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ANN

UAL

REP

OR

T 20

12

UNITEd POwER TEchNOLOGy

ValueGenerating

ANNUAL REPORT 2012

120

0

60

30

90

2011 2012

REVENUE BY REGION* (in EUR million)

China Europe North America Other regions Total

* Revenue split by end consumer 2012

22.5 26.2

41.4 40.5

17.3 21.0 19.223.5

100.3111.2

Key Financials

REVENUE BY SEGMENT* (in EUR million)

Commercial generators 38.9 Residential generators 52.4

Components 2.1

1 January – 31 December 2012* Based on (non-consolidated) segment information as per the accounts, including inter-company sales.

Outdoor power equipment 5.1

2012 2011 +/– %

Revenues EUR million 111.05 100.28 +10.74

Gross profit EUR million 22.41 22.14 +1.22

Gross profit margin % 20.18 22.08 –1.90pp

EBIT EUR million 15.26 11.89 +28.34

Adjusted EBIT 1) EUR million 16.50 16.60 –0.61

Adjusted EBIT margin1) % 14.86 16.55 –1.69pp

Profit for the period EUR million 12.59 9.55 +31.83

Adjusted profit for the period 1) EUR million 13.83 14.26 –3.02

Adjusted profit for the period margin 1) % 12.45 14.22 –1.77pp

Earnings per share 2) EUR 1.03 0.85 +21.18

Adjusted Earnings per share 1) 2) EUR 1.12 1.26 –11.111) Adjusted for non-recurring IPO expenses.2) EPS for 12 months 2011 is based on the weighted average of shares (11.28m shares), for 12 months 2012

it is based on the weighted average of shares (12.30m shares).

Technology Group is a leading manufacturer of engine-driven power equipment in china. we design, develop, manu-facture and sell an extensive range of generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial generators, which are currently delivered into 60 countries around the world.

03 Letter to Shareholders 05 Report of the Supervisory Board 10 Growth Strategy 18 The Share 20 Corporate Governance Report

26 Group Management Report 50 Consolidated Financial Statements 93 Responsibility Statement 94 Independent Auditor‘s opinion 96 Financial Calendar/Imprint

content

United Power

Mr Xu WU Chairman, Co-Ceo

Co-founder and major indirect shareholder

Responsible for government and key domestic accounts relationships as well as Group strategy

MEMBERS oF ThE MANAGEMENT BoARD

Mr Zhong Dong HUANG deputy Chairman, Co-Ceo

Co-founder and major indirect shareholder

Responsible for strategy and general management of the Group

Mr oliver KUAN CFo

Responsible for finance function of the Group

ANNUAL REPoRT 2012 United Power teChnoloGy2 Company Profile Management Board

dear FellowShareholders,

Against the background of the continuing Euro and debt crisis, which continued to impact on our Euro-pean end customer market, United Power Technology was able to continue to achieve double-digit revenue growth and meet our revenue target. We also further executed on our long-term growth strategy.

With a growth in turnover of 10.7% to EUR 111.1 million, we increased our revenues in line with the communicated guidance. In accordance with our strategy to grow stronger in the commercial genera-tor segment, we were able to raise revenues in this sector with a plus of 51.4% to EUR 58.9 million. The residential generator segment achieved EUR 46.2 million reflecting our strategy to gradually move the mix towards larger generators. We achieved strong growth particularly in North America (22% year-on-year revenue growth) and new markets such as Russia, Latin America and Asia Pacific. We were also able to consolidate further our position in our domestic market China with growth of 16%. our sales in Europe slightly declined due to the effects of the Euro and debt crisis.

In 2012 we realised an operating result (EBIT) of EUR 15.3 million, increasing by 28.34% year-on-year. our adjusted EBIT was 16.5 million, which is at a similar level of last year’s result. The adjustment in-cluded extraordinary non-recurring effects, which occurred in conjunction with the IPo. Accordingly, our adjusted EBIT margin reached 14.9% slightly below our target for 2012, mainly due to further unex-pected RMB appreciation towards the end of 2012.

our net assets increased by 11.4% to EUR 101.5 million compared to the previous year. Furthermore, we are on a solid financial base with our equity ratio of 85.4%. While liquid assets amounting to EUR 31 million, we ensure the necessary flexibility for further growth.

During the past fiscal year our growth continues to be driven by the pursuit of a three-pronged strat-egy. As part of our continued geographic expansion, we entered into new markets such as Mexico, Venezuela or Zimbabwe within the past year. We also further penetrated existing markets, such as the North American market. The expansion and distribution of our product range has been advanced through the development of a series of new products. Among them the development of a 2kW gen-erator with a vertical axis, which is characterised by its user-friendliness, and two models with liquid gas engines, which are especially aimed at the American market. The increasing focus on larger gen-erators with a higher performance is evidenced by the strong growth in our commercial generator segment. In this area we brought a model with 5KW output and an ultra quiet diesel generator to the market. In the current fiscal year we will also launch a series of new products, which are being de-signed with our overriding objective in mind of addressing our customers’ needs.

United Power teChnoloGy ANNUAL REPoRT 2012 Company Profile 3 Letter to Shareholders

our revenue and earnings development in 2013 will very much depend on the further development of the Euro and debt crisis as well as on the fiscal development in the USA. At this time we anticipate that the economic situation will gradually improve throughout 2013. on the premise of relatively sta-ble exchange rates and a general improvement of the macroeconomic environment, we reckon with a revenue growth of approximately 8% in 2013 with an EBIT margin in line with the EBIT margin of 2012.

In August 2012 a change in the Supervisory Board took place. We want to thank Mrs Ning Cong for her dedication and commitment over the past two years. We are pleased to be able to welcome Mr Brian K. Krolicki as successor and valuable addition to the Supervisory Board. I look forward to a successful future cooperation with him.

Against the background of the still challenging economic conditions the Management and Supervisory Board made the decision not to pay a dividend for the fiscal year 2012. Net profit 2012 and the current cash position should be used as a reserve for further investments in the corporate expansion as well as possible M&A transactions. Nevertheless United Power intends to pay a dividend to its sharehold-ers in the fiscal year 2014. The amount will be based on our 2013 results and take the general eco-nomic conditions into account.

on this note, I would like to thank you, our shareholders and business partners, for your trust and val-ued cooperation. Furthermore, my thanks goes out to all our employees for their tireless commitment.

Kind regards,

Xu Wu Chairman of the Management Board

ANNUAL REPoRT 2012 United Power teChnoloGy4 Company Profile Letter to Shareholders

In the reporting year 2012, the Supervisory Board again con-scientiously fulfilled the tasks incumbent upon it pursuant to law, the company articles and the rules of procedure.

report of theSupervisory Board

Review of the conduct of business of the Management BoardThe Supervisory Board continuously advised and supervised the Management Board in its conduct of business. The Management Board submitted to the Supervisory Board all matters requiring the consent of the Supervisory Board for a decision. The members of the Supervisory Board prepared for upcoming resolutions subject to approval by means of documents, which they had previously been provided with by the Management Board. They discussed with the Management Board the measures and business proceedings to be decided upon. Prior to granting its approval after diligent examination and consulta-tion, the Supervisory Board convinced itself of the legitimacy of the Management Board’s actions. The Supervisory Board discussed the information and valuations decisive for its decisions with the Manage-ment Board.

In the financial year 2012, the Management Board attended, inter alia, the Supervisory Board’s balance sheet meeting during which the Company’s situation, business development, the financial situation as well as fundamental questions regarding the corporate strategy were intensely discussed. There was an intensive exchange with the Management Board regarding occurrences of special interest between the meetings as well.

Mr Wei SoNG, Chairman of the Supervisory Board

United Power teChnoloGy ANNUAL REPoRT 2012 Company Profile 5 Report of the Supervisory Board

Supervisory board meetings/resolutions in the financial year 2012In the financial year 2012, the Supervisory Board held eight meetings, including six meetings, which were conducted as telephone conferences, and one resolution per email:

In its meeting held on 6 February which was conducted as telephone conference, the Supervisory Board dealt with and adopted the rules of procedure for the Company’s Management Board and Supervisory Board. In another meeting, which was held on 6 February as well, the Supervisory Board discussed via telephone about the declaration on the Corporate Governance Code pursuant to sec. 161 of the German Stock Corporation Act (AktG) and adopted the Supervisory Board’s decla-ration of compliance.

During a Supervisory Board meeting held on 20 March, in addition to the Company’s risk manage-ment, the Company’s preliminary annual financial statement and the preliminary consolidated fi-nancial statement as well as the preliminary joint management report for the financial year 2011 were dealt with. The Supervisory Board discussed those documents in the presence of the auditor who reported on the results of his preliminary audit and was available to answer questions.

During its conference call meeting held on 5 April, the Supervisory Board dealt with the Company’s annual financial and consolidated financial statements for the financial year 2011 and the joint man-agement report of the Company and the Group for the financial year 2011 as well as with the Supervi-sory Board report for the financial year 2011. The Supervisory Board intensely discussed these docu-ments in the presence of the auditor who reported on the final outcome of his audit and was available to answer questions. The Supervisory Board approved the Management Board’s statements. The Company’s financial statement 2011 was thus adopted. During this meeting, the Supervisory Board furthermore adopted the Supervisory Board report and the remuneration report.

ANNUAL REPoRT 2012 United Power teChnoloGy6 Company Profile Report of the Supervisory Board

During a telephone conference meeting held on 30 April, the Company’s draft invitation to its annual general meeting 2012 as well as the Supervisory Board’s proposals for resolution regarding the agen-da of the annual general meeting were dealt with. By a resolution passed on 2 May via email, this invi-tation and the Supervisory Board’s proposals for decision regarding the annual general meeting were adopted.

Subject matters of a meeting held on 11 June via telephone included, inter alia, discussions of the sales situation and of the sales strategy of the Company. The Management Board reported on these issues as well as on the risk management of the Company. Another subject matter was the discussion of the final preparations of the annual general meeting 2012.

In the Supervisory Board’s conference call meeting held on 17 September the Management Board re-ported on the business development in the 3rd quarter of 2012 and on the risk management. In addi-tion, the Supervisory Board was provided with the investment plan for the second half of the year 2012, which it acknowledged and approved.

The final meeting for the year 2012 was held on 10 December. In this meeting, the Supervisory Board discussed and adopted the subscription conditions of the stock option plan 2012 and the Supervisory Board granted stock options in accordance with the subscription conditions of the stock option plan 2012 to the Management Board member oliver Kuan.

During the past financial year, all of the members of the Supervisory Board, which were in office at that time, attended all meetings and/or participated in the passing of all resolutions of the Supervi-sory Board.


Corporate GovernanceAs in the previous year, the Supervisory Board again dealt with the standards of good corporate gov-ernance in the financial year 2012. Apart from expertise, the members’ diversity, appropriate to the size of the board, in relation to nationality, gender, ethnic origin and experience is an important guar-antor of an efficient cooperation between the Supervisory Board members. When dealing with pro-posals for the election of candidates to the Supervisory Board, the Supervisory Board pays attention to, inter alia, internationality and diversity. Considering the current members of the board, i.e. Mr Wei Song, Mr Hubertus Krossa and Mr Brian Krolicki, the Supervisory Board considers this diversity as en-sured, especially in relation to nationality, ethnic origin and experience.

The Supervisory Board resolved the declaration of compliance 2011 in February 2012. The declaration of compliance 2012 was published on the Company’s website. This fact and further information on the Company’s corporate governance are separately illustrated in the corporate governance report of the Management Board and the Supervisory Board.

The members of the Supervisory Board are obliged to disclose to the entire board any conflicts of in-terest. In the financial year 2012, there were no indications of incidences of conflicts of interest.

Change in the Supervisory BoardThe term of office of the member Ning Cong who had been delegated to the Supervisory Board end-ed on 12 August 2012 since the shareholder orchid Asia IV L. P. revoked her delegation effective as of this date. The Supervisory Board would like to thank Ning Cong for her achievements and collabora-tion. By way of resolution of 16 August 2012, the Local Court of Frankfurt am Main, Germany, ap-pointed Mr Brian Krolicki as a member of the Company’s Supervisory Board.

ANNUAL REPoRT 2012 United Power teChnoloGy8 Company Profile Report of the Supervisory Board

Audit of the annual financial statements 2012The Company’s annual financial statement, the consolidated financial statement and the management report 2012, which covers both the Company and the Group, have been duly audited by the audit firm Deloitte & Touche GmbH Wirtschafts-prüfungsgesellschaft, Frankfurt am Main, Germany, and each been provided with an unqualified auditor’s opinion.

During a meeting, which took place on 15 April 2013, the Supervisory Board dealt with the Company’s annual financial statement, the consolidated financial statement and the consolidated management report. The Supervisory Board mem-bers were provided with extensive documents to prepare for this meeting, such as the financial statement and the consoli-dated financial statement, the consolidated management report for the Company and the Group as well as the auditor’s reports of Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, Germany.

The Supervisory Board dealt with these documents in detail and intensely discussed them in the presence of the auditor who answered questions and provided information. Based on the final outcome of the Supervisory Board’s own review, the Supervisory Board agreed to the auditor’s results, declared that no objections needed to be raised and approved the Man-agement Board’s statements and the consolidated management report. The Company’s annual financial statement 2012 was thus adopted.

AcknowledgementsThe Supervisory Board would like to thank all employees of the Group’s companies and the Company’s Management Board for their commitment and achievements throughout the past financial year.

Fuzhou, 15 April 2013

on behalf of the Supervisory Board

Wei Song Chairman of the Supervisory Board


GrowthStrategy

Scaling up the size of products

10kW

90

54

Broadening the range of engine-powered products

products

new customers in 2012

Further geographic expansion and penetration

We are increasingly focusing on generators with higher output and selling in categories with larger engine sizes. Along with this shift we also seek to increase our margins. We will particularly focus our investment on new production lines for larger generator products in particular generators for commercial use in line with our previously stated strategy. our new heavy-duty power generator with a V-Twin highly efficient aluminium engine is a good example for this product category. It delivers a heavy-duty maximum power of 10 kW. It also features a new improved design to meet the demands of the market place’s most sophisticated users.

In order to meet the demands of end consumers looking for power sources featuring low noise, easy maintenance and stable tension, United Power designs new generation of inverter generators with the latest inverter technology. We produce specially designed generators exclusively for customers with individual requirements due to technical, envi-ronmental and quality standards. In 2012, eight new products were developed by our R&D department. At the end of the year 2012, our customers were able to choose out of more than 90 different products – from a 0.5 kW residential generators to a 10 kW heavy-duty commercial generator.

�We plan to further penetrate our important growth markets like China, Europe and North America and diversify our international customer base. We intend to further build our own or licensed brands in new markets and enhance their position in markets that have already been penetrated through various distribution channels. As a major long-term strategy, we seek to further strengthen our reputation of reliability and to improve brand awareness, especially outside of China. We are going to further expand our customer base especially in the developing countries. In 2012,13 new supplier contracts were signed with wholesaler in Europe and 2 new supplier contracts were signed with the retailer in US. United Power gained 54 new clients in 2012, 13 clients in China, and 23 clients in Europe, nine clients in North America, nine clients from other regions. The company expanded into six new sales countries in 2012: Bahamas, Zimbabwe, Lebanon, Libya, Mexico and Venezuela.

10 Company Profile Company Strategy

ANNUAL REPoRT 2012 United Power teChnoloGy

In 2012, we successfully improved our market position through United Power’s long-term strategy, which is based on three pillars: scaling up the size, broadening product range and expanding geogra-phic penetration. We are confident that United Power is on the right track for further growth. In 2013 we will continue on this growth path through the pursuit of our three strategic objectives.

ValuechainA frictionless process along the entire value chain is one of our main success drivers. We are seeking to maximize the efficiency from sourcing raw materials up to the delivery of the final product. our overall goal is to maintain a highly integrated value chain.

Starting from the source, our approach is to have long and trustful relationships with our suppliers. Every new product is created in our R&D department from scratch – using high quality steel to create stiff frames and state-of-the art engines for maximum output. our customers and distribution partners are highly involved in the development process. They provide valuable information from the market place. Their input is the basis for our innovations. Also involved in the development is our senior production team. Based on their experience, they guarantee a smooth, efficient and cost-effective production process. Through flexible production techniques and our 25 production lines, we are able to produce a large number of units, ready for international markets. We focus on on-going quality control to meet the highest worldwide production and emission standards. our well-trained sales force keeps direct contact to our key distributors and is at the same time United Power’s face to the market. They also stay attuned to the latest trends and requirements, which again is swiftly fed back into the development process.

With this value process we continuously meet the demands of our clients, which is the basis of our growth targets.

01 Research & Development

03 Sales02 Production

Broadening the range of engine-powered products

Company Profile 11 Value Chain

United Power teChnoloGy AnnUAl rePort 2012

Specialized know-how to meet the highest

international standardsour in-house R&D department is the starting point for every product innovation. Further more, we are continuously enhancing our existing product range in the three segments residential generators, com-mercial generators and outdoor power equipment. We aim to meet the highest quality and emission standards of the international markets – especially in Europe and US. our team of 57 experienced engi-neers is working in close cooperation with the Fuzhou Institute of Technology. We have a strong product pipeline to generate incremental revenues with both existing and new customers.

12 CREATING VAlUE / RESEARCh & DEVEloPMENT

CreAtinG VAlUe / RESEARCh & DEVEloPMENT 13

14 CREATING VAlUE / ProdUCtion

The combination of a broad local network of qualified contractors and substantial in-house capabilities to produce key components ensures a high level of supply security. our 472 skilled production employees are working in an efficient organizational set-up, which allows us to shorten lead times through vertical integration and ensure a multi-usage of our 25 production lines. We have core competencies in engine technology. Together with our cost advantages due to economies of scale, this further supports our low cost operation model.

efficiencythrough vertical integration

CreAtinG VAlUe / ProdUCtion 15

16 CreAtinG VAlUe / SAleS

CreAtinG VAlUe / SAleS 17

our sales force of approx. 40 people covers the most important global markets for generators. We have a multi-channel distribution strategy and particularly in the US and Europe we have agree-ments with more than 200 specialized dealers, international wholesalers and retailers as well as oDM partnerships with renowned companies. In selected markets like Africa and Asia we promote our own brands and are rapidly expanding our agent network. our aim is to maintain a broad and diversified customer base, penetrate markets quickly and strike the ideal balance of low pricing, high margins and excellent product quality.

diversifiedmulti-channel distribution

to improve global customer base

The Share

Market environmentThe European debt crisis continued to affect the financial markets in 2012 and led to volatility during the year. Espe-cially the fragile economic state of several Southern Euro-pean member countries combined with an uncertain political situation together with measurements taken by the Euro-pean Central Bank weighed on investor behaviour and senti-ment. While the US economy showed signs of recovery in the early part of 2012, political budget and tax controversies sur-rounding the ’potential fiscal cliff’ discussion created uncer-tainty right until the end of 2012. This also had an impact on the European capital markets. Given this market environ-ment, relatively stable nations such as Germany regained economic strength and benefited from inward capital flows.

Overall, the most important German stock index (DAX) per-formed well in 2012. Despite the volatile development over the year with a drop in June and a year-low on 5 June 2012 at 5,969.40 points, the index increased by 29.01% in 2012 closing at 7,612.39 points on 28 December 2012. During the first months of 2013 this trend continued.

The SDAX as United Power Technology’s benchmark per-formed similar, closing at 5,249.35 points on 28 Decem-ber 2012, a plus of 18.84%. The DAX subsector Industrial showed a slightly lower performance compared to the SDAX.

Development of the share Starting at EUR 4.60 on 2 January 2012, the share reached its year-high on 23 April 2012 at EUR 5.10. Although United Power predicted a difficult first quarter in 2012 in its annual report of 2011, the share price decreased after the an-nouncement of the quarterly results on 14 May 2012 and reached its year-low on 9 August 2012 at EUR 2.58. During the third quarter of 2012 and among others after the re-lease of the positive half-year results on 14 August 2012 the share price recovered and stabilised at around EUR 3.30.

Finally, similar to the development of some other Chinese companies listed in Germany and after the publication of the 9-months report on 12 November 2012, the share price of United Power further increased and stabilised at around EUR 4.00, closing at EUR 4.15 on 28 December 2012, repre-senting a year loss of 9.78%.

The stability was confirmed in the first months of 2013.

Dividend policyAgainst the background of the still uncertain economic con-ditions the Management and Supervisory Board made the decision not to pay a dividend for the fiscal year 2012. Net profit 2012 and the current cash position will be used as a reserve for further investments in the corporate expansion as well as possible M&A transactions. Nevertheless United Power intends to pay a dividend to its shareholders in the fiscal year 2014. The amount will be based on our 2013 re-sults and take the general economic conditions into ac-count.

Designated sponsor and research coverageUnited Power Technology has designated sponsorship and research coverage from the investment bank Kepler Capital Markets, the lead manager of the Company’s IPO in 2011. Additionally, United Power is covered by Erste Group. All lat-est research notes can be found on the Investor Relations website at www.unitedpower.de.com/en, once available.

In its latest research from 5 November 2012 Kepler Capital Markets has a buy recommendation with a target price of EUR 5.40 due to the positive trend in the second half of 2012.

Erste Group set its target price at EUR 7.50 on 7 Novem-ber 2012 and reiterates its buy recommendation as well.

18 Company Profile The Share

ANNUAL REPORT 2012 united Power teChnology

Transparent investor relationsUnited Power Technology is determined to provide a com-prehensive and transparent communication vis-à-vis its shareholders. Therefore, the Company attended several in-vestor conferences since its IPO, e.g. DVFA Small Cap Con-ference (SCC) and the Equity Forum of the Deutsche Börse. Furthermore, the Company invites its shareholders periodi-cally to investor presentations and meets up with investors on road shows all over Europe.

In the future, United Power will continue its transparent In-vestor Relations activities through further institutionalisa-tion and a continuous flow of information. Regular road shows, individual talks, telephone conferences as well as attendance at investors’ and analysts’ conferences follow our ambition to satisfy investors’ information needs. An ex-tensive range of information can be found on the Company’s Investor Relations website www.unitedpower.de.com/en. All of these activities are geared towards an objective and fair assessment of the Company.

BasiC data

ISIN/WKN/Ticker/Reuters DE000A1EMAK2/A1EMAK/UP7/UP7G.DE

Market segment/stock exchange Regulated Market (Prime Standard)/Frankfurt Stock Exchange

First trading day 10 June 2011

Shares issued (number) 12,300,000as at 31 December 2012

share Key FaCts 2012

Year-end price (in EUR) 4.15

Share price high (EUR) 5.10

Share price low (EUR) 2.58

Adjusted Earnings per share (EUR) 1.12

Market capitalization as at 31 december 2012 (eur million) 51.05

SHAREHOLDER STRUCTURE (in %)

as at 31 December 2012

Fortune Sunrise BVI (Mr. Xu Wu) 20.14%

Fortune Great BVI (Mr. Wei Song) 18.99%

High Advance BVI (Mr. Zhong Dong Huang) 18.42%

Orchid Asia IV L.P. 22.12%

Free�oat 20.13%

Orchid Asia IV Co-investment L.P. 0.20%

120

100

80

60

40

SHARE PERFORMANCE (Januar 2012 – December 2012)

Jan’12 Feb’12 Mar’12 Apr’12 May’12 Jun’12 Jul’12 Dec’12Nov’12Oct’12Sep’12Aug’11

UNITED POWER TECHNOLOGY AG SDAX DAXSECTOR INDUSTRY

Company Profile 19 The Share

united Power teChnology ANNUAL REPORT 2012

Corporate GovernanceReport

Corporate governance declarationSince its inception in 2002, the German Corporate Govern-ance Code (‘the Code’) has been used as a benchmark for good corporate governance. The cornerstones of United Power Technology AG’s management philosophy, such as responsibility, transparency and sustainability, are both in line with the Code and help underpin the Company’s busi-ness success. The Management Board and Supervisory Board are committed to following and supporting the goals and the spirit of the Code.

Declaration of complianceThe Management Board and the Supervisory Board dealt with issues of corporate governance and in particular the provisions of the German Corporate Governance Code. On 8 April 2013 they jointly issued a corporate governance dec-laration for the fiscal year 2012 pursuant to section 161 of the German Stock Corporation Act (AktG). The declaration of compliance has been made public on United Power Technol-ogy AG’s website under www.unitedpower.de.com/en.

United Power Technology AG has, since its last declaration of compliance on 6 February 2012, complied with the rec-ommendations of Code as of 26 May 2010 with the excep-tions listed and justified in its last declaration of compli-ance. United Power Technology AG complies with the recommendations of the Code as of 15 May 2012 and will comply with them in future, with the exception of the fol-lowing recommendations:

In the D&O insurance for the Supervisory Board, a deduct-ible up to a certain amount has been partially agreed (de-viation from no. 3.8 para. 3 of the Code). Based on eco-nomic considerations and due to the comparatively low remuneration of the Supervisory Board, the Company has decided to introduce a fixed deductible in certain cases.

A general Management Board remuneration system has not yet been resolved (deviation from no. 4.2.2 para. 1 s. 3, no. 4.2.3 para. 6 and no. 4.2.5 para. 1 s. 2 of the Code). How-ever, the Supervisory Board has taken the standards of a uniform remuneration system as a basis for stipulating the respective remuneration of the current Management Board members; in particular regarding the division in fixed and variable remuneration elements.

In connection with variable compensation components negative developments are not taken into account (devia-tion from no. 4.2.3 para. 2 s. 4 of the Code). In addition, with regard to the variable remuneration elements, subsequent amendments to the targets of success or to the compari-son parameters are not excluded (deviation from no. 4.2.3 para. 3 s. 3 of the Code). Considering the relatively low per-formance remuneration for Management Board members, the Supervisory Board is of the opinion that neither such exclusion nor the taking into account of negative develop-ments is necessary.

The Supervisory Board and the Management Board mem-bers have not stipulated how to proceed in case of a pre-mature termination of the Management Board contract (deviation from no. 4.2.3 para. 4 of the Code). Therefore the provisions of law apply in this case. The Company is of the opinion that the provisions of law are sufficient regarding the respective interests when it comes to the resignation of a Management Board member and is thus an appropri-ate basis.

So far, abstract provisions requiring the approval of the Supervisory Board with regard to transactions of funda-mental importance have not been specified (deviation from no. 4.3.4 s. 3 of the Code). However, an array of transactions of fundamental importance that are subject to prior approval are listed in the Management Board by-laws. The Company is of the opinion that it is easier for the Management Board to adhere to a specific catalogue than to abstract regulations. Furthermore, the Company is a holding company without operative business.

ANNUAL REPORT 2012 united Power teChnology20 Company Profile Corporate Governance Report

There is no general age limit for Management Board mem-bers (deviation from no. 5.1.2 para. 2 s. 3 of the Code) and for Supervisory Board members (deviation from no. 5.4.1 para. 2 s. 1 of the Code). However, the Management Board contracts contain an individual regulation stipulating that the employment ends automatically without notice by the end of the month in which the Management Board member turns 65 or – if he is born in 1947 or later – as soon as the regulation for pension annuity of the statutory pension in-surance applying to him has become effective (sec. 25 SGB (German Social Security Code) VI). The Supervisory Board does not consider strict age limits as a rule appropriate. In the opinion of the Company, it is not plausible why qualified persons with comprehensive experience in career and life shall not be eligible for the Management Board or the Su-pervisory Board only because of their age.

The Supervisory Board has not established any committees (deviation from no. 5.2 para. 2 and no. 5.3 of the Code). Due to the fact that the Supervisory Board only consists of three members and thus has a small size, the Company does not consider the establishment of committees necessary and, beyond this, is of the opinion that all items falling within the scope of responsibilities of the Supervisory Board should be discussed and decided by the full Supervisory Board.

The Supervisory Board has not explicitly stipulated specific targets for its structure (deviation from no. 5.4.1 para. 2 and 3of the Code). As recommended in no. 5.4.1 para. 2 of the Code, the Supervisory Board certainly takes the Company’s situation, its international business activity, possible con-flicts of interest and the number of independent Supervi-sory Board members within the meaning of no. 5.4.2 of the Code into consideration when it comes to its current and future structure. Moreover, as the structure of the Supervi-sory Board that existed until recently shows, the Company has an open mind about female Supervisory Board mem-bers. At the moment and considering the small size of the Supervisory Board with only three members, the Company is of the opinion, however, that it is more appropriate to se-lect candidates for the Supervisory Board according to the targets mentioned above but on a case-by-case basis in-stead of stipulating explicit regulations for the structure of

the Supervisory Board in written form. The Company is of the opinion that the implementation of such regulations and continuous compliance with them would mean an inap-propriately high effort at this point.

When proposing a person for election as Supervisory Board member to the Annual General Meeting, the Supervisory Board does not intend to disclose the private and business relationships of such a candidate with the Company, its rep-resentative bodies and any significant shareholder struc-ture (deviation from no. 5.4.1 paras. 4 to 6 of the Code). In the Company’s opinion, the recommendation of the Code does not specify clearly which relationships of a candidate to what extent must be disclosed in order to comply with the recommendation. In the interests of legal certainty with respect to future elections to the Supervisory Board, the Management Board and Supervisory Board have decided to declare a deviation from the recommendation. The Com-pany is of the opinion that the disclosure requirements of the German Stock Corporation Act are sufficient to meet the informational needs of the shareholders.

Apart from regularly assessing the efficiency, the Supervi-sory Board does not carry out any other additional effi-ciency assessments on a regular basis (deviation from no. 5.6 of the Code) as the Company is convinced of its ef-ficiency considering the size of the Supervisory Board and the size of the Company.

Last year, the Company has not met the deadline of 90 days after the end of the financial year for the publication of its consolidated financial statements (deviation from no. 7.1.2 s. 4 of the Code) and will probably not met this deadline within this year either. As a young and international company, the Company places emphasis on applying utmost care in pre-paring its first consolidated financial statements as a listed company. Additionally, the required translations from Chi-nese make the preparations of the financial statements time-consuming. Nevertheless, the Company strives to comply with the recommendations for the publication dead-lines also with a view to the consolidated financial state-ment in the future.

united Power teChnology ANNUAL REPORT 2012 Company Profile 21 Corporate Governance Report

Information on the practice of corporate governance: Principles of corporate governance and economic management The management and governing bodies of United Power Technology AG are committed to the principles of good and responsible corporate governance. The Company’s aim is to gain and maintain the trust of its shareholders, customers and employees by managing the Company in a transparent and responsible manner and through close and constructive co-operation between the Supervisory Board and Manage-ment Board. Our company serves a dual purpose of both generating substantial profits and growth and thus share-holder value and also playing a key role in the field of mobile generators.

The Company’s system of internal control is designed to ensure the achievement of business objectives in opera-tions, financial reporting integrity and compliance with ap-plicable laws and regulations. The system of internal con-trol is designed to manage, rather than completely eliminate, risks impacting the Company’s ability to achieve its business objectives. Accordingly, the system can only provide reasonable but not absolute assurance that the financial statements do not contain a material misstate-ment or loss. The Company assists the Board with respect to its duty to identify, evaluate, and manage the significant risks faced by the Company. The Company implements the Board’s policies and procedures to mitigate such risks by (i) identifying and assessing the risks the Company faces and (ii) designing, operating and monitoring a system of internal controls to mitigate and control such risks.

Our employee policies are described within the manage-ment report of the annual report. As a listed company, our accounts are audited by a reputable international auditor and we disclose significantly more information to our shareholders than required. Furthermore, we are using third-party experts to additionally advise and audit other parts of the business. We are consistently working on im-prove all aspects of our operations, including occupational health and safety, sales and distribution and our conduct as a corporate citizen.

Shareholders and Annual General MeetingThe shareholders exercise their rights at the Annual General Meeting where they exercise their voting rights. The Annual General Meeting takes place within the first eight months of each fiscal year in accordance with the German Stock Corporation Act and with the Company’s Articles of Asso-ciation. All shares are pari passu equal to one vote at the Annual General Meeting. Shares with multiple voting rights or preference shares as well as maximum-voting rights do not exist. Shareholders have the option of exercising their voting rights at the Annual General Meeting in person, through a representative of their choice or through the Company’s proxy representative. In the invitation to the Annual General Meeting, there are particular explanations about the conditions of participation, voting rules (also for assignees) and shareholder rights. The applicable reports and documents, including the annual report and agenda, which are legally required for the Annual General Meeting, are published under www.unitedpower.de.com/en. Subse-quent to the Annual General Meeting, the attendance and voting results are published there as well.


Management Board and Supervisory Board

Management BoardIn accordance with the laws for German stock corpora-tions, United Power Technology AG has a dual board structure consisting of the Management Board and the Supervisory Board, each possessing its own competences. The system is characterised by a personnel separation between Management and Supervisory bodies. The Man-agement Board is in charge of self-responsibly managing the Company, whereas the Supervisory Board is responsi-ble for supervising and advising the Management Board. A member of the Management Board cannot be a Supervi-sory Board member at the same time and vice versa. The two boards work closely together in the best interest of the Company.

The Management Board of United Power Technology AG currently comprises three members, Mr Xu Wu, Mr Zhong Dong Huang and Mr Oliver Kuan, who are responsible for the management of certain areas of the Company such as the Company’s strategy, negotiating key agreements, coordi-nating the daily operations as well as financial reporting, fund raising, investor relations and financial reporting to the Supervisory Board. The Company’s key activities and finan-cial performance are regularly circulated to the manage-ment team and the Supervisory Board. In addition, the Gen-eral Management meets on a regular basis to discuss and make fundamental decisions. At these meetings, Mrs Fang Yu Wang, Financial Controller and Financial Manager, Mr Jia Yang Zhong, are present as well. The working relationship between the Management Board and the Supervisory Board is described in the report of the Supervisory Board within the annual report.

In accordance with the Code, United Power Technology AG presents the remuneration of the members of the Manage-ment Board individually in the remuneration report, which is part of the management report.

Supervisory BoardThe Supervisory Board of United Power Technology AG comprises three members, Mr Wei Song, Mr Hubertus Krossa and Mr Brian Krolicki, the latter having replaced Ms Ning Cong who left the Supervisory Board. The Super-visory Board is responsible for supervising and advising the Management Board as well as for the election of the members of the Management Board, the determination of their remuneration as well as the review and approval of the annual financial statements of the Company. The Chairman of the Supervisory Board maintains frequent contact with the members of the Management Board to discuss issues of particular importance.

In particular, the Supervisory Board looked into the financial reporting process, the effectiveness of the internal risk man-agement system (RMS) and internal control systems (ICS), the effectiveness of internal audit systems and the auditing process and conducted interviews with key personnel in the finance department. The close and confident working rela-tionship between the Management Board and the Super-visory Board is described in detail in the report of the Super-visory Board within the annual report.


Directors’ dealingsPursuant to section 15a of the German Securities Trading Act (WpHG), members of the Management Board and the Supervisory Board, other key employees as well as related people, must immediately declare any purchase or disposal of shares in United Power Technology AG to the Federal Financial Supervisory Authority (BaFin) as long as the total consideration is larger than EUR 5,000 within one calendar year. In the following, the notifications transferred to the authority are listed:

Due to the exercise of the seller’s put option, High Advance Investments Limited purchased 2,374 shares at the price of EUR 12,257.07, Fortune Sunrise Investments Limited purchased 2,596 shares at the price of EUR 13,403.27, both subject to notification via governing bodies, and Fortune Great Investments Limited purchased 2,448 shares at the price of EUR 12,639.14, subject to notification via a super-visory body, outside of the stock market on 24 Janu-ary 2012 pursuant to notifications as at 30 January 2012.

Due to the exercise of the seller’s put option, High Advance Investments Limited purchased 2,310 shares at the price of EUR 9,109.39, Fortune Sunrise Investments Limited pur-chased 2,311 shares at the price of EUR 9,113.33, both sub-ject to notification via governing bodies, and Fortune Great Investments Limited purchased 2,310 shares at the price of EUR 9,109.39, subject to notification via a supervisory body, outside of the stock market on 22 August 2012 pur-suant to notifications as at 28 August 2012/03 Septem-ber 2012.

As at the date of preparation of this report the members of the Management Board directly or indirectly hold 38.56% and taking into consideration the imputation regu-lations pursuant to WpHG in total 57.55% of the shares and voting rights in United Power Technology AG. At this date, the members of the Supervisory Board directly or indirect-ly hold in total 19.03% and taking into consideration the imputation regulations pursuant to WpHG in total 57.58% of the shares in United Power Technology AG.

Accounting and auditingThe annual consolidated financial statements of United Power Technology AG are prepared pursuant to the Interna-tional Financial Reporting Standards (IFRS) and the individual financial statements of United Power Technology AG are prepared according to the German accounting rules and the German Commercial Code (HGB). Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft was appointed by the general shareholders’ meeting as auditor and has audited the consolidated and individual financial statements. The auditors attended the Supervisory Board’s meeting, when the individual and consolidated financial statements were approved, and reported on the main results of their audit.

Corporate Compliance Compliance with the relevant statutory provisions for its operations and internal company policies (hereinafter also referred to as ‘Corporate Compliance’) is an essential part of United Power Technology AG’s corporate governance and it is one of the key duties of all business areas to ensure the compliance with the prevailing policies in the individual ar-eas of responsibility.

The Company has adopted a code of business conduct and ethics (the “Code of Conduct”), which provides guidance about doing business with integrity and professionalism. The Code of Conduct addresses issues that include fraud, conflicts of interest, corporate opportunities, protection of intellectual property, transactions in the Company’s securi-ties, use of the Company’s assets, and relationships with customers and third parties. Any violation of the Code of Conduct is reported to the management team, which will subsequently report such violation to the Audit Committee.

In addition to the Code of Conduct, the Company has em-ployee manuals/policies, which are communicated to all em-ployees. All employees are required to sign an agreement on compliance with the Group’s Code of Conduct and ethics when they join the Group. Departures from the Group’s ap-proved policies and procedures are prohibited and sanction will be imposed for non-compliance.

All business activities in China are carried out in strict com-pliance with Chinese laws and international conventions.


Risk ManagementUnited Power Technology AG’s risk management policies are described in detail in the chapter ‘Risk Management Report’. They are designed in accordance with statutory provisions to detect significant risks early, so that appropriate meas-ures can be taken in order to minimise, diversify, transfer or avoid risks thus ensuring the continuity of the Group. The Risk Management process is supported through the con-trolling and auditing functions.

Avoiding conflicts of interestIn the year under review, conflicts of interest of Manage-ment Board members or Supervisory Board members were not reported to the Supervisory Board, which is responsible in this case.

TransparencyShareholders and other interested parties can obtain infor-mation about United Power Technology AG’s standing and business development through financial reports (business and interim reports), press conferences on financial state-ments, analyst and press interviews, press releases and/or ad hoc announcements and through attending the Annual General Meeting. Current information is permanently avail-able and may obtained from the Company’s webpage under www.unitedpower.de.com/en, providing all relevant infor-mation both in German and English. Apart from extensive information about the United Power Technology AG Group and regarding the United Power Technology AG share, the webpage contains the Company calendar providing an over-view about all-important events.

Eschborn, 15 April 2013

United Power Technology AG

supervisory Board Management Board


Group Management

Report

26 detailled index

ManageMent rePort

28 Group structure and business operations

29 Research and development30 Economic and business

environment33 Revenues and earnings position36 Segment information36 Assets and liabilities position38 Cash flows38 Human resources

39 Statement and report pursuant to section 315 paragraph 4 HGB (German Commercial Code)

42 Remuneration report43 Risk report48 Statement pursuant to section 289 a of the German Commercial Code (HGB)48 Outlook

detailled index 27

ManagementReport

Group structure and business operations

Legal group structureUnited Power Technology AG is the ultimate holding com-pany of United Power Technology Group. The economic de-velopment of the holding is basically depended on the de-velopment of the respective subsidiaries abroad. The holding company and all foreign subsidiaries are included in the consolidated financial statements where United Power Technology AG has direct or indirect control.

The number of consolidated companies has not changed compared with last year and is shown in the Group struc-ture below.

United Power Technology AG is a public limited company under German law. The Company is registered with the Commercial Register of Frankfurt/Main, Germany under HRB 88245. The Company has been listed on the regulated market of the Frankfurt Stock Exchange since 10 June 2011.

The intermediate holding company United Power Equip-ment Co., Ltd. (“UP HK-Holding”) is located in Hong Kong. The operating companies, United Power Equipment Co., Ltd. (“UPEC”), Fujian United Power Equipment Co., Ltd. (“FU-PEC”), Sealand Machinery Co., Ltd. (“SMC”), Fujian Di Sheng Wan Kai Machinery Co., Ltd. (“DWC”), Shanghai Genmaster International Trading Co., Ltd. (“Genmaster Shanghai”) and United Power France SASU are located in Fuzhou, Shanghai and Lille, France. All companies are subsidiaries and are included in the consolidated financial statements of United Power Technology AG.

united Power technology agGermany

(founded in 04/2010)

100%

100%

100% 100%51%

100%100%

Fujian di sheng wan Kai Machinery Co., ltd.

�PRC Fuzhou�(founded in 06/2010)

Fujian united Power equipment Co., ltd.

�PRC Fuzhou�(founded in 05/2003)

sealand Machinery Co., ltd.�PRC Fuzhou�


hK united Power equipment Co., ltd.Hong Kong


shanghai genmaster international trading Co., ltd.

�PRC Shanghai�(founded in 10/2010)

united Power France sasu�France Lille�


united Power equipment Co., ltd.�PRC Fuzhou�


uP grouP struCture

28 Financial report Management Report


Business segments and organisational structureUnited Power Technology Group designs, develops, manu-factures and sells an extensive range of engine-driven pow-er equipment, including generators, outdoor power equip-ment and components such as engines. Business segments can be divided into portable generators, outdoor power equipment and components. Business segments are sup-ported by the holding function of United Power Technol-ogy AG. The production facilities of the Group are located in Fuzhou, China. Our major products comprise residential as well as commercial generators, which are currently delivered to our customers in 60 countries around the world. Our main markets are the domestic market (China) and over-seas markets, in particular North America and Europe.

In selected markets such as China, Canada, Africa (Nigeria, South Africa), Malaysia, Europe (Italy, Spain) or Russia we sell our own branded products. In the other markets our products are usually developed and manufactured by Unit-ed Power and branded by third parties. United Power is a leading Original Design Manufacturer (ODM) which develops and produces its products for leading Original Equipment Manufacturers (OEMs), wholesalers and retailers such as Metro, Einhell, B&Q and Hornbach.

Legal and economic factors on the businessUnited Power Group has to follow different national and international statutory provisions. Apart from general stat-utory provisions industrial safety regulation and healthy protection are of particular relevance for the Group.

In terms of economic influencing factors, energy, raw and material costs as well as the development of the RMB, EUR US Dollar exchange rate are of particular importance.

Internal control systemUnited Power Group’s internal control system is essentially comprised of the following components:

Regular meetings of the Management Board every four weeks

Regular rolling profit and liquidity planning

Monthly reporting of the business segments

Risk and opportunity management Regular reporting to the Supervisory Board

The Company is managed through regular discussions by the Management Board and by the managers of the busi-ness segments. The Management Board is informed on a monthly basis as to the development of key financial ratios and early operating indicators for both the Group and the business segments, with the primary focus on revenue, costs, earnings, personnel, investment and other key ratios.

The numerous early indicators in particular include market potential, which is the foundation of any business strategy decision, in order to take advantage of opportunities and avoid potentially undesirable developments. Additionally, rolling projections provide information as to the earnings figures for the current year. The purpose is to analyse devia-tions from the estimate of the previous quarter as well as from the overall plan, and to take corrective action if need-ed. For investment and cooperation opportunities, teams are established with clearly defined functions in the interest of efficient implementation.

The continuous involvement of all business segments in risk management and the internal control system guarantees the fast response to changes in all areas and at all decision levels of United Power Group. Management and the Man-agement Board are notified immediately of any significant changes that are relevant to earnings within an individual area of the business.

Research and DevelopmentOur aim is to become a leading global engine and generator developer and producer. Therefore we are continuously spending substantial efforts to improving and enhancing our existing product range as well as developing new products to meet the diverse requirements of the global market place.

We have a strong in-house research and development team currently consisting of 57 members dedicated to quality im-provements and innovation. In addition we are closely coop-erating with the Fuzhou Institute of Technology and Tianjin Internal Combustion Engine Research Institute especially in design and patent issues.

Financial report 29 Management Report


Below we have summarized some activities in 2012.

In the segment of portable generatorsVertical axis generatorIn 2012 we developed a new generator with an output of 2kW. It is using an independent vertical axis engine, which is designed to be highly user-friendly and very compact. We believe that United Power is the first manufacturer who produces this kind of vertical axis generator in China. Our main target markets for this product are Southeast Asia, the Middle East and Russia.

lPg generatorUnited Power has developed two generators in the last year powered by liquefied petroleum gas (LPG) with an output of 3kw and 5kw. The LPG generators are mainly developed for the US market and designed to be especially environmen-tally friendly, convenient and safe in their usage. The gen-erators are designed to meet the stringent US performance and environmental standards (U.S. EPA III).

inverter generatorAfter launching the IG3600 with 3.2kw output in 2011, in 2012 IG2400 with 2 kW output was launched. We already realized initial sales especially in the US market. The aver-age selling price of our inverter generators are considerably higher than a comparable generator without inverter tech-nology. Furthermore, during 2012 we have developed in-house our own 1kw and 2kw inverter engines for the IG1200, IEG1200 and IG2400 generator models. Through this we are able to reduce the unit production cost of our inverter prod-ucts. The target markets for the inverter generator prod-ucts are mainly Europe and North America, which have the highest quality requirements; furthermore we plan to launch the products to our domestic market China.

Commercial generatorThe P5000 Gasoline generator model with 5KW output has been developed specifically for a major customer in the US. The generator is designed for high durability and long useful life.

In addition we developed a 5KW output ultra silent diesel generator with intelligent controls. This product is an up-grade from the previous ultra silent diesel generator model.

The model features an electronic integrated intelligent con-trol module, a low oil pressure alarm, automated transmis-sion system (ATS) control, load-sensing adjustment, param-eter display and security control. The features increase the product safety, reliability, user friendliness and thereby in-creasing overall attractiveness and marketability.

Outdoor power equipmentIn the last year we developed new versions of vertical axis high-pressure water pumps. The pumps pressure is 2000–3000 PSI and the flow is 2.5 GPM, thereby attaining stand-ards comparable with the most competitive pumps cur-rently in the market place. The main target market for the products is Europe.

Also, a new horizontal axis high-pressure washer product has entered the certification stage, which is expected to be completed in the third quarter of 2013. The product main target market is the US.

In the Components business segmentenginesWe also introduced new motors in the past year. The UP152 was mainly developed for the US market and can be used for manual generators and pumps, such as our GP 40 water pump. It complies with the EPA III environmental standard. In addition we developed engines in the UP2 series for our residential generators. The motors feature improvements in the areas of design, efficiency and environmental compat-ibility. The main target markets for these types of products are Europe and South America.

Economic and business environment

Economic environmentGlobal economic growth continues to be weak in 2012. The global real gross domestic product (GDP) is expected to in-crease by only 2.5% following a 3.0% increase in 2011. In par-ticular, the unstable economic situation in Europe is putting a strain on global economic development. Concerns about the stability of the banking sector, the national debt crisis and uncertain economic development continue to inhibit private investment and consumption.



Europe recorded the greatest decrease in growth in the past year. The national debt crises and the Euro crisis have led to a recession in most Southern European countries. This development was reinforced by rising unemployment as well as a restrictive fiscal policy and continues to affect Northern and Central Europe. The rescue and stability measures established and announced by the European Community had a positive impact on the financial markets. As a result, refinancing of most of the countries affected and, consequently, economic development has become more favourable over the course of the years.

Germany’s economy experienced a stronger economic growth than the rest of Europe. This development was due in particular to the strong export economy. Especially the continuingly favourable interest rate environment and the positive developments in the employment market stimu-lated investment and private consumption during the first half of the year. The slight economic downturn and weaken-ing of the employment market during the course of the year resulted in decreased growth in the second half of the year.

In the USA, slow developments in the labour market and the political stalemate resulted in minimal growth. High levels of corporate investment and a recovering housing market in particular provided positive stimulus to the economy.

The growth trend in the Chinese economy lost some mo-mentum compared to the previous year since China, as a leading exporting nation, is influenced by the economic de-velopment of the target markets. To counter this, China has taken some fiscal policy measures.

overall statement on the economic environmentUnited Power Technology benefited from the economic growth in North America and in the domestic market and particularly boosted sales of its commercial portable gen-erators segment.

Currently, our main markets are Europe, China and North America. However, we have potential customers all around the world and are continuously seeking to evaluate and penetrate new markets, particularly other emerging mar-kets. Therefore, the global economic outlook is relevant for the demand for our products.

Even though there are signs that growth is picking up in certain developing countries, particularly the United States, the world continues to face a volatile and uncertain recov-ery. According to World Bank’s global outlook a real GDP growth of 2.4% for 2013 is expected. In the eurozone, the return to recovery after a protracted contraction is delayed. Uncertainty over the future policy and necessary fiscal and financial restructuring are expected to continue to be a drag on growth in many European countries. For 2013, GDP growth is expected to contract at an annual rate of –0.2% in the eurozone according to the latest economic outlook of the IMF in January 2013. The expected contraction reflects delays in the transmission of lower sovereign spreads and improved bank liquidity to private sector borrowing condi-tions, and still significant uncertainty about the ultimate resolution of the crisis despite recent progress.

In China, GDP is expected to grow at a rate of about 8.4%. Ensuring sustained growth requires continued progress with structural reforms and rebalancing of the economy toward increased private consumption.

While overall economic sentiment and recent growth fig-ures provide mixed signals, we remain confident about our long-term growth and earnings prospects for the following reasons:

We are growing from a relatively low base and continue to be able to capture market share both in our existing as well as new markets.

We continue to capture growth opportunities in our do-mestic market China and in other developing and emerging markets.

The recent concerns about global economic growth have also led to a stabilisation of commodity prices, which should alleviate pressure on our cost side.



Industry environmentGlobal demand for our products is expected to grow at an average annual rate of 7.5% until 2015 based on a market study by US market research firm “Global Industry Analysts” of July 2010.

The demand for our products is driven by a number of fac-tors including general economic growth, changing consumer lifestyles and the accompanying demand for mobile and reliable sources of electricity and the general increasing af-fordability and visibility of generators as they are increas-ingly sold directly to consumers through retail outlets. In addition, there are increasing supply uncertainties and dis-ruptions due to ageing grids (particularly in North America), failing grids due to natural disasters and underdeveloped grids particularly in emerging markets. In addition, we ex-pect that with the recent discussions surrounding nuclear power the supply uncertainties are likely to increase both in developed as well as developing markets.

Many developed countries such as North America and Eu-rope have an ageing grid system. According to the North American Electrical Reliability Council, or NERC, 30% to 50% of the transmission and distribution network in the United States is 40 to 50 years old. Thus there is an increasing de-mand for generators for backup power in residential, com-mercial and industrial applications.

In emerging markets such as Brazil, Russia, India and China, the power infrastructure is generally not as developed as in developed markets, and the majority of generators sold in these markets are designed for use in extended power out-ages or as a substitute for utility power. In developed mar-kets such as the United States, generators are primarily sold for emergency standby purposes such as electrical generation, transmission and distribution in these markets is generally more mature. In addition, in many international markets diesel generators represent a more significant per-centage of the market than they do in the United States providing an opportunity for increased revenue of gaseous and Bi-Fuel™ generators for certain applications in areas with existing natural gas infrastructure.

Our performance is driven by the demand for reliable back-up power solutions by our customer base. This demand is influenced by several important trends affecting our indus-try and our company’s positioning. These factors include:

Cost leadership and increasing penetration opportunities We are a cost leader in the industry and we believe that by expanding our distribution network, continuing to develop our product line, and targeting our marketing efforts, we can continue to build awareness and increase penetration for our standby generators.

Effect of large-scale power disruptions Power disruptions are an important driver of consumer awareness and have historically influenced demand for generators. Disruptions of the power grid due to ageing and/or natural disasters increase product awareness and drive consumer demand for standby generator.

Impact of residential investment cycle The market for residential generators is affected by the residential investment cycle and overall consumer senti-ment. When homeowners are confident of their house-hold income or net worth, they are more likely to invest in their home. These trends can have a material impact on demand for residential generators.

Impact of business capital investment cycle The market for commercial and industrial generators is affected by the capital investment cycle and overall non-residential construction and durable goods spending. These trends can have a material impact on demand for industrial and commercial generators. However, the capi-tal investment cycle may differ for the various industrial and commercial end markets (industrial, telecommunica-tions, distribution, retail, health care facilities and munici-pal infrastructure, among others).



Statement of the Management Board on business development in 2012The year 2012 was a successful year for the United Power Group – despite the uncertainty surrounding the single cur-rency and sovereign debt crisis in the eurozone and its po-tential effects on the real economy. In particular, United Power leveraged the enormous growth potential in the commercial generators segment.

United Power Group generated revenue of EUR 111.05 mil-lion, and increase of 10.7% over the previous year. EBIT in-creased by 28.34% to EUR 15.3 million.

For most part, the United Power Group has no long-term agreements on fixed pricing and quantities. Disclosure of the order levels for United Power Group and its business areas is therefore not relevant for evaluating short and me-dium-term earnings potential.

Comparison of actual business development versus guidancerevenue guidanceWith an increase of 10.74% to EUR 111.05 million, our rev-enue rose in line with published guidance. Revenue in the commercial generators segment grew 51.40% to EUR 58.95 million. We were thus able to expand this seg-ment further. With 11.8%, the residential generators seg-ment remained below the level of last year with revenue of EUR 46.20 million. We had especially strong growth in North America (22% revenue growth compared to last year) and in new markets such as Russia, Latin America and Asia-Pacif-ic. In addition, we solidified our position in our home market of China with growth of 16%. Sales in Europe were slightly lower due to the repercussions of the Euro and the sover-eign debt crisis.

EBIT guidanceIn 2012 we achieved an adjusted operating profit (EBIT) of EUR 16.50 million, which corresponds to the previous year’s result. The adjustment included extraordinary expenses in connection with the capital injection in the IPO year. Conse-quently, our adjusted EBIT margin was 14.86%, which was just below our goal for 2012 and was mainly attributable to the further unexpected rise in the RMB toward the end of the year.

Revenues and earnings position Earnings positionThe table below shows the consolidated income statement for the year 2012 compared to 2011.

in EUR million

united Power ag

2012

united Power ag

2011 +/– %

revenue 111.05 100.28 +10.74

Cost of sales –88.64 –78.14 +13.44

Gross profit 22.41 22.14 +1.22

Other operating income 1.15 1.06 +8.49

Distribution and selling expenses –1.36 –1.20 +13.33

Administrative expenses –4.13 –3.23 +27.86

Research and development –1.00 –1.03 –2.91

Other expenses –1.81 –5.85 –69.06

including expenses as a result of the IPO 1.24 4.71 –73.67

Profit from operations (eBit) 15.26 11.89 +28.34

Interest income 0.17 0.00 –

Interest expense –0.28 –0.10 +180.00

Profit before tax 15.15 11.79 +28.50

Income taxes –2.56 –2.24 +14.29

Profit for the period 12.59 9.55 +31.83

Earnings per share* 1.03 0.85 +21.18

adjusted 1) eBit 16.50 16.60 –0.61

adjusted 1) net income for the period 13.83 14.26 –3.02

adjusted 1) earnings per share* (eur) 1.12 1.26 –11.11

* EPS for 12 months 2011 is based on a weighted average of shares (11.28m shares), for 12 months 2012 it is based on the weighted average of shares (12.30 m shares).

1) Adjusted for extraordinary non-recurring expenses in relation to the IPO.



RevenueUnited Power’s revenue increased robustly from EUR 100.28 million for the 12 months of 2011 by 10.74% to EUR 111.05 million for the full year 2012. Despite a difficult macroeconomic environment and a weak first quarter, we were able to slightly surpass our revenue growth target of 10% in Euro terms. Measured in local currency Renminbi (RMB), revenues remained stable compared to the previ-ous reporting period. This was a reflection of the further strengthening RMB against the Euro and US Dollar (USD) particularly in the second half of 2012. We recognized strong growth in North America, our domestic market Chi-na and in other new markets (e.g. Russia, Latin America, Asia-Pacific). Against the background of the ongoing chal-lenging economic environment in Europe due to the cur-rent debt crisis we saw a small decrease in sales in our largest market by end customer.

According to an internal analysis, revenues by end customer in North America and other new markets showed strong growth each by approximately 22% in 2012 compared to the same period last year. Our domestic sales by end customer in China improved significantly by approximately 16% while sales to European end customers dropped by roughly 2%.

In 2012 our commercial generator segment grew particu-larly strongly by approximately 51% compared to the previ-ous period while our residential generator segment sales dropped by approximately 12%. The faster growth of our commercial generator segment is in line with our growth strategy to expand sales of increasingly larger generators.

Cost of salesOur cost of sales grew from EUR 78.14 million in 2011 by 13.44% to EUR 88.64 million for the full year 2012. This was mainly due to revenue growth, RMB appreciation as well as higher fixed assets depreciation. Measured in RMB, cost of sales increased by about 2.4% in this period. Cost of sales constitutes materials (e.g. copper, alumini-um, steel), parts, factory level overheads and labour costs as well as fixed asset depreciation and is therefore af-fected by currency appreciation, investment as well as domestic wage inflation as well as commodities prices.

Gross profitGross profit increased from EUR 22.14 million for the 12 months of 2011 by 1.22% to EUR 22.41 million for the full year 2012. Measured in RMB, gross profit decreased by about 8.6% in this period.

United Power’s gross profit margin decreased by approxi-mately 1.9 percentage points to 20.18% in 2012. This was mainly due to appreciation of the RMB against the USD par-ticularly in the second half of 2012 and the time lag until, and extent to which, such currency movements can be passed on to customers and higher fixed assets depreciation.

Other operating incomeOther operating income mainly consists of government grants of EUR 0.76 million in respect of our achievements in new product developments and environmental protection as well as interest and rental income.

Distribution and selling expensesOur distribution and selling expenses increased from EUR 1.20 million for the full year of 2011 by 13.33% to EUR 1.36 million for the comparable period of 2012. This was mainly due to increased sales as well as expanding and strengthening our sales force. Measured in RMB, dis-tribution and selling expenses increased by 2.29% in this period.

As a percentage of revenues, distribution and selling ex-penses have remained stable at 1.22% in 2012 compared to 1.20% for the full year 2011.

Administrative expensesUnited Power’s administrative expenses grew from EUR 3.23 million for the full year of 2011 by 27.86% to EUR 4.13 million for the comparable period of 2012. Meas-ured in RMB, administrative expenses increased by about 15.4% in during this period. Reasons for the development were mainly higher costs of being a listed company.

As a percentage of revenues, administrative expenses have changed from 3.22% for the 12 months of 2011 to 3.72% for the same period in 2012.



Research and development expensesDespite continuing research and development activities we were able to stabilize the corresponding expenses. For the full year 2012 research and development costs amounted to EUR 1.00 million compared to EUR 1.03 mil-lion for the for the comparable period of 2011. Measured in RMB, research and development expenses decreased by 12.37% for this period.

As percentage of revenues, research and development ex-penses have slightly decreased from 1.03% to 0.9% for the full year of 2011 to full year 2012. The decrease in research and development expenses are due to lower certification costs incurred in 2012 compared to 2011 in which we had an unusually high number of certifications which are typi-cally valid for several years.

other expensesOther expenses strongly decreased from EUR 5.85 million in 12 months 2011 by 69.06% to EUR 1.81 million for the full year 2012. Measured in RMB, other expenses decreased by about 72.07% in this period.

As a percentage of revenues, other expenses have de-creased from 5.83% to 1.63% for the 12 months of 2011 to the full year 2012. Other expenses include to a large part remaining non-recurring one-off expenses of EUR 1.24 mil-lion in relation to our company’s Initial Public Offering in 2011 as well as various government taxes and levies and bank charges.

Profit from operations (eBit)Our EBIT for the full year 2012 increased by 28.34% to EUR 15.26 million year-on-year especially due to lower other expenses. Measured in RMB, the EBIT increased by 15.84% in this period.

As a percentage of revenues, EBIT increased from 11.86% to 13.74% for the full year 2011 to full year 2012.

Adjusted EBIT (adjusted for non-recurring one-off IPO re-lated expenses) decreased from EUR 16.60 million for the 12 months of 2011 by 0.61% to EUR 16.50 million in the com-parable period of 2012. Measured in RMB, adjusted EBIT decreased by about 10.29% in this period. The adjusted EBIT margin decreased from 16.55% for the full year of 2011 to 14.86% in the comparable period in 2012.

Finance costFinance cost of United Power increased from a low level of EUR 0.10 million for the 12 months of 2011 by 180% to EUR 0.28 million for the comparable period of 2012. Meas-ured in RMB, finance expenses increased by 152.72% in this period.

As a percentage of revenues finance expenses remained low at 0.25% in the reporting period 2012.

income taxesIn 2012 income tax increased from EUR 2.24 million for the 12 months of 2011 by 14.29% to EUR 2.56 million. At group level, this represents a tax rate of 16.88%. Measured in RMB, income tax expenses increased by 3.15% in the re-porting period. Our main PRC operating company UPEC (which accounts for approximately 90% of group revenues) continues to enjoy a favourable corporate tax rate of 12.5% in 2012. As we have been certified as a high technology company in China, we expect to enjoy a continued favour-able corporate tax rate of 15% from 2013 onwards. Our group level tax rate is expected to continue to exceed our nominal corporate tax rate due to non tax-deductible ex-penses incurred outside the PRC.

Profit for the period and ePs United Power’s profit for the period grew from EUR 9.55 million in 2011 by 31.83% to EUR 12.59 million in the comparable period of 2012. Measured in RMB, profit for the period increased by 18.99% in this period.

As a percentage of revenues, profit for the period increased from 9.52% to 11.34% for the full year of 2011 to the full year of 2012.



The earnings per share (EPS) in the 12 months of 2012 was EUR 1.03, an increase of 21.18% year-on-year. The reason for the increase in profit and EPS was mainly due to the signifi-cantly reduced other expenses, which consist mainly of non-recurring expenses relating to our initial public offering (IPO).

Adjusted profit for the period (adjusted for non-recurring one-off related IPO expenses amounted to EUR 1.24 million in 2012 versus EUR 4.71 million in 2011) decreased from EUR 14.26 million in the 12 months of 2011 by 3.02% to EUR 13.83 million for the comparable period of 2012. Meas-ured in RMB, adjusted profit for the period decreased by 12.47% in this period. The adjusted profit for the period mar-gin decreased from 14.22% to 12.45% from the full year 2011 to full year 2012. The decrease in adjusted profit margin compared to 2011 is mainly because of the decreased gross profit margin for the reasons explained above. The adjusted EPS for the full year of 2012 was EUR 1.12.

Segment information

Residential generatorsRevenues in our largest segment Residential generators have decreased by around 12% in 2012. For the 12 months of 2012 they were EUR 46.2 million compared to the corre-sponding period last year of EUR 52.4 million. This is partly a reflection of the continuing weakness in the European mar-kets into which we historically have been selling dispropor-tionately more residential generators. However it’s also in line with our strategy to expand sales of larger generators.

Commercial generatorsOur second largest segment Commercial generators showed a strong increase and performance for the Group. Segment’s revenues increased by 51.4% from EUR 38.9 million for the full year 2011 to EUR 58.9 million for 2012. This is in line with the Company’s strategy of increasingly focusing on generators with higher output and selling in categories with larger en-gine sizes.

Outdoor power equipmentsThe outdoor power equipment segment showed a slight decline within the reporting period. Total segment revenue for 2012 was EUR 4.4 million compared to last year’s com-parable period of EUR 5.1 million. The decrease in this seg-ment was mainly due to lower sales to one of our Chinese wholesale clients, which defocused its outdoor power equipment sales compared to 2011.

ComponentsThe components segment is currently not a strategic sector for the Company but rather taking advantage of opportuni-ties in the market place. This segment represents less than 5.0% of the Company’s total revenue. There was a decrease from EUR 8.7 million for the full year 2011 to EUR 4.8 million for full year 2012 mainly due to temporarily disruption of production as a result of the relocation of our Sealand Ma-chinery parts manufacturer from one of our old factories to our new factory site.

Assets and liabilities positionThe following table shows the consolidated balance sheet as at 31 December 2012 compared to the consolidated bal-ance sheet as at 31 December 2011.

in EUR million 31 dec 2012 31 dec 2011

Current assets 59.03 54.93

Non-current assets 59.84 56.36

total assets 118.87 111.29

Current Liabilities 15.44 18.14

Non-current liabilities 1.88 2.04

total liabilities 17.33 20.18

total equity 101.54 91.11

total liabilities and equity 118.87 111.29



Current Assetsinventories Inventories include raw materials, work in progress and finished goods. Inventories decreased by 36.16% from EUR 7.30 million as at 31 December 2011 to EUR 4.66 million as at 31 December 2012. The decrease is mainly due to the fact that the 2012 Chinese New Year holiday period occurred early in 2012 and as a result there was increased produc-tion at the end of 2011 in the lead up to the Chinese New Year holiday. In 2013 the Chinese New Year holiday was later than in 2012 therefore not requiring the production surge at the end of the calendar year.

The average volatility corresponds to 19 days in 2012 com-pared with 17 days in the previous year.

trade and other receivablesTrade and other receivables increased from EUR 19.56 million at year-end 2011 to EUR 20.78 million as at 31 Decem-ber 2012. Trade receivable days increased from 60 days for the full year 2011 to 66 days for the same period in 2012 due to significant sales increase in the last two months of 2012 compared to the same period the year before.

amounts due from related partiesAmounts due from related parties decreased by 100% from EUR 0.24 million as at 31 December 2011 to EUR 0.00 million as at 31 December 2012.

Cash and cash equivalentsCash and cash equivalents amounted to EUR 30.94 million as at 31 December 2012 which represented an increase of 14.59% from EUR 27.00 million (including EUR 0.79 million pledged bank deposit) as at 31 December 2011. Cash in-creased despite a substantial investment in property, plant and equipment due to the cash inflow from operations.

Cash and cash equivalents comprise bank balances mainly held in RMB at international commercial banks in China with some balances in Hong Kong and Germany.

Non-current assetsProperty, plant and equipmentProperty, plant and equipment grew by 7.31% from EUR 52.27 million as at 31 December 2011 to EUR 56.09 mil-lion as at 31 December 2012. The increase is mainly associ-ated with our on-going production capacity and R&D facili-ties expansion. In particular, United Power has completed the installation of three new production lines, a residential generator line, a commercial generator line and an engine parts production line and also invested into an additional R&D laboratory. All the production expansion was installed at the production site in Gaoqi Industrial Park, Fuzhou. As a result, production capacity increased to more than 1,200,000 units per year.

Property, plant and equipment is mainly located in Fuzhou, China and comprises buildings and land-use-rights (EUR 30.69 million), plant and equipment (EUR 23.59 million), motor vehicles and office equipment (EUR 1.16 million) and deposits (EUR 0.64 million). The additions to plant and equipment amounted to EUR 8.99 million.

The asset depreciation rate in 2012 is 11.95% (2011: 6.20%).

Liabilities trade and other payablesTrade and other payables increased by 25.93% from EUR 9.45 million as at 31 December 2011 to EUR 11.9 million as at 31 December 2012. Account payable days increased from 31.2 days for the full year 2011 to 43.4 days for the comparable period in 2012. The payable days increase is mainly due significant purchase activity increase over the last two months of 2012 compared to the same period of the previous year.

Borrowings and amount due to shareholdersBorrowings for the full year 2012 decreased to EUR 2.40 mil-lion from EUR 6.58 million as at 31 December 2011 repre-senting a decrease of EUR 4.18 million. The additional bor-rowing was used to fund working capital and comprised an additional loan extended by a domestic commercial bank.

The amounts due to related parties decreased to EUR 0.00 million in 2012 from EUR 0.86 million in 2011.



equity to total assets ratioThe total equity increased from EUR 91.11 million by 11.45% to EUR 101.55 million mainly due to the consoli-dated profit for the period.

The equity to total assets ratio rose from 81.86% as at 31 December 2011 to 85.43% as at 31 December 2012.

Cash flowsOverall cash amounted to EUR 30.94 million as at 31 De-cember 2012 year-on-year compared to the figure from 31 December 2011 of EUR 27.00 million. Overall, the cash generated from our operations exceeded the cash flow from investing activities thereby increasing our overall cash posi-tion.

in EUR million 2012 2011

Operating cash flow before working capital changes 19.41 15.30

Cash generated from operations before interest and taxes 20.73 9.34

Cash generated from operating activities 17.80 6.90

Cash flow from investing activities –9.25 –29.70

Cash flow from financing activities –3.98 22.15

net increase in cash and cash equivalents 4.57 –0.66

Cash at beginning of year 27.00 25.80

Effect of exchange rate changes –0.63 1.86

Cash and bank balances at end of the period 30.94 27.00

Cash generated from operations before tax and interestCash generated from operations strongly increased by EUR 11.39 million to EUR 20.73 million at the end of the re-porting period 2012. This was mainly due to increased sales as well as decreased inventory levels in the lead up of the Chinese New Year festival, which occurred later in 2013 compared to 2012.

Cash flow from investing activitiesThe investment of the Company in property, plant and equipment for capacity and production expansion is reflect-ed in the cash flow from investing activities. For the full year of 2012, the Company invested EUR 9.42 million in property, plant and equipment resulting in negative cash from investing activity of EUR 9.25 million.

Cash flow from financing activitiesCash from financing activities on 31 December 2012 was EUR 3.98 million mainly due to the difference of maturing and new working capital loans.

Based on the existing cash balances, the Management Board does not at present see any risks arising from fund-ing outside the period prescribed.

New borrowings raised is from China Merchant Bank.

As at 31 December 2012 there are no off-balance-sheet fi-nance transactions.

Cash at end of periodOverall cash increased to EUR 30.94 million compared to EUR 27.00 million for the full year last year representing a positive development of 14.59%.

Human resourcesUnited Power’s total number of employees decreased from 884 as at the end of 2011 to 705 as at 31 December 2012. While key areas such as management, R&D, sales and mar-keting were strengthened, overall employees decreased. This was mainly due to adjustments of our production per-sonnel and some administrative personnel as a result of streamlining and continued automation. The average num-ber of employees was 772 over the course of 2012. The em-ployee split by function as at 31 December 2012 is shown in the table below:



2012 2011

Management 28 16

R&D 57 55

Sales & Marketing 37 32

Administration 111 155

Production 472 626

total 705 884

SPLIT OF EMPLOYEES BY FUNCTION (in %)

Production 66.95Administration 15.74

R&D 8.09Sales & Marketing 5.25 Management 3.97

as at 31 December 2012 United Power continues to strengthen its management, sales and marketing and R&D teams through further re-cruitment of qualified mostly university-educated staff.

Our revenue growth, despite a reduced work force, is the result of our continuous efforts to increase overall produc-tivity through further automation and management im-provements.

Statement and report pursuant to section 315 paragraph 4 HGB (German Commercial Code)

Subscribed CapitalThe subscribed capital (share capital) of United Power Tech-nology AG amounts to EUR 12,300,000.00 and is divided into 12,300,000 no par value bearer shares with a notional value of EUR 1.00 each.

Restrictions regarding voting rights and the right to transfer sharesThere are no restrictions on the transferability of shares and there are no restrictions on voting rights for shares under the Articles of Association of United Power Technology AG.

Between Mr Xu Wu, Mr Wei Song and Mr Zhong Dong Huang exists an agreement to coordinate the exercise of voting rights associated with their shares in United Power Tech-nology AG, which can be regarded as restriction in the sense of section 315 para. 4 no. 2 of the German Commercial Code.

In addition, legal restrictions on voting rights may exist, for example in the sense of section 136 of the German Stock Corporation Act.

Direct or indirect participation in shares with more than 10% of the voting rightsAs at 31 December 2012, the following shareholders hold more than 10% of the shares in United Power Technology AG:

20.14% are held by Fortune Sunrise Investments Limited, Road Town, Tortola, British Virgin Islands, (indirectly held by Mr Xu Wu) with a corresponding amount of voting rights;

18.99% are held by Fortune Great Investments Limited, Road Town, Tortola, British Virgin Islands, (indirectly held by Mr Wei Song) with a corresponding amount of voting rights;

18.42% are held by High Advance Investments Limited, Road Town, Tortola, British Virgin Islands, (indirectly held by Mr Zhong Dong Huang) with a corresponding amount of voting rights;

22.12% are held by Orchid Asia IV L.P., Cayman Islands, with a corresponding amount of voting rights.



Shares with special rightsThere are no shares with special control powers.

Voting rights of employeesThe employees, who hold shares, exercise their unrestrict-ed (voting) rights directly.

Appointment and dismissal of Management Board members. Amendments to the Articles of AssociationAccording to section 7 of the Articles of Association, the Management Board of United Power Technology AG con-sists of one or more persons. The Supervisory Board deter-mines the number of members of the Management Board. The Management Board of United Power Technology AG consists of three members.

The Supervisory Board elects the Management Board members in accordance with section 84 AktG for a term not exceeding five years. Any extension of the term requires a Supervisory Board decision and cannot be decided earlier than a year before the end of the current contract period. In special cases, the district court can appoint a replacement for a member of the Management Board at the request of any person who has legitimate interest (for example other board members) (section 85 AktG). Such an appointment would be terminated immediately when, for example, the Supervisory Board appointed a member of the Management Board.

The dismissal of members of the Management Board can only be for important reasons (section 84 paragraph 3 sen-tences 1 and 2 AktG). Important reasons are for example, general neglect of duties, inability to properly exercise the duties or the loss of confidence by the Annual General Meeting.

The Articles of Association of the Company can be changed by the Annual General Meeting and the changes will take effect once they are registered with the Commercial Regis-ter (Handelsregister). If the Annual General Meeting decides to change the Company’s Articles, according to section 133 paragraph 1 AktG a simple majority of the votes cast is re-quired and according to section 179 paragraph 2 AktG a ma-jority of at least three fourths of the share capital repre-sented at the passing of the resolution is required, unless a simple majority of the capital represented is sufficient ac-cording to section 18 paragraph 4 of the Articles of Associa-tion. According to section 10 paragraph 3 of the Articles of Association, the Supervisory Board is entitled to amend the Articles of Association, provided that such amendments affect only the wording.

Authorized CapitalOn 12 June 2012, the Annual General Meeting authorised the Management Board, with the approval of the Supervisory Board, to increase the share capital of United Power Tech-nology AG until 11 June 2017, once or several times by up to a total of EUR 6,150,000.00 by issuing a total of 6,150,000 no par value bearer shares in consideration of contribution in cash or in kind (Authorised Capital 2012/I). On principle, shareholders are to be offered subscription rights; the stat-utory subscription rights may also be offered in such a way that the new shares are taken over by a bank or a syndicate of banks with the obligation to offer them to the Company’s shareholders for subscription. The Management Board is authorised, in each case with the approval of the Supervi-sory Board, to exclude the subscription rights of the share-holders. An exclusion of the subscription right, however, shall only be admissible in the following cases:



a) in order to exclude fractional amounts from the sub-scription right;

b) in the case of a capital increase against cash contribu-tions, if the entire proportional amount of the share capital that relates to the new shares for which the subscription right is excluded does not exceed 10% of the share capital, in fact neither at the point when it becomes valid nor at the point when the authorization is exercised, and if the amount of issue of the new shares is not considerably lower than the stock market price of shares of the same type and with the same features that are already traded at the stock market when the final issue price is stipulated. When calculat-ing the 10% of the share capital, the proportional amount of the share capital that relates to the shares that were sold or issued or are to be issued under ex-clusion of the subscription right during the term of this authorization due to other authorizations that apply directly or indirectly mutatis mutandis section 186 subsection 3 sentence 4 AktG shall be offset; or

c) in the case of a capital increase against contributions in kind, particularly for the purpose of acquiring compa-nies, parts of companies or interests in companies, in the frame of mergers and/or for the purpose of acquir-ing other assets including rights and claims.

The Management Board shall decide, with the approval of the Supervisory Board, on the additional content of the rights to shares and the conditions of issuance of the shares.

After utilisation of authorised capital or the lapse of the pe-riod for the utilisation of authorised capital, the Supervisory Board is authorised to amend the Articles of Association.

The authorised capital has not yet been utilized and is thus available at a volume of 6,150,000 shares at 31 Decem-ber 2012.

Conditional CapitalOn 12 June 2012, the Annual General Meeting conditionally increased United Power Technology AG’s share capital by up to EUR 246,000.00 by means of issuing up to 246,000 no-par value bearer shares (Conditional Capital 2012/I). The Conditional Capital 2012/I is exclusively for the purpose of servicing subscription rights to shares of United Power Technology AG, which are issued, based on the Stock Option Plan 2012 to members of the Management Board or to se-lected executive employees of the United Power Technol-ogy AG and its domestic and international group subsidiar-ies. The conditional capital increase shall only be carried out insofar as subscription rights are issued and their owners exercise their subscription right for shares of United Power Technology AG and United Power Technology AG does not grant own shares in fulfilment of the subscription rights. The Supervisory Board is authorized to adjust the wording of the Articles of Association in accordance with the respec-tive use of the Conditional Capital 2012/I.

The conditional capital has not been claimed and accounts for 246,000 shares as at 31 December 2012.

Change of control provisionsThere are no agreements with United Power Technology AG, which are subject to the condition of a change of control due to takeover offer.

Agreement on compensation in the event of a takeover offerThere are no agreements between the members of the Management Board or employees and United Power Technology AG, which provide for compensation in the event of a change of control due to a takeover offer.



Remuneration report

Management Board remunerationAccording to section 87, para. 1, and section 107, para. 3, sentence 3 of the German Stock Corporation Act, the Su-pervisory Board is responsible for determining the Man-agement Board’s remuneration. The remuneration for the Company’s Management Board is based both on the size and the area of activity, as well as on the financial status of United Power Technology AG. The remuneration for the Management Board contains both fixed components as well as performance-related components.

• Fixed remuneration The fixed remuneration comprises a fixed salary plus fringe benefits in the form of insurance premiums and housing fund. The fixed salary is paid monthly in twelve equal instalments and is not dependent on certain tar-gets being reached.

• Performance-related remuneration The performance-related remuneration is dependent on the achievement of certain targets. It is divided into an annual bonus and a component with a long-term incen-tive effect.

The annual bonus as a short-term variable remuneration component is based on the achievement of the budgeted EBIT.

In order to create incentives for positive performance of United Power Technology AG in the long term, the Manage-ment Board member Oliver Kuan has been granted 34,440 options to purchase 34,440 shares in United Power Tech-nology AG. The granting of such stock options and the sub-sequent granting of shares are subject to the subscription conditions which have been adopted by the Supervisory Board on the basis of the Stock Option Plan 2012 which had been passed by the 2012 Annual General Meeting. In par-ticular, the subscription conditions of the Stock Option Plan 2012 adopted by the Supervisory Board provide that

• stock options may only be issued to members of the Man-agement Board of the Company, if they hold less than 5% in the share capital of United Power Technology AG;

• of a maximum amount of 172,000 stock options which may be granted to members of the Management Board, 20% may be granted in 2012, 30% may be granted in 2013 and 50% may be granted in 2014;

• stock options may only be issued in certain periods of is-suance, which shall be four weeks and shall begin after the publication of an annual financial report, an interim financial report of and a quarterly report and an interim announcement of United Power Technology AG;

• the term of the stock options shall be six years;

• stock options may only be exercised after a waiting period of four years;

• stock options may only be exercised in certain exercise periods, which shall be four weeks and shall begin after the publication of an annual financial report, an interim financial report and a quarterly report and an interim an-nouncement of United Power Technology AG;

• the exercise price per share corresponds to the stock mar-ket price of United Power Technology AG’s share ascer-tained at the opening auction on the day of issuance of the respective stock option in the XETRA trading of Frank-furt Stock Exchange or in a subsequent system replacing the XETRA system, however being at least EUR 1.00 per share;

• stock options may only be exercised if United Power Tech-nology AG’s adjusted EBIT has increased on average by at least 5% per financial year since the day of issuance of the respective stock option.

The Management Board members have not been promised any benefits in the event of the regular termination of their activity.



in EUR Fixed BonusInsurance

Pension Fund Total

Xu Wu 2012 80,000.00 0.00 3,086.60 83,086.602011 55,572.00 12,251.15 264.00 68,087.15

Zhong Dong Huang 2012 80,000.00 0.00 3,086.60 83,086.602011 53,572.00 12,251.15 264.00 66,087.15

Oliver Kuan 2012 122,835.00 0.00 0.00 122,835.002011 103,752.73 332,812.10 – 436,564.83

Total 2012 282,835.00 0.00 6,173.20 289,008.202011 212,896.73 357,314.40 528.00 570,739.13

Supervisory Board remunerationRemuneration of the Supervisory Board shall be set at the Annual General Meeting and regulated in the Articles of Association of United Power Technology AG. Provided that the 2013 Annual General Meeting resolves accordingly, each member of the Supervisory Board shall receive a fixed annual remuneration of EUR 20,000.00 and Supervi-sory Board members Hubertus Krossa and Brian Krolicki shall each receive an additional EUR 20,000.00.

Members who have not served on the Supervisory Board for the entire year shall receive a prorated remuneration. The members of the Supervisory Board are further reim-bursed for expenses and for any VAT applicable to their re-muneration and expenses.

Provided that the 2013 Annual General Meeting resolves as mentioned above, the Supervisory Board members will re-ceive the following remuneration for the 2012 fiscal year:

in EUR 2012 2011

Mr Wei Song (Chairman of the Supervisory Board) 20,000.00 20,000.00

Mr Hubertus Krossa (Vice Chairman of the Supervisory Board) 40,000.00 40,000.00

Ms Ning Cong 13,978.49 20,000.00

Mr Brian Krolicki 15,053.76 –

Total 89,032.25 80,000.00

Risk Report Risk policyThe business policy of the United Power Technology Group is geared towards securing the existence of the Company, sustainably generating risk-adequate returns as well as systematically and continuously increasing enterprise value. To achieve this objective, our global business activities re-quire a permanent, responsible consideration of opportuni-ties and risks. The Board of Directors bears overall respon-sibility for effective risk and opportunity management, which is an integral part of corporate management. Within the Board of Directors, the CEO takes primary responsibility for the risk and opportunity management function.

Financial Report 43 Management Report

unITed PoweR Technology ANNUAL REPORT 2012

Opportunity managementOpportunity and risk management are closely interlinked within the United Power Technology Group. We essentially derive our opportunity management from the goals and strategies of our business segments and ensure a balanced relationship between opportunities and risks. Direct re-sponsibility for the early and regular identification, analysis and utilisation of opportunities rests with the operational management of our company. Opportunity management is an integral part of the Group wide planning and controlling systems. We occupy ourselves intensively with market and competition analyses, relevant cost elements and key suc-cess factors, including those in the economic, political and regulatory environment in which the Company operates. This serves as the basis for identifying concrete opportunity potentials that are specific to business segments and cor-responding targets, which are discussed and then defined between the Board of Directors and the managers respon-sible for the business segments. Selected opportunity po-tentials for the United Power Technology Group are dis-cussed in the ‘Opportunities’ section of the forecast report.

Risk management systemThe definition of risks considers that a deviation from a planned outcome (positive or negative) includes a measure of uncertainty, which might impact United Power Technol-ogy AG’s short and long-term (strategic) goals.

Risk management is therefore seen as the systematic and regular process to identify, asses and analyse all unexpected or unplanned events of material nature for their potential impact on Untied Power Technology AG’s business, financial situation and processes and to coordinate and economically apply United Power Technology AG’s resources to minimize, monitor and control the probability and/or impact of events or to maximize the realization of opportunities.

Organisation and tools of the risk management systemThe CEO together with the risk management officer has defined group wide guidelines principles and rules of be-haviour as well as guidelines for systematic and effective risk management of the United Power Group. The Group wide Risk management consists of the following elements:

• the guideline on the risk management structure

• the person responsible for risk management

• regular risk reporting

• immediate reporting in urgent cases

The proper functioning of the risk management system of the United Power Group is regularly reviewed by our inter-nal audit department. Furthermore, the Supervisory Board is regularly informed of developments in the risk manage-ment system.

Risk identificationThe regular identification of risks is carried out by the risk management officer through use of various tools and pre-sented to the Board of Directors. The methods used for risk determination range from analyses of markets and compe-tition through close contacts with customers, suppliers and institutions to observing risk indicators in an economic en-vironment.

Risk assessment and quantificationIdentified risks are assessed according to a uniform meth-odology. The risks are assessed according to their financial impact and the probability of occurrence.



Risk controlAn important part of the risk management system is the development of suitable countermeasures. Measures for preventing or diminishing risks have the goal of reducing the loss potential and the likelihood of materialisation. Risks can also be transferred to a third party (e.g. by taking out insurance). The decision regarding the implementation of corresponding measures also takes into consideration the costs related to the effectiveness of possible measures.

Risk reportingOur risk management system is intended to ensure a trans-parent presentation of the risk situation. On a quarterly ba-sis, the Board of Directors receives an overview of the cur-rent risk situation via a standardized reporting system. Material risks that arise in the short term are, if urgent, im-mediately communicated directly to the Board of Directors outside customary reporting channels. The Supervisory Board is briefed by the Board of Directors in just as regular and timely a manner and, if urgent, immediately.

Risk management in relation to financial instrumentsThe United Power Group essentially holds financial instru-ments of the ‘Loans and Receivables’ category as well as financial liabilities.

The financial objective of United Power Technology AG is to limit financial risks (e.g. currency exchange risks, default and liquidity risks) through systematic financial management. As part of its financial management, the United Power Group controls its capital structure and makes adjustments if necessary, taking into account the economic framework structure.

The primary objective of the Group is to ensure the future ability to repay liabilities and to maintain financial sub-stance.

Description of the key features of the internal control and risk management system with regard to the Group accounting process (Sec. 315 Para. 2 No. 5 of the German Commercial Code – HGB)The internal control system of United Power Group encom-passes of the principles, procedures and measures designed to ensure the effectiveness, economy and adequacy of ac-counting procedures as well as the compliance with the rel-evant regulations.

The guideline for accounting and reporting of the United Power Group in accordance with IFRS stipulate the uniform accounting and valuation principles for the German and foreign companies included in the consolidated financial statements.

New provisions and amendments to existing regulations for the accounting are analysed on a timely basis for their ef-fects and are, if these are relevant to us, implemented into guidelines and accounting processes.

An adequate IT platform is used for the consolidated enti-ties and reported to the Group in consolidated manner. The consolidation of the United Power Holding HK to the United Power Technology AG is performed by an external expert. In individual cases, such as the evaluation of the stock option plans are also carried out by an external expert.

An adequate and complete elimination of internal group transaction actions is ensured by formalized inquiries of consolidation relevant information.

All consolidation processes for preparation of the consoli-dated financial statements are carried out and documented in a consolidation sheet.

The annual financial statements of companies subject to mandatory audit and the consolidated financial statements are audited by independent auditors. This is the key pro-cess-independent monitoring measure with regard to the Group accounting process.



Overview of corporate risksRisks material to the United Power Group are described in the following section, but no conclusion should be drawn from their order regarding their likelihood of materialization or the potential extent of losses. Furthermore, timescales also have a role in identifying substantial risks.

The assessment of the likelihood of a risk materializing is based on the criteria

Very low (likelihood of materializing < 5%)

Low (likelihood of materializing 5 – 30%)

Medium (likelihood of materializing 30 – 60%)

High (likelihood of materializing 60 – 90%)

Very High (likelihood of materializing > 90%)

The assessment of the possible financial impact

Extreme (Negative Impact on EBIT > 50%)

High (Negative Impact on 30% > EBIT < 50%)

Medium (Negative Impact on 10% > EBIT < 30%)

Low (Negative Impact on 5% > EBIT < 10%)

Very Low (Negative Impact on 0% > EBIT < 5%)

The table below provides an overview of risks that are ma-terial to the United Power Group, their likelihood and their possible financial impacts.

likelihood of materialization

Possible financial impact

strategic risks

Risk arising from market dependency Low High

Risk arising from customer/demand dependency Low High

environmental risks

Effects of the macroeconomics Low Medium

Market risks

Risk arising from lack of long term contracts High Medium

Risk arising from increased commod-ity prices and component prices Medium Medium

Financial risks

Risk arising from customers default Low Medium

Risk arising from currency translation Medium Low

operational risks

Personnel Risks Low High

Strategic risksrisk arising from market dependencyAs an international Group United Power is dependent on the individual sales markets. The Company counters market risks through among other things a diverse customer base, close customer contact and market research. In addition to external measures United Power reacts to sales risks with a diversification of their products (e.g. establishing an own brand and exploring additional markets)

risk arising from fluctuation in demand and consumer be-haviourOur products may face significant fluctuations in demand and in consumer behaviour. As a result of external influences, whose occurrences and non-occurrences we cannot normally influence, the demand for our products may decline in the relevant markets and may lead to pressure on the price level. These factors include but are not limited to the swings of the economic cycle, decreasing global prices, the market entry of new competitors, concentration on the demand side as well as deliberate buying restraints on the part of the customers.



Market risksrisk arising from loss of major customersThe Group has numerous customers, five of which account for a significant part of the Group’s sales revenues (between 5 – 8% each). The Group might not be able to maintain these relationships with one or more of the major customers and thus the major customers choose products from other com-petitors.

The Group performs a constant monitoring of the sales to its customers and by investing in R&D to improve the quality of our products we further try to achieve the costumers’ needs. Further the Company is trying to develop long-term contracts with its major customers to minimize the risk of potential customer losses.

risk arising from increased commodity and component pricesAs a manufacture for power equipment we are exposed to numerous risks arising from increased commodity and component prices. We are building strong relationships with our suppliers and source of alternative sources to prevent ourselves from the risk of increased commodity and com-ponent prices. Further we try to counter the pressure on our margins by passing the increased costs to our customers through higher product prices. In order to be able to do this we require greater pricing power in the market which we seek to achieve through the measures mentioned i.e. ex-panding market share, improving quality and establishing own or licensed brands. Improving product quality is achieved through a number of measures including better processes and controls, increased R&D efficiency and activ-ity as well as increased automation. Increased automation in particular is also a measure by which we address the risks arising from rising labour costs and high fluctuation of workers, indirectly through less reliance on labour and thereby controlling the unit labour costs. Furthermore, Unit-ed Power intends to increase sales of our own branded goods and evaluate opportunities for licensed brands in or-der to cover the above-mentioned risks.

Environmental Risk effects of the macroeconomic environmentThe behaviour of demand for power equipment of United Power is considerably influenced by general economic growth as well as the economic trends and the associated improving living standards in relevant markets.

In particular the unresolved and worsening national debt crisis in some major countries of the eurozone and the slowdown in growth in emerging countries such as China have resulted in scepticism with regard to the global econo-my’s growth prospects for 2012 and 2013. A worsening of the national debt crisis in Europe and the associated further uncertainty in capital and financial markets and among businesses and consumers might have a negative impact on the global economy and the demand for products pro-duced by the Untied Power Group.

Financial Risksrisk arising from foreign exchange ratesMost of the revenues and expenses of United Power are gen-erated in RMB and USD, thus the changes to the exchange rate could have a negative impact on the consolidated results of United Power.

risk arising from customers defaultThe default of a customer should be understood as a cus-tomer not to fulfil his contractual obligation in full or partially. This default could lead to a loss to us.

We perform intensive credit checks of our customers before entering into new arrangement. Further we perform credit checks with existing customers on a regular basis. Further we implemented credit limits to our customers to minimize the potential risk exposure.



Operational risksPersonnel risksHealthy and committed employees and managers are the key to United Power’s success. There is a risk that key mem-bers of the management will leave the Company due to health issues.

We perform regular health checks on all levels and have a formal safe and health policy implemented and a process to enforce the adherence to the requirements of the policy.

Overall riskUnited Power has taken sufficient precautions against nor-mal business risks, which might have a negative impact on the development of the United Power Group. As of the end of the year under review there were no identifiable risks for the United Power AG and the United Power Group, which might represent a threat to their existence.

Statement pursuant to section 289 a of the German Commercial Code (HGB)On 8 April 2013, the Management Board and Supervisory Board issued the statement pursuant to section 289a of the German Commercial Code (HGB). The declaration, along with the gorporate governance report, is permanently available on the website of the Company under www.unitedpower.de.com/en.

OutlookAccording to the international monetary fund (IMF), global growth is expected to stabilize in 2013, but at 3.5% it would remain relatively subdued. In the current year the economic situation is still mainly influenced by the unstable economic situation in Europe. This causes headwinds for global de-

mand and the global economy in general. The Euro Area is expected to contract by 0.2% in 2013. Apart of that the fiscal situation in the US with automatic spending cuts and tax increases could have a negative effect on the US market. Currently the IMF estimates a GDP growth of 2.0% for the US. The growth in the emerging markets is expected to con-tinue to be significantly higher than in industrial countries. China and India continue to be growth engines in Asia with an expected GDP growth of 8.2% and 5.9%, respectively.

The growth of the United Power Technology Group contin-ues to be driven by the pursuit of our three-pronged strat-egy, which comprises further geographic expansion and penetration, broadening the range of engine-powered products and scaling up the size of its products in order to further expand their commercial and industrial usage of its products.

The investment plan is concentrated on capacity expansion. Our current investment budget this year is around RMB 250 million (about EUR 31 million), based on a currency rate of EUR/RMB of 1:8.1 approximately 80% of which is desig-nated for property, plant and equipment and the remaining funds for R&D, sales and distribution as well as general working capital requirements. The Company has the ability to finance its investment through operating cash flow and its existing cash balances. In the second half of 2013 or in 2014 we consider to commence with building a third phase of our newest and third factory, Gaoqi Industrial Park, and install another four to seven new product production lines. This would include investments in production lines for all our major products including residential and commercial generators as well as outdoor power equipment. We may adjust our investment plan in light of the demand prevailing at the time and capacity utilisation conditions. We will also continue to evaluate M&A opportunities.



United Power aims to gain further market share in its prin-cipal markets Europe, North America and China. Further-more, we plan to leverage our standing and quality recog-nition in established developed markets to penetrate and expand into emerging markets. We have plans to expand our global and domestic sales and distribution network though all major distribution channels including direct sales, wholesalers, specialized dealers and manufacturers.

In 2012 we have successfully continued to widen our inter-national customer base acquiring more than 50 new cus-tomers around the world, bringing our total number of cus-tomers to more than 250 in 60 countries. Also, in 2013 we intend to further expand our network of Chinese distribu-tion agents.

Our company intends to further establish its own or li-censed brands in new markets and enhance them in mar-kets that have already been penetrated through various distribution channels to make its brands known. As a ma-jor long-term strategy, we seek to further strengthen our reputation of reliability and to enhance brand awareness, especially outside China. It is intended to achieve strength-ening of the Group’s brands by enhancing marketing ef-forts such as participating in industrial trade fairs or exhi-bitions in local markets, media, internet and outdoor advertisement campaigns as well as through promotional campaigns, which can be launched together with local partners. Meanwhile, the Group further explores to estab-lish regional sales subsidiaries/branches to directly ex-plore the local market for United Power branded products and reinforce the customer relationship.

While there appear to be green shoots in the US markets, the situation in Europe, our largest market by end custom-er remains fragile. Also, the recovery in our home market

China has been somewhat volatile. Overall therefore, the global economic environment continues to be fragile, prone to downside risks and vulnerable to a multitude of poten-tial shocks. However, we remain confident about our con-tinuing profitable growth prospects particularly over the medium to long term. For this year, we do expect the weakness in our key export market Europe and weak Euro currency as well as still uncertain Chinese recovery con-tinue to weigh on growth and profitability. Despite the ad-verse conditions in Europe and China (which are our two largest markets by end customer), we do however aim to continue gaining market share globally.

Assuming a stable EUR:RMB exchange rate and generally improved trading conditions in the later part of this year and next year, our current expectation for revenue growth is about 8% for 2013 and similar growth for 2014. We ex-pect that our commercial generator segment will continue to grow at a rate exceeding that of the residential genera-tor segment over this period in line with our strategy. Also, we do expect our outdoor power segment to grow dispro-portionately faster this year. The components sector con-tinues to be less strategic sector, which will be driven by opportunities presenting themselves in the market place. We expect our average EBIT margin over the next two years to be in line with our EBIT margin of 2012.


United Power Technology AG Management Board

Xu Wu Zhong Dong Huang Oliver Kuan Co-CEO Co-CEO CFO



Consolidated Financial

Statements

50 detailled index

Consolidated FinanCial stateMents

52 Consolidated Statement of Financial Position

53 Consolidated Statement of Income

54 Statement of Income and Expenses recognized in Equity

55 Consolidated Statement of Changes in Equity

56 Consolidated Statement of Cash Flow

57 Notes to the Consolidated Financial Statements

detailled index 51

in EUR thousand notes 2012 2011*

non-current assets

Property, plant and equipment 18 56,090 52,269

Intangible assets 17 1,025 1,174

Available-for-sale investments 22 0 16

Deferred tax assets 20 583 868

Other non-current assets 19 2,141 2,041

59,839 56,368

Current assets

Inventories 21 4,657 7,298

Trade and other receivables 23 20,781 19,558

Amounts due from related parties 34 0 238

Current recoverable income taxes 9 1

Other current financial assets 24 2,598 785

Other current assets 19 47 47

Cash and cash equivalents 24 30,936 27,002

59,028 54,929

total assets 118,867 111,297

Capital and reserves

Share capital 25 12,300 12,300

Additional paid-in capital 25 55,883 55,883

Revaluation reserve 25 –1 –1

Foreign currency translation reserve 25 7,288 9,432

Retained earnings 25 25,009 12,343

Equity attributable to owners of the parent 25 100,479 89,957

Non-controlling interests 25 1,056 1,154

total equity 101,535 91,111

Liabilities

non-current liabilities

Deferred tax liabilities 20 97 101

Other liabilities 1,788 1,941

1,885 2,042

Current liabilities

Borrowings 27 2,405 6,582

Trade and other payables 28 11,900 9,448

Amounts due to related parties 34 0 857

Other provisions 29 433 167

Current tax liabilities 709 1,090

15,447 18,144

total liabilities and equity 118,867 111,297* Correction according to IAS 8

Consolidated Statement ofFinancial Position

as at 31 December 2012

ANNUAL REPORT 2012 united Power teChnology52 Financial report Consolidated Financial Statements

in EUR thousand notes 2012 2011

Revenue 6 111,047 100,283

Cost of sales 8 –88,641 –78,143

Gross profit 22,406 22,140

Other operating income 9 1,153 1,068

Distribution and selling expenses –1,358 –1,204

Administrative expenses –4,134 –3,233

Research and development expenses –1,002 –1,032

Other expenses 10 –1,806 –5,849

Profit from operations (EBIT) 15,259 11,890

Interest income 13 171 4

Interest expense 13 –280 –104

Financial result –109 –100

Profit before taxes 15,150 11,790

Income taxes 14 –2,562 –2,238

Profit for the period 15 12,588 9,552

Profit for the period attributable to:

Owners of the Company 12,666 9,580

Non-controlling interests –78 –28

12,588 9,552

Earnings per share in EUR (diluted – basic) 16 1.03 0.85

Consolidated Statement ofIncome

for the period from 1 January to 31 December 2012

united Power teChnology ANNUAL REPORT 2012 Financial report 53 Consolidated Financial Statements

Statement of Income and Expenses recognized in Equity

in EUR thousand 2012 2011

Profit for the period 12,588 9,552

Exchange differences arising on translation –2,164 7,555

Other comprehensive income (expense) for the period –2,164 7,555

Total comprehensive income for the period 10,424 17,107

Total comprehensive income (expense) attributable to:

Owners of the Company 10,522 17,105

Non-controlling interests –98 2

10,424 17,107



in EUR thousandshare capital

uP agCapital

reserves revaluation

reserve

Foreign currency

translation reserve

retained earnings

attributable to owners

of the Company

non-controlling

interests Total equity

Balance as of 1 Jan 2011 10,000 39,552 –1 1,907 2,763 54,221 834 55,055

Capital injection 2,300 18,400 20,700 20,700

IPO–Cost –1,756 –1,756 –1,756

Contribution by non–controlling shareholders 79 79 318 397

Profit for the period 9,580 9,580 –28 9,552

Other comprehensive income (expense) for the year 7,525 7,525 30 7,555

Correction according to IAS 8 –392 –392 –392

Balance as at 31 dec 2011/1 Jan 2012 12,300 55,883 –1 9,432 12,343 89,957 1,154 91,111

Profit for the period 12,666 12,666 –78 12,598

Other comprehensive income (expense) for the year –2,144 –2,144 –20 –2,164

Balance as at 31 dec 2012 12,300 55,883 –1 7,288 25,009 100,479 1,056 101,535


Consolidated Statement ofChanges in Equity

united Power teChnology ANNUAL REPORT 2012 Financial report 55 Consolidated Financial Statements

in EUR thousand 2012 2011*

Profit before tax 15,150 11,790

Adjustments for: allowance for doubtful debts 0

Depreciation on intangible assets and property, plants and equipment 4,514 1,868

Income tax expense (income) –273 126

Interest (income) expense, net –171 –146

Other financial result 296 104

Other non-cash (income) expense –112 1,555

(Gain) loss from the disposal of intangible assets and property, plant and equipment 0 –1

(Increase)/decrease in current assets –421 –2,889

Increase/(decrease) in current liabilities 1,745 –3,065

Cash generated from operations 20,728 9,342

Interest paid –296 –104

Interest received 0 4

Income taxes paid –2,643 –2,346

net cash generated from operating activities 17,798 6,896

Payments for acquisition of:

Intangibles –15 –406

Property, plant and equipment –9,416 –28,197

Short–term investments 0 –1,245

Proceeds on disposal of:

Property, plant and equipment 0 1

Long-term investments 16 0

Interest income 171 142

Increase in cash and bank balances due to contribution in kind 0 0

Cash flow from investing activities –9,244 –29,705

Repayment of borrowings –12,747 –10,588

New borrowings raised 8,605 13,585

Capital injection 0 2,300

Proceeds from new shares 0 18,400

Capital increase 0 –1,756

Correction according to IAS 8 0 392

Capital contributions by non-controlling shareholders 0 647

Repayment of advances to controlling shareholders 163 –44

Advances from controlling shareholders 0 0

Cash flow from financing activities –3,979 22,152

net increase (decrease) in cash and bank balances 4,566 –657

Cash and bank balances at beginning of year 27,002 25,800

Effect of exchange rate changes –632 1,859

Cash and bank balances at end of period 30,936 27,002* Correction according to IAS 8

Consolidated Statement of Cash Flow



Consolidated Financial Statements Notes to the


1. General informationUnited Power Technology AG, Eschborn, Germany, (“United Power” or “the Company”) is registered under the firm Unit-ed Power Technology AG with the commercial register of the local court of Frankfurt am Main (HRB 88245). The address of the Company’s registered office is: Mergenthalerallee 10–12, 65760 Eschborn, Germany.

The Company and its subsidiaries (collectively “the Group”) produce and sell generators and related equipment globally.

The shares of the Company have been admitted to trading on the regulated market of the Frankfurt Stock Exchange. On 10 June 2011 the Company issued 2,300,000 shares with a value of EUR 1.00 per share for an initial share price of EUR 9.00 per share.

The consolidated financial statement was approved as pre-pared by the Management Board on 10 April 2013 and pre-sented to the Supervisory Board for its meeting on 15 April.

The consolidated financial statements are presented in Euros. Amounts are stated in thousands of Euros (kEUR) except where otherwise indicated.

The currency of the primary economic environment in which the Company and its subsidiaries operate is Renminbi (“RMB”) (the functional currency of the Company and its subsidiaries).

The figures mentioned in the consolidated financial state-ments were subject to rounding adjustments that were car-ried out according to established commercial standards. As a result, the figures stated in a table may not exactly add up to the total values that may also be stated in the table.

Dividends and foreign exchange restrictionsDividends to be paid by the operating Chinese subsidiaries generally have to be approved by Chinese government bod-ies. In addition, dividends are only payable if Chinese statu-tory reserves satisfy the related legal requirements.

2. Basis of preparationThe consolidated financial statements of United Power have been prepared in accordance with the International Finan-cial Reporting Standards (IFRS) as adopted by the European Union (EU), as well as with the regulations under commer-cial law as set forth in section 315a (1) of the German Com-mercial Code (Handelsgesetzbuch – HGB). All IFRSs issued by the international Accounting Standards Board (IASB), which were effective at the date of the preparation of the accompanying consolidated financial statements and have been applied by United Power, are adopted by the EU.

The following revised IFRS has been applied in the consoli-dated statements. The initial adoption has no material im-pact on the recording and valuation of assets and liabilities and the results of the following reporting periods.

Amendments of IFRS 7 – Improving information on trans-fer of financial assets (effective date: 1 July 2011)

The following new and revised standards and interpreta-tions which have already been adopted by the IASB, but which were not yet in effect for FY 2012, have not been con-sidered in the consolidated financial statements as of 31 December 2012:

Amendments to IFRS 1 – Severe Hyperinflation and Re-moval of Fixed Dates for First-Time Adopters (Effective for annual periods beginning on or after: 1 January 2013)

Financial report 57 Notes


Amendments to IAS 12 – Deferred Tax: Recovery of Un-derlying Assets (Effective for annual periods beginning on or after: 1 January 2013)

Amendments to IAS 1 – Presentation of Items of Other Comprehensive Income (Effective for annual periods be-ginning on or after: 1 July 2012)

Amendments to IAS 19 – Employee Benefits (as revised in 2011) (Effective for annual periods beginning on or after: 1 January 2013)

IFRS 10 – Consolidated Financial Statements (Effective for annual periods beginning on or after: 1 January 2013)

IFRS 11 – Joint Arrangements (Effective for annual periods beginning on or after: 1 January 2013)

IFRS 12 – Disclosure of Interests in Other Entities (Effec-tive for annual periods beginning on or after: 1. Janu-ary 2013)

IFRS 13 – Fair Value Measurement (Effective for annual periods beginning on or after: 1 January 2013)

Amendments to IAS 32 – Offsetting Financial Assets and Financial Liabilities (Effective for annual periods begin-ning on or after: 1 January 2014)

Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities (Effective for annual peri-ods beginning on or after: 1 January 2013)

Amendments to IFRS 9 – Financial Instruments: Classifi-cation and Measurement of Financial Assets (Effective for annual periods beginning on or after: 1 January 2015)

Amendments to IFRS 9 – Financial Instruments: Classifi-cation and Measurement of Financial Liabilities (Effective for annual periods beginning on or after: 1 January 2015)

Amendments to IFRS 7 – Amendments to IFRS 1 – Gov-ernment Loans (Effective for annual periods beginning on or after: 1 January 2013)

Amendments to IFRS 10, IFRS 11 and IFRS 12 – Transition Guidance (Effective for annual periods beginning on or after: 1 January 2013)

Annual Improvements to IFRSs 2009–2011 Cycle for IFRS 1, IAS 1, IAS 16, IAS 32 und IAS 34 (Effective for an-nual periods beginning on or after: 1 January 2013)

The Management Board anticipates that the application of these standards and interpretations will have no significant impact on the presentation of net-assets, financial position and results of operations of the Company.

According the balance sheet disclosure the Company dif-ferentiates between non-current and current assets and liabilities, which were shown in the notes to the financial statements according to their maturity. The consolidated income statement is classified according to the cost of sales method. Thereby the revenues are compared with expenses incurred for their realization. The expenses are allocated to the functional areas production, sales and general administration.

58 Financial report Notes


3. Consolidated GroupAll subsidiaries are included in the consolidated financial statements.

Subsidiaries are companies that are directly or indirectly controlled by United Power and are fully consolidated. The existence and effect of potential voting rights that are cur-rently exercisable or convertible, including potential voting rights held by another entity, are considered when assess-ing whether an entity is controlled.

Consolidated financial statements

name registered office of the Company

share capital (in eur

thousand) equity interest

(in %)

United Power Equipment Co., Ltd., Mongkok, Hong Kong (UP HK-Holding) 1 100

United Power Equipment Co., Ltd., Fuzhou, People’s Republic China (UPEC) 29,635 100

United Power France SASU, Lille, France 10 100

Fujian United Power Equipment Co., Ltd., Fuzhou, People’s Republic China (FUPEC) 2,405 100.0*

Sealand Machinery Co., Ltd., Fuzhou, People’s Republic China 1,202 100.0*

Disheng WanKai Machinery Co., Ltd., Fuzhou, People’s Republic of China (DWC) 1) 2,405 51.0*

Shanghai Dai Fei International Trading Co., Ltd., Shanghai, People’s Republic of China (SHDF) 758 1001) Incorporated by the Group and Mr Wei Gao Xin (an independent investor) on

22 June 2010. The Group holds 51% and Mr Wei Gao Xin 49% of shares in DWC. * Indirect.

The percentage of equity interests in the subsidiaries at-tributable to the Group did not change during the Track Re-cord Period.

4. Significant accounting policiesThe consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards, as applicable in the European Union.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial in-struments, as explained below. Historical cost is generally based on the fair value of the consideration given in ex-change for goods.

The material principles on recognition and measurement outlined below were applied uniformly.

Basis of consolidationThe consolidated financial statements incorporated in the financial statements of the Company and entities controlled by the Company. Control is achieved where he Company has the power to govern the financial and operating policies of an entity so as obtain benefits from its activities.

The financial statements of United Power Technology AG and its subsidiaries are consolidated in accordance with IFRS under consideration of the Group accounting policies. The financial statements of the subsidiaries are prepared on the same reporting-date as the parent. Where neces-sary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.



The intra-group receivables and liabilities, investments and shares as well as income and expenses were eliminated.

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-control-ling interests having a deficit balance.

Cost of equity transactionCosts for the capital increase have been included as ex-penses in the period.

intangible assets

Intangible assets acquired separatelyIntangible assets acquired separately and with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives.

An intangible asset is derecognised at its disposal or when no further economic benefit is expected from its use or its disposal. Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period when the asset is derecognised.

Internally-generated intangible assetsExpenditures on research activities is recognised as an ex-pense in the period incurred. An internally-generated intan-gible asset arising from development is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and the resources to complete the development and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attribut-able to the intangible asset during its development.

The amount initially recognised for an internally generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first met the recognition criteria listed above. Where no internally generated intangi-ble asset can be recognised, development expenditure is charged to profit or loss in the period incurred.

Subsequent to initial recognition, an internally generated intangible asset is measured at cost less accumulated am-ortisation and accumulated impairment losses, on the same basis intangible assets acquired separately.

In the reporting period all expenses related to research and development costs do not fulfil the described requirements and are therefore included in the income statement.

Impairment of tangible and intangible assets, except GoodwillAt the end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.



Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimat-ed future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks spe-cific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating item) is estimated to be less than its carrying amount, the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the car-rying amount of the asset is increased to the revised esti-mate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an im-pairment loss is recognised immediately in profit or loss.

Property, plant and equipmentProperty, plant and equipment are carried at cost and de-preciated over the estimated useful life. As at the report-ing date, the book values are reviewed for impairment in regard of their recoverability and necessary revaluations and values are adjusted if necessary.

Construction in progress for use in production, sales or ad-ministration is carried at cost less any recognised impair-ment loss. Borrowing costs directly attributable to the ac-quisition, construction or production of qualifying assets, are added to the cost of those assets according to Group accounting policies. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets commences when the assets are ready for their intended use.

Production costs comprises direct material costs, direct production costs, special direct costs of production, indirect material costs, indirect production costs and depreciation of property, plant and equipment.

Depreciation is provided to write off the cost of items of property, plant and equipment, other than construction in progress, over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

Plant and equipment 10 years

Motor vehicles 5 years

Buildings 20 years

Office equipment 5 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are ex-pected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

inventoriesInventories are stated at the lower of cost and net realis-able value. The production costs of finished goods and work in progress include all costs for product development, raw materials and supplies, direct personnel costs, other direct costs and indirect costs attributable to production (based on a normal operating capacity) and are calculated using the weighted average method. Acquisition costs of raw materi-als and supplies are measured at weighted average. The acquisition and production costs do not include borrowing costs.

The net realisable value is the estimated sales price minus necessary variable cost of distribution, in normal course of business.

The details of inventories are disclosed in Note 21 of the notes.



Borrowing costsBorrowing costs directly attributable to the acquisition, con-struction or production of qualifying assets, which are as-sets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are sub-stantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisa-tion.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

revenue recognitionRevenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the course of ordinary activities, net of dis-counts and sales-related taxes.

Revenue from sales of goods is recognised when the goods are delivered and title has passed respectively as at this date all rights, entitlements and obligations shall be as-sumed by purchaser.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that ex-actly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Dividend income from investments is recognised when the rights to receive payment have been established.

leasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee (finance lease). All other leases are classified as operating leases. The Group has not en-tered into finance leases in the reporting period and in pre-ceding periods.

The Group as lessorRental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

The Group as lesseeOperating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease.

Prepaid lease paymentsUpfront prepayments made for the land use rights are ini-tially recognised on the combined statement of financial position as other assets and are charged to the profit or loss as expenses over the periods of the respective lease.

Foreign currenciesThe management has determined the currency of the pri-mary economic environment in which the Group operates, to be Renminbi as the currency of the primary economic envi-ronment. Fluctuations in RMB primarily influence revenue and also the major cost for the supply of goods and major operating expenses. The presentation currency of the Group is EUR, being the presentation currency of its German domi-ciled legal parent and holding company, and therefore the financial information has been translated from RMB to EUR.



Preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity oper-ates) at the exchange rates prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items car-ried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recog-nised in profit or loss in the period in which they arise.

For the purpose of presenting the combined financial statements, the assets and liabilities of the Group are translated to EUR as its presentation currency using ex-change rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluc-tuated significantly during that period, in which case the exchange rates prevailing at the dates of the transactions are used. Exchange differences arising, if any, are recog-nised in other comprehensive income and accumulated in equity (the foreign currency translation reserve).

The following exchange rates have applied:

2012 2011

Balance sheet date 31 December 1 EUR = RMB 8.3176 8.1625

Average 1 EUR = RMB 8.1423 9.0213

Balance sheet 31 December 1 HKD = RMB 0.8108 0.8107

Average 1 HKD = RMB 0.8136 0.8279

government grantsGovernment grants are not recognised, as profit until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.

Government grants are recognised in profit or loss on a sys-tematic basis over the periods in which the Group recog-nises as expenses the related costs for which the grants are intended to compensate. Government grants are recog-nised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis.

Government grants that are realisable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no fu-ture related costs are recognised in profit or loss in the pe-riod in which they become realisable.

retirement benefit costsContributions to statutory retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions. These are de-fined contribution plans.

The Company has no direct and indirect pension obligations which would be classified as defined benefit obligation.

taxationIncome tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the combined statements of comprehensive income because it excludes items of income or expense that are taxable or de-ductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.



Deferred tax is recognised on temporary differences be-tween the carrying amounts of assets and liabilities in the combined financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable tempo-rary differences. Deferred tax assets are generally recog-nised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business com-bination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, ex-cept where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. De-ferred tax assets arising from deductible temporary differ-ences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are presented net if an enforceable legal title for offsetting exists and if the de-ferred tax assets and liabilities are related to income taxes which are raised by the same tax authority for either the same taxpayer or different taxpayers which intend to achieve the settlement on a net basis.

The carrying amount of deferred tax assets is reviewed at the end of a reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rate (and tax laws) that have been enacted or substantively en-acted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflect the tax conse-quences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehen-sive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity, respectively. Where current or deferred tax arises from initial accounting for a business combina-tion, the tax effect is included in the accounting for the business combination.

Financial instrumentsFinancial assets and financial liabilities are recognised in the combined statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially meas-ured at fair value. Transaction costs that are directly attrib-utable to the acquisition or issue of financial assets and fi-nancial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or fi-nancial liabilities, as appropriate, on initial recognition.

Financial assetsFinancial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.



At the end of the reporting period the Group holds solely financial assets classified as available for sale financial as-sets and loans and receivables.

effective interest methodThe effective interest method is a method of calculating the amortised cost of financial assets and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash re-ceipts (including all fees and points paid or received that form an integral part of the effective interest rate, trans-action costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recogni-tion.

Interest income is recognised on an effective interest basis for debt instruments.

available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, or neither (a) loans and receivables (b) nor held-to-maturity investments or (c) nor financial assets which are measured at fair value through profit or loss. The Group designated listed shares invest-ment as available-for-sale financial assets, which are not held for selling in near future, or managed for short-term profit taking.

Available-for-sale financial assets are measured at fair val-ue at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumu-lated in revaluation reserve until the financial asset is dis-posed of or is determined to be impaired, at which time, the cumulative gain and loss previously accumulated in the re-valuation reserve is reclassified to profit or loss.

loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, amount due from a director) are measured at amortised cost using the effective interest method, less any impairment losses.

Interest income is recognised on basis of the effective inter-est method except of short-term receivables for which the interest effect would be immaterial.

impairments of financial assetsFinancial assets, except for those, which are recognised at fair value through profit or loss, are assessed for indicators of impairment at the end of the reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated fu-ture cash flows of the investment have been affected.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For loans and receivables, objective evidence of impairment could include:

significant financial difficulty of the issuer or counter-par-ty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bank-ruptcy or financial reorganisation; or

that the active market for this financial asset disappears because of financial problems.



For certain categories of financial assets, such as trade and other receivables, assets that are assessed not to be im-paired individually are assessed for impairment on a collec-tive basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impair-ment loss is recognised in profit or loss when there is objec-tive evidence that the assets is impaired, and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discount-ed at the financial asset’s original effective interest rate.

The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets with exception of trade and other receivables, where the carry-ing amount is reduced through the use of an allowance ac-count. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade or other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss de-creases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not ex-ceed what the amortised cost would have been had the im-pairment not been recognised.

In respect of available-for-sale equity investments, impair-ment losses previously recognised in profit or loss are not reversed through profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is rec-ognised directly in other comprehensive income and accu-mulated in revaluation reserve.

Cash and cash equivalents include cash-accounts and short-term cash deposits at banks are measured at amor-tised cost.

Financial liabilities and equityFinancial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a re-sidual interest in the assets of the Group after deducting all of its liabilities.

Financial liabilities are categorised as either financial liabili-ties measured at fair value through profit or loss or other financial liabilities.

The Groups financial liabilities are solely belonging to the category “other financial liabilities”.

effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the fi-nancial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.



Financial liabilitiesFinancial liabilities including trade and other payables, amounts due to related parties and other borrowings are subsequently measured at amortised cost using the effec-tive interest method.

equity instrumentsEquity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.

DerecognitionFinancial assets are derecognised when the rights to re-ceive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred sub-stantially all the risks and rewards of ownership of the fi-nancial assets.

On derecognition of a financial asset, the difference be-tween the asset’s carrying amount and the sum of the con-sideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. If the Group retains substantially all the risks and rewards of ownership of a transferred asset, the Group continues to recognise the fi-nancial asset and recognise collateralised borrowings for the proceeds received.

When a financial asset is fully derecognised, the difference between the carrying amount and the sum of the past or future consideration received plus all accumulated gains or losses that were recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

Correction according to IAS 8The audit of the consolidated financial statements and the Group Management report as of 31 December 2012 re-vealed that corrections in accordance with IAS 8 were re-quired. The corrections were made retroactively on 31 De-cember 2011. Therefore, the consolidated balance sheet is shown with the adjustments made as of 31 Decem-ber 2011.

5. Key sources of estimation uncertaintyThe presentation of financial position and results of opera-tions is dependent upon accounting policies, assumptions and estimates. The actual amounts may differ from those estimates insofar as each assumption and estimate has inherent uncertainty.

The consolidated financial statements include the following described material estimates and assumptions.

The valuation of assets on initial recognition as well as the determination of the market value at the balance sheet date is connected with estimations of fair value. The de-termination of fair value is based on appraisals of the management.

The assumptions and estimates are reviewed on a regular basis. The impact of amendments in the assumptions and estimates are recorded in the reporting period in which they are identified. In the event that amendments are re-lated to other reporting periods, they are recorded in the appropriate period.

The following assumptions and estimates are related to future reporting periods and may have material impacts on assets and liabilities in the following financial year.



Impairment of trade receivablesThe trade receivables are impaired when possible losses in regard of the realisation of the receivables become appar-ent. In doing so, the book value is compared to expected fu-ture cash flow. The carrying amounts of trade receivables as at 31 December 2012 were kEUR 20,781. As at 31 Decem-ber 2012 kEUR 3 valuation allowances were recorded.

Depreciation and impairment of property, plant and equipmentProperty, plant and equipment are depreciated on a straight-line basis over the estimated useful lives, after taking into account their estimated residual value. The Company assesses annually the residual value and the useful life and adjusts the carrying amount if necessary. This may cause future amendments in the valuation. The amounts of depreciation and impairment are shown under note 18.

There are no other relevant judgements made by manage-ment in regards to the consolidated financial statements except for the judgements made by management in regards to use of estimates that are described above.

6. RevenueRevenue represents revenue arising from sales of goods and finished goods.

An analysis of the Group’s revenue as follows:


Portable generators 105,148 91,295

Outdoor power equipment 4,358 5,115

Components 1,541 3,873

111,047 100,283

7. Segment informationThe Company has adopted IFRS 8 to report segment infor-mation. Segments are defined according to products. These are prepared by the operative business unit on the basis of internal information, which is regularly reviewed by the management.

The information is also used for internal assessment of per-formance.

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered or provided. The Group’s reportable segments under IFRS 8 are therefore as follows.

United Power has three major reportable segments: Port-able generators, outdoor power equipment and compo-nents. The portable generators segment is further sepa-rated into residential use units and commercial units. The portable generators segment produces portable generators for remote power and back up assistance. The outdoor pow-er equipment segment produces industrial equipment (e.g. high-pressure washers) and landscaping machines (e.g. wa-ter pumps). The components segment produces engines to be used by other generator manufacturers and also to be used as spare parts.

Portable generators residential use unit commercial use unit

Outdoor power equipment industrial equipment landscaping machines

Components engines parts other



Revenue by segments


Portable generators

Residential use unit 46,199 52,360

Commercial use unit 58,948 38,935

outdoor power equipment

Industrial equipment 3,901 4,893

Landscaping machines 458 222

Components

Engines 583 2,125

Parts 3,491 4,703

Other 687 1,906

Total segment revenue 114,267 105,144

Inter-segment revenue elimination –3,410 –4,793

Other adjustments 1) 190 –68

111,047 100,2831) Other adjustments are related to freight expenses and sales tax surcharge included

in the revenue.

Due to internal organizational changes, generators with a capacity of 5 kW are reported within the segment reporting under the units for commercial use since 2012. To make a comparison to the previous year, an amount of kEUR 3,796 for 2011 was reclassified from the units for residential use to the units for commercial use.

Depreciation and impairment, tax expense and income, and cost of sales are not allocated by the company to the busi-ness segments.

Results by segments


Portable generators

Residential use unit 6,306 9,735

Commercial use unit 14,583 10,284

outdoor power equipment

Industrial equipment 745 993

Landscaping machines 137 46

Components

Engines 151 637

Parts 117 123

Other 137 189

Total segment result 22,176 22,007

Other adjustments 1) 230 133

Consolidated gross profit 22,406 22,140

unallocated items:

Other operating income 1,153 1,068

Distribution and selling expenses –1,358 –1,204

Administrative expenses –4,124 –3,233

Research and development expenses –1,002 –1,032

Other expenses –1,806 –5,849

Interest income 171 4

Interest expenses –280 –104

Consolidated profit before tax 15,150 11,7901) Other adjustments are related to freight expenses included and sales tax surcharge

in the revenue.

The accounting policies of the operating segments are based on the accounting requirements applicable to the PRC entities of the Group (“PRC GAAP”). Segment profit represents the gross profit earned by each segment pre-pared under PRC GAAP. Differences between accounting policies under PRC GAAP and IFRS are immaterial, insofar as it is not necessary to prepare reconciliations and expla-nations. Since information about assets and liabilities of different operating divisions is not regularly provided to the chief operating decision maker for the purpose of as-sessing performance and resource allocation, segment assets and segment liabilities are not presented.



The basis of segmentation and the basis of measurement of segment results have not been changed for the full year 2012.

The activities by invoicing customer of the Group are mainly in the PRC. It should be noted that management conducts its own analysis as to revenue by end customer geography, which it believes is a more useful guide for indicating ulti-mate demand for its products. The geographical segmenta-tion is as follows:

Geographical segmentationThe following table shows the geographical segmentation by invoicing customers:


People’s Republic of China 68,628 55,907

Poland 2,361 3,672

United States of America 20,167 19,085

Russian Federation 7,535 9,120

Other foreign countries 12,356 12,499

111,047 100,283

For internal analysis management also conducts geograph-ical split of revenues by end customers.

In the reporting period as well as in the comparison periods all non-current assets except financial assets are in Peo-ple’s Republic of China.

Revenues with one customer amounting to more than 10% of the total revenues did not take place.

8. Cost of sales


Material 81,990 73,713

Overhead 5,036 2,900

Labor 1,615 1,530

88,641 78,143

9. Other operating incomeOther operating income is mainly related to Government grants.


Government grants 764 749

Reversal of liabilities 0 128

Reversal of provisions 0 5

Rental income 129 44

Exchange rate differences 191 0

Other 69 142

1,153 1,068

Government grants represent the incentive subsidies grant-ed by the PRC local government authorities to the Group’s subsidiaries as incentives mainly for two purposes:

(1) For grants relating to product research and development activities carried out by the Group, the grant income is recognised as related research and development expens-es that have been charged to profit or loss.

(2) For grants relating to capital expenditure incurred by the Group, the grant income is recognised on a systematic basis, which matches the depreciation of the related as-sets.

(3) For grants that are incentive payments to provide imme-diate financial support to the Group, the grants are rec-ognised as income when they are received.

The grants were unconditional, non-recurring and had al-ready been received by the Group’s subsidiaries.

In 2011 as well as in the quarterly reports in 2012 interest income on bank deposits has been reported in the other operating income. In the income statement for 2012 inter-est income on bank deposits is reported in interest income.



10. Other expenses


Capital increase 1,244 4,705

Other taxes 470 250

Bank charges 92 168

Exchange rate differences 0 726

1,806 5,849

11. Headcount and payroll expensesTotal personnel costs compared to the previous year were:


Wages and salaries 3,403 3,492

Social security costs 277 390

3,630 3,882

Employer contributions to statutory pension insurance in China amounted to kEUR 277.

For fiscal year 2013 expenditures is expected to be similar to that in fiscal year 2012.

The Group employed an annual average of 772 employees based on continued activities. The employees were acting in the following functions:

employees (annual average) 2012 2011

Production and services 527 596

Administration 189 200

Research and development 56 54

772 850

12. Depreciation and amortization expensesDepreciation and amortization expenses compared to the previous period are as follows:


Depreciation of property, plant and equipment 4,326 1,725

Amortization of intangible assets (included in administration expenses) 133 117

Total depreciation and amortization expenses 4,459 1,842

13. Interest expenseThe interest income during the reporting period is as fol-lows:


Interest from banks 171 4

Interest Income 171 4

Interest to banks –280 –104

Interest paid –280 –104

Interest income –109 –100

14. Income tax expenseIncome tax recognized in the profit and loss statement:


Current Tax

- in Germany 0 0

- in China 2,287 2,745

Deferred Tax

- in Germany 251 –126

- in China 24 –381

- of which from loss carry forwards 251 –126

taxes on income 2,562 2,238



The following tax rates were used as the basis for the tax calculation:

Hong Kong 16.5%

People’s Republic of China 12.5%

Germany 25.6%

The effective tax can be reconciled as follows:


Profit before tax 15,150 11,790

Expected income tax expenses at tax rate of 25% (China)* +3,788 +2,947

Effect of tax benefit granted to a subsidiary –2,291 –2,421

Effect of tax losses not recognised +792 +1,271

Tax effect of loss-carry forwards 202 -138

Tax effect of expenses that are not deductible +99 +579

Tax effect of income not taxable –29 0

Adjustment on other differing national tax rates 1 0

2,562 2,238

* The national tax rate in China is 25%.The national tax rate of China is the most appropriate tax rate for the effective tax reconciliation, because most of the taxable activities of the Group are located in China.

15. Profit for the yearProfit for the year has been calculated after charging/ (crediting):


Cost of inventories recognised as an expense 88,570 78,142

(Reversal of) allowance for doubtful debt 0 0

Depreciation of property, plant and equipment 4,326 1,725

Foreign exchange (gains) and losses –191 –740

Amortisation of intangible assets (included in administrative expenses) 145 26

Amortisation of prepaid lease payments (included in administrative expenses) 43 117

Gain on disposal of property, plant and equipment 5 –1

16. Earnings per shareThe income and the weighted average of shares and em-ployee share options which is the basis for the income per share are as follows:

in EUR 2012 2011

Income attributable to owners of the parent in EUR at 12,666,591 9,580,748

Income for calculation of the basic income per share in EUR at 12,666,591 9,580,748

Weighted average number of shares for the calculation of the basic income per share 12,302,870 11,284,166

Earnings per share 1.03 0.85

The weighted average number of shares and employee share options for the calculation of basic earnings per share is equivalent to the calculation of the diluted earnings per share.

17. Intangible assetsIntangible assets are related to computer software. In the period from 1 January 2012 through 31 December 2012 the software was amortised over its useful life.

in EUR thousand 2012

Cost:

As at 1 January 2012 1,427

Additions/disposals 14

Currency translation adjustments –43

1,398

accumulated amortisation:

As at 1 January 2012 253

Additions 133

Currency translation adjustment –13

373

Carrying amounts:


As at 31 December 2012 1,025



The intangible assets primarily consist of accounting and management software. Office administration computer software has finite useful life and is amortised over its esti-mated useful life of ten years. Accounting computer soft-ware has finite useful life and is amortised over its esti-mated useful life of two years.

18. Property, plant and equipmentProperty, plant and equipment changed in the reporting pe-riod as follows:

in EUR thousand BuildingPlant &

equipment Motor vehiclesoffice

equipment

deposits and construction

in progress total

acquisition and production cost:

As at 1 January 2012 35,076 17,787 1,354 864 644 55,725

Additions 0 8,994 13 16 12 9,035

Disposals 0 –11 –6 0 0 –17

Reclassifications 0 0 0 0 0

Currency translation –654 –332 –25 –16 –12 –1,039

at 31 december 2012 34,422 26,438 1,336 864 644 63,704

accumulated depreciation:

As at 1 January 2012 1,910 851 321 374 0 3,456

Additions 1,894 2,063 252 117 0 4,326

Disposals 0 –9 –3 0 0 –12

Currency translation –76 –59 –11 –10 0 –156

at 31 december 2012 3,730 2,846 557 481 0 7,614

Net carrying amounts as at 27 April 2011

Net carrying amounts as at 1 January 2012 33,166 16,936 1,033 490 644 52,269

net carrying amounts as at 31 december 2012 30,692 23,592 779 383 644 56,090

The buildings are erected on land use rights under medium-term leases for a period of 50 years and will expire in 2057 and 2058. The land use rights are located in Fuzhou, the People’s Republic of China.

The depreciation rates are 5% on buildings, 10% on plant and equipment and 20% on motor vehicles and office equipment.

The Group pledged buildings with carrying amounts of kEUR 5,504 (2011: kEUR 3,034) to secure borrowings of the Group (see also note 27). The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.



19. Other assetsOther assets increased by kEUR 100 to kEUR 2,188 (current and non-current other assets). The other assets include:


Prepaid lease payments 43 43

Others 5 4

Other current assets 47 47

Prepaid lease payments 1,948 2,028

Others 193 13

Other non-current assets 2,141 2,041

2,188 2,088

Other assets mainly include prepaid lease payments. On 31 December 2012 the Company had capitalised a total kEUR 1,990 for prepaid lease payments, of which kEUR 42 is recorded as current assets and kEUR 1,948 is recorded as non-current assets;

in EUR thousand 2012

Cost:


Addition 0


2,118

amortisation:

As at 1 January 2012 88

Addition 43


128

Carrying amounts:


as at 31 december 2012 1,990

The Group has pledged prepaid lease payments of kEUR 476 (2011: kEUR 952) in order to secure liabilities of the Group (see note 27).

20. Deferred taxesDeferred taxes are recognised in the consolidated financial statements as follows:

in EUR thousand 31.12.2012 31.12.2011

Deferred tax assets 583 1,260

Corrections according to IAS 8 0 –392

Deferred tax liabilities –97 –101

486 767

Deferred tax assets have resulted primarily the tax effects on deferred government grants (kEUR 449) and loss carry-forwards (kEUR 134). Deferred tax liabilities have resulted primarily from the tax effects on the capitalisation of bor-rowing costs.

Deferred taxes are calculated at the tax rates that are ex-pected to apply in the period when the deferred tax assets or liabilities are realised. The tax rates are as follows:

Percentage 2012 2011

Germany 25.6% 25.6%

People’s Republic of China 25.0% 25.0%

21. Inventories

in EUR thousand 31.12.2012 31.12.2011

Raw material 1,847 2,121

Work in progress 1,235 1,028

Finished goods 1,575 4,149

4,657 7,298

The cost of inventories recognized as an expense during the year was kEUR 88,570 (2011: kEUR 78,142).

The cost of inventories recognized as an expense does not include write downs of inventory to net realizable value. Previous write downs have been reversed as a result of in-creased sales prices in certain markets.

Inventories of kEUR 0 are expected to be recovered after more than twelve month.



22. Available-for-sale investmentsAvailable-for-sale investments are stated at fair value at the end of each reporting period and relate to investment shares listed on the Shanghai Stock Exchange in the Peo-ple’s Republic of China.

23. Trade and other receivables

in EUR thousand 31.12.2012 31.12.2011

Trade receivables 18,345 16,664

Allowance for doubtful debts –3 –

Deposits 902 1,070

Value-added tax receivable 684 847

Advance payments to suppliers 311 638

Other receivables 542 339

20,781 19,558

Period on sales of goods generally ranges from 30 to 60 days. No interest is charged on trade receivables for the overdue balance. Allowances for doubtful debts are recog-nised based on historical experience.

Before accepting any new customer, the Group obtains the background and financial information and performs an as-sessment on the potential customer’s credit quality and de-fines credit limits for the customer. As at 31 December 2012, 98% of trade receivables were neither past due nor impaired.

Included in the Group’s trade receivable balance and pre-sented in the table below are trade receivables past due at the end of the reporting period which the Group has not recognised an allowance because there has not been a sig-nificant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collat-eral or other credit enhancements over these balances nor does it have a legal right to offset against any amounts owed by the Group to the counterparties.

The following analysis shows the overdue but not impaired receivables.

in EUR thousand 31.12.2012 31.12.2011

Current trade receivables 18,345 16,664

Overdue

Past due 1 – 30 days 239 4,973

Past due 31 – 60 days 2 179

Past due 61 – 180 days 105 93

Past due over 180 days 9 37

355 5,282

As at the end of the reporting period no impairments were necessary.

In 2012 trade receivable with a carrying amount of EUR 0 (2011: kEUR 1,690) were pledged in order to secure bank loans (see note 27).

24. Cash and cash equivalents and other current assets

In addition to cash and cash equivalents in the amount of kEUR 30,936 (2011: kEUR 27,002), kEUR 2,598 (2011: kEUR 785) of bank deposits were used to secure short-term lines of credit. They are shown under the other financial assets.

For purposes of consolidated statements of cash flows, cash and cash equivalents include cash balances and bank notes.

Bank balances carry interest rates of 0.5% per annum and the pledged bank deposits carry interest rates of 3.1% per annum.

in EUR thousand 31.12.2012 31.12.2011

Cash and cash equivalents 30,936 27,002

Pledged bank deposits 2,598 785

Other current assets 2,598 785

33,534 27,787



25. Equity

subscribed Capital number of shares share capital (eur)

1 January 2012 12,300,000 12,300,000

Issuance of new shares 0 0

31 december 2012 12,300,000 12,300,000

The subscribed capital of the parent is 12,300,000 and is divided into no-par value bearer shares with a computed value of the participation in the share capital of EUR 1.00. The Company has no treasury shares.

Fully paid no-par value bearer shares with a computed val-ue of EUR 1.00 carry one vote per share and carry a right to dividends.

Authorised capitalOn 12 June 2012, the Annual General Meeting authorised the Management Board, with the approval of the Supervisory Board, to increase the share capital of United Power Tech-nology AG until 11 June 2017, once or several times by up to a total of EUR 6,150,000.00 by issuing a total of 6,150,000 no par value bearer shares in consideration of contribution in cash or in kind (Authorised Capital 2012/I). On principle, shareholders are to be offered subscription rights; the stat-utory subscription rights may also be offered in such a way that the new shares are taken over by a bank or a syndicate of banks with the obligation to offer them to the Company’s shareholders for subscription. The Management Board is authorised, in each case with the approval of the Supervi-sory Board, to exclude the subscription rights of the share-holders. An exclusion of the subscription right, however, shall only be admissible in the following cases:

a) in order to exclude fractional amounts from the subscrip-tion right;

b) in the case of a capital increase against cash contribu-tions, if the entire proportional amount of the share capi-tal that relates to the new shares for which the subscrip-tion right is excluded does not exceed 10% of the share capital, in fact neither at the point when it becomes valid nor at the point when the authorization is exercised, and if the amount of issue of the new shares is not consider-ably lower than the stock market price of shares of the same type and with the same features that are already traded at the stock market when the final issue price is stipulated. When calculating the 10% of the share capital, the proportional amount of the share capital that relates to the shares that were sold or issued or are to be issued under exclusion of the subscription right during the term of this authorization due to other authorizations that ap-ply directly or indirectly mutatis mutandis section 186 subsection 3 sentence 4 AktG shall be offset; or

c) in the case of a capital increase against contributions in kind, particularly for the purpose of acquiring companies, parts of companies or interests in companies, in the frame of mergers and/or for the purpose of acquiring oth-er assets including rights and claims.

The Management Board shall decide, with the approval of the Supervisory Board, on the additional content of the rights to shares and the conditions of issuance of the shares.

After utilisation of authorised capital or the lapse of the pe-riod for the utilisation of authorised capital, the Supervisory Board is authorised to amend the Articles of Association.

The authorised capital has not yet been utilized and is thus available at a volume of 6,150,000 shares at 31 Decem-ber 2012.



Conditional CapitalOn 12 June 2012, the Annual General Meeting conditionally increased United Power Technology AG’s share capital by up to EUR 246,000.00 by means of issuing up to 246,000 no-par value bearer shares (Conditional Capital 2012/I). The Condi-tional Capital 2012/I is exclusively for the purpose of servicing subscription rights to shares of United Power Technology AG, which are issued, based on the Stock Option Plan 2012 to members of the Management Board or to selected executive employees of the United Power Technology AG and its do-mestic and international group subsidiaries. The conditional capital increase shall only be carried out insofar as subscrip-tion rights are issued and their owners exercise their sub-scription right for shares of United Power Technology AG and United Power Technology AG does not grant own shares in fulfilment of the subscription rights. The Supervisory Board is authorized to adjust the wording of the Articles of Associa-tion in accordance with the respective use of the Conditional Capital 2012/I.

The conditional capital has not been claimed and accounts for 246,000 shares as at 31 December 2012.

in EUR thousand 31.12.2012 31.12.2011

reserves

Additional paid-in capital 55,883 55,883

Revaluation reserve –1 –1

Foreign currency translation reserve 7,288 9,432

Retained Earnings 25,009 12,344

88,179 77,658


additional paid-in capital

1 January 55,883 39,552

Capital injection 0 18,400

IPO-Cost 0 –1,756

Contribution by non-controlling shareholders 0 79

Correction according to IAS 8 0 –392

55,883 55,883

The amount of the capital reserve reflects the received share premium from the issuance of no-par value bearer shares with a computed value of EUR 1.00 after deduction of expenses that are directly attributable to the issuance of new shares. The correction according to IAS 8 is explained in note 26.

The revaluation reserve (kEUR –1) results from the accumu-lated profits or losses from the revaluation of non-current available-for-sale assets. These are recognised in the other comprehensive income except when amounts which are reclassified to profit or loss in the event of disposal or de-termination of impairment.

The difference from currency translation of foreign opera-tions amounts to kEUR 7,288. Differences from the transla-tion of functional currencies of foreign operations are rec-ognised in other comprehensive income and accumulated in the foreign currency translation reserve. Translation differ-ences from foreign currency translation are reclassified to profit or loss on the disposal of the foreign operation.

The profit for the period allocated to the owners of the par-ent (kEUR 12,666) is recognised in retained earnings.

26. Correction according to IAS 8The audit of the consolidated financial statements as of 31 December 2012 revealed that a correction of errors ac-cording to IAS 8 was required with regard to the accounting treatment of deferred tax asset for net operating losses incurred in Hong Kong. The assessment of the operating loss carried forward resulted in an increase in equity (re-serves) and an increase in deferred taxes. The deferred tax-es amounted to kEUR 392. Deferred taxes were recognised at the end of the reporting period in the previous year. Fur-thermore, deferred taxes were recognised by offsetting them against the direct and indirect costs of capital pro-curement.

Therefore, the correction according to IAS 8 resulted in a de-crease of kEUR 392 in deferred tax assets to kEUR 868 and a decrease in revenues from the issuance of shares by kEUR 392 to kEUR 16,253.



27. BorrowingsThe borrowings are related to secured bank borrowings. The average effective interest rates are approximately 6.9% per year.

in EUR thousand 31.12.2012 31.12.2011

Secured bank borrowings 2,405 6,582

The following carrying amounts have been pledged to se-cure bank borrowings:

in EUR thousand 31.12.2012 31.12.2011

Buildings 5,504 3,034

Prepaid lease payments 476 952

Trade receivables 0 1,690

5,980 5,676

28. Trade and other payables in EUR thousand 31.12.2012 31.12.2011

Trade payables 7,840 5,695

Notes payable 433 927

Advance payments 1,436 891

Others 2,191 1,935

11,900 9,448

The maturity of trade payables is as follows:

in EUR thousand 31.12.2012 31.12.2011

Short-term 7,829 5,676

Overdue (0 to 60 days) 11 19

7,840 5,695

Other payables are due within one year.

29. Other provisions

in EUR thousand

supervisory Board remu-

neration audit costoutstanding

invoices total

Balance 1 January 2012 117 50 0 167

Additional provi-sions recognised 109 155 12 276

Reductions arising from payments 0 –10 0 –10

Reductions arising from remeasurements 0 0 0 0

226 195 12 433

The expected outflow of the other provisions is within one year.

30. Government grantsGovernment grants, which were made in connection with the acquisition of property, plant, and equipment are ac-cordingly recognised as deferred income under the other payables.

During the year ended 31 December 2012, the Group re-ceived government subsidies of kEUR 763 to compensate for the building cost of a plant. The amounts have been de-ferred and are to be released to income over the useful lives of related assets once the assets are ready for their intend-ed use by the management and depreciation commences. During the year ended 31 December 2012, kEUR 99 was re-leased to income.

31. Non-cash transactionsMaterial non-cash transactions did not take place in the period from 1 January to 31 December 2012.



32. Capital managementThe Group’s capital management area provides services to the business areas. It also monitors and controls the finan-cial risks associated with the Group’s business areas through internal risk reporting, which analyses risk according to the level and extent of the risks. These risks encompass the market risk (including exchange risk, interest risk, and price risk), credit risk and the liquidity risk.

The Group is not obliged to compile with any externally imposed capital requirements.

The primary goal of the Group is to ensure the future ability to repay liabilities and to maintain financial substance.

A key indicator in capital management is gearing, which shows the relationship between net debt and equity ac-cording to the consolidated financial statements of financial position. United Power uses net debt as a key indicator for investors and analysts. As this indicator is not covered by the IFRS accounting rules, the way in which it is defined and calculated may differ from practice at other companies. On 31 December 2012 the Company’s gearing was –28.10% ( 2011: –22.41%).

Further the financial substance is mainly measured with the equity-to-assets ratio. Part of this financial ratio is the balance sheet total of the Groups consolidated financial statements and the equity shown in the Groups consoli-dated financial statements.

The gearing ratio (ratio of net assets and equity at the end of the reporting period) was as follows:

in EUR thousand 31.12.2012 31.12.2011

Debt (i) 2,405 6,582

Cash and bank balances 30,936 27,002

Net debt –28,531 –20,420

Equity (ii) 101,535 91,111

Net debt to equity ratio –28.10% –22.41%

Equity-to-assets ratio 85.42% 81.86%

(i) Debt is defined as long- and short-term borrowings (excluding derivatives and finan-cial guarantee contracts), as described in note 27.

(ii) Equity includes all capital and reserves of the Group that are managed as capital.

33. Financial InstrumentsTo present the market risk, sensitivity analysis are required according to IFRS 7, which indicates how hypothetical chang-es of relevant risk variables would have affected our annual net income or other value changes recognized in equity. In this connection the Group is mainly affected by currency risks. The impacts are evaluated by hypothetical changes in risk variables on the portfolio of the financial instruments.



The carrying amounts and fair values of financial instru-ments as of 31 December are as follows:

in EUR thousand 31.12.2012 31.12.2011

Carrying amount

at amortized costs Fair Value

Carrying amount


Assets

Trade and other receivables 20,781 20,781 20,781 19,558 19,558 19,558

Amounts due from related parties 0 0 0 245 245 245

Pledged bank deposits 2,598 2,598 2,598 758 758 758

Cash and cash equivalents 30,936 30,936 30,936 27,002 27,002 27,002

Value-added tax receivable –684 –684 –684 –848 –848 –848

Advance to suppliers –311 –311 –311 –638 –638 –638

in EUR thousand 31.12.2012 31.12.2011

Carrying amount


Carrying amount


Liabilities

Trade payables 10,464 10,464 10,464 8,556 8,556 8,556

Borrowings from banks 2,405 2,405 2,405 6,582 6,582 6,582

Amounts due to related parties 0 0 0 857 857 857

in EUR thousand 31.12.2012 31.12.2011

Classification according to ias 39Carrying amount


Carrying amount


Financial assets

Loans and receivables 53,320 53,320 53,320 46,104 46,104 46,104

Available for sale financial assets 0 0 0 16 16 16

Financial liabilities (at amortized costs) 31,703 31,703 31,703 15,995 15,995 15,995



Market risk

interest rate riskThe Group’s fair value interest rate risk relates primarily to its fixed-rate bank borrowings. The Group’s cash flow inter-est rate risk relates primarily to its variable-rate bank bal-ances and pledged bank deposits.

The management performs sensitivity analyses on a peri-odic basis by evaluating increases or decreases in interest rates.

During the reporting period, an increase or decrease of 25 basis points in interest rates would increase or decrease the Group’s post-tax profit approximately +/– kEUR 62.

Currency riskCertain Group transactions are denominated in foreign cur-rencies, thereby creating risks due to exchange rate fluctua-tions. The Group’s operating transactions are performed in RMB, HKD, USD and EUR.

The Group has material amounts of foreign currency mon-etary assets and liabilities in USD (kEUR 8 in liabilities and kEUR 6,390 in assets) and RMB (kEUR 56,090 in assets) as at the balance sheet date.

The sensitivity analysis of the management regarding the increase or decrease in currency rate leads to the result that an increase or decrease of exchange rates of RMB, USD or HKD to the Euro of 5% would result in a profit of approxi-mately +/– kEUR 0.7. There is no impact on the other com-prehensive income.

other price riskThe management believes that the Group does not have significant exposure to price risk. Therefore, no sensitivity analysis has been performed.

Credit riskThe management has taken measures in order to minimise credit risk. These measures include determining credit lim-its, diligent credit approvals and regularly monitoring ac-counts receivables.

Trade receivables have the following aging structure:


Not due, not individually impaired 17,987 11,382

1 – 30 days past due 239 4,973

31 – 60 days past due 2 179

61 – 180 days past due 105 93

More than 180 days past due 9 37

total past due, but not individually impaired receivables 355 5,282

Individually impaired 3 0

net carrying amount 18,345 16,664

The value of the specific allowance for bad debts is deter-mined on the assessment of the individual risk for each in-dividual receivable. Due to the fact that no United Power customer accounts for more than 10% (2011: 10%), the liabil-ity and credit risk for the Group are negligible. No collateral has been received and there are no other credit enhance-ments.

liquidity riskIn order to reduce liquidity risk, the Group maintains a suf-ficient amount of liquidity. The Group did not have unutilised bank facilities as at 31 December 2012.

The following tables detail the Group’s remaining contrac-tual maturity for its non-derivative financial liabilities as at 31 December 2010, 2011 and 2012 based on agreed repay-ment terms The tables have been drawn up based on un-discounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.



non-derivative financial liabilities

weighted aver-age interest rate < 3 months 3–6 months 6–12 months

total undis-counted cash

outflows

Carrying amounts as at

31 december 2012

Carrying amounts as at

31 december 2011

% kEUR kEUR kEUR kEUR kEUR kEUR

Trade payables 11,900 0 0 11,900 11,900 9,448

Borrowings from banks 8 42 2,430 2,472 2,405 6,582

Liabilities due to related parties – 0 0 0 0 0 0

Liabilities due to the con-trolling shareholder 0 0 0 0 0 0

Fair valueThe fair values of financial assets and financial liabilities are determined as follows:

The fair value of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets is determined with reference to quoted market bid prices; and

The fair value of other financial assets and financial li-abilities is determined in accordance with generally ac-cepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions.

The management considers that the carrying amounts of financial assets and financial liabilities recorded at amor-tised cost approximate their fair values.

Fair value measurements recognised in the combined statement of financial positionThe following table provides an analysis of financial instru-ments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either di-rectly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of available-for-sale financial assets are level 1 measurements.

34. Stock-based compensationThe Company has a share option scheme for executives and senior employees of the Company and its subsidiaries. In ac-cordance with the terms of the plan, as approved by share-holders at the Annual General Meeting on 12 June 2012, members of the Management Board owning less than 5% of shares in the Company (Group 1) and selected executives of the Group companies in which United Power Technology AG has an interest in more than 50% (Group 2) may be granted options to purchase ordinary shares.

Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient of the option. The options carry neither rights to dividend nor voting rights.



According to the Company’s stock option plan the volume of a maximum amount of 246,000 stock options on new shares shall be allocated to the Groups of entitled parties as follows:

(1) Entitled parties of group 1: in total a maximum amount of 172,200 subscription rights;

(2) Entitled parties of Group 2: in total a maximum of 73,800 subscription rights.

The period of issuance begins with the entry of the Condi-tional Capital 2012/I and ends as at 9 July 2015. Within this period each group shall be granted stock options only in three annual tranches as follows:

(1) 2012: 20%;

(2) 2013: 30%;

(3) 2014: 50%.

The first tranche of stock options was issued on 10 Decem-ber 2012.

options series number grant date expiry date exercise dateFair value at

grant date

Granted on 10 December 2012 49,200 10/12/12 10/12/16 10/12/18 47,232

The waiting period for the stock options is four years begin-ning with the date of issuance.

Fair value of share options granted in the yearThe weighted average fair value of the share options granted during the financial year is EUR 47,232. Options were priced using a binomial option-pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effect of non-transfer-ability, exercise restrictions (including the probability of meeting market conditions attached to the option), and be-havioural considerations. Expected volatility is based on the historical share price volatility of the period from the IPO un-til balance sheet date and the historical share prices volatil-ity of the shares in three comparable companies of a period of six years before the balance sheet date.



The following parameters are used as the starting point of the calculation:

Grant date: 10 December 2012

Expected volatility: 47.6%

Expected return on dividends: 6.92%

Risk-free interest rate: 0.54%

Option’s term: 6 years

Holding period: 4 years

Exercise price: EUR 3.90

35. Other disclosures to related partiesBalances and transactions between the Company and its subsidiaries, which are related parties, are eliminated in the consolidation and are not explained in this note. Informa-tion on transactions between the Group and other related parties are discussed in the following paragraphs.

Nature of relationship with related parties:

name relationship with the Company

Fuzhou Rongli Power Fittings Co., Ltd. (“Rongli”)

An entity wholly owned by Mr Wei Gaoxin, non-controlling shareholder of DWC

Fuzhou Wankai Machinery Co., Ltd. (“Wankai”)

An entity controlled by Mr Zhong Dong Huang, a key management personnel of the Group

Related parties

trading transactionsThe transactions of goods between the Group companies and related parties are as follows:

in EUR thousand 31.12.2012 31.12.2011

sales of goods:

United Generating Power Nigeria Ltd., Trade receivables – –

Advance payments

Fuzhou Wankai Machinery Co., Ltd. – –

Purchase of goods:

Fuzhou Rongli Power Fittings Co., Ltd. 6,608 4,968

The companies are controlled by controlling shareholders.

amounts due from related partiesThe Group has the following receivables against the follow-ing non-consolidated related parties:

in EUR thousand 31.12.2012 31.12.2011

Fuzhou Wankai Machinery Co., Ltd. (“Wankai”) Advance payments 0 245

Wankai is controlled by Mr Wei Gaoxin, non-controlling shareholder of DWC.

The receivables are unsecured and non-interest bearing.

amounts due to related partiesNature of relationship with related parties:

name relationship with the Company

Fuzhou Rongli Power Fittings Co., Ltd. (“Rongli Power”)

An entity controlled by Mr Zhong Dong Huang, a key management personnel of the Group



The Group has the following liabilities against other related persons resulting from trade payables:

in EUR thousand 31.12.2012 31.12.2011

Fuzhou Rongli Power Fittings Co., Ltd. 658 857

Related persons

Management Board and key management personnelThe following persons are members of the Management Board:

Mr Xu Wu, Chairman of the Management Board, Co–CEO, Fuzhou/China Responsible for government and key domestic accounts relationships as well as Group strategy

Mr Zhong Dong Huang, Vice Chairman of the Management Board, Co–CEO, Fuzhou/China Responsible for strategy and general management of the Group

Mr Oliver Kuan, CFO, Fuzhou/China Responsible for finance function of the Group

The expenses recognized in the financial statements for compensation paid to Management Board and other mem-bers of the management are as follows:


Short term employee benefits 283 570

Health insurance 5 0

Pension costs 1 1

Equity settled share based compen-sation 0 0

total 289 571

Furthermore members of the Management Board hold indi-rectly shares in the Company as follows:

Mr Wu Xu (20.14%)

Mr Zhong Dong Huang (18.42%)

Supervisory BoardMembers of the Supervisory Board include the following persons:

Mr Wei Song, General Manager of Fortune Great Invest-ments Limited, Tortola, British Virgin Islands, Chairman of the Supervisory Board, Fuzhou/China

Mr Hubertus Krossa, self-employed Master of Business Administration (Diplom-Kaufmann), Vice-chairman of the Supervisory Board, Wiesbaden/Germany. Mr Hubertus Krossa is also Chairman of the Supervisory Board of Eck-elmann AG, Wiesbaden/Germany, of Bauknecht Haus-geräte GmbH, Stuttgart/Germany as well as Chairman of Balfour Beatty Rail GmbH, Munich/Germany and Non-Executive Director of Balfour Beatty Plc, London/Great Britain

Mrs Ning Cong, General Manager of Orchid Asia Group Management Ltd., Hong Kong Island/Hong Kong, Member of the Supervisory Board until 12 August 2012

Mr Brian K. Krolicki, Lieutenant Governor of the State of Nevada/USA, Member of the Supervisory Board since 16 August 2012

The members of the Supervisory Board have received re-munerations of kEUR 0 (2011: kEUR 9). The Group had the following liabilities due to the Supervisory Board:

in EUR thousand 31.12.2012 31.12.2011

Remuneration of Supervisory Board 213 117

ShareholdersThe liabilities due to majority shareholders amount to EUR 0 (as at 31 December 2011: EUR 0 million).



36. Remuneration reportThe information in the remuneration report is part of the Group management report. An additional description of the information reported in the remuneration report has been therefore omitted.

37. Operating lease arrangementsOperating leases relate to the property owned by the Group with lease terms of 2 and 5 years. The leases do not contain an option to purchase the property. The rental income earned by the Group from its property, amounted to kEUR 158 in the financial year (2011: kEUR 44).

in EUR thousand 31.12.2012 31.12.2011

Within one year 72 37

From one to four years 1,861 0

1,933 37

38. Contingent liabilitiesAcquisition of property, plant and equipment and intangible assets contracted but not provided for in the consolidated financial statements total kEUR 0 (as at 31 December 2011: kEUR 408).

39. Audit feesDeloitte & Touche GmbH (“Deloitte”) was appointed as the auditor for United Power Technology AG and the Group for financial business year 2012. Total fees paid to Deloitte of kEUR 110 are related to auditing with kEUR 95 (2011: kEUR 207) and audit-related consulting including travelling cost and value added tax of kEUR 15.

40. Declaration of compliance with the German Corporate Governance Code

Pursuant to section 161 of the German Stock Corporation Act (AktG), the Management Board and Supervisory Board issued a corporate governance declaration on the recom-mendations of the provisions of the German Corporate Gov-ernance Code as amended. The declaration was published on the Company’s website at www.unitedpower.de.com/en.

41. Shareholdings in United Power Technology AG Management BoardMr Wu Xu owns indirectly 20.14% shares in United Power Technology AG (2,477,454 voting rights) as at 31 Decem-ber 2012.

Mr Zhong Dong Huang owns indirectly 18.42% shares in United Power Technology AG (2,265,272 voting rights) as at 31 December 2012.

supervisory BoardMr Wei Song owns indirectly 18.99% shares in United Power Technology AG (2,336,000 voting rights) as at 31 Decem-ber 2012.

Mr Hubertus Krossa owns directly 0.03% shares in United Power Technology AG (4.086 voting rights) as at 31 Decem-ber 2012.



Shareholdings

1. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Management Limited, Cay-man Islands, informed us that, as at 1 February 2012, its vot-ing rights in United Power Technology AG were 22.04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instru-ments pursuant to section 25a WpHG. We were further in-formed that the voting rights pursuant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the chain of controlled undertakings was OAIV Holdings L.P., Cayman Islands, Orchid Asia IV L.P., Cayman Islands.

2. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), OAIV Holdings L.P., Cayman Islands, informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22.04% (2,710,555 voting rights). There-of 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the voting rights pur-suant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the controlled undertaking was Orchid Asia IV L.P., Cayman Islands.

3. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Mr Gabriel Li, Hong Kong, informed us that, as at 1 February 2012, his voting rights in United Power Technol-ogy AG were 22.49% (2,765,873 voting rights). Thereof 11.89% (1,462,433 voting rights) were based on indirectly held fi-nancial/ other instruments pursuant to section 25a WpHG. We were further informed that the voting rights pursuant to sections 21, 22 WpHG were 10.60% (1,303,440 voting rights) and that the chain of controlled undertakings was as fol-lows: 11.65% (1,433,184 voting rights) were held through The Li Family Trust 2007, British Virgin Islands, YM Investment Limited, British Virgin Islands, Orchid Asia IV Investment Limited, British Virgin Islands, Orchid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 0.24% (29,249 voting

rights) were held through The Li Family Trust 2007, British Virgin Islands, YM Investment Limited, British Virgin Islands, Orchid Asia IV Co-Investment Limited, Cayman Islands.

4. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsge-setz – WpHG), The Li Family Trust 2007, British Virgin Is-lands, informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22.49% (2,765,873 voting rights). Thereof 11.89% (1,462,433 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the voting rights pursuant to sections 21, 22 WpHG were 10.60% (1,303,440 voting rights) and that the chain of controlled undertakings was as follows: 11.65% (1,433,184 voting rights) were held through YM Investment Limited, British Virgin Islands, Orchid Asia IV Investment Limited, British Virgin Islands, Orchid Asia IV Group Limited, Cay-man Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 0.24% (29,249 voting rights) were held through YM Investment Limited, British Virgin Islands, Orchid Asia IV Co-Investment Limited, Cay-man Islands.

5. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), YM Investment Limited, British Virgin Islands, in-formed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22.49% (2,765,873 voting rights). Thereof 11.89% (1,462,433 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the vot-ing rights pursuant to sections 21, 22 WpHG were 10.60% (1,303,440 voting rights) and that the chain of controlled undertakings was as follows: 11.65% (1,433,184 voting rights) were held through Orchid Asia IV Investment Limited, Brit-ish Virgin Islands, Orchid Asia IV Group Limited, Cayman Is-lands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 0.24% (29,249 voting rights) were held through Orchid Asia IV Co-Investment Limited, Cayman Islands.



6. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Investment Limited, British Virgin Islands, informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22,04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instru-ments pursuant to section 25a WpHG. We were further in-formed that the voting rights pursuant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the chain of controlled undertakings was Orchid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Is-lands, and Orchid Asia IV L.P., Cayman Islands.

7. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Limited, Cayman Islands, in-formed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22,04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the vot-ing rights pursuant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the chain of controlled un-dertakings was Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands.

8. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsge-setz – WpHG), Orchid Asia IV Group Management Limited, informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22,04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the voting rights pursuant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the chain of con-trolled undertakings was OAIV Holdings L.P., Cayman Is-lands, and Orchid Asia IV L.P., Cayman Islands.

9. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), OAIV Holdings L.P., Cayman Islands, , informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22,04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on indirectly held financial/ other instruments pursuant to section 25a WpHG. We were further informed that the voting rights pur-suant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights) and that the controlled undertaking was Orchid Asia IV L.P., Cayman Islands.

10. On 12 March 2012, pursuant to section 41 para. 4d of the German Securities Trading Act (Wertpapierhandelsge-setz – WpHG), Orchid Asia IV L.P., Cayman Islands, informed us that, as at 1 February 2012, its voting rights in United Power Technology AG were 22,04% (2,710,555 voting rights). Thereof 11.65% (1,433,184 voting rights) were based on di-rectly held financial/ other instruments pursuant to sec-tion 25a WpHG. We were further informed that the voting rights pursuant to sections 21, 22 WpHG were 10.39% (1,277,371 voting rights).

11. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), High Advance Investments Limited, British Virgin Islands, informed us that its voting rights in United Power Technology AG have fallen below the 20% threshold on 05 April and on that day amounted to 18.40% (2,262,963 voting rights).

12. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Fortune Great Investments Limited, British Virgin Islands, informed us that its voting rights in United Power Technology AG have fallen below the 20% threshold on 05 April and on that day amounted to 18.97% (2,333,690 voting rights).



13. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV L.P., Cayman Islands, informed us that its voting rights in United Power Technology AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.04% (2,218,941 voting rights).

14. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), OAIV Holdings L.P., Cayman Islands, informed us that its voting rights in United Power Technology AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.04% (2,218,941 voting rights). Thereof 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV L.P., Cayman Islands.

15. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Management Limited, Cay-man Islands, informed us that its voting rights in United Power Technology AG have exceeded the 15% thresh-old on 05 April and on that day amounted to 18.04% (2,218,941 voting rights). Thereof 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 WpHG through Orchid Asia IV L.P., Cayman Islands.

16. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Limited, Cayman Islands, informed us that its voting rights in United Power Technol-ogy AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.04% (2,218,941 voting rights). Thereof 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Group Management Limited, Cayman Is-lands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

17. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Investment Limited, British Virgin Islands, informed us that its voting rights in United Power Technology AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.04% (2,218,941 voting rights). Thereof 18.04% (2,218,941 voting rights) were at-tributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Group Limited, Cayman Islands, Or-chid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 18.04% (2,218,941 voting rights) were at-tributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

18. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), YM Investment Limited, British Virgin Islands, informed us that its voting rights in United Power Tech-nology AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.49% (2,274,259 voting rights). Thereof 18.04% (2,218,941 voting rights) were at-tributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Investment Limited, British Virgin Islands, Orchid Asia IV Group Limited, Cayman Islands, Or-chid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 0.45% (55,318 voting rights) were attrib-utable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Co-Investment Limited, Cayman Islands. 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

19. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), The Li Family Trust 2007, British Virgin Islands, informed us that its voting rights in United Power Technol-ogy AG have exceeded the 15% threshold on 05 April and on that day amounted to 18.49% (2,274,259 voting rights). Thereof 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through YM Investment Limited, British Virgin Islands, Orchid Asia IV



Investment Limited, British Virgin Islands, Orchid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Man-agement Limited, Cayman Islands, OAIV Holdings L.P., Cay-man Islands, and Orchid Asia IV L.P., Cayman Islands. 0.45% (55,318 voting rights) were attributable pursuant to sec-tion 22 para. 1 s. 1 no. 1 WpHG through YM Investment Limited, British Virgin Islands, and Orchid Asia IV Co-In-vestment Limited, Cayman Islands. 18.04% (2,218,941 vot-ing rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

20. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Mr Gabriel Li, Hong Kong, informed us that his voting rights in United Power Technology AG have exceed-ed the 15% threshold on 05 April and on that day amounted to 18.49% (2,274,259 voting rights). Thereof 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through The Li Family Trust 2007, British Virgin Islands, YM Investment Limited, British Virgin Islands, Orchid Asia IV Investment Limited, British Virgin Islands, Orchid Asia IV Group Limited, Cayman Islands, Or-chid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 0.45% (55,318 voting rights) were attribut-able pursuant to section 22 para. 1 s. 1 no. 1 WpHG through The Li Family Trust 2007, British Virgin Islands, YM Invest-ment Limited, British Virgin Islands, and Orchid Asia IV Co-Investment Limited, Cayman Islands. 18.04% (2,218,941 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

21. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV L.P., Cayman Islands, informed us that its voting rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.12% (2,720,556 voting rights).

22. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), OAIV Holdings L.P., Cayman Islands, informed us that its voting rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.12% (2,720,556 voting rights). Thereof 22.12% (2,720,556 voting rights) were attributable pursuant to sec-tion 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV L.P., Cayman Islands.

23. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Management Limited, Cayman Islands, informed us that its voting rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.12% (2,720,556 voting rights). Thereof 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 WpHG through Orchid Asia IV L.P., Cayman Islands.

24. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Group Limited, Cayman Islands, informed us that its voting rights in United Power Tech-nology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.12% (2,720,556 voting rights). Thereof 22.12% (2,720,556 voting rights) were at-tributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Group Management Limited, Cay-man Islands, OAIV Holdings L.P., Cayman Islands, and Or-chid Asia IV L.P., Cayman Islands. 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.



25. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Orchid Asia IV Investment Limited, British Virgin Islands, informed us that its voting rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.12% (2,720,556 voting rights). Thereof 22.12% (2,720,556 voting rights) were attrib-utable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Group Limited, Cayman Islands, Or-chid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Islands. 22.12% (2,720,556 voting rights) were at-tributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

26. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), YM Investment Limited, British Virgin Islands, in-formed us that its voting rights in United Power Technol-ogy AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.57% (2,775,874 voting rights). Thereof 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through Or-chid Asia IV Investment Limited, British Virgin Islands, Or-chid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Is-lands. 0.45% (55,318 voting rights) were attributable pursu-ant to section 22 para. 1 s. 1 no. 1 WpHG through Orchid Asia IV Co-Investment Limited, Cayman Islands. 22.12% (2,720,556 voting rights) were attributable pursuant to sec-tion 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.

27. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), The Li Family Trust 2007, British Virgin Islands, informed us that its voting rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.57% (2,775,874 voting

rights). Thereof 22.12% (2,720,556 voting rights) were attrib-utable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through YM Investment Limited, British Virgin Islands, Or-chid Asia IV Investment Limited, British Virgin Islands, Or-chid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cayman Is-lands. 0.45% (55,318 voting rights) were attributable pursu-ant to section 22 para. 1 s. 1 no. 1 WpHG through YM In-vestment Limited, British Virgin Islands, and Orchid Asia IV Co-Investment Limited, Cayman Islands. 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cay-man Islands.

28. On 13 April 2012, pursuant to section 21 para. 1 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), Mr Gabriel Li, Hong Kong, informed us that his vot-ing rights in United Power Technology AG have exceeded the 20% threshold on 10 April and on that day amounted to 22.57% (2,775,874 voting rights). Thereof 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through The Li Family Trust 2007, British Virgin Islands, YM Investment Limited, British Virgin Islands, Orchid Asia IV Investment Limited, British Virgin Is-lands, Orchid Asia IV Group Limited, Cayman Islands, Orchid Asia IV Group Management Limited, Cayman Islands, OAIV Holdings L.P., Cayman Islands, and Orchid Asia IV L.P., Cay-man Islands. 0.45% (55,318 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 1 WpHG through The Li Family Trust 2007, British Virgin Islands, YM Investment Limited, British Virgin Islands, and Orchid Asia IV Co-Invest-ment Limited, Cayman Islands. 22.12% (2,720,556 voting rights) were attributable pursuant to section 22 para. 1 s. 1 no. 6 s. 2 WpHG through Orchid Asia IV L.P., Cayman Islands.



42. Events after the reporting periodNo material events between the end of the reporting period and the date of the approval and authorization for issuance of the financial statements have occurred.

43. Proposal on the utilisation of United Power’s net retained earnings

At the Annual General Meeting the Management Board and the Supervisory Board will propose to carry forward the re-tained earnings.

44. Approval of the Consolidated Financial Statements

The financial statements were prepared by the Manage-ment Board on 10 April 2013 and authorised for issuance to the Supervisory Board.


The Management Board United Power Technology AG




To the best of our knowledge, and in accordance with the applicable financial reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the management report of the Group includes a fair re-view of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.


Management Board United Power Technology AG


ResponsibilityStatement

united Power teChnology ANNUAL REPORT 2012 Financial report 93 Responsibility Statement

IndependentAuditor‘s Report

We have audited the consolidated financial statements prepared by the United Power Technology AG, Eschborn, – comprising the balance sheet, the income statement and statement of income and expense recognized in equity, the cash flow statement, the statement of changes in eq-uity and the notes to the consolidated financial state-ments – and the group management report for the busi-ness year from January 1 to December 31, 2012. The preparation of the consolidated financial statements and the group management report in accordance with IFRS, as adopted by the European Union (EU), and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB („German Commercial Code“) are the re-sponsibility of the parent Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management re-port based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaft-sprüfer. Those standards require that we plan and per-

form the audit such that misstatements materially affect-ing the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal envi-ronment of the group and expectations as to possible misstatements are taken into account in the determina-tion of audit procedures. The effectiveness of the account-ing-related internal control system and the evidence sup-porting the disclosures in the consolidated financial statements and the group management report are exam-ined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and sig-nificant estimates made by management, as well as eval-uating the overall presentation of the consolidated finan-cial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.

ANNUAL REPORT 2012 united Power teChnology94 Financial report Independent Auditor’s Report

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the con-solidated financial statements of the United Power Tech-nology AG, Eschborn, comply with IFRS, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these require-ments. The group management report is consistent with the consolidated financial statements and as a whole pro-vides a suitable view of the group’s position and suitably presents the opportunities and risks of future develop-ment.

Frankfurt, April 10, 2013

deloitte & touche gmbh Wirtschaftsprüfungsgesellschaft

(Lüdke) (Meyer zu Schwabedissen) Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]

united Power teChnology ANNUAL REPORT 2012 Financial report 95 Independent Auditor’s Report

Published by: United Power Technology AG Mergenthalerallee 10–12 65760 Eschborn Germany

Phone: +49 61 96 40 08 04 Fax: +49 61 96 40 09 10 E-mail: [email protected]

FinancialCalendar

Imprint

Publication

Interim report 3-months 2013 14 May 2013

Annual General Meeting 2013 11 June 2013

Half-year report 2013 14 August 2013

Interim report 9-months 2013 12 November 2013

Concept and design: Kirchhoff Consult AG, Hamburg

Photographs: United Power Technology AG

date of publication:18 April 2013

investor relations:Phone: +49 40 60 91 86 50 Fax: +49 40 60 91 86 16 E-mail: [email protected] Internet: www.unitedpower.de.com/en

Cautionary note regarding forward-looking statement This document contains forward-looking statements, which are based on the current estimates and assumptions by the corporate man-agement of United Power Technology AG. Forward-looking statements are characterised by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be understood as in any way guaran-teeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by United Power Tech-nology AG and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the for-ward-looking statements. Many of these factors are outside United Power Technology AG’s control and cannot be accurately estimated in advance, such as the future economic environment or the actions of competitors and others involved in the marketplace. United Power Technology AG neither undertakes nor plans to update any forward-looking statements.

ANNUAL REPoRT 2012 United Power teChnoloGy96 Financial report Financial Calendar/Imprint

United Power AG United Power Technology AG Mergenthalerallee 10 –12 65760 Eschborn Germany

Phone: +49 61 96 40 08 04 Fax: +49 61 96 40 09 10 Email: [email protected]

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