generating growth - handelsblatt

ANNUAL REPORT 2011

UNITEd POwER TEchNOLOGy

GrowthGenerating

2009 2010 2011

100

80

40

0

20

60

REVENUE BY REGION* (in EUR million)

China Europe North America Other regions Total

9.5

22.515.5

29.5

41.338.2

10.717.316.6

5.9

19.214.4

55.6

100.3

84.7

* Revenue split by end consumer 2011 (not audited)

Key Financials

REVENUE BY SEGMENT (in EUR million)

Specialised dealers 37.8

Wholesalers 37.8

OEM 10.6

as at 31 December 2011

Retailers 14.1

2010 (“as if”)3)

2011(consolidated

AG-level) +/– %

Revenues EUR million 84.59 100.28 +18.55

Gross profit EUR million 20.54 22.14 +7.79

Gross profit margin % 24.28 22.08 –2.20PP

EBIT EUR million 15.86 11.89 –25.03

Adjusted EBIT 1) EUR million 16.88 16.60 –1.66

Adjusted EBIT margin1) % 19.96 16.55 –3.41PP

Profit for the period EUR million 13.50 9.55 –29.26

Adjusted profit for the period 1) EUR million 14.52 14.26 –1.79

Adjusted profit for the period margin 1) % 17.17 14.22 –2.95PP

Earnings per share 1) EUR 1.35 0.85 –37.04

Adjusted Earnings per share 1) 2) EUR 1.45 1.26 –13.101) Adjusted for non-recurring IPO expenses.2) EPS for 12 months 2010 is based on 10m shares, for 12 months 2011 it is based on the weighted average of shares (11.28m shares). 3) For further explanation of the “as if” 12 months 2010 figures please see section 6 of the notes to consolidated financial statements.

Technology Group is a leading manufacturer of engine-driven power equipment in china. we design, develop, manufacture and sell an extensive range of generators, outdoor power equip ment and components such as engines. Our major prod-ucts comprise residential as well as commercial generators, which are currently delivered to more than 50 countries in the world.

03 Letter to Shareholders 05 Report of the Supervisory Board 10 Growth Strategy 20 The Share 22 Corporate Governance Report

28 Group Management Report 48 Consolidated Financial Statements 93 Responsibility Statement 94 Independent Auditor‘s Opinion 96 Further Information

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

MR ZhOnG DOnG hUAnG deputy Chairman, Co-Ceo


Responsible for strategy and general management of the Group

MR OLIvER KUAn CFo

Responsible for overall finance function of the Group

MEMBERS of thE MANAGEMENt BoARD

AnnUAL REPORT 2011 United Power teChnoloGy2 Company Profile Management Board

dear FellowShareholders,

2011 was an exiting year in our Company’s history. Despite a challenging economic environment, we made significant progress toward achieving our long-term strategic objectives. We succeeded in strengthening the Company’s competitiveness, increased our capacity and at the same time main-tained our high standards of quality and efficiency. After our successful market flotation in June last year, I am proud to present our first annual report, which should give you a detailed insight into your company.

Group revenues for 2011 increased by 18.6 per cent compared to the previous year to EUR 100.3 mil-lion. Thus we achieved the EUR 100 million mark in line with our guidance for 2011. Gross profit im-proved by 7.8 per cent to EUR 22.1 million. Our EBIT adjusted for IPO expenses amounted to EUR 16.6 million, representing an adjusted EBIT-margin of 16.6 per cent. Our adjusted net profit amounted to EUR 14.3 million.

In 2011 United Power propelled its three-pronged strategy, which comprises further geographic expansion and penetration, broadening the range of engine-powered products and scaling up the size of our products in order to further expand the commercial and industrial usage of our products.

With the aim to further diversify our customer base and increase our own international presence we expanded our sales network and marketing activities. We thus gained 50 new customers in our target markets. Additionally, new supplier contracts for residential and commercial generators which were signed included others retailers in the UK, France and the US, a specialized dealer in nepal, a major Australian wholesaler, which supplies to Woolworth and Lowes, and a German wholesaler, which supplies to the discounter norma. For the fiscal year 2011, United Power generated total revenues of more than EUR 5 million from new customers. Many of the new customers in diverse geographical regions including Australia, Canada, Columbia, France, Germany, Ireland, Italy, nepal, nigeria Russia, the UK, the US, and of course our home market China will be supplied with our Company’s own branded products.

We used the net proceeds from the capital increase to finance the further production capacity expan-sion. Overall, United Power increased the number of production lines from 13 to 25. new production lines were installed for both existing as well as new products and to upgrade and improve the produc-tion lines for existing products. Therefore we now have the capacity to produce more than 1.1 million units per year. We will particularly focus our investment on new production lines for larger generator products. This will include commercial generators and industrial generator products in line with our strategy.

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 3 Letter to Shareholders

Further, we invested the IPO proceeds in R&D activities for new technologies and products. In the past year, we continued to devote significant effort to improve and enhance our existing products as well as develop new products to meet the diverse requirements of the global market place. United Power extended its product range within the target markets. We developed new product innovations within all three product segments such as the new v-Twin highly efficient aluminum engine or our new in-verter generator with the latest inverter technology, which allows the end customers to use the most sensitive electrical products such as laptop and LCD Tv anywhere.

In December 2011 we acquired the remaining 43 per cent of our subsidiary Sealand Machinery Co, which as a result became a wholly-owned subsidiary of the United Power Group. This acquisition pro-vides us the opportunity to fully integrate the parts business and to further increase the Company’s degree of vertical integration.

In 2012 we are still facing an uncertain global economic environment. Despite the adverse conditions in Europe and China (which are our two largest market by end customer), we do however aim to grow faster than our industry (which is estimated to grow on average by about 7.5 per cent annually until 2015) as a whole over the next two years and continue to gain market share globally. Assuming a stable EUR:RMB exchange rate and generally improved trading conditions in the later part of this year, our current expectation for revenue growth is about 10 per cent for 2012. Our EBIT margin for 2012 and 2013 is expected to be somewhat lower compared to the adjusted EBIT margin of 2011 due to the effect of the RMB appreciation over the last year, our strategy to further strengthen our R&D and sales and distribution capabilities and also due to the increased administrative costs of being a listed company. We aim to gradually refine our guidance throughout the year.

On this note, I would like to thank you, our shareholders and business partners, for your valued coop-eration over the recent financial year and we look forward to our continued future partnership.

Kind regards,

XU WU Chaiman of the Management Board

AnnUAL REPORT 2011 United Power teChnoloGy4 Company Profile Letter to Shareholders

report of theSupervisory Board

In the reporting year 2011, the Supervisory Board fulfilled the tasks incumbent upon it pursuant to law and the Company articles and continuously advised and supervised the Management Board in the management of the Company.

After thorough examination and discussion, the Supervisory Board resolved measures subject to its approval, in particular in connection with the IPO of the Company in June 2011. The Management Board furthermore frequently informed the Supervisory Board about the business development and the economic situation of the Company. The Supervisory Board discussed the information and valua-tions decisive for its decisions with the Management Board. As regards the reports and proposals for resolutions of the Management Board, the Supervisory Board passed the respective resolutions, insofar as it was required pursuant to law or the Company articles.

Cooperation between Supervisory Board and Management BoardIn the financial year 2011, all members of the Management Board attended the Supervisory Board’s balance sheet meeting during which they intensely discussed the Company’s situation, business de-velopment, the financial situation as well as fundamental questions regarding the corporate strat-egy. 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. There was an intensive exchange with the Management Board regarding occurrences of spe-cial interest between the meetings as well.

Supervisory Board meetings/resolutions in the financial year 2011During the first Supervisory Board meeting in the financial year 2011, which took place in Febru-ary 2011 and in which the two members of the Management Board Xu Wu and Zhong Dong huang participated, the preliminary figures for the financial year 2011 were dealt with. The Management-Board reported on the positive business development, especially on the figures related to revenue and cash-flow which were above the figures initially forecast. Furthermore, the appointment of the Manage ment Board candidate Mr. Oliver Kuan was discussed.

In April 2011, the Supervisory Board appointed Mr. Oliver Kuan as member of the Management Board. Mr. Kuan is Chief Financial Officer.

In its meeting held in May 2011, the Supervisory Board dealt with the Company’s annual financial statement and the consolidated financial statement, which the auditor provided with an unqualified auditor’s opinion, as well as with the respective Supervisory Board reports for the financial year 2010. To prepare for this meeting, the Supervisory Board members had been provided with the annual

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 5 Report of the Supervisory Board

financial statement, the consolidated financial statement as well as the draft version of the Super-visory Board report. The Supervisory Board dealt with these documents in detail and intensely dis-cussed them in the presence of the auditor who reported on the results of his audit and was available to answer questions and provide supplementary information. Based on the final outcome of the Su-pervisory Board’s own review of the annual financial statements and the consolidated financial state-ments, the Supervisory Board agreed to the auditor’s results, declared that no objections needed to be raised and approved the Management Board’s statements. The Company’s annual financial state-ment 2010 was thus adopted. During this meeting, the Supervisory Board furthermore adopted the Supervisory Board report and its proposals for decision regarding the agenda of the annual general meeting 2011.

In another meeting held in May 2011, the Supervisory Board re-elected Mr. Wei Song as chairman of the Supervisory Board and Mr. hubertus Krossa as deputy chairman of the Supervisory Board. In preparation of the Company’s IPO, the Supervisory Board furthermore dealt with the draft version of an underwriting agreement regarding the new shares to be created in the course of the IPO that shall be underwritten and placed by a banking consortium as well as with the price range of the new shares. The Supervisory Board agreed with the conclusion of the Underwriting Agreement and with a price range from EUR 9.00 to EUR 11.50 for new shares.

In its meeting held in June 2011, the Supervisory Board agreed with a cash capital increase with which new shares were created for the Company’s IPO: The Supervisory Board agreed with the Management Board’s resolution on a capital increase, so that the Company’s nominal capital is increased by EUR 2,300,000.00 by issuing 2,300,000 new shares in total. The Supervisory Board furthermore de-cided an adaption of the articles of association to this nominal capital increase.

In the final meeting for the year held in December 2011, the Supervisory Board discussed the prepara-tion of the Corporate Governance compliance declaration. Furthermore, a discussion regarding the strengthening of the sales and distribution function as well as of the management incentive system were part of the agenda.

During the past financial year, all members of the Supervisory Board attended all meetings and/or participated in the passing of all resolutions of the Supervisory Board.

AnnUAL REPORT 2011 United Power teChnoloGy6 Company Profile Report of the Supervisory Board

Corporate GovernanceIn the financial year 2011, the Supervisory Board dealt with the standards of good corporate gover-nance. 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 guarantor of an efficient cooperation between the Supervisory Board members. When dealing with proposals for the election of candidates to the Supervisory Board, the Supervisory Board pays attention to internationality and diversity. Con-sidering the current members of the board, i.e. Mr. Wei Song, Mr. hubertus Krossa and Ms. ning Cong, the Supervisory Board considers this diversity as ensured, especially in relation to nationality, gender, ethnic origin and experience.

The members of the Supervisory Board are obliged to disclose to the entire board any potential con-flicts of interest and not to contribute to dealing with and/or taking part in the resolution of topics which could lead to a conflict of interest. In the financial year 2011, there were no indications of poten-tial conflicts of interest.

The Supervisory Board dealt with the ICS and the risk management system of the Company as well as compliance. They were informed about these systems by the Management Board and were given an overview of risk management review work performed by Grant Thornton. They were also provided with an introduction of the work done by the internal audit and risk management team by the head of the team.

Composition of the Supervisory BoardThe previous Supervisory Board members’ terms of office ended with the conclusion of the annual general meeting held on 24 May 2011. At the suggestion of the Supervisory Board, Mr. Wei Song and Mr. hubertus Krossa were re-elected to the Supervisory Board. Mrs. ning Cong was delegated to the Supervisory Board by the shareholder Orchid Asia Iv L. P.

Change of the Management BoardAs stated above, the Supervisory Board appointed Mr. Oliver Kuan as member of the Management Board in April 2011. he succeeded the former member Mr. Liwei Wang with immediate effect and for a period of five years. Mr. Kuan is Chief Financial Officer.

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 7 Report of the Supervisory Board

Audit of the annual financial statements 2011The Company‘s annual financial statement, the consolidated financial statement and the manage-ment report 2011, which covers both the Company and the Group, have been duly audited by the audit firm Deloitte & Touch Gmbh Wirtschaftsprüfungsgesellschaft, Frankfurt, Germany, and provided with an unqualified auditor‘s opinion.

In the framework of a meeting in March 2012 and in the presence of a representative of the auditor, the preliminary key figures of the annual and the consolidated financial statements 2011 as well as the appropriation of profits to the general shareholder‘s meeting 2012 have been intensely discussed. The auditor‘s representative reported on the results of the audit, answered questions and provided information.

During another meeting which took place in early April 2012, the Supervisory Board dealt with the Company’s annual financial and consolidated financial statements, which the auditor each pro-vided with an unqualified auditor’s opinion, the consolidated management report for the Company and the Group, the Supervisory Board report and the remuneration report. The Supervisory Board members were provided with extensive documents to prepare for this meeting, such as the financial statements and the consolidated financial statements, the consolidated management report for the Company and the Group as well as the remuneration report, the annual financial statement of the Com pany, the auditor’s reports of Deloitte & Touche Gmbh Wirtschaftsprüfungsgesellschaft, Frankfurt, Germany, on the Company’s annual financial and consolidated financial statements as well as the draft version of the Supervisory Board report.

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 out-come of the Supervisory Board’s own review of the annual financial statements and the consolidated financial statements, the Supervisory Board agreed to the auditor’s results, declared that no objec-tions needed to be raised and approved the Management Board’s statements and the consolidated management report. The Company’s annual financial statement 2011 was thus adopted.

The Supervisory Board furthermore agreed to adopt the Supervisory Board report and the remunera-tion report.

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, April 2012

On behalf of the Supervisory Board

WEI SOnG Chairman of the Supervisory Board

AnnUAL REPORT 2011 United Power teChnoloGy8 Company Profile Report of the Supervisory Board

MR WEI SOnG Chairman of the Supervisory Board


Formerly member of the management of the Group

MR hUBERTUS KROSSA deputy Chairman of the Supervisory Board

Chairman of the Supervisory Board of Eckelmann AG, since 2001

Current non-Executive Director of the Board of Balfour Beatty Plc

MS nInG COnG Member of the Supervisory Board

Managing Director of Orchid Asia Group Management, a private equity fund management company, managing two of UP’s shareholders – Orchid Asia Iv L.P. and Orchid Asia Iv Co-Investment

MEMBERS of thE SupERviSoRy BoARD

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 9 Supervisory Board

Scaling up the size of products

10 kW

84

50

Broadening the range of engine-powered products

products

new customers in 2011

Further geographic expansion and penetration

We are increasingly focusing on generators with higher output and selling in cate-gories with larger engine sizes. Along with this shift we expect also to increase our margins.

We will particularly focus our investment on new production lines for larger generator products including commercial generators and possibly industrial generator products in line with our previously stated strategy.

Our new heavy duty power generator with a v-Twin highly efficient aluminum engine is a good example for this product category. It delivers a heavy duty maximum power of 10 kW. To meet the demands of a product used by professionals, a newly shaped structure had been designed.

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 inverter generators with the latest inverter technology.

We produce specially designed generators exclusively for customers with individual requirements due to technical, environmental and quality standards.

In 2011, 16 new products were developed by our R&D department. At the end of the year 2011 our customers could choose out of 84 different generators – from a 0.5kW residential generators to a 10kW heavy duty commercial generator.

We further plan to penetrate our important growth markets like China, Europe and north America and diversify our international customer base.

We intend to establish our own or licensed brands in new markets and enhance their position in markets that have already been penetrated with various distribution channels. As a major long-term strategy, we seek to further strengthen our reputati-on of reliability and to improve brand awareness, especially outside of China.

We are going to further expand our customer base especially in the developing coun-tries. In 2011 new supplier contracts were signed with retailers in the UK, France and the US. Furthermore with a specialized dealer in nepal, a major Australian wholesaler, which supplies to Woolworth, and a German wholesaler, which supplies to the dis-counter norma.

GrowthStrategy

10 Company Profile Company Strategy

AnnUAL REPORT 2011 United Power teChnoloGy

Broadening the range of engine-powered products

Further geographic expansion and penetration

GG7300

OUR MAIn SALES REGIOnS ARE ChInA, EUROPE AnD nORTh AMERICA BUT WE ALSO FOCUSInG On OThER REGIOnS SUCh AS LATIn AMERICA, ASIA-PACIFIC AnD LATIn AMERICA

RESIDEnTIAL GEnERATORS AnD InvERTER GEnERATORS FOR OUTDOOR ACTIvITIES AnD BACK-UP POWER AT hOME

COMMERCIAL GEnERATORS FOR ThE COnS-TRUCTIOn SECTOR AnD RELIABLE BACK-UP POWER In EMERGEnCy SITUATIOn

OUTDOOR POWER EqUIPMEnT FOR E. G. WA-TER PUMPS OR hIGh PRESSURE WAShERS FOR RESIDEnTIAL AnD InDUSTRIAL USAGE

GG4500 GG10000

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 11 Company Strategy

Under constructionReal estate spurs growth

in line with the growing real estate sector, the construction industry in Asia has developed dynamically in the recent years. this was driven by continuous government investments in infrastructure development as well as private investments.

Demand for our high power generators was propelled by this growth. in 2011 our revenues in China generated by end consumers grew by 43.5 per cent to EuR 22.3 million compared to 2010.

12 ChinA

Under constructionReal estate spurs growth

45

15

30

0

REVENUE CHINA (in EUR million)

2009 2010 2011

9.5

22.5

15.5

GG 10000 New heavy duty power generator with a v-twin efficient aluminum engine and unique air cooling design for professional usage.

GG 7150Generator combines high efficiency, mobility and large tank capacity for long duty cycle.

ProdUCtS

ChinA 13

45

15

30

0

REVENUE EUROPE (in EUR million)

2009 2010 2011

29.5

41.438.1

ProdUCtS

in Europe our sales are to a large degree driven by the desire for high flexibility. Despite a reliable electricity network our customers wish to be able to use electricity anywhere and at anytime.

our residential generators and inverter generators are indispensible tools for do-it-yourself en-thusiasts. furthermore on outdoor activities our products ensure our customers to maintain their access to reliable electricity. Compared to the previous year our revenues in Europe grew by 7.7 per cent to EuR 41.1 million in 2011. hence Europe accounts for the largest share of our revenues.

Flexibility first Electricity anywhere – at anytime

iG 3600inverter generator powered by a reliable en-gine that offers low noise, easy maintenance and stable tension for residential usage.

iG 2400 inverter technology for a constant sine wave power and reliable power supply with low noise and economic fuel consumption.

14 eUroPe

Flexibility first eUroPe 15

the uS market combines several factors which makes the region attractive for a generator producer like us: aging electricity grids, above ground lines susceptible by disruptions of natural disasters and a high dependency on electricity.

in the residential segment we offer generators for reliable back-up power that keeps the light at home always on – also in case of an emergency. Beyond that we offer smaller residential generators and inverter generators for outdoor activities. in 2011 we generated EuR 17.1 million from end customers in North America. this represents an increase of 31.7 per cent compared to 2010.

Always on Back-up poweroffers safety

16 north AMeriCA

45

15

30

0

REVENUE NORTH AMERICA (in EUR million)

2009 2010 2011

10.7

17.316.6

ProdUCtS

Always on Back-up poweroffers safety

GG 4600universally applicable generator with a unique design and lighter weight for long duty cycle.

GG 3250Compact 4-stroke generator with new design front panel for easy and consumer friendly handling.

north AMeriCA 17

Apart from our main sales regions China, North America and Europe we are selling our products to new markets such as Latin America, Asia-pacific or Africa. in Regions like South America for example, where reliable power supply to operate water pumps for the cultivation are highly needed.

in 2011 we sold products with a corresponding value of around EuR 19.0 million to these markets. Compared to the same period last year this means an increa-se of 31.7 per cent.

.

let it rain Strong development in new markets

18 othER REGioNS | SoUth AMeriCA

45

15

30

0

REVENUE OTHER REGIONS (in EUR million)

2009 2010 2011

5.9

19.214.4

ProdUCtS

dP 100powerful 4-stroke diesel engine for high discharge capacity and reliable long run abilities.

GP 8 0Water pump with full frame but light and compact design and a high flow rate.

SoUth AMeriCA | other reGionS 19

TheShare

Successful start to tradingOn 10 June 2011 the shares of United Power Technology AG were successfully listed on the Frankfurt Stock Exchange. The shares are traded in the Prime Standard, the segment with the highest transparency level. The first trading price was EUR 9.10, slightly above the issue price of EUR 9. Plac-ing 2.3 million non-par-value ordinary bearer shares, the Company raised 20.7 million net issuing proceeds. The pro-ceeds are mainly used to expand production capacities, e.g. optimise, upgrade and add production lines for existing products as well as to install production lines for new products. Furthermore, we are investing in Research and Development for new technologies and products as well as in the expansion of our distribution channels.

Tense market environmentThe positive capital market sentiment of 2010 and early 2011 was dwindling in the second half of 2011. The Ameri-can economy did not recover as quickly as expected, which resulted in higher unemployment rates.

Meanwhile, irregularities of Chinese companies listed in north America manipulating their balance sheet figures were uncovered. This in turn had, an in our view, an unjusti-fied negative effect on the sentiment towards Chinese companies listed in Europe.

In August the on-going unresolved financial situation of the Greek economy as well as increasing concern regarding the cre dibility of other southern European countries resulted in a steep drop of all relevant indices. Due to deep uncertainty on the capital markets the small cap index SDAX dropped by more than 20% within two weeks down to 4,500 points. The market remained highly volatile for the rest of the year until a recovery began in December 2011 which has been sus-tained during the early months of 2012.

Development of the share After the IPO, United Power’s shares faced a downward pressure before the share price stabilised to some extent at the beginning of July at a level of approximately EUR 8. During the beginning of August our share followed the gen-eral sudden decrease of the stock markets, due the general economic condition. On August 12, the United Power share reached its year’s low of EUR 3.80. Afterwards it recovered quicker than its benchmark, the SDAX. Within one month the share price surpassed the mark of EUR 6 but remained at this low level due to the difficult market environment. On the last day of trading in 2011, the share closed at a price of EUR 4.41. The average trading volume per day in 2011 amounted to 4,391 units. Since the beginning of the year 2012 the share price has continuously lost its volatile tendency and settled between in the price range of EUR 4.60 to 5.00.

Dividend policyAs mentioned in our IPO prospectus, United Power will not propose a dividend for the fiscal years 2011. We intend to pay a dividend to our shareholders in the financial year 2013. The amount of the payout will be based on our 2012 results and taking account of the general economic conditions.

Designated sponsor and research coverageAs at December 2011, United Power has designated spon-sorship and regular research coverage from the investment bank Kepler Capital Markets, which was also the lead manager of the Companyʼs IPO in 2011. Additionally, United Power is covered by Erste Group and Silvia quandt & Cie.

20 Company Profile The Share


Transparent investor relations During the IPO process, the Company conducted numerous discussions with potential investors at international road-shows. After the listing in Frankfurt the primary task of the Company was to make the Company better known and build up confidence among investors and shareholders. Therefore, the Company is determined to provide a compre-hensive and transparent communication vis-à-vis its share-holder.

Within this context, United Power attended several investor conferences, e.g. DvFA Small Cap Conference (SCC) and the Equity Forum of the Deutsche Börse in november 2011. Ad-ditionally, the Company invites its shareholders periodically to investor presentations and meets up with investors at roadshows all over Europe. In March 2012 United Power welcomed several European investors at its plants in Fu-zhou, China during a reverse investor roadshow organised by one of the European investment banks.

In the future, United Power will strive for transparent in-vestor relations activities, seek to further institutionalise its investor relations’ work and provide a continuous flow of information. We will regularly stage roadshows, conduct individual talks, telephone conferences and attend analysts’ as well as investors’ conferences in order to satisfy inves-tors’ information needs.

United Power presents an extensive range of information about the Company and the share on its investor relations website www.unitedpower.de.com/en. All of these activities are geared towards an objective and fair assessment of the Company.

ShAre key FiGUreS

Market capitalisation (million EUR) 54.24

Share price high (EUR) 9.00

Share price low (EUR) 3.80

Share closing price (EUR) 4.41

Adjusted earings per share (EUR) 1.26


120

100

80

60

40

UNITED POWER TECHNOLOGY AG SDAX

SHARE PERFORMANCE (June 2011 – March 2012)

June 11 March 12November 11

key FACtS

First trading day 10 June 2011

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

Shares issued 12,300,000

ISIn DE000A1EMAK2

WKn A1EMAK

Ticker UP7

Reuters UP7G.DE


SHAREHOLDER STRUCTURE (in %)


Fortune Sunrise BVI (Mr. Xu Wu) 24.26%

Fortune Great BVI (Mr. Wei Song) 22.88%

High Advance BVI (Mr. Zhong Dong Huang) 22.18%

Orchid Asia IV L.P. 10.47%

Orchid Asia IV Co-Investment Limited 0.21%

Freefloat IV L.P. 17.89%

Jade Sky 2.11%

Company Profile 21 The Share

United Power teChnoloGy AnnUAL REPORT 2011

corporate GovernanceReport

Corporate governance declarationSince its inception in 2002, the German Corporate Govern-ance Codex (‘the Codex’) 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 Codex 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 Codex.

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 6 February 2012 they jointly issued a corporate governance declaration for the fiscal year 2011 pursuant to section 161 of the German Stock Corporation Act (AktG). The declara-tions of compliance are made public on United Power Technology AG’s webside under www.unitedpower.de.com/en. Except for the following exceptions, the Company com-plied with all the recommendations of the Code as amended on 26 May 2010 in the fiscal year 2011 and will comply with it in future:

In the D&O insurance for the Supervisory Board, a deduct-ible up to a certain amount has been partially agreed (devia-tion from no. 3.8 s. 5 of the Code). Based on economic con-siderations and due to the comparatively low remuneration of the Supervisory Board, the Company has decided to in-troduce a fixed deductible in certain cases.

A general Management Board remuneration system has not yet been resolved (deviation from no. 4.4.2 of the Code). however, the Supervisory Board has taken the standards of a uniform remuneration system as basis for stipulating the respective remuneration of the current Management Board members; in particular regarding the division in fixed and

variable remuneration elements. Furthermore, in order to comply with the requirements of the Code, a remuneration system shall explicitly be resolved in due course.

At the time when this Declaration of Compliance is made, there has not yet been agreed upon a variable remunera-tion for one Management Board member for the period of time since the IPO (deviation from no. 4.2.3 s. 3, 4, 5, 7, 8, 9 and 10 of the Code). Consequently, there is also a partial de-viation from no. 4.2.3 s. 5 concerning the positive as well as negative developments with regard to the variable remu-neration of this Management Board member. Furthermore, the contract of this Management Board member does not contain any regulations when it comes to a positive devel-opment regarding the fixed income (deviation from no. 4.2.3 s. 5 of the Code). The governing bodies of the Company, however, intend to implement variable remuneration sys-tems in the course of 2012. Besides, the contract of this Management Board member includes regulations to the effect that the details of a variable remuneration, particu-larly regarding the targets and the implementation of a stock option plan, shall be stipulated by the respective gov-erning bodies of the Company at short notice.

Concerning the other two Management Board members, the following is not yet intended for the variable remunera-tion elements of the remuneration of Management Board members: subsequent amendments to the targets of suc-cess or the comparison parameters (deviation from no. 4.2.3 s. 9 of the Code). Considering the relatively low perfor-mance remuneration for Management Board members, the Supervisory Board is of the opinion that such an exclusion is not necessary.

The Supervisory Board and the Management Board mem-bers have not stipulated how to proceed in the event of a premature termination of the Management Board contract without good reason (deviation from no. 4.2.3 s. 11 and s. 12 of the Code). Therefore the provisions of law apply in this case. The Company is of the opinion that the provisions of

AnnUAL REPORT 2011 United Power teChnoloGy22 Company Profile Corporate Governance Report

law are sufficient regarding the respective interests when it comes to the resignation of a Management Board member and is thus an appropriate basis.

So far, abstract provisions requiring the approval of the Su-pervisory Board with regard to transactions of fundamental 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 regula-tions. Furthermore, the Company is a holding company without operative business.

There is no general age limit for Management Board mem-bers (deviation from no. 5.1.2 s. 7 of the Code) and for Su-pervisory Board members (deviation from no. 5.4.1 s. 2 of the Code). however, the Management Board contracts con-tain an individual regulation stipulating that employment ends automatically without notice at 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 pen-sion annuity of the statutory pension insurance applying to him has become effective (section 25 SGB (German Social Security Code) vI). The Supervisory Board does not consider strict age limits as an appropriate rule. In the opinion of the Company, it is not plausible that qualified persons with comprehensive experience in career and life should not be eligible for the Management Board solely on account the Supervisory Board only because of their age.

The Supervisory Board has not established any committees (deviation from 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 estab-lishment of committees necessary and, beyond this, is of the opinion that all items falling within the scope of respon-sibilities 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 sentence 2 to 5 of the Code). As recommended in no. 5.4.1 sentence 2 and sentence 3 of the Code, the Supervisory Board certainly takes the Company’s situation, its international business activity and possible conflicts of interest into consideration when it comes to its current and future structure. Moreover, as the current structure of the Supervisory Board shows, the Company has an open mind about female Supervisory Board members. 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 appro-priate to select candidates for the Supervisory Board ac-cording to the targets mentioned above but on a case-by-case basis instead 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 inappropriately high effort at this point.

The members of the Supervisory Board receive a fixed sal-ary without performance-related components (deviation from no. 5.4.6 sentence 4 of the Code). In particular with respect to the supervisory function of the Supervisory Board, the Management Board and the Supervisory Board do not consider it to be expedient to pay a performance-related remuneration to the members of the Supervisory Board. A performance-related remuneration could nega-tively influence the independence of the Supervisory Board’s decisions from any financial interests of its mem-bers and could, in particular, induce them to approve trans-actions that are too risky.

Apart from regularly assessing the efficiency, the Super-visory Board does not carry out any other additional ef-ficiency 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.

United Power teChnoloGy AnnUAL REPORT 2011 Company Profile 23 Corporate Governance Report

Last year, the Company had not met the deadline of 90 days after the end of the financial year for the publication of its consolidated financial statements and the deadline of 45 days after the end of the reporting period for the publication of its interim reports (deviation from no. 7.1.2 sentence 4 of the Code) and will probably not met these deadlines within this year as well. As a young and international company, the Company places emphasis on applying utmost care in pre-paring its first financial statements as a listed company. Ad-ditionally the required translations from Chinese make the preparations of the financial statements time-consuming. nevertheless, The Company strives to comply with the rec-ommendations for the publication deadlines in the future.

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 control is designed to manage, rather than completely eliminate, risks impacting the Company’s ability to achieve its busi-ness objectives. Accordingly, the system can only provide reasonable but not absolute assurance that the financial statements do not contain a material misstatement 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 poli-cies and procedures to mitigate such risks by (i) identifying and assessing the risks the Company faces and (ii) design-ing, 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 Company’s by-laws. All shares are pari passu equal to one vote at the An-nual 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 vot-ing 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 condi-tions 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. Subsequent 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 corporations, 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 Man-agement and Supervisory bodies. The Management Board is in charge of self-responsibly managing the Company, whereas the Supervisory Board is responsible for supervis-ing and advising the Management Board. A member of the Management Board cannot be a Supervisory 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, coor-dinating the daily operations as well as financial reporting, fund raising, investor relations and financial reporting to the Supervisory Board. In 2011 there was a change in the Management Board of United Power Technology AG. On 28 April 2011, the Company’s Chief Financial Officer, Mr. Li Wei Wang was replaced by Mr. Oliver Kuan. The Company’s key activities and financial performance are regularly circu-lated to the management team and the Supervisory Board. In addition, the General 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 Codex, 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 com-prises three members, Mr. Wei Song, Mr. hubertus Krosa and Ms. ning Cong. The Supervisory 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 re-view and approval of the annual financial statements of the Company. The Chairman of the Supervisory Board main-tains frequent contact with the members of the Manage-ment Board to discuss issues of particular importance.

In particular, the Chairman of the Supervisory Board looked into the financial reporting process, the effectiveness of the internal risk management 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 relationship between the Manage-ment Board and the Supervisory Board is described in detail in the report of the Supervisory 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 Fi-nancial 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:


On 5 July BaFin was notified that on 30 June 2011, Super-visory Board member hubertus Krossa purchased 4,086 shares at a price of in total EUR 27,376.20 (EUR 6.70 per share) via the stock exchange (XETRA).

Due to lending in the framework of a feeless securities lending contract, high Advance Investments Limited lent 1,833,765 shares, Fortune Sunrise Investments Limited lent 2,005,689 shares, both subject to notification via governing bodies, and Fortune Great Investments Limited lent 1,891,046 shares, subject to notification via a supervisory body, outside of the stock market on 26 May 2011.

Due to a lending within the framework of a feeless securi-ties lending contract, high Advance Investments Limited lent 10,000 shares, Fortune Sunrise Investments Limited lent 10,000 shares, both subject to notification via govern-ing bodies, and Fortune Great Investments Limited lent 10,000 shares, subject to notification via a supervisory body, outside of the stock market on 10 June 2011.

All the notifications due to the aforementioned feeless transfers arising from securities lendings were made on 21/22 July 2011. Owing to the minimum limit of EUR 5,000.00, the obligation to notify only occurred in the framework of the occurrence of the obligation to notify of the following transactions which are subject to fees:

Due to the exercise of the seller’s put option, high Ad-vance Investments Limited purchased 28,889 shares at the price of EUR 260,341.53 (notification was made on 22/25 July 2011), Fortune Sunrise Investments Limited purchased 31,597 shares at the price of EUR 248,748.55 (notification was made on 21 July 2011), both subject to notification via governing bodies, and Fortune Great In-vestments Limited purchased 29,792 shares at the price of EUR 268,477.20 (notification was made on 21 July 2011), subject ot notification via a supervisory body, out-side of the stock market on 14 July 2011.

Due to the exercise of the seller’s put option, high Ad-vance Investments Limited purchased 2,374 shares at the price of EUR 12,257.07, Fortune Sunrise Investments Lim-ited purchased 2,596 shares at the price of EUR 13,403.27, both subject to notification via governing bodies, and For-tune 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 the notification as at 30 Janu-ary 2012.

As at the date of preparation of this report the members of the Management Board directly or indirectly hold 46.49% and taking into consideration the imputation regulations pursuant to WphG in total 69.38% of the shares and voting rights in United Power Technology AG. At this date, the members of the Supervisory Board directly or indirectly hold in total 22.93% and taking into consideration the imputation regulations pursuant to WphG in total 69.42% 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 indi-vidual 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 au-dited 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.

Also, the Company has formal written code of conduct and employee manuals/policies, which are communicated to all employees. All employees are required to sign an agree-ment on compliance with the Group’s code of conduct and ethics when they joined the Group. Departures from the Group’s approved 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 Executive Board members and Supervisory Board members were not reported to 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, 20 March 2012

United Power Technology AG

Supervisory Board Management Board


Group Management

Report

100In line with the forecast, United Power Technology achieved the mark of EUR 100 million in revenues for the financial year 2011.

million

28 detAilled index

MAnAGeMent rePort

30 Group profile31 Economic and business

environment33 Revenues and earnings position35 Segment information36 Assets and liabilities position37 Cash flows38 human resources39 Research and development40 Statement and report pursuant

to section 315 paragraph 4 hGB (German Commercial Code)

42 Remuneration report43 Corporate governance declaration43 Risk and opportunity management44 Accounting-related internal

control system45 Risk report46 Report on post-balance

sheet events46 Outlook

detAilled index 29

ManagementReport

Group profileUnited Power Technology Group designs, develops, manu-factures and sells an extensive range of engine-driven power equipment, including generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial gen-erators, which are currently delivered to our customers in 50 countries around the world. Our main markets are the domestic market (China) and overseas 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 United 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.

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 Prime Standard of the Frankfurt Stock Exchange since 10 June 2011.

United Power Technology AG is the ultimate holding com-pany of United Power Technology Group. The intermediate holding company United Power Equipment 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. (“FUPEC”), 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 finan-cial statements of the Group.

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

30 Financial report Management Report


Economic and business environment

Economic environmentCurrently, 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.

Due to European financial turmoil and weaker growth pros-pects in emerging nations (Brazil, India, to a lesser extent Russia, South Africa and Turkey) the World Bank has low-ered its global economic growth forecast. Overall, growth of real GDP at an annual rate of 2.5% for 2012 and 3.1% for 2013 is now expected. Europe in particular appears to have en-tered recession as a result of contractionary effects of fiscal austerity programmes. The outcome is an expected GDP growth of 1.6% in 2011. For 2012 a growth of GDP at an an-nual rate of –0.3 for 2012 and 1.1% for 2013 is expected.

After a phase of weak and volatile macroeconomic perfor-mance throughout the first nine months of 2011 the United States economic growth accelerated in q4 2011 and the outlook for 2012 received a boost from several positive data releases. Aggregate demand benefits from the mild improvement in labour market and the progress achieved in household deleveraging.

In China, growth has slowed down in the third quarter amidst the global turbulence and GDP grew by 9.1% – a decelerating trend from 9.7% in the q1 2011 and 9.5% in q2 2011. Reasons for the slowdown are the restrictive mon-etary politics of the Chinese government to control the inflation rate as well as measures to cool the property market. As a result the inflation rate was reduced to 4%. Another reason for the slowdown was a decreasing trade

surplus which can be attributed to the real appreciation of our local currency RMB particularly against a weakening Euro in the second half last year. While nominal apprecia-tion against the USD has been limited by pegging the RMB to the USD, inflation was a significant contributing factor causing the real appreciation. now, with declining inflation real appreciation is expected to slow down. That should help China to regain exports as a driver of economic growth. For 2012, an economic growth of 8.4% is expected by the World Bank and the Chinese Government has recently low-ered its growth target for this year to 7.5% (historically, however, China’s actual growth has exceeded the govern-ment targets).

While overall economic sentiment and recent growth fig-ures have deteriorated particularly in the developed mar-kets and especially in the eurozone, 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 emerg-ing 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.

Financial report 31 Management Report


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 Europe 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 is designed for use in extended power outages or as a substitute for utility power. In developed markets 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 percentage 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 ef-forts, 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 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).

In 2011 we had unit sales of more than 860,000 (2010: about 800,000). In addition the average value of our projects increased in line with our strategy to sell increasingly larger generators. The order book at the end of 2011 has been slightly below the order book at the end of 2010 reflecting the difficult economic environment and consequently ex-pected weaker first quarter of 2012.



Revenues and earnings positionThe table below shows the consolidated income statement for the full year 2011 compared to the “as if” income state-ment for the 12 months of 2010. As United Power Technol-ogy AG was formed in April 2010 and the United Power’s operating business injected in October 2010, the “as if” in-come statement combines the United Power hong Kong consolidated income statement with the income statement of United Technology AG for the period from its formation to 31 December 2010. See section 6 of the notes to the finan-cial statements for further explanation of the “as if” figures.

in EUR million

United Power AG

2010(“as if”)

United Power AG

2011(consolidated) +/– %

revenue 84.59 100.28 18.55

Cost of sales –64.06 -78.14 21.98

Gross profit 20.54 22.14 7.79

Other operating income 0.56 1.06 89.29

Distribution and selling expenses –1.15 -1.20 4.35

Administrative expenses –2.22 -3.23 45.50

Research and development expenses –0.33 -1.03 212.12

Other expenses –1.54 -5.85 279.87

including expenses as a result of the IPO ** 1.02 4.71 361.76

Profit from operations (eBit) 15.86 11.89 –25.03

Interest income 0.00 0.00 n.a.

Interest expense –0.19 -0.10 –47.37

Profit before tax 15.67 11.79 –24.76

Income taxes –2.17 -2.24 3.23

Profit for the period 13.50 9.55 –29.26

Earnings per share* 1.35 0.85 –37.04

Adjusted 1) eBit 16.88 16.60 –1.66

Adjusted 1) net income for the period 14.52 14.26 –1.79

Adjusted 1) earnings per share (eUr)* 1.45 1.26 –13.10

* EPS for 12 months 2010 is based on 10m shares, for 12 months 2011 it is based on the weighted average of shares (11.28m shares)

** Compared to the 2011 interim report all non-recurring IPO cost (including those previously included in administrative expenses) have been reclassified under other expense

1) Adjusted for non-recurring IPO expenses

RevenueRevenue increased from EUR 84.59 million for the 12 months of 2010 by 18.55% to EUR 100.28 million for the full year 2011 just exceeding the EUR 100 million mark we set for ourselves as a target for the financial year 2011. Measured in RMB, revenues increased by 19.83% for 2011. We saw particularly strong growth in our domestic market China and in other new markets (e.g. Russia, Latin America, Asia-Pacific). By invoicing customer the revenues in Chinese market increased by 24% and according to an internal analy-sis of the management revenues by end customer revenues in China increased by more than 40% compared to the same period last year. Our residential and commercial generator segments grew by approximately 18% and 23% growth re-spectively compared to last year the faster growth of our commercial generator segment is in line with our strategy to expand sales of increasingly larger generators.

Cost of salesCost of sales increased from EUR 64.06 million for the 12 months of 2010 by 21.98% to EUR 78.14 million for the full year 2011. Measured in RMB, cost of sales increased by 23.31% in this period. Cost of sales consists of costs asso-ciated with sourcing of copper, aluminium, steel and other components and parts, labour costs for personnel employed in production, depreciation of fixed assets used for produc-tion purposes, certain vAT surcharges and others local gov-ernment levies.

Gross profitGross profit increased from EUR 20.54 million for the 12 months of 2010 by 7.79% to EUR 22.14 million for the full year 2011. Measured in RMB, gross profit increased by 8.98% in this period. The gross margin amounted to 22.1% for full year 2011 compared to 24.3% for the comparable previous period. The gross margin while being in line with the average gross margins over the last years, decreased mainly due to accelerating appreciation of the RMB against the USD and the time lag until, and extent to which, such currency movements can be passed on to customers and higher depreciation.



Other operating incomeOther operating income mainly consists of a government grant of EUR 0.749 million in respect of our achievement in new product development.

Distribution and selling expensesDistribution and selling expenses increased from EUR 1.15 million for the full year of 2010 by 4.35% to EUR 1.2 million for the comparable period of 2011. Measured in RMB, distri-bution and selling expenses increased by 5.67% in this pe-riod. As a percentage of revenues, distribution and selling expenses have decreased slightly from 1.36% to 1.20% from full year 2010 to the full year 2011.

Administrative expenses Administrative expenses increased from EUR 2.22 million for the full year of 2010 by 45.50% to EUR 3.23 million for the comparable period of 2011. Measured in RMB, administra-tive expenses increased by 47.34% in this period, mainly due to the higher costs of being a listed company. As a percent-age of revenues, administrative expenses have changed from 2.62% for the 12 months of 2010 to 3.22% for the same period in 2011.

Research and development expensesResearch and development expenses increased from EUR 0.33 million for the full year 2010 by 212.12% to EUR 1.03 million for the comparable period of 2011. Meas-ured in RMB, research and development expenses increased by 221.07% for this period. As percentage of revenues, research and development expenses have increased from 0.39% to 1.03% for the full year of 2010 to full year 2011. The increased research and development expenses are in line with our strategy to further strengthen our R&D capabili-ties through the hiring of qualified staff, accelerated new product development and outside research and develop-ment consulting support.

other expensesOther expenses increased from EUR 1.54 million in 12 months 2010 by 279.87% to EUR 5.85 million for the full year 2011. Measured in RMB, other expenses increased by 285.13% in this period. As a percentage of revenues, other expenses have increased from 1.8% to 5.8% for the 12 months of 2010 to the full year 2011. The increase in other expenses are to a large part non-recurring one-off expenses of EUR 4.71 million in relation to our company’s Initial Public Offering this year.

Profit from operations (eBit)EBIT for the full year of 2011 decreased by 25.03% to EUR 11.89 million year-on-year. Measured in RMB, EBIT decreased by 24.22% in this period. As a percentage of rev-enues, EBIT decreased from 18.75% to 11.86% for the full year 2010 to full year 2011. Adjusted EBIT (adjusted for non-recurring one-off IPO expenses) decreased from EUR 16.88 million for the 12 months of 2010 by 1.66% to EUR 16.60 mil-lion in the comparable period of 2011. Measured in RMB, adjusted EBIT decreased by 0.62% in this period. The ad-justed EBIT margin decreased from 19.96% for the full year of 2010 to 16.55% in the comparable period in 2011.

Finance cost Finance cost decreased from EUR 0.19 million for the 12 months of 2010 by 47.37% to EUR 0.10 million for the comparable period of 2011. Measured in RMB, finance ex-penses decreased by 45.57% in this period. As a percentage of revenues finance expenses have decreased slightly from 0.23% to 0.10% for the full year of 2010 compared to full year 2011.

income taxesIncome tax increased from EUR 2.17 million for the 12 months of 2010 by 3.23% to EUR 2.24 million in the com-parable period of 2011. At group level, this represents a tax rate of 18.98%. Measured in RMB, income tax expenses in-creased by 4.48% in this period including a deferred tax of



EUR 0.51 million. 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% this year and in 2012. As we have been certified as a high technology company in China, we expect to enjoy a contin-ued favourable corporate tax rate of 15% from 2013 on-wards. Our group level tax rate is expected to continue to exceed our nominal corporate tax rate due to non tax-de-ductible expenses incurred outside the PRC.

Profit for the period and ePS Profit for the period decreased from EUR 13.50 million for the 12 months of 2010 by 29.26% to EUR 9.55 million in the comparable period of 2011. Measured in RMB, profit for the period decreased by 28.49% in this period. As a percentage of revenues, profit for the period decreased from 15.96% to 9.52% for the full year of 2010 to the full year of 2011. The EPS in the 12 months of 2011 was EUR 0.85, a decrease of 37.04% year-on-year. The reason for the decrease in profit and EPS was mainly the non-recurring expenses for the ini-tial public offering (IPO). Adjusted profit for the period (ad-justed for non-recurring one-off IPO expenses amounting to EUR 4.71 million) decreased from EUR 14.52 million in the 12 months of 2010 by 1.79% to EUR 14.26 million for the comparable period of 2011. Measured in RMB, adjusted profit for the period decreased by 0.75% in this period. The adjusted profit for the period margin decreased from 17.16% to 14.22% from the full year 2010 to full year 2011. The de-crease in adjusted profit margin compared to 2010 is mainly because of the decreased gross profit margin for the rea-sons explained above. The adjusted EPS for the full year of 2011 was EUR 1.26.

Segment information

Residential generatorsRevenue for residential generators has increased by around 18% in 2011. Revenue for the 12 months of 2011 was EUR 56.2 million compared to the comparable period last year of EUR 47.6 million.

Commercial generatorsCommercial generators segment showed the strongest in-crease and performance for the group by increasing 23.4% from EUR 28.5 million for the full year 2010 compared to this year’s EUR 35.13 million. This is in line with the Com-pany’s strategy of increasingly focusing on generators with higher output and selling in categories with larger engine sizes.

Outdoor power equipmentsThe outdoor power equipment segment showed a slight decline from last year. Total segment revenue for the 12 months of 2011 was EUR 5.1 million compared to last year’s comparable period of EUR 5.2 million. The decrease in this segment was mainly due to lower sales to one of our US clients compared to 2010.

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 9% of the Company’s total revenue. There was a slight increase from EUR 5.1 million for the full year 2010 to EUR 8.7 million for full year 2011.



Assets and liabilities positionThe following table shows the consolidated balance sheet as at 31 December 2011 compared to the consolidated bal-ance sheet as at 31 December 2010.

in EUR millionUnited Power AG

31 dec 2010

United Power AG 31 dec 2011

(consolidated)

Current assets 49.11 54.93

non-current assets 23.15 56.76

total assets 72.26 111.69

Current Liabilities 16.96 18.5

non-current liabilities 0.24 2.04

total liabilities 17.21 20.19

total equity 55.06 91.50

total liabilities and equity 72.26 111.69

Current Assets

inventories Inventories include raw materials, work in progress and finished goods. Inventories increased by 61.8% from EUR 4.51 million as at 31 December 2010 to EUR 7.30 million as at 31 December 2011. The increase is mainly due to the overall increase in company revenue and due to increased production in the lead up to the 2012 Chinese new year hol-iday period which occurred early in 2012.

trade and other receivablesTrade and other receivables increased from EUR 17.2 million in year-end 2010 to EUR 19.6 million for the 12 months of 2011. Trade receivable days decreased from 66 days for the full year 2010 to 60 days for the same period this year.

Amounts due from related partiesAmounts due from related parties decreased by 63.1% from EUR 0.65 million as at 31 December 2010 to EUR 0.24 million as at 31 December 2011.

Cash and cash equivalentsCash and cash equivalents amounted to EUR 27.00 million (including EUR 0.79 million pledged bank deposit) as at 31 December 2011 which represented a slight increase of 4.66% from EUR 25.80 million (including EUR 0.94 million pledged bank deposit) as at 31 December 2010. Cash in-creased despite a substantial investment in property, plant and equipment boosted by the cash inflow from operations and from the proceeds of the IPO.

Cash and cash equivalents comprises bank balances at in-ternational commercial banks amounting to EUR 26.88 mil-lion (EUR 25.80 million in 2010) and national commercial banks EUR 0.12 million (EUR 0.0 million in 2010).

Non-current assets

Property, plant and equipmentProperty, plant and equipment increased by 149% from EUR 20.99 million as at 31 December 2010 to EUR 52.27 mil lion as at 31 December 2011. The increase is mainly asso-ciated with our ongoing production capacity expansion. In particular, United Power has completed the installation of twelve new production lines. As a result, production capac-ity increased to more than 1,100,000 units per year. United Power achieved its announced 2011 year-end target capac-ity of 1,000,000 units per year ahead of time. Three of the new production lines are for residential generators, one for inverter generators, three for commercial generators, one for water pumps, one for high pressure washers and three new engine lines (including a new vertical engine line devel-oped in-house). They are part of the second phase of pro-duction expansion at the production site in Gaoqi Industrial Park, Fuzhou.

Property, plant and equipment is mainly located in Fuzhou, China and comprises buildings and land-use-rights (EUR 33.16 million), plant and equipment (EUR 16.94 million), motor vehicles and office equipment (EUR 1.52 million) and



deposits (EUR 0.64 million). The additions in property, plant and equipment amount to EUR 25.20 million for buildings and land-use-rights, EUR 2.58 million additions to plant and equipment plus EUR 11.34 million reclassifications from deposits and construction in progress (in total EUR 13.92 million) and EUR 0.72 million for motor vehicles and office equipment.

The asset depreciation rate of 6.20% in 2011 (2010: 6.44%) is rather low.

Liabilities

trade and other payablesTrade and other payables decreased by 25.32% from EUR 12.65 million in 31 December 2010 to EUR 9.45 million as at 31 December 2011. Account payable days decreased from 52 days for the full year 2010 to 31.2 days for the com-parable period in 2011. The payable days decrease is mainly due to our purchasing strategy to counter price increase requests from our suppliers by offering improved payment terms.

Borrowings and amount due to shareholdersBorrowings for the full year 2011 increased to EUR 6.58 mil-lion from EUR 3.03 million as at 31 December 2010 repre-senting an increase of EUR 3.55 million. The additional borrowing was used to fund working capital and comprised an additional loan extended by a domestic commercial bank. The amounts due to related parties increased to EUR 0.86 million in 2011 from EUR 0.55 million in 2010.

equity to total assets ratioThe total equity increased from EUR 55.1 million by 66.2% to EUR 91.5 million mainly due to the capital increase of EUR 18.9 million and increased retained earnings.

The equity to total assets ratio rose from 76.19% as at 31 December 2010 to 81.93% as at 31 December 2011.

Cash flowsOverall cash increased slightly to EUR 27.0 million on 31 December 2011 year-on-year compared to the figure from 31 December 2010 of EUR 25.8 million. The IPO pro-ceeds of 10 June 2011 contributed to the increase in the cash position but our investment activity associated with capacity expansion in line with the Company’s strategy and increased working capital needs due to higher revenue affected the cash balance.

in EUR million 2010

(“as if”)2011

(consolidated)

Operating cash flow before working capital changes 16.3 15.3

Cash generated from operations before interest and taxes 14.7 9.0

Cash generated from operating activities 12.8 6.5

Cash flow from investing activities –15.4 –29.7

Cash flow from financing activities 16.6 22.5

net increase in cash and cash equivalents 14.0 –0.7

Cash at beginning of year 10.4 25.8

Effect of exchange rate changes 1.4 1.9

Cash and bank balances at end of the period 25.8 27.0

As United Power Technology AG was formed in April 2010 and the United Power’s operating business injected in Octo-ber 2010, the “as if” cash flow statement combines the United Power hong Kong consolidated cash flow statement with the cash flow statement of United Technology AG for the period from its formation to 31 December 2010. See section 6 of the notes to the financial statements for fur-ther explanation of the “as if” figures.



Cash generated from operationsCash generated from operations decreased by EUR 5.7 mil-lion to EUR 9.0 million at period ended 31 December 2011 mainly due to working capital requirements.

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 2011, the Company invested over EUR 28.20 million in property, plant and equipment resulting in negative cash from investing activity of EUR 29.71 million.

Cash flow from financing activitiesCash from financing activities on 31 December 2011 was EUR 22.5 million mainly from the injection of new capital by the IPO in 2011. This figure was an increase of EUR 5.9 mil-lion from the same period last year in which we received a private equity investment. The asset cover ratio decreased from 249.80% on 31 December 2010 to 175.04% on 31 De-cember 2011.

new borrowings raised are from three government owned banks in China. As at 31 December 2011 there are no unuti-lised bank facilities and no off-balance-sheet finance trans-actions.

Cash at end of periodOverall cash increased to EUR 27.00 million compared to EUR 25.80 million for the full year last year representing a slight increase of 4.66%.

Human resourcesUnited Power’s total number of employees increased from 789 at the end of 2010 to 884 at the end of December 2011. The number of employees averaged 850 employees over the course of the year. The employee split by function is shown in the table below:

2010 2011

Management 14 16

R&D 52 55

Sales & Marketing 28 32

Administration 155 155

Production 540 626

total 789 884

SPLIT OF EMPLOYEES BY FUNCTION (in %)

Workshops 70.82%Administration 17.53%

R&D 6.22%Sales & Marketing 3.62% Management 1.81%


United Power continues to strengthen its management, sales & marketing through further recruitment of qualified mostly university-educated staff.

United Power has continuously spent substantial efforts to maintain and enhance its engineering department (“R&D”) capacity with the aim of further expanding its product range to include products with higher performance and a better design. As at 31 December 2011, the R&D team had 55 members.



The increase in the overall work force has been significantly smaller in proportion to the overall increase in production capacity due to further automation and management im-provements.

Research and development United Power aims to become a leading global engine and generator developer. We continue to devote significant effort to improving and enhancing our existing products as well as developing new products to meet the diverse re-quirements of the global market place.

We have a strong in-house research and development team currently consisting of 55 members dedicated to quality im-provements and innovation. In addition we are closely coop-erating with the Fuzhou Institute of Technology and have also been cooperating with a UK design firm.

We have summarised below the status of our various prod-uct development activities:

Residential generatorsWe have launched a new residential generator (SX3250) for a new customer designed for sale in the US market. The new generator is based on the former model and is more fuel-efficient and also features significant design improve-ments to meet the customers’ requirements.

Inverter generatorsIG3600 (3.2kw) is on the market and several units have al-ready been sold into the European, Asian and African mar-kets. The ASP is considerably higher than a comparable generator without inverter technology. IG2400S has now entered into commercial production stage and has mean-while received all of the requisite international certificates (e.g. CE/GS/noise/EMC etc.). IG1200S and IEG1200S have

entered the pilot production stage. The inverter generator will mainly be sold to the European and north American markets, which have the highest quality requirements, and to our domestic market. We are also developing in-house 1kw and 2kw inverter engines, which are expected to be launched in May and July 2012, respectively. The two en-gines will significantly cut down the unit production cost of our inverter products.

High-power generatorsMore than 1,000 units of the new 10kw high power gasoline generator have already been sold to several customers in most of our customer geographical regions and United Power received a positive market response. The tests for the 10kw high power diesel generator have been completed and the sales and marketing process for the product has commenced.

Vertical high-pressure washersWe have also developed a series of new high pressure washer products with six different engine sizes which is easier to operate, safer and of smaller size compared to the previous model and is mainly designed for the European, north American and domestic markets.

Natural gas generatorsWe developed a new natural gas generator and completed the testing phase at the end of 2011. The product has been developed primarily for the US market and we are currently proceeding with the product certification process required to enter into the US market.

Industrial generatorsR&D started the conceptual phase for the development of the industrial generators, especially for marketing research and research on core components such as engines and al-ternators. The development for the industrial generators is expected to be completed by the end of 2012.



Existing products improvementUnited Power has made further improvements (design, ef-ficiency and/or environmental) to existing products such as the GG1200 (which has been launched as GG1256 with a more powerful and environmentally friendly engine).

Also, United Power has developed a new combustion tech-nology for its engines, which is a more efficient technology and also significantly reduces the cost for meeting the strictest EPA standards. The EPA III certificate has been obtained for the products with this technology.

Finally, a new exterior design and appearance has been de-veloped for the 2–5 KW residential generators: this offers a number of advantages including increased user-friendliness and safety as well as higher fuel efficiency due to enhanced cooling properties.

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 sharesEach share represents one vote. There are no restrictions on any shares and according to the Articles of Association there are also no restrictions on voting rights for shares of the Company. The board is not aware of any agreements between shareholders, which provide for restrictions on voting rights or the transfer of the shares.

Direct or indirect participation in shares with more than 10% of the voting rights As at 31 December 2011, the following shareholders hold more than 10% of shares in United Power Technology AG:

24.26% 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;

22.88% are held by Fortune Great Investments Limited, Road Rown, Tortola, British virgin Islands, (indirectly held by Mr. Wei Song) with a corresponding amount of voting rights;

22.18% are held by high Advance Investments Limited, Road Town, Tortolam British virgin Islands, (indirectly held by Mr. Zhong Dong huang) with a corresponding amount of voting rights;

10.47% are held by Orchid Asia Iv LP 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 unrestricted (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 of the German Stock Corporation Act (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 cas-es, the district court can appoint a replacement for a mem-ber 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 Super-visory Board appointed the 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 3 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 (AGM).

The Articles of Association of the Company can be changed by the AGM and the changes will take effect once they are registered with the Commercial Register (handelsregister). If the AGM decides to change of the Company’s statutes according to section 179 and 133 AktG a majority of 75% of the cast votes cast is required. According to section 10 par-agraph 3 of the Articles of Association the Supervisory Board is entitled to amend the Articles of Association, pro-vided that such amendments affect only the wording.

Authority of the Management Board to issue sharesOn 1 October 2010, the AGM authorised the Management Board, with the approval of the Supervisory Board, to increase the share capital of the Company until 5 Octo-ber 2015, once or several times by up to a total of EUR 5,000,000.00 by issuing a total of 5,000,000 no par val-ue bearer shares in consideration of contribution in cash or in kind (Authorised Capital 2010/II). On principle, share-holders are to be offered subscription rights; the statutory 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 board of managing directors is authorised, in each case with the approval of the Super visory Board, to resolve on the exclusion of the subscription right of the shareholders. An exclusion of the subscription right, however, shall only be admissible in the following cases:

a) if the new shares are issued to acquire companies, shares in companies or parts of a company;

b) for fractional amounts.

The Management Board shall decide, with the approval of the Supervisory Board, on the 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.

With the issuance of 2,300,000 shares on 10 June 2011 an unused authorised capital of 2,700,000 shares is remaining as at 31 December 2011.

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 Super-visory Board is responsible for determining the Manage-ment 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 a non-performance-based component, payable in twelve monthly salary pay-ments, as well as bonus components.

The Management Board members had various variable remuneration components, which, in the case of two Man-agement Board members, were based on an increase in the EBITDA, and, in the case of one Management Board member, on the successful execution of the United Power Technology AG’s IPO, along with other criteria. At the time of writing, the Management Board members do not receive any options to purchase United Power Technology AG shares.

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

One change took place in the Management Board in fiscal year 2011. With a resolution dated 27 April 2011, the Super-visory Board appointed Management Board member Oliver Kuan to the Management Board of United Power Technology AG effective 28 April 2011. Management Board member Oliver Kuan received a net salary in the amount of EUR 103,752.73 for fiscal year 2011. In addition, he received net remuneration in the amount of EUR 320,560.95 for his contribution to the IPO of United Power Technology AG. Oliver Kuan will receive a profit-sharing bonus of EUR 12,251.95 for other contributions in 2011.

In addition, Management Board member Oliver Kuan was promised a profit-sharing bonus that was to be determi-nated by 31 December 2011. Management Board member Oliver Kuan was also promised a stock option plan. The in-troduction of such a stock option plan is planned as part of the 2012 Annual General Meeting. Details regarding the plan have yet to be determined.

in EUR Fixed Bonusinsurance

Pension Fund Total

Xu Wu 20112010

55,572.0018,409.58

12,251.15–

264.00206.41

68,087.1518,615.99

Zhong Dong huang 20112010

53,572.0017,959.43

12,251.15–

264.00206.41

66,087.1518,165.84

Oliver Kuan 20112010

103,752.73–

332,812.10–

––

436,564.83–

Wang Liwei 20112010

–49,182.41

––

––

–49,182.41

total 20112010

212,896.7385,551.42

357,314.40–

528.00412.82

570,739.1385,964.24



Supervisory Board remunerationRemuneration of the Supervisory Board shall be set at the Annual General Meeting and regulated in the articles of as-sociation of United Power Technology. In addition to having their expenses reimbursed (including any vAT expenses incurred in carrying out Supervisory Board activities), each member of the Supervisory Board shall receive fixed remu-neration of EUR 20,000.00 payable after the end of fiscal year 2011. Supervisory Board member hubertus Krossa shall receive an additional payment of EUR 20,000.00. Members who were not part of the Supervisory Board for the entire year shall receive a remuneration proportional to the time they were members.

variable payments were not made to the Supervisory Board for fiscal year 2011. At present, the Supervisory Board members do not receive any options to purchase United Power Technology AG shares.

The Supervisory Board members received the following remuneration for the 2011 fiscal year:

in EUR thousand 2010 2011

Mr. Wei Song (Chairman of the Supervisory Board) 14 20

Mr. hubertus Krossa (vice Chairman of the Supervisory Board) 9 40

Ms. ning Cong 4 20

total 27 80

Corporate governance declarationThe corporate governance declaration is included in the annual report and was also published on our website www.unitedpower.de.com/en.

Risk and opportunity management

Risk management systemIn order to operate successfully in the current volatile en-vironment, we need to anticipate developments at an early stage and systematically identify, assess and manage the resulting risks. It is equally important to recognise and exploit opportunities.

United Power has implemented an internal risk manage-ment system to further mitigate the Group’s exposure to financial risks, compliance risks and operational risks. The scope of our risk management reviews extend to the Group’s overall governance in management structure, human resource policy, operations and financial reporting, as well as IT systems and IT security functions.

United Power endeavours to assume a proper and system-atic risk management system in order to ensure it can achieve optimal trading results and meet expectations from investors and regulators.

The management and organisational structure is well defined and facilitates the flow of information among the functional departments. The organisational structure has four layers, senior management, middle management, func-tional leads and staff. The duties and functions are segre-gated between sales, purchase, production, human re-source, finance, R&D and asset management departments.



Management oversees the risk assessment process, includ-ing anticipating any changes, estimating the significance of risks, assessing the likelihood of occurrence, and determin-ing the needed actions required. Weekly management meetings are held, involving the CEO and other senior man-agement to discuss about the Group’s operation matters and immediate action will be taken to mitigate the opera-tional and financial risks. Management Board and Supervi-sory Board meetings are held at least once quarterly to dis-cuss about the key operation matters and strategies (including financial decisions) and review the performance of the Group.

The finance department monitors new and significant changes in financial reporting pronouncements and stand-ards. Significant changes are communicated to appropriate accounting personnel in the parent and subsidiaries. The finance department is notified of changes in the Group’s business practices and/or operating environment that may affect the method/process of recording transactions via written notice. Management tends to be conservative in the selection and application of accounting principles and ac-counting estimation. Estimates made by management are typically within or above the midpoint of the range of pos-sible outcomes.

The Group has strict policies on authorisation of transac-tions. All transactions that require cash and bank settle-ments must be approved by the General Manager.

The Group has installed an internal audit department, which reports directly to the General Manager. The internal audit department is expanded in order to conduct a comprehen-sive financial and operational examination at each operating location using a risk-based approach to determine the fre-quency of visits to a specific entity.

human resources policies are in compliance with the labour laws in the People’s Republic of China. According to the Group’s recruitment process, all the candidates are required to undergo interviews by the department manager and hR manager. In addition, the performance review processes are performed regularly and with great diligence.

The Group has a formal written code of conduct and em-ployee manuals/policies, which are communicated to all employees. All employees are required to sign an agree-ment on compliance with the Group’s code of conduct and ethics.

Accounting-related internal control systemUnited Power Technology AG’s accounting-related internal control system (ICS) comprises the principles, methods, and measures used to ensure appropriate accounting. The ac-counting-related ICS is continuously refined and aims to en-sure that the consolidated financial statements of United Power are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the Eu-ropean Union (EU), as well as with the regulations under commercial law as set forth in section 315a (1) hGB (German Commercial Code).

Internal Audit is responsible for independently reviewing the functionality and effectiveness of the ICS in the Group and, to comply with this task, has comprehensive infor-mation, audit and access rights. In addition, the external auditors conduct a risk oriented audit to verify the effec-tiveness of those parts of the ICS that are relevant to finan-cial reporting.

Finance department manages the process of Group ac-counting and management reporting. Laws, accounting standards and other pronouncements are continuously an-alyzed as to whether and to what extent they are relevant



and how they impact on financial reporting. The relevant requirements are communicated to the relevant units. In addition, supplementary process directives, standardised reporting formats, IT systems, as well as IP-based reporting and consolidation processes support the process of uniform and compliant Group accounting. Where necessary we also draw on the services of external service providers.

Finance department ensures that these requirements are complied with consistently throughout the Group. The staff involved in the accounting process receives regular training.

Internal controls are embedded in the accounting process depending on risk levels. The accounting related ICS com-prises both preventive and detective controls, which include:

IT-based and manual data matching

the segregation of functions

the dual checking principle

general IT checks such as access management in IT systems, and change management

In order to ensure a high-quality accounting-related ICS, internal audit is closely involved in all stages of the process.

Risk reportOf all the risks indentified for the Group, the following sec-tion examines those risk areas of individual risks that could materially affect United Power’s financial position and results. Our business operations may also be impacted by other risks that we are not currently aware of or did not consider significant. Insurable risks are covered by a Group-wide insurance program.

United Power Group and United Power Technology AG are exposed to a number of risks related to the market for pow-er equipment, the ability to develop new products, protec-tion of trademarks and intellectual properties, rising com-modity costs and component prices, rising labour costs, high fluctuation of workers and tightening requirements of Chinese regulations relating to environment protections.

We minimze these risks by expanding our market share in our principal markets and improving our product quality. Furthermore we are aiming to establish new sales offices outside China in target markets within the next three years. United Power intends to establish their own or licensed brands in order to cover the above mentioned risks.

Most of our financial risk arise from liquidity, credit, currency and interest rate risks. We monitor and manage these risks by means of regular analysis and evaluation of the invest-ment risks. To ensure the Group’s solvency and financial flexibility at all times, we maintain a liquidity reserve in the form of cash.

The credit risk is managed by determining credit limits, diligent credit approvals and regularly monitoring accounts receivables.



The foreign exchange rate risk is a risk relating to financial instruments. The management is monitoring closely the risk relating to the appreciation of the RMB, the weakness of the Euro according to the “Euro-crisis”, exchange rate risks and the costs and benefit of hedging operations. In the past hedging operations were not considered as necessary.

In order to manage the interest rate risk, management per-forms sensitivity analyses on a periodic basis by evaluatig increases or decreases in interest rates.

Based on our current evaluation, United Power Group is not exposed to any risks which would materially affect the profit or loss, financial position and assets or liabilities.

Report on post-balance sheet events There were no transactions or other events of special sig-nificance after the balance sheet date of 31 December 2011.

OutlookUnited Power Technology Group’s growth continues to be driven by the pursuit of a three-pronged strategy, 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. Total investment this year is expected to be around RMB 100 million (EUR 11 million), based on a currency rate of EUR/RMB of 1:9 more than 60% of which will be invested in property, plant and equipment and the rest in R&D, sales and distribution as well as general working capital require-ments. The Company has the ability to finance its invest-ment through operating cash flow and its existing cash bal-ances. This year we plan to add another two to four product production lines, which we expect to still accommodate within the second phase of the production expansion of Gaoqi Industrial Park, which is our third factory. We will par-ticularly focus our investment on new production lines for larger generator products including commercial generators and possibly industrial generator products in line with our strategy. We may adjust our investment plan in light of the demand prevailing at the time and capacity utilisation con-ditions.

United Power aims to gain further market share in its prin-cipal markets Europe, north America and China and to leverage its standing and quality recognition in established developed markets to penetrate and expand into emerging markets. United Power intends to build up its own overseas (i.e. outside China) sales channels through the establish-ment of sales offices in target markets within the next three years. In addition to providing better service, quicker response time to customer inquiries and more sales cover-age for potential customers, the Group’s direct sales strat-egy is expected to result in lower sales costs and higher margins.



United Power has successfully continued to widen its inter-national customer base in 2011 acquiring 50 new customers around the world, bringing our total number of customers to more than 200 in more than 50 countries. new supplier contracts for residential generators and commercial gen-erators were signed with several retailers in UK, France, the US and sizeable wholesalers in Germany and Australia, respectively, and a specialised dealer in nepal. Supplier con-tracts signed by United Power include a major Australian wholesaler, which supplies to Woolworth and Lowes, and with a German wholesaler, which supplies to the discounter norma. United Power also entered new countries such as Brazil, Ireland and other new countries in Africa, Asia and Latin America.

United Power continues to expande its Chinese distribution agents network. We recently completed the set-up of our South East China, Sichuan and Inner Mongolia agent net-works and are currently expanding our distribution network particularly in northern China.

United Power intends to establish its own or licensed brands in new markets and enhance them in markets that have already been penetrated through various distribution channels to make its brands known. As a major 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 strengthening of the Group’s brands by enhancing marketing efforts such as participating in industrial trade fairs or exhibitions in local markets, media, internet and outdoor advertisement cam-paigns as well as through promotional campaigns, which can be launched together with local partners. Meanwhile, the Group seeks to establish regional sales subsidiaries/ branches to directly explore the local market for United Power branded products and reinforce the customer relationship.

The uncertain global economic environment and particularly weaker demand from Europe as well as a slowdown in the Chinese construction market caused by tightening meas-ures implemented by the Chinese government over recent months has impacted our growth and profitability, particu-larly in the later part of 2011. The year 2012 commenced with a largely unchanged picture: a still fragile global eco-nomic environment vulnerable to a multitude of potential shocks and risks and an possible recession in the eurozone. While we remain confident about our continuing profitable growth prospects particularly over the medium to long term, we do expect the weakness in our key export market Europe and weak Euro currency as well as a subdued Chi-nese construction market to continue to weigh on growth and profitability particularly in the first quarter and possibly second quarter of this year. In view of this uncharacteristi-cally uncertain environment, we would not see it as prudent to provide detailed and definitive guidance for the next two years. Despite the adverse conditions in Europe and China (which are our two largest markets by end customer), we do however aim to grow faster than our industry (which is esti-mated to grow on average by about 7.5% annually until 2015) as a whole over the next two years and continue to gain market share globally. Assuming a stable EUR:RMB ex-change rate and generally improved trading conditions in the later part of this year, our current expectation for rev-enue growth is about 10% for 2012. Our EBIT margin for 2012 and 2013 is expected to be somewhat lower compared to the adjusted EBIT margin of 2011 due to the effect of the RMB appreciation over the last year, our strategy to further strengthen our R&D and sales and distribution capabilities and also as a result of the increased administrative costs of being a listed company. We aim to gradually refine our guid-ance throughout the year.




Consolidated Financial

Statements

16.6In a challenging environment, United Power achieved an adjusted EBIT-margin of 16.6% for fiscal year 2011.

per cent

48 detAilled index

ConSolidAted FinAnCiAl StAteMentS

50 Consolidated Statement of Financial Position

51 Consolidated Statement of Comprehensive Income

52 Other Comprehensive Income (Expenses)

53 Consolidated Statement of Changes in Equity

54 Consolidated Statement of Cash Flow

55 notes to the Consolidated Financial Statements

detAilled index 49

in EUR thousand notes 2010 2011

non-current assets

Property, plant and equipment 19 20,988 52,269

Intangible assets 18 1,149 1,174

Available-for-sale investments 23 17 16

Deferred tax assets 21 98 1,260

Other non-current assets 20 898 2,041

23,150 56,760

Current assets

Inventories 22 4,509 7,298

Trade and other receivables 24 17,209 19,558

Amounts due from related parties 34 649 238

Current recoverable income taxes 0 1

Other current financial assets 25 943 785

Other current assets 20 0 47

Cash and cash equivalents 25 25,800 27,002

49,110 54,929

total assets 72,260 111,689

Capital and reserves

Share capital 26 10,000 12,300

Additional paid-in capital 26 39,552 56,275

Revaluation reserve 26 –1 –1

Foreign currency translation reserve 26 1,907 9,432

Retained earnings 26 2,763 12,343

Equity attributable to owners of the parent 26 54,221 90,349

non-controlling interests 26 834 1,154

total equity 55,055 91,503

Liabilities

non-current liabilities

Deferred tax liabilities 21 38 101

Other liabilities 206 1,941

244 2,042

Current liabilities

Borrowings 27 3,031 6,582

Trade and other payables 28 12,651 9,448

Amounts due to related parties 34 546 857

Other provisions 29 86 167

Current tax liabilities 602 1,090

Amounts due to controlling shareholders 34 45 0

16,961 18,144

total liabilities 17,205 20,186

total liabilities and equity 72,260 111,689

consolidated Statement ofFinancial Position


AnnUAL REPORT 2011 United Power teChnoloGy50 Financial report Consolidated Financial Statements

in EUR thousand notes 2010

27.04.–31.12.2010 2010 (“as if”) 1) 2011

Revenue 7 22,120 84,593 100,283

Cost of sales 9 –17,085 –64,058 –78,143

Gross profit 5,035 20,535 22,140

Other operating income 123 555 1,068

Distribution and selling expenses –318 –1,151 –1,204

Administrative expenses –722 –2,218 –3,233

Research and development expenses –114 –325 –1,032

Other expenses 11 –703 –1,535 –5,849

thereof as a result of the IPO 461 1,019 4,705

Profit from operations (EBIT) 3,301 15,861 11,890

Interest income 0 0 4

Interest expense 14 –15 –193 –104

Financial result –15 –193 –100

Profit before taxes 3,286 15,668 11,790

Income taxes 15 –521 –2,166 –2,238

Profit for the period 16 2,765 13,502 9,552

Profit for the period attributable to:

Owners of the Company 2,763 13,495 9,580

non-controlling interests 2 7 –28

2,765 13,502 9,552

Earnings per share in EUR (diluted – basic) 2) 17 0.73 1.35 0.85

Adjusted eBit 2) 3,762 16,880 16,595

Adjusted net income for the period 3) 3,226 14,521 14,257

Adjusted earnings per share (in eUr) 4) 0.85 1.45 1.261) For further explanation please see section 6 ”as if” combined financial information

for the preceding period in the notes to the financial statements.2) Adjusted EBIT is the profit from operations (EBIT) adjusted for IPO expenses.3) Adjusted net income for the period is the consolidated profit for the period adjusted for IPO expenses.4) EPS for 12 months 2010 is based on 10m shares, for 2011 it is based on the weighted average of shares (11.28m shares).

consolidated Statement ofComprehensive Income

for the period from 1 January to 31 December 2011

United Power teChnoloGy AnnUAL REPORT 2011 Financial report 51 Consolidated Financial Statements

Other comprehensiveIncome (Expenses)

in EUR thousand 2010 2010 (“as if”) 1) 2011

Exchange differences arising on translation 1,936 2,636 7,555

net (loss) gain arising on revaluation –1 3 0

Other comprehensive income (expense) for the period 1,935 2,639 7,555

Total comprehensive income for the period 4,700 16,141 17,107

Total comprehensive income (expense) attributable to:

Owners of the Company 4,670 16,157 17,105

non-controlling interests 30 –16 2

4,700 16,141 17,1071) For further explanation please see section 6 ”as if” combined financial information for the preceding period in the notes to the financial statements.



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 at 27 Apr 2010 – – – – – – – –

Capital injection 50 – – – – 50 – 50

Effects on contribution in kind with UP-hK holding 9,950 39,552 – – – 49,502 804 50,306

Profit for the period – – – – 2,763 2,763 2 2,765

Other comprehensive income (expense) for the year – – –1 1,907 – 1,906 28 1,934

Total comprehensive income (expense) for the year – – –1 1,907 2,763 4,669 30 4,699

Balance as at 31 dec 2010 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

Total comprehensive income (expense) for the year – – – 7,525 9,580 17,105 2 17,107

Balance as at 31 dec 2011 12,300 56,275 –1 9,432 12,343 90,349 1,154 91,503


consolidated Statement ofChanges in Equity

United Power teChnoloGy AnnUAL REPORT 2011 Financial report 53 Consolidated Financial Statements

in EUR thousand 2010 2010 (“as if”) 2011

Profit before tax 3,286 15,668 11,790

Adjustments for: Allowance for doubtful debts 0 –112 0

Depreciation on intangible assets and property, plants and equipment 237 645 1,868

Income tax expense (income) 66 66 126

Interest (income) expense, net –43 –114 –146

Other financial result 16 194 104

Other non-cash (income) expense –1 –10 1,555

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

(Increase)/decrease in current assets –1,277 –6,497 –3,281

Increase/(decrease) in current liabilities 1,108 4,847 –3,065

Cash generated from operations 3,392 14,686 8,950

Interest paid –41 –263 –104

Interest received 0 0 4

Income taxes paid –531 –1,641 –2,346

net cash generated from operating activities 2,820 12,782 6,504

Payments for acquisition of:

Intangibles –146 –1,179 –406

Property, plant and equipment –9,543 –14,000 –28,197

Short and medium–term investments 28 0 –1,245

Proceeds on disposal of:

Property, plant and equipment 0 2 1

Government grants received 3 213 0

Advance to a related party –181 –522 0


Increase in cash and bank balances due to contribution in kind 32,855 1 0

Cash flow from investing activities 23,058 –15,372 –29,705

Repayment of borrowings –1,671 –11,524 –10,588

new borrowings raised 0 8,511 13,585

Payment of initial capital of UPT AG 50 50 0

Capital injection 719 18,946 2,300

Proceeds from new shares 0 0 18,400

Payment of IPO-cost 0 0 –1,756

Capital contributions by non-controlling shareholders 0 782 647

Repayment of advances to controlling shareholders 0 –180 –44

Advances from controlling shareholders 0 45 0

Cash flow from financing activities –902 16,630 22,544

net increase (decrease) in cash and bank balances 24,976 14,040 –657

Cash and bank balances at beginning of year 0 10,369 25,800

Effect of exchange rate changes 824 1,391 1,859

Cash and bank balances at end of period 25,800 25,800 27,002

consolidatedStatement of Cash Flow

For the period from 1 January to 31 December 2011


consolidated Financial Statements notes to the

For the period from 1 January to 31 December 2011

1. General informationUnited Power Technology AG, Eschborn, Germany, (“United Power” or “the Company”) is registered under the firm United 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 of nominal EUR 1.00 per share for an initial share price of EUR 9.00 per share.

The consolidated financial statements of the Company for the financial year ended 31 December 2011 were authorised for issue by Management Board on 27 March 2012.

The consolidated financial statements are presented in Eu-ros. Amounts are stated in thousands of Euros (kEUR) ex-cept 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 carried 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 Group has not early applied the following new and re-vised standards and interpretations that have been issued but are not yet effective.

IFRS 7 (amendments) – Disclosures – Transfer of financial assets (Effective date: 1 July 2011)

The following new and revised standards and interpreta-tions that have been issued but are not yet effective, are not yet endorsed by the European Union (EU):

IFRS 1 (amendments) – Replacement of a fixed date with the date of transition to IFRS for first time adoptors (Effective date: 1 July 2010)

Financial report 55 notes


IFRS 1 (amendments) – Severe hyperinflation (Effective date: 1 July 2010)

IFRS 9 (amendments) – Financial instruments: Classifica-tion and measurement of financial assets (Effective date: 1 January 2015)

IFRS 9 (amendments) – Financial instruments: Classifica-tion and measurement of financial liabilities (Effective date: 1 January 2015)

IFRS 10 (amendments) – Consolidated financial state-ments (Effective date: 1 January 2013)

IFRS 11 (amendments) – Joint arrangements (Effective date: 1 January 2013)

IFRS 12 (amendments) – Disclosure of interests in other entities (Effective date: 1 January 2013)

IAS 27 (2011) (amendments) – Separate financial state-ments (Effective date: 1 January 2013)

IAS 28 (2011) (amendments) – Investments in associates and joint ventures (Effective date: 1 January 2013)

IFRS 13 (amendments) – Fair value measurement (Effective date: 1 January 2013)

IAS 1 (amendments) – Presentation of items of other comprehensive income (2011) (Effective date: 1 July 2012)

IAS 12 (amendments) – Deferred tax (Effective date: 1 January 2012)

IAS 19 (amendments) – Employee benefits (Effective date: 1. Januar 2013)

IFRIC 20 (new interpretation) – Stripping costs in the production phase of a surface mine (Effective date: 1 January 2013)

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

According the balance sheet disclosure the Company differ-entiates between non-current and current assets and liabil-ities, which were shown in the notes to the financial state-ments 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 ad-ministration.

56 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 thousands)

equity interest (in %)

United Power Equipment Co., Ltd., Mongkok, hong Kong (UP hK-holding) 1 EUR 100

United Power Equipment Co., Ltd., Fuzhou, People’s Republic China (UPEC) 39,100 USD 100

United Power France SASU, Lille, France 1) 10 EUR 100

Fujian United Power Equipment Co., Ltd., Fuzhou, People’s Republic China (FUPEC) 20,000 RMB 100.0*

Sealand Machinery Co., Ltd., Fuzhou, People’s Republic China 10,000 RMB 100.0*

Disheng WanKai Machinery Co., Ltd., Fuzhou, People’s Republic of China (DWC) 2) 20,000 RMB 51.0*

Shanghai Dai Fei International Trading Co., Ltd., Shanghai, People’s Republic of China (ShDF) 1,000 USD 1001) Incorporated by the Group in October 2011.2) 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.

Additions to the consolidated group in 2011 financial year include United Power France SASU, a company established in Lille, France. United Power France SASU is a sales com-pany for the European market. As of 31 December 2011, the company had not yet performed any significant transac-tions for the Group. The addition to the consolidated group in 2011 has no material impact on the comparability of the financial statements.

The percentage of equity interests in the subsidiaries at-tributable to the Group did not change during the Track Re-cord Period, except Sealand Machinery Co., Ltd. 43% equity of Sealand was acquired by UPEC from a minority share-holder. The purchase price of the Company amounts to ap-proximately EUR 0.25 million. In financial year 2010 Sealand Machinery Co., Ltd., had revenues of approx. EUR 2.0 million. The acquisition of Sealand Machinery Co., Ltd., has no mate-rial impact on the comparability of the financial statements.

IFRS 3, business combinations, was not applicable for the business combination in financial year 2010 in connection with the contribution of United Power Equipment Co., Ltd., hong Kong. Thus, there are no effects on subsequent meas-urement that have to be reported.

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 in connection with the initial public offering (IPO) by raising equity through the offering and issuance of new shares – as far as they are attributable to the offer of new shares – have been deducted from equity. Costs which were directly attributable to the listing procedure have been in-cluded as expenses in the period. Costs which were not clearly attributable have been allocated in relation to the new shares to the total of old and new shares between the share issue and the listing.

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 intangible 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 reporting date, the book values are reviewed for impairment in regard of their recoverability and necessary revaluations and val-ues 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 22 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 capitali-sation.

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 state-ments, the assets and liabilities of the Group are translated to EUR as its presentation currency using exchange 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 fluctuated significant-ly during that period, in which case the exchange rates pre-vailing at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other compre-hensive income and accumulated in equity (the foreign cur-rency translation reserve).

The following exchange rates have applied:

2010 2011

Balance sheet date 31 December 1 EUR = RMB 8.8065 8.1625

Average 1 EUR = RMB 8.9247 9.0213

Balance sheet 31 December 1 hKD = RMB 0.8509 0.8107

Average 1 hKD = RMB 0.8708 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, except 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 expect-ed 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 tax-es 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 financial 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 financial 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 receipts (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 appropri-ate, a shorter period to the net carrying amount on initial recognition.

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 are assessed for indicators of impairment at the end of the reporting period. Financial assets are im-paired where there is objective evidence that, as a result of one or more events that occurred after the initial recogni-tion of the financial assets, the estimated future 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-party; 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 carrying amount is reduced through the use of an allowance ac-



count. Changes in the carrying amount of the allowance ac-count 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 decreases 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 exceed what the amortised cost would have been had the impairment 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 recognised directly in other comprehensive income and ac-cumulated 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 (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial 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 financial 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 financial 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.

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 determination 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 related 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. The carrying amounts of trade receivables as at 31 De-cember 2011 were kEUR 16,664. As at 31 December 2011 kEUR 0 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 use-ful 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 19.

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. “As if” combined financial information for the preceding period

In October 2010, the Company acquired 100% of the shares in United Power Equipment Company Limited, Mongkok, hong Kong (“UP hK-holding”) by a contribution in kind. IFRS 3, Business Combinations (Revised 2008) was not ap-plicable for the business combination because United Power Technolgy AG and UP hK-holding were under common control. The acquisition of the sub-group UP hK-holding was accounted for by the Company under a common control transaction according to the book value method (also known as the predecessor accounting method called) under IDW RS hFA 2 (Standard RS hFA 2 of the German Institute of Certi-fied Public Accountants “Institut der Wirtschaftsprüfer”).

The Company incorporated the acquired sub-groups’ results with effect from the date on which the business combina-tion occured between the entities under common control occurred. Consequently, the comparative financial infor-mation for the preceding period 2010 included in the con-solidated financial statements does not reflect the results of the acquired sub-group for the period before the trans-action occurred.

For a better understanding of the Groups development the Company has prepared an “as if” consolidated statement of comprehensive income as well as an “as if” consolidated statement of cash flows. This should help to raise transpar-ency of business development and should help the user of financial statements to understand the developments in the financial year 2011 especially in respect to the net as-sets, financial and earnings position. Additionally the man-agement uses the above mentioned “as if” statements for purposes of deviation analysis.

The “as if” financial information combines the 2010 profit and loss accounts of United Power Technology AG and UP hK-holding as though the acquisition date for the business combination had been the beginning of 2010 (1 January 2010).

The “as if” financial information for the consolidated state-ment of comprehensive income and the consolidated state-ment of cash flows for the period from 1 January 2010 through 31 December 2010 has been calculated as follows:



“As if” consolidated statement of comprehensive income

total total

Statement of comprehensive

income UP hk-holding

2010

Statement of comprehensive

income UP AG 2010 2010

“as if” adaptations

2011“as if” P&l

in EUR thousand 1 2 3 (1+2) 4 5 (3+4)

Revenue 84,593 – 84,593 – 84,593

Cost of sales 64,058 – 64,058 – 64,058

Gross profit 20,535 – 20,535 – 20,535

Other operating income 555 59 614 –59 555

Distribution and selling expenses 1,151 – 1,151 – 1,151

Administrative expenses 1,942 335 2,277 –59 2,218

Research and development expenses 325 – 325 – 325

Other expenses 1,535 1,535 – 1,535

operating result 16,137 –276 15,861 – 15,861

Interest expense 193 – 193 – 193

Financial result 193 – 193 – 193

income before taxes 15,944 –276 15,668 – 15,668

Income taxes 2,232 – 2,232 –66 2,166

Profit for the period 13,712 –276 13,436 –66 13,502

net income attributable to:

Owners of the parent 13,705 –276 13,429 66 13,495

non–controlling interests 7 – 7 – 7

net income 13,712 –276 13,436 66 13,502

Exchange differences arising from translating foreign operations 2,636 – 2,636 – 2,636

net gains/loss arising on revaluation of available for-sale-investments 3 – 3 – 3

Other comprehensive income/loss 2,639 – 2,639 – 2,639

total comprehensive income 16,351 –276 16,075 66 16,141

Total comprehensive income attributable to:

Owners of the Company 16,367 –276 16,091 66 16,157

non–controlling interests –16 0 -16 - -16

16,351 -276 16,075 66 16,141



“As if” consolidated statement of cash flows

total total

Group cash flow statementUP

hk-holding 2010Cash flow state-

ment UP AG 2010 2010“as if”

adaptations2011

“as if” P&l

in EUR thousand 1 2 3 (1+2) 4 5 (3+ 4)

Profit before tax 15,944 –276 – 15,668

Adjustments for:

(Reversal of) allowance for doubtful debt –112 – –112 – –112

Depreciation on intangible assets and property, plants and equipment 645 – 645 – 645

Income tax expense – – 66 66

Interest (income) expense, net –114 – –114 –114

Other financial results 194 – 194 – 194

Other non-cash (income) expense –10 – –10 – –10

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

(Increase)/decrease in current assets –6,429 –2 –6,431 –66 –6,497

Increase/(decrease) in current liabilities 4,593 254 4,847 – 4,847

Cash generated from operations 14,710 –24 14,686 – 14,686

Interest paid –263 – –263 – –263

Income taxes paid –1,641 – –1,641 – –1,641

net cash generated from operating activities 12,806 –24 12,782 – 12,782

Payments for acquisition of:

Intangibles –1,179 – –1,179 – –1,179

Property, plant and equipment –14,000 – –14,000 – –14,000

Proceeds on disposal of:

Property, plant and equipment 2 – 2 – 2

Government grants received 213 – 213 – 213

Advance to a related party –522 – –522 – –522

Interest income 113 – 113 – 113

Dividend income 1 – 1 – 1

Cash flow from investing activities –15,372 – –15,372 – –15,372

Repayment of borrowings –11,524 – –11,524 – –11,524

new borrowings raised 8,511 – 8,511 – 8,511

Proceeds from new shares and capital contributions 18,946 50 18,996 – 18,996

Capital contributions by non-controlling shareholders 782 – 782 – 782

Repayment of advances to controlling shareholders –180 – –180 – –180

Advances from controlling shareholders 45 – 45 – 45

Cash flow from financing activities 16,580 50 16,630 – 16,630

net increase in cash and bank balances 14,014 26 14,040 – 14,040

Cash and bank balances at beginning of year 10,369 – 10,369 – 10,369

Effect of exchange rate changes 1,391 – 1,391 – 1,391

Cash and bank balances at end of period 25,774 26 25,800 – 25,800



7. RevenueRevenue represents revenue arising from sales of goods. An analysis of the Group’s revenue as follows:

in EUR thousand27.04 –

31.12.2010 2010 (“as if”) 2011

Portable generators 20,662 76,297 91,295

Outdoor power equipment 908 5,183 5,115

Components 550 3,113 3,873

22,120 84,593 100,283

8. Segment InformationThe Company has adopted IFRS 8 to report segment infor-mation. The segment information was analysed on the basis of the types of the sold goods. These are prepared by the operative business unit on the basis of internal infor-mation, which is regularly reviewed by the management.

The information is also used for internal assessment of performance.

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

Portable generators residential use unit commercial unit

Outdoor power equipment industrial equipment landscaping machines

Components engines parts other

Revenue by segments


31.12.2010 2010 (“as if”) 2011

Portable generators

Residential use unit 11,059 47,601 56,156

Commercial use unit 9,487 28,476 35,139

outdoor power equipment

Industrial equipment 698 4,594 4,893

Landscaping machines 211 590 222

Components

Engines 687 2,915 2,125

Parts 495 1,954 4,703

Other 0 196 1,906

Total segment revenue 22,637 86,326 105,144

Inter-segment revenue elimination –633 –1,953 –4,793

Other adjustments 1) 116 220 -68

22,120 84,593 100,2831) Other adjustments are related to freight expenses and sales tax surcharge included

in the revenue.



Results by segments


31.12.2010 2010 (“as if”) 2011

Portable generators

Residential use unit 2,213 10,786 10,803

Commercial use unit 2,343 7,410 9,216

outdoor power equipment

Industrial equipment 62 951 993

Landscaping machines 58 157 46

Components

Engines 209 877 637

Parts 19 89 123

Other 15 45 189

Total segment result 4,919 20,315 22,007

Other adjustments 1) 116 220 133

Consolidated gross profit 5,035 20,535 22,140

Unallocated items:

Other operating income 123 555 1,068

Distribution and selling expenses –318 –1,151 –1,204

Administrative expenses –722 –2,218 –3,233

Research and develop-ment expenses –114 –325 –1,032

Other expenses –703 –1,535 –5,849


Interest expenses –15 –193 –104

Consolidated profit before tax 3,286 15,668 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 rep-resents the gross profit earned by each segment prepared under PRC GAAP. Differences between accounting policies under PRC GAAP and IFRS are immaterial, insofar as it is not necessary to prepare reconciliations and explanations. Since

information about assets and liabilities of different operat-ing divisions is not regularly provided to the chief operating decision maker for the purpose of assessing performance and resource allocation, segment assets and segment liabil-ities are not presented.

The basis of segmentation and the basis of measurement of segment results have not been changed for the full year 2011.

The activities by invoicing customer of the Group are mainly in the PRC. It should be noted that managemt 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 segmentation

The following table shows the geographical segmentation by invoicing customers:


31.12.2010 2010 (“as if”) 2011

People’s Republic of China 12,596 45,245 55,907

Poland 1,101 4,517 3,672

United States of America 3,159 14,825 19,085

Russian Federation 1,088 4,480 9,120

Other foreign countries 4,176 15,526 12,499

22,120 84,593 100,283

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.



9. Cost of sales


31.12.2010 2010 (“as if”) 2011

Material 16,447 61,620 73,713

Overhead 379 1,382 2,900

Labor 259 1,056 1,530

17,085 64,058 78,143

10. Other Operating IncomeOther operating income is mainly related to Government grants.


31.12.2010 2010 (“as if”) 2011

Government grants 62 389 749

Other 61 166 319

123 555 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 sys-tematic basis, which matches the depreciation of the related assets.

(3) For grants that are incentive payments to provide im-mediate financial support to the Group, the grants are recognised as income when they are received.

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

11. Other expensesOther expenses are mainly related to the portion of the pro-fessional service fees for preparing the listing of the shares, which cannot be capitalised.

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


31.12.2010 2010 (“as if”) 2011

Wages and salaries 611 2,381 3,492

Social security costs 104 372 390

715 2,753 3,882

Employer contributions to statutory pension insurance in China amounted to kEUR 390.

For fiscal year 2012 expenditures is expected to be similar to that in fiscal year 2011.



The Group employed an annual average of 850 employees based on continued activities. The employees were acting in the following functions:

employees (annual average) 2010 2011

Production and services 135 596

Administration 49 200

Research and development 13 54

197 850

The previous year is a short financial year 2010. Based on the „as if“ comparable period, the Group employed an an-nual average of 789 employees in 2010.

13. DepreciationDepreciation of property, plant and equipment amounted to kEUR 1,725 (2010: kEUR 216, 2010 “as if”: kEUR 561).

14. Interest expenseInterest expense of kEUR 104 includes interest expense with kEUR 286 less amounts capitalised of kEUR 182.

Borrowing costs capitalised during the reporting period arose on the borrowing pool. The calculation was made by applying a capitalisation rate of 7%.

15. Income tax expenseThe income tax expense include expenses for current tax of kEUR 2,745 which are offset with income of deferred tax of kEUR 507. In total, income taxes were kEUR 2,238.

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

hong Kong 16.5%

People’s Republic of China 25.0%*

Germany 25.6%

* Reduced tax rate of 12.5% until 31 December 2011 which is released over a tax benefit.

The effective tax can be reconciled as follows:


31.12.2010 2010 (“as if”) 2011

Profit before tax 3,286 15,668 11,790

Income tax at local tax rates (China) 25% +891 +3,986 +2,947

Income tax at local tax rates (Germany) –70 –70 –138

Effect of tax benefit granted to a subsidiary –480 –2,050 –2,421

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

Tax effect of expenses that are not deductible +180 +300 +579

521 2,166 2,238



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


31.12.2010 2010 (“as if”) 2011

Cost of inventories rec-ognised as an expense 17,085 64,058 78,142

(Reversal of) allowance for doubtful debt – –112 0

Depreciation of property, plant and equipment 216 561 1,725

Foreign exchange (gains) and losses 99 305 –740

Amortisation of intan-gible assets (included in administrative expenses) 21 65 26

Amortisation of prepaid lease payments (includ-ed in administrative expenses) 5 19 117

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

17. Earnings per shareThe income and the weighted average of shares which is the basis for the income per share are as follows:

in EUR27.04 –

31.12.2010 2010 (“as if”) 2011

Income attributable to owners of the parent in EUR at 2,763,314 13,495,020 9,580,748

Income for calculation of the basic income per share in EUR at 2,763,314 13,495,020 9,580,748

Weighted average number of shares for the calculation of the basic income per share 3,781,250 10,000,000 11,284,166

Earnings per share 0.73 1.35 0.85

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

18. Intangible assetsIntangible assets are related to computer software. In the period from 1 January 2011 through 31 December 2011 the software was amortised over its useful life.

in EUR thousand 2011

Cost:

As at 27 April 2010 0

Additions from contribution in kind of UP hK-holding 861

Additions/disposals 52

Deposits 350

Currency translation adjustments 7

As at 1 January 2011 1,270

Additions/disposals 49


1,427

Accumulated amortisation:


Additions from contribution in kind of UP-holding 96

Additions 21

Currency translation adjustment 4

As at 1 January 2011 121

Additions 117


253

Carrying amounts:


As at 1 January 2011 1,149

As at 31 December 2011 1,174

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



19. Property, plant and equipmentProperty, plant and equipment changed in the reporting period as follows:

in EUR thousand BuildingPlant &

equipment Motor vehiclesoffice

equipment

deposits and construction

in progress total

Acquisition and production cost

As at 27 April 2010 0 0 0 0 0 0

Additions from contribution in kind of UP-hK-holding 6,102 1,370 423 499 2,086 10,480

Additions 162 826 295 41 10,029 11,353

Currency translation adjustments 437 26 17 48 71 599

As at 1 January 2011 6,701 2,222 735 588 12,186 22,432

Additions 25,195 2,580 514 209 0 28,498

Disposals 0 0 –7 –1 0 –8

Reclassifications 0 11,344 0 0 –11,344

Currency translation 3,179 1,641 112 68 –198 4,802

At 31 december 2011 35,075 17,787 1,354 864 644 55,724

Accumulated depreciation

As at 27 April 2010 0 0 0 0 0 0

Additions from contribution in kind of UP-hK-holding 587 248 58 158 0 1,051

Additions 129 40 20 27 0 216

Currency translation adjustments 109 31 10 27 0 177

As at 1 January 2011 825 319 88 212 0 1,444

Additions 923 459 211 132 0 1,725

Disposals 0 0 –7 –1 0 –8

Currency translation 162 74 29 30 0 295

At 31 december 2011 1,910 852 321 373 0 3,456

net carrying amounts as at 27 April 2010 0 0 0 0 0 0

net carrying amounts as at 1 January 2011 5,876 1,903 647 376 12,186 20,988

net carrying amounts as at 31 december 2011 33,165 16,935 1,033 491 644 52,268

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 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.



20. Other assetsOther assets increased by EUR 1.2 million to kEUR 2,088 (current and non-current other assets). Other assets mainly include prepaid lease payments. On 31 December 2011 the Company had capitalised a total kEUR 2,028 for prepaid lease payments, of which kEUR 43 is recorded as current assets and kEUR 2,071 is recorded as non-current assets; kEUR 43 of this amount is shown as current assets and kEUR 2,028 as non-current assets:

in EUR thousand 2011

Cost:


Addition 1,113


2,159

Amortisation:


Addition 26


88

Carrying amounts:


As at 31 december 2011 2,071

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

21. Deferred TaxesDeferred taxes are recognised in the consolidated financial statements as follows:

in EUR thousand 31.12.2010 31.12.2011

Deferred tax assets 98 1,260

Deferred tax liabilities –38 –101

60 1,159

Deferred tax assets have resulted primarily from the tax benefit of the IPO cost accounted for as deduction from eq-uity (kEUR 592), the tax effects on deferred government grants (kEUR 476) and loss carry-forwards (kEUR 192). De-ferred tax liabilities have resulted primarily from the tax effects on the capitalisation of borrowing 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.

22. Inventories

in EUR thousand 31.12.2010 31.12.2011

Raw material 1,711 2,121

Work in progress 1,623 1,027

Finished goods 1,175 4,149

4,509 7,297

23. 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.

24. Trade and other receivables

in EUR thousand 31.12.2010 31.12.2011

Trade receivables 15,428 16,664

Allowance for doubtful debts – –

Deposits 502 1,070

value-added tax receivable 51 847

Advance payments to suppliers 373 638

Advance lease payments 19 0

Other receivables 836 339

17,209 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 defines credit limits for the customer. As at 31 Decem-ber 2011, 73% 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 31.12.2010 31.12.2011

Current trade receivables 15,428 16,664

Overdue

Past due 1 – 30 days 3,228 4,973

Past due 31 – 60 days 346 179

Past due 61 – 180 days 939 93

Past due over 180 days - 37

4,513 5,282

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

The Group pledged trade receivables with a carrying amount of kEUR 1,690 in order to secure bank loans (see note 27).

25. Cash and cash equivalentsIn addition to the cash and cash equivalents of kEUR 27,002 (2010: kEUR 25,800), kEUR 785 (2010: kEUR 943) of the bank deposits are pledged to secure short-term lines of credit. They are shown under the other financial assets.

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 31.12.2010 31.12.2011

Cash and cash equivalents 25,800 27,002

Pledged bank deposits 943 785

26,743 27,787

26. Equity

Subscribed Capital number of shares Share capital (eUr)

1 January 2011 10,000,000 10,000,000

Issuance of new shares 2,300,000 2,300,000

31 december 2011 12,300,000 12,300,000

Issued capital comprises:

Fully paid ordinary shares 12,300,000 12,300,000

12,300,000 12,300,000

Fully paid ordinary shares:

1 January 2011 10,000,000 10,000,000

Capital increase by issuanceof new shares 2,300,000 2,300,000

31 december 2011 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.



On June 2011 the Company has issued 2,300,000 new shares with a computed value of EUR 1.00 per share on the Frankfurt Stock Exchange at an initial share price of EUR 9.00 per share. In total a gross proceeds of EUR 20.7 million were received.

EUR 2.3 million have been accounted as addition as an sub-scribed capital.

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 capitalThe Board of Management is authorised to increase the Company’s share capital up to five years from the regis-tration of the authorisation into the commercial register with the approval of the Supervisory Board by issuing new shares against cash and/or non-cash contributions once or repeatedly, but in total not exceeding a total of EUR 5,000,000.

Since Company has issued 2,300,000 new shares on June 2011 an authorised capital of 2,700,000 is remaining.

in EUR thousand 31.12.2010 31.12.2011

reserves

Additional paid-in capital 39,552 56,275

Revaluation reserve –1 –1

Foreign currency translation reserve 1,907 9,432

Retained Earnings 2,763 12,343

44,221 78,049

in EUR thousand 31.12.2010 31.12.2011

Additional paid-in capital

1 January 2011 0 39,552

Effects of contribution in kind 39,552 0

Proceeds from issuance of new shares 0 16,644

Other payment into the capital reserve 0 79

39,552 56,275

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 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 foreign currency translation reserve of foreign opera-tions amounts to kEUR 9,432. 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 (EUR 9,580 thousand) is recognised in retained earnings.

27. BorrowingsThe borrowings are related to secured bank borrowings. The average effective interest rates are approximately 7% per year.

in EUR thousand 31.12.2010 31.12.2011

Secured bank borrowings 3,031 6,582

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

in EUR thousand 31.12.2010 31.12.2011

Buildings 5,858 3,034

Prepaid lease payments 915 952

Trade receivables 533 1,690

7,306 5,676



28. Trade and other Payables in EUR thousand 31.12.2010 31.12.2011

Trade payables 9,170 5,695

notes payable 1,952 927

Advance payments 624 891

Others 905 1,935

12,651 9,448

The maturity of trade payables is as follows: in EUR thousand 31.12.2010 31.12.2011

Short-term 8,401 6,691

Overdue (0 to 60 days) 769 19

9,170 6,710

Other payables are due within one year.

29. Other provisions

in EUR thousand

Supervisory Board remu-

neration Audit cost office rent total

Balance 1 January 2011 35 50 1 86

Additional provi-sions recognised 91 50 0 141

Reductions arising from payments –9 –50 0 –59

Reductions arising from remeasurements 0 0 –1 –1

117 50 0 167

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

30. Deferred government grant incomeDuring the year ended 31 December 2011, the Group re-ceived government subsidies of kEUR 1,663 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 2011, kEUR 108 was released to income.

31. Non-cash transactionsMaterial non-cash transactions did not take place in the period from 1 January to 31 December 2011.

32. Capital risk managementThe Group aims to ensure the future ability to repay liabili-ties and to maintain financial substance.

The financial substance is mainly measured with the equi-ty-to-assets ratio. Part of this financial ratio is the balance sheet total of the consolidated financial statements and the equity shown in the Groups consolidated financial state-ments.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while max-imising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of net debt (which includes short-term borrowings), cash and cash equivalents and equity attributable to the owners of the Company comprising share capital and reserves as dis-closed in the Consolidated Financial Statements.

The directors of the Company review the capital structure regularly. As part of this review, the Group considers the cost of capital and the risks associated with each class of capital, and will balance its overall capital structure through the payment of dividends, new shares as well as additional borrowings.



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

in EUR thousand 31.12.2010 31.12.2011

Debt (i) 3,031 6,582

Cash and bank balances 25,800 27,002

net debt –22,769 –20.420

Equity (ii) 55,055 91,503

net debt to equity ratio –41.36% –22.31%

Equity-to-assets ratio 76.19% 81.93% (i) Debt is defined as long- and short-term borrowings (excluding derivatives and

financial guarantee contracts), as described in note 27.(ii) Equity includes all capital and reserves of the Group that are managed as capital.

33. Financial InstrumentsIFRS 7 requires to demonstrate the sensitivity analysis to be demonstrated, which show the impacts of hypothetical changes of relevant risk variables on profit and loss or equity and the market risk. In this connection the Group is mainly affected by currency risks. The impacts are evalu-ated by hypothetical changes in risk variables on the port-folio of the financial instruments.

The financial instruments are classified in the following cat-egories:

in EUR thousand 31.12.2010 31.12.2011

Loans and receivables (including cash and bank balances)

Trade and other receivables 17,190 19,558

Amounts due from related parties 649 238

Pledged bank deposits 943 785

Cash and cash equivalents 25,800 27,002

value-added tax receivable -51 -848

Advance to suppliers -373 -638

44,158 46,097

Available-for-sale financial assets 17 16

44,175 46,113

Financial liabilities at amortised cost 15,649 15,995

The risks associated with these financial instruments in-clude market risk (interest risk, currency risk and other price risk), credit risk and liquidity risk.

The management monitors these exposures in order to en-sure appropriate timely measures are taken to minimise risks.

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 evaluatig increases or decreases in interest rates.

During the reporting period, an increase or decrease of 27 basis points in interest rates would increase or decrease the Group’s post-tax profit approximately +/– kEUR 15. There would be no impact on other comprehensive income and equity.

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 7,537 in liabilities and kEUR 1,750 in assets) and RMB (kEUR 52,269 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 10% would result in a profit of aproxi-mately +/– kEUR 169. 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.

The Group has a concentration of credit risk in respect of bank balances and bank deposits. Approximately 98% of the bank balances and bank deposits as at 31 December 2011 were deposited at three major banks, which are state-owned banks located in the People’s Republic of China.

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 2011.

The following tables detail the Group’s remaining contrac-tual maturity for its non-derivative financial liabilities as at 31 December 2009, 2010 and 2011 based on agreed repayment terms. The tables have been drawn up based on undiscounted 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 month 3–6 month 6–12 month

total undis-counted cash

outflows

Carrying amounts as at

31 december 2011

Carrying amounts as at

31 december 2010

% kEUR kEUR kEUR kEUR kEuR kEUR

Trade payables 8,556 – – 8,556 8,556 12,027

Borrowings from banks 8 1,596 2,760 2,539 6,895 6,582 3,031

Liabilities due to related parties – 857 – – 857 857 546

Liabilities due to the con-trolling shareholder – – – – – 45

11,009 2,760 2,539 16,308 15,995 15,649



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 directly (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. 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.

Related parties

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

in EUR thousand 31.12.2010 31.12.2011

Sales of goods:

United Generating Power nigeria Ltd., Trade receivables 119 –

Advance payments

Fuzhou Wankai Machinery Co., Ltd. 530 –

Purchase of goods:

Fuzhou Rongli Power Fittings Co., Ltd. 1,044 4,968

The companies are controlled by controlling shareholders.



Amounts due from related parties nature and relationship with related parties

name relationship with the Company

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

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

United Generating Power nigeria Ltd., (“UP nigeria”)

An entity controlled by the controlling shareholder (Mr. Wei Song, Mr. Xu Wu and Mr Zhong Dong huang)

The Group has the following receivables against the follow-ing non-consolidated related parties:

in EUR thousand 31.12.2010 31.12.2011

Fuzhou Wankai Machinery Co., Ltd. (“Wankai”) Advance payments 530 245

United Generating Power nigeria Ltd., (“UP nigeria”) Trade receivable 119 0

649 245

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

UP nigeria is controlled by controlling shareholder (Mr. Wei Song, Mr. Xu Wu and Mr. Zhong Dong huang).

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 non-consoli-dated other related persons resulting from trade payables:

in EUR thousand 31.12.2010 31.12.2011

Fuzhou Rongli Power Fittings Co., Ltd. 546 857

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

Mr. Zhong Dong huang, vice Chairman of the Management Board, Co–CEO, Fuzhou/China

Mr. Li Wei Wang, CFO, Fuzhou/China until 28 April 2011

Mr. oliver Kuan, CFO, Fuzhou/China from 28 April 2011

The Management Board has received salaries of kEUR 570 and retirement benefit plan contributions of kEUR 1. There are no receivables with the Management Board. Further-more members of the Management Board hold indirectly shares in the Company as follows:

Mr. Wu Xu (24. 26%)

Mr. Zhong Dong huang (22.18%)



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

Mrs. Ning Cong, General Manager of Orchid Asia Group Management Ltd., hong Kong Island/hong Kong

Mr. hubertus Krossa is also a member of the Supervisory Board of Eckelmann AG, Wiesbaden/Germany

The members of the Supervisory Board have received remu-nerations of kEUR 9 (2010: kEUR 0).

The Group had the following liabilities due to the Super-visory Board:

in EUR thousand 31.12.2010 31.12.2011

Remuneration of Supervisory Board 35 117

ShareholdersThe liabilities due to majority shareholders amount to EUR 0 (as at 31 December 2010: EUR 0.05 million).

35. 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.

36. 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 44 in the financial year (2010: kEUR 13)

in EUR thousand 31.12.2010 31.12.2011

Within one year 52 56

From two – four years 52 86

104 142

37. Capital commitmentsCapital commitments in respect of the acquisition of prop-erty, plant and equipment and intangible assets contracted but not provided for in the consolidated financial statements total kEUR 408 (as at 31 December 2010: kEUR 4,046).

38. Audit feesDeloitte & Touche Gmbh (“Deloitte”) was appointed as the auditor for United Power Technology AG and the Group for financial business year 2011. Total fees paid to Deloitte which are entirely related to auditing and include travelling cost and value added tax, amount to kEUR 207.

39. 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.



40. Shareholdings in United Power Technology AG Directors dealingsThe members of the Management Board and the Supervi-sory Board have the legal obligation to notify United Power Technology AG immediately according to section 15a of the Wertpapierhandelsgesetz (German Securities Trading Act) (“WphG”) of the purchase and sale of shares in United Pow-er Technology AG.

Management BoardMr. Wu Xu owns indirectly 24.26% shares in United Power Technology AG (2,984,399 voting rights) as at 31 Decem-ber 2011.

Mr. Zhong Dong huang owns indirectly 22.18% shares in United Power Technology AG (2,728,567 voting rights) as at 31 December 2011.

Supervisory BoardMr. Wei Song owns indirectly 22.88% shares in United Power Technology AG (2,813,845 voting rights) as at 31 Decem-ber 2011.

Mr. hubertus Krossa owns directly 0.03% shares in United Power Technology AG (4.086 voting rights) as at 31 Decem-ber 2011.

Shareholdings

15 June 20111. On 10 June, pursuant to section 21, paragraph 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler holding S.A., nyon, Switzerland, informed us that, as at 9 June 2011 – the day of the initial public offer-ing, its voting rights in our Company was 30.50% (3,050,000 voting rights). These 30.50% (3,050,000 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG. voting rights attributable to Kepler holding S.A. were held by the following companies controlled by her, whose voting rights in United Power Technology AG amounts to 3% or more: Kepler Capital Markets S.A., Frank-furt branch.

2. On 10 June, pursuant to section 21, paragraph 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler Capital Markets S.A., Frankfurt branch, Frankfurt, Germany, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 30.50% (3,050,000 voting rights).

17 June 20111. On 16 June, pursuant to section 21, paragraph 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), FORTUnE GREAT InvESTMEnTS Limited, Road Town, Tortola, British virgin Islands, informed us that, as at 10 June 2011, its voting rights in our Company fell below the threshold of 15% and was 14.50% (1,787,006 voting rights) on that day.

2. On 16 June, pursuant to section 21, paragraph 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), hIGh ADvAnCEInvESTMEnTS Limited, Road Town, Tortola, British virgin Islands, informed us that, as at 10 June 2011, its voting rights in our Company fell below the threshold of 15% and was 14.06% (1,729,908 voting rights) on that day.

3. On 16 June, pursuant to article 21, section 1 of the Wert-papierhandelsgesetz (German Securities trading Act (“WphG”), Mr Wei Song, People’s Republic of China, informed us that, as at 10 June 2011, its voting rights in our Company fell below the threshold of 50% and was 43.95% (5,406,033 voting rights) on that day. Of these, 14.50% (1,784,006 voting rights) were attributable to him through Fortune Great Investments Limited, Road Town, Tortola, British virgin Is-lands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 29.45% (3,622,027 voting rights) through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Islands, and high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.



4. On 16 June, pursuant to article 21, section 1 of the Wert-papierhandelsgesetz (German Securities trading Act (“WphG”), Mr Xu Wu, People’s Republic of China, informed us that, as at 10 June 2011, its voting rights in our Company fell below the threshold of 50% and was 43.95% (5,406,033 vot-ing rights) on that day. Of these, 15.38% (1,892,119 voting rights) were attributable to him through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Is-lands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 28,57% (3,513,914 voting rights) through Fortune Great Investments Limited, Road Town, Tortola, British vir-gin Islands, and high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.

5. On 16 June, pursuant to article 21, section 1 of the Wert-papierhandelsgesetz (German Securities trading Act (“WphG”), Mr Zhong Dong huang, People’s Republic of China, informed us that, as at 10 June 2011, its voting rights in our Company fell below the threshold of 50% and was 43.95% (5,406,033 voting rights) on that day. Of these, 14.06% (1,729,908 voting rights) were attributable to him through high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 29.89% (3,676.125 voting rights) through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Islands, and Fortune Great Invest-ments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.

6. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Mr Gabriel Li, hong Kong, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands, Orchid Asia Iv Group Limited, Cay-

man Islands, Orchid Asia Iv Investment Limited, British vir-gin Islands, yM Investment Limited, British virgin Islands, and The Li 2007 Family Trust, British virgin Islands. 0.26% (26,069 voting rights) were attributable to Gabriel Li pursu-ant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Investment Limited, Cayman Is-lands, through yM Investment Limited, British virgin Islands and The Li 2007 Family Trust, British virgin Islands.

7. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), The Li 2007 Family Trust, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no. 1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands, Orchid Asia Iv Group Limited, Cayman Islands, Orchid Asia Iv Investment Limited, British virgin Islands, yM Investment Limited, Brit-ish virgin Islands, and The Li 2007 Family Trust, British vir-gin Islands. 0.26% (26,069 voting rights) were attributable to The Li 2007 Family Trust pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG through Orchid Asia Iv Co-Invest-ment Limited, Cayman Islands, through yM Investment Lim-ited, British virgin Islands.

8. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), yM Investment Limited, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 par-agraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands, Orchid Asia Iv Group Limited, Cayman Islands, Orchid Asia Iv Investment Limited, British virgin Islands, yM Investment



Limited, British virgin Islands, and The Li 2007 Family Trust, British virgin Islands. 0.26% (26,069 voting rights) were at-tributable to yM Investment Limited pursuant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Investment Limited, Cayman Islands.

9. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Investment Limited, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 voting rights). These 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 par-agraph 1 sentence 1 no. 1 WphG through OAIv holdings L.P., Cayman Islands, and Orchid Asia Iv Group Management Limited, Cayman Islands.

10. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Group Limited, George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 voting rights). These 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG through OAIv holdings L.P., Cayman Islands, and Orchid Asia Iv Group Management Limited, Cayman Islands.

11. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Group Management Limited, George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 vot-ing rights). These 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG through Orchid Asia Iv L.P., Cayman Islands, and OAIv holdings L.P., Cayman Islands.

12. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), OAIv holdings L.P., George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Com-pany was 12.77% (1,277.371 voting rights). These 12.77% (1,277,371 voting rights) were attributable pursuant to sec-tion 22 paragraph 1 sentence 1 no. 1 WphG through Orchid Asia Iv L.P., Cayman Islands.

13. On 15 June, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv L.P., George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Com-pany was 12.77% (1,277.371 voting rights).

14. On 10 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler Private Shareholders S.A., Luxemburg, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 30.50% (3,050,000 voting rights). These 30.50% (3,050,000 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG. voting rights attributable to Kepler holding S.A. were held by the following companies con-trolled by her, whose voting rights in United Power Tech-nology AG amounts to 3% or more: – Kepler holding S.A. – Kepler Capital Markets S.A., Frankfurt branch.

15. On 14 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), FORTUnE GREAT InvESTMEnTS Limited, Road Town, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights was 17.84% (1,784,006 voting rights).



16. On 14 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), FORTUnE SUnRISE InvESTMEnTS Limited, Road Town, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 18.92% (1,892,119 voting rights) on that day.

17. On 14 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Mr Wei Song, People’s Republic of China, informed us that, as at 9 June 2011 – the day of the initial public offer-ing, its voting rights in our Company was 54.06% (5,406,033 voting rights). Of these, 17.84% (1,784,006 voting rights) were attributable to him through Fortune Great Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 36.22% (3,622,027 voting rights) through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Is-lands, and high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 para-graph 2 sentence 1 WphG.

18. On 14 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Mr Xu Wu, People’s Republic of China, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 54.06% (5,406,033 vot-ing rights). Of these, 18.92% (1,892,119 voting rights) were attributable to him through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 35.15% (3,513,914 voting rights) through Fortune Great In-vestments Limited, Road Town, Tortola, British virgin Is-lands, and high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 para-graph 2 sentence 1 WphG.

19. On 14 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Mr Zhong Dong huang, People’s Republic of China, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 54.06% (5,406,033 voting rights). Of these, 17.30% (1,729,908 voting rights) were attributable to him through high Advance In-vestments Limited, Road Town, Tortola, British virgin Is-lands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 26.76% (3,676,125 voting rights) through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Islands, and Fortune Great Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.

20. On 15 June, pursuant to section 21, section 1 Sentence 1 and section 22 paragraph of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler Private Shareholders S.A., Luxemburg, informed us that, as at 10 June 2011 voting rights in our Company fell below the theshold of 30% and was 28.50% (3,505,555 voting rights) at that day. These 28.50% (3,050,000 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG. voting rights attributable to Kepler Private Sharholders S.A. were held by the following companies controlled by her, whose voting rights in United Power Tech nology AG amounts to 3% or more: – Kepler holding S.A. – Capital Markets S.A., Frankfurt branch.

21. On 15 June, pursuant to section 21, paragraph 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler holding S.A., nyon, Switzerland, informed us that, as at 9 June 2011 – the day of the initial public offer-ing, its voting rights in our Company fell below 30.0% and was 28.50% (3,505,555 voting rights) at that day. These 28.50% (3,505,555 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG. voting rights attributable to Kepler holding S.A. were held by the following companies controlled by her, whose voting rights in United Power Technology AG amounts to 3% or more: – Kepler Capital Markets S.A., Frankfurt branch.



22. On 15 June, pursuant to article 21, section 1 of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Kepler Capital Markets S.A., Frankfurt branch, Frankfurt, Germany, informed us that, as at 10 June 2011 fell below 30% and was 28.50% (3,505,555).

5 July 20111. On 1 July, pursuant to section 21, paragraph 1 sentence 1 and 22 paragraph 1 sentence 1 of the Wertpapierhan-delsgesetz (German Securities trading Act (“WphG”), Kepler Private Shareholders S.A., Luxemburg, informed us that, as at 28 June 2011, its voting rights in our Company fell below 25%, 20%, 15%, 10%, 5%, 3% and was 1,626% (200,000 voting rights) at that day. These 1.626% (200,000 voting rights) were attributable pursuant to section 22 paragraph 1 sen-tence no.1 WphG.

2. On 1 July, pursuant to section 21, paragraph 1 sentence 1 and 22 paragraph 1 sentence 1 of the Wertpapierhan-delsgesetz (German Securities trading Act (“WphG”), Kepler holding S.A., nyon, Switzerland, informed us that, as at 28 June 2011, its voting rights in our Company fell below 25%, 20%, 15%, 10%, 5%, 3% and was 1,626% (200,000 voting rights) at that day. These 1.626% (200,000 voting rights) were at-tributable pursuant to section 22 paragraph 1 sentence no.1 WphG.

3. On 1 July, pursuant to section 21, paragraph 1 sentence 1 and 22 paragraph 1 sentence 1 of the Wertpapierhan-delsgesetz (German Securities trading Act (“WphG”), Kepler Capital Markets S.A., Frankfurt branch, Frankfurt, Germany, informed us that, as at 28 June 2011, its voting rights in our Company fell below 25%, 20%, 15%, 10%, 5%, 3% and was 1,626% (200,000 voting rights) at that day.

4. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), FORTUnE GREAT InvESTMEnTS Limited, Road Town, Tor-tola, British virgin Islands, informed us that, as at 28 June 2011, its voting exceeded 15% and 20% and was 22.63% (2,784,053 voting rights) at that day.

5. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), FORTUnE SUnRISE InvESTMEnTS Limited, Road Town, Tor-tola, British virgin Islands, informed us that, as at 28 June 2011, its voting exceeded 15% and 20% and was 24.01% (2,952,802 voting rights) at that day.

6. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), hIGh ADvAnCEInvESTMEnTS Limited, Road Town, Tortola, British virgin Islands, informed us that, as at 28 June 2011, its voting exceeded 15% and 20% and was 21.95% (2,699,678 voting rights) at that day.

7. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), Mr Wei Song, People’s Republic of China, informed us that, as at 28 June 2011, its voting rights in our Company exceed-ed 50% and was 68.59% (8,436,533 voting rights) at that date. Of these, 22.63% (2,784,053 voting rights) were attrib-utable to him through Fortune Great Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to sec-tion 22 paragraph 1 sentence 1 no. 1 WphG, and 45.96% (5,652,480 voting rights) through Fortune Sunrise Invest-ments Limited, Road Town, Tortola, British virgin Islands, and high Advance Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.

8. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), Mr Xu Wu, People’s Republic of China, informed us that, as at 28 June 2011, its voting rights in our Company exceeded 50% was 68.59% (8,436,533 voting rights) at that date. Of these, 24.01% (2,952,802 voting rights) were attributable to him through Fortune Sunrise Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 44.58% (5,483,731 voting rights) through Fortune Great Investments Limited, Road Town, Tortola, British virgin Islands, and high Advance Investments Limited, Road Town, Tortola, British virgin Is-lands, pursuant to section 22 paragraph 2 sentence 1 WphG.



9. On 1 July, pursuant to article 21, section 1 of the Wertpa-pierhandelsgesetz (German Securities trading Act (“WphG”), Mr Zhong Dong huang, People’s Republic of China, informed us that, as at 28 June 2011, its voting rights in our Company exceeded 50% and was 68.59% (8,436,533 voting rights) at that date. Of these, 21.95% (2,699,678 voting rights) were attributable to him through high Advance Investments Lim-ited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG, and 46.64% (5,736,855 voting rights) through Fortune Sunrise Invest-ments Limited, Road Town, Tortola, British virgin Islands, and Fortune Great Investments Limited, Road Town, Tortola, British virgin Islands, pursuant to section 22 paragraph 2 sentence 1 WphG.

6 october 20111. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Mr Gabriel Li, hong Kong, informed us that, as at 9 June 2011 – the day of the initial public offering, its vot-ing rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attrib-utable pursuant to section 22 paragraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Man-agement Limited, Cayman Islands, Orchid Asia Iv Group Lim-ited, Cayman Islands, Orchid Asia Iv Investment Limited, British virgin Islands, yM Investment Limited, British virgin Islands, and The Li 2007 Family Trust, British virgin Islands. 0.26% (26,069 voting rights) were attributable to Gabriel Li pursuant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Investment Limited, Cayman Is-lands, through yM Investment Limited, British virgin Islands and The Li 2007 Family Trust, British virgin Islands.

2. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), The Li 2007 Family Trust, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial

public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 paragraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands, Orchid Asia Iv Group Limited, Cayman Islands, Orchid Asia Iv Investment Limited, British virgin Islands, yM Investment Limited, Brit-ish virgin Islands, and The Li 2007 Family Trust, British vir-gin Islands. 0.26% (26,069 voting rights) were attributable to The Li 2007 Family Trust pursuant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Invest-ment Limited, Cayman Islands, through yM Investment Lim-ited, British virgin Islands.

3. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), yM Investment Limited, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 par-agraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands, Orchid Asia Iv Group Limited, Cayman Islands, Orchid Asia Iv In-vestment Limited, British virgin Islands, yM Investment Limited, British virgin Islands, and The Li 2007 Family Trust, British virgin Islands. 0.26% (26,069 voting rights) were at-tributable to yM Investment Limited pursuant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Investment Limited, Cayman Islands.

4. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Investment Limited, Tortola, British virgin Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 voting rights). These 12.77%



(1,277,371 voting rights) were attributable pursuant to sec-tion 22 paragraph 1 sentence 1 no. 1 WphG through OAIv holdings L.P., Cayman Islands, and Orchid Asia Iv Group Management Limited, Cayman Islands.

5. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Group Limited, George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 voting rights). These 12.77% (1,277,371 voting rights) were attributable pur-suant to section 22 paragraph 1 sentence 1 no. 1 WphG through OAIv holdings L.P., Cayman Islands, and Orchid Asia Iv Group Management Limited, Cayman Islands.

6. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Group Management Limited, George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277.371 vot-ing rights). These 12.77% (1,277,371 voting rights) were at-tributable pursuant to section 22 paragraph 1 sentence 1 no. 1 WphG through Orchid Asia Iv L.P., Cayman Islands, and OAIv holdings L.P., Cayman Islands.

13 october 20111. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), yM Investment Limited, Road Town, British virgin Islands,, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 13.03% (1,303,440 voting rights). Thereof 12.77% (1,277,371 voting rights) were attributable pursuant to sec-tion 22 paragraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Is-lands, Orchid Asia Iv Group Management Limited, Cayman

Islands, Orchid Asia Iv Group Limited, Cayman Islands and Orchid Asia Iv Investment Limited, British virgin Islands. 0.26% (26,069 voting rights) were attributable to yM Invest-ment Limited pursuant to section 22 paragraph 1 Sentence 1 no. 1 WphG through Orchid Asia Iv Co-Investment Lim-ited, Cayman Islands.

2. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Investment, Road Town, British virgin Islands,, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277,371 voting rights). The 12.77% (1,277,371 voting rights) were attributable pursuant to section 22 par-agraph 1 sentence no.1 WphG through Orchid Asia Iv L.P., Cayman Islands, OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands and Orchid Asia Iv Group Limited, Cayman Islands. At the same time 12.77% (1,277,371 voting rights) are atributable to Or-chid Asia Iv L.P. pursuant to section 22 paragraph 1 Sen-tence 1 no. 6 WphG.

3. On 30 September, pursuant to section 21, section 1a of the Wertpapierhandelsgesetz (German Securities trading Act (“WphG”), Orchid Asia Iv Group Management Limited, George Town, Grand Cayman, Cayman Islands, informed us that, as at 9 June 2011 – the day of the initial public offering, its voting rights in our Company was 12.77% (1,277,371 vot-ing rights). The 12.77% (1,277,371 voting rights) were attrib-utable pursuant to section 22 paragraph 1 sentence no.1 WphG through OAIv holdings L.P., Cayman Islands, Orchid Asia Iv Group Management Limited, Cayman Islands. At the same time 12.77% (1,277,371 voting rights) are atributable to Orchid Asia Iv L.P. pursuant to section 22 paragraph 1 Sen-tence 1 no. 6 WphG.



41. 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.

42. 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.

43. Approval of the Consolidated Financial StatementsThe financial statements were approved and authorised for issuance by the Management Board on 27 March 2012.


the Management Board



Pursuant to section 37 y of the German Securities Trading Act (WphG) in conjunction with section 37 w Para. 2 no. 3 WphG.

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 2011 Financial report 93 Responsibility Statement

We have audited the consolidated financial statements prepared by the United Power Technology AG, Eschborn, – comprising the income statement and statement of comprehensive income, the balance sheet, the cash flow statement, the statement of changes in equity and the notes to the consolidated financial statements – and the group management report for the business year from January 1, 2011 to December 31, 2011. 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 responsibility of the parent Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report 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 Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations.

IndependentAuditor‘s Report

AnnUAL REPORT 2011 United Power teChnoloGy94 Financial report Independent Auditor’s Report

In our opinion, based on the findings of our audit, the consolidated financial statements of the United Power Technology 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 requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the group’s position and suitably presents the opportunities and risks of future development. Frankfurt, 27 March, 2012 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Lüdke) (Meyer zu Schwabedissen) Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]

United Power teChnoloGy AnnUAL REPORT 2011 Financial report 95 Independent Auditor’s Report

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

Phone: +49 6196 400804 Fax: +49 6196 400910 E-mail: [email protected]

FinancialCalendar

Imprint

Publication

Interim report 3-months 2012 14 May 2012

Annual General Meeting 2012 12 June 2012

half-year report 2012 14 August 2012

Interim report 9-months 2012 12 november 2012

Concept and design: Kirchhoff Consult AG, hamburg

Photographs: United Power Technology AG

date of publication:13 April 2012

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 statementThis document contains forward-looking statements, which are based on the current estimates and assumptions by the corporate management 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 guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by United Power Technology AG and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside United Power Technology AG’s control and cannot be accurately estimat-ed 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 2011 United Power teChnoloGy96 Financial report Further Information

photo credits:

© Ignacio hennigs (page 12 f.)© www.dreamstime.com (page 14 f.)© Agus Sutanto (page 16 f.)© Christoph hurni (page 18 f.)

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

Phone: +49 6196 400 804 Fax: +49 6196 400910 Email: [email protected]

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