financing, and projections for the reporting year. The following items were also topics of the meeting agendas:

At the meeting of March 26, 2012, the Supervisory Board dealt in detail with the financial statements of fiscal year 2011, the report of the Supervisory Board, and the 2011 Annual Report. Details of the Annual General Meeting on May 24, 2012, were also on the meeting agenda as well as discussions on the current status of the Management Board's submitted revisions to the risk management system.

The capital increase was one focus of the meeting of May 24, 2012. Additionally, the Supervisory Board appointed Bernd Bartmann for another five years as member of the Management Board until December 31, 2017 and extended his employment contract accordingly.

In the meeting of July 24, 2012, the Supervisory Board also received and discussed in detail the Management Board's report regarding the five-year projections for the individual locations' expected revenue development, required investment, and the financing thereof.

In the meeting of December 11, 2012, the focal point was the presentation, discussion, and adoption of medium-term planning with regard to the earnings development, balance sheet, financing, and personnel and investment requirements up to and including the year 2015. Additionally, the Supervisory Board concerned itself with the revision of its by-laws and discussed the Management Board's reports on risk management, compliance, internal revisions, and questions concerning mandating. The Supervisory Board also dealt with diverse corporate governance topics. On the basis of a questionnaire, it also gave advice in detail on the efficiency of the Supervisory Board's activities. The scope of this audit included, among others, the number, preparation, and conduction of Supervisory Board meetings, the quality of the meeting documents, and the completeness and regularity of the topics of the obligatory questions posed by the Supervisory Board to the Management Board.

At this meeting, the Supervisory Board together with the Management Board discussed and resolved Progress Werk Oberkirch AG's declaration of conformity pursuant to Section 161 AktG relating to the recommendations of the "Government Commissioned German Corporate Governance Code" in its version of May 15, 2012 including deviations from these recommendations.

Further information on corporate governance is included in Progress-Werk Oberkirch AG's Corporate Governance Report together with the statement on corporate governance according to Section 289a HGB. These are both available in the 2012 Annual Report and on the Company's website (www.progress-werk.de).

At the meeting of March 25, 2013, the Supervisory Board dealt in depth with the financial statements and consolidated financial statements of fiscal year 2012. This included the amalgamated management report for the Company and the Group, the Management Board's proposal for appropriation of unappropriated retained earnings, and the Dependence Report of the Management Board's pursuant to Section 312 AktG. In accordance with Section 315a HGB, consolidated financial statements according to HGB were not prepared.

The accounting, financial statements, consolidated financial statements, amalgamated management report for the Company and the Group, and the Dependence Report, were audited and furnished with an unqualified audit opinion by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart. The audit opinion furnished by Ernst & Young GmbH with regard to the Dependence Report is as follows: "In accordance with our duty, and based on our audit and assessment, we hereby confirm that the details specified within the disclosure report are accurate."

The financial statements, the amalgamated management report for the Company and the Group, the Management Board's proposal for appropriation of unappropriated retained earnings, the Dependence Report, and the audit reports prepared by the auditor, were provided to the Supervisory Board members in advance of the meeting on March 25, 2013. The Audit Committee reviewed these documents at its meeting on March 12, 2013.

The auditor was present at the meeting of the Audit Committee on March 12, 2013 and at the Supervisory Board meeting on March 25, 2013 and had reported on the material results of the audit.

Report of the Supervisory Board

The Supervisory Board has examined the financial statements, the consolidated financial statements, the amalgamated management report for the Company and the Group, and the Management Board's proposal for the appropriation of unappropriated retained earnings. Upon the recommendation of the Audit Committee, the Supervisory Board has agreed with the auditor's results of the audit at the meeting on March 25, 2013.

No objections were raised following the conclusive results of the Supervisory Board's examination. The Supervisory Board approved the consolidated financial statements and the parent company financial statements, which was thereby adopted.

At the meeting on March 25, 2013, the Supervisory Board had also examined and approved the Dependence Report as well as the results of the auditor's examination. No objections to the Management Board's statement at the end of the Dependence Report were raised following the conclusive result of the Supervisory Board's examination.

The Supervisory Board also agreed on the Management Board's proposal as to the appropriation of the 2012 unappropriated retained earnings. Therefore, the company administration will propose a dividend distribution of EUR 1,60 per share at the Annual General Meeting on May 22, 2013.

The work of the committees

In order to efficiently perform its duties, the Supervisory Board has established a Personnel Committee and Audit Committee in accordance with its Rules of Procedure. It has conferred upon them certain decision-making rights to the extent permissible under law. In addition, the committees prepare the relevant issues for their consideration by the plenary. The Chairmen of the committees regularly report to the plenary on the deliberation and resolutions of the respective committee.

The Chairman of the Supervisory Board heads the Personnel Committee. The Committee prepares the personnel decisions of the Supervisory Board. Rather than the Supervisory Board, the Personnel Committee decides on the Company's representation in dealings with Management Board members, the consent to any outside or competing offices held by members of the Management Board, and the granting of loans to Management and Supervisory Board members.

The Personnel Committee met once during the reporting year on April 17, 2012 and all members were present. The Committee dealt with the extension of Bernd Bartmann's appointment as member of the Management Board of Progress Werk Oberkirch AG and the extension of his employment contract.

The Deputy Chairman of the Supervisory Board heads the Audit Committee. He possesses longstanding and particular knowledge and experience in the application of accounting principles and internal controlling methods.

Rather than the Supervisory Board, the Audit Committee assumes the tasks of previewing the financial statements and consolidated financial statements, the management report and Group management report, as well as the audit report furnished by the auditor. In addition, the Committee prepares the report to be submitted by the Supervisory Board according to Section 171 AktG.

The Audit Committee met on five occasions in the 2012 fiscal year: February 14; March 12; April 27; July 27; and October 26. Excluding one occasion, all meetings were attended by all member of the Committee. The main topics discussed were the 2011 financial statements, the interim reports of fiscal year 2012, the recommendation for the Supervisory Board's proposal for the election of the auditor, and the agreement of the auditor's fee for fiscal year 2012.

According to the plenary's guidelines, the Audit Committee also carried out the mandating of the auditor. Similarly, the Audit Committee obtained the auditor's Declaration of Impartiality pursuant to Section 7.2.1 of the German Corporate Governance Code. During the year under review, the Audit Committee found no evidence that would cast doubt on the auditor's impartiality.

In addition, the Audit Committee intensely concerned itself with the economic development. To this end, it accepted the reports of the Management Board giving special attention to the current development of the Company's and Group's profitability. Moreover, the Committee discussed questions regarding, among others, the measurement of equity interests, corporate management, and accounting practices. The Audit Committee regularly reviewed the Company's and the Group's current development and compared it with the corresponding plan in order to determine a need for action.

In the fiscal year under review, the committees continued to comprise the following members:

Personnel Committee

Dieter Maier (Chairman) Dr. jur. Klaus-Georg Hengstberger Ulrich Ruetz

Audit Committee

Dr. jur. Klaus-Georg Hengstberger (Chairman) Herbert König Dieter Maier

Report of the Supervisory Board

Changes in the composition of the Governing Bodies

There were no changes in the composition of the Management Board or in the Supervisory Board in fiscal year 2012

A word of thanks from the Supervisory Board

The international competitive ability of the PWO Group, which has been expanded consistently in recent years, and its technological and market leadership in its relevant market segments, have yielded more benefits in fiscal year 2012. The Group's revenues and income reached a new record and all locations demonstrated positive developments. The remarkable sales success – already visible in the previous year – was brought even higher once again in 2012. As a result, our volume of new business also reached a new record. This volume greatly exceeds the volume of contracts expiring in the years to come. The successfully executed capital increase in May 2012 brought the additional leeway to finance our growth from a solid capital base.

With the extraordinary commitment of all those involved, the Group's future outlook has continued to improve. This secures employment within the PWO Group for years to come. The Supervisory Board would like to extend its thanks to all employees at all of the Groups locations and the Management Board for this performance and for their great commitment!

This report was discussed in detail and approved by the Supervisory Board at its meeting on March 25, 2013.

Oberkirch, March 25, 2013

Dieter Maier (Chairman)

Corporate Governance Report

Acting responsibly throughout the entire Company forms a key aspect of how we view ourselves. We are committed to long-term and sustainable added value. At Progress Werk Oberkirch Aktiengesellschaft, good corporate governance is built on this basis.

In order to maintain and increase the confidence in our management of shareholders and employees, customers and suppliers, and the general public, all of the Company's officers have committed themselves to complying with these principles. In their implementation, Progress-Werk Oberkirch AG follows the relevant statutory regulations and the standards of good corporate governance commonly used by German businesses. The Company's Articles of Association do not contain any provisions deviating from those mentioned. The Management Board and the Supervisory Board work together closely, efficiently, and faithfully. No least, we want to build trust through transparent and timely communication, both internally and externally.

Statement on Corporate Governance pursuant to section 289a HGB

(Part of the management report – unaudited pursuant to Section 317 (2) no. 3 HGB)

This Statement on Corporate Governance (Section 289a HGB) of Progress-Werk Oberkirch AG contains the Declaration of Conformity by the Management Board and the Supervisory Board pursuant to Section 161 of the AktG. It also includes information on the corporate governance practices applied above and beyond the legal requirements and a description of the procedures of the Management Board and the Supervisory Board along with the composition and procedures of the committees established by the Supervisory Board.

1. Declaration of conformity pursuant to section 161 AktG

In December 2012, the Management Board and the Supervisory Board had issued the following Declaration of Conformity according to Section 161 AktG:

The Management Board and Supervisory Board of Progress-Werk Oberkirch AG declare that the Company will comply with the recommendations of the Government Commission on the German Corporate Governance Code as published on May 15, 2012 with the following exceptions:

Code Item 3.8 | D&O Insurance

For the Supervisory Board, the Articles of Association stipulate a deductible equal to half of the fixed annual remuneration of the Supervisory Board member. In the opinion of the Company, this provides an adequate arrangement.

Code Item 4.2.3 | Contracts with Management Board Member

With the extension of management contracts that were concluded before this code item was entered into force, for the protection of established rights, Code Item 4.2.3, paragraph 4 and 5, will not be complied with.

Corporate Governance Report

Code Item 5.3.3 | Nomination Committee

The Supervisory Board sees no reason for the formation of a Nomination Committee. Since the Supervisory Board consists of only six members, it is considered appropriate that the entire Supervisory Board deals with the nomination of Supervisory Board candidates.

Code Item 5.4.1 | Composition of the Supervisory Board

The Supervisory Board aims to bring the different professional and specialist knowledge and experience together in the Supervisory Board, especially in the areas of the automotive sector, finance, and commercial law. In view of the low number of Supervisory Board members, for practical reasons it is not possible to consider further issues with this formation. Insofar, there are deviations from the requirements of Item 5.4.1. In particular, there is currently no age limit for member set for members of the Supervisory Board. The Company will continue to refrain from setting an age limit for Supervisory Board members, as this would limit the selection of qualified candidates.

The Supervisory Board has refrained from setting a specific number of "independent" Board members as referred to in Item 5.4.1 (2), since in practice there is no uniform definition in the interpretation of the term "independent". Based on the current assessment of the Supervisory Board together with the employee representatives, all Supervisory Board members shall be regarded as "independent" for the purposes of Item 5.4.2.

Code Item 5.4.6 | Remuneration of Supervisory Board Members

For Committee membership, the Board members receive the attendance fee set out in the Articles of Association and no additional compensation.

The recommendations of the government commission on the German Corporate Governance Code in the version of May 15, 2012 (published on June 15, 2012), and in the version of May 26, 2010 (published on July 2, 2010) have been complied with since the submittal of the last declaration in accordance with Section 161 AktG in December 2011 with the exception of the described items.

Oberkirch, December 2012

Progress-Werk Oberkirch AG

The Supervisory Board The Management Board

The relevant current declaration pursuant to Section 161 AktG can be found on the Company's website in the Investor Relations section under Corporate Governance.

2. Relevant information on Corporate Governance practices

Our corporate policy is based on defined principles and values as well as good corporate governance as a matter of course.

Corporate Values

With our three key corporate principles "customer orientation, employee orientation, and the pursuit of success," we strive to set the highest standards. These imply the corporate values that form the cornerstone of PWO's management culture and serve as a model of corporate governance for the daily activities:

CUSTOMERS, PRODUCTS, AND A GLOBAL PRESENCE

Continuously satisfied customers: Here is where we focus our efforts. Worldwide, we develop and produce products at the highest level for our customers for the comfort and safety of cars. When meeting their demands, we set standards in our industry. We bring satisfaction through quality, reliability, flexibility, speed, and competitive pricing. The PWO production system provides lean processes and a balanced value creation along the entire process.

EMPLOYEES

Our employees are the key to our success. Therefore, we make sustainable investments in our long term "human capital". We offer performance-based compensation and allow our employees to participate in the success. We pay heed to a balanced relationship between wages, salaries, and other remuneration across all hierarchical levels within the Group. By providing the optimal working conditions, we create the environment necessary for our employees to be enthusiastic, enjoy their work, and deliver maximum performance

INVESTORS, SUPPLIERS, AND THE GENERAL PUBLIC

We want to raise the value of our Company in a sustainable manner and gear ourselves toward the interests of our investors and the general public. Through our strategic long-term vision, we are strengthening our market position. We take part in shaping the future worldwide and are already working on a successful reaction to the demands of tomorrow. Our corporate objectives are clearly focused on success and advancement. We make progress through our creative efforts and have the necessary momentum to be able to respond to new opportunities quickly and flexibly. Our economic efficiency safeguards our earnings. We are fair to our suppliers because our products require flawless materials. Our Company is a part of society, therefore we take an active role in issues of societal importance, and take our social, economic, and ecological responsibility seriously at all times.

Governance Principles

Our management culture is based on the personal responsibility and initiative of our managers which is reflected in our governance principles. These principles are an expression of our attitude and give our managers a policy framework for their daily interaction with employees. We are convinced that a cooperative attitude, the ability to coordinate, and an informative and delegating management style are the key requirements necessary for a trusting collaboration between managers and employees.

Corporate Governance Report

Transparency

In addition to the statutory requirements and listing standards for timely reporting and the equal treatment of all shareholders (annual and quarterly reports, ad-hoc announcements, directors' dealings and reportable changes of voting rights of which the Company becomes aware), the Management Board feels committed to comprehensive communication with the public.

In recent years, the Management Board has expanded its communication with the capital market. The management presents itself at capital market conferences and addresses the questions of analysts, investors and media representatives. Information that is relevant in judging the Group's perspectives is made public as promptly as possible. All reports and announcements are documented on our website under www.progress-werk.de/investor-relations. Here, further information is also available such as all of the necessary information related to the Annual General Meeting, the Company's Articles of Association, as well as the professional activities and other mandates of the Supervisory Board members.

Risk Management

Good corporate governance includes the reasonable limitation and responsible handling of all risks associated with business decisions. The Company has introduced a modern and efficient risk management system. This system is regularly subjected to a review of its effectiveness and is continuously developed further according to the constant changes in national and – in those areas where the Company is represented abroad – international statutory requirements.

Code of Conduct

The assurance of the legally compliant and ethical behavior of our employees is our central concern. For this reason, we have summarized compliance behavior guidelines into a Code of Conduct. The contents of these can be viewed at any time during normal business hours at our offices at Industriestraße 8, 77704 Oberkirch.

3. The procedures of the Management Board and the Supervisory Board

As a stock corporation under German law, Progress-Werk Oberkirch AG is subject to the relevant statutory provisions with regards to management and supervision. Its dual management and control structure consists of a Management Board and a Supervisory Board

The Management Board is solely responsible for the Company's operational management and strategic development. The Supervisory Board monitors and advises the Management Board in these matters. The Management Board and the Supervisory Board base their management and monitoring of the Company on the German Corporate Governance Code in its relevant current version.

Management Board

The Management of Progress Werk Oberkirch AG currently consists of three members. The principles of cooperation are summarized in the Board's by-laws and the assignment of duties within the Body is documented in the schedule of responsibilities.

The Management Board conducts the business of the Company and bears the overall responsibility for the common goals, plans, and policies. Irrespective of the overall responsibility of the Management Board, each member acts on his own responsibility in his own field, is however advised to keep the departmental-related interests subordinate to the overall interests of the Company. Where activities and transactions of one board member's responsibility coincide with that of one or more of the other board members, the responsible board member must attain the agreement in advance from the other board members involved. If an agreement is not reached, each participating board member is obliged to bring a resolution to the entire board.

Each Board member is also obliged to bring a resolution to the board when the activities under another board members responsibility cause reason for concern when these concerns cannot be resolved by discussion with the responsible board member. Irrespective of these principles, the consent of the entire board is required for measures and transactions which are conducted by the Company or the Group which are either of particular importance or which are pose an extraordinary economic risk.

The Chairman of the Board coordinates the management of the Company via the entire board. The board members are obliged to regularly inform the Chairman of the Board of any major transactions and the progress of business in their respective departments. Board meetings should take place at regular intervals, and if possible, take place at least every two weeks and on dates established long in advance.

The Management Board can take decisions with a simple majority of votes cast, and outside of the regularly scheduled meetings by a simple majority of its members, as long as unanimity is not required by the mandatory statutory provisions. An abstention shall not be considered as a vote. In a tied vote, the vote of the Chairman of the Board shall be decisive. The Board will take its decisions unanimously when possible.

The Management Board regularly informs the Supervisory Board in accordance with statutory requirements, timely and comprehensively on all key issues regarding business activity and the business trends of the Company and the Group, and in particular, the intended business policy and other fundamental issues of corporate planning, significant transactions that could be important for the liquidity and profitability of the Company or the Group, as well as the current profitability and earnings situation including the risk situation and risk management. In addition, the Management Board reports on investments, on-going development projects, and the strategic development of the Company and the Group.

Corporate Governance Report

In the Management Board's Rules of Procedure, a list of transactions and activities is defined that may require the prior approval of the Supervisory Board.

Supervisory Board

The Supervisory of Progress Werk Oberkirch AG consists of six members. Two-thirds of the Supervisory Board is comprised of shareholder representatives, and one third is comprised of employee representatives. The Supervisory Board monitors and advises the Management Board in the management of the Company. Duties and responsibilities are derived from the legal requirements and the Articles of Association as well as the Supervisory Rules of Procedure. The decisions of the Supervisory Board are passed by a simple majority vote, unless the law requires otherwise. In the event of a tied vote, the vote of the chairman decides.

Generally, the members of the Management Board participate at the meetings of the Supervisory Board, unless in individual cases the Supervisory Board makes an alternative arrangement.

The Rules of Procedure provide for the formation of committees, amongst other things. There are currently two committees: the Personnel Committee and the Audit Committee. Their capabilities are detailed in the Rules of Procedure of the Supervisory Board.

The Personnel Committee prepares the personnel and compensation decisions of the Supervisory Board. During the preparation of compensation decisions, the Committee consults, if necessary, with outside consultants. Its members include the Chairman of the Supervisory Board, his deputy, as well as a further member of the Supervisory Board who is proposed for election by the Supervisory Board's shareholder representatives. It is chaired by the Chairman of the Supervisory Board. In fiscal year 2012, the composition of the Personnel Committee was unchanged as follows:

Dieter Maier (Chairman) Dr. jur. Klaus-Georg Hengstberger Ulrich Ruetz

In the place of the Supervisory Board, the Audit Committee conducts the preliminary examination of the financial statements, the management report, and the auditor's audit report. In addition, there are other assigned duties of the Audit Committee which are derived from the German Corporate Governance Code. The Committee consists of the Chairman of the Supervisory Board and his deputy. The Supervisory Board may also appoint other Supervisory Board members to the Audit Committee. The chair of the Committee should not be led by the Chairman of the Supervisory Board. In fiscal year 2012, the composition of the Audit Committee continued as follows:

Dr. jur. Klaus-Georg Hengstberger (Chairman) Herbert König Dieter Maier

Mr. Dieter Maier is an independent financial expert as defined in Section 100 (5) AktG.

The Committee chairmen report to the Supervisory Board on the deliberations and decisions of the various committees. Further details on the Supervisory Board's manner of operating and its committees – particularly with regard to the number of meetings and their topics – can be found in the Report of the Supervisory Board in the 2012 Annual Report.

Additional disclosures on Corporate Governance

Shareholders and the Annual General Meeting

The Management Board feels a special obligation towards the shareholders. We respect the interests of our shareholders and note their rights in full. All shareholders are treated equally. As owners of the Company, they provide the capital for maintaining and expanding the international market position of Progress-Werk Oberkirch AG and act entrepreneurial. It is the aim of the Management Board to permanently strengthen the competitive position of Progress-Werk Oberkirch AG and its subsidiaries, and, simultaneously, to achieve a sustainable and long term attractive return on the capital provided.

The shareholders of Progress-Werk Oberkirch AG exercise their rights at the Annual General Meeting which is held at least once a year. Every shareholder who registers in time is allowed to attend the Annual General Meeting. Shareholders who cannot attend the Annual General Meeting in person have the opportunity to exercise their voting rights through a credit institution, a shareholders' association, a proxy set up by the Company, or another nominee of their choice. All documents and information regarding the Annual General Meeting are made available on our website.

Diversity in the Management Board and Supervisory Board

The Supervisory Board is committed to continue to paying attention to diversity in the future appointment of Management Board members and in particular aims to give proper consideration to women. The Supervisory Board also welcomes the intention of the German Corporate Governance Code, to define rules governing the appointment and composition of the Supervisory Board and feels fundamentally committed to this aim. From those reasons given for the deviations to code item 5.4.1 of the German Corporate Governance Code, which are listed in the declaration of conformity, the Supervisory Board believes it is inappropriate to name specific objectives, with respect to the criteria for diversity, among others.

Mandates of the Management Board

Outside of the PWO Group, Bernd Bartmann carries out an additional function as member of the Advisory Board of the Sparkasse Offenburg/Ortenau. Dr. Winfried Blümel serves on the University Council of the University of Offenburg. At the present time, Karl M. Schmidhuber has accepted no mandates outside of the Group. In the fiscal year under review, there were no conflicts of interest of the Management Board members.

Shareholdings of the Governing Bodies

At the end of fiscal year 2012, the Deputy Chairman of the Supervisory Board, Dr. Klaus-Georg Hengstberger held 46.55 percent of the outstanding shares of Progress-Werk Oberkirch AG. The shares are held through Consult Invest Beteiligungsberatungs-GmbH, Böblingen of which he is the majority shareholder and managing director. In the past fiscal year, the Company was made aware of the following transactions which were subject to statutory disclosure pursuant to Section 15a of the German Securities Trading Act (WpHG). These are available on our website at www.progress-werk/investor-relations/die-pwo-aktie/directors-dealings.

Corporate Governance Report

There were no stock-option programs or similar stock-based incentive systems in existence in fiscal year 2012, nor are there any currently in existence.

Accounting and Auditing

The consolidated financial statements and the consolidated interim reports of Progress-Werk Oberkirch AG are prepared in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU. The financial statements of Progress-Werk Oberkirch AG are prepared in accordance with the provisions of the Commercial Code.

The consolidated financial statements and the financial statements were audited by the 2012 Annual General Meeting elected auditor, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft in Stuttgart. The Supervisory Board has agreed with the auditor that the Chairman of the Audit Committee be informed immediately of any issues during the audit for disqualification or bias issues, where these issues cannot be resolved without delay. The auditor should also report to the Supervisory Board immediately on important facts and events that arise during the course of the audit.

PWO Shares: Important milestones achieved, volatile share price development

The matter of the capital market was of central importance in fiscal year 2012. The capital increase in May 2012 not only secured the Company with necessary funds for financing future growth, but also broadened our shareholder base, led to a record rise in our trading volume, and was accompanied by increased investor relations activities. However, the share price development of PWO shares in 2012 did not reflect these successes. A change in opinion occurred only with the turn of the year allowing the PWO share to record a brilliant start in the new year. We know through numerous discussions that the great majority of our shareholders – some of whom have been invested in PWO for many years – believe in the strategy and positioning of the Company. Thus, we are confident that in the medium term, this will be reflected via a further rising share price and an appropriate valuation of PWO's shares.

A successful capital increase

The chief highlight of fiscal year 2012 was the cash capital increase. Shareholders were offered new shares at a ratio of 4:1 at an issue price of EUR 36.50. Strong investor interest made it possible to set the share's issue price close to the market price. The issue price was at just a 9.7 percent discount to the closing price on the day prior to setting the issue price. The shareholders fully subscribed to the 625,000 new shares. EUR 22.8 million in gross proceeds accrued to PWO from the cash capital increase. After transaction costs, net proceeds amounted to EUR 22.0 million.

These proceeds were of high importance to PWO from a strategic viewpoint. In recent years, PWO has demonstrated vigorous growth. Since our last cash capital increase in 2005, our revenues have risen by around two thirds. Further growth is also visible for the upcoming years and can anticipated when looking at our very dynamic level of new business. However, this growth requires investment in additional production capacity and further expansion in our international presence. In principal, these investments would have been possible even without new equity but only at the expense of higher net debt.

As a result of the capital increase, the balance sheet ratios have significantly improved despite the higher investment volume in the reporting year. The equity ratio rose from 31.1 percent at the end of 2011 to 38.0 percent as at December 31, 2012. At the same time, we could lower our gearing (net debt in percent of equity) from 121 percent to 86 percent as at December 31, 2012. With the current balance sheet ratios, we have nearly reached our targets of a gearing within the range of 60 to 80 percent and an equity ratio of 40 percent. We will work towards further improvements.

PWO Shares

Broadening of the shareholder structure

Another positive aspect of the capital increase was the noticeable expansion in our free float. Since the major shareholder, Consult Invest Beteiligungsberatungs-GmbH, Böblingen, did not fully take part in the capital increase, its equity interest dropped from 55.28 percent to 46.55 percent. In return, the free float rose from 44.72 percent to 53.45 percent.

The increase by Delta Lloyd N.V. – a PWO investor for the past several years – of its previous stake of less than 10 percent to 16.49 percent is regarded as a great vote of confidence. As is the increase by our long-term business partner for the region, the Sparkasse Offenburg/Ortenau, who now owns a 5.88 percent share in PWO. In addition, there are several further institutional investors which had increased their stake in PWO in connection with the capital increase.

Shareholder structure as at December 31, 2012

Source: WpHG notifications

A new high in trading volume

As a result of the higher free float and the increased investor relations activities, the trading volume in PWO's shares rose strongly and reached a new record high in 2012. The average daily volume of PWO shares in 2012 was 2,404 units after 1,713 units in the previous year. At approximately 75 percent, XETRA continues to handle a dominant portion of the trading volume. About 15 percent of the trading is carried out on the Frankfurt Stock Exchange and nearly 8 percent is carried out in Stuttgart. The rest is distributed among the regulated unofficial markets of the regional exchanges.

Development of trading volume

PWO share development

The price development of PWO shares was very volatile in fiscal year 2012 and in the first months of 2013. At the start of 2012 the share price was promising. Based on the previous year's closing price of EUR 31.34, the shares developed very favorably and reached a year's high on February 24, 2012 of EUR 44.50. In this time period, PWO's shares distinctly outperformed its SDAX and DAXsector Automobile benchmark price indices. At the end of the first quarter concerns regarding the global economy and the European debt crisis reemerged and led to a general market correction which also PWO could not escape. Due to the dilution effect of the capital increase, PWO shares came under even more pressure. After six months, PWO shares were still 8.5 percent higher than the closing price at the previous year's end. Hence they had achieved the same performance as that of the DAXsector Automobile index and an even somewhat better performance than the SDAX.

In June 2012, the market began to stabilize at this lower level and started a recovery in the third quarter. In the second half of the year, the SDAX price index rose relatively steadily by a total of 8.9 percent. At year's end the index was 14.9 percent higher than at the end of 2011. The DAXsector Automobile price index performed even better. This development is even more remarkable in view of the significant deterioration in the sector's environment during that period of time. The global automotive market showed growing weakness in momentum in the second half of the year which forced many international and European automobile manufacturers and suppliers to cut their forecasts. Nevertheless, the DAXsector Automobile price index rose 25.9 percent in the second half of the year and 36.7 percent in the full year of 2012.

In contrast, PWO shares dropped significantly in the remaining course of the year. At the start of the third quarter, the shares initially remained in a range of EUR 32.00 to EUR 34.00. After reducing the forecasts in October, the shares slipped to a year's low of EUR 25.75 on November 26, 2012. This share price performance was all the more disappointing since, in contrast to many of the automotive manufacturers and suppliers, PWO still reached a marked increase in revenues and earnings in 2012 – despite the reduction in the forecast. With a year-end closing price on XETRA of EUR 28.20, PWO shares fell 10.0 percent on balance in the course of 2012.

However, PWO shares were more than able to recoup these losses at the beginning of 2013. Already in January, the share price rose 11.7 percent and consequently fully recovered the price decline of the prior year. This trend gained even more momentum after the announcement of the preliminary figures for 2012 on February 14. In total, the share price rose 23.7 percent to EUR 34.87 up until February 25, 2013. This meant that the shares had clearly outperformed both the SDAX (+14.3 percent) and the DAXsector Automobile price indices (+2.3 percent). When compared to the level at the end of 2011, PWO shares have since experienced a favorable price increase of 11.3 percent.

PWO Shares

SHARE PRICE PERFORMANCE 2012

(Indices are rebased on the PWO share price of the first day of trading in 2012)

trading volume

(Number of traded shares - XETRA and regional exchanges)

For years, PWO has pursued a shareholder-friendly dividend policy. The goal is to pay a dividend on a regular basis amounting to between 30 and 40 percent of the consolidated net income for the period and as a result, steadily and sustainably increase it. A dividend distribution of EUR 1.60 per share for fiscal year 2012 is proposed to the Annual General Meeting. This is equivalent to a payout ratio of 49 percent and, based on the 2012 year-end closing price, a dividend yield of 5.67 percent.

Dividend per share (EUR) Pay-out ratio

Stock exchange data

Subscribed capital	9,375,000
Total number of shares outstanding	3,125,000
Treasury shares	None
ISIN	DE0006968001
Ticker symbol	PWO
Market segment	Regulated Market (Prime Standard)
Sector	Automobile
Subsector	Auto Parts and Equipment
Place of trading	Regulated market: Stuttgart and Frankfurt, XETRA
	Regulated unofficial markets: Berlin, Düsseldorf, Hamburg and Munich
Designated Sponsor	Close Brothers Seydler Bank AG

Data as at December 31, 2012

Investor Relations activities

Over the past several years, the Company has been consistently expanding its presence on the capital market. The successful execution of the capital increase in May 2012 was impressive evidence of the investor confidence that we have achieved over the past several years. In the reporting year, the Company has been presenting its strategy and developments at conferences and roadshows in Germany and other European countries. We have also gathered contacts to new investors.

A focal point of our activities was the preparation and execution of the capital increase. In the course of this activity we had many discussions with investors and analysts. Next to our press and analyst conference in March we also presented our Company at several small & mid-cap conferences and at the German Equity Forum in November.

In addition, we have again cultivated immense contact with analysts, investors, and to the financial and investment media.

PWO Shares

Composition and development of equity

Information on the composition of both equity and authorized capital are presented in the management report. The development of equity is presented in detail in the consolidated statement of changes in equity, which is part of this annual report. As part of the capital increase in May 2012, the Company's share capital rose from EUR 7,500 million to EUR 9,375 million through the issue of 625,000 new shares. The share capital is divided into 3,125 million bearer shares.

Stock options continue to play no part in the compensation of PWO's Management Board members or its employees. From the Company's standpoint, there is little correlation between individual employee performance and the development of the share price. As a result, stock options do not offer any additional incentive for performance.

Key figures of the PWO share

Corporate Key Figures		2008	2009	2010	2011	2012
Revenue	EUR million	260.36	206.37	264.20	331.08	358.07
EBIT	EUR million	7.72	-4.95	16.01	19.16	20.88
Net income for the period	EUR million	1.35	-8.95	6.46	9.02	10.16
Revenue per share	EUR	104.14	82.55	105.68	132.43	124.02
Earnings per share	EUR	0.58	-3.58	2.58	3.61	3.52
Dividend per share	EUR	0.55	--	1.00	1.40	1.60*
Book value per share	EUR	27.19	24.59	27.59	29.91	33.54
Valuation Key Figures (based on year-end share price on XETRA)
XETRA share price, year-high	EUR	35.55	20.00	37.00	46.95	44.50
XETRA share price, year-low	EUR	16.05	14.77	20.40	30.88	25.75
XETRA share price, year-end	EUR	16.48	20.00	35.50	31.34	28.20
Market capitalization	EUR million	41.20	50.00	88.75	78.35	88.13
Net debt	EUR million	67.19	79.09	79.86	90.25	90.45
Enterprise Value (EV)	EUR million	108.39	129.09	168.61	168.60	178.58
Price/Sales		0.16	0.24	0.34	0.24	0.23
PER		28.41	negative	13.76	8.68	8.01
Price/Book		0.61	0.81	1.29	1.05	0.84
Dividend yield	percent	3.34	--	2.82	4.47	5.67
EV/Sales		0.42	0.63	0.64	0.51	0.50
EV/EBIT		14.04	negative	10.53	8.80	8.55

* Proposal to the 90th Annual General Meeting

We have perfected precision.

Zero-defect quality is the valid measure in the automotive industry for all products and processes. As a manufacturer of safety components, PWO is particularly committed to these quality standards for example in the areas of airbag components or air suspension systems, seat locking mechanisms, steering column brackets, or body and chassis structures, regardless of individual customer requirements. Here we make full use of our integrated, automated quality checks in production.

High precision already at the stage of tool development is a mandatory prerequisite for uncompromising product quality: A product can only be as good as the tool that created it. At PWO, we are committed to the art of reduction. Continuous process improvements allow for higher production speeds and the elimination of subsequent processing steps in series production.

The most prominent example of PWO's process innovation is our production process of housings for electric engines. Here we have achieved the world wide fastest production of deep-drawn housings on high-speed transfer presses with ninety strokes per minute. Consequently, we need only 0.66 seconds to manufacture ready-to-install housings, including the optoelectronic quality check, and without any need for subsequent processing steps. With 90 strokes per minute, we command the world's fastest deep-drawing process for electric engine housings. Naturally, we are not satisfied with just this.

Proximity to the customer.

Global strategies need to be realized in local solutions. We use our comprehensive expertise in tool design and in the forming and joining technologies of steel, stainless steel, and aluminum for our global customers in the automotive industry. Together we create new product solutions in the highest quality and precision available using the leeway available in modern product design.

We accompany our customers into new markets with our know-how. Our locations in the Czech Republic, Canada, Mexico, and China are increasingly profiting from the potential accompanying the expansion in the production locations of our customers in Eastern Europe, Central and South America, and China. We are increasingly being contracted by our customers to deliver products from several of our locations for their respective local production.

Our understanding of the phrase "Near to the Customer" means consistently solving development tasks in a customer-oriented manner. The customer and PWO work together for the best solution and combine the experience gathered by both parties. Therefore, our know-how in engineering and tool design are offered globally at all locations. The final attunement of the series tools is made internally at PWO and always jointly through development, production, planning, and construction on the respective production line.

The diversified product range allows us to remain independent of single customers, the success of individual vehicle models, and individual contracts. We maintain a balanced revenue structure through a number of technically sophisticated orders and some large orders. This secures our capacity utilization.

Over the next few years, we plan to rapidly expand all of our locations. For the foreseeable future, our technological expertise in the area of sheet forming will remain concentrated at our five current locations in Germany, the Czech Republic, Canada, Mexico, and China. We are planning the construction of an additional assembly site in order to extend our regional reach. In contrast to locations with presses, these new assembly sites will demand much less investment in both the infrastructure as well as in the employee structure. In addition, we want to further expand our network of cooperation partners.

Management Report for the PWO Group and PWO AG

• Company Profile 44
• Strategy and Control 46
• The Economic Environment 48
• Net Assets, Financial Position and Results of Operations 50
• Order Situation 57
• General Statement on the Economic Situation of the Group 58
• Employees 59
• Additional Information 60
• Risk Report 62
• Remuneration Report 68
• Changes in the Governing Bodies 72
• Corporate Governance Statement pursuant to Section 289a of the German Commercial Code 72
• 02 Disclosures Required pursuant to Section 289 (4) and Section 315 (4) of the German Commercial Code 72
• Significant Events Subsequent to the End of the Financial Year 74
• Dependency Report 74
• Outlook 74
• Management Report for the PWO AG 78

Management Report for the PWO Group and PWO AG

On the following pages, we present the amalgamated management report for Progress-Werk Oberkirch Aktiengesellschaft and the PWO Group for the fiscal year ending December 31, 2012. The Group continues to prepare its accounts in accordance with International Financial Reporting Standards (IFRS) as applicable in the EU. Progress-Werk Oberkirch AG prepares its accounts in accordance with the provisions of the German Commercial Code.

The composition of the consolidated Group is described in detail in the notes to the annual financial statements. There have been no changes to the group of consolidated companies that would have materially affected the net assets, financial position, or results of operations.

Company Profile

PWO is a leading international supplier to the automotive industry. We produce customer-specific solutions in large series, sometimes in unit amounts reaching the millions, and deliver worldwide to our customers. In addition, we cover the entire value chain from customer-related development and tool design to series production. Further factors which set us apart are innovativeness, reliable delivery, and zero-defect quality.

In our more than 90-year company history, we have built the highest expertise with regard to the behavior of steel during the cold forming process and its use in sophisticated joining technologies. Today, we produce components and subsystems made of steel including high-strength, lightweight steels, stainless steel and aluminum.

We use this expertise to develop and produce a broad range of products. These products serve to raise comfort and safety throughout the vehicle. These areas are demonstrating an above-average and sustainable growth trend. Demand among car buyers for greater comfort and greater safety in all vehicle categories and in all sales regions is rising inexorably. We are largely independent of the type of the vehicle's drive technology but still profit from the increasing importance of electric drive technology. Our revenue is divided among three strategic product areas as shown in the graph below.

Revenue in fiscal year 2012 (100% = EUR 358.1 million)

Company Profile Management Report for the PWO Group and PWO AG

Mechanical components for electrical/electronic applications and safety components, which comprise around 50 percent of our revenue, are sold predominantly to international tier-1 parts suppliers. These part suppliers deliver these components as part of their own systems to numerous automotive manufacturers.

Structural components and subsystems for vehicle bodies and chassis are generally supplied model-specific and directly to the automotive manufacturers. Here too however, the breadth of applications continues to increase due to the increased use of platform concepts based upon which a variety of vehicle models are built. The bulk of our components and subsystems are delivered to the premium segment of the auto industry.

With this arrangement, we are the only supplier worldwide to provide such a broad product range. This is how we can ensure that we are independent of the commercial success of single vehicle models and can replace expiring series contracts with follow-on contracts for diverse product solutions. This gives us the greatest possible entrepreneurial flexibility and allows us to concentrate on our attractive growth opportunities.

We continuously expand our competitive strength and profitability by utilizing our innovative capabilities in product solutions and respective production processes. Customer requirements, particularly when it comes to function, precision, weight, costs, and deadlines, are not only met but often exceeded. We are particularly successful in developing new solutions for sheet metal forming, which replace significantly heavier and more expensive cast or forged parts. Thereby, we experience a higher-than-average benefit from the trend towards light-weight construction, which is increasingly gaining momentum in the automotive industry.

Our technological leadership in tool design is a prerequisite for high quality parts and production speed as well as the integration of the subsequent processing steps in the forming process. We have also earned a reputation for our long-standing ultra-reliable supply of zero-defect quality – also in times of fluctuating customer demand. These factors significantly underpin enduring customer relations and open the door to rising order volumes and future growth.

With five production locations, by the end of the reporting year, the Company was present on three continents with 2,916 employees including part-timers. Other regions are served on a contract-by-contract basis by means of cooperative arrangements with our partners. This is how we have been able to position ourselves within the small group of our customers' partners having worldwide delivery capabilities. At the same time we preserve our resources since we use the production capacities of our cooperation partners.

Strategy and Control

Corporate strategy

We are our customers' global strategic partner for sophisticated metal components and subsystems. Our high level of innovative strength in the design of product solutions and their respective production processes clearly sets us apart from the competition. This forms the basis for sustainable, profitable growth in all of our markets.

We focus on market opportunities where we can deliver higher added value to our customers. This allows us to achieve an adequate margin even in an intensely competitive environment. This is how we generate the necessary income for our capital-intensive business.

Our global presence is a key component of this strategy. Therefore, we not only profit from the varying growth rates in the different regions, but we also have access to orders which are only given to companies manufacturing internationally. These orders include particularly large quantities of components for vehicle platforms running over many years. At the very least these types of contracts are very attractive due to their positive effect on the capacity utilization at our European locations.

In all markets we can rely primarily on our existing customers who operate globally. The aim is to satisfy their demands on a global basis since they also expect PWO's customary performance and reliability abroad. This is how we reduce lead times and start-up costs. Furthermore, we are determined to successively win new local customers as well.

The strategy of continuous expansion in market share is not only bearing fruit in the international markets but also in Europe where market growth is much lower or even negative. Our high level of innovation allows us to succeed in regularly providing solutions that exceed customer expectations. This leads to increasing demand for our components from our broad range on offer and therefore also leads to increasing market share.

Over the next few years, we plan to further expand at all of our locations. The technological expertise in sheet metal forming is expected to remain concentrated in today's five locations. We would like to stretch our regional coverage, where necessary, through the establishment of additional assembly sites. Compared to stamping facilities, these facilities will require lower investments in both the infrastructure as well as in the employee structure. Furthermore, we will continue to expand our network of cooperation partners.

Corporate management

The global management and leadership of PWO take place at the parent company's location in Oberkirch. Here resides the technology and innovation center of the Group. It is at this location that groupwide processes are developed and refined.

Fundamentally, the Group is managed in a manner that greatly reduces order-related and cyclical risks. For this reason, we have created an extensive product range. This allows us to remain independent of individual orders and the success of individual vehicle models. Additionally, we maintain a balanced revenue structure with a high number of smaller orders and individual large contracts with staggered points in time for their respective start-ups and phasing-out. Thus, we can ensure high capacity utilization while at the same time limiting the risk of follow-on orders.

Strategy and Control Management Report for the PWO Group and PWO AG

The Company predominantly uses earnings before interest and taxes (EBIT), the cash flow from operating activities and gearing (net debt as a percentage of equity) to manage operations.

We have implemented a comprehensive lean management system in which all relevant processes are documented in detail from the design of the product to series production and from sales, procurement, and logistics to quality management. This gives the transparency necessary to steer businesses processes in a targeted manner and to systematically optimize these processes through continuous improvement processes. The administrative processes of IT, finance, and human resource management and controlling are currently being successively integrated into this system. This contributes to further increases in our productivity.

All sites are managed consistently throughout the Group taking the technological requirements and production levels into consideration. This facilitates the supervision of production and business processes. Additionally, our facilities take part in an internal on-going best-practice competition. Our zero-defect policy applies globally and without exception.

Internally, PWO is organized along a continuous value chain. Customer-related development, tool design, and series production work together in integrated teams from the product request to the start of series production. The respective teams also monitor and optimize the processes on a regular basis even while production is in progress.

The Economic Environment

The economic environment in 2012

The market weakness in 2012 in several crisis countries in the eurozone and the resulting economic weakness in Europe was also felt in the German economy. Consequently, the economic output in Germany continuously weakened in the course of the year. Gross domestic product fell slightly in real terms in the fourth quarter after comparatively robust growth of 1.7 percent in the first quarter. The tendency towards weakness arose primarily from the industrial sector which at last significantly curbed production, in particular in the capital goods sector. The pronounced decline in industrial production in the course of the second half of the year was mainly due to special factors: The summer months reported a higher level due to refraining from shut-downs of some automotive plants during the holidays. Exports in countries outside of the European Union supported the German economy. For 2012, the German Central Bank expects growth in Germany overall to grow slightly by 0.7 percent (0.9 percent calendar adjusted). In the previous year, GDP had still grown 3.0 percent.

The world economy had also recorded slightly lower growth in 2012 as in the previous year. Nevertheless, the decline was less pronounced than in Europe where the International Monetary Fund IMF had expected a decline of 0.4 percent after a 1.4 percent rise in the prior year. At +5.3 percent (p/y: +6.2 percent), emerging market growth remained comparatively high and Japan achieved positive economic growth once again following the recession of the prior year. The US economy also continued to pick up compared to the previous year. The falling unemployment rate, signs of a stabilizing in housing prices, and rising domestic oil and gas production had a stimulating effect. Here the IMF is expecting GDP growth of 2.2 percent in 2012 after 1.8 percent in the previous year. Overall, global GDP in 2012 should rise 3.3 percent (p/y: 3.8 percent).

The international automotive industry in the year 2012

Not only the world economy but also the automotive industry can reflect on a 2012 fiscal year with significant regional differences. Automotive manufacturers and their suppliers saw in part sharp declines in Europe and on the other hand growth overseas. The German Automobile Industry Association, VDA, even refers to a very dynamic automotive cycle outside of Western Europe. The premium German manufacturers and their suppliers benefited more than average from this development. Overall, the global passenger car market rose 4 percent to 68 million units in 2012. The Chinese market was the main contributor to this growth followed by renewed strength in the leading market of the USA.

New registrations in the European Union (EU27) in 2012 were at their lowest level since 1995. At 12.1 million units, the number of newly registered vehicles was 8.2 percent below the previous year's level – a decline of a magnitude which has not been seen since 1993. Thus, the negative trend of falling annual rates has continued for the fifth consecutive year since the historical high reached in 2007. The weak sales were particularly evident in the second half of 2012. In December alone there were 16.3 percent less passenger cars registered as in the comparative period of the prior year. Admittedly, December 2012 had two fewer working days.

Among the larger regional markets, significant double-digit declines were seen in the highvolume markets of France (–13.9 percent) and Italy (–19.9 percent). Spain (–13.4 percent), the Netherlands (–9.6 percent) and Belgium (–14.9 percent) also experienced a stronger-than-average drop in new registrations. Spain (–13.4 percent), the Netherlands (–9.6 percent) and Belgium

The Economic Environment Management Report for the PWO Group and PWO AG

(–14.9 percent) also experienced a stronger-than-average drop in new registrations. Germany (–2.9 percent) and Poland (–1.4 percent) were only slightly below the previous year's level. Of the larger markets in the EU27, only the United Kingdom with +5.2 percent had achieved an increase. Switzerland also realized a minor increase of 2.9 percent.

According to the German Federal Motor Vehicle Office, a total of 3.08 million new vehicles were registered in Germany in 2012. This represents a decline of around 91,000 units or 2.9 percent compared to 2011. On a structural basis there were considerable changes in the single passenger vehicle segments. Substantial declines can be observed in seven of the eleven segments. With –13.9 percent, sales in the premium segment declined the strongest. In contrast, there were sizeable growth rates in the mini segment (+20.3 percent) and the minivan segment (+9.1 percent) as well as with off-road vehicles (+17.4 percent). Despite declining 8.8 percent, the compact segment still represents the largest segment and accounts for a 23.8 percent share of the total market.

For the entire year of 2012, domestic production of passenger cars amounted to a volume of nearly 5.4 million units (–4 percent). Manufacturers brought production down more than market demand had required – particularly in the last months of the year. The manufacturer's aim in this was to minimize the passenger car inventories. Passenger car exports in 2012 were over 4.1 million cars (–3 percent). This meant that three of four cars produced in Germany were exported.

In the US market, German brands again experienced faster growth than the overall market in 2012. They were able to increase their sales of light vehicles (passenger cars and light trucks) by over 21 percent to around 1.27 million units while the overall market for light vehicles grew 13 percent to over 14.4 million vehicles. As a result, the German manufacturers raised their market share in the world's largest automotive market for the seventh consecutive year.

German manufacturers grew faster than the overall market in both segments, passenger cars and light trucks. They were able to raise their sales of passenger cars in 2012 by a solid 22 percent to 920,400 units while the total passenger car market grew almost 19 percent to 7.2 million units. Their market share in passenger cars grew to 12.7 percent. In the light truck segment, which represents around 50 percent of the total US market, the German manufacturers could expand their sales in the prior year by over 19 percent to 345,000 units. Thus, their growth was twice as high as the growth of the total market for light trucks which had increased 8 percent to 7.2 million units. Overall, for German manufacturers, the 2012 automotive year was the most successful in the US market thus far.

The results of the PWO Group segments divided according to regions reflect this very different regional development only to a limited extent. This is due to the fact that the PWO Group profited from its clear focus on the premium segment which worldwide had developed much more favorably in 2012 than the high-volume models.

Net Assets, Financial Position, and Results of Operations

Results of operations

INCOME STATEMENT

Selected data (in EURk)	2012	in % of total output	2011	in % of total output
Revenue	358,072	97.7 %	331,080	100.7 %
Total output	366,624	100.0 %	328,832	100.0 %
Cost of materials	197,958	54.0 %	179,707	54.7 %
Staff costs	97,680	26.6 %	87,962	26.7 %
Other operating expenses	35,680	9.7 %	32,248	9.8 %
EBITDA	39,813	10.9 %	35,828	10.9 %
EBIT	20,878	5.7 %	19,161	5.8 %
Net profit for the period	10,159	2.8 %	9,016	2.7 %

PWO Group's revenue strongly increased once again in fiscal year 2012. It rose 8.2 percent to EUR 358.1 million. Total output climbed even 11.5 percent to EUR 366.6 million due to positive changes in finished goods and work-in-progress – particularly in tools. This contrasted with the previous year where finished goods and work-in-progress had a net decline.

However, in the course of the year this overall favorable business development was influenced by different factors effecting single product areas and locations. There was a slight decline in the sales of high-volume standard products in Europe which had accelerated in the course of the fiscal year. In contrast, the products in the premium segment experienced higher demand in the third quarter, particularly at our location in Oberkirch. In part, this caused us to exceed our capacity limits and resulted in significant additional expenses whereas, in the fourth quarter, call orders experienced a marked decline. We were also faced with ample burdens at our location in Puebla, Mexico. This was the result of a strong increase in call orders in the second half of the year and the fact that we grew our business by over 60 percent as compared to the prior year clearly exceeding our budget. In China however, there were noticeable reductions in volumes due to customer delays in their scheduled series start-ups. With revenue growth of just 40 percent these delays had led to considerably lower growth rates than planned.

On a Group level, tool sales in the reporting year were higher than planned at EUR 27.2 million (p/y: EUR 34.1 million). In 2011, ahead of large series start-ups at all locations, a far aboveaverage volume of tools were invoiced. In 2010, tool sales were still at EUR 20.9 million.

Other operating income amounted to EUR 4.5 million (p/y: EUR 6.9 million). This was mainly due to lower currency gains.

As a result of reduced steel prices and lower tool purchases, we were able to achieve a slight improvement in our material expense ratio to 54.0 percent (p/y: 54.7 percent). The expense ratios for wages and salaries and for depreciation were nearly unchanged compared to 2011.

The considerable expenses in the summer months from the unexpectedly high capacity utilization in single areas on the one side, and declines in volume on the other, are reflected in other operating expenses which rose to EUR 35.7 million (p/y: EUR 32.2 million). A decline had initially been expected. The causes for the unexpected increase were the considerably higher repair and

Net Assets, Financial Position and Results of Operations Management Report for the PWO Group and PWO AG

maintenance costs especially in comparison to the previous year and the additional expenses related to part-time workers.

Despite these additional burdens, EBIT still rose to EUR 20.9 million in the reporting year (p/y: EUR 19.2 million). As already mentioned, this was below our initial expectations. However, when adjusted for currency effects, the operating result rose 17.0 percent and therefore even more than the revenue.

EBIT (in EUR million)

The interest expenses remained unchanged when compared to the prior year's level and amounted to EUR 6.3 million (p/y: EUR 6.3 million). The tax rate also remained nearly unchanged at 30.2 percent (p/y: 30.0 percent). Over the medium-term, we expect the tax rate to decline again since the successive improvements in the profitability of our location in Mexico will allow us to use the tax-loss carryforwards there – as was already the case with our location in the Czech Republic.

Overall, the Group's net income for the period in fiscal year 2012 was at the highest level in the Company's history and amounted to EUR 10.2 million (p/y: EUR 9.0 million). On the basis of the higher weighted average number of shares outstanding following the capital increase, earnings per share reached EUR 3.52 (p/y: EUR 3.61).

Segment reporting

According to the Group's management, our production facilities provide the basis for our segment reporting, broken down by regions. The segments are determined according to location of the Group's assets. Accordingly, segment revenues are also allocated according to the location of the assets.

Supplies and services exchanged between the various locations include mainly the tools produced at either the Oberkirch location or produced at the Valašské Mezirˇícˇí facility in the Czech Republic for other facilities. These are eliminated at the Group level.

SEGMENT GERMANY

		in % of		in % of
Selected data (in EURk)	2012	total output	2011	total output
External revenue	234,914	93.5 %	228,861	96.9 %
Total output	251,230	100.0 %	236,217	100.0 %
EBITDA	28,732	11.4 %	28,471	12.1 %
EBIT	17,430	6.9 %	18,095	7.7 %
Net profit for the period	10,296	4.1 %	10,681	4.5 %

The PWO Group headquarters are allocated to the segment Germany. This is the location of the parent company, Progress-Werk Oberkirch AG, which conducts the operations at the Oberkirch location and provides the structure of the Group management. The Germany segment continues to achieve the main earnings contribution to the Group.

Revenues and total output grew 2.6 percent and 6.4 percent respectively in the reporting year. At EUR 17.4 million (p/y: EUR 18.1 million), EBIT was slightly below last year's level. This was caused by the decline in the European volume business and the additional expenses related to filling call orders in the third quarter which were in some cases much higher than the installed capacity.

While sales in the first half of 2012 were at a high level, by the middle of the year they had started to weaken.

During this period, several market observers had already warned that the automotive industry's level of production was very high and probably not sustainable. We had expected a slowdown over the summer months and had planned a number of measures for maintenance and repair and the modification of production plants. However, this slowdown did not occur. The premium sector manufacturers had even forfeited the customary plant holidays or had these significantly reduced. The call orders rose considerably for a very limited period of time. Hence, we had to quickly increase our capacity in order to meet the delivery deadlines and this entailed a high level of additional costs. Only in the fourth quarter, we experienced a larger decline in call orders – also in the premium segment.

This high volatility put a burden on the fiscal year 2012 EBIT of the Oberkirch location. The margin dropped to 6.9 percent (p/y: 7.7 percent).

The interest expenses declined slight to EUR 3.0 million (p/y: EUR 3.1 million). After taxes, the net income for the period was nearly stable at EUR 10.3 million (p/y: EUR 10.7 million).

Selected data (in EURk)	2012	in % of total output	2011	in % of total output
External revenue	34,642	86.5 %	39,997	102.4 %
Total output	40,029	100.0 %	39,066	100.0 %
EBITDA	5,910	14.8 %	4,262	10.9 %
EBIT	3,619	9.0 %	1,912	4.9 %
Net profit for the period	2,488	6.2 %	1,162	3.0 %

SEGMENT REST OF EUROPE

The current capacity of our location in the Czech Republic – which is included in the Segment Rest of Europe – is well utilized with the currently running series productions. Larger increases were not planned for the 2012 fiscal year. Nevertheless, revenues declined by approximately EUR 5 million due to lower tool sales as a result of the timing of invoices and the declines in call order in the series business. Nonetheless, EBIT still managed a considerable rise to EUR 3.6 million (p/y: EUR 1.9 million). The EBIT margin reached 9.0 percent and is the new Group benchmark. The net profit for the period for the segment Rest of Europe was EUR 2.5 million (p/y: EUR 1.2 million).

53 01 Overview ⁰² Management Report 04 Further Information

Net Assets, Financial Position and Results of Operations Management Report for the PWO Group and PWO AG

The development of the Czech location in the reporting year reflects the level of maturity and stability that this location has been able to achieve in the meantime. Therefore, we are very optimistic that in the future the business at this location will continue to be successful and develop profitably.

SEGMENT NAFTA AREA

	in % of		in % of
2012	total output	2011	total output
82,025	97.9 %	57,259	97.2 %
83,779	100.0 %	58,925	100.0 %
7,146	8.5 %	3,808	6.5 %
2,550	3.0 %	543	0.9 %
998	1.2 %	–773	–1.3 %

In the NAFTA Area segment, our two locations, Canada and Mexico, are combined. In the reporting year, both locations benefited from the further ramp-up of large series productions and from the strong increase in market demand. After sound revenue growth of more than 50 percent in the 2011 fiscal year, we were able to expand our revenue again in the NAFTA area by 43 percent.

Our well-established Canadian site has stable processes and could therefore achieve high growth of approximately 33 percent and at the same time considerably improve its EBIT margin. Revenue growth in Mexico reached 51 percent and, as projected, has reached a positive EBIT for the first time for an entire reporting period. However, in order to achieve this, comprehensive supportive measure were necessary to further stabilize and improve the production processes. In 2013, these measures will have their affect and will continue to be carried out. We expect the Mexican location to successively improve its profitability.

The Segment NAFTA Area reached an EBIT of nearly EUR 2.6 million in the reporting year (p/y: EUR 0.5 million). The net profit for the period was EUR 1.0 million (p/y: EUR –0.8 million).

Selected data (in EURk) 2012 in % of total output 2011 in % of total output External revenue 6,491 88.7 % 4,963 82.3 % Total output 7,319 100.0 % 6,033 100.0 % EBITDA –1,648 –22.5 % –532 –8.8 % EBIT –2,459 –33.6 % –1,252 –20.8 % Net profit for the period –3,378 –46.2 % –1,973 –32.7 %

SEGMENT ASIA

The segment Asia consists of our site in China. It continues to be in the development phase, as planned, and is therefore still loss-making. Revenue and total output increased further in the reporting year. In view of the new series start-ups, we had expected higher volumes and a lower loss in the reporting year. Some of the start-ups were delayed by the customers and are now planned for the current fiscal year.

As a result, the corresponding revenues and contribution margin were lacking in the reporting period. The capacity already installed for the series start-ups had furthermore placed an additional burden on the earnings situation. From this point of view, limiting the EBIT loss to EUR –2.5 million in the reporting year can be regarded as positive. In the previous year, the EBIT had benefited from currency gains in an amount of EUR 0.7 million. The net loss for the period for the segment Asia was EUR –3.4 million in fiscal year 2012 (p/y: EUR –2.0 million).

In fiscal year 2012, we had acquired a number of further orders for China and can expect a significant expansion in revenues and a decline in losses in the coming years. We will have a high growth rate in China; however it will be more moderate than our initial expectations. There have been signs that the demand thus far for qualitatively high complex components and subsystems such as those offered by PWO have been growing slower than the market. Meanwhile, these components and subsystems have shown a marked recovery. Going forward, PWO will increasingly benefit from this trend.

Export share of German site China Canada Mexico Czech Republic 24 % 2 % 9 % 8 % 12 % Germany 45 %

Revenue in fiscal year 2012 (100 % = EUR 358.1 million)

Financial position, net assets, and investments

BALANCE SHEET and STATEMENT of CASH FLOWS

Selected data (in EURk)	2012	in % of total assets	2011	in % of total assets
Non-current assets	151,149	54.9 %	129,438	53.8 %
Current assets	124,385	45.1 %	111,297	46.2 %
Total equity	104,802	38.0 %	74,784	31.1 %
Non-current liabilities	79,897	29.0 %	67,405	28.0 %
Current liabilities	90,835	33.0 %	98,546	40.9 %
Total assets	275,534	100.0 %	240,735	100.0 %
Cash flow from operating activities	26,617		25,547
Cash flow from investing activities	–33,262		–26,412
Cash flow from financing activities	11,851		–5,787
Net change in cash and cash equivalents	5,206		–6,652

55 01 Overview ⁰² Management Report 04 Further Information

Net Assets, Financial Position and Results of Operations Management Report for the PWO Group and PWO AG

Total assets increased 14.5 percent during the reporting year to EUR 275.5 million (p/y: EUR 240.7 million). Currently, we are preparing our locations for their future growth and the already visible series productions to come due to the high level of new business in the past two years. For this reason we had specifically expanded property, plant, and equipment by 19.1 percent to EUR 136.3 million (p/y: EUR 114.5 million).

Inventories also saw a significant increase of 16.9 percent to EUR 55.8 million (p/y: EUR 47.7 million). However, this increase resulted mainly from EUR 6.4 million higher work-in-progress as per the reporting date. This will lead to revenues in fiscal year 2013. Receivables and other assets on the other hand rose 3.1 percent to EUR 60.8 million (p/y: EUR 59.0 million) and thus significantly below the level of our business expansion in the reporting year.

On the liability side of the balance sheet, equity rose by 40.1 percent to EUR 104.8 million (p/y: EUR 74.8 million) in part due to the net profit for the period but primarily due to the successful capital increase in May 2012. The equity ratio improved accordingly to 38.0 percent (p/y: 31.1 percent). Gearing (net debt as a percentage of equity) fell significantly to 86 percent (p/y: 121 percent) and came quite close to our target gearing range of 60 to 80 percent.

In the future, gearing should decline further as a result of growing profits and a corresponding increase in contributions to retained earnings. These effects will be offset by investments in expanding capacity which will in part be financed externally. Therefore, in periods, such as the current period, where we are preparing for high growth, we expect gearing to be at the upper end of our target range. A return in gearing to the lower end of our range would tend to occur in periods of moderate new business and when lower-than-average growth is in view.

At the end of fiscal year 2011, various loans which were due in 2012 were reported under current liabilities. As already announced, we have renewed some of these with long-term commitments. Consequently, non-current interest-bearing borrowings rose to EUR 48.3 million by the end of fiscal year 2012 (EUR 37.1 million). In contrast, the current interest-bearing borrowings declined as at December 31, 2012 to EUR 50.0 million (p/y: EUR 57.7 million). Thus, our bank borrowings again have the duration structure which is appropriate for our business.

Trade payables have changed in the course of business expansion. The remaining items on the liability side of the balance sheet showed no significant developments.

Cash flow from operating activities rose slightly in fiscal year 2012 to EUR 26.6 million (p/y: EUR 25.5 million). This resulted from an accumulation of smaller diverse changes in various positions. Important individual developments relate to the high outflow of funds for the expansion of current assets. These were contrasted by lower income taxes paid.

Considerably more funds than in the prior year were utilized for investment in the future growth of the Company in the reporting year. The focus in 2012 was on the build-up and expansion of foreign locations in particular. As can be seen in the segment reporting, investments in our German location persisted at the high level of the prior year and amounted to EUR 19.6 million (p/y: EUR 18.3 million). These investments were related to the new cross-member production and the establishment of a technical center for tool design (Technikum). Furthermore, investments were made in welding, assembly, and testing facilities for new project-related orders. In addition, we are currently investing in new presses and equipment and in construction for expanding our locations.

We have increased investments in our Czech Republic location to EUR 5.1 million (p/y: EUR 1.4 million). This investment was mainly for a new 1,250 ton press for expanding our production. This press relieves two other running presses which were previously permanently fully utilized. This press also expands our capacity.

In the NAFTA Area we have raised our investment to EUR 9.5 million (p/y: EUR 5.2 million). A large part of this investment was made in Mexico, while only smaller measures were necessary for the running production of cross-members in Canada. In Mexico, we had expanded our production capacity by a total of three modern presses. Moreover, a variety of rationalization and maintenance investments were made.

In China we had also expanded production capacity with an additional 1,250 ton press and a 600 ton press. Overall, EUR 7.1 million (p/y: EUR 3.3 million) was invested.

In total, cash flow from investing activities amounted to EUR –33.3 million (p/y: EUR –26.4 million). After interest paid and received of EUR –4.5 million (p/y: EUR –4.7 million), free cash flow was EUR –11.2 million in the reporting year (p/y: EUR –5.6 million).

Cash flow from financing activities excluding interest paid, totaled EUR 16.4 million in fiscal year 2012 (p/y: EUR –1.1 million). This included EUR 22.0 million resulting from the proceeds of the capital increase after transaction costs. On balance, an outflow of EUR 2.1 million resulted from the repayment of debt in the reporting year while in the prior year a corresponding inflow of EUR 1.4 million had occurred. The dividend distribution amounted to EUR 3.5 million (p/y: EUR 2.5 million).

This resulted in a net change in cash and cash equivalents of EUR 5.2 million (p/y: EUR –6.7 million) in the reporting year.

equity ratio and gearing (in %)

Net Assets, Financial Position and Results of Operations Order Situation Management Report for the PWO Group and PWO AG

Order Situation

We were again very successful in acquiring new contracts in the 2012 fiscal year. With EUR 350 million, we greatly exceeded the volume of EUR 300 million of the previous year.

All of our locations will profit from the new business of the reporting year. We have received additional volume for our fast-growing international locations in Mexico, Canada, and China and also substantial new orders for our locations in Oberkirch and Valašské Mezirˇícˇí in the Czech Republic. Therewith, we underscore our ability to win contracts and increase our market share in both well-established markets as well as in growth markets.

New business is divided among our entire product range and relates to differing platforms and vehicle models of numerous automotive manufacturers. Therefore, we expect to continue to remain largely independent of the market success of single vehicle models.

After we had recently won several large contracts for body and chassis components (especially cross-members), we were again more successful in other product areas – particularly in components for seats, steering, brakes, and air suspension.

In the future, we will also start delivering to Thailand. For the global platform of an American automotive manufacturer for whom we already deliver European and North American crossmember volumes, we have also been awarded a contract for the component volume for Thailand. The assembly and delivery will be assumed by a local partner. This again underlines our global delivery capabilities.

Additionally, we will deliver cross-members for other American passenger car models of this manufacturer from our Canadian location. This will provide us with a renewed expansion in our growth in the USA.

Due to the long lead times in our business, which at the same time mean a high level of planning certainty, these new orders will start-up and ramp-up in the fiscal years following 2014. Their series production period is five to eight years. Therefore, the high level of new business in the reporting year is the underlying basis of our positive expectations in terms of our medium-term revenue growth.

General Statement on the Economic Situation of the Group

The PWO Group is excellently positioned and in good economic condition. In the past fiscal year, the Company achieved the highest result in its history. The capital increase in the summer of 2012 substantially strengthened the balance sheet. Irrespective of this, the Group continues to have stable and favorable relationships with banks. As a result, it has access to adequate financial resources at attractive conditions.

Continued growth in revenues and EBIT are foreseeable for the future. In the past two years we have been able to continue to considerably grow our new business. These new contracts will now start-up successively. They will contribute to our European locations being able to maintain their high income levels and aid our overseas locations in greatly improving their results.

This becomes increasingly so as the performance ability of our locations continues to rise. Alongside Germany, our locations in Canada and particularly the Czech Republic make strong earnings contributions. China and Mexico have the peak of their start-up costs behind them and we have no doubt that these locations will also make a noticeable contribution to earnings in the mid-term.

General Statement on the Economic Situation of the Group Employees Management Report for the PWO Group and PWO AG

Employees

Number of employees in the Group by location as of December 31

(including part-timers)

In the context of our growth, we continuously create new jobs. The trend in our number of employees generally has a certain lead time over our revenue development. New employees are hired and trained in advance of extensive series launches. This in turn, ensures that the launches are both time efficient and cost efficient.

At our highly-efficient and largely automated German location, we are concentrating primarily on strengthening select key functions. We will also continuously expand the Group functions since we expect that in the future the growth of the Group will be driven by our foreign locations in particular.

In fiscal year 2012, as in the previous year, we have again significantly increased our employee numbers in the NAFTA Area. The focal point here was on the location in Mexico where the production processes are structured in a noticeably more work-intensive manner as in the higher automated Canadian location.

We have also significantly increased the number of employees in China and will continue to do so in the course of the upcoming series start-ups.

Traditionally, we have been strongly committed to the training of young people in order to give them a chance to enter the workforce and to ensure that the Group has the skilled workers it needs for the future. Along with our home base in Germany, we also offer training positions at all of our international locations. Both China and Mexico are a particular focus of ours when it comes to training. This is due to the lack of skilled workers available for recruitment who possess the necessary knowledge of our production processes.

Additionally in 2012, we have invested extensively in continuing education. Overall, the expenses for training and continuing education in the reporting year amounted to a total of EUR 2.8 million (p/y: EUR 2.8 million).

Additional Information

Product and process innovation

We have earned a reputation for high innovative strength in product development. This is the basis for the preservation and expansion of our competitive position in an industry in which development activities are increasingly being provided by the suppliers.

We are a development partner of our customers when it comes to new and creative solutions and promote ourselves on this basis for future tasks even before the series contracts are up for bidding. Thereby, we benefit from the extensive expertise we have gained though offering diversified applications as part of our broad product range and which validate our unique market position.

Additionally, we have positioned ourselves early enough to benefit from the trend towards lightweight construction. We certainly expect increased competition in the future from other technologies such as hot forming of steel sheets, plastic injection molding, or in the use of other materials such as carbon-fiber-reinforced-polymers (CFRPs).

Volumes which will be lost as a result, will be more than offset in our view by the migration in favor of our portfolio. For example, we see a strong trend towards replacement of forged and cast components by those made of steel sheets. We have already earned a reputation in the market for such solutions. This also applies to the use of high-strength steels and high-quality joining and bonding technologies for load-optimized components and subsystems. This allows for example considerable reductions in weight to be achieved through the use of modern laser welding or gluing processes.

In our opinion, product innovation is inextricably linked to process innovation, even during the production period of the series production. The necessary tools for the entire production process are already conceived in the development phase of the product solution. This is the manner in which we achieve innovation which play a significant part in the highest efficiency of series production and therefore contribute to the sustainable earnings strength of PWO.

Our own tool design is a decisive part of this process. It is the tool that determines both the precision of the product as well as the production process speed that is achievable. In order to produce components where the essential feature is the adherence to tolerances of a few hundredths of a millimeter, it is necessary to have tools which are built to be even much more precise. Only very few companies are able to meet these requirements. Therefore, tool-making has traditionally been a core competence of PWO and it is instrumental in contributing to the competitiveness of the Group.

Quality management

Our zero-defect philosophy depicts a core aspect of our self-image. It is practiced group-wide and implemented along the entire value chain. It includes both the areas of production and administration. In production we attach importance to the permanent reduction of errors. In delivering to our customers, we provide zero-defect quality through stable processes as well as an integrated and automated quality control, to the greatest extent possible.

Additional Information Management Report for the PWO Group and PWO AG

high quality standards – independent of the individual customer requirements.

This underpins our reputation as a leading provider offering the utmost in dependability and delivery reliability. As a manufacturer of safety components, we feel particularly committed to

Sales and marketing

The automotive industry is a very transparent industry. We know those OEMs and tier-1 and tier-2 suppliers who are our target customers and have established customer relationships with them. Typically, these customers ask for innovative product solutions at the highest level of quality and they need unit numbers which demand large series production. Therefore, the main focus of our marketing and sales efforts is directed toward the expansion of sales to these customers, all of which operate globally.

We position ourselves early on to win the subsequent orders of currently running series productions. Moreover, we specifically market solutions from product areas not yet purchased from us by the customer. The key drivers of our growth are also international and global orders for delivery to our customers using several of our locations. Our new locations in China and Mexico are also successively building their technological performance abilities and hence are expanding their range of services.

Research and development

PWO produces exclusively to customer orders. Accordingly, the vast volume of development costs arises in the context of customer projects. These costs are either partially reimbursed at the conclusion of a defined developmental phase or paid for directly through the prices for parts in the course of the series production.

Logistics and procurement

We work with steel, stainless steel, and aluminum. We source our raw materials from various suppliers on the global market. Apart from standard grades, we procure special alloys for a large proportion of our products. These are delivered by our long-standing partners in the European steel industry to our international locations as well since it is usually impossible to attain them locally. We do not enter into commitments requiring purchase minimums. Short-term scheduling is based on the call order volume forecasts given to us by our customers.

Corporate responsibility

We consider ourselves corporate citizens and as such are committed to acting responsibly, even beyond compliance with the law. This applies to our international sites as well as to our German domestic site. The goal is to shape the interactions between employees, customers, business partners, and the social environment overall, in such a way as to avoid or restrict any impairments to social interests and the environment resulting from our business activities. This also includes comprehensive occupational safety.

Moreover, we promote a company culture that places the appreciation of our employees as the central focus and supports their voluntary social commitment. The Group itself is also committed in a variety of ways. Our efforts are also directed at environmental protection that is as far reaching as possible. These efforts include a regular reduction in the necessary use of natural resources per production unit.

Risk Report

Description of the risk management strategy

The goal of our risk management strategy is to avoid existential risks, as well as limit strategic and operational risks as far as it is possible and economically feasible to do so. Financial risks are avoided that do not arise from our business operations. For example, we do not take open positions if these do not facilitate the securing of our operational business.

In addition, our business model and our processes are structured in such a manner as to limit risk. This includes our innovative strengths in product and process development in particular as well as our global delivery capabilities. Thus, we meet key requirement of our customers which already today play a decisive role when it comes to selecting strategic partners among the suppliers and which will continue to gain importance in the future. Our broadly diversified product range and the strategic limitation of the portion of individual large orders also serve to limit risks. The use of standardized machinery and equipment and being organized along standard processes also help to limit risks in the same manner.

With our traditionally high commitment to employee training and further education, we aim to develop a substantial portion of our experts internally – both in developed markets, where demand-related constraints may be possible, as well as abroad, where in some cases there is a lack of skilled workers with the necessary qualifications. Our suppliers are seen as cooperation partners with whom we maintain long-term relationships and stabile processes.

Key aspects of PWO's risk management

PWO's risk management system has proven itself in both, phases of strong growth as well as recessive phases, and has demonstrated its exceptional capabilities.

Against the background of our substantially growing international activities, a considerably more volatile overall economy as well as industry-related developments, we have decided to fundamentally carry out further development of our risk management system in fiscal year 2012. At an organizational level, a Group risk management system was established which carries the central responsibility for risk management group-wide. The Group risk manager coordinates the systematic and timely identification, evaluation, and management of risks by the risk owner and reports directly to the Management Board.

The aim of the further development of PWO's risk management system is not only to secure the Group's existence but also to fulfill legal standards and requirements. This also includes the early identification of new risks and especially an increase in the risk consciousness of the organization, the optimization of risk-related costs and of the opportunity and risk profile, as well as securing future success.

The functional ability of the risk management system is reviewed internally on a regular basis. The principles formulated by the Management Board are documented in a risk management manual. The Audit Committee, established by the Supervisory Board, concerns itself with the effectiveness of the risk management and the internal controlling and revision systems. The risk management system is applied uniformly throughout the Group, and is subject to the stage of development of each individual location and its scope of application varies accordingly. Through the Group risk management, the international locations are to be integrated even more closely in the risk management system than in the past.

Risk Report Management Report for the PWO Group and PWO AG

Description of the key characteristics of the internal control and risk management system regarding the accounting process

We consider an internal control system to be a system comprising the principles, processes, and measures introduced internally and which are aligned to the organizational implementation of the management's decisions

• to safeguard the effectiveness and economic efficiency of business operations (including the protection of assets and the prevention and detection of asset impairments);
• to ensure the correctness and reliability of internal and external accounting processes, and
• to comply with the provisions of the applicable laws.

With regard to the accounting process, the following structures and processes have been implemented at PWO: The Management Board bears the overall responsibility for the accountingrelated internal control and risk management system within the Group. All operating units are integrated into a clearly defined management and reporting structure. The principles, structural and procedural organization, as well as processes and systems are defined in a handbook which is updated at regular intervals.

PWO Group's accounting policies ensure that uniform recognition and measurement standards are applied by the consolidated domestic and foreign companies. Underlying these rules is a uniform group-wide system of accounts. Business transactions of the operating units are recorded in a uniform, SAP-based accounting system.

To ensure the accuracy of the accounting and the overall message of the financial statements, including the management report, the following measures and controls are implemented regularly in a structured process:

• Identification of the essential risk and control areas;
• Monitoring and plausibility checks in order to oversee the processes and their results at the level of the Management Board and the operating business units. This includes regular visits to foreign plants repeatedly throughout the year by the Management Board and parent company manage ment staff;
• preventive control measures within the finance and the accounting system as well as within the material operational business processes, including the separation of functions and predefined approval processes in the relevant areas;
• Measures to ensure the proper IT-based processing of accounting matters and data;
• Measures to monitor the accounting-related in¬ternal risk management and control system, including intensive personal communication between management staff at the parent company and its foreign locations.

Changes in the risk situation in 2012

The Company and industry risks of the PWO Group remained unchanged in the reporting year. Material new risks did not arise. In 2012, the production volume of the Group at several locations was occasionally at or even above capacity limits. This resulted in additional expenses which burdened the Group results.

The overall economic risks remained unchanged and at a high level in 2012. The debt crisis in several countries continues to be unsolved. Meanwhile, this is affecting not only the smaller countries but has also arisen in the larger countries of the eurozone. The public budgets of the

USA and Japan also have high deficits. The risks and difficulties that resulted are muted by the significant expansion in global market liquidity by the central banks at historically low interest rates.

However, the long-term impact of this policy is not yet clear. The volatility in the capital and commodity markets has increased considerably due to the higher uncertainty and the available liquidity in the system. Consumers in countries having stable economic development are responding with a reluctance to make large purchases such as new cars. The unit sales of the automotive industry have been in massive decline in crisis countries afflicted with unemployment and debt.

Market-related and capacity utilization risks

Market risks include the need to safeguard the adequate utilization of the production capacity of our sites by securing orders suited to our available equipment at the margins required for our capital-intensive business.

In the case of existing orders, the market and capacity utilization risks in normal cycles extend primarily to delays in new project start-ups and to sales fluctuations in series production resulting from volatility in end-customer demand. Due to the broad diversification of our product range and the limitation of large orders for strategic purposes, we are not dependent on the success of single passenger car models and to a large extent only experience average market fluctuations. In order to optimize our response, we work continuously on improving the flexibility of all of our operating processes. This also allows us to economically manufacture even small unit volumes.

We do not anticipate any structural capacity utilization risks for our well-established locations in Germany and Canada, or for our locations in growth regions such as Eastern Europe, China, and Mexico. Aside from the opportunities which present themselves via the growth of the respective markets, we aim to continually gaining market share through our high innovative strength in product and process development. This will enable us to offer solutions to our customers which more than meet their requirements.

Moreover, we have structured our plant and equipment as flexibly as possible and utilize uniform production processes worldwide. This allows us to replace expiring series orders with very different follow-on contracts. In addition, there is the possibility to shift machinery and assembly equipment within our portfolio of locations.

Our broad-based positioning also prevents a dependence on large customers, since our sales to single companies in the automotive industry groups are always spread across diverse contractually independent projects with differing contract terms and volumes. The probability of all projects for any one customer failing simultaneously is extremely low.

The following agreements were predominantly made for contracts with defined services that we should provide: In the case of our services including an amortization agreement for the entire life of the contract, certain obligations will be incumbent on the customer in the case of a contract cancellation. Project-specific market risks related to investments and the pre-financing of services are contractually hedged in line with usual market practices. No significant risks from development services exist which would be amortized via the unit price in the course of a series production.

Risk Report Management Report for the PWO Group and PWO AG

The permanent increase in competitive pressure is also one of the typical market risks for the automotive components industry. Through our innovative strength, we provide our customers with quantifiable added value. Furthermore, we are constantly improving the efficiency of all operational processes. Our positive development, which has been sustained over many years, proves that we are capable of successfully overcoming these risks.

Performance and quality-related risks

Performance and quality-related risks are among the major risks facing the PWO Group. Today, series production for the international automotive industry means permanently meeting the demands of maximum process security and product quality, as well as delivery reliability in mass production over many years, even in times of unexpectedly strong fluctuations in call orders.

Performance failures not only lead to short-term costs but also to significant damage to one's reputation. Therefore, for providers such as PWO who are positioned at the head of the market, performance failures are to be avoided in all cases.

In the 2012 fiscal year, we were plagued with higher risks due to call orders which remained higher than expected over a longer period of time and in some cases increased even more. Consequently, we were not only forced to introduce unplanned Sunday and holiday working shifts and take on additional part-time workers, but in some instances we had to purchase outside services at very short notice. At the same time we had to delay regular preventative maintenance work in order to keep available capacity as high as possible. This resulted in direct as well as indirectly attributable expenses due to process adjustments and additional quality control.

This burdened the earnings development of the Oberkirch location which was largely affected by this. Still, it was still possible to achieve a high EBIT. This again demonstrated the quality of the PWO production system which allows for high flexibility in managing difficult periods without endangering the location's earnings strength. Our reputation with our customers improved once again in the 2012 fiscal year.

We currently reach this level of performance reliability and product quality at our locations in Germany, Canada, and the Czech Republic. We are continuously developing our newer locations in China and Mexico in this direction. Generally however, the markets in these countries do yet necessitate the highly-complex, fully-automated production ¬processes which are employed at our other locations. Accordingly, greater leeway is allowed in the production process which in turn helps in limiting risk.

Risks arising from our international presence

The Group is globally structured and we would like to pursue further globalization in the future. In order to shorten development phases and limit structural capacity utilization risk, our sites are positioned in regions where our existing customer's production facilities are located and where we can foresee growth opportunities from increasing vehicle production. In the next few years and depending on our ability to acquire contracts, the further expansion of our international presence will be pursued by means of additional assembly plants which are less capital intensive.

Above-average investment risk is found mainly in China, where we have developed an entirely new location with the correspondent and necessary infrastructure investment. Here, investment in production equipment is also determined by the order situation.

Beyond investment risks, our goal in the upcoming years is to continue to strengthen the earnings of our locations. This is particularly true to the Asia and NAFTA segments. Alongside Oberkirch, we have high technological performance capabilities and stable processes, particularly in Canada and the Czech Republic, so that here no special risks arise.

The set-up of internal processes at our China location is progressing according to plan. Achieving profitability at this location is currently being delayed by the postponement of production start-ups by our customers. Additionally, the demand in China for high-tech solutions is still well below that of Europe and the NAFTA Area but, in the meantime, is experiencing above-average growth. The sale of qualitative highly-complex components and subsystems still requires higher expenditure and a longer lead time.

Our location in Mexico reached a positive EBIT in the reporting year. We expect this location to carry on with its favorable development and achieve improved results. Nevertheless, substantial support from Oberkirch is currently necessary in order to attain the required performance and quality levels and further improve them. Therefore, we expect it to take another two to three years until the location in Mexico reaches the Group average in terms of earnings strength.

Risks to accounts receivable

PWO is only confronted with receivable risks to a limited extent. We do business with international automotive manufacturers and their suppliers; companies that have been successfully established in the marketplace for decades. This is true for our German location as well as for our foreign locations. At the same time we closely follow the market developments and customer behavior patterns in order to detect potential warning signs at an early stage. For additional security, we have arranged for commercial credit insurance. We limit the risks from potential failures to accept deliveries through our zero-defect philosophy.

Financial risks

Financial risks are comprised mainly of financing, interest, and currency risks. The volatility of the markets has greatly increased in recent years in the course of the financial market crisis and the sovereign debt crisis. We expect this to continue in the future and hence have set-up our monitoring of the capital markets accordingly.

Financing risks have failed to materialize. Through our capital increase in fiscal year 2012, we have strengthened our balance sheet and have also prevented possible future risks. The very long-term relationships with our banking partners have proven themselves again in recent years. Until now, we have not deemed it necessary to increase our funding instruments beyond that of the traditional bank loan.

Financing risks may arise when a financial institution does not fulfill its obligations in connection with the investment of liquid funds, or as a counter party of derivative financial assets. We rely on the careful selection and diversification of our partners and therefore see no need for adjustments with regard to risk management.

Risk Report Management Report for the PWO Group and PWO AG

Interest rate risks are limited using an appropriate combination of current and non- current borrowings. In principle, investments associated with long-term customer orders are also financed over the long-term. In the case of variable-interest loans, interest rate swaps are also employed. Hereby, we strive for a balanced maturity profile of our loans and of our interest rate hedges. We consider this an integral part of our risk management.

In order to limit currency risks in our operating business, we enter into hedging transactions based on comparable principles throughout the Group. Translation risks with regard to intercompany loans have been successively reduced in recent years.

Fluctuations in the euro/Canadian dollar exchange rate, as well as in the Canadian/US dollar exchange rate are of significance for the Group since the plant in Canada supplies the entire North American region.

Beyond this, in the field of procurement, currency risks are structurally limited by the fact that all raw materials and supplies for the plants in Oberkirch and the Czech Republic – and insofar as particular steel grades and alloys are not available locally – also for the plants in North America and Asia are purchased in Europe. Our long-term supply contracts are accordingly denominated in euro. Therefore, the principal currency risks are derived from wages payable in local currencies.

Procurement risks

The raw materials and supplies required for our production processes include mainly steel, and to a far lesser extent aluminum. We purchase these metals on the world market. With selected suppliers we have long-term delivery relationships. Long-term framework agreements are currently no longer offered on the market.

In the past, we have not experienced any shortages in the supply of our input materials. Any price increases in excess of the fluctuation span that was contractually agreed on with the customer could be passed on through either escalation clauses or by successfully arriving at a solution through a negotiation with the customer. In turn, we also pass on price reductions.

Going forward, we expect higher price volatility and price increases. Additionally, we cannot rule out an occasional shortage of supply. Particularly the following developments are likely to influence this situation:

• Rising costs in Germany imposed by renewable energies legislation;
• Escalating demand for metals from emerging countries especially China and India coupled with long-term increases in ore and energy prices which will drive up the cost of steel production;
• Increasing speculation by financial investors and banks in the raw material markets;
• An increase in natural disasters and catastrophic events.

Claims risks

In order to protect ourselves against the risk of claims made against us we have arranged for the appropriate insurance. The insurance coverage is continuously reviewed on a Group-wide basis and adjusted as necessary. Adequate security is thereby guaranteed at all times. Moreover, we have a Business Community Management system available which is a company-specific emergency and crisis management system for the systematic preparation for the management of company critical emergency situations. Through our Oberkirch location, this system is successively implemented and is also used for the management of risks Group wide.

IT risks

PWO maintains a comprehensive and modern IT infrastructure extending to all areas of the Group. This makes a meaningful contribution to the on-going improvements in Group efficiency.

In order to limit risks, we use established standard software, which we in turn continuously refine to meet our individual needs. In addition, our Group IT processes are permanently and comprehensively monitored by specialist staff in order to safeguard the system's functionality.

Summary risk statement for the PWO Group

The PWO Group is currently not exposed to any risks other than those typically or also atypically associated with its business activities. The overall risk situation significantly improved with the strengthening of the balance sheet through the capital increase carried out in fiscal year 2012. This has equipped the Group for any distinct fluctuations in sales in the course of possible and noticeable volatility in the automotive industry such as in the years 2008/2009. However, at the moment, we do not see any signs that we are definitely facing this type of volatility.

Also the upcoming outlook is very favorable. Again in fiscal year 2012, we were able to attain a much higher amount of new business than in the previous year. This will contribute to securing our capacity utilization in the years ahead and to increase our revenues even if the automotive industry's production figures in single regions stagnate or slightly decline.

Remuneration Report

Remuneration of the Management Board

The Supervisory Board of Progress-Werk Oberkirch AG believes that a balance between the wages and salaries of the workforce and the remuneration of the Management Board should be maintained. The Board shares this view in its entirety.

The criteria for defining the compensation of the Management Board include the duties of the single Board members, their personal performance, the financial situation, the success and the future prospects of the Group, as well as the prevailing level of compensation at peer companies and the remuneration structure in the Company.

The total remuneration of the Management Board members includes monetary components, non-cash compensation, and pension plans and is composed of fixed and performance-related components. The fixed remuneration consists of a basic annual salary, non-cash benefits, and pension benefits.

Risk Report Remuneration Report Management Report for the PWO Group and PWO AG

The performance-based element of the compensation is the bonus. This is divided into a shortterm variable component and a long-term variable component. The short-term variable component is measured by the net income of the Group for the past fiscal year. The long-term variable component is measured by the average net income of the Group over a period of three years. However, for the years 2011 and 2012, a two-year basis was used for measurement.

The variable component is structured in such a manner that the long-term component is more heavily weighted. It is limited as to its absolute amount in order to exclude inappropriate increases due to extraordinary developments in individual years. The variable compensation also ensures that both positive and negative developments of the Company are taken into account.

In fiscal year 2011, a discretionary bonus was added to the existing employment contracts of the Management Board members, whereby the Supervisory Board may consider extraordinary positive and negative developments up to a limited amount at its discretion.

In fiscal year 2012, the total compensation of the Management Board was EURk 1,529 (p/y: EURk 1,407). This included performance-based compensation amounting to EURk 783 (p/y: EURk 665). The non-cash benefits, especially in the form of insurance premium payments and the provision of company cars, amounted to EURk 73 (p/y: EURk 69).

The individual remuneration of the members of the Management Board is shown in the table below.

EURk			Fixed remuneration		Performance-related remuneration				Total remuneration
	Basic annual salary Non-cash benefits			of bonus	Short-term variable component	Long-term variable component of bonus
	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
Karl M. Schmidhuber, Chairman	295	295	22	22	145	128	168	137	630	582
Bernd Bartmann	180	180	27	24	112	100	123	100	442	404
Dr. Winfried Blümel	198	198	24	23	112	100	123	100	457	421
Total	673	673	73	69	369	328	414	337	1,529	1,407

Remuneration of the Management Board

The members of the Management Board are also insured under one of the Company's financial loss liability insurance policies for directors and certain managers (D&O insurance). The D&O policy provides for a deductible of 10 percent of the loss up to the amount of one and a half times the Management Board members fixed remuneration.

In addition, Management Board members are entitled to retirement, disability, and widow's pensions as of their second term. The individual expenses for pensions are also listed in the table "pension expenses".

Pensions for retirement are paid to Management Board members who have either reached the pension age of currently 65 years, or following their departure from the Company from the age of 60, provided they are receiving social security benefits as a full pension simultaneously. In granting pensions for retirement, Management Board members must have been in the service of the Company for at least 3 consecutive years (waiting period) at the time of the commencement of retirement, unless prior to the insured event the pension rights were already vested.

The amount of the Management Board member's monthly pension is set out in the pension agreement. The amount of an early retirement pension is calculated from the retirement pension amount, whereby during the drawing of the pension, this amount is reduced by 0.25 percent per month of the period from the beginning of early retirement until the end of the members 65th year. The future pension benefits of the current Management Board members are adjusted in line with the changes in the cost of living for a 4-person household of hourly and salaried workers pursuant to the Federal Statistics Office.

The Company has made provisions for pensions in accordance with IFRS for the future entitlements of the Management Board members for payment of the retirement pensions. In the year under review, EURk 140 (p/y: EURk 125) was allocated to the pension provisions for active Management Board members. This amount takes into account the so-called service cost and excluding interest costs.

The following table details the annual pension entitlements of the Management Board members when they have reached the retirement age of 65 on the basis of the acquired claims as of December 31, 2012.

EURk	Annual entitlement		Present value of benefit obligations			Allocation to pension provisions
	2012	2011	2012	2011	2012	2011
Karl M. Schmidhuber, Chairman	96	96	1,636	1,557	0	0
Bernd Bartmann	72	72	548	422	80	72
Dr. Winfried Blümel	72	72	455	350	60	53
Total	240	240	2,639	2,329	140	125

Pension expenses

Former members of the Management Board and their surviving dependents have received pension payments amounting to EURk 234 in the year under review (p/y: EURk 227). At December 31, 2012, the corresponding pension provisions amounted to EURk 2,146 (p/y: EURk 1,989).

In the event of termination of employment no other benefits were promised to any member of the Management Board. In fiscal year 2012, no members of the Management Board had received any payments or promises from a third party in connection to their work as Management Board member.

Remuneration Report Management Report for the PWO Group and PWO AG

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board members is specified in Section 11 of the Articles of Association, and is essentially governed as follows:

Every member of the Supervisory Board receives a fixed annual remuneration of EUR 20,000. The Chairman of the Supervisory Board receives twice this amount and the Deputy Chairman receives one and one half times this amount. Additionally, the members of the Supervisory Board receive an attendance fee of EUR 500 for every personal participation in a meeting of the Supervisory Board and its committees. For numerous meetings taking place on the same day, an attendance fee is paid only once.

Supervisory Board members who have been members for only part of the fiscal year, receive one twelfth of the yearly compensation for the commencement of each month they were present. The compensation is payable at the end of the fiscal year. The Company also reimburses the Supervisory Board members for their expenses as well as for any value added tax payable on their remuneration and expenses.

The members of the Supervisory Board are also insured under one of the Company's financial loss liability insurance policies for directors and certain managers (D&O insurance). The premiums for this are assumed by the Company. Here, a deductible is agreed in the amount of half of the fixed annual remuneration of the Supervisory Board member.

Also in this reporting year, the Company had not paid any remuneration to the Supervisory Board members for activities performed outside of their supervisory role.

The individual remuneration of Supervisory Board members is shown in the table below.

EURk		Fixed remuneration		Attendance fees *	Total remuneration
	2012	2011	2012	2011	2012	2011
Dieter Maier, Chairman	40	40	6	6	46	46
Dr. Klaus-Georg Hengst berger, Deputy Chairman	30	30	5	6	35	36
Herbert König	20	20	5	5	25	25
Ulrich Ruetz	20	20	3	4	23	24
Katja Ullrich (née Hertwig)	20	20	3	4	23	24
Dr. Gerhard Wirth	20	20	2	4	22	24
Summe	150	150	23	26	173	176

Remuneration of the Supervisory Board

* All figures shown have been rounded. This results in deviations when using addition.

Changes in the Governing Bodies

There were no changes in the composition of the Management Board or in the Supervisory Board in the reporting year.

Corporate Governance Statement pursuant

to section 289a HGB

The Corporate Governance Statement of Progress-Werk Oberkirch AG is part of the reproduced Corporate Governance Report in this Annual Report.

Disclosures required pursuant to section 289 (4) and section 315 (4) HGB

In the following, the information required under Sections 289 (4) and 315 (4) HGB is detailed and explained.

The share capital of Progress-Werk Oberkirch AG ("Company") is EUR 9,375,000.00. It is divided into 3,125,000 ordinary bearer shares with a notional value of EUR 3.00 per share each. All shares are bearer shares. They carry identical rights and convey one vote each at the Annual General Meeting.

There are no restrictions on the voting rights or the transfer of shares. In addition, the Board is not aware of such arrangements which have been agreed between shareholders.

Consult Invest Beteiligungsberatungs-GmbH, Böblingen, has given notification of an interest of 46.65 percent in the Company. Delta Lloyd N.V., Amsterdam, the Netherlands, has given notification of an interest of 16.49 percent.

Preferences or other rights conveying powers of control do not exist. The provisions of the German Stock Corporation Act regarding the rights and obligations are referenced.

There is no participation of employees, who do not exercise their control rights directly.

In accordance with the Company's Articles of Association, the Management Board consists of two or more members. These members are appointed for a period of no more than five years. A reappointment or extension of term of office is permissible in each case up to a maximum of five years.

The Supervisory Board determines the number of Management Board members, their appointment and the revocation of their appointment as well as the conclusion, amendment, and termination of employment contracts concluded with them. The Supervisory Board may appoint one member of the Management Board as Chairman or Spokesman of the Management Board. The nomination as well as the appointment of Board Members can be revoked before the expiration of the term, if there is good cause.

Pursuant to Section 179 (1) and Section 119 (1), no. 5 AktG Act, each amendment in the Articles of Association requires a shareholder resolution of the Annual General Meeting. In a deviation to Changes in the Governing Bodies

Management Report for the PWO Group and PWO AG

Corporate Governance Statement pursuant to Section 289a of the German Commercial Code Disclosures Required pursuant to Section 289 (4) and Section 315 (4) of the German Commercial Code

Section 179 (2), no. 1 of the said Act, Section 15 of the Articles of Association provides for resolutions on amendments to the Articles to be adopted by the Annual General Meeting by a simple majority of voting capital to the extent that legally a larger majority is not required. In addition, the Supervisory Board is authorized to adopt amendments to the Articles which relate only to their wording.

Repurchase of own shares

There is no authorization to repurchase own shares.

Authorized Capital I/2010

By resolution of the Annual General Meeting of May 26, 2010 and subject to the consent of the Supervisory Board, the Management Board is authorized to increase the Company's share capital once or several times by up to EUR 3,000,000.00 by issuing new non-par bearer shares against payment in cash (Authorized Capital I/2010), until May 25, 2015. Shareholders must generally be afforded the right to subscribe. The Management Board is however authorized, with the consent of the Supervisory Board, to exclude the right of shareholders to subscribe in order to redress fractional shares or issue shares to employees of the Company or employees of the Group member companies.

In May 2012, the Management Board partially exercised this authority with the consent of the Supervisory Board. The share capital was increased by EUR 1,875,000.00 by issuing 625,000 shares. The shares were offered to shareholders by way of indirect subscription rights. The new shares are entitled to dividend payment as of January 1, 2012. The execution of the capital increase was entered in the commercial register on May 16, 2012. On the same day, the new shares were approved for trading on the Frankfurt Stock Exchange.

As a result, the Authorized Capital 1/2010 amounted to up to EUR 1,125,000.00 as per the reporting date.

Authorized Capital II/2010

By resolution of the Annual General Meeting of May 26, 2010 and subject to the consent of the Supervisory Board, the Management Board is authorized to increase the Company's share capital once or several times by up to EUR 750,000.00 by issuing new non-par bearer shares against payment in cash (Authorized Capital II/2010), until May 25, 2015. Shareholders must generally be afforded the right to subscribe. The Management Board is however authorized, with the consent of the Supervisory Board, to exclude the right of shareholders to subscribe in order to redress fractional shares.

No use has been made of this authorization to date.

Contingent Capital 2010

By resolution of the Annual General Meeting on May 26, 2010, the Management Board is authorized once or on several occasions to issue warrant-linked bonds or convertible bonds made out to bearer ("bonds") for a total nominal value of up to EUR 65,000,000.00, until May 25, 2015. In addition, the Management Board is authorized with the consent of the Supervisory Board to grant option rights to the holders of warrant-linked bonds and/or conversion rights to the holders of convertible bonds; said rights being to receive bearer shares in the Company representing a proportion of share capital totaling up to EUR 3,000,000.00, pursuant to the terms of the warrant-linked and/or convertible bonds.

The share capital shall therefore be conditionally increased by up to EUR 3,000,000.00 through the issue of bearer shares insofar as the holders of bonds shall exercise their option or conversion rights or meet any incumbent conversion obligations.

When bonds are issued, shareholders must be afforded the right to subscribe. The Management Board is however authorized, with the consent of the Supervisory Board, to exclude the right of shareholders to subscribe, insofar as the Management Board upon due investigation is of the opinion that the issue price for the bonds is not materially below their hypothetical market price as calculated in accordance with recognized, and in particular, actuarial methods.

The authorization to exclude the subscription right applies to bonds with warrants or conversion rights or conversion obligations in respect of Company shares on a pro rata amount of the share capital that may not exceed 10 percent of the equity capital. This 10 percent limit may not be exceeded at the time it takes effect or at the time of executing this authorization if the value is lower.

No use has been made of this authorization to date.

Other than the usual extraordinary rights of termination contained in loan agreements and contracts with customers, no further agreements have been entered into for the event of a change in control resulting from a takeover. Nor are there any compensation agreements which favor the Management Board or employees.

Events subsequent to the end of the fiscal year

No events of significant importance have been recorded since the end of the fiscal year that would require reporting.

Dependence Report

A Dependence Report in accordance with Section 312 AktG has been prepared regarding the relationship with Consult Invest Beteiligungsberatungs-GmbH, Böblingen. As in previous years the report concludes with the following statement: "Transactions subject to disclosure have not occurred in the fiscal year."

Outlook

The economic environment in the year 2013

The forecasts for the current fiscal year remain subdued and are afflicted with high uncertainty. In October 2012, the IMF had still expected a modest recovery in the world economy in the year 2013. Global growth was to improve to 3.6 percent following 3.3 percent in the previous year. The key cause would have been the improved development in Europe and a growth spurt in the emerging markets, particularly in China and India. In the USA, the economy should have grown slightly more than two percent. Japan however should have grown half as fast as the prior year with an increase of a good 1 percent. In the fourth quarter of 2012, the forecasts have again somewhat deteriorated.

The decline of 0.4 percent in the eurozone seen in the prior year should have turned into weak growth of 0.2 percent in 2013 as a result of the less recessive declines in important countries such as Italy and Spain, and due to an upturn in France. The comparatively good development in Germany should continue in 2013 with an increase in GDP of 0.9 percent. This is according to the IMF forecasts in October 2012.

Disclosures Required pursuant to Section 289 (4) and Section 315 (4) of the German Commercial Code Management Report for the PWO Group and PWO AG

The German Central Bank also expects a resumption of growth in Germany in the course of the year after a weak half year in Winter 2012/2013. The expectations for Germany and the eurozone however are significantly more subdued and clearly dependent upon specific conditions as those of the IMF. For example, the forecast for Germany in 2013 is for lower year-average growth as in the previous year (+0.4 percent after +0.7 percent).

In the view of the German Central Bank, the economic development in the eurozone will continue to be affected by the necessary adjustment processes in several countries. Nevertheless, there are clear signs of progress in some of the countries stricken by the debt crises and their current account deficits have noticeably declined. Therefore, it appears likely that in the course of 2013, the economic environment in the eurozone will stabilize and subsequently will start a slow recovery. The prerequisite for this is that the sovereign debt crisis and the bank crisis in the eurozone do not intensify once again and that the consolidation and reform efforts remain intact. In addition, the world economy needs to come back on course and larger negative surprises do not occur.

The international automotive industry in the year 2013

The year 2013 will be challenging according to the German Automotive Industry Association. The income and employment situation in Germany is satisfactory. The customers however have become uncertain as a result of the eurozone's continued debt crisis. This ongoing issue has dampened their mood. Since it has to be assumed that the difficult situation in the eurozone will continue in 2013, the VDA's forecast for the domestic passenger car market is accordingly subdued. The association expects declines in domestic volumes of around three percent to approximately 3 million new registrations in 2013. After a decline in the Western European passenger vehicle market in 2012 of around eight percent to almost 11.8 million units, the VDA expects a further decrease of three percent to 11.4 million new vehicles in 2013.

Optimism however is prevalent when considering the global outlook: The passenger car market should resume its growth course in 2013 after rising 4 percent in 2012 to a solid 68 million units. The VDA expects that the market will reach the EUR 70 million level. This buoyancy will be provided mainly by the Chinese market and renewed strength in the leading market of the USA. German passenger car manufacturers are expected to profit from this development. Domestic production of passenger cars in 2013 should rise by one percent to 5.4 million units. Exports should also show a stable development in the course of the year and with 4.1 million units they should slightly exceed the level in 2012.

Opportunities and risks

The risks described in the risk report for the year under review are also valid for the fiscal year 2013 and subsequent years. Significant additional risks have not been identified for either the Group or for the segments.

In fiscal year 2012, we experienced once again a very lively year in new business and were able to acquire a much higher volume as in the previous year. This forms the basis of our expectation for the Group's development in the upcoming years.

Long lead times in our business and series production running periods of five to eight years enable us to forecast the future revenue development of the Group relatively well.

Additional opportunities beyond the projects which we are currently working on do typically not exist. At the same time, risks associated with the loss of contracts can be disregarded. Since individual vehicle models do not amount to a significant share of revenues, their individual market success is not material to the development of our Group revenues.

Beyond revenue development, which is the balance of expirations and start-ups of series productions, the further development of the global economy and demand in the premium segment of the automotive industry are key to our growth. Currently, there is no substantial market downturn in sight. Nevertheless, the overall economic risk is altogether higher. In addition, it must be assumed that the development in China – one of the largest sales markets for German premium vehicle manufacturers – will operate under volatility. Even if the sales opportunities in these markets will be extraordinary in the years or decades to come, there will be interim periods where there is very little growth in demand or demand even declines.

Therefore, we are cautiously optimistic for the years to come and will intensely concentrate on further raising the profitability of our locations. In recent years, we have made tremendous progress in this respect. In the meantime, in Germany, Canada, and the Czech Republic we have achieved three highly profitable locations. The locations in China and Mexico are successively improving their profitability but will still need considerable time until they have reached the level of the other locations.

The outlook for the PWO Group

We expect an increase in revenues of around 8 percent to EUR 390 million for fiscal year 2013. Several of the burdens experienced in fiscal year 2012 are expected to not reoccur in the fiscal year just begun. From a pure operating standpoint, we are expecting a disproportional rise in EBIT.

The current market weakness in Europe will dampen the rise in results of the Oberkirch location. Therefore, we expect an EBIT in the order of EUR 23 million in fiscal year 2013 and with this achieve another record despite the increase in market uncertainty. In the two years to come until 2015, we expect yearly revenue growth to continue at a similar level as in fiscal year 2013. The EBIT margin should also show a successive expansion.

We continue to expect the net income for the period to achieve above-average growth in the coming years. Here, there will also be a positive effect from the use of tax credits from our Czech location. Second, we will be able use our local tax-loss carryforwards at our Mexican site with the sustainable positive numbers we expect there.

This gives us room to carry on with our shareholder-friendly dividend policy. The goal is to pay a dividend on a regular basis amounting to between 30 and 40 percent of the consolidated net income for the period and as a result, steadily and sustainably increase it.

Group revenue growth will be mainly supported by increasing production volumes at our locations in the NAFTA area and China. In Germany, we are expecting a flatter growth curve. Our current capacity at the Czech Republic location is already fully utilized and we are not expecting a significant growth spurt due to the market developments in Europe.

With regard to the development of our results, we expect the locations in Oberkirch and Valašské Mezirˇícˇí in the Czech Republic to continue to achieve high profitability in the coming years which is within the range of their recently reported EBIT margins. Canada and Mexico should see a step-by-step marked increase in their margins. China should reduce its losses. At all locations,

Outlook Management Report for the PWO Group and PWO AG

especially in Mexico, we will continue to invest in raising the performance capabilities in order to achieve sustainable improvements.

A large portion of the necessary production facilities are already available for the growth we have currently planned. Nevertheless, the management of strongly increasing volumes requires some structural expansion. We are expecting a decrease in our investments to around EUR 35 million in fiscal year 2013. In the years thereafter, investments are expected to remain at that level. However, these projects will be chiefly influenced by the further development in our new business.

In 2013, investments at our individual locations are planned to remain at the level of the reporting year with the exception of China. Here, we expect a significantly lower level of investments in 2013 following the strong increase in the past year. We expect to finance our investments largely through the cash flow of the fiscal year. To the extent that additional financing might be required, we possess sufficient facilities to draw on existing credit lines or other bank financing.

Management Report for Progress-Werk Oberkirch AG

Progress-Werk Oberkirch AG (the "parent company") is located in Oberkirch, Baden-Württemberg. This location forms the headquarters of the Group. It is the largest production site and, at the same time, the center of competence for product development, manufacturing technology, and PWO's production system. Central Group functions such as sales and marketing, finance, controlling, legal, IT, and human resources are also coordinated in Oberkirch.

In order to limit risk, the Group's international locations are closely managed by the Oberkirch site, particularly in the areas of finance, controlling, and legal affairs. However, each office is responsible for carrying out their daily business operations.

The financial statements for the AG are prepared in accordance with the provisions of the German Commercial Code (HGB), whereas the consolidated financial statements are prepared in accordance with IFRS.

The general statements of the amalgamated management report for the PWO Group and the PWO AG, also apply to the PWO AG, particularly in the areas of market, strategy, management, and the opportunities and risks inherent in business activities. The number of employees in the AG, including part-time workers, rose to 1,393 (p/y: 1,340) at the reporting date.

	in % of		in % of
			total output
247,819	98.9 %	237,652	100.9 %
250,679	100.0 %	235,540	100.0 %
129,792	51.8 %	122,396	52.0 %
72,335	28.9 %	68,384	29.0 %
9,560	3.8 %	9,199	3.9 %
25,071	10.0 %	21,223	9.0 %
–6,653	–2.7 %	–3,089	–1.3 %
11,348	4.5 %	15,029	6.4 %
6,786	2.7 %	10,351	4.4 %
4,726	1.9 %	5,240	2.2 %
	2012	total output	2011

INCOME STATEMENT

The AG's course of business in the reporting year was dominated by a high volatility in call orders and additional expenses due to the high level of call orders in the premium segment in the third quarter. Here we would like to refer to the statements regarding the Segment Germany in this amalgamated management report. Overall, revenues rose 4.3 percent as compared to the prior year, and total output rose 6.4 percent.

While the expense ratio for materials, staff costs, and depreciation were each slightly below the prior year's level, other operating expenses experienced a rise of 18.1 percent. This was expressly due to the higher repair and maintenance costs, as well as additional expenses for part-time workers in the course of periods where call orders had exceeded installed capacity.

In the reporting year, the carrying amount of the loans granted from PWO AG to Holding Co., Ltd., Hong Kong, was adjusted. This resulted in a charge of EUR 3.6 million which was reported in the financial result under write-downs of financial assets. Excluding this effect, the financial result remained at the level of fiscal year 2011. This was partly due to the fact that bank liabilities were reduced by EUR 3.8 million due to the capital increase in the summer of 2012 although total assets had risen by EUR 23.8 million.

The result from ordinary activities amounted to EUR 11.3 million (p/y: EUR 15.0 million). If adjusted for the impairment of the loans and the expenses for the capital increase of EUR 0.8 million, on a purely operating basis, results even had a slight increase despite the challenges of the reporting year.

The net income amounted to EUR 6.8 million (p/y: EUR 10.4 million) after an unchanged extraordinary result of EUR –0.3 million and income taxes at the previous year's level.

As already stated, PWO AG's total assets expanded significantly in the reporting period. This was caused in part by higher cash on hand and bank balances of EUR 4.9 million (p/y: EUR 0.7 million) at the reporting date. In addition, investments for the further strengthening of the Oberkirch location resulted in an increase in property, plant, and equipment to a level of EUR 56.4 million (p/y: EUR 47.3 million).

The PWO AG financially reinforced the subsidiaries for their further growth. This was contrasted by the write-downs of the loans of PWO AG to Holding Co., Ltd., Hong Kong. On balance, on the reporting date financial assets amounted to EUR 68.2 million (p/y: EUR 67.2 million).

Furthermore, inventories rose to EUR 33.0 million (p/y: EUR 30.0 million) especially due to higher inventories of work-in-progress which were at the reporting date. This will then lead to revenues in fiscal year 2013. A large portion of the increase in receivables and other assets to EUR 44.4 million (p/y: EUR 37.4 million) were related to higher receivables from affiliated companies and therefore, from the growth of our foreign locations.

PWO AG's equity ratio rose to a solid 53.0 percent (p/y: 45.8 percent) through the contribution to retained earnings from the annual result and especially due to the successful capital increase.

There were no material changes to provisions. We reduced our liabilities to EUR 59.6 million (p/y: EUR 62.2 million). Beyond the reduction in bank liabilities mentioned above, we also cut our trade payables while at the same time other liabilities increased.

In view of upcoming business development, the statements in the opportunities and risks section of the Group's report on the outlook are also largely valid for the AG. However, we expect lower growth in the AG than in the Group since the AG primarily serves the saturated European market which beyond the cyclical fluctuations has fundamentally lower growth rates than many of the international markets.

However, this should not affect the AG's profitability. We continue to expect that in the future the AG will also be able to generate a significant portion of the Group's income and realize a result within the range of the margins achieved in recent years.

Efficiency throughout the entire value-added process.

Our understanding of lean management is "Creating value without waste". The aim is to coordinate, as ideally as possible, all activities which are necessary for adding value. From the customer's point of view, this means meeting their preferences for availability, individuality, quality, and pricing as best as possible. From the Company's point of view, adding value in a profitable manner is at the forefront. PWO is distinguished through its extremely short reaction times to the changing demands of customers and its continuous improvements.

We operate according to the value-stream principle on a global basis. In order to ensure consistent process quality company-wide, PWO successfully employs its internally-developed PWO production system. This standardizes the operating processes in all value-added areas and defines, monitors, and follows uniform planning and performance guidelines at all locations. Since the introduction of the PWO production system, set-up times have fallen by 60 percent, employee productivity has risen 50 percent, and overall equipment effectiveness (OEE) in the press area has increased by more than 75 percent.

Our best practice processes have created standards which are fulfilled by our employees with enthusiasm – beginning with the stages of method planning, construction, and preparation. We constantly put our processes to the test and live this continuous improvement process. Results are processes with a high focus on the customer. The basis for operating in an economic manner and achieving a high level of efficiency is the targeted and flexible fulfillment of the customer's demands. The precise definition of the process, the description of the interfaces, clear lines of responsibility, timely reactions to failures, and simple organization methods lead to processes producing qualitative high-value products.

Processes set up in a lean manner and extremely short reaction times to changing customer demands also allow for made-to-order production. Maximum flexibility, high precision, and detailed planning enable us to set standards and provide for the highest cost efficiencies. We take advantage of "best cost" production opportunities worldwide.

Performance encouragement and recognition.

The employees put their personal stamp on the corporate culture of PWO and this is something we are very proud of. Competence, flexibility, reliability, and the expressed desire for continuous improvements are what set our employees apart. Values which are encompassed in PWO's approach and which lead to more performance, higher commitment, and more enjoyment and success at work. Tasks are always fulfilled using teamwork and are project, product, or customer related.

Across the entire value chain you will find not only deeply-rooted entrepreneurial responsibility but also high cost awareness. Individual responsibility and entrepreneurial thinking is not only demanded of the management but also of every single employee.

A high level of transparency ensures that our employees have all of the information available to them that they need to do their jobs and are able to see where their department stands at all times. The orientation towards high customer value, transparency with regard to projects and key figures, working together across departments, and including the employees in continuous improvement process, are all strengths we possess.

Ever growing demands and close cooperative teamwork result in a higher need for information. We use modern IT-supported knowledge management tools. These are embedded in our intranet and are available to our employees along the entire process chain.

Consolidated Financial Statements of the PWO Group

• Consolidated Income Statement 86
• Consolidated Statement of Comprehensive Income 87
• Consolidated Balance Sheet 88
• Consolidated Statement of Changes in Equity 90
• Consolidated Statement of Cash Flows 91
• 03 Notes to the Consolidated Financial Statements 92
• Audit Opinion 128
• Responsibility Statement 129

Note no.		2012 EURk	2011 EURk
6	Revenue	358,072	331,080
	Change in finished goods and work-in-progress	5,205	-3,777
7	Other own work capitalized	3,347	1,529
	Total output	366,624	328,832
8	Other operating income	4,507	6,913
	Cost of raw materials and supplies and merchandise purchased	-175,248	-162,549
	Cost of purchased services	-22,710	-17,158
	Cost of materials	-197,958	-179,707
	Wages and salaries	-81,528	-73,468
	Social security and post-employment costs	-16,152	-14,494
9	Staff costs	-97,680	-87,962
	Amortization of intangible non-current assets and depreciation of property, plant and equipment	-18,935	-16,667
10	Other operating expenses	-35,680	-32,248
	Earnings before interest and taxes (EBIT)	20,878	19,161
	Financial income	52	11
11	Financial expenses	-6,378	-6,292
	Financial result	-6,326	-6,281
	Earnings before taxes (EBT)	14,552	12,880
12	Income taxes	-4,393	-3,864
	Net income for the period*	10,159	9,016
13	Earnings per share in EUR (diluted = basic) based on net income attributable to the shareholders of PWO AG	3.52	3.61

* The net income for the period is entirely attributable to the shareholders of PWO AG

03 Consolidated Financial Statements

Consolidated Income Statement Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Income

	2012 EURk	2011 EURk
Net income for the period	10,159	9,016
Other comprehensive income
Derivative financial instruments
Net gains/losses from cash flow hedges	1,494	-1,352
Tax effect	-351	379
Unrealized gains/losses from derivative financial instruments	1,143	-973
Currency translation	2	270
Other comprehensive income after tax	1,145	-703
Total comprehensive income after tax	11,304	8,313

Consolidated Balance Sheet

ASSETS

Note no.		2012 EURk	2011 EURk
	Land and buildings	47,331	42,962
	Technical equipment and machinery	62,879	47,969
	Other equipment, operating and office equipment	11,471	7,512
	Prepayments and assets under construction	14,598	16,013
14	Property, plant, and equipment	136,279	114,456
	Contract and customer-related development services	4,161	3,350
	Industrial property rights and similar rights	2,375	3,139
	Goodwill	5,485	5,478
	Prepayments	7	4
15	Intangible assets	12,028	11,971
	Deferred tax assets	2,842	3,011
	Non-current assets	151,149	129,438
	Raw materials and supplies	18,389	14,864
	Work-in-progress	23,156	16,729
	Finished goods and merchandise	14,245	16,151
16	Inventories	55,790	47,744
	Trade receivables	52,125	50,972
	Other assets	6,475	6,808
	Other financial assets	1,226	555
	Income tax receivables	959	638
17	Receivables and other assets	60,785	58,973
18	Cash and cash equivalents	7,810	4,580
	Current assets	124,385	111,297
	Total assets	275,534	240,735

Consolidated Balance Sheet

EQUITY AND LIABILITIES

Currency translation differences Interest-bearing borrowings Provisions for pensions Deferred tax liabilities Non-current liabilities Advance payments received on account of orders	9,375 37,494 56,192 1,741 104,802 48,275 27,551 3,203 868 79,897 22,061 2,091	7,500 17,155 48,390 1,739 74,784 37,088 26,373 3,509 435 67,405 20,957
		1,757
Interest-bearing borrowings	49,988	57,742
	12,033	12,522
	1,424	2,492
	0	227
	1,495	1,410
	1,743	1,439
	90,835	98,546
	170,732	165,951
	Other financial liabilities Income tax liabilities Current portion of provisions for pensions Current portion of other provisions

Consolidated Statement of Changes in Equity

Equity attributable to PWO AG shareholders

				Cumulative income and expenses recognized directly in equity
EURk	Subscribed capital	Capital reserves	Retained earnings	Currency translation differences	Cash flow hedges	Total equity
As at January 1, 2012	7,500	17,155	49,269	1,739	-879	74,784
Net income for the period			10,159			10,159
Other comprehensive income				2	1,143	1,145
Total comprehensive income	7,500	17,155	59,428	1,741	264	86,088
Capital increase 1)	1,875	20,339				22,214
Dividend payment			-3,500			-3,500
As at December 31, 2012	9,375	37,494	55,928	1,741	264	104,802

As at January 1, 2011	7,500	17,155	42,753	1,469	94	68,971
Net income for the period			9,016			9,016
Other comprehensive income				270	-973	-703
Total comprehensive income	7,500	17,155	51,769	1,739	-879	77,284
Dividend payment			-2,500			-2,500
As at December 31, 2011	7,500	17,155	49,269	1,739	-879	74,784

1) According to IAS 32.37, the proceeds from the capital increase are shown net of net transaction costs in an amount of EURk 599. This includes income tax benefits in an amount of EURk 233.

03 Consolidated Financial Statements

Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows

Consolidated Statement of Cash Flows

Note no.	2012 EURk	2011 EURk
Net income for the period	10,159	9,016
Amortization of intangible non-current assets and depreciation of property, plant, and equipment, net of write-ups	18,935	16,667
12 Income tax expense/refund	4,393	3,864
11 Interest income and expenses	6,326	6,281
Change in current assets	-9,679	-7,086
Change in non-current liabilities (excluding interest-bearing borrowings)	-741	-1,060
Change in current liabilities (excluding interest-bearing borrowings)	199	5,023
12 Income taxes paid	-4,421	-5,764
Other non-cash expenses/income	1,482	-1,373
Gain/loss on disposal of property, plant and equipment	-36	-21
Cash flow from operating activities	26,617	25,547
Proceeds from disposal of property, plant, and equipment	219	349
Payments for investments in property, plant, and equipment	-30,898	-24,919
Payments for investments in intangible assets	-2,583	-1,842
Cash flow from investing activities	-33,262	-26,412
19 Proceeds from capital increase	22,813	0
Transaction costs related to the capital increase	-832	0
19 Dividends paid	-3,500	-2,500
Interest paid	-4,589	-4,727
Interest received	52	11
Proceeds from borrowings	29,087	15,178
Repayment of borrowings	-31,180	-13,749
Cash flow from financing activities	11,851	-5,787
Net change in cash and cash equivalents	5,206	-6,652
Effect of exchange rates on cash and cash equivalents	18	-213
Cash and cash equivalents as at January 1	-2,560	4,305
Cash and cash equivalents as at December 31	2,664	-2,560
18 of which cash and cash equivalents	7,810	4,580

Notes to the Consolidated Financial Statements

Company Information

The consolidated financial statements of Progress-Werk Oberkirch AG (PWO) and its subsidiaries for the fiscal year January 1, 2012 to December 31, 2012 were authorized by the Management Board on the basis of a resolution passed on March 18, 2013 and were subsequently submitted to the Supervisory Board for examination. PWO is an exchange-listed stock corporation headquartered in Oberkirch, Germany. The Company's shares are traded on XETRA, within the regulated market in Frankfurt and Stuttgart, as well as within the Regulated Unofficial Market in Berlin, Düsseldorf, Hamburg-Hannover and Munich.

The main business activities of the Company and its subsidiaries are described in detail in the Group management report (chapter "Company profile").

Accounting Policies

1 | Basis of presentation

The consolidated financial statements of Progress-Werk Oberkirch AG and its subsidiaries are prepared in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) and applicable in the European Union, as well as with the commercial regulations also applicable under Section 315a (1) HGB (German Commercial Code).

The consolidated financial statements are prepared using the historical cost principle, with the exception of derivative financial instruments and foreign currency receivables and payables which are carried at fair value. The income statement has been presented on the basis of the nature of cost method. The consolidated financial statements are presented in thousands of euros. Unless otherwise indicated, all values are rounded up or down to the nearest thousand (EURk) according to the commercial method.

2 | Principles of consolidation

The consolidated financial statements include the financial statement of Progress-Werk Oberkirch AG and its subsidiaries for each fiscal year ending December 31. Subsidiaries are fully consolidated effective from the acquisition date. Consolidation ends as soon as the parent company ceases to control the subsidiary. The financial statements of the subsidiaries are prepared using uniform accounting methods for the same reporting periods as the financial statements of the parent company.

Business combinations are accounted for by applying the purchase method (IFRS 3). The acquisition costs of the business combination are allocated to the acquired identifiable assets, liabilities, and contingent liabilities at their fair values applicable at the acquisition date. Insofar as the remaining difference is positive, it is then reported as goodwill; insofar as it is negative, the remaining difference is recognized in profit or loss. Revenues, expenses and income, as well as receivables and payables between consolidated entities, are offset against one another (IAS 27). Deferred taxes are recognized for consolidation measures that affect income taxes.

Company Information Accounting Policies Notes to the Consolidated Financial Statements

The consolidated financial statements include six foreign entities held either directly or indirectly. Details relating to ownership interests, the equity, and net income of the consolidated entities are outlined below:

	Owner	Net
EURk	ship	income	Equity
PWO Canada Inc., Ontario, Canada	100 %	1,464	13,509
PWO UNITOOLS CZ a.s., Valašské Mezirˇícˇí, Czech Republic	100 %	2,488	12,575
PWO Holding Co., Ltd., Hong Kong, China	100 %	-30	-826
PWO High-Tech Metal Components (Suzhou) Co., Ltd., Suzhou, China 1)	100 %	-3,286	14,376
PWO High-Tech Tool Trading (Suzhou) Co., Ltd.,Suzhou, China 1)	100 %	-49	145
PWO de México S.A. de C.V., Puebla, Mexico 2)	100 %	-466	12,552

1) indirect holding through PWO Holding Co., Ltd., for a total of 100%

2) indirect holding through PWO Canada Inc. for a total of 1%

3 | Summary of significant accounting policies

Currency translation

The consolidated financial statements are presented in euros which is the functional currency of the parent company. The financial statements of the companies included in the consolidated financial statements which are prepared using foreign currencies are translated according to the functional currency concept (IAS 21). Each company within the Group determines its own functional currency. The items contained in the financial statements of the respective companies are measured using this functional currency. All balance sheet items of the foreign consolidated entity were translated into euros by applying the relevant mean rate of exchange at the reporting date. Expenses and income in the Group income statement were translated using the year-average exchange rate. The net income for the year from the translated income statement was transferred to the balance sheet. Differences are recognized directly in equity as a currency translation difference.

Foreign currency transactions are initially translated between the functional currency and the foreign currency at the spot rate prevailing on the transaction date. Monetary assets and liabilities denominated in a foreign currency are translated at the closing rate. All exchange rate differences are recorded in the net income or loss for the period. Non-monetary items that are measured in a foreign currency at the historical purchase or production cost are translated at the foreign exchange rate prevailing on the transaction date. Non-monetary items in a foreign currency that are measured at fair value are translated at the rate prevailing at the time the fair value was determined.

As of January 1, 2012, PWO Holding Co., Ltd., Hong Kong, China changed its functional currency from HKD to EUR as the underlying transactions have since predominantly been invoiced and paid in EUR.

Goodwill arising in connection with the acquisition of a foreign operation, and fair-value adjustments to carrying amounts of assets and liabilities arising from the acquisition of this foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

The following exchange rates were used for currency translation purposes within the consolidated financial statements:

		Year-end exchange rate		Average exchange rate
		31/12/2012	31/12/2011	2012	2011
China	CNY	8.21	8.15	8.11	9.00
Hongkong	HKD	-	10.05	-	10.83
Kanada	CAD	1.31	1.32	1.28	1.38
Mexico	USD	1.32	1.29	1.29	1.39
Czech Republic	CZK	25.12	25.81	25.15	24.59

Revenue recognition

Income is recognized when it is likely that the economic benefit of the transaction will accrue to the Group, and when the amount of income can be reliably determined, regardless of the time of payment. Income is measured at the fair value of the consideration received or claimable, in accordance with contractually stipulated payment terms, net of taxes or other duties.

Revenue is recognized from the sale of products when the key opportunities and risks associated with the sold products pass from the seller to the buyer. This normally occurs when goods are delivered.

Interest income from financial instruments carried at amortized cost is recognized on the basis of the effective interest rate. This is the rate that precisely discounts future expected cash payments or receipts through the expected term of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Interest income is reported as part of financial income in the income statement.

Government grants

Government grants are recognized if there is reasonable assurance that the grants will be received and the entity will comply with the conditions attached to it. Grants related to assets are presented in the balance sheet by deducting the grant in order to arrive at the carrying amount of the asset. Cost-related grants are reported as income.

Taxes

Actual tax refund claims and tax liabilities for the current period are calculated based on the amount expected to be refunded by the taxation authority or paid to the taxation authority. The calculation of the amount is based on the tax rates and tax laws in force at the reporting date in the countries in which the Group operates and generates taxable income.

Deferred taxes are recognized using the balance sheet liability method for all temporary differences existing at the reporting date between the recognition of an asset or liability in the balance sheet and the tax valuation rates. Deferred tax liabilities are recognized for all taxable temporary differences, excluding non-tax-deductible goodwill and temporary differences originating from initial recognition of an asset or a liability in a business transaction which is not a business combination, and which at the time of the transaction influences neither IFRS results for the period or the taxable results. Deferred taxes are recognized for tax-loss carryforwards to the extent that it is probable that these can be used. Deferred taxes are measured at the tax rates that apply or are expected to apply to the period when the asset is realized or the liability is settled, based on the current legal situation in the individual countries.

03 Consolidated Financial Statements

Accounting Policies Notes to the Consolidated Financial Statements

Deferred taxes attributable to items accounted for directly in equity are recognized in equity rather than through the income statement.

Deferred tax assets and deferred tax liabilities are offset if the Group has a legally enforceable right to set off current tax assets and current tax liabilities, and if these relate to the income taxes of the same taxable entity, and imposed by the same taxation authority.

Property, plant, and equipment

Property, plant, and equipment are carried at cost less accumulated depreciation and impairment losses. Depreciation is performed on the basis of the straight-line method. Certain items of machinery as well as contract-related tools were depreciated according to the units-of-production method, based on the number of units in the reporting year, and calculated in terms of the total number of items specified or planned in the order.

Leases

The decision as to whether an agreement contains a lease is based on the economic content of the agreement at the time the agreement was concluded and requires an assessment as to whether the performance of the contractual agreement depends on the utilization of a specific asset or assets and whether the agreement grants a right to the use of the assets, even if this right is not expressly stated in an agreement.

Upon initial recognition, finance lease arrangements where largely all risks and opportunities associated with the ownership of the transferred assets are transferred to the Group, are recognized at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between financial expenses and the repayment of the outstanding lease liability, such that the remaining residual carrying value of the lease liability bears interest at a fixed and variable interest rate. Leased assets are depreciated over the useful life of the asset. If, however, the transfer of asset to the Group is not guaranteed at the end of the lease period, the leased asset is completely depreciated over the shorter of the two periods, either the expected useful life or the lease term.

Lease payments for operating leases are recorded as expenditure linearly over the term of the lease.

Borrowing costs

Borrowing costs are recognized as part of the acquisition or production costs of an asset if they can be allocated directly to the acquisition or production of the asset, and if a considerable period of time is necessary in order to assign the asset in its intended usable or sellable condition. All other borrowing costs are recognized as an expense in the period in which they occurred. Borrowing costs consist of interest costs and other costs that a company incurs in connection with the borrowing of funds.

Intangible assets

Individually acquired intangible assets are valued at acquisition cost less cumulative amortization and impairment losses. Intangible assets include goodwill, patents, customer-related development services, software, customer relations, non-competitive clauses, licenses and similar rights. The Group applies the straight-line method to amortize intangible assets with finite useful lives over the expected useful life to the estimated residual value. Customer-related development services, which are amortized based on their volume, are excluded. Goodwill is not amortized on a scheduled basis. Instead it is subject to an annual impairment test. With the exception of goodwill, the Group has not identified any intangible assets with indefinite useful lives.

Development costs are capitalized if the recognition criteria of IAS 38 are fulfilled. This specifically relates to the existence of specific customer orders for the development of tools. After initial capitalization, the asset is carried at cost less accumulated amortization and impairment losses. Capitalized development costs include all directly attributed individual costs as well as proportional overheads, and are amortized over the planned product life span (5 to 7 years). The amortization of capitalized development costs forms part of the production costs and is allocated to the components through which they have been incurred.

An impairment test relating to goodwill is performed annually. An impairment test is performed for other intangible assets with a finite useful life, as well as for property, plant, and equipment, if there are specific indications that an asset may be impaired. Impairment is recognized in profit and loss if the recoverable amount of the asset is less than its carrying amount. The recoverable amount must be determined for each individual asset unless the asset does not generate cash inflows that are largely independent of those of other assets or other groups of assets. The recoverable amount is the higher of an asset's net realizable value and its value in use. The net realizable value is the amount that can be realized from the sale of an asset in a normal market transaction, less selling costs. Value in use is calculated using the discounted cash flow method on the basis of the estimated future cash flows expected to arise from the continuing use of an asset and from its disposal. The cash flows are derived from long-term corporate planning which take into account historical developments and macroeconomic trends. The value in use of the relevant cash generating unit is normally considered in order to calculate the intrinsic value of the goodwill.

The long-term corporate planning, approved by the Supervisory Board, runs until the end of the detailed planning period in 2015. Long-term corporate planning reacts sensitively to the key assumptions regarding the development of sales figures in the automotive industry, commodity prices, and the increase in productivity. These developments were assessed and determined on the basis of past experience, using publicly available data, existing project agreements, and on measures decided internally.

Cash flows are discounted up until the reporting date by applying risk equivalent capitalization rates (pre-tax). When applying an impairment test on the goodwill associated with PWO UNITOOLS CZ a.s. and PWO Canada Inc., capitalization rates (Weighted Average Cost of Capital – WACC) of 10.39% (p/y: 10.28%) and 13.78% (p/y: 13.09%) were applied respectively with regard to the first phase. The second phase (growth rate in perpetuity) was calculated with a growth rate of 1.04% (p/y: 1.01%) and 1.28% (p/y: 1.27%), respectively. The growth rates of the relevant automotive markets were used as a basis for determining the cash flows.

Assumptions that have been made are subject to a certain level of sensitivity. While based on reasonable judgment a change to one of the assumptions made in determining the value in use for PWO UNITOOLS CZ a.s. and PWO Canada Inc. is fundamentally possible, we believe it is rather unlikely that the carrying amount of goodwill for the Company' PWO Canada Inc. unit will exceed its recoverable amount since the actual recoverable amount exceeds the carrying amount by EURk 11,195 (p/y: EURk 4,722). This cannot be ruled out for PWO UNITOOLS CZ a.s. since the actual recoverable amount exceeds the carrying amount by only EURk 1,604 (p/y: EURk 4,274).

However, under the assumption of an unchanged capitalization rate, an impairment would be required if the free cash flows were sustainably reduced by more than 5% for PWO UNITOOLS and by 41% for PWO Canada. In turn, under the assumption of unchanged free cash flows, an impairment would be required if the capitalization rate increased to 10.76% for PWO UNITOOLS and to 19.66% for PWO Canada.

Accounting Policies Notes to the Consolidated Financial Statements

Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity (IAS 39). In the case of financial assets, where the trade and the settlement could occur on different dates, the settlement date is applied for the purpose of initial recognition. Financial instruments are measured at cost on initial recognition; transaction costs are generally included in the initial measurement. The subsequent measurement of financial instruments is dependent on how these instruments are allocated to the categories in accordance with IAS 39. They are either measured at fair value or at amortized cost. IAS 39 differentiates between primary and derivative financial instruments.

Primary financial instruments relate specifically to trade receivables and payables, other financial assets, cash and cash equivalents, bank borrowings, and other financial liabilities. These items are measured at amortized cost. In the case of trade receivables and payables, and other liabilities as well as cash and cash equivalents, the carrying amount mainly corresponds to fair value.

In order to hedge interest-rate and exchange-rate risks PWO employs currency-related derivatives in the form of interest-rate swaps, foreign exchange swaps, options, and foreign exchange forward contracts. These are carried at fair value both at the time of purchase and as part of subsequent measurement. In the case of derivative financial instruments which do not fulfill the criteria of a hedging transaction, gains or losses from changes in the fair value are reported immediately in profit or loss. Market value changes of derivative financial instruments used to hedge future cash flows (cash flow hedges) are recognized directly in equity in the amount of the effective portion, while the ineffective portion is immediately recognized in profit or loss. When the hedged transaction takes place, the derivative is transferred from equity to profit and loss. The fair value of exchange listed derivatives corresponds to the positive or negative market value. If market values are not available, these are calculated using recognized actuarial valuation models, e.g. discounted cash flow model or option price model.

In the case of short-term financial assets and financial liabilities, the carrying amount is a reasonable approximation of the fair value. At each reporting date, the Group determines whether there is objective evidence of an impairment of a financial asset or group of financial assets.

The Group has not yet made use of the option of designating financial assets at fair value through profit or loss at the time of their initial recognition.

In the case of financial liabilities, the Group has not yet resorted to the option of designating these as financial liabilities at fair value through profit or loss at the time of their initial recognition.

Inventories

Inventories of raw materials and supplies are recognized at the lower of average purchase price or realizable values. Unsalable or obsolete materials are impaired accordingly. Work-in-progress and finished goods are measured at the lower of cost or net realizable value on the basis of item-by-item calculations based on current operational accounting. In addition to direct costs, production costs include appropriate portions of material and production overheads as well as production-related depreciation and production-related administration costs. Costs arising from general administration and borrowing costs are not capitalized.

Tooling and development contracts are measured at acquisition or production cost. For this, a loss-free valuation considers the maximum cost to be recognized as the selling price plus revenue generated via series production.

Revenue is recognized when the Group has transferred the significant risks and opportunities relating to ownership of the goods to the buyer.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and short-term bank deposits with an initial remaining term of less than 90 days.

Provisions

Pension provisions are measured on an annual basis for the consolidated financial statements by independent appraisers using the internationally accepted projected unit credit method in accordance with IAS 19. As part of this process, expected future increases in salaries and pensions are taken into account in addition to pensions and acquired vested rights to future pension payments known at the reporting date. Pension obligations are calculated on the basis of actuarial methods. Actuarial gains and losses are recognized through profit and loss if the actuarial gains and losses which were not recognized at the beginning of the fiscal year exceed ten per cent of the present value of the obligation at that date (corridor method).

Past service cost is expensed on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a pension plan, past service cost is expensed immediately.

Other provisions are recognized when the Group has a present obligation with respect to third parties, either legal or constructive, where a future outflow of resources is probable and a reliable estimate of the amount of the obligation can be made. If the interest effect is material, provisions are discounted.

If the Group expects at least a partial reimbursement for a provision carried as a liability, the reimbursement is recognized as a separate asset, provided inflow of the reimbursement is likely.

• 99 01 Overview 02 Management Report 04 Further Information
• Accounting Policies Notes to the Consolidated Financial Statements

4 | Changes in accounting policies

NEW AND AMENDED STANDARDS AND INTERPRETATIONS

The accounting policies applied remained unchanged as compared to the previous year with the exception of the following standards which have been applied from January 1, 2012:

IFRS 7 | Financial Instruments: Disclosures — Improvement of the Disclosure Requirements regarding the Transfer of Financial Assets (amended)

In order to provide the user of financial statements with an understanding of the assets and the corresponding liabilities, through the amendment, the IASB requires extensive new disclosures on transferred financial assets that have not been derecognized. In addition, disclosures are required regarding the continuing involvement in transferred and derecognized assets at the reporting date in order to provide the user with an understanding of the nature and the corresponding risks of the on-going involvement. The amendment must be applied for the first time to fiscal years beginning on or after July 1, 2011. This amendment will have no impact on the consolidated financial statements since the Group does not possess assets with such features.

STANDARDS PUBLISHED BUT NOT YET MANDATORY

At the time of the publication of the consolidated financial statements, the following standards and interpretations were published and were already incorporated into EU law but were not yet mandatory. These standards were applied by the Group when they entered into force on January 1, 2013. The standards were not applied in advance of that date.

Amendment of IAS 1 | Presentation of Components of Other Comprehensive Income

The amendment of IAS 1 results in a change in the classification of components presented in the other comprehensive income. Components, which will be reclassified in the future to net income for the period (among others gains from the hedging of a net investment; differences from currency translation of foreign entities; gains/losses from cash flow hedges; and gains/ losses from available-for-sale financial assets) are to be presented separately from the components that will not be reclassified (among others actuarial gains and losses from defined benefit pension plans and effects from the revaluation of land and buildings). The amendment only relates to the presentation and has no impact on the Group's net assets, financial position, or results of operations. The amendment must be applied for the first time to fiscal years beginning on or after July 1, 2012 and will be applied by the Group upon the first annual reporting following its entry into force.

Amendment of IAS 12 | Income Taxes – Deferred Taxes: Realization of Underlying Assets

The amendment includes a clarification with regards to the assessment of deferred taxes for real estate measured at fair value. The amendment introduces the refutable assumption that the realization of the carrying amount through a sale is generally decisive for the assessment of deferred taxes for real estate measured at fair value in accordance with IAS 40. For assets with an indefinite useful life, which are measured using the revaluation model according to IAS 16, the assessment of deferred taxes is generally to be assumed through sale. The amendment must be applied for the first time to fiscal years beginning on or after January 1, 2013. It will not have an impact on the Group's net assets, financial position or results of operations nor on the Group's disclosures in the notes.

IAS 19 | Employee Benefits (amended)

The IASB has comprehensively revised IAS 19. The adjustments range from fundamental changes, such as those concerning the determination of expected returns on plan assets and the abolition of the corridor method, to mere clarifications and reformulations. The amended standard will have an impact on the amount of the provision, which will in the future fully reflect the obligation. The actuarial gains and losses will no longer be recognized on a pro-rata basis through profit or loss, but fully recognized in the period incurred within other comprehensive income. As the cumulative unrecognized actuarial losses amounted to EURk 13,404 (p/y: EURk 6,320) as at December 31, 2012, the legislative amendment will have a material impact on the amount of the revaluation reserves, the amount of pension provisions, and consequently on the amount of the total comprehensive income. The amendment must be applied for the first time to fiscal years beginning on or after January 1, 2013.

IAS 28 | Investments in Associated Companies and Joint Ventures (amended in 2011)

With the adoption of IFRS 11 (Joint Arrangements) and IFRS 12 (Disclosure of Interests in Other Entities), IAS 28 was renamed to Investments in Associated Companies and Joint Ventures and its scope was extended to include the application of the equity method for joint ventures in addition to associated companies. Regarding the effects, we refer to our comments on IFRS 11. The revised standard will apply for the first time to fiscal years beginning on or after January 1, 2014.

Amendment of IAS 32 | Offsetting Financial Assets and Financial Liabilities

The amendment clarifies the wording "has currently an enforceable legal right to offset". It also defines the application of criteria pursuant to IAS 32 for offsetting with regards to settlement systems (such as clearing houses), which provide gross settlement when the single transactions do not occur simultaneously. The revised standard will apply for the first time to fiscal years beginning on or after January 1, 2014 and is not expected to have any impact on the consolidated financial statements.

IFRS 1 | First-time Application of International Financial Reporting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (amended)

The amendment of IFRS 1 was issued in December 2010 and is to be applied for the first time to fiscal years beginning on or after January 1, 2013. The amendment removes the fixed date of application for the derecognition of financial assets and liabilities and also removes the provisions regarding the recognition of gains and losses upon acquisition pursuant to IFRS 1 and replaces them with the date of transition to IFRS. The amendment further gives guidance as to how an entity should resume presenting financial statements in accordance with IFRS after a period of severe hyperinflation in its functional currency during which it had been unable to fully comply with IFRS. This amendment will not have an impact on the consolidated financial statements.

Amendment of IFRS 7 | Offsetting Financial Assets and Financial Liabilities

The amendments to IAS 32 and IFRS 7 were published in December 2011 and will apply for the first time to fiscal years beginning on or after January 1, 2014 and January 1, 2013, respectively. An addition to this amendment's application guidelines should eliminate existing inconsistencies. However, the existing basic provisions for the netting of financial instruments have been maintained. The amendment also defines supplemental disclosures.

Accounting Policies Notes to the Consolidated Financial Statements

IFRS 10 | Consolidated Financial Statements, IAS 27 | Separate Financial Statements (amended) IFRS 10 was published in May 2011 and should be applied for the first time to fiscal years beginning on or after January 1, 2014. The new standard replaces the existing provisions of IAS 27 Consolidated and Separate Financial Statements for Group accounting, and the interpretations of SIC-12 Consolidation – Special Purpose Entities. IFRS 10 established a unified command concept, which applies to all entities, including special purpose entities. In June 2012, the revised transitional provisions to IFRS 10-12 were also published and should facilitate the first-time application of the new standard.

IFRS 11 | Joint Arrangements

IFRS 11 was published in May 2011 and should be applied for the first time to fiscal years beginning on or after January 1, 2014. This standard replaces IAS 31 Investments in Joint Ventures and the interpretations of SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Partner Companies. With IFRS 11, the previous option for the application of proportionate consolidation for joint ventures will be abolished. In the future, such companies will only be consolidated at equity. The application of the new standard is expected to have no impact on the consolidated financial statements.

IFRS 12 | Disclosure of Interests in Other Entities

IFRS 12 was published in May 2011 and should be applied for the first time to fiscal years beginning on or after January 1, 2014. This standard sets uniform disclosure requirements for the area of consolidated financial reporting and consolidates the disclosures on subsidiaries, which was previously covered by IAS 27, the disclosures for jointly controlled and associated companies, which was thus far included in IAS 31 and IAS 28, as well as for structured companies. The application of the new standard is expected to have no impact on the consolidated financial statements.

IFRS 13 | Measurement of Fair Value

IFRS 13 was published in May 2011, and should be applied for the first time to fiscal years beginning on or after January 1, 2013. This standard establishes guidelines for the determination of fair value and imposes extensive quantitative and qualitative disclosures regarding the measurement at fair value. However, the standard does not cover the question of when assets and liabilities must or can be measured at fair value. IFRS 13 defines fair value as the price at the measurement date received by a party in a regular transaction between market participants for the sale of an asset or the price necessary to transfer a liability.

The following standards and interpretations issued by the IASB were not yet mandatory in fiscal year 2012 and have not yet been transposed into EU legislation. These standards and interpretations have not been applied by the Group.

IFRS 1 | First-time Application of International Financial Reporting Standards

Clarification that a company which has discontinued financial reporting under IFRS and has decided or is obliged to continue financial reporting under IFRS has the option of reapplying IFRS 1. If the company does not apply IFRS 1, it must adjust its financial statements retroactively as if it had always prepared its reporting in accordance with IFRS.

IFRS 9 | Financial Instruments: Classification and Measurement

In November 2009, the first part of phase I of the preparation of IFRS 9 Financial Instruments was published. This standard includes new regulations for the classification and measurement of financial assets. Accordingly, debt instruments are to be recognized at either amortized purchase costs or at fair value through profit or loss depending upon their respective characteristics and dependent upon the business model. Equity instruments are always accounted for at fair value. However, fluctuations in the value of equity instruments may be recorded in other comprehensive income due to an instrument-specific option exercisable upon the acquisition of the financial instrument. In this case, only specific dividend income would be recognized in profit or loss for equity instruments. Financial assets held for trading and which must be measured at fair value through profit or loss form an exception. In October 2010, the IASB completed the second part of phase I of the project. The standard was expanded by provisions pertaining to financial liabilities and stipulated that the existing classification and measurement requirements for financial liabilities be retained with the following exceptions: The effects of changes in the own credit risk of financial liabilities, which have been classified as measured at fair value through profit or loss, must be recognized directly in equity and derivate liabilities on unquoted equity instruments may no longer be measured at amortized cost. IFRS 9 is to be applied for the first time to fiscal years starting on or after January 1, 2015.

IAS 1 | Presentation of Financial Statements

Clarification of the difference between voluntary comparative information and mandatory comparative information and which generally includes the prior reporting period.

IAS 16 | Property, Plant, and Equipment

Clarification that material spare parts and maintenance equipment which are qualified as property, plant, and equipment, do not fall under the provisions for inventories.

IAS 32 | Financial Instruments: Presentation

Clarification that income taxes on distributions to holders of equity instruments fall under the provisions of IAS 12 Income Taxes.

IAS 34 | Interim Financial Reporting

Provision regarding the alignment of disclosures regarding segment assets and segment liabilities in the interim financial reporting as well as aligning disclosures in the interim financial reporting with the disclosures in the annual financial reporting.

103 01 Overview 02 Management Report 04 Further Information Accounting Policies Notes to the Income Statement Notes to the Consolidated Financial Statements

5 | Key judgments, estimates, and assumptions

In compiling the consolidated financial statements, the Management Board makes discretionary judgments, estimates, and assumptions which affect the level of reported income, expenses, assets, and liabilities shown at the end of the reporting period. The actual figures may differ from these estimates.

Note 29 explains the most important discretionary judgments, forward-looking assumptions, and other key sources of estimating uncertainties existing on the reporting date in cases where there is a significant risk that a key adjustment in the carrying amounts of assets and liabilities will be required within the next fiscal year.

Notes to the Income Statement

6 | Revenue

The breakdown of Group revenue by location and product area is shown in the segment reporting (see Note 28).

7 | Other own work capitalized

Own work capitalized comprises an amount of EURk 1,551 (p/y: EURk 1,128) of development costs subject to mandatory capitalization according to IAS 38. These development costs are related particularly to the development of steering components. Series orders are on hand for these projects.

8 | Other operating income

Other operating income breaks down as follows:

EURk	2012	2011
Currency gains	2,545	4,386
Income from derecognition of accruals	199	300
License income	147	209
Other	1,616	2,018
Total	4,507	6,913

Non-periodic income amounted to EURk 427 (p/y: EURk 718).

Government grants of EURk 39 (p/y: EURk 183) were provided for the creation of new jobs as well as for training, restructuring, and environmental protection measures. These grants were recognized through profit and loss.

9 | Staff costs and employees

Staff costs

EURk	2012	2011
Wages and salaries	81,528	73,468
Social security and post-employment costs	16,152	14,494
Total	97,680	87,962

Number of employees by division (year-average)

	2012	2011
Development and sales	152	140
Production and materials	1,607	1,374
Tool center	475	463
Administration	138	137
Sub-total	2,372	2,114
Part-timers	318	275
Trainees	138	132
Total	2,828	2,521

10 | Other operating expenses

Other operating expenses break down as follows:

EURk	2012	2011
Costs for part-timers	9,942	7,641
Maintenance costs	6,463	4,643
Outgoing freight	3,617	3,279
Currency losses	3,095	3,420
Travel costs	1,541	1,569
Rental costs	1,374	1,450
Insurance premiums	1,225	1,078
Legal, audit, and consultancy costs	1,193	1,407
Minimum lease payments for operating leases	900	688
Other	6,330	7,073
Total	35,680	32,248

Non-periodic expenses amounted to EURk 112 (p/y: EURk 136).

Notes to the Income Statement Notes to the Consolidated Financial Statements

Financial expenses include interest expenses to banks amounting to EURk 4,460 (p/y: EURk 4,553), interest expenses for pension provisions of EURk 1,515 (p/y: EURk 1,498), interest expenses under finance leases in the amount of EURk 322 (p/y: EURk 121) and interest expenses on other provisions of EURk 81 (p/y: EURk 120). Of the interest expenses to banks, financial liabilities which were not recognized at fair value through profit or loss have caused interest expenses of EURk 4,210 (p/y: EURk 4,178).

12 | Income taxes

Income taxes are divided as follows:

EURk	2012	2011
Actual taxes	3,873	4,409
Deferred taxes	520	-545
Total	4,393	3,864

Deferred taxes were not recognized for temporary differences in retained profits from subsidiaries totaling EURk 7,326 (p/y: EURk 3,623), since these profits will be used to fund the further business expansion at the individual locations.

The differences between the expected income tax expense based on the calculated tax rate and the actual income tax expense have been outlined in the following reconciliation. The tax rate applied is based on the domestic income tax rate.

EURk 2012	2011
Earnings before income taxes 14,551	12,880
Theoretical tax expense at 28.08% (p/y: 28.08%) 4,086	3,617
Change in theoretical tax expense due to different tax rates applicable to foreign entities -151	-29
Tax increase due to non-deductable expenses 192	269
Tax increase (+) / -reduction (-) previous years -100	-61
Tax effects from future tax rate changes 0	2
Tax effects from tax credits -575	-692
Effects from non-capitalised tax-loss carryforwards 844	870
Other effects 97	-112
Income taxes 4,393	3,864

			Deferred tax liabilities
2012	2011	2012	2011
67	76	4,454	3,647
655	451	368	200
4,015	3,685	0	0
1,651	1,545	0	0
418	676	10	10
6,806	6,433	4,832	3,857
-3,964	-3,422	-3,964	-3,422
2,842	3,011	868	435
		Deferred tax assets

See Note 29 for further details.

13 | Earnings per share

Earnings per share are computed by dividing net income for the period attributable to PWO AG shareholders by the weighted average number of shares outstanding during the fiscal year. Dilution effects did not occur.

	2012	2011
Net income for the period in EURk	10,159	9,016
Average number of bearer shares	2,887,153	2,500,000
Earnings per share in EUR	3.52	3.61

Notes to the Income Statement Notes to the Balance Sheet Notes to the Consolidated Financial Statements

Notes to the Balance Sheet

14 | Property, plant, and equipment

EURk	Land and buildings	Technical equipment and machinery	Other equipment, operating and office equipment	Prepayments and assets under construction	Total
Acquisition and production costs
As at Jan. 1, 2011	62,797	173,913	24,927	11,211	272,848
Additions	2,294	8,113	1,842	13,545	25,794
Reclassifications	499	7,279	1,086	-8,864	0
Disposals	-1	-1,305	-1,159	0	-2,465
Currency effects	865	633	117	121	1,736
As at Dec. 31, 2011	66,454	188,633	26,813	16,013	297,913
Additions	4,442	18,985	5,331	9,785	38,543
Reclassifications	2,114	7,861	1,174	-11,149	0
Disposals	0	-1,802	-1,134	0	-2,936
Currency effects	-115	-106	-44	-51	-316
As at Dec. 31, 2012	72,895	213,571	32,140	14,598	333,204
Depreciation and amortization
As at Jan. 1, 2011	21,501	130,713	18,228	0	170,442
Additions	1,895	10,638	2,073	0	14,606
Reclassifications	0	0	0	0	0
Disposals	0	-1,029	-1,108	0	-2,137
Currency effects	96	342	108	0	546
As at Dec. 31, 2011	23,492	140,664	19,301	0	183,457
Additions	2,086	11,815	2,522	0	16,423
Reclassifications	0	0	0	0	0
Disposals	0	-1,740	-1,113	0	-2,853
Currency effects	-14	-47	-41	0	-102
As at Dec. 31, 2012	25,564	150,692	20,669	0	196,925
Net carrying amounts
As at Dec. 31, 2011	42,962	47,969	7,512	16,013	114,456
As at Dec. 31, 2012	47,331	62,879	11,471	14,598	136,279

The useful life of buildings is 25 to 50 years. The useful life of technical equipment and machinery is 2 to 10 years and 3 to 14 years for other equipment including operating and office equipment. The useful life of computer hardware and software is 3 to 5 years.

The depreciation of technical equipment and machinery at the production sites in Germany in fiscal year 2012 includes EURk 542 in impairments, pursuant to IAS 36, for a non-depreciable investment. This was undertaken in order to measure the relevant asset at fair value. This impairment was compensated by a corresponding reimbursement on the part of the customer.

15 | Intangible assets

EURk	Contract and customer related development services	Industrial property rights and similar rights	Goodwill	Other intangible assets	Prepayments	Total
Acquisition and production costs
As at Jan. 1, 2011	2,884	11,812	6,721	932	0	22,349
Additions	1,128	1,048	0	0	4	2,180
Reclassifications	0	0	0	0	0	0
Disposals	0	0	0	0	0	0
Currency effects	0	29	26	25	0	80
As at Dec. 31, 2011	4,012	12,889	6,747	957	4	24,609
Additions	1,551	1,107	0	0	4	2,662
Reclassifications	0	0	0	0	0	0
Disposals	0	-300	0	0	0	-300
Currency effects	1	-1	-6	-18	-1	-25
As at Dec. 31, 2012	5,564	13,695	6,741	939	7	26,946
Amortization
As at Jan. 1, 2011	227	8,119	1,250	928	0	10,524
Additions	435	1,622	0	4	0	2,061
Reclassifications	0	0	0	0	0	0
Disposals	0	0	0	0	0	0
Currency effects	0	9	19	25	0	53
As at Dec. 31, 2011	662	9,750	1,269	957	0	12,638
Additions	743	1,769	0	0	0	2,512
Reclassifications	0	0	0	0	0	0
Disposals	0	-200	0	0	0	-200
Currency effects	-2	1	-13	-18	0	-32
As at Dec. 31, 2012	1,403	11,320	1,256	939	0	14,918
Net carrying amounts
As at Dec. 31, 2011	3,350	3,139	5,478	0	4	11,971
As at Dec. 31, 2012	4,161	2,375	5,485	0	7	12,028

The useful life for software is 3 to 5 years.

Development costs of EURk 4,161 (p/y: EURk 3,350) that required capitalization under IAS 38 are amortized using the units of production method as soon as development is complete and production of series parts commences.

The residual carrying amount of SAP software is EURk 841 (p/y: EURk 1,245). The remaining amortization period is 1 to 5 years.

As at December 31, 2012 the goodwill of PWO UNITOOLS CZ amounted to EURk 4,331 (p/y: EURk 4,331) and the goodwill of PWO Canada Inc. amounted to EURk 1,154 (p/y: EURk 1,147). The increase at PWO Canada resulted from fluctuations in the exchange rate.

03 Consolidated Financial Statements

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

Accumulated amortization includes EURk 698 from the amortization of goodwill at PWO de México de C.V. in fiscal year 2009.

16 | Inventories

The total amount of inventories at the reporting date of EURk 55,790 (p/y: EURk 47,744) includes spare tool parts in an amount of EURk 5,342 (p/y: EURk 4,179) accounted for at acquisition and production costs. In the fiscal year under review, an impairment of EURk 707 (p/y: EURk 693) was recognized through profit or loss.

17 | Receivables and other assets

At December 31, 2012, the allowances for trade receivables and other receivables amounted to EURk 1,094 (p/y: EURk 1,309). The carrying amount of trade receivables and other receivables before valuation allowances was EURk 53,219 (p/y: EURk 52,281). The development of the valuation allowance account is comprised as follows:

EURk	2012	2011
Valuation allowance as at Jan. 1	1,309	1,328
Additions	16	21
Utilisation	-18	-25
Releases	-213	-15
Valuation allowance as at Dec. 31	1,094	1,309

For receivables of a material amount, allowances are provided for according to uniform standards and at the level of the incurred loss. A potential impairment is assumed in the presence of various factors such as late payments over a specified period, the initiation of compulsory measures, threat of default or insolvency, the filing or commencement of insolvency proceedings, or the failure of restructuring measures.

Allowances for doubtful accounts are recorded regularly on separate impairment accounts and lead to an impairment loss through profit and loss. The allocation to, and thus, the increase in the valuation allowance during the year, pertained to only a few isolated cases. Definite defaults result in derecognition of the relevant receivable.

The non-current portion of other assets amounts to EURk 535 (p/y: EURk 268) and the non-current portion of income tax receivables amounts to EURk 427 (p/y: EURk 521).

18 | Cash and cash equivalents

Deposits at banks bear interest at variable interest rates for short-term call deposits. At December 31, 2012 the Group had undrawn credit lines for which all necessary conditions for use are already met.

At December 31, 2012, for purposes of the consolidated statement of cash flows, the balance of cash and cash equivalents of EURk 7,810 (p/y: EURk 4,580) consisted of cash on hand and bank deposits net of bank borrowings due on demand.

19 | Subscribed capital and reserves

On May 26, 2010, the Annual General Meeting had approved new authorized and contingent Capital.

An amount of EURk 1,875 of the total Authorized Capital I/2010 of EURk 3,000 was utilized by issuing 625,000 new shares via a capital increase in May 2012. As at December 31, 2012, the fully paid-up subscribed capital amounted to EURk 9,375 (p/y: EURk 7,500), and was divided into 3,125,000 (p/y: 2,500,000) bearer shares with a par value of EUR 3.00 each.

Remaining authorized capital

By resolution of the Annual General Meeting of May 26, 2010 and subject to the consent of the Supervisory Board, the Management Board is authorized to increase the Company's share capital once or several times by up to EURk 1,125 against payment in cash (Authorized Capital I/2010) until May 25, 2015.

By resolution of the Annual General Meeting of May 26, 2010 and subject to the consent of the Supervisory Board, the Management Board is authorized to increase the Company's share capital once or several times by up to EURk 750 against payment in cash (Authorized Capital II/2010) , until May 25, 2015.

The Annual General Meeting of May 26, 2010 has approved a conditional increase in share capital by up to EURk 3,000 (Contingent Capital 2010).

Capital reserves

Capital reserves include the premium from the issuance of shares.

Retained earnings and other equity

Retained earnings include current and previous years' earnings by PWO AG and the consolidated subsidiaries, which have not yet been distributed.

Differences resulting from the earnings-neutral currency translation of the financial statements of foreign subsidiaries in the amount of EURk 1,741 (p/y: EURk 1,739) are reported separately.

In addition, the portion of the profit or loss is recognized when it results from a cash flow hedging instrument, which has been determined as an effective hedge.

Proposed and distributed dividends

As at December 31, 2012, PWO AG reported unappropriated retained earnings of EUR 5,025,949.03. The distributable amounts are based on the unappropriated retained earnings of PWO AG in accordance with commercial law.

It has been proposed to the Annual General Meeting that the unappropriated retained earnings of PWO AG be appropriated as follows:

	EUR
Payment of a dividend of EUR 1.60 per dividend-bearing share	5,000,000.00
Carried forward to new account	25,949.03

In fiscal year 2012, a total dividend of EUR 3,500,000.00 (EUR 1.40 per dividend-bearing share) was paid for the fiscal year 2011.

03 Consolidated Financial Statements

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

Notifications pursuant to Section 21 (1) WpHG

In a release dated May 21, 2012, Sparkasse Offenburg/Ortenau, Offenburg, gave notification that it held an interest of 5.88%.

In a release dated May 23, 2012, Consult Invest Beteiligungsberatungs-GmbH, Böblingen, gave notification that it held an interest of 46.65%.

In a release dated May 24, 2012, Delta Lloyd N.V., Amsterdam, The Netherlands, gave notification that it held an interest of 16.49%.

20 | Liabilities

Pension provisions

Provisions for pensions and similar obligations are formed on the basis of pension plan entitlements for retirement, invalidity, and survivor dependent's benefits. The retirement benefits are based on salary and length of service. The direct and indirect obligations include those arising from current pensions as well as benefits for pensions and retirement allowances payable in the future.

The vast majority of provisions for defined benefit plans concern the PWO AG. PWO de México S.A. de C.V. accounted for a pension provision amounting to EURk 180 (p/y: EURk 140).

The provisions for defined benefit plans are calculated in accordance with IAS 19 using the projected unit credit method. The pension obligations are recognized at the present value of the defined benefit obligations at the measurement date, and take into account likely future increases in pensions and salaries.

The Group has defined contribution plans. These resulted in a recognized expense at PWO Canada Inc. in the amount of EURk 67 (p/y: EURk 60) and at PWO UNITOOLS CZ in the amount of EURk 140 (p/y: EURk 126).

Employer contributions to the statutory state pension scheme were made in the amount of EURk 7,349 (p/y: EURk 6,630).

Defined benefit obligations have been measured on the basis of the following actuarial assumptions:

	2012	2011
Interest rate	3.3 %	4.5 %
Employee turnover rate	2.5 %	2.5 %
Future salary trend < 40 years	3.5 %	3.5 %
Future salary trend > 40 years	2.5 %	2.5 %
Future pension adjustments	2.0 %	2.0 %

The ten percent corridor rule is applied when measuring pension provisions and determining pension costs. Actuarial gains and losses are not recognized unless they exceed ten percent of the total amount of the obligation.

The following net obligations arise:

EURk	2012	2011
Present value of defined benefit obligations	42,469	34,270
Actuarial losses	-13,404	-6,320
Unrecognised past service cost	-19	-168
Balance sheet value as at Dec. 31	29,046	27,783

The changes in the present value of defined benefit obligations are as follows:

EURk	2012	2011
Present value of defined benefit obligations as at Jan. 1	34,270	30,779
Interest cost	1,515	1,498
Service cost	782	640
Pension payments rendered	-1,432	-1,369
Actuarial losses	7,350	2,591
of which experiential adjustments	-31	177
Past service cost	0	127
Foreign currency differences	-16	4
Present value of defined benefit obligations as at Dec. 31	42,469	34,270

The recognized amount of pension provisions and similar obligations reported in the balance sheet changed as follows when compared to the previous year:

EURk	2012	2011
Balance sheet value as at Jan. 1	27,783	26,848
Expenses from pension obligations	2,711	2,300
Pension payments rendered	-1,432	-1,369
Foreign currency differences	-16	4
Balance sheet valus as at Dec. 31	29,046	27,783

Of the pension provisions recognized in the balance sheet, EURk 27,551 (p/y: EURk 26,373) are non-current and EURk 1,495 (p/y: EURk 1,410) are current.

The amounts included in the income statement are composed as follows:

EURk	2012	2011
Service cost	782	640
Interest expenses	1,515	1,498
Actuarial losses	236	66
Past service cost	178	96
Expenses from pension obligations	2,711	2,300

The service cost and realized actuarial losses are reported under staff costs, while interest expense is reported under financial expenses.

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

The following table presents the defined benefit obligations for the current and prior reporting periods:

EURk	2012	2011	2010	2009	2008
Present value of defined benefit obligation	42,469	34,270	30,779	28,809	26,300
Experiential adjustments	-31	177	38	177	-638

Plan assets to meet pension obligations do not exist.

Other provisions

Other provisions consist of necessary amounts for employee-related expenses and other identifiable obligations and risks. The provisions recognized in the balance sheet include provisions for employees (obligations for age-related part-time working and anniversary bonuses) and provisions for contingent losses. It is expected that the total amount of obligations for age-related part-time working will accrue within 5 years after the reporting date.

Other provisions have changed as follows:

		Personnel-related provisions	Provisions for contingent losses
EURk	2012	2011	2012	2011
As at Jan. 1	4,705	4,714	243	288
Utilisation	-1,562	-1,291	0	-41
Releases	0	-20	-27	-148
Additions	1,553	1,302	34	144
of which accrued interest	79	110	2	10
As at Dec. 31	4,696	4,705	250	243
of which non-current	3,094	3,385	109	124
of which current	1,602	1,320	141	119

Grants from the Federal Employment Agency (Bundesagentur für Arbeit) as part of the retirement agreements of departing employees are reported as other assets in the amount of EURk 1,066 (p/y: EURk 660) and have not been offset against provisions.

Interest-bearing borrowings

Of the interest-bearing borrowings, EURk 49,988 (p/y: EURk 57,742) have a maturity of less than one year and EURk 3,642 (p/y: EURk 4,305) have a maturity of more than five years. Bank borrowings amount to EURk 89,212 (p/y: EURk 92,095).

The loans were granted at interest rates between 1.32% and 7.60%. Bank borrowings repayable on demand amounted to EURk 5,146 (p/y: EURk 7,140).

Of the bank borrowings, EURk 12,508 (p/y: EURk 18,572) are secured by mortgages and EURk 27,178 (p/y: EURk 22,134) by assignment as security. In addition, the usual retention of proprietary rights exists for the supply of raw materials and supplies and merchandise.

Other liabilities

Other liabilities include a non-current portion amounting to EURk 442 (p/y: EURk 460).

Finance leases and hire-purchase agreements

Finance leases are used for various technical equipment and machinery. In some cases, these leases contain a purchase options for the lessor. As at December 31, 2012, the assets had a carrying amount of EURk 9,380 (p/y: EURk 2,773). Due to the structure of the leases, the assets are depreciated over their expected useful life, pursuant to IAS 17.28, rather than according to the term of the lease agreement.

The future minimum lease payments under finance leases and hire-purchase agreements are reconciled to their present cash value as follows:

	Minimum lease payments		Present value of minimum lease payments
EURk	2012	2011	2012	2011
Residual term up to 1 year	2,255	823	1,884	695
Residual term 1 to 5 years	6,784	2,060	6,041	1,839
Residual term > 5 years	1,163	208	1,126	201
Total minimum lease payments	10,202	3,091	9,051	2,735
Less interest cost	-1,151	-356	0	0
Present value of minimum interest payments	9,051	2,735	9,051	2,735

Contingent liabilities and other financial obligations

A counter guarantee to secure age-related part-time working credits amounted to EURk 2,345 (p/y: EURk 2,345) as of the reporting date.

As at December 31, 2012 other financial obligations included purchase commitments of EURk 20,837 (p/y: EURk 28,642). These amounts apply to subsequent fiscal years according to maturity as follows:

	Obligations from non cancellable operating lease and rental agreements		Order commitments arising from investment orders *				Other financial obligations
EURk	2013 ff.	2012 ff.	2013 ff.	2012 ff.	2013 ff.	2012 ff.
Residual term up to 1 year	1,682	1,282	15,381	20,180	147	85
Residual term 1 to 5 years	1,127	1,463	0	3,124	745	684
Residual term > 5 years	3	30	0	0	1,752	1,794
Total	2,812	2,775	15,381	23,304	2,644	2,563

* Property, plant, and equipment and intangible assets

In some cases, the existing operating leases contain extension and call options.

21 | Financial risk management

The Group's financial risk management system is focused on the uncertainty of future financial market developments and aims at the minimization of adverse effects for the overall financial strength of the Group. The Management Board has the lead responsibility for this risk management system. The Board also sets out the general principles for risk management and defines the procedures. All significant concentrations of risk are shown in the notes and in the management report.

03 Consolidated Financial Statements

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

The key risks are described below:

Credit risk

The credit risk from trade receivables and other receivables is controlled by Progress-Werk Oberkirch AG and its subsidiaries based on uniform standards, procedures, and controls. The creditworthiness of the customer is regularly checked using credit reports and historical data. The customer's individual credit limits are set based on these findings. Outstanding trade receivables and other receivables are monitored regularly by a diligent management of receivables. Furthermore, commercial credit insurance has been concluded for additional protection and protects a large portion of the receivables. The need for valuation allowances is analyzed at each reporting date and appropriate allowances are made.

With regard to investments of cash and cash equivalents as well as the portfolio of derivative financial assets, the Group is exposed to potential losses from credit risks to the extent that financial institutions do not fulfill their obligations. PWO manages the resulting risk exposure through policies and guidelines of the Group Treasury as well as through diversification and the careful selection of financial institutions. In addition, all financial institutions are reviewed at regular intervals, particularly with the aim of quantifying their default risk. Currently, there are no cash and cash equivalents nor derivative financial assets which are overdue or impaired resulting from default.

As at December 31, 2012, the maximum credit risk of financial assets in the event of counterparty default was equivalent to the carrying amount of those instruments. Additional commercial credit insurance is being deducted for trade receivables and other receivables.

EURk	2012	2011
Trade receivables and other receivables	52,125	50,972
Protection from commercial credit insurance	-40,344	-38,026
Maximum default risk	11,781	12,946
Derivative financial assets with hedging relationships	1,226	555
Cash and cash equivalents	7,810	4,580

At December 31, 2012, the analysis of overdue but not impaired trade receivables and other receivables breaks down as follows:

EURk	2012	2011
Trade receivables and other receivables	52,125	50,972
of which neither overdue nor impaired	42,548	43,457
of which < 30 days overdue (but not impaired)	5,739	4,915
of which > 30-90 days overdue (but not impaired)	1,182	1,281
of which > 90-180 days overdue (but not impaired)	1,873	955
of which > 180-360 days overdue (but not impaired)	575	164
of which > 360 days overdue (but not impaired)	208	200

As at the reporting date, there were no indications of impairment for any non-impaired trade receivables or other receivables.

There are sufficient credit lines available from a number of banks for our current level of business. Financing risks are limited by an appropriate combination of short-term and long-term loans. Long-term customer contracts and the related investments and pre-financing of services are generally financed on a long-term, project-specific basis. The Group has secured nearly half of its financing needs with long-term financing at fixed interest rates. Additional derivative interest-rate hedges have been concluded when necessary.

The following table shows the maturities of the undiscounted cash flows resulting from the Group's financial liabilities as at the reporting date:

	< 1 year		1 to 5 years		> 5 years		Total
EURk	2012	2011	2012	2011	2012	2011	2012	2011
Bank borrowings	50,110	59,192	41,729	34,183	2,593	4,264	94,432	97,639
of which repayment of principal	48,104	57,047	38,592	30,944	2,516	4,104	89,212	92,095
of which interest payment	2,006	2,145	3,137	3,239	77	160	5,220	5,544
Liabilities to leasing companies	2,255	823	6,784	2,060	1,163	208	10,202	3,091
of which repayment of principal	1,884	695	6,041	1,839	1,126	201	9,051	2,735
of which interest payment	371	128	743	221	37	7	1,151	356
Trade payables	22,061	20,957	0	0	0	0	22,061	20,957
Derivative financial instruments with hedging relationships	358	972	846	1,674	0	0	1,204	2,646
Derivative financial instruments without hedging relationships	336	291	215	345	0	0	551	636

The amounts of derivative financial instruments with hedging relationships presented in the table above correspond to the undiscounted cash flows on a gross basis. The following table shows the undiscounted cash inflows and outflows:

	< 1 year		1 to 5 years		> 5 years		Total
EURk	2012	2011	2012	2011	2012	2011	2012	2011
Cash inflow	3,600	15,800	8,898	23,190	20	0	12,518	38,990
Cash outflow	-3,958	-16,772	-9,744	-24,864	-20	0	-13,722	-41,636
Net balance	-358	-972	-846	-1,674	0	0	-1,204	-2,646

Interest-rate risk

In order to assess risks arising from changes in interest rates, as a matter of principle, financial instruments must be categorized into those with fixed and those with variable interest rates, in accordance with IAS 32. Risks arising from changes in interest rates exist in the case of variable interest rate loans. These risks are addressed using interest-rate swaps. Interest rate risks are determined by means of a sensitivity analysis. These show the effects of changes in market interest rates on interest payments, interest income and expense, other income components, and where applicable, the effects on equity.

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

The interest rate sensitivity analysis is based on the following assumptions:

Changes in the market interest rates of primary financial instruments with fixed interest rates only affect income if these instruments are measured at fair value. Accordingly, all financial instruments with fixed interest rates measured at amortized cost are not subject to interest-rate risks as defined by IFRS 7. Currency derivatives are not accounted for due to their immateriality in the interest rate sensitivity analysis.

PWO is subject to interest rate risk at all locations. If the market interest rates at December 31, 2012 had been 100 basis points higher, earnings before taxes would have been EURk 244 (p/y: EURk 162) lower. If market interest rates at December 31, 2012 had been 100 basis points lower, earnings before taxes would have been EURk 236 (p/y: EURk 156) higher.

Currency risk

Currency risk is the risk of foreign-exchange-rate-induced fluctuations in the value of balance sheet items. A sensitivity analysis is conducted for each currency that constitutes a significant risk for the Company. This analysis is based on the following assumptions:

For the sensitivity analysis, the Group takes into account all monetary financial instruments that are not denominated in the functional currency of the respective separate entities. Thus, exchange rate differences arising from the translation of financial statements into the Group's reporting currency (translation risk) are not considered.

According to IFRS an exchange risk does not arise from financial instruments that are non-monetary items or from financial instruments denominated in the functional currency. Therefore, in the case of derivative financial instruments, only the currency derivatives are included in the sensitivity analysis, since not all interest-rate derivatives are exposed to currency risk. The hypothetical effect on profit or loss and equity for each separate primary item included in the sensitivity analysis is determined by comparing the carrying amount (calculated on the basis of the closing rate) with the translation amount, which in turn is determined by applying a hypothetical exchange rate.

If the EUR had appreciated by 10% against the CZK as at December 31, 2012, the earnings before taxes would have been EURk 239 higher (p/y: EURk 300). The net gains (losses) from cash flow hedges recorded in equity would have been EURk 779 lower (p/y: EURk 845). If the EUR had depreciated by 10% against the CZK as at December 31, 2012, the earnings before taxes would have been EURk 292 lower (p/y: EURk 366) and net gains (losses) from cash flow hedges recorded in equity would have been EURk 952 higher (p/y: EURk 844).

If the EUR had appreciated by 10% against the USD as at December 31, 2012, the earnings before taxes would have been EURk 85 higher (p/y: EURk 147 lower). The net gains (losses) from cash flow hedges recorded in equity would have been EURk 1,725 higher (p/y: EURk 1,178 lower). If the EUR had depreciated by 10% against the USD as at December 31, 2012, the earnings before taxes would have been EURk 103 lower (p/y: EURk 213) and net gains (losses) from cash flow hedges recorded in equity would have been EURk 1,939 lower (p/y: EURk 1,333 higher).

If the EUR had appreciated by 10% against the CAD as at December 31, 2012, the earnings before taxes would have been EURk 150 lower (p/y: EURk 1). The net gains (losses) from cash flow hedges recorded in equity would have been EURk 1,331 higher (p/y: EURk 1,552). If the EUR had depreciated by 10% against the CAD as at December 31, 2012, the earnings before taxes would have been EURk 183 higher (p/y: EURk 1) and net gains (losses) from cash flow hedges recorded in equity would have been EURk 1,625 lower (p/y: EURk 1,883).

Capital management

The primary objective of the Group's capital management is to maintain a high credit rating and a favorable equity ratio. In order to maintain the capital structure, adjustments to dividend payments to shareholders may be made and new shares may be issued. The monitoring of capital is performed via the gearing ratio, which is the ratio of net financial liabilities to equity. According to internal guidelines, the target gearing is in the range of 60% to 80%. This range had been significantly exceeded in 2009 and subsequent years as result of the economic and financial crisis. The aim is to bring this ratio back into the target range as quickly as possible. No changes were made to the objectives and guidelines as at December 31, 2012 and December 31, 2011. Net financial liabilities are defined as interest-bearing borrowings less cash and cash equivalents.

EURk	2012	2011
Interest-bearing loans	98,263	94,830
Less cash and cash equivalents	-7,810	-4,580
Net financial liabilities	90,453	90,250
Total equity	104,802	74,784
Gearing ratio	86 %	121 %

22 | Financial instruments

As at December 31, 2012 the following derivative financial instruments were open:

EURk	Nominal value	Redemption 2012	Residual value	Variable rate	Term	Market value
Interest-rate swaps	23,560	2,015	17,097	1.19 % to 4.19 %	2013 to 2016	-492
Currency hedging instruments without hedge accounting	3,789	0	3,789	-	2013 to 2014	6
Currency hedging instruments with hedge accounting	56,334	0	56,334	-	2013 to 2018	288

The market value changes of derivative financial instruments used to hedge future cash flows were recognized directly in equity, and have taken into account tax effects of EURk 264 (p/y: EURk –879).

As part of hedge accounting, EURk 99 (p/y: EURk 674) was derecognized from equity and recorded in profit or loss. Of the amount derecognized, EURk 0 (p/y: EURk 0) was due to hedge ineffectiveness.

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

At the reporting date it was assumed that all planned transactions will occur. Furthermore, it is expected that the hedged cash flows will occur and will affect profits and losses within the period specified in the table above.

The following table lists the carrying amounts and fair values according to valuation categories and classes:

	Valuation category	Carrying amount		Fair Value
EURk	(IAS 39)	2012	2011	2012	2011
ASSETS
Trade receivables
and other receivables	LaR	52,125	50,972	52,125	50,972
Other financial assets		1,226	555	1,226	555
of which derivatives with hedging relationship	n.a.	1,220	555	1,220	555
of which derivatives without hedging relationship	FAHfT	6	0	6	0
of which deposits > 3 months	LaR	0	0	0	0
Cash and cash equivalent	LaR	7,810	4,580	7,810	4,580
LIABILITIES
Interest-bearing loans		98,263	94,830	103,751	98,885
Bank borrowings	FLAC	89,212	92,095	93,790	95,926
of which variable interest rate		45,310	42,908	45,310	42,908
of which fixed interest rate		43,902	49,187	48,480	53,018
Liabilities to leasing companies	n.a.	9,051	2,735	9,961	2,959
of which variable interest rate		67	86	67	86
of which fixed interest rate		8,984	2,649	9,894	2,873
Trade payables	FLAC	22,061	20,957	22,061	20,957
Other financial liabilities		1,424	2,492	1,424	2,492
of which derivatives with hedging relationship	n.a.	932	1,796	932	1,796
of which derivatives without hedging relationship	FLHfT	492	696	492	696
of which aggregated according to IAS 39
measurement categories:
Loans and Receivables (LaR)		59,935	55,552	59,935	55,552
Financial Assets Held for Trading (FAHfT)		6	0	6	0
Financial Liabilities Measured at Amortised Cost (FLAC)		111,273	113,052	115,851	116,883
Financial Liabilities Held for Trading (FLHfT)		492	696	492	696

The Group applies the following hierarchy in determining and disclosing the fair value of financial instruments according to valuation procedures:

Level 1 | Quoted prices (unadjusted) on active markets for identical assets or liabilities.

Level 2 | Procedures in which all input parameters which materially affect the recognized fair value are either directly or indirectly observable.

Level 3 | Procedures using input parameters which materially affect the recognized fair value and are not based on observable market data.

Financial instruments carried at fair value:

		Level 1	Level 2		Level 3		Total
EURk	2012	2011	2012	2011	2012	2011	2012	2011
ASSETS
Other financial assets	0	0	1,226	555	0	0	1,226	555
of which derivatives with hedge relationship	0	0	1,220	555	0	0	1,220	555
of which derivatives without hedge relationship	0	0	6	0	0	0	6	0
LIABILITIES
Other financial liabilities	0	0	1,424	2,492	0	0	1,424	2,492
of which derivatives with hedge relationship	0	0	932	1,796	0	0	932	1,796
of which derivatives without hedge relationship	0	0	492	696	0	0	492	696

There were no reclassifications between assessments at fair value of Level 1 and Level 2 and no reclassifications into or from values at fair value of Level 3.

The following total comprehensive income and expenses arose with respect to the position of financial instruments in the portfolio measured at fair value:

		Assets		Liabilities
EURk	2012	2011	2012	2011
Recognized in the income statement: Derivatives without hedge relationship	125	0	85	-189
Recognized in equity: Derivatives with hedge relationship	1,003	-61	140	-238

The income or expenses resulting from the fair value measurement of derivatives without a hedge relationship is reported in other operating income or other operating expenses.

Notes to the Balance Sheet Notes to the Consolidated Financial Statements

The following table shows the net gains or losses on financial instruments, which are recognized in the income statement (excluding derivative financial instruments, which are included in hedge accounting):

EURk	2012	2011
Loans and Receivables (LaR)	-108	9
of which due to disposal	44	100
of which due to remeasurement	0	0
of which due to impairment/impairment reversal	54	-116
of which due to currency effects	-206	25
Financial Assets Held for Trading (FAHfT)	125	0
of which due to disposal	0	0
of which due to remeasurement	125	0
Financial Liabilities Measured at Amortised Cost (FLAC)	-43	1,331
of which due to disposal	103	275
of which due to remeasurement	0	0
of which due to impairment/impairment reversal	0	0
of which due to currency effects	-146	1,056
Financial Liabilities Held for Trading (FLHfT)	85	35
of which due to disposal	0	224
of which due to remeasurement	85	-189

Additional Information

23 | Research and development costs

Research costs were not incurred. Of the customer-related development costs amounting to EURk 9,390 (p/y: EURk 8,120), EURk 1,551 (p/y: EURk 1,128) were capitalized as intangible assets.

24 | Total remuneration of the Management Board and the Supervisory Board

In the 2012 fiscal year, the total remuneration of the Management Board (short-term remuneration) amounted to EURk 1,529 (p/y: EURk 1,407). This included a performance-related component of EURk 783 (p/y: EURk 665). In fiscal year 2012, for the members of the Management Board, service costs for pension benefits in the amount of EURk 140 (p/y: EURk 125) were incurred.

The total remuneration for the Supervisory Board for fiscal year 2012 amounted to EURk 173 (p/y: EURk 176).

The Group management report contains the compensation report along with the individual compensation details of the Management Board and Supervisory Board.

Pension payments to former members of the Management Board of PWO AG and their surviving dependents amounted to EURk 234 (p/y: EURk 227). As of the reporting date, the correspondent pension provisions amounted to EURk 2,146 (p/y: EURk 1,989).

25 | Auditor's fee

The auditor's fee for the fiscal year under review which was recorded as an expense according to Section 314 (1) no. 9 HGB comprises the following:

EURk	2012	2011
Audit	152	154
Tax consultancy services	40	39
Other services	10	54
Total	202	247

The auditor's fee that was expensed in the year under review included non-periodic charges of EURk 17 (previous year: EURk 12).

Further certification and valuation services were not utilized.

26 | Related party disclosures

Related parties include the Group's ultimate parent company as well as the members of the Management Board and Supervisory Board. In the fiscal year under review, there were no transactions between the Group and the ultimate parent company. There were no relationships with related parties with regard to the supply of goods or the rendering of services. Please refer to the final declaration in the Dependence Report which is included in the Group management report.

Additional Information Notes to the Consolidated Financial Statements

According to IAS 24, reportable compensation of related parties of the Group includes the remuneration of the Management Board and the Supervisory Board. The Group management report includes the remuneration report of the Management Board and the Supervisory Board on an individual basis.

27 | Additional information on the statement of cash flows

In the statement of cash flows, cash flows are presented on the basis of IAS 7. The amounts taken into consideration in the cash flow statement include cash and cash equivalents and bank borrowings due on demand. The bank borrowings payable on demand, amounting to EURk 5,146 (p/y: EURk 7,140) have been included in the balance sheet item "current interest-bearing borrowings".

28 | Segment reporting

In line with the Group's internal management system, the individual production sites provide the basis for the segment reporting. The Group's main decision-making body is defined as the Management Board of PWO AG. The segments are determined on the basis of the location of the Group's assets. Accordingly, the revenues of these segments are also allocated according to the location of assets. The regions are categorized as Germany, Rest of Europe, NAFTA Area and Asia. The NAFTA Area is comprised of the locations in Canada and Mexico.

Earnings, assets, liabilities, and depreciation and amortization among the individual segments are eliminated in the column "consolidation effects". This column also contains items that cannot be allocated to individual segments. Segment data is calculated in accordance with the accounting policies applied in the consolidated financial statement.

As at December 31, 2012 and December 31, 2011, no customers were identified with whom the Group had achieved 10% or more of total revenues.

Segment information by region

Financial year 2012

		Rest of	NAFTA		Consolidation
EURk	Germany	Europe	Area	Asia	effects	Group
Total revenue	247,819	37,693	82,755	6,508	0	374,775
Inter-segment revenue	-12,905	-3,051	-730	-17	0	-16,703
External revenue	234,914	34,642	82,025	6,491	0	358,072
Total output	251,230	40,029	83,779	7,319	-15,733	366,624
Other income	4,080	859	1,402	755	-2,589	4,507
Other expenses (aggregated)	226,578	34,978	78,035	9,722	-17,995	331,318
Depreciation and amortisation	11,302	2,291	4,596	811	-65	18,935
Earnings before interest and taxes (EBIT)	17,430	3,619	2,550	-2,459	-262	20,878
Financial income	689	1	0	3	-641	52
Financial expenses	3,722	1,249	1,111	919	-623	6,378
Earnings before taxes (EBT)	14,397	2,371	1,439	-3,375	-280	14,552
Income taxes	4,101	-117	441	3	-35	4,393
Net income for the period	10,296	2,488	998	-3,378	-245	10,159
Assets	147,291	46,761	59,260	34,436	-12,214	275,534
of which non-current assets	64,614	26,133	34,573	23,225	-238	148,307
Liabilities	22,558	6,548	15,293	32,938	93,395	170,732
Investments	19,560	5,051	9,514	7,113	-33	41,205

Additional Information Notes to the Consolidated Financial Statements

Segment information by region

Financial year 2011

		Rest of	NAFTA		Consolidation
EURk	Germany	Europe	Area	Asia	effects	Group
Total revenue	237,652	41,724	58,294	4,986	0	342,656
Inter-segment revenue	-8,791	-1,727	-1,035	-23	0	-11,576
External revenue	228,861	39,997	57,259	4,963	0	331,080
Total output	236,217	39,066	58,925	6,033	-11,409	328,832
Other income	3,780	1,207	2,909	1,746	-2,729	6,913
Other expenses (aggregated)	211,526	36,011	58,026	8,311	-13,957	299,917
Depreciation and amortisation	10,376	2,350	3,265	720	-44	16,667
Earnings before interest and taxes (EBIT)	18,095	1,912	543	-1,252	-137	19,161
Financial income	754	1	0	3	-747	11
Financial expenses	3,807	1,274	1,261	721	-771	6,292
Earnings before taxes (EBT)	15,042	639	-718	-1,970	-113	12,880
Income taxes	4,361	-523	55	3	-32	3,864
Net income for the period	10,681	1,162	-773	-1,973	-81	9,016
Assets	124,998	40,655	57,192	23,950	-6,060	240,735
of which non-current assets	56,457	23,376	29,757	17,108	-271	126,427
Liabilities	24,614	6,518	17,187	22,479	95,153	165,951
Investments	18,278	1,356	5,163	3,331	-154	27,974

The segment assets and segment liabilities correspond to the values from the balance sheets of the single Group companies. The Germany segment contains significant non-cash items in an amount of EURk 2,701(p/y: EURk 2,195).

The following table shows the breakdown of external revenues into the three strategic product areas. The product areas are discussed in the Group management report and can be found in the "Company Profile" section.

Revenue

EURk	2012	2011
Mechanical components for electrical and electronic applications	86,198	92,219
Safety components for airbags, seats, and steering	105,752	108,179
Structural components and subsystems for vehicle bodies and chassis	166,122	130,682
Total	358,072	331,080

29 | Discretionary judgment, estimates, and assumptions

The Group performs impairments tests for goodwill at least once a year. This requires making estimates with regard to the value in use of cash-generating units to which goodwill is allocated. For the purpose of estimating value in use, the Group is required to determine, on the basis of estimates, the projected future cash flows associated with the relevant cash-generating unit, as well as to select an appropriate discount rate in order to determine the present value of the aforementioned cash flows. At December 31, 2012, the carrying amount of goodwill was EURk 5,485 (p/y: EURk 5,478). Regarding the sensitivity analysis, we refer to Note 3 of the section on "intangible assets".

Deferred tax assets are recognized for all unutilized tax-loss carryforwards and tax credits, to the extent that, based on tax planning, it is probable that future taxable profit will be available against which the unused tax losses and tax credits can actually be utilized. As at December 31, 2012, deferred tax assets relating to as yet unutilized tax-loss carryforwards in an amount of EURk 1,913 (p/y: EURk 2,158) and deferred tax assets relating to tax credits in an amount of EURk 2,102 (p/y: EURk 1,527) had been formed. Of the tax-loss carryforwards, EURk 444 was attributable to PWO Canada Inc. (p/y: EURk 422), EURk 613 to PWO UNITOOLS CZ a.s. (p/y: EURk 1,092), and EURk 856 to PWO de México S.A. de C.V. (p/y: EURk 644). The tax credits concern PWO UNITOOLS CZ a.s.

It is assumed that the deferred tax assets will retain their value due to the planned business development for the subsequent years. Determining the amount of deferred tax assets requires significant judgment with regard to timing and amount of future taxable profit as well as the future tax planning strategies. As at December 31, 2012, the recognized value of tax-loss carryforwards was EURk 6,532 (p/y: EURk 8,769), translated into euro at the exchange rate on the reporting date. The unrecognized tax-loss carryforwards which may be utilized for a limited period of time was EURk 17,734 (p/y: EURk 14,273). Further details are provided in Note 12.

EURk	31/12/2012	31/12/2011
Within a period of 1 year	0	0
Within a period of 2 years	2,990	0
Within a period of 3 years	2,890	3,013
Within a period of 4 years	2,904	2,696
Within a period of 5 years	3,445	2,971
Subsequent years	5,505	5,593
Total	17,734	14,273

The expiry of the unrecognized tax-loss carryforwards which may be utilized for a limited period of time is presented below:

Expenses relating to defined post-employment pension plans are determined on the basis of actuarial methods. Actuarial valuation is conducted on the basis of assumptions in respect of discount rates, the expected rate of return on plan assets, future rates of salary increase, mortality, and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

Development costs are capitalized in accordance with the accounting policy described. The initial capitalization of costs is based on the Group's assessment that the technical and economic feasibility has been established. For the purposes of determining the amounts to be capitalized, the Group makes assumptions as to the project's future cash flows, the applicable discount rates and the period over which the expected future benefit will accrue. The carrying amount of capitalized development costs as at December 31, 2012 was EURk 4,161 (p/y: EURk 3,350). This amount mainly consisted of investments in the development of steering components. Series orders are on hand for these projects.

30 | Group relationships

The consolidated financial statements are included in the consolidated financial statements of Consult Invest Beteiligungsberatungs-GmbH, Böblingen, as the premier group parent company, which are published in the Bundesanzeiger (Federal Gazette) in electronic form.

31 | Corporate Governance

The Declaration of Conformity issued by the Management Board and Supervisory Board in December 2012 in connection with the German Corporate Governance Code, is permanently available to shareholders via the Company's website.

32 | Events subsequent to the end of the fiscal year

No events of significant importance have been recorded since the end of the fiscal year.

Oberkirch, March 18, 2013

The Management Board

Karl M. Schmidhuber Bernd Bartmann Dr. Winfried Blümel (Chairman)

Audit Opinion

The following audit certificate was awarded by Ernst & Young GmbH for the consolidated financial statements and consolidated management report which was amalgamated with the company management report:

"We have audited the consolidated financial statements prepared by Progress-Werk Oberkirch Aktiengesellschaft, Oberkirch comprising the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes as well as the consolidated management report amalgamated with the company management report for the fiscal year from January 1 to December 31, 2012. It is the responsibility of the legal representatives of the Company to prepare the consolidated financial statements and consolidated management report in accordance with International Financial Reporting Standards as applicable in the EU and with the supplementary provisions of German commercial law applicable pursuant to Section 315a, (1) of the German Commercial Code (HGB). Our task is to deliver a judgment on the consolidated financial statements and consolidated management report on the basis of the audit we have undertaken.

We have conducted our audit of the consolidated financial statements in accordance with Section 317 of the German Commercial Code (HGB) in consideration of the German auditing standards defined by the Institut der Wirtschaftsprüfer (IDW). These require the audit to be planned and conducted in such a manner as to detect, with adequate certainty, any inaccuracies or infringements which may have a significant impact on the impression of the assets, financial and earnings situation, as conveyed by the consolidated financial statements in consideration of the applicable accounting standards, and by the consolidated management report. In determining the actions to be taken as part of the auditing procedure, consideration was given to the knowledge of the business activities of the Group and its economic and legal environment, as well as to the possible errors likely to be encountered. In the course of the audit, the effectiveness of the internal accounting control system and proof of the information contained in the consolidated financial statements and consolidated management report, were assessed on the basis of random samples. The audit encompasses an appraisal of the annual financial statements of the companies integrated into the consolidated accounts, the demarcation of the group of consolidated companies, the accounting and consolidation principles applied, and the principal assessments made by the officers legally entitled to represent the Company, as well as an evaluation of the overall presentation of the consolidated financial statements and consolidated management report. We are of the opinion that our audit forms an adequately secure foundation on which to base our judgment.

Our audit has caused us to raise no objections.

In our judgment based on the findings of our audit, the consolidated financial statements comply with International Financial Reporting Standards as applicable in the EU and with the supplementary provisions of German commercial law applicable pursuant to Section 315a, (1) of the German Commercial Code (HGB) and in consideration of these standards convey an image of the assets, financial and earnings position of the Group which concurs with the true circumstances. The consolidated management report is consistent with the consolidated financial statements and overall presents an accurate image of the position of the Group and the opportunities and risks of future development."

Freiburg i. Br., March 22, 2013

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Nietzer Ruby

Auditor Auditor

129 01 Overview 02 Management Report 04 Further Information 03 Consolidated Financial Statements Audit Opinion

Responsibility Statement

Responsibility Statement

"We hereby confirm to the best of our knowledge, and in accordance with the applicable reporting principles, that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results of operations of the Group, and furthermore that the consolidated management report includes a fair review of the development of the business including the results and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group."

Oberkirch, March 18, 2013

The Management Board

Karl M. Schmidhuber Bernd Bartmann Dr. Winfried Blümel (Chairman)

The most important order is the one entrusted to us by society.

Our corporate activities are characterized by the responsibility we exercise toward society in the social, economic, and environmental areas.

Our products contribute to keeping the risk of accidents and damage to a minimum and to achieving the highest comfort possible in modern automobiles. We see this as opportunity and potential which is far from being exhausted.

However, we understand product quality to mean that our products not only meet the statutory requirements and satisfy customer needs, but are also as environmentally friendly and socially responsible as possible in their production, application, and disposal. We place high value on the efficient use of raw materials and energy during production as well as in waste disposal or recycling.

New energy-saving technologies such as lightweight components, more efficient gearboxes, or smaller engines with lower energy consumption are gaining in importance worldwide. Our developers often achieve ground-breaking solutions which open up additional room for manoeuver in product design. Our modules, components, and systems reduce the need for materials, weight, and assembly work. This is how raw material costs can be greatly reduced and the performance can be increased in an environmentally-friendly manner.

The figures behind the vision.

Solid financial resources are a key prerequisite in financing further growth from our own resources. Through the capital increase in which 625,000 new PWO shares were issued at a ratio of 4:1, we have included our shareholders in the financing of our further growth.

We are pleased with the high level of interest. In May 2012, the new shares were fully subscribed. After transaction costs, PWO received proceeds of EUR 22.0 million. Now, with an equity ratio of 38 percent, we have created a solid basis from which we can make the necessary investment in advancing our growth for the new business we have acquired.

The higher order volume requires investment at all locations. The global character of this industry also requires an expansion in our international presence. We want to achieve this through additional assembly plants near our customers – preferably in Asia and North America. This will also allow us to secure short distances and competitive prices even in the face of growing international competition.

• Governing Bodies 136
• Proposal for the Appropriation of Profits 138

Governing Bodies

Supervisory Board

Dieter Maier, Stuttgart

Chairman of the Supervisory Board Former member of the Executive Board of Baden-Württembergische Bank AG, Stuttgart

FURTHER MANDATES

• Düker GmbH & Co. KGaA, Karlstadt | Member of the Supervisory Board
• Leitz GmbH & Co. KG, Oberkochen | Chairman of the Advisory Board

Dr. jur. Klaus-Georg Hengstberger, Böblingen

Deputy Chairman of the Supervisory Board Managing Director of Consult Invest Beteiligungsberatungs-GmbH, Böblingen

FURTHER MANDATES

Düker GmbH & Co. KGaA, Karlstadt | Chairman of the Supervisory Board

Herbert König, Renchen-Erlach*

Industrial clerk and Chairman of the Works Council of PWO AG

Ulrich Ruetz, Ludwigsburg

Former Chairman of the Management Board of BERU AG, Ludwigsburg

FURTHER MANDATES

• Düker GmbH & Co. KGaA, Karlstadt | Deputy Chairman of the Supervisory Board
• Sumida Corporation, Tokyo, Japan | Member of the Board
• Wüstenrot Holding AG, Ludwigsburg | Member of the Supervisory Board
• Wüstenrot & Württembergische AG, Stuttgart | Member of the Supervisory Board

Katja Ullrich (née Hertwig), Durbach*

Commercial training officer and Member of the Works Council of PWO AG

Dr. Gerhard Wirth, Stuttgart

Attorney-at-law, partner in the law firm Gleiss Lutz Hootz Hirsch Partnerschaftsgesellschaft von Rechtsanwälten, Steuerberatern

FURTHER MANDATES

• Karl Danzer GmbH & Co. KG, Reutlingen | Chairman of the Advisory Board
• Düker GmbH & Co. KGaA, Karlstadt | Member of the Supervisory Board
• Wolff & Müller Holding GmbH & Co. KG, Stuttgart | Member of the Advisory Board

Supervisory Board Management Board Governing Bodies

Management Board

Dipl.-Ing. Karl M. Schmidhuber, Alzenau

Chairman Market and Technology

FURTHER MANDATES

• PWO Canada Inc., Kitchener, Canada | Director
• PWO Holding Co., Ltd., Hong Kong, China | Director
• PWO High-Tech Metal Components (Suzhou) Co., Ltd., Suzhou, China | Chairman of the Board of Directors
• PWO High-Tech Tool Trading (Suzhou) Co., Ltd., Suzhou, China | Chairman of the Board of Directors
• PWO de México S.A. de C.V., Puebla, Mexico | Chairman of the Board of Directors

Bernd Bartmann, Offenburg

Administration and Finance

FURTHER MANDATES

• PWO Canada Inc., Kitchener, Kanada | Director
• PWO UNITOOLS CZ a.s., Valašské Mezirˇícˇí, Czech Republic | Member of the Supervisory Board
• PWO Holding Co., Ltd., Hong Kong, China | Director
• PWO High-Tech Metal Components (Suzhou) Co., Ltd., Suzhou, China | Director
• PWO High-Tech Tool Trading (Suzhou) Co., Ltd., Suzhou, China | Director
• Sparkasse Offenburg/Ortenau, Offenburg | Member of the Advisory Board

Dr.-Ing. Winfried Blümel, Oberkirch

Production and Materials

FURTHER MANDATES

• PWO UNITOOLS CZ a.s., Valašské Mezirˇícˇí, Czech Republic | Chairman of the Supervisory Board
• PWO de México S.A. de C.V., Puebla, Mexico | Member of the Board of Directors
• Offenburg University of Applied Sciences | Member of the University Council

Proposal for the Appropriation of Profits

It is proposed to the Annual General Meeting that the unappropriated retained earnings of PWO AG to December 31, 2012 in the amount of EUR 5,025,949.03 be appropriated as follows:

Payment of a dividend of EUR 1.60
per dividend-bearing share	5,000,000.00 EUR
Carried forward to new account	25,949.03 EUR

The proposal for the appropriation of the unappropriated retained earnings does not take treasury shares into account. Should the Company hold shares in treasury at the time a resolution on the appropriation of the unappropriated retained earnings is adopted by the Annual General Meeting, the sum to be distributed shall be reduced by the proportion of the dividend accruing to the treasury shares. The sum carried forward to new account shall increase by the same amount.

Oberkirch, March 18, 2013

The Management Board

Karl M. Schmidhuber Bernd Bartmann Dr. Winfried Blümel (Chairman)

Progress-Werk Oberkirch AG

Industriestraße 8 | 77704 Oberkirch P.O. Box 13 44 | 77697 Oberkirch Germany Telephone: +49 7802 84-0 Fax: +49 7802 84-356 info@progress-werk.de www.progress-werk.de

Financial Calendar

06/05/2013	Interim Financial Report 1st Quarter 2013
22/05/2013	Annual General Meeting 2013
31/07/2013	Interim Financial Report 2nd Quarter and Half-Year 2013
04/11/2013	Interim Financial Report 3rd Quarter and 9 Months 2013
Nov. 2013	German Equity Forum, Frankfurt
10/04/2014	Annual Report 2013
06/05/2014	Interim Financial Report 1st Quarter 2014

Your Investor Relations contacts

Bernd Bartmann Member of the Management Board (Administration and Finance) Telephone: +49 7802 84-347 Fax: +49 7802 84-789 E-Mail: ir@progress-werk.de

Charlotte Frenzel Investor Relations Telephone: +49 7802 84-844 Fax: +49 7802 84-789 E-Mail: ir@progress-werk.de

Conception, photos, design and realisation

Wirtschaftskommunikation Co-Produktion@B&P Bransch & Partner GmbH, Stuttgart

The PWO Annual Report is published in German (decisive legal text) and as translation in English.

Progress-Werk Oberkirch AG

P.O. Box 13 44 77697 Oberkirch Germany

Telephone: +49 7802 84-0 Fax: +49 7802 84-356 info@progress-werk.de www.progress-werk.de