TWINTEC INTERIM REPORT 2016 THE 360° EMISSION CONTROL … · include, in particular, SCR systems, active and pas-sive particulate filters and associated services. These activities

TWINTEC INTERIM REPORT 2016

THE 360° EMISSION CONTROL COMPANY

2 TWINTEC 2016

CONTENTS TWINTEC INTERIM REPORT 2016 FOR THE PERIOD FROM JANUARY 1 TO JUNE 30, 2016

Available for download in PDF format at: http://twintecag.twintecbaumot.de/en/investor-relations/publications/reports/

Key figures ……………………………………………………………… 3

Consolidated interim report ……………………………………… 4 I. Business profile of the Twintec Group …………………………… 4 Group structure and operations ……………………………… 4 Goals and strategies …………………………………………… 8 Management and control system ………………………… 10 Research and development ……………………………… 11 II. Economic report …………………………………………… 12 Framework conditions …………………………………… 12 Trend of business ………………………………………… 12 Net assets, financial position and results of operations … 14 Non-financial performance indicators …………………… 15 III. Overall assertion regarding the trend of business ……… 16 IV. Supplementary report ……………………………………… 17 V. Forecast, opportunities and risks ………………………… 18 Outlook ……………………………………………………… 18 Opportunities and risk …………………………………… 20 VI. Dependency report ………………………………………… 24

Consolidated financial statements ……………………………… 25 Consolidated balance sheet as of June 30, 2016 ………… 26 Consolidated income statement January 1 to June 30, 2016 ………………………………… 28 Notes to the consolidated financial statements as of June 30, 2016 …………………………………………… 29 Consolidated cash flow statement January 1 to June 30, 2016 …………………………………… 42 Consolidated statement of changes in equity as of June 30, 2016 …………………………………………… 44

2 TWINTEC 2016 3 TWINTEC 2016

KEY FIGURES 1ST HY 2016

Key figures, income statement(per HGB) in KEUR

Jan 1, 2016 -June 30, 2016

Jan 1, 2015 -June 30, 2015

Change absolute

HY16 - HY15in %

Revenue 19,770 8,881 10,889 122.61Total output 21,032 9,212 11820 128.31EBITDA -1,672 -2,419 747 30.88EBIT -4,311 -3,660 -651 -17.79EBT -4,576 -3,830 -746 -19.48 Consolidated net income before use -4,539 -4,794 255 5.32

Key figures, CFS(per HGB) in KEUR

Jan 1, 2016 -June 30, 2016

Jan 1, 2015 -June 30, 2015

Change absolute

HY16 - HY15in %

Cash flow operative -1,837 -1,047 -790 -75.5Cash flow overall 133 1,058 -925 -87.4

Employees (Headcount, per HGB)

Jan 1, 2016 -June 30, 2016

Jan 1, 2015 -June 30, 2015

Change absolute

HY16 - HY15in %

Number of employees on average 364 74 290 391.9Number of employees on closing date 353 74 279 377.0

Key figures, balance sheet(per HGB) in KEUR

Jan 1, 2016 -June 30, 2016

Jan 1, 2015 -June 30, 2015

Change absolute

HY16 - HY15in %

Total assets 31,732 24,690 7,042 28.52Equity 9,655 12,634 -2,979 -23.58Equity ratio [%] 30.4 51.2 -20.8 -40.63

Financial liabilities 14,626 9,480 5,146 54.28-of which non-current 2,720 2,874 -154 -5.36-of which current 11,906 6,606 5,300 80.23Net financial position (net debt) -4,572 -1,681 -2,891 -171.98

Working Capital 1 2,536 5,333 -2,797 -52.45

Earnings per share [EUR] -0,1 -0,13 0,03 23.08Number of shares on closing date 46,067,875 32,287,500 13,780,375 42.68

1 Working Capital: current assets – current liabilities

4 TWINTEC 20164 TWINTEC 2016

CONSOLIDATED INTERIM REPORT PART I »»

BASIS OF THE GROUP

1.1 GROUP STRUCTURE AND OPERATIONS

Thanks to the buy-and-build strategy it has pursued in recent years, Twintec AG has a much broader posi-tion today than it has had in the past.

Since the takeover of Baumot AG in 2013, the Group now does business as the TwintecBaumot Group. Taking into account the October 2015 acquisition of Kontec GmbH with its seven subsidiaries and the Group’s new identity in light of this, the Executive Board also intends to institute a unified name for the company, one that integrates all of the subsidiaries. It is expected to be decided on at this year’s general meeting.

Business model

The TwintecBaumot Group is a leading provider of comprehensive solutions all along the value chain in the areas of exhaust-aftertreatment and engine devel-opment. It offers its customers high-quality products and services from its Design & Engineering, Products & Solutions and Testing & Validation Services divi-sions. These are used in multiple business sectors including OEMs (original equipment manufacturers), retrofitting and aftermarket (repairs and spare parts).

The target sectors it addresses include, in particular, on-road (e.g. cars, trucks and other commercial vehi-cles), off-road (e.g. agricultural machinery or station-ary equipment) and other sectors, such as the mar-itime industry. The TwintecBaumot Group therefore targets a wide range of customers, from vehicle and engine builders to original component manufacturers, tier 1 suppliers and highly specialized manufacturers in niche markets.

Following the Kontec acquisition, the Group has more than 350 employees on its payroll as of December 31, 2015, offering decades of experience in the field of exhaust-aftertreatment.

Kontec GmbH, acquired in 2015 along with its sub-sidiary DIF Die Ideenfabrik GmbH, forms the Group’s OEM development arm and provides renowned OEMs with low-emission engines and exhaust-after-treatment systems. Acquired in 2013, Baumot AG ranks among Europe’s leading solution providers for SCR systems, as well as for active and passive particulate filters in the OEM and retrofit business fields. In addition to this, as a development specialist for emissions technology, Twintec Technology GmbH provides its customers, particularly in the retrofit and aftermarket areas, with innovative emissions-reducing solutions.

With Interkat Katalysatoren GmbH, the TwintecBaumot Group held know-how on catalytic coating services which were offered across all industries until the time of sale on October 31, 2016.

Even after the sale of Interkat on October 31, 2016, the TwintecBaumot Group continues to have access to its products. The key strategic motive behind this transaction has been the development of Interkat since 2013. The subsidiary was repositioned in niche markets in the field of heterogeneous catalysis. This repositioning made it possible to establish a sus-tainable and stable business on the one hand. On the other hand, Interkat moved away from the core business of the TwintecBaumot Group. Therefore, the Executive Board decided to sell Interkat’s assets in order to ensure a clear profile on the market.

Group structure and scope of consolidation

In total, 16 companies were included and consolidat-ed as of June 30, 2016, in the consolidated finan-cial statements of Twintec AG. Compared with the previous year, the scope of consolidation with Kontec GmbH, which was economically effective as of Oc-tober 1, 2015, and its seven subsidiaries has sub-stantially expanded. Further details on the changes in the scope of consolidation are given in the ‘Scope of consolidation’ section on page 29.



4 TWINTEC 2016

As of June 30, 2016, the TwintecBaumot Group consisted of Twintec AG as the corporate parent company and its four direct subsidiaries. At the same time, Twintec AG assumes the functions of a classic financial and management holding, while the op-erating business was exercised by the subsidiaries Kontec GmbH, Baumot AG, Twintec Technologie GmbH and Interkat Katalysatoren GmbH and their affiliates. Twintec AG held 100% of the shares in all subsidiaries.

Divisions

During the 2016 reporting period, the operational activities of the TwintecBaumot Group were divided across the three divisions – OEM, Retrofit & Aftermar-ket and Catalytic Coating.

In the OEM division, activities were bundled in the development, design, simulation and validation of low-emission engines and exhaust-aftertreatment systems for leading original equipment manufactur-ers. Kontec GmbH, together with its subsidiary DIF (Die Ideenfabrik GmbH), focused on the development of low-emission engines and exhaust-aftertreatment systems for the target industries of on- and off-road; Kontec GmbH focuses on the on-road sector and DIF GmbH on off-road.

In the Retrofit & Aftermarket division, innovative solutions for reducing exhaust emissions for the retrofitting of already registered vehicles and main-tenance-related replacement of existing systems were developed, manufactured and marketed. These include, in particular, SCR systems, active and pas-sive particulate filters and associated services. These activities were bundled in Baumot AG and Twintec Technologie GmbH.

Interkat Katalysatoren GmbH, a specialist for high-efficiency catalytic coatings to reduce emissions in a wide variety of industrial applications, was responsible for the activities in the Catalytic Coatings division in 2016.

As a consequence of the strategic goals of establish-ing itself in a multi-sector fashion as a holistic solution provider along the entire value chain for exhaust-after-treatment and engine development and, in the course of this, the successfully implemented buy-and-build strategy, the strategic divisions will be restructured beginning with the current 2016 financial year. This will also lead to a renaming of divisions to reflect the products and services offered: Design & Engineering, Products & Solutions and Testing & Validation Servic-es. The following graphic provides an overview:

GROUP STRUCTURE



The Group distinguishes between products and services that can be used across industries and business fields. The products and services are offered individually or in combination in the OEM, Retrofit and Aftermarket divisions. With these offerings, the Twintec Baumot Group appeals to customers in a wide variety of sectors. It appeals particularly to the industries of on-road – for instance cars, commercial vehicles, buses or vans – and off-road, such as ag-ricultural machines or stationary equipment. Thanks to the various and customized adaptation opportuni-ties, the products and services are also used in other niche industries such as maritime.

Design &Engineering

Testing &Validation

Products &Solutions

Products &Services

OEM(Original equipment manufacturers)

Retrofit(Retrofitting) (Repairs,

replacement parts)

Business segments

Industries

Aftermarket

On-Road

Cars

Commercial vehicles, e.g. trucks

Buses, vans

Off-Road Machinery

e.g. excavators & agricultural machines

Stationary equipmente.g. power plants

Other Maritime

OVERVIEW OF DIVISIONS

6 TWINTEC 20166 TWINTEC 2016 7 TWINTEC 2016


Products and services, customers and markets

The product portfolio of the TwintecBaumot Group comprises particularly passive and active diesel particulate filter systems (DPF) and the highly effi-cient SCR system BNOx for the reduction of nitrogen oxides (NOx). The BNOx SCR system is distinguished by a high NOx implementation rate in the low-tem-perature range and a small installation space. With this, the system already meets the Euro 6c emission standard that will take effect in 2017 for on-road and Stage V for off-road, and can be applied in both the OEM and retrofit business segments. In addition, the TwintecBaumot Group offers services such as conceptual design, simulation, and design in the field of engine development. The portfolio is supplement-ed along the value chain with services around the measuring and testing technology for vehicle, engine and exhaust post-development components as well as laboratory tests.

With its comprehensive portfolio of products and services, the TwintecBaumot Group addresses a broad range of customers, from vehicle or engine manufacturers to leading OEMs and tier 1 suppliers. In the meanwhile, the Group has more than 200,000 references for the passenger-car sector, more than 35,000 retrofits in commercial vehicles and over 25,000 retrofits for off-road vehicles. At present, the TwintecBaumot Group is in advanced project phases for series development and subsequent production with numerous new and existing OEM customers for agricultural machines, tractors, commercial vehicles, buses and cars, as well as with both German and international engine manufacturers. In regional terms, based on a strong market base in Germany and other German-speaking countries, the focus of the corporate strategy is aimed at profitable growth in the leading markets of Central Europe, such as Italy, Great Britain, the Czech Republic and Poland.

In the context of further internationalization, the Company is also advancing its business activities in promising markets such as Turkey, the United States and China.

During the first half of the year, 66.2% of revenue was generated in Germany (PY: 56.7%), followed by Europe with 4.4% (PY: 27.5%) and the remainder of countries abroad with 29.4% (PY: 15.8%). Among the other foreign countries, the TwintecBaumot Group mainly concentrates its operations in what for the Company are relatively young markets in Turkey, the US and China, where the market presence will gradu-ally be expanded.

Locations and employees

As of June 30, 2016, through its individual compa-nies, the TwintecBaumot Group had a total of 20 lo-cations in 5 countries. This is how the Group ensures the customer proximity necessary for high-quality ser-vice and effective sales. During the first half of 2016, the TwintecBaumot Group employed an average of 364 (PY: 74) employees. The significant increase is due solely to the first-time consolidation of Kontec GmbH effective October 1, 2015, with an annual average of 310 employees on the payroll in the first half of 2016.

The steady expansion of the technology and product portfolio with around 300 qualified engineers and technicians, a strong local presence in Germany, as well as an increasing proportion of the workforce abroad remain key components of the Company’s strategic orientation; this is also reflected in the em-ployee structure.

8 TWINTEC 2016

With its consistent expansion of the OEM business and the internationalization of business activities, the TwintecBaumot Group pursues a sustainably profita-ble growth strategy.

Through its buy-and-build strategy in recent years, Twintec AG has evolved from being a specialist for the retrofitting of catalytic converters to its current status of a diversified provider of exhaust-aftertreat-ment systems.

With the successful acquisition of Baumot AG and Kontec GmbH, the TwintecBaumot Group has sig-nificantly expanded its product and service portfolio. With its development team, it can provide high-quality design, engineering and testing services in a short period of time.

Based on a technology platform, the Group offers a broad range of active and passive particulate filters; technologically speaking, its BNOx system is the leading SCR system on the market.

This already situates the Group among the leading technology providers of integrated solutions in the area of exhaust-aftertreatment and engine devel-opment for OEM manufacturers of cars, trucks and off-road vehicles, extending to mobile or stationary generators, engines and industrial equipment. The Executive Board’s goal is to further solidify and extend this good market positioning in order to continuously reduce the Company’s dependency on the overall declining market for retrofit systems in Europe. The successful advances towards a strategic focus on the OEM sector are buttressed by the revenue trend in this area.

1.2 GOALS AND STRATEGIES

At the same time, the internationalization strategy is designed to tap new growth markets and hence additional revenue and earnings potentials. The devel-opment of business activities in the US, Chinese and Turkish markets will be stepped up. These markets offer growth opportunities both in the OEM segment and in the retrofit and aftermarket areas. The expan-sion course in select European foreign markets will continue to be pursued as well.

The short-term goal of the TwintecBaumot Group is to further stabilize the Company’s financial situation and, following completion of the takeover, to complete the integration of the Kontec companies in the Group. This was achieved by implementing a comprehensive package of measures at the end of October 2016. The Group therefore has a solid financial foundation for the growth it plans in the coming years. Detailed information can be found in the supplementary report. The continuous progression of integration within the Group will realize synergies and sustainably optimize cost structures. During the 2016 reporting period, revenue will increase to between KEUR 40,000 and KEUR 44,000 due to consolidation effects and based on organic growth.

The medium-term goal through 2018 is to achieve consolidated revenues within the KEUR 70,000 to KEUR 90,000 range, achieved largely through the targeted growth in the OEM sector, internationaliza-tion and selective acquisitions that complement the Group’s technology portfolio. The target margin the Executive Board expects to achieve is an EBITDA margin in the upper single digits.



GOALS REVENUE 2015 > 2018


2015 20152018 2018

Stationary Stationary

Off-Road

Products & Solutions

Products & Solutions

Testing & Validation

* Design &

Engineering

Off-RoadOn-Road

*

On-Road

Other

Other

26,8 Mill. € 26,8 Mill. €

80 Mill. € 80 Mill. €

Afterm

arket

&

Retro

fit US

A, CH

grow

th fr

omco

nsoli

datio

ns

OEM St

age V

OEM

10 TWINTEC 2016

1.3 MANAGEMENT AND CONTROL SYSTEMS

As the Group parent company and a German stock corporation, Twintec AG has a dual management system consisting of an Executive Board and a Su-pervisory Board.

The competencies and personnel of the two bodies are strictly separated. Whereas the Executive Board is in charge of managing the Company, the Supervisory Board monitors the Company and the activities of the Executive Board.

The Executive Board of Twintec AG manages the Group and, in particular, determines the long-term corporate strategy. With respect to Company share-holders, it has an obligation to pursue the goal of in-creasing the company’s value – and through suitable measures the sustained growth – of the TwintecBau-mot Group. Management of the group of companies is performed on the basis of detailed short- and medi-um-term plans as well as a Group-wide controlling system on the Group and individual-company levels.

Key business figures at the heart of company man-agement are, in particular, revenue, EBITDA and liquidity. The budgeted values of the control pa-rameters are matched in regular reports against the actual business trend and the updated estimates of framework conditions. On this basis, the Executive Board can always check to see whether the Group is developing within the scope of the strategic objec-tives that have been set, and whether the meas-ures launched are producing the expected results. Strategic planning is not static; instead, it is regularly reviewed by the Executive Board and adapted to changed framework conditions. Components of the regular reports are comprehensive weekly reports and analyses sent to the bodies of Twintec AG, as well as budgetary control by the Executive Board and the Managing Directors of the individual companies. This is carried out at least once each month.

The Supervisory Board also carries out a detailed review of corporate planning.

Even today, the BNOx SCR system already meets the future legal requirements for on-road vehicles.

.



1.4 RESEARCH AND DEVELOPMENT

The extensive research and development (R&D) ac-tivities of the TwintecBaumot Group are designed to develop new products and solutions that will improve its market position as one of the leading technology companies in the area of exhaust-aftertreatment while developing additional sales channels. These activities form the basis for the further successful development of the company. A variety of customer-specific devel-opment projects were completed during the reporting year; products were brought to series-ready status, and patents were applied for.

Overall, the TwintecBaumot Group applied for three new patents (PY: 3). These were joined by another seven patents within the scope of the acquisition of Kontec GmbH and DIF GmbH. Thus, the entire Group has 29 patents as of June 30, 2016.

A particular focus for R&D activities involved fur-ther development of the BNOx SCR system for the reduction of nitrogen oxides. Together with a lead-ing tier 1 supplier, in mid-2015 the TwintecBaumot Group launched a development project with the goal of being able to use this system, originally designed for use in agriculture and construction equipment, in passenger cars. With the patented BNOx SCR sys-tem, nitrogen oxides can be reduced by an average of 93% at low exhaust temperatures of as low as 150 degrees Celsius. This makes it perfectly suited for use by car manufacturers to meet the strict emissions regulations, even under real road conditions.

After successfully completing the concept stage, the BNOx SCR system can be used not only in new vehi-cles but also to retrofit commercial vehicles and pas-senger cars. Supplemental to this, the TwintecBau-mot Group has also developed services in the area of mobile emissions measurement. With this product, dubbed “PEMS” (portable emissions measurement system), automobile manufacturers and automotive suppliers can test and inspect exhaust systems under real road conditions. This is how the Group covers the entire value chain: from development and design to the inspection and testing of exhaust systems

A variety of customer and development projects were also completed with leading manufacturers and in-dustry suppliers, in the automotive industry as well as in the agricultural machinery, marine, and tracked-ve-hicles area. In the area of agricultural machines, the TwintecBaumot Group successfully completed projects with both the second- and third-largest man-ufacturers of agricultural machinery in Turkey.

The goal of joint development efforts with OEM manu-facturers was to combine engines that to date only met the Stage III A emission standard with innovative exhaust-aftertreatment systems so that the more stringent Stage III B emissions standard could be met. This goes into effect in Turkey beginning in 2018.

Another R&D focus was on developing special aftermarket products such as the DPF Kit and SCR Exchange.

In the Catalytic Coatings division, the focus was on a variety of test series with major tier l suppliers. Among the goals of the test series was qualification for an OEM order that was also realized (in 2016).

During the first half of 2016, expenses for research and development at the TwintecBaumot Group to-taled KEUR 1,288 (PY: KEUR 1,253).

The share of consolidated revenue to which this cor-responds is 6.2% (PY: 14.11%). Development costs were also capitalized in fixed assets in the amount of KEUR 251 (PY: KEUR 419).



CONSOLIDATED INTERIM REPORT PART II »»

2.1 FRAMEWORK CONDITIONS

Economic development in the euro area has not changed significantly compared to the content pre-sented in the group management report for financial year 2015.

2.2 TREND OF BUSINESS

Despite sales and earnings improvements compared to financial year 2015, the trend of business in the first half of 2016 remained below expectations. Revenue was KEUR 8,881 in the first half of 2015, and through June 2016 amounted to KEUR 19,770 due to the consolidation of the Kontec Group. EBITDA improved compared to the previous year, from KEUR -2,419 in the first half of 2015 to KEUR -1,692 this 1st HY. In the first half of the year, extraordinary expenses for the integration of Kontec GmbH amounted to approx-imately KEUR 250.

Sales growth at Kontec GmbH and Baumot AG was lower than planned. The reasons for this are, on the one hand, the temporary reduction of development budgets for well-known OEMs as well as the delayed technology approval for the US market.

In the first half of 2016, the entire industry as well as the business development of Kontec GmbH were affected by the “dieselgate” affair, and the corresponding uncertainties among the companies concerned and a preliminary reduction of budgets for external development services. For example, two major customers of Kontec reduced their budget for external development services by more than 50%. Other customers followed this trend and also reduced

ECONOMIC REPORT

their spending on external services. As a result, the sales of Kontec GmbH in the first six months of 2016 were approximately KEUR 3,000 below plan. As early as the second half of the year, the respective custom-ers placed more orders with Kontec. The Executive Board expects that the initially negative impact on the entire EDL industry will continue to normalize in 2017, leading to an increase in sales and an improvement in earnings. The strategic reorientation of Kontec GmbH has been positive. The new structure of Kontec GmbH addresses the future growth markets of Emission Control Solutions, Autonomous Driving and Automotive Software more effectively. In addition, strategically important projects with a well-known German commercial vehicle manufacturer were won in the amount of KEUR 3,500.

The development of Baumot AG was also weaker than expected. Reasons for this are the pending tech-nology approval in the US and the expected decline in DPF retrofitting in Europe. In connection with US ap-proval, major milestones were successfully achieved in the fourth quarter of 2016. The approval of CARB is expected by the end of 2016 or in early 2017.

The strategic orientation of Baumot AG as an OEM supplier and the internationalization of business ac-tivities were positive. In the Middle East, for example, Baumot AG was able to successfully advance and complete projects with several OEM customers. In Turkey, two agricultural machine manufacturers were successfully homologated in the first half of 2016, with key sales expected in 2018.

12 TWINTEC 201612 TWINTEC 2016 13 TWINTEC 2016


In addition, an exclusive agreement for the retrofitting of stationary systems with the BNOx SCR system was concluded in an Eastern European country. First sales were achieved in the second quarter of 2016. As of 2018, sales with this customer will rise signifi-cantly as a result of the introduction of a new emis-sion standard.

Promising business development continued even after the end of the reporting period 2016: in Sep-tember 2016, the new emission ordinance “Iran IVa” came into force in the Middle East. Baumot AG has been active there since 2013 and successfully completed several long-term tests with OEMs this year. The first major incoming orders from OEMs were realized in the third and fourth quarters of 2016. For 2017, the Executive Board expects to continue this positive development. In addition, in the second half of 2016, Baumot AG received major orders from OEMs from the Middle East. In England, a new plan for air cleaning was adopted which stipulates that, from July 2017 and continuing for five years, around KEUR 180,000 should be spent on the promotion of retrofitting city buses and taxis with SCR systems. In light of the BNOx SCR system, Baumot AG is ideally positioned there with a local branch office.

A positive consequence of the exhaust gas scandal is the increasing interest of OEMs in new, innovative SCR technologies such as the proprietary BNOx SCR system from the TwintecBaumot Group. In the first six months of 2016, five new development projects were launched with leading car manufacturers as well as another top tier supplier.

The product portfolio has also developed positively; development of the diesel burner system (TB Flame) has been successfully completed. The market launch in Germany is currently underway. The expansion of the aftermarket offer was also pushed ahead. Tech-nological progress was also made with the introduc-tion of the product SCR Exchange for trucks as well as the DPF kits for passenger cars.

As a result of the lower sales performance in the first half of 2016, the TwintecBaumot Group carried out numerous refinancing and cost-cutting measures, as well as process optimizations.

Key figures

1st HY 2016

1st HY 2015

+/- Change

Revenue KEUR 19,770 8,881 10,889EBITDA KEUR -1,672 -2,419 747Adjusted EBITDA KEUR -1,442 -2,419 977EBITDA margin KEUR -8,5 -27,2 18,7EBIT KEUR -4,311 -3,660 -651EAT KEUR -4,538 -4,794 -256Equity KEUR 9,655 12,634 -2,979Equity ratio % 30.4 51.2 -20.8Net financial debt KEUR 4,572 1,681 2,891

SELECT KEY FIGURES ON THE TREND OF BUSINESS

14 TWINTEC 2016

2.3 NET ASSETS; FINAN-CIAL POSITION AND RE-SULTS OF OPERATIONS

2.3.1 Results of operations

The following commentary on the revenue situation for the first half-year of 2016 relates to the peri-od from January 1 to June 30, 2016 (comparative period: 1st HY 2015). Due to the consolidation of the Kontec Group, a comparison is only possible up to a point.

Sales revenues of the Twintec Group amounted to KEUR 19,770 (previous year: KEUR 8,881) in the first half of 2016.

Gross profit in the first half of 2016 amounted to KEUR 15,415 (1st HY 2015: KEUR 4,107). The gross profit margin rose to 78.0% (2015: 46.2%).

Personnel expenses rose to KEUR 12,119 (1st HY 2015: KEUR 3,205) as a result of the acquisition of Kontec GmbH. Other operating expenses increased to KEUR 4,986 (1st HY 2015: KEUR 3,310). Other operating expenses include special expenses for the integration of Kontec GmbH in the amount of around KEUR 250.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first half of 2016 amount-ed to KEUR -1,692 (1st HY 2015: KEUR -2,419). The EBITDA margin was -8.5% (previous year: -27.2%).

In the course of the acquisition of Kontec GmbH, de-preciation and amortization rose to KEUR 2,639 (prior

period: KEUR 1,241) as planned.

Overall, profit from ordinary business activities in the first half of 2016 amounted to KEUR -4,936 (1st HY 2015: KEUR -3,830).

After taking into account extraordinary income and taxes, the loss after the first half-year of 2016 amounted to KEUR -4,538 (1st HY 2015: KEUR -4,794), slightly lower than in the previous period.

This results in earnings per share of EUR -0.10 (com-parative period: EUR -0.13).

2.3.2 Financial position

Operating cash flow in the first half of 2016 amounted to KEUR -1,837 (1st HY 2015: KEUR -1,047). The changes relate in particular to adjustments in provi-sions and changes in receivables and liabilities and other assets.

Cash flow from investment activities was KEUR -364, lower than in the previous financial year (KEUR -650k). Expenses for repayments in the amount of KEUR 150 (1st HY 2015: KEUR 120) and the inflows received in the first half of 2016 from the inclusion of financial loans in the amount of KEUR 3,100 (1st HY 2015: KEUR 550) resulted in a positive cash flow from financing activities of KEUR 2,334 (1st HY 2015: KEUR 2,755).

Cash and cash equivalents at the end of the 1st HY 2016 amounted to KEUR 1,460 (1st HY 2015: KEUR 2,734). Net financial debt amounted to KEUR 4,572 (1st HY 2015: KEUR 1,681).

Key figures

1st HY 2016

1st HY 2015

+/- Change

Cash and cash equivalents KEUR 1,460 2,734 -1,274Cash flow from operating activities KEUR -1,837 -1,047 -790Cash flow from investing activities KEUR -364 -650 286Cash flow from financing activities KEUR 2,334 2,755 -421Net financial debt KEUR 4,572 1,681 2,891

SELECT KEY FIGURES ON THE FINANCIAL POSITION



2.3.3 Net assets

As of June 30, 2016, the balance sheet total for the Twintec Group rose to KEUR 31,732 (1st HY 2015: KEUR 24,690), particularly as a result of the consoli-dation of the Kontec companies.

On the assets side, fixed assets increased by KEUR 3,847 to KEUR 18,239 (1st HY 2015: KEUR 14,392).

Intangible assets rose to KEUR 13,262 (1st HY 2015: KEUR 11,189). Property, plant and equipment in-creased to KEUR 4,977 (1st HY 2015: KEUR 3,203), mainly driven by the integration of the Kontec Group.

At KEUR 13,254, current assets were also higher than the previous year’s level (KEUR 10,160). Invento-ries increased by KEUR 1,359 to KEUR 5,732 (1st HY 2015: KEUR 4,373). Cash and cash equivalents as of June 30, 2016, amounted to KEUR 1,460 (previous year: KEUR 2,734).

On the liabilities side, the equity of the Twintec Group decreased by KEUR 2,979 to KEUR 9,655 (1st HY 2015: KEUR 12,634) as of June 30, 2016. This means that the equity ratio is 30.4% (previous year: 51.2%). The main reason for this is the increase in the balance sheet loss.

The capital reserve remained unchanged at KEUR 574, while the balance sheet loss increased to KEUR -38,547 (1st HY 2015: KEUR -25,613).

Provisions increased from KEUR 2,711 (1st HY 2015) to KEUR 4,217 as of June 30, 2016. Liabilities to credit institutions increased by KEUR 1,617 to KEUR 6,032 (1st HY 2015: KEUR 4,415).

As of June 30, 2016, other off-balance-sheet financial obligations amounted to KEUR 4,679 (1st HY 2015: KEUR 4,184) pursuant to Section 314 No. 2a HGB (German Commercial Code). They are mainly attribut-able to orders already made by material suppliers as well as to obligations arising from long-term contracts (rentals and leases). In this respect, there is the risk of future liquidity outflows and opportunities arising from the use of the ordered, rented or leased items

2.3.4 Non-financial performance indicators

Employees In the first half of 2016, an average of 364 (1st HY 2015: 74) employees were employed in the Twintec Group. Personnel expenses amounted to KEUR 12,119 as of June 30, 2016 (1st HY 2015: KEUR 3,205).

SELECT KEY FIGURES ON NET ASSETS

Key figures

1st HY 2016

1st HY 2015

+/- Change

Intangible assets KEUR 13,262 11,189 2,073Property, plant and equipment KEUR 4,977 3,203 1,774Fixed assets KEUR 18,239 14,392 3,847Inventories KEUR 5,732 4,373 1,359Receivables and other assets KEUR 6,062 3,052 3,010Cash and cash equivalents KEUR 1,460 2,734 1,274Current assets KEUR 13,254 10,160 3,094Prepaid expenses, deferred tax assets KEUR 237 138 99Total assets KEUR 31,732 24,690 7,042

Equity KEUR 9,655 12,634 -2,979Equity ratio % 30.4 51.2 20.8Non-current liabilities KEUR 2,720 2,874 -154Non-current liabilities / total assets % 8.5 11.6 -3.1Current liabilities KEUR 11,906 6,606 5,300Current liabilities / total assets % 37.5 26.8 10.7


16 TWINTEC 2016

OVERALL ASSERTION REGARDING THE TREND OF BUSINESS

Due to poor turnover for Kontec GmbH and Baumot AG in the first two quarters of 2016 as well as the sale of Interkat GmbH, which has now been concluded, the Executive Board expects sales of KEUR 40,000 to KEUR 44,000 for the year as a whole.

Sales growth and an improvement in earnings are expected for 2017. The main reasons for this are the normalization of development budgets for OEM customers, the US approval, the introduction of new exhaust gas standards in the Middle East, the imple-mentation of the air pollution control plan in England, and the expansion of the aftermarket business.

CONSOLIDATED INTERIM REPORT PART III »»


SUPPLEMENTARY REPORT

In order to successfully implement the company strat-egy in the medium term, the TwintecBaumot Group restructured its financial situation at the end of Octo-ber 2016 by implementing a comprehensive package of measures. The company received cash and cash equivalents of around EUR 7.0 million in financial year 2016 up to the preparation of the consolidated finan-cial statements. In addition, a refinancing package of EUR 5.0 million was concluded with the mezzanine capital providers.

Overall, the refinancing package consists of four building blocks: the sale of the assets of Interkat Katalysatoren GmbH with an inflow of cash and cash equivalents of EUR 3.6 million, a flexible factoring framework of up to EUR 2.5 million, newly negotiat-ed terms for the existing mezzanine financing with a liquidity effect of more than EUR 5 million as well as the sale of a special property in the amount of EUR 0.9 million. As a result, bank borrowings of around EUR 1.8 million were repaid. The annual interest savings from these measures amount to around EUR 0.7 million.

As part of an asset deal, the assets of the subsidiary Interkat Katalysatoren GmbH were sold with a book gain of EUR 2.3 million. In recent years, Interkat has been successfully repositioned in attractive niche markets in the field of heterogeneous catalysis, but at the same time moved away from the core business of the TwintecBaumot Group. Interkat has now been sold as part of the TwintecBaumot Group’s strategic focus on its core competencies in exhaust-aftertreat-ment and engine development.

In addition, the conditions for existing mezzanine capital were renegotiated. The TwintecBaumot Group was able to achieve a significant reduction in interest rates to an interest rate in the medium single-digit percentage range. At the same time, a capital lease agreement was entered into with the sponsoring bank until the end of 2018, which means that no inter-est or redemption payments are to be made by the Group for this period. The accrued capital service for the next two years is reduced by the agreements by around EUR 5 million. The funds released will then be available to implement the growth strategy. In order to further optimize working capital management, a factoring agreement with a framework of up to EUR 2.5 million was instituted.

With this agreement as an efficient, complementa-ry financing instrument, the TwintecBaumot Group frees up the capital tied up in working capital financ-ing. As a result, the Company plans to invest in the expansion of its business activities in the course of internationalization, intensify its OEM business and further accelerate its growth dynamics. Against the backdrop of the planned significant increases in sales, this agreement and the considerably shorter period of capital commitment also ensure, in particular, the necessary funding for the future. The working capital line is available to the TwintecBaumot Group effective immediately at very attractive terms.

As part of a sale-and-lease-back agreement, a spe-cial property of Kontec GmbH was sold to a pro-fessional investor for EUR 0.9 million. A share of the funds freed up were used to repay more expensive liabilities with a bank.

CONSOLIDATED INTERIM REPORT PART IV »»

18 TWINTEC 2016

FORCAST, OPPORTUNITIES AND RISKS

5.1 OUTLOOK

Economic framework conditions

According to forecasts by the Ifo Institute, global economic growth will continue to benefit from the sharp drop in oil prices in the second half of 2016; consequently, growth in global GDP of around 3.5% is forecast for the full year. Economic output in the United States (+2.5%) and China (+6.8%) is expected to exhibit the same kind of strength as in the previous year. In the Eurozone, unchanged strong domestic demand is expected to continue to support econom-ic recovery. Private households will benefit from low general price inflation and comparatively low energy prices again in 2016.

The trends forecast for the markets of the Eurozone relevant to the TwintecBaumot Group remain heter-ogeneous, although the disparity in trends is begin-ning to level off. The growth rate in GDP forecast for Germany in 2016 was 1.9%, for Belgium 1.5%, for France 1.4%, for Italy 1.1%, for the Netherlands 1.5%, and for Austria 1.6%. Outside the Eurozone, economic researchers predict growth rates of 2.3% for the UK and 1.7% for Switzerland. In sum, the trend for the global economy remains a positive one, despite a year-over-year increase in uncertainties.

Regulatory framework conditions and opportunities for the divisions

The trend toward a tightening of existing emissions regulations and legislation in the developed countries will continue in the view of the Executive Board of Twintec AG, as will the effort to establish appropriate regulations in the emerging markets. Additional impe-tus stems from the effects of the so-called “exhaust scandal,” which even in the short term will lead to revisions in test methods used in the measurement of exhaust gas. From today’s perspective, while further consequences from this are still open-ended, the awareness of consumers and regulatory authorities for the issue of exhaust-aftertreatment has been significantly heightened.

A variety of sharper statutory regulations to reduce emissions were adopted at the international level in 2016; this will have a clearly positive effect on the business operations of the individual divisions of the TwintecBaumot Group in subsequent years. The Group’s divisions in the OEM segment will benefit in the future from the stricter test cycles for test proce-dures to obtain Euro 6c type approval in on-road ve-hicles. The new Stage V directive, which beginning in 2018 will broaden emissions regulations on all power classes and institutes a particulate-filter requirement, will provide additional impetus for the off-road target industry.

In addition, a new exhaust gas standard was intro-duced in the Middle East, which came into effect in September 2016. Baumot AG has already benefited from this as an OEM supplier and is expecting strong growth in this market in 2017.

After the first cities and counties in China began retrofit projects in 2015, few new conversions were carried out in 2016 due to the lack of new environ-mental zones, mostly by Chinese manufacturers. For 2017, the VECC expects a second major retrofit wave to benefit Baumot products which have proven their worth since 2015.

TwintecBaumot currently expects to be qualified in three major cities and is working with the local part-ners to implement the projects.

As one of the few Western manufacturers with a large number of successfully installed systems in local use, TwintecBaumot has good chances to qualify in other cities and to generate substantial sales again from 2017 onwards.

In England, a new plan for air pollution was adopted which stipulates that from July 2017, around KEUR 180,000 will be spent over five years for the promo-tion of retrofitting of city buses and taxis with SCR systems. Baumot AG is well positioned to benefit from this with a local branch office with the BNOx SCR system.

CONSOLIDATED INTERIM REPORT PART V »»


Already as of 2007, cars and trucks must fulfil the Euro 5 exhaust standard ex works and be fitted with a particulate filter or an SCR system.

Operation permits will be revoked without a func-tioning filter or SCR system. This is why owners of older cars and trucks must install a new system in the form of a substitute at the end of the life cycle of the exhaust-aftertreatment system.

Given the average service life of seven to eight years for factory-fitted systems, there is significant growth potential for the Retrofit and Aftermarket Divisions in the spare-parts business.

Prospects for development and overall statement on future development

The Executive Board of Twintec AG is confident that the acquisition of Kontec GmbH will enable the Group to further consolidate and develop its position as one of the leading providers of integrated and highly efficient solutions for the reduction of nitrogen oxides for OEM customers, thus benefiting in particular measure from the expected growth spurt for original equipment in the wake of statutory tightening that takes effect beginning in 2018. Besides the additional growth in expertise and technology, Kontec GmbH also gives the TwintecBaumot Group better access to national and international OEMs, providing added momentum to continued internationalization of busi-ness operations. The Executive Board thus considers the TwintecBaumot Group to be well-equipped for the sustainable growth that is planned. Nevertheless, the task in the 2016 financial year has been to consist-ently implement the integration of Kontec GmbH in the Group and to realize the synergies that this brings.

The specific basis for a sustainably successful trend in business is the Group’s technological expertise and innovativeness. R&D activities are being stepped up with this in mind.

Specifically, the further development of the BNOx system, as well as the broadening of the product portfolio in the Aftermarket Division, will constitute priorities from today’s point of view. Investment ac-tivity is expected to exceed the previous year’s level. A particular focus here is on the BNOx system and market developments.

As a consequence of the strategic goals of establish-ing itself in a multi-sector fashion as a holistic solution provider along the entire value chain for exhaust-after-treatment and engine development and, in the course of this, the successfully implemented buy-and-build strategy, the strategic divisions will be restructured beginning with the current financial year. This will lead to a new designation of the divisions in line with the products and services offered.

Given the overall positive economic and regulatory conditions, the Group’s Executive Board anticipates a positive trend in revenue and earnings in 2016 in all three divisions: Design & Engineering, Products & Solutions and Testing & Validation Services. With this in mind, the Executive Board forecasts group revenue of between KEUR 40,000 and KEUR 44,000 for the entire year 2016. Group EBITDA in the 2016 financial year will once again be negative at - EUR 2.0 million to - 2.5 million. Reasons for this are essentially a de-cline in sales at Kontec GmbH in connection with the reduction of the development budgeted by two major customers due to the exhaust gas scandal as well as the approval for the USA that has not been granted yet, which also led to a drop in sales at Baumot AG. In addition, the costs for technology and market development impacted EBITDA at around EUR 2.0 million.


20 TWINTEC 2016

5.2 OPPORTUNITIES AND RISKS

As a globally operating company, the TwintecBaumot Group operates in a dynamic environment and is reg-ularly confronted with risks and opportunities. Risks and opportunities are defined as deviations from the planned results. To ensure the controlled and con-scious handling of opportunities and risks that forms the basis for a sustainably successful business trend, there is an effective risk and opportunity management system in place that is deeply integrated within the individual business processes of the TwintecBau-mot Group. The goal is to apply proactive defensive strategies to mitigate or avoid risks and to apply a consistent, entrepreneurial approach that seizes the opportunities that arise.

Opportunity and risk management system

The TwintecBaumot Group has a comprehensive op-portunity and risk management system in place that aims to identify, evaluate and control risks and oppor-tunities at an early stage. The internal early warning system for risks takes into account not only opera-tional processes – from development to production to delivery – but also accounting and finance, including planning and reporting.

The reporting channels are firmly defined and designed to keep the Executive Board optimally ap-prised of all relevant events as soon as possible. The opportunity and risk management system used is not static. Instead, an ongoing effort is made to optimize the tools and methods used for early risk detection, risk assessment and risk management. Among other aspects, recognized quality assurance methods and tools based on DIN EN ISO 9001:2008 and VDA 2.4 are used here. An integral part of the Group-wide management and control system among subsid-iaries and the holding company, in addition to the early warning system, is also the effort to record and assess opportunities, with comprehensive, continu-ous and timely information provided to the Executive Board.

Significant opportunities

In the estimation of the Executive Board of Twintec AG, opportunities present themselves particularly through the following developments, events and strategic decisions:

•• Continued international expansion

Growth momentum for the TwintecBaumot Group comes particularly from the most dynamically devel-oping markets, such as China, the USA or the Middle East. In these countries, the TwintecBaumot Group has partnerships in place with local partners, as well as the necessary national or regional, metropolitan ar-ea-based limited permits for its own innovative tech-nologies. There is great potential for the TwintecBau-mot Group over the medium to long term, particularly in the OEM, Retrofit and Aftermarket fields.

•• Expansion of the product portfolio for the replace-ment and spare parts business

Basically, despite the strong competitive environment involved, there are growth opportunities in the Retrofit and Aftermarket fields through systematic expansion of the product portfolio through systems and parts usable in the aftermarket setting. This applies to de-velopments in emerging markets as well as to devel-opments in industrialized economies due to increased reaching of the end of the lifecycle of factory-fitted particulate filters and SCR systems.

•• Technological innovations

The high level of technological expertise within the TwintecBaumot Group and the continuous develop-ment of new technologies and the sustained opti-mization of existing solutions can more effectively meet customer needs and comply with the exhaust emissions limits. Accordingly, technological market leadership presents an opportunity to further increase the demand for products from all divisions.



•• Strengthening and enacting regulatory framework conditions

The business performance of the Twintec Group is largely determined by the sustained trend toward ad-dition of stricter provisions to existing regulations and the implementation of new regulatory guidelines for emissions levels. This can result in additional growth potential due to increased demand for the Company’s solutions and products.

This trend offers particularly good opportunities for the BNOx SCR system (short for selective catalytic reduction) for the reduction of nitrogen oxides. The BNOx SCR system was originally designed for use in agricultural and construction machinery. The further development of the system for the car sector in Feb-ruary 2016 was the result of a development project launched in mid-2015. With successful completion of the concept stage, TwintecBaumot has succeeded in making BNOx technology accessible to the mass car market. In doing so, the TwintecBaumot Group addresses not only the OEM market for cars but also the retrofit business. In the future, mobile emissions measurement (PEMS) will complement the range of services in the passenger car segment. The Twin-tecBaumot Group has the expertise that this involves through its subsidiary, Kontec GmbH, which since 2013 has assisted OEMs with the testing of engines and exhaust-aftertreatment systems, among other areas. The Company thus views itself as well-po-sitioned to benefit from the tightening of regulatory frameworks in the future, particularly in the passenger car segment.

Risks

What follows is a description of the main risks to which the TwintecBaumot Group is exposed in its daily business as an internationally active company; these risks could have a significant adverse effect on the Group’s business position and on its net assets, financial position and results of operations. The order in which the risks are listed should not be taken as an indicator of the probability of their occurrence.

•• Business environment and industry risks

Major customers for the TwintecBaumot Group are national and international automobile manufacturers and automotive suppliers. There are a host of factors that affect the business climate of the international automotive industry. These include trends in con-sumption outlays and gasoline prices as well as the availability of attractive financing options through car-makers. Overall, it should be noted that the demand is subject to strong cyclical fluctuations that can lead to reduced production by automobile manufactur-ers, with corresponding negative effects on supplier operations and automotive technology companies. The TwintecBaumot Group counters this risk through maximum flexibility in capacity and continuous anal-ysis and monitoring of selected early indicators for further market development.

While there is a fundamental societal trend towards a continual tightening of emissions standards, it cannot be ruled out that the implementation of future reg-ulatory requirements may be delayed or carried out only in a modified form due to national specificities or activities on the part of certain interest groups.

The resulting uncertainty about individual details of implementation deadlines and technical details can lead, at least temporarily, to reluctance to buy on the part of commercial and/or private customers. Accord-ingly, firmly planned contributions to revenue may be realized only at a later date, or to a lesser extent.

There is a fundamental risk that customers from the construction sector or the transport sector may be particularly hard-hit by economic slumps and, as a consequence, postpone retrofit and conversion pro-jects to a later date.

The TwintecBaumot Group counters this particular economic risk through a diversified sales approach within the affected industries, and with increasing diversification within the customer portfolio.


22 TWINTEC 2016

The market potential for particulate filters will stead-ily decline in the Retrofit business field. This trend is rooted in general factory fitting of the appropriate filters.

Similar market saturation can be observed with the retrofitting of cold start valves and upgrade catalytic converters for cars with gasoline engines, as well as upgrade catalytic converters for cars with diesel engines and particulate filters for commercial vehicles. The TwintecBaumot Group counters this risk of a continuous decline in the product segments de-scribed with a strategic realignment and the system-atic expansion of the OEM Division.

The evolution into its role as a leading OEM supplier of highly efficient SCR systems can lead to a tougher competitive situation, as it is to be expected that ex-isting competitors will follow a similar strategy, thereby increasing the number of competitors. Basically, by our own estimates, the competitive environment is in a consolidation phase; in special situations, this could lead individual competitors to apply additional, temporary price pressures in the market.

The TwintecBaumot Group counters this risk through continuous and comprehensive market monitoring. The Executive Board has appropriate tools available to it to provide an adequate response if this situation should arise.

The customers of the TwintecBaumot Group are ex-posed to heavy price pressures in their markets. They might attempt to pass these price pressures along, thereby decreasing the company’s margins.

The TwintecBaumot Group responds to this risk with continuous further development of existing products and production processes, together with expansion of its leading market position in technology.

•• Performance-related risks

The ongoing development of new and improved products is of vital importance to our ability to partic-ipate in the market in a sustainable manner over the long term. There is a risk that new developments and advancements will not make it to the marketability stage, or that they will not make it in time. This could result in a loss of market share to competitors. The TwintecBaumot Group counters this risk with high innovative skills and continuous expansion of its R&D expertise; in the past, this has led to strong position-ing as a technological market leader.

The strategic goal of positioning itself as a leading OEM supplier of highly efficient SCR systems also involves the risk that established access does not exist for all relevant target audiences. While this risk was reduced significantly through the acquisition of Kontec GmbH, it was not eliminated entirely.

•• Financial risks

Liquidity risk could come from an economic slow-down in individual markets, combined with further declining revenues and an associated expansion of DSO for individual customers.

The TwintecBaumot Group counters this risk with tight receivables management and active factoring tailored to liquidity requirements. Implementation of the strategic realignment may result in additional capital requirements, both for borrowed capital and for equity. As the cash capital increases carried out in the past have shown, however, with its innova-tive business model, the TwintecBaumot Group is quite capable of realizing sufficient levels of financing through the capital market.



The survival of the Group’s parent company is there-fore also dependent on the maintenance of the credit lines by the financing factoring institution as well as the financing banks and the achievement of the budget in financial year 2016 and beyond.

•• Other risks

Personnel risks can arise in the case of high turno-ver, or departures by specialists and managers to competitor companies and the loss of expertise that this entails.

The TwintecBaumot Group counters this possible risk with a variety of employee retention measures and individual programs for employee development.

Management’s overall assessment of the risk situation

Overall, it should be noted that there has not been any material change in the risk situation in the course of the 2016 financial year. In the view of the Execu-tive Board, all discernible risks to the Company are manageable.

Specifically the further internationalization and the expansion of the OEM division present significant growth opportunities. It cannot be ruled out, how-ever, that in the future there will be other influencing factors, factors not currently known or considered material that can affect the Group’s continued exist-ence as a going concern.

•• Note:

Like the report on opportunities and risks, the out-look contains forward-looking statements that are based on assumptions, estimates and the expected outcomes of individual events. The forward-looking statements made are based on current expectations and were formulated based on certain assumptions. Accordingly, they pose a series of risks and uncertain-ties and can change significantly over time. A variety of factors, many of them lying outside the sphere of influence of the Group, can lead to actual results and events at variance – both in a positive and a negative sense – with those expected here. The following fac-tors warrant highlighting in particular: changes in the general economic situation, introduction of competing business fields by other companies, lack of accept-ance of new business fields by other companies as well as lack of acceptance of new business fields and unexpected defaults on the part of major customers

.


24 TWINTEC 2016

CONSOLIDATED INTERIM REPORT PART VI »»

Under Section 312 of the German Stock Corporati-on Act [AktG], the Executive Board of Twintec AG is obliged to issue a dependency report. In accordance with Section 312 (3) AktG, the Executive Board of Twintec AG hereby states that, in the case of the legal transactions and measures set forth in the report con-cerning relationships with affiliated companies, these transactions and measures were carried out or were not carried out on the basis of the conditions known to us at the time; for each legal transaction, we recei-ved appropriate consideration, and the Company was not disadvantaged by the fact that measures were or were not carried out.

Furthermore, the Executive Board can confirm that a required review has been waived in accordance with Section 37w para. 5 p. 6 WpHG.

Königswinter, December 9, 2016

Twintec AG

DEPENDENCY REPORT

Marcus Hausser CEO

Klaus Bänsch Member of the Executive Board

Roger Kavena Member of the Executive Board


CONSOLIDATED FINANCIAL STATEMENTS

TWINTEC INTERIM REPORT 2016

26 TWINTEC 2016


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2016

ASSETSDisclosures in EUR

June 30, 2016 June 30, 2016 June 30, 2015 June 30, 2015

A.

Fixed assets

I.

Intangible Assets 1. Internally generatedassets as well as licenses to such rights and assets 2. Licenses, trademarks and similar rights and assets as well as licenses to such rights and assets acquired for a consideration 3. Goodwill

1,458,772.34

6,027,898.15

5,775,411.62

13,262,082.11

1,530,692.38

7,154,467.14

2,504,081.86

11,189,241.38

II. Property, plant and equipment 1. Land, leasehold rights and buildings including buildings on third-party land 2. Technical equipment andmachinery 3. Other equipment, operating and office equipment

765,876.18

3,309,226.37

902,333.22

4,977,435.77

2,166,509.55

363,575.47

672,859.21

3,202,944.23

18,239,517.88

14,392,185.61

B.

Current assets

I.

Inventories 1. Raw materials and supplies 2. Work in progress 3. Finished goods and merchandise 4. Advance payments

2,209,557.733,039,489.85

329,966.69153,250.00

5,732,264.27

2,586,059.86435,955.83

1,157,989.36193,257.48

4,373,262.53

II. Receivables and otherassets 1. Trade receivables 2. Other asset

4,238,795.801,823,663.58

6,062,459.37

1,289,477.611,762,721.42

3,052,199.03

III. Cash and cash equivalents

1,460,161.15

2,734,206.60

13,254,884.79

10,159,668.16

C. Deferred charges and prepaid expenses

237,788.96

138,431.55

31,732,191.63

24,690,285.32



LIABILITIESDisclosures in EUR

June 30, 2016 June 30, 2016 June 30, 2015 June 30, 2015

A.

Equity

I.

Subscribed capital

46,067,875.00

35,516,250.00

II.

Capital reserve

573,716.87

573,716.87

III.

Difference in equity due to currency translation

1,560,956.73

2,157,710.48

IV.

Consolidated net loss

-38,547,089.46

-25,613,251.34

9,655,459.13

12,634,426.01

B.

Provisions 1. Tax provisions 2. Other provisions

166,867.324,050,914.81

4,217,782.13

69,838.252,641,923.48

2,711,761.73

C.

Liabilities 1. Liabilities to banks 2. Advance payments received on account of orders 3. Trade payables 4. Other liabilities

6,032,281.61

663,664.622,636,715.125,958,531.76

15,291,193.11

4,415,410.48

476,679.65770,152.70844,757.84

6,507,000.67

D. Deferred items

237,877.32

261,785.04

E.

Deferred tax liabilities

2,329,879.94

2,575,311.86

31,732,191.63

24,690,285.31

28 TWINTEC 2016

CONSOLIDATED INCOME STATEMENT JANUARY 1 TO JUNE 30, 2016

Income statement Disclosures in EUR

1st HY 2016 1st HY 2016 1st HY 2015

1. Revenue 19,770,351.78 8,880,603.922. Changes in inventories 1,011,010.57 -87,348.703. Other own work capitalized 251,770.88 419,724.004. Other operating income 401,859.40 200,377.435. Cost of materials

a) Expenses for raw materials and supplies b) Expenses for purchased services

-4.900.065.31

-1.119.626.30

-5,064,543.55

-241,916.22-6,019,691.61 -5,306,459.77

6. Personnel expenses a) Wages and salaries b) Social security, pensions and other benefits

-10.245.656.98

-1.874.276.94

-2,815,529.64

-389,295.45

-12,119,933.92 -3,204,825.097. Accumulated amortization, depreciation and

write-downs -2,639,891.26 -1,241,121.82

8. Other operating expenses -4,986,829.09 -3,309,682.379. Other interest and similar

income

9,915.36

710.5210. Interest and similar income -615,467.78 -182,438.1411. Profit (loss) from continuing operations

-4,936,905.66

-3,830,460.0212. Exceptional income 359,968.53 0.0013. 13. Income taxes (thereof expenses from

change in recognized deferred taxesEUR -47,574.86PY EUR -801,783.27

48,871.79

-952,041.95

14. Other taxes -10,491.29 -11,559.3715. Consolidated net loss -4,538,556.64 -4,794,061.3416. Share allocated to other shareholders

0.00

0.0017. Share allocated to the shareholders

-4,538,556.64

-4,794,061.3418. Loss carryforward -34,008,532.82 -20,819,190.0019. Consolidated net loss -38,547,089.46 -25,613,251.34



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JANUARY 1 TO JUNE 30, 2016

I. Obligation to prepare consolidated financial statements

The consolidated financial statements of Twintec AG for the first half of financial year 2016 were prepared according to the applicable accounting regulations of Sections 290-314 of the German Commercial Code [HGB] as well as the complementary provisions of the German Stock Corporations Act [AktG].

II. Preparation date

The financial year of Twintec AG and of its subsidiar-ies included in the consolidated financial statements is essentially the calendar year..

III. Consolidation principles and methods, scope of consolidation

1. Scope of consolidation

The consolidated financial statements of Twintec AG comprise the financial statements of Twintec AG and of all affiliated companies in which the Twintec AG di-rectly or indirectly holds a majority of the voting rights. Subsidiaries are fully consolidated beginning with the date of the acquisition of control. The following companies are included in the consolidated financial statements of Twintec AG as of June 30, 2016:

• Interkat Katalysatoren GmbH, Königswinter 100,0 % (PY: 100,0 %)

• Twintec Technologie GmbH, Königswinter 100,0 % (PY: 100,0 %)

• Baumot AG, Glattpark, Schweiz 100,0 % (PY: 100,0 %)

• Kontec GmbH, Korntal-Münchingen 100,0 % (PY: 100 %)

Baumot AG, Glattpark, holds the following wholly-owned subsidiaries:

• Baumot UK Limited, Milton Keynes, Großbritannien

• Baumot Deutschland GmbH, Recklinghausen

• Baumot Northamerica LLC, Santa Monica, U.S.A.

• Baumot Italia S.r.l., San Giuliano, Milanese, Italien

KONTEC GmbH, Korntal-Münchingen, holds the following wholly-owned subsidiaries:

• KONTEC Unternehmensbeteiligungs GmbH, Korntal-Münchingen

• KONTEC Engineering Stuttgart GmbH, Korntal-Münchingen

• KONTEC Engineering Heidenheim GmbH, Heidenheim

• KONTEC Engineering Rhein-Main GmbH, Langen

• KONTEC Motorenentwicklungsgesellschaft mbH, Möckmühl-Züttlingen

• KONTEC EngineeringThüringen GmbH, Korntal-Münchingen

• DIF Die Ideenfabrik GmbH, Friedrichshafen

There were no disposals from the scope of consolida-tion. As in the previous year, as of the balance sheet date, there are no investments that would be included under the rules of proportionate consolidation (Section 310 et seqq. HGB) or equity accounting (Section 311 et seqq. HGB).


30 TWINTEC 2016


2. Capital consolidation

For companies established prior to the 2013 financial year, capital consolidation is performed pursuant to Section 301 (1) Sentence 2 No. 1 HGB (previous ver-sion) through offsetting of the acquisition cost of the investment against equity based on the book value method at the time of the acquisition.

Baumot AG, together with its subsidiaries, which have been included in the consolidated financial state-ments since December 9, 2013, within the framework of a full consolidation in accordance with 301 (1) Sen-tence 2 No. 1 HGB, was netted against the pro-rata revalued equity based on the revaluation method as of the date of the acquisition, through an offsetting of the acquisition cost of the investment.

For the shares of Kontec GmbH acquired as of Oc-tober 1, 2015, an initial consolidation was carried out pursuant to the revaluation method as of the date of the acquisition. The revaluation of Kontec GmbH did not reveal any further hidden reserves; consequently, the remaining difference amounting to KEUR 9,236 is recognized as goodwill. The useful life is based on the expected lifecycle characteristic for the industry.

The dates for initial consolidation are as follows:

• Interkat Katalysatoren GmbH: 24.06.2002

• Twintec Technologie GmbH: 01.01.2006

• Baumot AG: 09.12.2013

(incl. subsidiaries)

• Kontec GmbH: 01.10.2015

(incl. subsidiaries)

The resulting differences on the assets side from the capital consolidation under the first-time consolidation of Baumot AG (December 2013: KEUR 5,507) as well as Kontec GmbH (October 2015: KEUR 10,600), that, in application of Section 301 (3) HGB, are recog-nized as goodwill under intangible assets, are written down over a scheduled useful life of five years.

In December 2015, the acquisition cost of shares in Kontec GmbH was subsequently reduced; goodwill decreased accordingly to KEUR 9,269.

As part of preparing the annual financial statements as of December 31, 2015, a depreciation of good-will of EUR 3,762,033.96 was made for commercial prudence reasons.

At this point, we would like to point out that the shares in Baumot AG and Kontec GmbH recognized in the financial statements of Twintec AG were stated at acquisition cost, and that this also forms the basis for the determination of the amount of the difference. A so-called “intermediate value” was applied in the context of the contribution in kind at Kontec GmbH.

To establish the comparability of the consolidated financial statements of Twintec AG as of June 30, 2016, with the consolidated financial statements as of December 31, 2015, we offer the following explana-tions:

• During the financial year, Kontec GmbH made a contribution to consolidated revenue in the amount of KEUR 10,850 (prior year: KEUR 9,166) and to the consolidated net loss in the amount of KEUR 1,774 (prior year: KEUR -163).

3. Consolidation of debt

Within the scope of consolidation of debt, the concerted assets and liabilities of the consolidated subsidiaries were netted against each other in ac-cordance with Section 303 HGB.

4. Elimination of interim results

The interim profits from intercompany trade as of June 30, 2016, are adjusted in equity, taking deferred taxes into account. Intercompany trade is conducted at prevailing market conditions.

5. Consolidation of expenses and income

In the consolidation of expenses and income, con-certed income and expenses of the consolidated companies are netted with one another in accord-ance with Section 305 (1) HGB.

Intercompany revenue and purchases of goods and services must be consolidated, along with cost ap-portionment among the consolidated companies.



IV. Currency translation

Business transactions denominated in foreign curren-cy are translated at the average spot exchange rate as of the closing date, in accordance with Section 256a HGB. Profits are only recognized if they relate to receivables and liabilities with a maturity of up to one year.

Individual financial statements denominated in foreign currencies are translated in accordance with Section 308a HGB. The amount of the resulting difference to exchange rates as of the reporting date is recognized in the consolidated statement of changes in equity and in the consolidated balance sheet as “Translation differences.” The goodwill resulting from the acquisi-tion of the shares in Baumot AG was translated at the spot rate of exchange on the balance sheet date of June 30, 2016.

The trend in exchange rate was as follows: Exchange rates as of December 31, 2015

• 1.00 € = 1.0679 CHF (average rate)

• 1.00 € = 1.0835 CHF (spot rate as of balance sheet date)

Exchange rates as of June 30, 2016

• 1.00 € = 1.0960 CHF (average rate)

• 1.00 € = 1.0864 CHF (spot rate as of balance sheet date)

V. Reporting, accounting and valuation principles

The consolidated balance sheet and the consolidat-ed income statement are broken down pursuant to Section 298 (1) HGB in conjunction with Sections 266 and 275 (2) HGB.

The financial statements of the companies included in the consolidated financial statements of Twintec AG were prepared pursuant to Sections 242 et seqq. and 264 et seqq. HGB and pursuant to the supplemen-tary provisions of the German Stock Corporation Act

[AktG] and the German Limited Liability Companies Act [GmbHG].

Where options were available to the Company with regard to whether to report information in the balance sheet or in the notes to the financial statements, the notes to the financial statements were chosen. In addition, as a matter of principle, ‘thereof’ notes were made on balance sheet items in the notes in order to enhance clarity of the presentation, Sections 298 (1), 265 (7) No. 2 HGB.

The total cost method was selected for use in prepar-ing the consolidated income statement.

Specifically, the following principles and methods are used in the financial statements as well as in the consolidated financial statements:

Depreciable intangible assets and property, plant and equipment are stated at acquisition/production cost, net of scheduled and, if necessary, unscheduled depreciation. Where technical processes, experience and developments have been acquired from third parties, these are capitalized as intangible assets acquired for a consideration in application of Section 246 HGB.

Where depreciable and non-depreciable fixed assets are concerned, non-scheduled write-downs at the lower fair value are undertaken where permanent impairment is expected. The Company exercised the option to capitalize internally generated intangible assets in accordance with Section 248 (2) HGB.

Low-value movable, depreciable fixed assets are fully depreciated during the year of their addition.

Inventories are stated at acquisition or produc-tion cost in accordance with Section 255 HGB. In determining production cost, the elements are taken into account in accordance with Section 255 (2) Sentences 1-3 HGB, also taking necessary general administrative expenses into account. Value-reducing conditions are factored in by means of impairment under strict application of the principle of lower cost or market value.

During the financial year under view, there were valu-ation allowances made taking purchasing ranges into account.

32 TWINTEC 2016


Movements in fixed assets pursuant to Section 268 (2) HGB Disclosures in EUR

As of Jan. 1, 2016

Additions Disposals Transfers Currency translations

As of Jun. 30, 2016

As of Jan. 1, 2016

Additions Disposals Currency translations

As of Jun. 30, 2016

As of Jun. 30, 2016

As of Dec. 31,

2015

A.

Fixed assets

I. Intangible assets 1. Internally created trademarks and similar rights and assets 2. Licenses, trademarks and similar rights and assets as well as licenses to such rights and assets acquired for a conside-ration 3. Goodwill4. Advance payments made on intangible assets

6,552,730.86

15,383,433.00

15,837,737.400.00

37,773,901.26

251,770.88

26,558.67

0,000,00

278,329.55

0.00

0.00

0.000.00

0.00

0.00

0.00

0.000.00

0.00

0.00

0.00

0.000.00

0.00

6,804,501.74

15,409,991.67

15,837,737.400.00

38,052,230.81

5,154,178.97

8,794,996.78

8,783,363.280.00

22,732,539.03

172,047.49

575,351.69

1,273,572.890.00

2,020,972.07

0.00

0.00

0.000.00

0.00

19,502.94

11,746.05

5,389.610.00

36,638.60

5,345,729.40

9,382,094.52

10,062,325.780.00

24,790,149.70

1,458,772.34

6,027,897.15

5,775,411.620.00

13,262,081.11

1,398,551.89

6,588,436.22

7,054,374.120.00

15,041,362.23

II. Property, plant and equipment 1. Land, leasehold rights andrights and buildings incl. buildings onthird-party land 2. Technical equipment and machinery 3. Other equipment, operating and officeEquipment

909,504.20

6,120,168.332,947,168.87

9,976,841.40

0.00

57,355.0040,518.65

97,873.65

0.00

0.0023,338.91

23,338.91

0.00

0.00104.61

-104.61

0.00

0.000.00

0.00

909,504.20

6,177,627.942,964,244.00

10,051,376.14

97,008.02

2,494,771.131,924,683.40

4,516,462.55

46,620.00

370,641.49155,991.34

573,252.83

0.00

0.0021,784.44

21,784.44

0.00

2,988.953,020.48

6,009.43

143,628.02

2,868,401.572,061,910.78

5,073,940.37

765,876.18

3,309,226.37902,333.22

4,977,435.77

812,496.18

3,625,397.201,022,485.46

5,460,378.84

47,750,742.66

376,203.20

23,338.91

0.00

0.00

48,103,606.95

27,249,001.58

2,594,224.90

21,784.44

42,648.03

29,864,090.07

18,239,516.88

20,501,741.07

Production or acquisition costs

Accounts receivable and other assets are recognized at their nominal amount. The risks inherent in receiv-ables are accounted for by formation of specific and general allowances.

Cash and cash equivalents are stated at nominal value.

They contain the funds available through factoring in the settlement account.

Prepaid expenses include deferred items in accord-ance with Section 250 (1) HGB.

Accrual items for deferred tax assets and deferred tax liabilities are netted in accordance with Section 274 HGB. Loss carryforwards are included only insofar as overall tax burdens are offset as a result.

An overall tax burden is shown on the balance sheet as a deferred tax liability. In the event of tax relief, there would be no exercise of the relevant capitali-zation option. Deferred taxes are summarized in the consolidated financial statements in accordance with Section 274 HGB and Section 306 HGB.



Movements in fixed assets pursuant to Section 268 (2) HGB Disclosures in EUR

As of Jan. 1, 2016

Additions Disposals Transfers Currency translations

As of Jun. 30, 2016

As of Jan. 1, 2016

Additions Disposals Currency translations

As of Jun. 30, 2016

As of Jun. 30, 2016

As of Dec. 31,

2015

A.

Fixed assets

I. Intangible assets 1. Internally created trademarks and similar rights and assets 2. Licenses, trademarks and similar rights and assets as well as licenses to such rights and assets acquired for a conside-ration 3. Goodwill4. Advance payments made on intangible assets

6,552,730.86

15,383,433.00

15,837,737.400.00

37,773,901.26

251,770.88

26,558.67

0,000,00

278,329.55

0.00

0.00

0.000.00

0.00

0.00

0.00

0.000.00

0.00

0.00

0.00

0.000.00

0.00

6,804,501.74

15,409,991.67

15,837,737.400.00

38,052,230.81

5,154,178.97

8,794,996.78

8,783,363.280.00

22,732,539.03

172,047.49

575,351.69

1,273,572.890.00

2,020,972.07

0.00

0.00

0.000.00

0.00

19,502.94

11,746.05

5,389.610.00

36,638.60

5,345,729.40

9,382,094.52

10,062,325.780.00

24,790,149.70

1,458,772.34

6,027,897.15

5,775,411.620.00

13,262,081.11

1,398,551.89

6,588,436.22

7,054,374.120.00

15,041,362.23

II. Property, plant and equipment 1. Land, leasehold rights andrights and buildings incl. buildings onthird-party land 2. Technical equipment and machinery 3. Other equipment, operating and officeEquipment

909,504.20

6,120,168.332,947,168.87

9,976,841.40

0.00

57,355.0040,518.65

97,873.65

0.00

0.0023,338.91

23,338.91

0.00

0.00104.61

-104.61

0.00

0.000.00

0.00

909,504.20

6,177,627.942,964,244.00

10,051,376.14

97,008.02

2,494,771.131,924,683.40

4,516,462.55

46,620.00

370,641.49155,991.34

573,252.83

0.00

0.0021,784.44

21,784.44

0.00

2,988.953,020.48

6,009.43

143,628.02

2,868,401.572,061,910.78

5,073,940.37

765,876.18

3,309,226.37902,333.22

4,977,435.77

812,496.18

3,625,397.201,022,485.46

5,460,378.84

47,750,742.66

376,203.20

23,338.91

0.00

0.00

48,103,606.95

27,249,001.58

2,594,224.90

21,784.44

42,648.03

29,864,090.07

18,239,516.88

20,501,741.07

Value adjustments Book value

Provisions are constituted based on a reasonable commercial appraisal for discernible risks and con-tingent liabilities in the necessary settlement amount. Provisions with a remaining term of more than one year are discounted at the average market rate of interest pursuant to Section 253 (2) HGB.

Liabilities are recognized at their repayment amounts.

VI. Notes on the balance sheet

1. Assets analysis

In the financial year, no unscheduled writedowns to the lower fair value were recognized (previous year: EUR 41,700.00).

Table: Assets analysis

34 TWINTEC 2016

Deferred taxes Disclosures in KEUR

Deferred tax

assets

Deferred tax

liabilities

Assess-mentbasis

Intangible assets 0 1,118 5,522Internally created intangible assets 0 236 747Loss carryforwards 489 0 2,056Consolidation of debt 0 1,561 6,025Elimination of interim profits 96 0 305Total 585 2,915Offset -585 -585

As of June 30, 2016 0 2,330

2. Internally generated intangible assets

During the 2016 financial year, there were develop-ment costs of KEUR 251 (PY: KEUR 419) capital-ized as internally generated intangible assets. Total research and development costs amounted to KEUR 1,228 (PY: KEUR 984).

3. Internally generated intangible assets

All accounts receivable and other assets have a remaining term of less than one year.

4. Deferred taxes

Deferred tax liabilities on intangible assets have their origin in the first-time consolidation of Baumot AG (brand/customer base) on December 9, 2013, and have been accordingly amortized to June 30, 2016.

There was a recognition of deferred taxes on tax-loss carryforwards of Baumot AG and Twintec Technolo-gie GmbH. Due to the acquisition of shares by RMK Beteiligungen GmbH in April 2015, as part of prepa-ration of the consolidated financial statements for 2015, domestic tax losses were taken into consid-eration only for the period following the acquisition. Furthermore, use was made of the netting options at the taxable entity level.

The domestic tax rate is 31.60%. The foreign tax rate in Switzerland is 20.94%.

Deferred taxes as of June 30, 2015, are as follows:



Deferred taxes Disclosures in KEUR

Deferred tax

assets

Deferred tax

liabilities

Assess-mentbasis

Intangible assets 0 1,118 5,522Internally created intangible assets 0 236 747Loss carryforwards 489 0 2,056Consolidation of debt 0 1,561 6,025Elimination of interim profits 96 0 305Total 585 2,915Offset -585 -585

As of June 30, 2016 0 2,330

5. Equity

•• Subscribed capital:

The share capital of Twintec AG is EUR 46,067,875.00, divided into 46,067,875 no-par value bearer shares (previous year: EUR 46,067,875.00).

•• Authorized capital:

The general meeting of August 13, 2015, resolved to amend section 4 of the Articles of Association (amount and classification of share capital), with Section 4 (4) (Authorized Capital 2013) and Section 4 (5) (Authorized Capital 2014) rescinded and a new Section 4 (4) (Authorized Capital 2015) inserted.

The Executive Board is authorized, with the consent of the Supervisory Board, to increase the share cap-ital of the Company during the period up to August 12, 2020, on one or more occasions, in exchange for cash contributions or contributions in kind, by up to a total of EUR 17,758,124.00 by issuing new bearer shares with a notional share of capital stock of EUR 1.00 per share (Authorized Capital 2015).

The Executive Board is also authorized, subject to the consent of the Supervisory Board, to decide to exclude the statutory subscription rights of sharehold-ers. Exclusion of subscription rights is only permissi-ble, however,

a) to balance out fractional shares,

b) to grant subscription rights to holders of issuable conversion and option rights from bonds,

c) to issue employee shares to employees of Twintec AG and companies affiliated with the Company within the meaning of Section 15 AktG,

d) to obtain contributions in kind, particularly in the

form of companies or parts of companies or interests in companies,

e) to develop new capital markets through share placement, especially abroad

f) if the capital increase is made against cash con-tributions and the total pro rata contribution of share capital of the new shares for which the subscription right is precluded does not exceed 10% of the share capital existing as of the date of the resolution of the general meeting of August 13, 2015, authorizing ex-clusion of subscription rights and existing on the date of exercise of this authorization (with the smaller of the share capital numbers deciding the matter in each case) and the issuance amount of the new shares does not fall significantly below the stock exchange price of shares of the same class and features as of the date of the final determination of the issuance amount by the Executive Board.

Authorized capital in 2015 totals EUR 7,206,499.00 as of June 30, 2016.

•• Conditional capital:

Share capital was conditionally increased by resolu-tion of the general meeting of August 13, 2015, by up to EUR 14,206,525.00 (Conditional capital 2015/I).

The conditional capital increase is carried out through issuance of up to 14,206,525 bearer shares with dividend rights from the beginning of the financial year of their issue, but only to the extent that the holders or creditors of convertible bonds, or the holders of warrants from options issued under the authorization of the Executive Board by the Twintec AG general meeting of August 13, 2015, through August 12, 2020, exercise their convertible bond/option rights, fulfill their convertible bond/option obligations or ten-ders of shares are made and thus no other forms of fulfillment for service are used.


36 TWINTEC 2016

The Executive Board has been authorized to stipulate further details concerning the implementation of the conditional capital increase.

Share capital was conditionally increased by resolu-tion of the general meeting of August 13, 2015, by up to EUR 3,551,599.00 (Conditional capital 2015/II).

The conditional capital increase serves to grant sub-scription rights to members of the Executive Board and employees of the Company and to Managing Directors and employees of Group companies as part of the “Stock Option Plan 2015.”

•• Ownership structure:

On August 5, 2015, the Company was informed that Zug (Switzerland)-based company RMK Beteiligun-gen GmbH (sole shareholder Mr. Roger Kavena) no longer holds a controlling stake in Twintec AG, but that that company still holds more than one-fourth of the shares of Twintec AG.

Mr. Roger Kavena notified the company by precau-tionary letter dated June 30, 2016, that in the event that he should be qualified as an enterprise within the meaning of Section 20 of the Stock Corporation Act, the one-fourth of the shares in TWINTEC AG no longer belongs to him, neither directly nor with inclusion of his interests in Zug (Switzerland)-based company RMK Beteiligungen GmbH, in accordance with Section 16 (4) of the Stock Corporation Act.

•• Capital reserve:

The capital reserve contains exclusively amounts generated through the issuance of shares including subscription shares in excess of the nominal value or in excess of the proportional amount of share capital (Section 272 (2) No. 1 HGB).

7. Provisions

Other provisions mainly relate to revenue reimburse-ments to customers, personnel expenses, in-kind obligations (delivery of precious metals), litigation costs, warranties, expenses for financial statements and auditing, as well as outstanding cost accounts.



8. Liabilities

The deadlines for liabilities are shown in the following overview.

The figures from the previous year are shown in brackets.

Liabilities to banks include mezzanine loans of Kontec GmbH in the amount of KEUR 3,720. Because the loans are subordinated to defined creditors, the lender can assert a repayment claim in bankruptcy or liquidation proceedings only after satisfaction of cer-tain creditor claims. A partial amount of KEUR 1,000 will be repaid in 2016.

Due to an extension agreement with the creditors, repayment will be made in 2017. Repayment of the remainder is essentially due in 2017. By agreement dated February 23, 2016, Kontec GmbH was granted the option of not paying installments due in 2017 until December 31, 2018

Liabilities Total thereof with a thereof with a thereof with a thereof Type of remaining term remaining term remaining term collateralized collateral of up to 1 year of between of more than Disclosures in EUR 1-5 years 5 years

Liabilities to 6,032,281.61 3,312,281.61 2,720,000.00 0.00 6,032,281.61 (Mortages, banks (4,415,410.68) (2,441,240.59) (1,974,169.89) (0.00) (4,415,410.48) guarantees, collateral assignment)

Advance 663,664.62 495,664.62 168,000.00 0.00 0.00 None payments received on (476,679.65) (476,679.65) (0.00) (0.00) (0.00) (none) account of orders

Trade 2,636,715.12 2,636,715.12 0,00 0.00 0.00 None payables (770,152.70) (770,152,70) (0,00) (0.00) (0.00) (none)

Other 5,958,531.76 4,494,197.76 1,464,334.00 0.00 0.00 None Liabilities (844,757.85) (344,757.85) (500,000) (0.00) (0.00) (none) Total 15,291,193.11 10,938,859.11 4,352,334.00 0.00 5,088,251.94 (6,507,000.68) (4,032,830.79) (2,474,169.89) (0.00) (4,415,410.48)

Other liabilities include EUR 895,179.24 in tax liabilities (PY: EUR 262,310.94) and liabilities within the scope of social security in the amount of EUR 132,642.11 (PY: EUR 11,138.69).


38 TWINTEC 2016

VII. Comments on the income statement

1. Breakdown of revenue (Section 314 (I) No. 3 HGB)

Revenue for 2016 1st HY 2016 1st HY 2015 relates to the following areas of activity KEUR KEUR

Products for emission control (cold-start systems, catalytic converters, exhaust manifolds, particulate filters) 2,334 5,054 Design & Engineering* 11,208 0 Engine test benches* 1,133 0 Coating services 5,095 3,827 Total 19,770 8,881

*Areas of activity added due to the change in the scope of consolidation

Based on geographical criteria 1st HY 2016 1st HY 2015 the presentation is as follows KEUR KEUR

Domestic 13,080 5,032 EU abroad 875 2,443 Third country 5,815 1,406 Total 19,770 8,881



2. Financial result

The financial result stands at KEUR -616 (PY: KEUR -182) and mainly includes interest expenses to banks and interest expenses on pre-financing/factoring.

3. Prior-period expenses and income

During the financial year, the other operating income is in the amount of KEUR 360, essentially as a result of the reversal of provisions. .

4. Income taxes

Income taxes apply exclusively to the result from ordinary activities.

VIII. Notes to the cash flow statement

Cash and cash equivalents as of June 30, 2016, consist of cash and bank balances in the amount of KEUR 1,460 (PY: KEUR 2,734). Liabilities with banks amount to KEUR 6,032 (PY: KEUR 4,415).

With regard to the disclosures on acquired assets and liabilities, please refer to our remarks on Item III. 2.

Employees 2016 2015

Wage-earners 19 15 Salaried staff 345 59

IX. Other disclosures

1. Transactions not included in the consolidat-ed balance sheet (Section 314 (I) No. 2 HGB)

As of June 30, 2016, there are other financial liabilities totaling KEUR 4,679 (PY: KEUR 4,184). They relate mainly to liabilities under continuous obligations (rental agreements and leases), with the rest to orders already carried out with material suppliers. In this regard, there is a risk of future cash outflows and op-portunities resulting from the application or utilization of the objects ordered, rented or leased.

2. Number of employees (Section 314 (I) No. 4 HGB)

The average number of persons employed by the Company during the year was 396. They were distrib-uted across the following groups:


40 TWINTEC 2016

3. Executive bodies

- Executive Board:

• Mr. Marcus Hausser, CEO, graduate economist, Bad Vilbel, CEO since June 16, 2012, authorized to represent the Company by joint proxy together with another member of the Executive Board or with an authorized signatory.

• Mr. Roger Kavena, COO, business graduate, Kilchberg, Switzerland, Member of the Executive Board since July 23, 2013, authorized to repre-sent the Company by joint proxy together with another member of the Executive Board or with an authorized signatory.

• Mr. Klaus-Dieter Bänsch, graduate engineer, Wüstenrot, member of the Executive Board since October 1, 2015, authorized to represent the Company by joint proxy together with another member of the Executive Board or with an au-thorized signatory.

All members of the Executive Board are exempt from the restrictions of Section 181 BGB insofar as they are permitted to enter into legal transactions on behalf of a principal as a representative of a third party.

- Supervisory Board:

• Mr. Metehan Sen, business graduate, MBA, CEO of Lesire AG, Frankfurt, since June 13, 2013, Chairman of the Supervisory Board since August 13, 2015.

• Dr. Gerald Weber, Management Consultant at “GW Management Consultants GmbH,” Schwäbisch Gmünd, since August 13, 2015. Dr. Weber is a member of the Advisory Board of FEV Group Holding GmbH, Aachen; of KBC GmbH, Lorch; of MR Plan GmbH, Donauwörth; Chairman of the Advisory Board of FFG Werke GmbH, Mosbach,

and Chairman of the Supervisory Board of Bartl Engineering Solutions AG, Burgheim/Strass.

• Mr. Robert Spittler, Director of “The Silverfern Group Europe B.V.” Managing Director of Transak-tionswerk GmbH, which operates in an advisory capacity for Kontec GmbH, Frankfurt / Main, since August 13, 2015. The advisory role of Transak-tionswerk GmbH is approved by decision of the Supervisory Board of November 26, 2015..

4. Remuneration of loans to members of su-pervisory bodies (Section 314 (I) No. 6a HGB / Section 314 (I) No. 6c HGB)

Total remuneration paid to members of the Executive Board in the 2016 financial year for the performance of their duties in the parent company and in the Group amounts to KEUR 265.

There are no claims against members of the Execu-tive Board pursuant to Section 314 No. 6c HGB.

The remuneration paid to members of the Supervi-sory Board of the parent company Twintec AG in the first half of 2016 totaled KEUR 20. In addition, one member of the Supervisory Board received a fee of KEUR 36 for advisory services performed by a com-pany attributed to him..

5. Total fee, auditor (Section 314 (I) No. 9 HGB)

The total fee invoiced by the auditor of the consoli-dated financial statements for all Group companies during the reporting year is:

Disclosures in EUR 1st HY 2016 2015

Auditing services 71,400 112,300 Tax-advisory services 0 0 Other services 0 47,000 Total 71,400 159,300



6. Companies included in the consolidated financial statements (Section 313 (II) No. 1 HGB)

Name Registered office Stake in share capital

Twintec Technologie GmbH Königswinter 100 % Interkat Katalysatoren GmbH Königswinter 100 % Baumot AG Glattpark, Schweiz 100 % Baumot UK Limited Milton Keyne, GB 100 % Baumot Deutschland GmbH Recklinghausen 100 % Baumot Northamerica LLC Santa Monica, U.S.A. 100 % Baumot Italia S.r.l. San Giuliano Milanese, Italien 100 % KONTEC GmbH Korntal-Münchingen 100 % KONTEC Unternehmensbeteiligungs GmbH Korntal-Münchingen 100 % KONTEC Engineering Stuttgart GmbH Korntal-Münchingen 100 % KONTEC Engineering Heidenheim GmbH Heidenheim 100 % KONTEC Engineering Rhein-Main GmbH Langen 100 % KONTEC Motorenentwicklungsgesellschaft mbH Möckmühl-Züttlingen 100 % KONTEC EngineeringThüringen GmbH Korntal-Münchingen 100 % DIF Die Ideenfabrik GmbH Friedrichshafen 100 %

Marcus Hausser CEO

Klaus Bänsch Member of the Executive Board (CTO)

Roger Kavena Member of the Executive Board (COO)

Königswinter, December 9, 2016

Twintec AG


42 TWINTEC 2016


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS OF JUNE 30, 2016

Statement of changes in equity Disclosures in EUR

Subscribed capital

Capital reserve

Differences in equity due to

Currency trans-lation


Subtotal

Minority interests

Total

Current as of December 31, 2014 32,287,500.00 573,716.87 263,577.17 -20,819,190.00 12,305,604.04 0,00 12,305,604.04Issuance of shares 13,780,375.00 0.00 0.00 0.00 13,780,375.00 0.00 13,780,375.00Additions from the scope of consolidation 0.00 0.00 0.00 0.00 0.00 0.00 0.00Currency translation 0.00 0.00 1,297,238.19 0.00 1,297,238.19 0.00 1,297,238.19Consolidated net loss 0.00 0.00 0.00 -13,189,342.82 -13,189,342.82 0.00 -13,189,342.82

Current as of December 31, 2015 46,067,875.00 573,716.87 1,560,815.36 -34,008,532.82 14,193,874.41 0.00 14,193,874.41Issuance of shares 0.00 0.00 0.00 0.00 13,780,375.00 0.00 13,780,375.00Additions from the scope of consolidation 0.00 0.00 0.00 0.00 0.00 0.00 0.00Currency translation 0.00 0.00 141,36 0.00 141.36 0.00 141.36Consolidated net loss 0.00 0.00 0.00 -4,538,556.64 -4,538,556.64 0.00 -4,538,556.64

Current as of June 30, 2016 46,067,875.00 573,716.87 1,560,956.72 -38,547,089.46 9,655,459.13 0.00 9,655,459.13

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Statement of changes in equity Disclosures in EUR

Subscribed capital

Capital reserve

Differences in equity due to

Currency trans-lation


Subtotal

Minority interests

Total

Current as of December 31, 2014 32,287,500.00 573,716.87 263,577.17 -20,819,190.00 12,305,604.04 0,00 12,305,604.04Issuance of shares 13,780,375.00 0.00 0.00 0.00 13,780,375.00 0.00 13,780,375.00Additions from the scope of consolidation 0.00 0.00 0.00 0.00 0.00 0.00 0.00Currency translation 0.00 0.00 1,297,238.19 0.00 1,297,238.19 0.00 1,297,238.19Consolidated net loss 0.00 0.00 0.00 -13,189,342.82 -13,189,342.82 0.00 -13,189,342.82

Current as of December 31, 2015 46,067,875.00 573,716.87 1,560,815.36 -34,008,532.82 14,193,874.41 0.00 14,193,874.41Issuance of shares 0.00 0.00 0.00 0.00 13,780,375.00 0.00 13,780,375.00Additions from the scope of consolidation 0.00 0.00 0.00 0.00 0.00 0.00 0.00Currency translation 0.00 0.00 141,36 0.00 141.36 0.00 141.36Consolidated net loss 0.00 0.00 0.00 -4,538,556.64 -4,538,556.64 0.00 -4,538,556.64

Current as of June 30, 2016 46,067,875.00 573,716.87 1,560,956.72 -38,547,089.46 9,655,459.13 0.00 9,655,459.13

44 TWINTEC 2016

Cash flow statement 1. HY 2016EUR

Period result (including interests) -4,538,556.64

± Depreciation and amortization of fixed assets 2,639,891.26± Increase/decrease in provisions -529,191.26± Other non-cash expenses/income 0.00± Changes in inventory due to exchange rates 141.37∓ Increase/decrease in inventories, trade accounts receivable and other assets which

are not assignable to investment or financing activities-189,232.82

± Increase/decrease in trade payables andother assets not related to investing or financing activities

129,666.58

∓ Profit/loss on the disposal of fixed assets -3,090.53± Interest expense/interest income 605,552.42± Income tax expense/income 48,871.79∓ Income tax payments -1,296.93

Cash flow from operating activities -1,837,244.77

- Cash outflows for investments in property, plant and equipment -136,385.60- Cash outflows for investments in intangible assets -241,691.94+ Cash inflows from disposals of property, plant and equipment 3,500.00+ Cash inflows from disposals from the scope of consolidation 0.00+ Interest received 9,915.36

Cash flow from investing activities -364,662.18

+ Proceeds from additions to equity 0.00- Proceeds from taking out of (financing) loans -150,000.00+ Payments from the retirement of (financing) loans 3,100,000.00- Interest paid -615,467.78

Cash flow from financing activities 2,334,532.22

Change in cash funds 132,625.28Cash and cash equivalents at the beginning of the group financial year 565,254.27Change in cash funds due to scope of consolidation 0.00Cash and cash equivalents at the end of the consolidated financial year 697,879.55Composition of financial assets:Cash and cash equivalents 1,460,161.15Current account liabilities with banks -762,281.61Cash and cash equivalents at the end of the consolidated financial year 697,879.54

CONSOLIDATED CASH FLOW STATEMENT FOR THE FIRST HALF OF 2016

* Pursuant to DRS 21.22, Twintec AG waives reporting of prior-year figures during the year under review



360° EMISSION CONTROL

CONSOLIDATED CASH FLOW STATEMENT FOR THE FIRST HALF OF 2016

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TWINTEC INTERIM REPORT 2016 THE 360° EMISSION CONTROL … · include, in particular, SCR systems, active and pas-sive particulate filters and associated services. These activities