Report

on the audit of the domination and

profit and loss transfer agreement

between

Demag Cranes AG,

Düsseldorf, and

Terex Germany GmbH & Co. KG,

Dortmund

Convenience Translation

This document is a translation of the report

“Bericht über die Prüfung des Beherrschungs-

und Gewinnabführungsvertrags zwischen der

Demag Cranes AG, Düsseldorf, und der Terex

Germany GmbH & Co. KG, Dortmund“ which

was written in German. The translation was

performed by a professional translator.

I-ADVISE AG Wirtschaftsprüfungsgesellschaft

does not assume any responsibility for the

correctness of the translation. Only the German

version is authoritative for decision-making

purposes.

- I -

CONTENTS

1  Engagement and performance of engagement 1 

1.1  Engagement 1 

1.2  Performance of the engagement 1 

2  Subject and scope of the contract audit pursuant to Sec. 293b AktG

and Sec. 293e AktG 7 

3  Audit of the domination and profit and loss transfer agreement 9 

3.1  Content of the domination and profit and loss transfer agreement 9 

3.1.1  Contracting entities 9 

3.1.2  Control 9 

3.1.3  Profit transfer 10 

3.1.4  Loss assumption 10 

3.1.5  Guaranteed dividend 10 

3.1.6  Compensation 11 

3.1.7  Effectiveness and term 12 

3.1.8  Other 13 

3.1.9  Conclusion 13 

3.2  Comments pertaining to the calculation of an appropriate guaranteed

dividend pursuant to Sec. 304 AktG and appropriate compensation

pursuant to Sec. 305 AktG 14 

3.2.1  Method used to calculate appropriate compensation pursuant to

Sec. 305 AktG 14 

3.2.1.1  Dividend discount method and discounted cash flow

method 14 

3.2.1.2  Liquidation value and net asset value 15 

3.2.1.3  Comparative valuation 15 

3.2.1.4  Share price 16 

3.2.2  Method used to calculate an appropriate guaranteed dividend

pursuant to Sec. 304 AktG 16 

3.2.3  Appropriateness of the method used to calculate the guaranteed

dividend 17 

3.2.4  Particular difficulties in the valuation 17 

3.3  Audit of the business valuation of Demag Cranes 17 

- II -

3.3.1  Valuation object 17 

3.3.2  Valuation date 18 

3.3.3  Composition of net assets, equity and liabilities 19 

3.3.4  Analysis of historical earnings 20 

3.3.5  Planning 24 

3.3.5.1  Planning process 24 

3.3.5.2  Ratified planning projections as of June 2011 24 

3.3.5.3  Budget to actual analysis 26 

3.3.5.4  Revised planning projections as of January 2012 27 

3.3.5.5  Terminal value 30 

3.3.5.6  Financial result 31 

3.3.5.7  Corporate taxes 32 

3.3.5.8  Distribution ratio and personal income taxes 32 

3.3.5.9  Final assessment of the modified business plan 33 

3.3.6  Discount rate 33 

3.3.6.1  Risk-free rate 34 

3.3.6.2  Risk premium 35 

3.3.6.2.1  Market risk premium 36 

3.3.6.2.2  Beta factor 36 

3.3.6.3  Growth factor 41 

3.3.7  Discounting future earnings 43 

3.3.8  Special assets and non-operating assets 44 

3.3.9  Business value and value per share 45 

3.3.10  Sensitivity analysis 45 

3.3.11  Testing the plausibility of the business value using a comparative

market valuation and prior acquisitions 47 

3.3.11.1  Comparative market valuation 47 

3.3.11.2  Prior acquisitions 50 

3.4  Appropriateness of the cash compensation pursuant to Sec. 305

AktG 50 

3.4.1  Comparison with the average share price 50 

3.4.2  Assessing the appropriateness of the compensation 53 

3.5  Appropriateness of the guaranteed dividend pursuant to Sec. 304

AktG 53 

4  Conclusion 56 

 

- III -

List of abbreviations

AG Aktiengesellschaft: German stock corporation

AktG Aktiengesetz: German stock Corporation Act

BaFin Bundesanstalt für Finanzdienstleistungsaufsicht: Federal financial supervisory agency

BGH Bundesgerichtshof: Federal Court of Justice

BVerfG Bundesverfassungsgericht: German Federal Constitution Court

B.V. Besloten Vennootschap met beperkte aansprakelijkheid

CAGR Compounded annual growth rate

CAPM Capital Asset Pricing Model

CIT Corporate Income Tax

DB Der Betrieb: German business administration journal

DCC GmbH Demag Cranes & Components GmbH

DCF Discounted Cash Flow

DVFA Deutsche Vereinigung für Finanzanalyse und Anlageberatung e.V.

EBIT Earnings Before Interest and Tax

EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation

EBT Earnings Before Tax

EUR Euro

FAUB Fachausschuss für Unternehmensbewertung und Betriebswirtschaft des IDW: Technical committee for business valuations and commerce of the Institute of Public Auditors in Germany

FN-IDW Fachnachrichten des IDW

FC Forecast

FY Fiscal Year

- IV -

HFA Hauptfachausschuss beim Institut der Wirtschaftsprüfer Deutschland e.V.: Main technical committee of the Institute of Public Auditors in Germany

HGB Handelsgesetzbuch: German Commercial Code

IDW Institut der Wirtschaftsprüfer in Deutschland e.V.: Institute of Public Auditors in Germany

IDW S1 IDW Standard 1

IFRS International Financial Reporting Standards

ISIN International Securities Identification Number

KStG Körperschaftsteuergesetz

NPV Net Present Value

OLG Oberlandesgericht: German Regional Court of Justice

p.a. Per Annum

pp. Following pages

PPA Purchase Price Allocation

SG e.V. Schmalenbach-Gesellschaft Deutsche Gesellschaft für Betriebswirtschaft e.V.

Tax-CAPM Capital Asset Pricing Model (tax adjusted)

WACC Weighted Average Cost of Capital

WP-Handbuch Wirtschaftsprüfer-Handbuch

WpÜG Wertpapierübernahmegesetz

- V -

Annexes

Annex 1: Ruling of the Düsseldorf Landgericht (Regional Court) dated October 4, 2011 on the

appointment of I-ADVISE AG Wirtschaftsprüfungsgesellschaft, Düsseldorf, as the joint

contract auditer of the domination and profit and loss transfer agreement between

Demag Cranes AG and Terex Germany GmbH & Co. KG

Annex 2: Domination and profit and loss transfer agreement between Demag Cranes AG and

Terex Germany GmbH & Co. KG

Annex 3: General Engagement Terms for “Wirtschaftsprüfer and

Wirtschaftsprüfungsgesellschaften” [German Public Auditors and Public Audit Firms]

dated January 1, 2002

Note:

For technical reasons the following tables might contain rounding differences.

- 1 -

1 Engagement and performance of engagement

1.1 Engagement

1 Demag Cranes AG, Düsseldorf, (hereinafter referred to as “Demag Cranes”) and Terex

Germany GmbH & Co. KG, Dortmund, (hereinafter referred to as “Terex Germany”) intend to

conclude a domination and profit and loss transfer agreement with Demag Cranes as the

dependent corporation and Terex Germany as the controlling corporation. Düsseldorf

Regional Court instructed us, I-ADVISE AG Wirtschaftsprüfungsgesellschaft, to audit the

corporate agreement as a joint reviewer in accordance with Sec. 293b AktG [“Aktiengesetz”:

German Stock Corporation Act] in response to a joint petition of Demag Cranes AG and

Terex Germany GmbH & Co. KG with its ruling dated September 23, 2011, in conjunction

with its ruling dated October 4, 2011.

2 The subject of the audit is the domination and profit and loss transfer agreement, in

particular the appropriateness of the guaranteed dividend in accordance with Sec. 304 (1)

and (2) AktG, as well as of the cash compensation in accordance with Sec. 305 (1), (2) no. 3

and (3) AktG. In its ruling appointing the joint auditer (refer to annex 1 to this document), the

regional court also imposed further specifications relating to the content of the audit report

defining the subject of the audit and the report.

3 The appropriate cash compensation was defined based onthe expert opinion (“valuation

report”) and prepared by Ebner Stolz Mönning Bachem GmbH & Co. KG,

Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Stuttgart (hereinafter referred

to as “Ebner Stolz” or the “valuer”), mandated by Demag Cranes, determining the value of

Demag Cranes as at March 16, 2012.

4 The management board of Demag Cranes and the management of Terex Germany GmbH &

Co. KG have adopted in full the content of the valuation report dated January 30, 2012

issued by Ebner Stolz in accordance with the IDW Standard: Principles for the Performance

of Business Valuations (IDW S1) in its function as neutral valuer, and included it as an annex

to the transfer report.

1.2 Performance of the engagement

5 Following our appointment by the court, we conducted our audit in the period from October

4, 2011 to January 30, 2012 at the offices of Demag Cranes and at our own offices in

Düsseldorf. Our audit was carried out at the same time as the work of the valuer. We carried

out each of our audit activities immediately after interim results had been presented by the

valuer. We came to our conclusions independently and at our own initiative.

- 2 -

6 We interviewed the management board of Demag Cranes and other designated contact

persons, and discussed the interim results of the valuation with the valuer on an ongoing

basis. The following meetings were held with the valuer and representatives of Demag

Cranes:

Date Topic Participants

10/13/2011 Kick-off, Demag Cranes company presentation, valuation status, site inspection, Düsseldorf Benrath

Demag Cranes AG

Ebner Stolz

11/22/2011 Meeting regarding capitalization interest rate, beta factor, peer group

Ebner Stolz

11/23/2011 Presentation valuation model Ebner Stolz Ebner Stolz

11/29/2011 Market research, economic development of relevant markets, competitive environment

Demag Cranes AG

Ebner Stolz

11/29/2011 Development, current and strategic business development

Demag Cranes AG

Ebner Stolz

12/02/2011 Personnel planning Demag Cranes AG

Ebner Stolz

12/02/2011 Taxes, discussions of tax matters Demag Cranes AG

Ebner Stolz

12/05/2011 Historical performance and projections for the Industrial Cranes/Port Technologies division

Demag Cranes AG

Ebner Stolz

12/06/2011 Historical performance and projections for the Services division

Demag Cranes AG

Ebner Stolz

12/06/2011 Production process Demag Cranes AG

Ebner Stolz

12/07/2011 Purchase, terms and conditions, synergies Terex Demag Cranes AG

Ebner Stolz

12/07/2011 Treasury, group financing, minimum cash levels Demag Cranes AG

Ebner Stolz

12/09/2011 Business plan as of June 2011 and adjustments to business plan

Ebner Stolz

12/14/2011 Site inspection, Wetter (production and administration), inspection of administration, Wetter

Demag Cranes AG

Ebner Stolz

12/15/2011 Discussion of the planning as of June 2011 and planning adjustments

Ebner Stolz

12/16/2011 Sales, competitive environment Demag Cranes AG

Ebner Stolz

01/09/2012 Business plan as of January 2012 Ebner Stolz

- 3 -

Date Topic Participants

01/10/2012 Current performance, business plan, resolutions of the management board and the supervisory board, defining next steps

Demag Cranes, Freshfields, Hengeler Müller, Terex Corp., Warth & Klein

01/12/2012 Valuation model Ebner Stolz

01/17/2012 Capitalization interest rate, beta Ebner Stolz

01/23/2012 Business plan Services and Harbor Cranes divisions as of January 2012

Demag Cranes AG

Ebner Stolz

01/24/2012 Business plan Industrial Cranes division as of January 2012

Demag Cranes AG

Ebner Stolz

01/30/2012 Business plan Demag Cranes

Ebner Stolz

7 In the course of our audit we discussed all different opinions on various aspects with the

valuer. On completion of the valuation, we fully agreed with the valuer on the valuation and

its outcome. Accordingly, our audit report is not qualified in any regard and confirms in full

the appropriateness of the cash compensation.

8 Documents made available for our audit primarily consisted of the following:

The articles of incorporation and bylaws of Demag Cranes AG dated March 2, 2011,

Excerpt from the commercial register for Demag Cranes AG dated September 12,

2011,

Draft of the domination and profit and loss transfer agreement (annex 2),

Joint report issued by the management board of Demag Cranes AG and the

management of Terex Germany GmbH & Co. KG concerning the domination and

profit and loss transfer agreement, and multiple draft reports,

Expert opinion issued by Ebner Stolz Mönning Bachem GmbH & Co. KG dated

January 30, 2012 on the business valuation of Demag Cranes Aktiengesellschaft,

Düsseldorf, as of March 16, 2012,

Audit reports issued by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft on

the audit of the consolidated financial statements of Demag Cranes AG for fiscal years

2007/08 through 2009/10, prepared in accordance with International Financial

Reporting Standards (IFRS),

- 4 -

Audit reports issued by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft

concerning the audit of the annual financial statements of Demag Cranes AG for fiscal

years 2007/08 through 2009/10, prepared in accordance with German commercial

law,

Audit report issued by Warth & Klein Grant Thornton AG

Wirtschaftsprüfungsgesellschaft on the audit of the consolidated financial statements

of Demag Cranes AG for fiscal year 2010/11, prepared in accordance with

International Financial Reporting Standards (IFRS)

Audit report issued by Warth & Klein Grant Thornton AG

Wirtschaftsprüfungsgesellschaft on the audit of the annual financial statements of

Demag Cranes AG for fiscal year 2010/11, prepared in accordance with German

commercial law

Report issued by Warth & Klein Grant Thornton AG Wirtschaftsprüfungsgesellschaft

concerning the audit of the depending report issued by the management board of

Demag Cranes AG concerning its relations with affiliates for fiscal year 2010/11

Business plan of Demag Cranes for fiscal years 2011/12 through 2013/14

Business plan projections of Demag Cranes for fiscal years 2011/12 through 2015/16

as amended on September 29, 2011

Bid documents for the voluntary public takeover bid issued by Terex Industrial Holding

AG to the shareholders of Demag Cranes AG dated May 19, 2011, as well as the

improved public takeover bid issued by Terex Industrial Holding AG to the

shareholders of Demag Cranes AG dated June 16, 2011

Joint statement issued by the management board and supervisory board of Demag

Cranes AG in accordance with Sec. 27 WpÜG [“Wertpapiererwerbs- und

Übernahmegesetzes”: German Securities Acquisition and Takeover Act] dated May

31, 2011 and June 10, 2011 concerning the public takeover bid issued by Terex

Industrial Holding AG to the shareholders of Demag Cranes AG dated May 19, 2011,

including the fairness opinions issued by Deutsche Bank AG, Rothschild GmbH and

Lazard & Co. GmbH dated May 31, 2011 and June 16, 2011 included as annexes to

the statement

Minutes of the meetings and resolutions of the supervisory board and the

management of Demag Cranes AG

Documentation of the direct shareholding in Demag Cranes AG by Terex Industrial

Holding AG as of August 18, 2011 and October 27, 2011

- 5 -

Letter from the German Federal Financial Supervisory Agency (Bundesanstalt für

Finanzdienstleistungsaufsicht) dated September 22, 2011 concerning the weighted

average domestic share price of Demag Cranes AG in accordance with WpÜG as at

September 2, 2011, September 3, 2011, September 4, 2011, September 5, 2011,

September 6, 2011 and September 7, 2011

Working papers requested from the valuer as well as other documents received from

Demag Cranes AG and Terex Germany GmbH & Co. KG.

9 Furthermore, we have relied on publicly available information and data from the capital

markets.

10 All requested explanations and supporting documentation were provided to us by the

representatives of Demag Cranes AG and Terex Germany GmbH & Co. KG, as well as

contact persons appointed by the legal representatives. The management board of Demag

Cranes AG and the management of Terex Germany GmbH & Co. KG have signed a letter of

representation stating that all information and documents material to our audit of the

appropriateness of the cash compensation have been disclosed comprehensively and

accurately .These letters of representation are dated January 30, 2012.

11 Should there be any material changes in the net assets, financial position, or results of

operations, or any other basis used for the valuation of Demag Cranes AG in the period

between the conclusion of our audit on February 1, 2012 and the prospective date of March

16, 2012 on which the annual shareholder meeting of Demag Cranes AG passes a

resolution on the transfer of shares held by minority shareholders of Demag Cranes AG,

then these must still be considered in the measurement of the cash compensation as well as

the guaranteed dividend.

12 When conducting our audit we observed the IDW standard, as amended on April 2, 2008:

“Principles for the Performance of Business Valuations” (IDW S1). We also applied the

statement issued by the main technical committee of the IDW: On Auditing Mergers

Pursuant to Sec. 340b (4) AktG (Statement HFA 6/1988).

13 We expressly refer to the fact that we have not performed and auditof the accounting, the

financial statements, or the management of the entities involved. Such activities do not fall

under a audit of the appropriateness of the cash compensation. The compliance of the

company’s separate and consolidated financial statements with the relevant legal

requirements has been confirmed without qualification by the independent auditors for the

balance sheet dates September 30, 2008 through to September 30, 2011. We therefore

assume that the separate and consolidated financial statements are correct, and also comply

with accounting valuation requirements. The dependency report for fiscal year 2010/2011

refers to Demag Cranes’ relationship with Terex Germany GmbH & Co. KG. By issuing an

- 6 -

opinion pursuant to Sec. 313 (3) AktG, the auditor has confirmed that there are no

reservations following the final conclusion of its audit of the dependency report.

14 The “General Engagement Terms for 'Wirtschaftsprüfer und Wirtschaftsprüfungs-

gesellschaften' [German Public Auditors and Public Audit Firms]” dated January 1, 2002,

which are attached to this report as annex 3, apply to the performance of this engagement

and govern our responsibilities, also to third parties. In addition to the statutory limitation of

liability in Sec. 293d (2) AktG and Sec. 323 HGB [“Handelsgesetzbuch”: German

Commercial Code], the General Engagement Terms also govern our responsibilities toward

third parties. This report may not be used for any purpose other than the one stated above.

This restriction on use does not apply to publications and measures relating to preparations

for and the implementation of the annual shareholder meeting which is to decide on the

domination and profit and loss transfer agreement or relating to legal action taken against

Demag Cranes or Terex Germany GmbH & Co. KG in connection with the annual

shareholder meeting.

- 7 -

2 Subject and scope of the contract audit pursuant to

Sec. 293b AktG and Sec. 293e AktG

15 The subject and scope of the audit of the domination and profit and loss transfer agreement

are derived from Secs. 293b and 293e AktG. Pursuant to Sec. 293b (1) AktG, the subject of

our audit is the corporate agreement. The audit focuses on assessing the appropriateness of

the guaranteed dividend (Sec. 304 AktG) and cash compensation (Sec. 305 AktG). Specific

details of the audit report are derived from Sec. 293e (1) AktG. This stipulates that a contract

auditer must provide a written report on the results of its audit. The report on the audit

requires a declaration of whether the proposed guaranteed dividend and compensation are

appropriate. In the process, the audit report must include information on

Methods used to determine the guaranteed dividend and compensation,

Reasons why it was appropriate to apply these methods,

If more than one method has been applied, the respective guaranteed dividend or

compensation resulting from the various methods,

What weighting has been given to the various methods used to determine the

proposed guaranteed dividend or the proposed compensation and the figures on

which they are based, and

What special difficulties arose when valuing the contracting entities.

16 The appropriateness of the guaranteed dividend and the appropriateness of the

compensation can be assessed by examining the valuation of Demag Cranes, which was

used to determine the guaranteed dividend and compensation. The contract auditer is

required to investigate whether the valuer used recognized methods, the relevant

parameters were properly determined and the projected results appear plausible. If the

valuation is based on share prices, the calculation of the share price must be assessed.

17 If the company agreement requires the approval of the annual shareholder meeting, Sec.

293a AktG requires the management board to submit a detailed written report to each stock

corporation that is party to a company agreement containing a legal and economic

explanation and argumentation for concluding the corporate agreement, as well as the

details of the agreement itself (including the nature and amount of the guaranteed dividend

pursuant to Sec. 304 AktG and compensation pursuant to Sec. 305 AktG). The management

board of Demag Cranes and the management of Terex Germany GmbH & Co. KG issued a

joint contract report. Since the contract report dated January 30, 2012 explains and justifies

the level of the guaranteed dividend and compensation, we have used it as a significant

- 8 -

document for our assessment of the appropriateness of the guaranteed dividend and

compensation.

18 Based on the above information, we assessed in our function as auditer pursuant to Sec.

293b (1) AktG whether the cash compensation and guaranteed dividend set by Terex

Germany GmbH & Co. KG as the controlling company can be considered fair and

appropriate with regard to the circumstances of Demag Cranes AG at the time that the

annual shareholder meeting passed the resolution concerning the domination and profit and

loss agreement.

19 We verified all the key steps of the valuation, in particular the derivation of future

distributable cash flows, the determination of the discount rate, the discounting of future cash

flows to the valuation date and the values of special assets, and checked the same

mathematically using our own valuation model.

20 We particulary focused on the following items when reviewing the application of the dividend

discounted earnings value:

Assessing the plausibility of the planning projections,

Assessing the appropriateness of the valuation method applied, and the proper

application of IDW S1,

Assessing the appropriateness of the determination of the discount rate

21 As the valuation was also based on share prices, we assessed the calculation of those share

prices.

- 9 -

3 Audit of the domination and profit and loss transfer

agreement

3.1 Content of the domination and profit and loss transfer agreement

3.1.1 Contracting entities

22 Company names and business addresses of the contracting entities are listed in the

domination and profit and loss transfer agreement.

23 Demag Cranes and Terex Germany GmbH & Co. KG intend to conclude a domination and

profit and loss transfer agreement with Demag Cranes as the dependent company and

Terex Germany GmbH & Co. KG as the controlling company.

24 According to bank confirmations dated August 18, 2011 and October 27, 2011, Terex

Industrial Holding AG directly held 17,345,848 shares in Demag Cranes, or approximately

81.92% of its share capital. All of Terex Industrial Holding AG’s shares are held by Terex

Germany GmbH & Co. KG. The conclusion of a domination and profit and loss transfer

agreement in a multi-level group, as is the case with Demag Cranes and Terex Germany

GmbH & Co. KG, is permitted (see Emmerich/Habersack, Aktien- und GmbH Konzernrecht,

6th edition (2010), Sec. 304 No. 61). According to prevailing opinion, Terex Industrial Holding

AG is not considered to be a minority shareholder for the purposes of Secs. 304, 305 AktG, if

it is wholly owned by its controlling company (in this case Terex Germany GmbH & Co. KG)

or, as is also the case here, a profit and loss transfer agreement is in place between the

controlling company Terex Germany GmbH & Co. KG and the dependent company Terex

Industrial Holding AG (see Koppensteiner, Kölner Kommentar zum AktG, 3rd edition (2009,

Sec. 295 No. 42 with further references). Terex Industrial Holding AG therefore has no right

to demand either a guaranteed dividend or cash compensation.

3.1.2 Control

25 Pursuant to Sec. 1 of the domination and profit and loss transfer agreement, Demag Cranes

submits control of its company to Terex Germany GmbH & Co. KG. Accordingly, Terex

Germany GmbH & Co. KG is entitled to give instructions to the management board of

Demag Cranes with respect to the management of the company. However, Terex Germany

GmbH & Co KG may not instruct the management of Demag Cranes to modify, maintain or

terminate the agreement. This provision satisfies the requirements of Secs. 291 (1) sentence

1, 299 and 308 AktG.

- 10 -

3.1.3 Profit transfer

26 Sec. 2 of the domination and profit and loss transfer agreement requires Demag Cranes to

transfer its entire profits as provided for by commercial law and taking into account the

provisions of Secs. 300 no. 1 and 301 AktG to Terex Germany GmbH & Co. KG. Pursuant to

Sec. 2 of the agreement and in accordance with the statutory provisions of Sec. 301 AktG,

any net income generated for the year (excluding the transfer of profits) less any losses

carried forward from the prior year, the amount to be added to statutory reserves pursuant to

Sec. 300 AktG and the amount barred from distribution in accordance with Sec. 268 (8) HGB

is to be transferred as profit. Revenue reserves including those created over the term of the

agreement must be released and used to offset any net loss for the year or transferred as

profit upon the written request of Terex Germany GmbH & Co KG. The obligation to transfer

profit becomes due at the end of each fiscal year of Demag Cranes, and bears interest of 5%

p.a. from that date. These provisions satisfy the statutory requirements of Sec. 291 (1)

sentence 1, and Sec. 301 in conjunction with Sec. 300 no. 1 AktG.

3.1.4 Loss assumption

27 Pursuant to Sec. 3 of the domination and profit and loss transfer agreement, Terex Germany

GmbH & Co. KG is obliged to compensate any net loss Demag Cranes incurs, in accordance

with the relevant provisions of Sec. 302 AktG, in entirety and as amended insofar as said net

loss is not offset by the (partial) release of other revenue reserves which have been built up

during the term of the agreement in accordance with Sec. 272 (3) HGB. The obligation to

compensate the net loss for the year first applies to the fiscal year of Demag Cranes in which

the agreement becomes valid in accordance with Sec. 6 (2) of the domination and profit and

loss transfer agreement. Pursuant to this provision, this is the case once the agreement has

been entered into the commercial register of the offices of Demag Cranes following the

approval of the general shareholder meeting of Demag Cranes and the partner meeting of

Terex Germany GmbH & Co. KG.

3.1.5 Guaranteed dividend

28 Pursuant to Sec. 4 of the domination and profit and loss transfer agreement, Terex Germany

GmbH & Co. KG grants the minority shareholders of Demag Cranes an adequate

guaranteed dividend in the form of an annual cash payment. The guaranteed dividend

payment amounts to € 3.33 (gross guaranteed dividend) per non-par value share in Demag

Cranes less corporate income tax and solidarity surcharge in accordance with the applicable

tax rate for the fiscal year concerned. This deduction is to be calculated only on the pro rata

guaranteed dividend of € 1.83 per share resulting from profits which are subject to German

- 11 -

corporate income tax and the solidarity surcharge. Based on the circumstances in place at

the time when the agreement was concluded, resulting in a net guaranteed dividend of

€ 3,04 per no-par value share in Demag Cranes for the full fiscal year 2011/2012. The

adjustment of the annual guaranteed dividend to the relevant corporate income tax rate for

the fiscal year in question is based on a ruling by the BGH (German Federal Court of

Justice) (the “Ytong ruling” of July 21, 2003, II-ZB-17/01). If the agreement terminates during

a fiscal year of Demag Cranes or if, during the term of the agreement, Demag Cranes has an

abbreviated fiscal year, the guaranteed dividend shall be reduced pro rata temporis.

29 Pursuant to Sec. 4 (2) sentence 2 of the agreement, the guaranteed dividend becomes due

on the first banking day following the annual shareholder meeting of Demag Cranes for the

preceding fiscal year. Pursuant to Sec. 4 (3) of the agreement, the guaranteed dividend is

granted beginning with the fiscal year of Demag Cranes in which the agreement takes effect.

30 If the share capital of Demag Cranes is increased by way of conversion of the company’s

funds in return for the issuance of new shares, Sec. 4 (4) sentence 1 of the domination and

profit and loss transfer agreement stipulates that the guaranteed dividend per share shall

decrease in such a way that the total amount of the guaranteed dividend for each fiscal year

remains unchanged. If the share capital of Demag Cranes is increased by means of a

contribution in cash or in kind, the rights pursuant to Sec. 4 (4) sentence 2 of the agreement

shall also apply to the shares resulting from the capital increase subscribed to by minority

shareholders.

31 In the event that proceedings concerning the adequacy of the guaranteed dividend

(Spruchverfahren) pursuant to the German Act on Appraisal Proceedings

(Spruchverfahrensgesetz) are initiated and the court determines a higher guaranteed

dividend by non-appealable decision, the minority shareholders shall be entitled to request a

corresponding supplement to the guaranteed dividend they have received, even if they have

already tendered their shares in return for compensation pursuant to Sec. 5. Likewise, all

minority shareholders shall be treated equally if Terex Germany GmbH & Co. KG, in a

settlement to avert or terminate proceedings concerning the adequacy of the guaranteed

dividend (Spruchverfahren), agrees to a higher guaranteed dividend vis-à-vis a minority

shareholder of Demag Cranes.

32 The provisions governing the guaranteed dividend comply with Sec. 304 AktG.

3.1.6 Compensation

33 Pursuant to Sec. 5 of the domination and profit and loss transfer agreement, Terex Germany

GmbH & Co. KG undertakes to acquire the shares of any minority shareholder of Demag

Cranes in return for a cash compensation of € 45,52 per no-par value share upon request.

- 12 -

34 Sec. 5 (2) imposes a time limit on Terex Germany GmbH & Co. KG’s obligation to acquire

the shares. Said time limit expires two months after the date on which the entry of the

agreement into the commercial register of Demag Cranes has been announced in

accordance with Sec. 10 HGB.

35 If an application has been submitted for the determination of the guaranteed dividend or

compensation by means of a special appraisal appeal, this period shall expire no sooner

than two months after the date on which the decision on the last motion ruled on has been

announced in the electronic version of the federal gazette [“elektronischer Bundesanzeiger”].

36 If, by the expiration of the aforementioned time period, the share capital of Demag Cranes is

increased by way of conversion of the company’s funds in return for the issuance of new

shares, the cash compensation per share shall decrease in such a way that the sum total of

compensation for all shares remains the same. If, by the expiration of the time period, the

share capital of Demag Cranes is increased by means of a contribution in cash or in kind,

the rights arising from Sec. 4 (4) sentence 2 of the domination and profit and loss transfer

agreement shall also apply to the shares resulting from the capital increase subscribed to by

minority shareholders.

37 The provisions governing the compensation comply with Sec. 305 AktG.

3.1.7 Effectiveness and term

38 Pursuant to Sec. 6 (2) of the agreement, the agreement takes effect following the approval of

the annual shareholder meeting of Demag Cranes and the approval of the partner meeting of

Terex Germany GmbH & Co. KG, and its subsequent entry into the commercial register at

the offices of Demag Cranes. The obligation to transfer profit pursuant to Sec. 2 and the

obligation for the assumption of losses pursuant to Sec. 3 shall apply retroactively for the

fiscal year of Demag Cranes in which the agreement takes effect upon its entry into the

commercial register at the offices of Demag Cranes.

39 The domination and profit and loss transfer agreement is one of the items to be brought

before the annual shareholder meeting of Demag Cranes on March 16, 2012. The partner

meeting of Terex Germany GmbH & Co. KG granted its approval on January 30, 2012.

40 The agreement is concluded for an indefinite period, and pursuant to Sec. 6 can be

terminated in writing subject to a period of notice of six months prior to the end of a fiscal

year of Demag Cranes provided the end of said fiscal year comes at least five years after the

beginning of the fiscal year in which the agreement takes effect.

41 Pursuant to Sec. 6 (4) sentence 1 of the agreement, each party may terminate the

agreement for good cause without notice. According to the wording of the domination and

- 13 -

profit and loss transfer agreement, good cause includes but is not limited to cases in which

Terex Germany GmbH & Co. KG and affiliates of Terex Germany GmbH & Co. KG for the

purposes of Sec. 15 AktG no longer hold the majority of the voting rights attached to the

shares in Demag Cranes, or, alternatively, Terex Germany GmbH & Co. KG and/or affiliates

of Terex Germany GmbH & Co. KG have undertaken to surrender the majority of the voting

rights attached to the shares in Demag Cranes. Termination may be effected without notice

at any time between entering into such an obligation and surrendering the majority of the

voting rights resulting from the shares in Demag Cranes or at the end of the fiscal year of

Demag Cranes in which the obligation is entered into or the voting rights are surrendered.

3.1.8 Other

42 Terex Germany GmbH & Co. KG is under the indirect control of Terex Corp. By means of a

letter of comfort dated January 30, 2012, Terex Corp. has undertaken vis-à-vis Demag

Cranes and Terex Germany, without any restrictions and irrevocably, to ensure that Terex

Germany GmbH & Co. KG is managed and financially supported in such a manner that it is

at all times in a position to fulfill all of its obligations with regard to Demag Cranes and its

minority shareholders resulting from the domination agreement. Furthermore, in the letter of

comfort Terex Industrial Holding has given the minority shareholders of Demag Cranes with

claims against Terex Germany GmbH & Co. KG resulting from the domination and profit and

loss transfer agreement between Terex Germany GmbH & Co. KG and Demag Cranes an

unrestricted and irrevocable guarantee that Terex Germany GmbH & Co. KG will fulfill all of

its obligations based on the domination and profit and loss transfer agreement, including but

not limited to the obligation to pay the guaranteed dividend and compensation.

3.1.9 Conclusion

43 As a result of our audit, we have found that the domination and profit and loss transfer

agreement dated January 30, 2012 contains full and proper provisions required by Sec. 291

ff. AktG, and therefore complies with statutory provisions.

- 14 -

3.2 Comments pertaining to the calculation of an appropriate guaranteed

dividend pursuant to Sec. 304 AktG and appropriate compensation

pursuant to Sec. 305 AktG

3.2.1 Method used to calculate appropriate compensation pursuant to Sec. 305

AktG

44 Pursuant to Sec. 305 (3) sentence 2 AktG, appropriate compensation must take into account

the situation of the company on the date the general shareholder meeting passes the

resolution on the domination and profit and loss agreement. Generally, the various methods

described below can be used to determine appropriate compensation.

3.2.1.1 Dividend discount method and discounted cash flow method

45 The value of a commercial enterprise’s equity is based on the uncertain future cash flows

expected by the providers of equity. This manner of business value can therefore be

calculated as the present value of all future net profits or losses made by the company. The

principles for performing this kind of forward-looking business valuation are set out in IDW

Standard S 1. In order to calculate the appropriate level of compensation, the business value

was first calculated using the dividend discount method pursuant to IDW S1. The principles

established by this standard, particularly the explanation of the dividend discount method,

reflect the prevailing opinion in the professional literature and business valuation practice.

The dividend discount method is also recognized by the courts in Germany. We therefore

consider the use of the dividend discount method in this case to be fundamentally

appropriate. Using this method, the value of the business is found using the risk-appropriate

discounting of anticipated future dividends paid by the company to its shareholders.

46 Pursuant to IDW S1, the discounted cash flow (DCF) method can also be used to value a

business in addition to the dividend discount method. When using the DCF method as it is

usually applied in practice (the “gross”, “entity”, “enterprise” or “WACC” approach), the total

present value of the company’s operations is first calculated. The value of equity is then

derived from the total present value by deducting net financial liabilities. Both the dividend

discount method and the DCF method are based on present value calculations and therefore

on the same conceptional basis. Where the assumptions or simplifications are the same,

both methods lead to the same result. It is therefore fully adequate to omit an alternative

valuation using the DCF method.

47 The net present value of forecast future cash flows as determined using the dividend

discount method only includes those elements that are accurately presented by means of

cash flows. Value-added factors which cannot be represented as cash flows, or very

incompletely so, must be valued separately. This may be the case, for example, with regard

- 15 -

to non-operating assets. We consider the application of the dividend discount method

subject to the potential inclusion of separately valued assets to be appropriate unless a

valuation based on the methods described in the following gives a higher level of

compensation.

3.2.1.2 Liquidation value and net asset value

48 In both the dividend discount and DCF method, the value of a business is derived from the

discounted future cash flows of the company as a going concern. On the other hand, the

liquidation value gives the cash flow from the liquidation of the business. The net asset value

comprises the total of all outgoing payments that would be required to replicate the business.

49 After making a rough estimate of the liquidation value, the valuer came to the conclusion that

the business value of Demag Cranes calculated using the dividend discount method is much

higher than the liquidation value. We verified this rough calculation, and were satisfied that

the liquidation value does not exceed the equity value. We also verified the fact that

liquidation in the form of the proper winding up of operations would lead to much lower

values than the continuation of the business as a going concern.

50 The calculation of the net asset value based on procurement gives the replacement value of

the business, which is only partially due to the customary absence of intangible assets. Net

asset value by itself has no bearing on the calculation of the aggregate value of a going

concern. It is therefore appropriate that the valuer did not calculate the net asset value.

3.2.1.3 Comparative valuation

51 In the interest of plausibility it is customary practice to determine an indicative value or range

of values using earnings multipliers that are considered usual for the industry in question.

Such valuations rely on a careful analysis of past earnings and also the expected future

earnings of the valuation object. Additionally, the earnings multipliers must be derived from

an analysis of the valuations of comparable entities. Such multiplier-based valuations only

constitute simplified valuations of future earnings. For this reason, a comprehensive analysis

using the dividend discount method, as performed in this case, is to be preferred. The valuer

merely conducted a comparative market valuation in order to test the plausibility of the

results of the valuation using the dividend discount method (please refer to section 3.3.11).

- 16 -

3.2.1.4 Share price

52 The shares of Demag Cranes are publicly listed. It is therefore possible to determine the

compensation based on the share price. In the opinion of the German Federal Constitutional

Court (ruling of April 27, 1999, BVerf- GE 100, 289), the share price is always the lower limit

for the compensation of minority shareholders in connection with company agreements and

integrations. In its ruling dated March 12, 2001 (II ZB 15/00, DB 2001, p. 969 ff.) on

domination and profit and loss transfer agreements, the German Federal Court of Justice

(BGH) decided that the average share price for the three months prior to the annual

shareholder meeting passing the resolution should be used. In its ruling dated July 19, 2010

(AG 2010, p. 629 ff.) the Federal Court of Justice ruled that the compensation paid to

squeeze-out minority shareholders must be based on the weighted average share price over

a three-month period prior to announcement of the structural action. The calculation of the

average is intended to eliminate random effects and short-term distortions. We consider it to

be appropriate to base this on an average share price that is weighted by the volume of

shares traded. Sec. 5 (1) of the bidding regulations for WpÜG determines that counter-

performance in the case of a takeover bid must at least correspond to the average price of

the shares in the target for the three months prior to the announcement of the restructuring

measure.

53 We give our opinion in section 3.4 on whether legal precedent concerning the relevance of

the share price was taken into adequate account when determining the compensation,

whether the share price needs to be rolled forward and the relationship between the

business value calculated using the dividend discount method and the average share price.

3.2.2 Method used to calculate an appropriate guaranteed dividend pursuant to

Sec. 304 AktG

54 Pursuant to Sec. 304 (1) sentence 1 AktG, a profit and loss transfer agreement must provide

for an appropriate guaranteed dividend for the minority shareholders in the form of a

recurring payment based on the respective portion of share capital. Sec. 304 (1) sentence 1

AktG also applies to domination and profit and loss transfer agreements.

55 According to Sec. 304 (2) sentence 1 AktG a guaranteed dividend for minority shareholders

must assure an annual payment of at least the amount that would likely be available as the

average profit distribution per share based on the profit performance of the company to date

and its profits projections for the future taking account of appropriate depreciation and

impairments, however without creating other revenue reserves. This requires a projection of

the average distributable profits.

- 17 -

3.2.3 Appropriateness of the method used to calculate the guaranteed dividend

56 Earnings forecasts were carried out for several years and on a long-term basis as part of the

business valuation using the dividend discount method. Various methods can be considered

for determining the legally required average value. From a mathematical perspective, we

consider it appropriate to first convert the discontinuous earnings forecasts into a net present

value, and then to calculate average earnings as a continuous value by transforming this net

present value into a perpetuity. Because the guaranteed dividend was calculated by

compounding the business value, we consider the method applied to be appropriate.

3.2.4 Particular difficulties in the valuation

57 No particular difficulties for the purposes of Sec. 293e (1) sentence 2 no. 3 AktG arose in

connection with the valuation of Demag Cranes.

3.3 Audit of the business valuation of Demag Cranes

3.3.1 Valuation object

58 Demag Cranes has its registered offices in Düsseldorf and is entered in the commercial

register of Düsseldorf Amtsgericht (District Court) under HRB no. 54517.

59 According to its articles of incorporation and bylaws, the purpose of the company is to

manage a group of companies primarily involved in developing, planning, manufacturing,

distributing and marketing machines, equipment, other goods and the performance of

services in the field of transportation and harbor technology, including cranes, automated

harbor systems and similar products including their components and corresponding software

solutions. Said management also includes performing services for companies belonging to

the group.

60 The fiscal year of Demag Cranes begins on October 1 and ends on September 30 of every

calendar year.

61 The share capital of Demag Cranes amounts to € 21,172,993.00 and is split into 21,172,993

bearer shares. Each no-par value share assigns the bearer one voting right. The annual

shareholder meeting on March 2, 2011 authorized the management board to increase the

share capital once or in several installments up until March 1, 2016 by up to a total amount

of € 10,586,496.00 with the approval of the supervisory board, by issuing new no-par value

bearer shares in return for contributions in cash or in kind. The shareholders’ statutory

- 18 -

subscription right (authorized capital) can be precluded. To date, the management board has

not made use of this authorization to increase the share capital.

62 The shares of Demag Cranes are admitted for official trading on the regulated market of the

Frankfurt Stock Exchange (General Standard), the Düsseldorf stock exchange and electronic

trading on the Xetra exchange. The shares are traded under ISIN DE000DCAG010. The

shares are also traded over the counter on the stock exchanges in Berlin, Stuttgart, Munich

and Hamburg.

63 According to the deposit confirmations dated August 18, 2011 and October 27, 2011, Terex

Industrial Holding AG directly held 17,345,848 shares in Demag Cranes, or approximately

81.92% of its share capital. All of Terex Industrial Holding AG’s shares are held by Terex

Germany GmbH & Co. KG.

3.3.2 Valuation date

64 The ordinary annual shareholder meeting of Demag Cranes to be convened on March 16,

2012 is scheduled to pass a resolution on the domination and profit and loss transfer

agreement. For this reason, March 16, 2012 has been chosen as the cut-off date for

valuation. The valuer has discounted the projected dividends as at the technical end of the

fiscal year, October 1, 2011, directly using the discount rate as of the valuation cut-off date.

These projected dividends are the basis for the deduction of the guaranteed dividend.

65 The results of the fiscal year 2011/2012 have been discounted by rounding to full Euros. The

guaranteed dividend is calculated consistently by annuitizing of the business value as per

October 1, 2012, using the interest rate for a full year.

- 19 -

3.3.3 Composition of net assets, equity and liabilities

66 The net assets of the Demag Cranes Group pursuant to IFRS can be summarized for the

year 2010/11 as follows:

BALANCE SHEET 2010/11

€ million

A S S E T S

Non-current assets

Goodwill 120.5 13.5%

Other intangible assets 42.9 4.5%

Property, plant and equipment 119.0 13.3%

Financial assets 28.0 3.3%

Deferred tax assets 23.9 2.7%

Total current assets 334.3 37.3%

Current assets

Inventories 231.5 25.9%

Trade receivables 193.3 21.6%

Other financial assets 28.2 3.2%

Cash and cash equivalents 107.6 12.0%

Total current assets 560.6 62.7%

Total assets 894.9 100.0%

E Q U I T Y A N D L I A B I L I T I E S

Equity

Subscribed capital 21.2 2.4%

Capital reserves 190.9 21.3%

Other reserves 36.5 4.1%

Equity interest of Demag Cranes’ shareholders 248.6 27.8%

Minority interests in equity 1.4 0.2%

Total shareholders’ equity 250.0 27.9%

Provisions

Provisions for pensions and similar obligations 1432 16.0%

Other provisions 45.5 5.1%

Total provisions 188.7 21.1%

Liabilities

Financial liabilities 127.3 14.2%

Trade payables 147.4 16.5%

Other liabilities 175.9 19.7%

Deferred tax liabilities 5.6 0.6%

Total liabilities 456.2 51.0%

Total equity and liabilities 894.9 100.0%

- 20 -

67 Other intangible assets totaling € 42.9 million consist of brands, patents, capitalized

development expenses for projects that have been initiated and completed, software and

other intangible assets. Development expenses totaling € 5.5 million were capitalized in

fiscal year 2010/11, relating to the harbor technology and industrial cranes segments.

68 Goodwill of € 120.5 million and brands, carried at € 27.3 million as of September 30, 2011,

were recognized primarily in conjunction with former acquisitions.

69 Demag Cranes’ interest-bearing liabilities include pension provisions totaling € 143.2 million

and liabilities to banks totaling € 127.3 million. These are offset by cash and cash

equivalents totaling € 107.6 million.

3.3.4 Analysis of historical earnings

70 An analysis of historical earning is of fundamental importance for projecting future

developments and for assessing the plausibility of the projections.

71 To assess the current earnings power of the company and the plausibility of the business

plan, the earnings for fiscal years 2007/08 through 2010/11 were taken from the audited

consolidated financial statements of Demag Cranes (which were prepared in accordance

with IFRS) and have been analyzed. Expenses and income were broken down and

explained in order to reveal the profit drivers of past performances. Additionally, we also took

the controlling figures of Demag Cranes used for internal purposes into consideration.

Accordingly we verified the plausibility of the analyses carried out by Ebner Stolz. In order to

make sure that the planning projections and past results are comparable, the valuer adjusted

the past results for extraordinary, non-recurring factors or factors relating to other periods.

Because the valuation of a business using the dividend discount method is based entirely on

the discounting of future potential earnings, adjusting past results has no immediate impact

on the value but serves purely as a basis for testing the plausibility of projections.

- 21 -

72 The following income statements for fiscal years 2007/08 through 2010/11 show the EBIT of

the Demag Cranes Group in accordance to IFRS, and the calculation of adjusted EBIT

based on this figure (hereinafter referred to as “EBIT”).

Income statements for Demag Cranes

€ million 2007/

08 2008/

09 2009/

10 2010/

11

Revenue 1,225.8

1,047.6

931.3 1,062

.3

Cost of sales -864.3

-797.8

-686.3

-754.2

Gross profit 361.5 249.7 244.9 308.1

Selling expenses -138.2

-139.3

-126.4

-152.1

Development expenses -19.7 -27.6 -16.9 -16.3

Administrative expenses -76.2 -74.2 -59.5

-101.5

Other operating income 26.6 15.8 17.5 15.1

Other operating expenses -20.6 -13.3 -13.4 -12.5

Income from equity investments 2.5 2.0 4.0 3.2

EBIT (before adjustments) 135.8 13.2 50.2 43.9

Adjustments:

Restructuring costs - 49.1 0.6 -1.8

Expenses relating to the takeover by Terex - - 0.0 31.0

Other adjustments 6.9 0.1 2.1 1.4

Adjustments: 6.9 49.2 1.5 30.7

EBIT (adjusted) 142.7 62.4 51.7 74.5

73 The valuator has identified and adjusted extraordinary and aperiodic items. The adjustments

comprise the neutral result as reported in the consolidated financial statements of the

reference period to derive the operating earnings before interest and taxes and relate to

restructuring expenses, costs arising from the acquisition by Terex and other eliminations.

We verified these adjustments based on the audit reports made available to us along with

supporting documents and information.

74 In the following we provide details of the amendments to past results in accordance with the

ruling of Düsseldorf Regional Court dated October 4, 2011. The signs in front of the figures

comply with the effect of the eliminations.

- 22 -

Restructuring costs € million 2007/

082008/

092009/

10 2010/

11

Severance payments - 23.6 - -

Paid leave - 2.0 - -

Employment and qualification company - 5.9 - -

Onerous contracts - 2.9 - -

Dismantling costs - 0.3 - -

Valuation allowances on non-current assets - 8.3 - -

DCC GmbH (contra-account to Donati) - - -0.7 -

Changes in valuation of inventories and raw materials, consumables and supplies - - 7.5 -

Other HR measures - 1.9 - -

Reversal of the provision for HR measures & hardship fund - - -6.3 -1.1

Provision for future consulting fees - 2.7 - -

Provision for past consulting fees - 1.5 - -

Reversal of the provision for consulting fees and representative - - -1 -

Other - - -0.1 -0.6

Total restructuring expenses -0.0 49.1 -0.6 -1.8

75 The negative effects of the financial and economic crisis, and restructuring expenses already

incurred, had a substantial impact on earnings after taxes in fiscal 2008/09. Expenses

amount to € 49.1 million mainly consist of severance payments, costs for an employment

and qualification company, valuation allowances for non-current assets, consulting fees and

onerous contracts.

Cost of the takeover by Terex

€ million 2007/08

2008/09

2009/10

2010/11

Assessment of takeover bids - - - 19.9

Management board severance payments - - - 8.5

Refinancing - - - 1.8

Provision for tax field audit - - - 0.9

Total cost of the takeover by Terex 0.0 0.0 0.0 31.0

- 23 -

76 The takeover by Terex resulted in expenses requiring an adjustment totaling € 31.0 million in

fiscal year 2010/11. The item “assessment of takeover bids” includes expenses for legal and

consulting fees as well as the cost of having selected banks prepare fairness opinions.

Other adjustments

€ million 2007/08

2008/09

2009/10

2010/11

PPA-related write-downs 5.4 1.6 1.6 1.2

Severance payments - 3.7 0.9 -

Refinancing expenses - - 0.6 -

Office containers - - 0.2 0.2

Remodelling of building A - - 1.0 -

Other integration expenses - - 0.2 -

Proceeds from the sale of real estate in Australia -0.9 - - -

Proceeds from the sale of the Rail Cranes business unit -2.9 - - -

Other adjustments 0.1 -0.2 - 0.1

Acquisition expenses - - - 1.2

Reversal of provisions in connection with the collective

bargaining agreement on restructuring -1.3 - - -

Reversal of the provision for the potential

contamination of "Plant 1" -1.3 - - -0.6

(Net) expenses in connection with the new collective bargaining agreement for DCC GmbH 4.2 - - -

Provision in connection with the FlexÜ collective bargaining

agreement 4.8 - - -

Reversal of provisions in connection with the FlexÜ collective

bargaining agreement - -4.8 - -

Reversal of the provision for warranties in

connection with the "Madrid Airport" project -2.0 - - -

Reversal of the “Other” provision -0.2 -0.2 -1.5 -3.2

Amortization of capitalized architects’ fees - 0.5 - -

Expenses in connection with

insurance benefits - - 2.5 -

Insurance indemnifications - - -2.8 -

Investment subsidies - - 0.0 -0.7

Exchange rate gains -15.5 -12.7 -11.1 -8.9

Exchange rate losses 15.8 11.6 10.2 12.2

Income from the disposal of non-current assets -0.7 -0.3 -0.1 -0.1

Losses on the disposal of non-current assets 1.4 0.8 0.4 0.1

Total other adjustments 6.9 0.1 2.1 1.4

77 The valuer eliminated the expenses and income reported in the consolidated financial

statements of Demag Cranes in the non-operating result as part of the adjustment of past

results. The adjusted expenses relate to circumstances that are neither listed in the Public

- 24 -

Auditors‘ Code of Practice (WP-Handbuch, A nos. 246 – 248) as requiring adjustment or

extraordinary in accordance of Sec. 277 (4) HGB, nor do they require adjustment for the

calculation of results per share in accordance with DVFA/SG e.V. (DB 1998, pp. 2537) to be

able to deduce an objective standard of comparison for the assessment of a company’s

profitability. These expenses comprise rationalization and restructuring expenses,

redundancy costs and extraordinary write-downs. However, pursuant to the

recommendations for calculating projectable results issued by the DVFA/SG e.V. working

group, these items would require adjustment (as in this case) because they are not usually

planned for the future (DB 2003, pp. 1913)

78 In our opinion, the necessary analyses and adjustments of past results have been performed

properly. Our audit also did not identify any other factors requiring adjustment.

3.3.5 Planning

3.3.5.1 Planning process

79 According to the information provided to us, the planning process at Demag Cranes always

begins in spring and ends in fall each year. Detailed operating projections are prepared for

each individual entity on the basis of budgeted figures. The main relevant planning

parameters as well as macroeconomic parameters such as exchange rates, rates of inflation

and interest rates are set at group level. Up until September 2011 the planning horizon was

five years.

80 Following the subsequent ratification by the management board, the planning projections are

submitted to the supervisory board for approval. At its meeting held on January 12, 2012, the

supervisory board agreed to the management board’s proposal to shorten the planning

horizon to three years. The planning was updated in December 2011 and January 2012 to

reflect new knowledge obtained from the ongoing development of business since

assumptions were set in February 2011 and the planning projections dated June 2011

werefinalized. Moreover, it was updated to reflect expected values instead of targets.

3.3.5.2 Ratified planning projections as of June 2011

81 The planning of Demag Cranes as of June 2011 prepared on the basis of the assumptions

issued in February and approved by the management board on September 12, 2011, can be

summarized as follows:

- 25 -

Planning as of June 2011 2011/12 2012/13 2013/14 2014/15 2015/16

€ million Proj. Proj. Proj. Proj. Proj.

Revenue 1,100.0 1,301.0 1,516.6 1,716.3 1,898.7

Cost of sales -739.0 -881.9 -1,035.7 -1,170.5 -1,298.0

Gross profit 361.0 419.1 480.9 545.8 600.7

Selling expenses -167.8 -177.9 -190.5 -202.7 -215.1

Development expenses -20.9 -22.4 -25.1 -23.2 -24.8

Administrative expenses -69.6 -72.3 -74.5 -77.5 -80.1

Other operating income less other operating expenses

0.1 0.1 0.1 0.2 0.4

Result from shares valued at equity

3.3 3.4 3.6 3.9 4.2

EBIT 106.1 150.0 194.6 246.6 285.3

82 The company’s planning projections consist of projected income statements, projected

balance sheets and financial requirements projections for the years 2011/12 through

2015/16. Demag Cranes consists of 3 segments: Industrial Cranes, Harbor Technology and

Services. The earnings projections of Demag Cranes take into account all affiliates

consolidated in full or using the equity method. All fully consolidated affiliates with the

exception of TBA B.V. are wholly owned, either directly or indirectly, by Demag Cranes. The

shares in entities consolidated using the equity method relate to the 50% of the shares held

in MHE-Demag (S) Pte. Ltd. Reported minority interests relate to TBA B.V., in which Demag

Cranes holds a 69.8% share.

83 Underlying assumptions were set for the entire group in February 2011. The group entities

were informed that all figures should at least meet prior year’s business plan. In the event of

figures falling short of the previous year’s amounts the planner was required to give detailed

reasons why this was the case.

84 The management board of Demag Cranes ratified the five-year plan on September 12, 2011

and submitted it to the supervisory board on September 28, 2011. At the same time, the

management board explained that the planning reflects the extent of their knowledge in June

2011, and that it therefore does not include the impact of deteriorating market conditions and

increasing competition. For example, the company has not yet been able to conclude

contracts for some of the growth drivers included in the planning, such as major mobile

harbor projects. The poor economic environment impacting sales prices also affected

revenues. As a result of the ongoing acceleration of economic cycles, the management

board resolved with the approval of the supervisory board on January 12, 2012 to reduce the

rolling budget and medium-term planning horizon to three years. The budget for the years

2014/15 and 2015/2016 finalized in June 16 therefore is no longer part of the relevant

planning. The planning as of June 2011 ratified in September 2011 was explained by the

management of Demag Cranes and analyzed by us and the valuer.

- 26 -

85 According to the planning projections as of June 2011 Demag Cranes expects revenues to

grow by 12.3% p.a. starting in 2010/11. The growth in revenues is expected to be based on

an anticipated generally positive economic development as well as a significant sales growth

in all three divisions of Demag Cranes. For the financial years 2011/12 as well as 2012/13

Demag Cranes has planned to launch new products in the industrial cranes division in the

mid market segments in China and India which are planned to be manufactured locally.

Significant competition and time lags regarding the implementation of new products into new

markets can be observed today already. Significant growth in revenues has been projected

for the port technology division, among other factors due to the expansion of the bulk

material segment. As of today, necessary products for the bulk material segment are still to

be further developed. Relevant contracts with customers have not been signed yet. In

addition Demag Cranes assumes that the revenue level reached due to an expected major

project in the automation system can be maintained at a constant high level. Revenues

projected for the services’ division are based on strategic projects accompanied by

increasing margins. Demag Cranes also plans an extension of the services offered for third

party cranes even though selling spare parts to those customers will not be possible. Demag

Cranes is anticipating the expansion of service locations in the USA as well as increasing

revenues as a result of the “under the hook” project.

86 The valuer came to the same conclusion as the company’s management, namely that the

planning from June 2011 reflects ambitious targets rather than anticipated values. Our

analysis of the planning confirmed that the opportunities presented by future developments

are given excessive weighting, while the risks are underestimated. In particular the

competitive situation and its influence on the development of prices and quantities has not

been sufficiently weighted. As a basic requirement of a valuation, expected values need to

equally reflect both, opportunities and risks. Therefore the planning projections were revised

in accordance with IDW S1 No. 90 in December 2011 and January 2012 in order to arrive at

realistic anticipated values. On the basis of our audit, we have come to the conclusion that

the planning projections require amendments in order to derive expected values of future

earnings.

3.3.5.3 Budget to actual analysis

87 In addition to analyzing past results, the valuer compared the adjusted actual results for the

years 2007/08 through 2010/11 with the original planning projections for the respective

periods in order to assess the accuracy of the company’s planning. We verified this analysis.

- 27 -

88 The following figure provides a comparison of projected and actual EBIT figures:

89 The business plan as of September 2007 shows moderate growth for year one of the

planning period and is outperformed in the first year. The business plan dated September

2008 extrapolates the positive development of the previous year. The adjusted operating

results of fiscal year 2008/09 failed to meet the ambitious plans. Due to an increased

uncertainty caused by the financial crisis the management projected decreasing profits for

the following two years which did not materialize in full.This business plan again, set up in

the middle of the financial crisis, projected an above-avarage growth after three years.

Overall, all business plans are characterized by higher growth rates in the long-term

compared to the short-term periods.

90 Actual planning results in the last two fiscal years have exceeded projections but budgets for

both years are characterized by negative, respectively minor growth rates. In the periods

analyzed 3-years-planning projections have never been met. Instead significant negative

budget to actual variances occurred.

3.3.5.4 Revised planning projections as of January 2012

91 In the following we present the findings of our audit of the plausibility of the business plan on

which the valuation was based.

92 To value future development after the three-year planning horizon, the valuer has developed

a forecast model to present the expected business development up until the year 2015/16 on

the basis of assumptions agreed on with the management board of Demag Cranes

(“planning as of January 2012”).

- 28 -

93 On the basis of our audit, we can confirm the conclusion drawn by the valuer, namely that

the planning projections needed to be revised in order to arrive at projected values of future

earnings.

94 Pursuant to IDW S1 No. 34, only “non-genuine” synergy effects are to be used to determine

the objectified enterprise value. Non-genuine synergies are characterized by the fact that

they can be materialized even if the measures underlying the reason for the valuation do not

occur. It is therefore important to make a distinction between synergies in place before the

company agreement and those following it. Precontractual synergies can be realized without

concluding a domination and profit and loss transfer agreement, while contractual synergies

can only be realized following the conclusion of a company agreement between the parties

concerned. Accordingly, Ebner Stolz took into account those synergies that could be realized

without concluding a domination and profit and loss transfer agreement in its calculation of

the enterprise value by assessing the planned integration projects currently in planning in

terms to what extent they are realizable in the absence of an affiliationagreement, and what

economic benefits they would provide for Demag Cranes.

95 The original business plan of Demag Cranes reflected the impact of purchase price

allocations in the form of the amortization of customer lists. These effects were correctly not

factored into the deduction of future earnings by the valuer.

- 29 -

96 The revised planning projections and the reconciliation to distributable earnings is shown

below:

Corporate planning as of January/2012 2011/12 2012/13 2013/14 2014/15 2015/16 Phase II

€ million Proj. Proj. Proj. Proj. Proj.

Revenue 1,124.7 1,294.0 1,434.3 1,485.6 1,581.2 -

Cost of sales -780.9 -908.1 -1,017.5 -1,054.0 -1,127.5 -

Gross profit 343.8 386.0 416.8 431.6 453.7 -

Selling expenses -152.5 -166.7 -183.8 -192.1 -202.5 -

Development expenses -20.9 -22.4 -25.1 -23.2 -24.8 -

Administrative expenses -69.1 -71.8 -75.8 -78.8 -81.4 -

Other operating income net of other operating expenses 1.9 1.9 1.9 1.9 1.9 -

Result from shares valued at equity 3.3 3.4 3.6 3.9 4.2 -

EBIT 106.3 130.3 137.6 143.3 151.0 152.6

Net interest income/expenses -13.6 -14.9 -16.3 -17.3 -18.7 -20.8

EBT 92.7 115.4 121.3 126.0 132.3 131.8

Income taxes -23.0 -32.6 -38.1 -40.1 -41.8 -40.8

Net income for the year 69.7 82.8 83.2 85.9 90.5 91.0

Minority shares in net profit or loss -0.3 -0.3 -0.4 -0.4 -0.5 -0.5

Group net income for the year 69.4 82.4 82.8 85.4 90.0 90.5

Addition to Retained earnings - - - - - -1.5

Distributable earnings 69.4 82.4 82.8 85.4 90.0 89.0

97 In total Demag Cranes projects a substantial growth of 35% (+ € 372 million) until the end of

the fiscal year 2013/14 compared to the last fiscal year 2010/11. The expected revenue

growth in 2013/14 is mostly due to the fact that a larger project in the port technology division

can be realized. The project “Rotterdam port” is included in the planning but could not be

contracted yet. Furthermore Demag Cranes expects significant increases in sales in the

industrial cranes division generated in the mid market segment and strategic projects in the

services’ division expected to be realized during the planning period. Demag Cranes expects

a total growth in revenue of almost 50% during the planning period. The average growth rate

amounts to 8.3% p.a.

98 The planned gross profit rises strongly and exceeds in the budget year 2012/13 the result of

the former record profit 2007/08 significantly with gross profits of € 386 million. The company

expects gross profits amounting to € 453.7 million. This represents a 47.4% increase

compared to the last business year.

99 The selling expenses comprise personnel, travel, marketing and bonuses that occur in the

segment port technology for closing contracts. The selling expenses relate strongly to sales

and developed proportionately. The introduction of the mid market segment and rising sales

- 30 -

in the segment port technology are expected to lead to disproportionate increases of selling

expenses. In later planning periods selling expenses rise at a lower rate than sales and the

selling expense ratio recedes to an average level. In total the selling expenses rise at a

compound annual growth rate of 5.9% in the planning periods which is less than the average

sales growth.

100 Development expenses consist of personnel costs as well as depreciation of developing

expenses that were capitalized in the past. Within the planning period development

expenses related to the revision of the smaller crane series and the development of a middle

crane series. In the segment industrial cranes development expenses were planned for the

products in the middle market segment. In both segments further development costs concern

the existing product portfolio. In the services segment development expenses are of minimal

significance; they range from 1.6% to 1.7% of net sales.

101 The administrative expenses mainly consist of personnel costs of the holding company

which is responsible for central administration and management of the Demag Cranes group

as well as personnel costs of various international subsidiaries. Because of economies of

scale the enterprise anticipates subproportional growth of administrative expenses which

come down to an average of some 3.0% p.a. This assumption is largely based on an

anticipated salary increase.

102 The total net result ofother income and expenses are positive throughout the planning period

amounting to € 1.9 million and are in line with the adjusted average of financial years

2007/08 – 2010/11.

103 The results from shares valued at equity telate to MHE Demag (S) Pte. Ltd.

104 The minority shares in profit relate to the fully consolidated TBA B.V., Delft/Netherlands, in

which 69.8% of the shares are held.

105 EBIT is expected to increase from € 74.5 Million (adjusted) in the past fiscal year 2010/11 to

€ 151.0 million in 2015/16, thus doubling operating result within the planning period. This

corresponds with an average annual growth of 15.2%.

106 Since also competitors follow a comparable strategy which will lead to strong competition in

the relevant markets, we believe the existing planning to be ambitious, but achievable.

3.3.5.5 Terminal value

107 Phase II (the “terminal phase”) corresponds to the anticipated long-term performance of the

company. To this end, the detailed figures for the last year of planning (2015/16) have been

adjusted under the assumption ofsustainable growth. This phase, the assumption is made

- 31 -

that the company is in a state of equilibrium. Any non-recurring effects still in place disturbing

this condition are seperated and considered via an annuity in the terminal value. By deriving

the terminal value from the earnings of the last year of the detailed planning phase, the

valuer extrapolates a level of earnings exceeding the earnings of the past by far. This

approach leads to a higher enterprise value compared to the other conceivable option of

taking the average of actual past and projected earnings to derive a sustainable level of

earnings reflecting a number of different economic cycles.

108 However, we conclude that no objection is raised to the approach taken by the valuer to

arrive at the terminal value.

3.3.5.6 Financial result

109 The interest result contains interest expenses from borrowing debt capital and interest

income from cash deposits. It was recalculated by the valuer considering distributions based

on the integrated balance sheet and liquidity plan. The recalculation was based on the

consolidated balance sheet of Demag Cranes as of September 30, 2011. The interest rate

agreed by the company was used to calculate net interest. The valuer calculated the income

from future cash deposits or expenses from borrowing capital using forward interest rates

provided by the latest interest curves. The forward interest rates were adapted to Demag

Cranes’ creditworthiness using corresponding premiums. Net interest also includes the

portion of interest relating to pension obligations.

110 According to the explanations provided to us, Demag Cranes requires a minimum cash of

approximately € 100.0 million to fund its operations, also in countries with tight foreign

exchange controls. The valuer took this minimum cash into account when calculating net

interest.

111 The valuer assumed that Demag Cranes’ credit conditions would not deteriorate on account

of the Terex Group’s worse credit rating if no domination and profit and loss transfer

agreement were to be concluded. Interest expenses were planned on the basis of the

existing terms and conditions.

112 We verified the valuer’s methods and calculations used to determine the financial result. The

audit did not result in any objections.

113 Our assessment of the modified business plan was based on plausibility interviews with the

management board of Demag Cranes and the contact persons they named as well as with

Ebner Stolz considering documents provided and the historical performance. We consider

the company’s modified planning to be a suitable basis for calculating its enterprise value.

- 32 -

3.3.5.7 Corporate taxes

114 Future corporate tax payments have been determined by Ebner Stolz. Material differences

between earnings before taxes in accordance with IFRS and the respective tax base were

analyzed and adjusted in order to calculate the tax assessment base.

115 The corporate taxes levied on domestic income include corporate income tax and the

solidarity surcharge. Trade tax was calculated based on an average multiplier of 425.0%.

116 Corporate taxes in other countries were determined separately for each country. The tax

assessment bases for all countries in which Demag Cranes generates taxable income were

determined separately. Withholding taxes on dividends were taken into account insofar as a

country’s tax system provided for such a tax.

117 According to the rules governing the deduction of tax losses, the takeover by Terex in

August 2011 constitutes a harmful acquisition that would result in the complete forfeiture of

all corporate income tax losses accrued prior to that point, totaling € 95.2 million (corporate

income tax, of which € 74.3 million loss carryforwards as of September 30, 2010 and € 20.8

million prorated loss for 2011 prior to the takeover by Terex) in accordance with Sec. 8c (1)

sentence 2 KStG [“Körperschaftssteuergesetz”: German Corporate Income Tax Act].

118 According to the wording of Sec. 8c (1) sentence 6 ff. KStG, the conditions for applying the

exemption regulations in the event of taxable domestic hidden reserves are not met because

the hidden reserves are held by the subsidiary, while gains from the disposal of these shares

are fundamentally exempt from tax. The valuer nevertheless recognized these old losses at

one third when projecting tax expenses in order to reflect the possibility of a more favorable

interpretation for the taxpayer by the tax authorities. We consider this approach to be

appropriate.

119 We verified the valuer’s tax calculations and consider the approach taken to be proper.

3.3.5.8 Distribution ratio and personal income taxes

120 The valuer considered it necessary to retain earnings of € 1.5 million in the terminal phase in

order to finance sustainable growth. The amount of earnings to be retained equals the

growth factor of 1.0% in relation to the equity capital. Given that sustainable growth can only

be generated by capital investments and the related financing, we support this approach.

121 When calculating the enterprise value using the dividend discount method, a distribution ratio

of 40% was assumed both for the detailed planning phase and for the terminal value phase.

The business plan should always be used to determine distributions for the detailed

- 33 -

forecasting phase, while a distribution pattern equivalent to an investment in a stock portfolio

needs to be assumed for the terminal value phase.

122 With regard to the annual results calculated after deducting retained earnings to finance the

sustainable growth in operations anticipated for the years 2016/17 onward, the valuer makes

a distinction between the value added from dividend distributions and the value added by the

(fixed-rate) retention of earnings for tax purposes.

123 The valuer applied a personal income tax rate including solidarity surcharge of 26.38%

(capital income tax) on dividends when calculating the personal income taxes on dividends.

With regard to the value added by the (fixed-rate) retention of earnings, the valuer assumed

that these amounts are directly attributed to the shareholder and taxed at shareholder level.

For purposes of taxation, the valuer assumed that the value added by the retention of

earnings will lead to a continuous increases in value and will also be subject to a capital

income tax rate of 26.38% in the future. This deferred tax burden was taken into account by

applying a halved rate of capital income tax including solidarity surcharge totaling 13.19%

(tax on capital gains) to the value added from the retention of earnings.

124 The assumptions made by the valuer and the approach taken are appropriate.

3.3.5.9 Final assessment of the modified business plan

125 We verified the modified planning on which the valuation is based using the documents and

information received and the related discussions held. We consider the modified business

plan and the resulting future sustainable earnings to be plausible overall. We are of the

opinion that the method described to determine discounted earnings is proper. The

calculations are accurate.

3.3.6 Discount rate

126 The enterprise value of a company is determined by discounting the projected future cash

flows (surplus of income over expenditure) to the valuation date. The discount rate

represents the return on an adequate alternate investment to an investment in the entity

being valued. The cash flows from an alternative investment should be comparable to the

cash flows accruing to the shareholders of the company being valued in terms of structure,

risk exposure and taxation.

127 When identifying the return obtainable on an alternative investment, reference is generally

first made to the returns available on the capital markets for equity investments. These

- 34 -

returns can be split into a risk-free rate and a risk premium expected of the shareholders for

their assumption of entrepreneurial risk (IDW S1 No. 114 f. and No. 92).

128 Tax effects need to be considered when determining the risk-free rate and the risk premium.

In order to record the impact of growth (in the form of constantly rising distributable cash

flows) after the end of the detailed planning phase, the discount rate is reduced by a growth

factor.

3.3.6.1 Risk-free rate

129 The risk-free rate represents a risk-free and alternative investment of an equivalent term to

the investment in the company being valued.

130 According to prevailing opinion, the risk-free interest rate is measured on the basis of the

expected return from fixed-interest government securities (IDW S1 No. 116). Due to the fact

that companies are valued on the assumption that they have an indefinite life, the risk-free

rate is determined by reference to the return on the valuation date attainable from

government bonds that also have an indefinite term (equivalent maturity). However, in light

of the fact that no such bonds exist, the returns on bonds with an indefinite term can be

estimated from the interest curves observed on the market (IDW S1, No. 117).

131 The interest curves published by the Deutsche Bundesbank in the wt 3201 and wt 3206 time

series can be applied. These constitute estimates based on the Svensson method that is

based on observed current returns on zero coupon bonds (federal bonds, government bonds

and federal treasury obligations). The interest curves derived from this data represent the

risk free rate for instruments of a comparable term (spot rates). These can be translated into

a uniform risk-free rate providing the same net present value using financial mathematics.

132 In order to smooth out short-term market fluctuations and possible errors in estimates, the

Main Technical Committee of the Institute of Public Auditors in Germany recommends not

relying solely on estimated returns on zero bonds on the valuation date but also average

returns for each specific month for the three months prior to the valuation date (FN IDW

2008, p. 491). Moreover, the FAUB recommends using the interest rate on zerobonds with a

residual term of 30 years for the estimated returns on zerobonds with terms longer than 30

years and rounding the risk-free rate up to the nearest 0.25% percentage point (FAUB, FN-

IDW 2008, p. 490 f.).

133 The valuer referred to the estimates of the daily interest curves published by the Deutsche

Bundesbank for the months October 2011 to December 2011 when setting the risk-free rate.

On this basis interest rates were estimated for hypothetical zerobonds with residual terms of

up to 30 years. The interest rates for zerobonds with longer residual terms were arrived at by

rolling forward the interest rates for zero bonds with the longest available residual terms.

- 35 -

Taking account of a growth rate of 1.00%, a uniform risk-free rate of 2.75% after rounding

was derived for all years of the planning. This risk-free rate was then correctly translated by

the valuer into an after-tax rate of approximately 2.02% using a standardized personal

income tax rate (capital gains tax) of 26.38%.

134 We verified the derivation of the risk-free rate and are satisfied it is arithmetically correct. In

conclusion, we are therefore of the opinion that the risk free rate of 2.75% before tax and

2.02% after deduction of the standardized income tax rate is appropriate for the valuation of

Demag Cranes. We would like to point out that the risk-free rate has reached a historically

very low level and this, in our opinion, is an expression of the extreme degree of uncertainty

and aversion to risk of market players in light of the sovereign debt crisis in the euro zone. In

these circumstances, investors have been willing for some time now to accept marginal

negative yields on investments in government-backed securities with short residual terms.

3.3.6.2 Risk premium

135 The risk premium serves to account for the risk associated with investing in shares in the

entity being valued. It must be assumed that market participants give greater weighting to

future risks than to future opportunities (risk aversion; IDW S1, No. 88). This risk aversion

can be accounted for as a deduction from the expected cash flows (certainty equivalent

method) or as a premium added to the discount rate (risk premium method) (IDW S1, No.

89). Both methods are interchangeable, but in practice risk aversion is taken into account

almost exclusively using a premium on the interest rate (IDW S1, No. 90).

136 Capital market models such as the Capital Asset Pricing Model (CAPM) and the Tax-CAPM

based thereon are suitable for determining the risk premium in objective valuations, as these

capital market models derive risk premiums indirectly from observable capital market prices

(IDW S1, Nos. 92, 118). The prices formed on the capital market are the result of actions by

investors. This means that securities prices also reflect the risk preferences of investors, as

investors decide freely and consciously which securities to buy or sell. This market valuation

of the risks of equities by rational and risk-averse investors is demonstrated in the CAPM

and the Tax-CAPM.

137 In its standard form, the CAPM is a capital market model in which cost of capital and risk

premiums are depicted without taking account of the effect of personal income taxes.

However, because equity returns and risk premiums are fundamentally affected by income

taxes, the Tax-CAPM pricing model offers a more real explanation of empirically observable

equity returns, as it extends the CAPM model to explicitly include the effects of personal

income taxes (IDW S1, No. 119). However, the different tax treatment of interest income,

dividends and share price gains is recorded directly in the Tax-CAPM valuation equation by

burdening the risk-free rate and the market risk premium with the respective tax rates. Tax-

- 36 -

CAPM therefore provides a verifiable objectified explanatory context for quantifying an

appropriate risk premium.

138 Using the CAPM, and also Tax-CAPM, the amount of the risk premium is calculated as the

product of the market risk premium and beta factor model parameters. The approach taken

by the valuer of using Tax-CAPM is therefore proper treatment.

3.3.6.2.1 Market risk premium

139 The market risk premium is the average additional return required by investors for investing

in shares as compared to risk-free securities. The equity market can be depicted using a

broad equity index such as the DAX or CDAX. With the Tax-CAPM, the discount rate is

composed of a risk-free rate that has been reduced to reflect a standardized income tax rate

and the after-tax risk premium identified using the Tax-CAPM, which is transformed into a

risk premium for an individual business using the beta factor applicable for the individual

business (IDW S1, No. 120).

140 The Technical Committee for Business Valuation and Economics (FAUB) of the IDW

considers it correct for business valuations in which a capital gains tax is taken into account

to use an after-tax market risk premium of 4.0% to 5.0%, based on the Tax-CAPM. The

valuer performed the valuation taking capital gains tax on rising share prices into account

and set the market risk premium at 5.0% after tax using the Tax-CAPM method. In the

process, the valuer considered the statement issued by the FAUB on 10 January 2012 which

recommends that the market risk premium should be set at the upper end of the scale on

account of the risk aversion of investors currently observable on the market.

141 In light of the rise in the risks of investing in shares, the use of a market risk premium of

5.0% after income tax is an appropriate approach.

3.3.6.2.2 Beta factor

142 Using the CAPM valuation calculation, the value of the beta factor reflects the extent of the

systemic risk of a share that cannot be diversified by capital market transactions. The higher

the beta factor, the higher the investor risk premium required by capital market participants.

The beta factor applicable for an individual business is defined as the covariance between

the equity return of the business entity to be valued or of equivalent business entities and the

return of an equity index, divided by the variance of the return of the equity index (IDW S1,

No. 121). From a technical perspective, it is also possible to use linear regression of the

equity price and equity index returns to determine the beta factor. In that case, the beta

factor corresponds to the increasing parameter of the regression equation.

- 37 -

Reference period and reference interval

143 The valuer, Ebner Stolz, used beta factors for a period of two years in its analysis. We are of

the opinion that the chosen two-year period is appropriate for calculating the beta factors as

this period appropriately represents the actual circumstances and excludes the distortions

and structural changes brought about by the crisis on the financial markets in 2008/09.

144 The weekly interval used to measure yields provides a sufficient number of observations to

arrive at a statistically significant result.

145 The valuer used adjusted beta factors when deriving the risk premium. In order to derive the

adjusted beta, the observed raw beta was multiplied by 0.667 and 0.333 added to the result.

Independent of the lack of statistical accuracy associated with an estimate, this adjusts the

beta factors towards the average beta of the market, which by definition is 1 and anticipates

an assumed long-term trend of market players to move towards the same risk profile. As the

use of both raw and adjusted beta factors are equally accepted and practiced, no objection

can be raised to the use of adjusted beta factors by the valuer. In this case, the adjusted

beta factors of the peer group are lower than the raw betas.

Statistical quality

146 The suitability of the beta factors for forecasting purposes has to be assessed in each

individual case (IDW S1, No. 121). Usually the criteria that can be used for this purpose

include the coefficient of determination (r2) and the t-test. In addition, the liquidity or relative

volume of share-trading may be used as an additional criterion. Moreover, the beta factors of

a share are no indicator of the inherent risks of a business, if its share price during the

reference period is determined by other factors that bear no relation to the risks and rewards

of the business itself.

Suitability of the orginal beta factor of Demag Cranes

147 Initially, the valuer examined whether the use of the original beta factor of Demag Cranes

could be used. For this purpose, he referred to the coefficient of determination r2 and the t-

test. Based on these measures of statistical quality, the use of the beta factor of Demag

Cranes cannot be ruled out.

148 To assess the suitability of the historical beta factor for forecasting purposes for judging the

future operating risk of Demag Cranes, we analyzed the company’s share price

development. The chart below shows the normalized development of the share price of

Demag Cranes compared to the MDAX and companies in the peer group.

- 38 -

149 The analysis of the development of share prices over time shows that the share price was

significantly influenced by the public announcement by Terex Industrial Holding AG on May

2, 2011 of its decision to make a public bid to buy the shares of Demag Cranes and the

public announcement regarding the start of negotiations by Demag Cranes dated September

5, 2011 to enter into a domination and profit and loss transfer agreement with Terex. There

- 39 -

were sharp increases in the share price and a huge rise in trading volume on the dates of the

bids. After publication of the public bid in May 2011, the share price remained at the level of

the public bid until shortly before the announcement of the negotiations regarding the

domination and profit and loss transfer agreement. After the deadline for accepting the public

offer, the number of shares still in free float had fallen considerably. As a result the share of

Demag Cranes was no longer included in the MDAX. Its share price fluctuated strongly

thereafter.

150 In the opinion of the court of Stuttgart, OLG Stuttgart, the historical share prices recorded

after the announcement of the structural measure are fundamentally unsuitable for

determining an original beta factor (OLG Stuttgart, 20W 2/08 from 18 December 2009, 4th

principle and ratio decidendi, No. 239). Due to the fact that the share price decoupled from

the general development of the market and that there was a general expectation of a

settlement and compensation payment, the beta factors for Demag Cranes for the period

after 5 September 2011 do not reflect the inherent business risks of Demag Cranes for the

long-term had no domination and profit and loss agreement been entered into.

151 Similar considerations apply to the period from 2 May 2011, the date on which the takeover

bid was made public by Terex Industrial Holding AG. As of this date, the share price of

Demag Cranes was influenced by the takeover bid and the price offered to minority

shareholders as well as the speculation about an increase in the offer. Consequently the

share price moved away from the general development of the market. The fact that, in

contrast to the domination and profit and loss transfer agreement, the price offered to

minority shareholders had already been published on 2 May 2011, only strengthens our

conviction that the beta factor of Demag Cranes is no longer suitable for use in the valuation

from this date at the very latest.

152 The share price of Demag Cranes was affected by speculation of a takeover as early as

October 7, 2010 already, once Demag Cranes had confirmed that it had recently received a

preliminary non-binding expression of interest from a foreign entity. The chart of the Demag

Cranes share price in comparison to the CDAX shows a sudden jump at this time. The

decoupling from the general market development for reasons that are not related to the

general business activity of Demag Cranes can be identified in the period immediately before

and, in particular, after the rumours of a takeover started on October 7, 2010.

153 In our opinon, the beta factor of Demag Cranes cannot be used at least for the period around

October 7, 2010 and from May 2, 2011. We therefore concluded that the original beta factor

of Demag Cranes is not informative for the two year period ending in January 2012 and does

not represent the inherent business risks of Demag Cranes. For this reason it was not used

by the valuer as a risk parameter in the valuation of Demag Cranes. We therefore agree with

the approach taken of deriving the beta factor from an analysis of the peer group.

- 40 -

Beta factor of the peer group

154 According to the valuer’s analyses and as supported by our supplementary assessment, the

original beta factor of Demag Cranes cannot be used. Consequently the valuer has based

the calculation of the beta factor on a peer group. This is in compliance with the

requirements of IDW S1, (IDW S1, No. 121 and also WP Handbuch 2008, p. 68).

155 The use of the beta factors of a peer group rather than the beta factors of just one company

has the statistical advantage of being based on a greater number of observations. By

averaging a number of beta factors from the peer group, fluctuations and differences in the

beta factors not arising from the operating business and the capital structure are evened out.

Consequently, the beta factor derived from a suitable peer group possesses a high degree of

statistical relevance for forecasts.

156 To determine a beta factor for Demag Cranes that is suitable for forecasting purposes, the

valuer analyzed a peer group of 7 companies in total, which operate in comparable fields to

Demag Cranes.

157 We checked the content of the valuer’s selection of peer group companies and verified it

using the information provided to us and our own research.

158 The beta factors of the seven companies contained in the peer group are shown in the

following table for the two year period used in the valuation and for the four year period we

used for comparative purposes:

Beta factors of the peer group 2 years

Unlevered beta

Observed period until January 6, 2012

Interval weekly

Raw / Adjusted Raw Adjusted

Index Local Local

Company:

Columbus McKinnon Corp., USA 1.40 1.27

Palfinger AG, Austria 0.51 0.67

Konecranes Plc, Finland 1.31 1.21

Cargotec Corporation, Finland 1.49 1.33

Kito Corporation, Japan 1.07 1.05

ZPMC Co.,Ltd., China 0.63 0.75 Taiyuan Heavy Industry Co.,Ltd., China 1.36 1.24

Value 1.11 1.07

- 41 -

159 Based on our analyses, we consider the peer group compiled by the valuer to be

appropriate.

160 In a first step, the valuer calculated the adjusted, leveraged beta factors of the peer group.

The valuer used the coefficient of determination and a t-test of the respective beta factors to

check the suitability for forecasting purposes of the beta factors determined. Using this

approach no single peer group company, and its beta factor respectively, is taken

separately.

161 To calculate the company-specific unlevered beta factor, the valuer used the following

adjustment formula based on the ratio of debt capital to the market value of equity that takes

into account the ratio of the market values of equity and debt capital as well as the risk

pertaining to debt capital in the form of beta debt.

; with

162 The extent of the beta debt is determined using the specific credit spread of a company. This

results in an average unlevered beta factor of 1.07 for the peer group.

163 We verified the appropriateness of the beta factor derived by the valuer by comparing the

data in Bloomberg, reviewing the formula used to unlever the resulting betas and the

leverage used by the value as well as a general check of arithmetical accuracy. In light of the

analysis steps carried out by us, we consider the unlevered beta factor of 1.07 used by the

valuer for Demag Cranes to be appropriate.

164 The values for the market risk premium, the beta factor and the risk premium are

appropriate.

3.3.6.3 Growth factor

165 The business valuation must also take into account the growth of the expected future

earnings (IDW S1, No. 94 ff.). In the detailed forecasting phase, any growth in the income

- 42 -

statement items and the individual balance sheet items is taken into account for the

individual periods in the planning projection.

166 The value of the company’s distributable cash flows after the detailed forecasting phase is

recognized in the valuation as the present value of a perpetuity as a simplification. As

perpetuity the expected sustainable earnings of this terminal value phase is used when using

the dividend discount model. If it can be assumed that the entity being valued is in a position

to increase its earnings sustainably in the period after the detailed forecasting phase, the

corresponding earnings growth can be taken into account mathematically by using a

markdown on the discount rate (IDW S1, No. 98).

167 To determine the growth in income statement and balance sheet items for the period after

the detailed forecasting phase, a thorough analysis has to be prepared on the basis of long-

term growth projections and the associated investment requirements have to be taken into

account (IDW S1, No. 97).

168 The basis for the valuer’s calculation of long-term growth is an analysis of the average

inflation rate. As an initial indication of sustainable growth, the valuer has set the growth rate

at 1.0% based on a rise in the consumer price index of approximately 1.57% in the three

years from December 2008 to December 2011 as well as estimates of future changes in the

consumer price index made by bank analysts of approximately 1.8% on average and by the

International Monetary Fund of up to 2%, of which they based a growth in earnings at a rate

of 45% to 50%.

169 To determine sustainable growth, the general industry development and the specific

competitive position of the company must also be taken into account. In order to check the

plausibility of the growth factor, we determined the average growth rates observed in the

past (compound annual growth rate (CAGR)) in revenues and EBIT as adjusted by

management:

Indicators for Demag Cranes 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

€ million Actual Actual Actual Actual Actual Actual

Revenue 986.9 1,080.4 1,225.8 1,047.6 931.3 1,062.3

EBIT (adjusted by management) 84.5 94.7 137.5 67.6 54.2 75.7

2005/06 -

2010/11 2006/07 -

2010/112007/08 -

2010/11

CAGR CAGR CAGR

Revenue 1.9% -0.4% -4.7%

EBIT (adjusted by management) -2.7% -5.4% -18.0%

- 43 -

170 An average positive growth rate was only achieved in revenue in the period from 2005/06 to

2010/11. The average annual growth rate in EBIT as adjusted by management was negative

in all the periods under audit. The development of revenue and EBIT in fiscal years 2005/06

to 2010/11 is no indicator for a higher growth rate than that set of 1.0%.

171 Growth in the relevant markets of Demag, some of which are growth markets, could also

count as an indicator for measuring the growth rate. However, it should be noted that local

competition in growth markets, such as China, has become strong and is growing faster than

the market, implying that the market share of Demag in this market is comparatively small.

The planning calculations used for the business valuation already consider an above-

average growth in these markets. Consequently, any potential growth at the end of the five

year planning horizon will be, equally in our opinion, offset by the risks of competition from

up and coming crane manufacturers in terms of both quantity and quality in these growth

markets.

172 In light of the above considerations, we believe the growth factor used in the business

valuation is appropriate.

173 The following summary shows the derivation of the period specific capitalization interest rate:

Capitalization interest rate 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Proj. Proj. Proj. Proj. Proj. Phase II

Risk-free rate 2.75% 2.75% 2.75% 2.75% 2.75% 2.75%

Standardized personal income tax 0.73% 0.73% 0.73% 0.73% 0.73% 0.73%

Risk-free rate after income tax 2.02% 2.02% 2.02% 2.02% 2.02% 2.02%

Market risk premium after income tax 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

Betafactor unlevered 1.07 1.07 1.07 1.07 1.07 1.07

Present values as of October,1 878.6 895.9 906.8 919.1 930.1 937.8

Interest bearing debt as of October,1 179.5 235.1 256.9 269.3 278.7 296.9

Debt equity-ratio 20.43% 26.25% 28.34% 29.30% 29.96% 31.66%

Betafactor levered 1.29 1.35 1.37 1.36 1.35 1.34

Risk premium 6.43% 6.75% 6.84% 6.81% 6.76% 6.70%

Growth rate -1.00%

Capitalization interest rate 8.45% 8.78% 8.86% 8.84% 8.78% 7.73%

174 We believe that the derivation of the capitalization interest rates is accurate.

3.3.7 Discounting future earnings

175 The business value of the operations of Demag Cranes stems from discounting the sum of

expected future dividend distributions plus the value of retained earnings.

- 44 -

A

176 As of the technical valuation date October 1, 2011, the business value calculated amounts to

€ 878.6 million

177 We verified the clerical and methodological accuracy of the derivation of the business value

from the cash flows of Demag Cranes. In our view, the resulting business value has been

calculated appropriately.

3.3.8 Special assets and non-operating assets

178 In the course of the valuation, the valuer measured non-operating assets, consisting of a

property in Wetter an der Ruhr and a property in South Africa separately. We inspected the

property in Wetter. We reviewed the plausibility of the assumed proceeds from liquidating the

property after deducting corporate taxes and income tax.

179 There were no indications of other non-operating assets.

180 The valuer also treated shares in smaller subsidiaries as special assets as these are neither

included in the consolidated financial statements nor in the business plan. The valuer

considered the share held in equity or, if higher, a rough estimate of their future discounted

earnings value.

181 The value of non-operating assets and separately weighted investments amounted to €3.1

million as of October 1, 2011. Our audit of the definition and valuation of non-operating and

special assets did not reveal any cause for objection to the findings of the valuer.

Discounted future earnings value of Demag Cranes 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

€ million Proj. Proj. Proj. Proj. Proj. Phase II

Distributable earnings 69.4 82.4 82.8 85.4 90.0 89.0

Retained earnings 45.1 55.6 53.8 55.5 58.5 52.8

Taxation on capital gains 5.9 7.1 7.1 7.3 7.7 7.0

Dividend payout ratio 35.0% 35.0% 35.0% 35.0% 35.0% 40.0%

Dividend distributions 24.3 28.9 29.0 29.9 31.5 36.2

Taxes on dividends 6.4 7.6 7.6 7.9 8.3 9.5

Net dividends 57.0 67.8 68.0 70.2 74.0 72.5

Discount rate 8.45% 8.78% 8.86% 8.84% 8.78% 7.73%

NPV factor 0.9221 0.8477 0.7787 0.7154 0.6577 8.5082

NPV as of October 1 of each year 878.6 895.9 906.8 919.1 930.1 937.8

Discounted future earnings value as of October 1, 2011 878.6

- 45 -

3.3.9 Business value and value per share

182 The business value of Demag Cranes is the sum of the discounted future earnings value of

the operating assets of Demag Cranes plus the value of non-operating assets. On March 16,

2012, and after addition of accrued interest and capitalization interest rate the business

value equals

€ 915.3 million.

183 Related to the 21,172,993 shares outstanding, the value per share as of March 16, 2012 is

€ 43.23.

3.3.10 Sensitivity analysis

184 In its engagement on 4 October 2011 appointing us as the auditor of the agreement, the

Regional Court of Düsseldorf requested us to present alternative methodical concepts and

calculations, which we believe are justifiable for arriving at the lowest possible and the

highest possible business value. With regard to the methodology of such calculations, the

court made reference to Großfeld, Unternehmens- und Anteilsbewertung, 4th edition, page

95 ff. We now present the simplified alternative methods for arriving at the business value

accordingly:

A – Business plan as of June 2011 for the period until 2015/16:

185 This alternative calculation is based on the planning of Demag as of June 2011. Due to the

fact that these planned objectives take neither fluctuations in the economic cycle, nor the

reaction of competitors to enterprise expansion plans into account, although these are to be

expected, we have used the average EBIT of the fiscal years 2007/08 – 2015/6 to derive the

terminal value. This corresponds in principle to the approach taken by Demag Cranes to test

the impairment of goodwill under IFRS in the consolidated financial statements as of

September 30, 2011.

Special values Oct. 1, 2011

in million €

Non-operating assets 2.2

Special value holdings / shares in other entities 0.9

Total special values 3.1

- 46 -

B - Business plan as of January 2012 for the period until 2013/14:

186 This alternative calculation is based on the planning as of January 2012. The terminal value

in this case was derived from the earnings in the plan year 2013/14 using a three year

planning horizon. Thus, this takes account of the fact that the longer the planning horizon is,

the less specific the planning becomes and evolves more towards a set of goals.

187 The following summary shows the business value determined by the valuer and the

simplified business values generated by the alternative calculations described above:

Variation Business Weighting / Weighted

value likelihood Business value

€ million € million

A Business plan as of June 2011

for the period until 2015/16

973.2 40% 389.28

B Business plan as of January 2012

873.1 60% 523.86

for the period until 2013/14

Weighted business value, total

100% 913.14

188 The alternative calculations verify the calculated enterprise value from Ebner Stolz which

amounts to € 915.3 million.

189 In addition, the valuer, Ebner Stolz carried out sensitivity analyses for purely informative

purposes and to review the impact of a change in the parameters: risk-free rate, beta factor,

market risk premium and growth factor. The valuer points out that the combination of higher

growth rates and lower beta factors is implausible as higher growth is typically associated

with higher risk.

190 We also reviewed the sensitivity analyses and made the following findings:

191 Risk-free rate / growth factor matrix

Value per share Risk-free rate

in € 2.25% 2.50% 2.75% 3.00% 3.25%

0.50% 43.83 42.38 41.01 39.73 38.53

Growth factor

0.75% 45.07 43.53 42.08 40.72 39.46

1.00% 46.40 44.76 43.23 41.79 40.45

1.25% 47.85 46.11 44.47 42.95 41.53

1.50% 49.43 47.57 45.82 44.20 42.69

- 47 -

192 Market risk premium matrix / risk-free rate matrix

193 Beta / market risk premium matrix

Value per share Beta factor

in € 1.00 1.05 1.07 1.10 1.20

4.00% 58.10 55.41 54.39 52.92 48.45

Market risk premium

4.50% 51.74 49.24 48.30 46.93 42.80

5.00% 46.44 44.11 43.23 41.96 38.12

5.50% 41.96 39.78 38.95 37.77 34.18

6.00% 38.12 36.07 35.30 34.18 30.82

3.3.11 Testing the plausibility of the business value using a comparative market

valuation and prior acquisitions

3.3.11.1 Comparative market valuation

194 According to IDW S1, the plausibility of the business value determined using the dividend

discount method can be assessed by referring to simplified valuation methods such as

methods based on earnings or revenue multipliers. However, such recourse to a multiplier-

based analysis is no substitute for a well-founded business valuation. Nevertheless, it can

provide an indication for assessing the business value determined using the dividend

discount method.

195 We conducted a comparative market analysis using multipliers to assess the plausibility of

the business value of Demag Cranes determined by the valuer. When calculating the

multipliers, the valuer selected a peer group of companies to identify the beta factors of the

peer group. In the process the valuer ignored those companies for which no up-to-date

earnings estimates are available from analysts or for which the range of earnings estimates

displayed an excessively wide range. No analyst estimates of EBIT and EBITDA were

available for the peer group companies, Kito and Taiyuan. Likewise, the data was either

incomplete or inconsistent for Columbus and ZPMC. The valuer therefore correctly refrained

from including these companies in its multiplier-based analysis.

Value per share Market risk premium

in € 4.00% 4.50% 5.00% 5.50% 6.00%

2.25% 59.09 52.12 46.40 41.62 37.57

Risk-free rate

2.50% 56.65 50.14 44.76 40.25 36.40

2.75% 54.39 48.30 43.23 38.95 35.30

3.00% 52.29 46.58 41.79 37.74 34.26

3.25% 50.35 44.97 40.45 36.60 33.29

- 48 -

196 As a first step we took the analyst estimates of EBIT and EBITDA of the selected companies

in the peer group from Bloomberg and calculated the EBIT and EBITDA multipliers for the

fiscal years 2010/11 to 2012/13 related to the enterprise value, which is based on the market

capitalization, interest-bearing debt of the peer group companies concerned. Other than the

valuer we additionally calculated the EBIT and EBITDA multipliers for FY 2010/11 because

analysts’ ratings for the future EBIT of the peer group companies in the second planning

year are less valid and not fully comparable with the planning of Demag Cranes for this

period.

197 The EBIT and EBITDA multipliers of the peer group companies are summarized in the

following table:

EBITDA multipliers 2010/11 2011/12 2012/13

Palfinger 7.91 7.58 6.83

Konecranes 8.43 8.24 7.39

Cargotec 8.01 7.68 7.49

Mean 8.12 7.83 7.24

EBIT multipliers 2010/11 2011/12 2012/13

Palfinger 11.22 10.53 8.84

Konecranes 11.11 11.13 9.76

Cargotec 10.56 10.20 9.94

Mean 10.97 10.62 9.51

198 In a second step, these multipliers are used to create a range of values for the enterprise

value and the market value of the equity of Demag Cranes. The resulting market value of the

equity and value per share derived on this basis are presented below for the years 2010/11,

2011/12 and 2012/13:

Market value of equity 2010/11

in € million Minimum Average Maximum

Enterprise value

EBITDA-multiple 762.5 782.4 812.9

EBIT-multiple 787.1 817.1 836.3

+ non-operating assets 3.1 3.1 3.1

- interest bearing debt -270.6 -270.6 -270.6

- minority interest (as of September 30th, 2011) -1.4 -1.4 -1.4

Market value of equity

EBITDA-multiple 493.6 513.5 544.0

EBIT-multiple 518.2 548.2 567.4

- 49 -

Market value of equity 2011/12

in € million Minimum Average Maximum

Enterprise value

EBITDA-multiple 978.7 1,011.0 1,063.9

EBIT-multiple 1,084.2 1,128.8 1,183.0

+ non-operating assets 3.1 3.1 3.1

- interest bearing debt -270.6 -270.6 -270.6

- minority interest (as of September 30th, 2011) -1.4 -1.4 -1.4

Market value of equity

EBITDA-multiple 709.8 742.1 795.0

EBIT-multiple 815.3 859.9 914.1

Market value of equity 2012/13

in € million Minimum Average Maximum

Enterprise value

EBITDA-multiple 1,051.5 1,115.2 1,153.7

EBIT-multiple 1,151.2 1,239.0 1,294.6

+ non-operating assets 3.1 3.1 3.1

- interest bearing debt -270.6 -270.6 -270.6

- minority interest (as of September 30th, 2011) -1.4 -1.4 -1.4

Market value of equity

EBITDA-multiple 782.5 846.3 884.8

EBIT-multiple 882.3 970.1 1,025.7

199 After inspecting the data sources and checking the arithmetical accuracy of the calculation

as well as performing our own calculations, we came to the conclusion that the business-

value determined by the valuer using the dividend discount method of € 915.3 lies on top of

the range of the market valuations of the equity of Demag Cranes derived using the EBIT

and EBITDA multiples. As a result, the audit of the plausibility of the business value of

Demag Cranes determined using the dividend discount method has not revealed any

indication that it may be inappropriate.

- 50 -

3.3.11.2 Prior acquisitions

200 In the period from April to August 2011, Terex Industrial Holding AG acquired a total of

17,345,848 shares in Demag Cranes at an average price of € 45.38 of which 17,110,259

shares were acquired within the framework of the voluntary takeover bid for the price offered

in the bid of € 45.50.

201 According to rulings handed down by the courts, prior acquisitions by the majority

shareholder are deemed to be irrelevant when determining the cash compensation (see

BVerfG, ruling from 27 April 1999, AZ 1 BvR 1613/94; OLG Stuttgart, ruling from 26 October

2006, AZ 20 W 14/05). For this reason, we are of the opinion that the audit of prior

acquisitions does not reveal any indication that the cash compensation is inappropriate.

3.4 Appropriateness of the cash compensation pursuant to Sec. 305 AktG

3.4.1 Comparison with the average share price

202 The cash compensation to be paid to minority shareholders of Demag Cranes pursuant to

Sec. 305 (2) No. 3 AktG is initially based on a business valuation determined in keeping with

the principles of the dividend discount method defined in IDW S1. These principles are in line

the prevailing opinion in the valuation profession and comply with the court rulings handed

down to date. This results in a business value derived by discounting the future financial

surpluses (cash-flows) of the enterprise. The per share value of the business value of

Demag Cranes derived in the valuation report from Ebner Stolz amounts to € 43.23.

203 The Federal Constitutional Court ruled on April 27, 1999 that the share price of a company

must be compared with the value per share calculated using the business value (BVerfG, 1

BvR 1613/94). The share price is the lower limit for appropriate cash compensation in this

case. The compensation must be measured so that minority shareholders do not in any case

receive less than they would have received if they had freely decided to divest at the time of

the structural measures under stock corporation law. However, the duty to consider the

share price when setting a fair cash compensation does not apply without restriction. For

example, one case in which the share price is not appropriate as the lower limit is if the

shares are only traded in small volumes or if the share price does not reflect the fair value of

the shares due to special effects (BVerfG, 1 BvR 1613/94). This is the case when there has

been virtually no trading of the shares in the company over a longer period of time, the

individual minority shareholder has not been able to sell his/her shares at the share price

owing to market constraints or when the share price has been manipulated (see OLG

Düsseldorf, 26th civil senate, I-26 W 7/06 AktE from October 4, 2006). The rules in § 5

WpÜG-Angebotsverordnung, the WpÜG regulation on takeover bids, can be used as a basis

for deciding whether or not there are market constraints. According to these rules, market

constraints exist, if share prices existed for the shares of the target company during less than

- 51 -

one third of the trading days during the last three month prior to the announcement of the

structural measure and several consecutive share prices deviated from each other by more

than 5%. However, this does not appear to apply in the case of Demag Cranes. We

observed the relevance as required by the court rulings of the share price as a lower limit

when assessing the appropriateness of the cash compensation.

204 According to the federal court decision of July 19, 2010 (see AG 2010, p. 629 ff.,

„Stollwerck“), the calculation of the average share price for a three month period prior to the

public announcement of the corporate measure is necessary.

205 The average share price for the three months prior to the announcement of the intention to

exclude the minority shareholders including the cut-off date of September 5, 2011, as

calculated and communicated by the BaFin, amounts to € 45.52. We have verified the value

measured by BaFin based on our own calculations.

206 The question is whether the cash compensation calculated takes adequate account of the

company’s circumstances on the date this resolution is adopted by the shareholder meeting.

The BGH stated in this respect that the share price would have to be extrapolated in

accordance with the general or industry-specific development in value – taking into account

the share price development since – if a longer period passes between the announcement of

the structural measure and holding the shareholder meeting (see BGH, ruling from 19 July

2010 - II ZB 18/09). In the case ruled on by the BGH, the time that passed between the

announcement of the structural measure and holding the shareholder meeting was 7½

months. According to various opinions in the literature, a longer period of time is considered

to have passed if the time between announcing the structural measure and holding the

shareholder meeting is considerably longer than the average time normally needed to

conclude a domination and profit and loss transfer agreement and the related business

valuation. It must be taken into account that a large number of time-consuming measures

have to be performed before the shareholder meeting can take place. For example, in

addition to the business valuation, an extensive report has to be prepared and the auditor

appointed by the court has to audit the appropriateness of the cash compensation and

prepare an audit report. Also, preparations have to be made for the shareholder meeting and

the meeting has to be convened, observing the required period of notice. In light of these

facts, the former judge presiding over the 2nd civil senate of the BGH, Goette, expressly

clarified that 7 ½ months is the lower limit for a longer period. This corresponds to the

prevailing opinion in practice and in the literature that a period of up to 6 months between

announcing the structural measure and holding the shareholder meeting does not constitute

a longer period. In the case of Demag Cranes, there is a period of approximately 6 months

and 10 days between announcing the structural measure and the shareholder meeting,

which is expected to take place on March 16, 2012. Although this is not a longer period in

the definition of the court, we took the precautionary measure of observing the development

of the share price over this period.

- 52 -

207 An adjustment is only appropriate if it leads to a significant increase in the compensation.

This is the case if the average industry-specific share price or share index (in this case the

MDAX) has risen by considerably more than 5% in the period between announcing the

structural measuring and holding the shareholder meeting. As a result, we considered the

development of the MDAX and the share prices of the peer group for the period between

announcing the structural measure and the reporting date. It has to be admitted that both,

the MDAX and the share prices of the peer group have decreased since the structural

measure was announced. The share price of the MDAX lay at an average of 98.76 points in

the three months prior to announcement of the corporate transaction. By comparison the

average for the three months prior to 27 January is just 89.39. The development of the

MDAX and the share prices of the peer group is explained below. The different share prices

on the German stock exchanges on which Demag Cranes shares are traded were compared

and the daily trading volume was analyzed. The stock exchanges in Düsseldorf, Stuttgart,

Hamburg, Munich, Frankfurt, Berlin and the Xetra exchange were selected as a base. A

reference period of 3 months was used as a base. These data were used to calculate

averages for the share price and the traded volume for different periods. Three reference

companies were also compared: Palfinger, Konecranes and Cargotec. The finding was that

the price of the Demag Cranes share has become visibly decoupled from those of the peer

group. The average price of the Demag Cranes share rose by approximately 13% in the

period since the conclusion of a profit and loss transfer agreement was announced on

September 5, 2011, while the average share prices of the peer group fell by more than 30%

and the M-DAX index dropped by roughly 9% in the same period. The average prices can

also be seen from the following table:

Average share price

June 5, 2011 to September 5, 2011

Average share price October 23, 2011 to

January 20, 2012 Delta

Demag Cranes 45.52 51.25 +13.18%

Palfinger AG 22.34 13.36 -40.20%

Konecranes Plc 22.93 15.10 -34.15%

Cargotec Inc. 28.36 23.60 -16.78%

MDAX 98.76 89.46 -9.42%

208 We compared the three month average share prices of the peer group companies,

Konecranes Plc, Cargotec Inc., and Palfinger AG, over the same period. Here too share

prices declined. Consequently, the share prices do not have to be extrapolated to the date of

the shareholder meeting

209 The relevant share price of Demag Cranes of € 45.52 lies above the value per share

determined using the dividend discount method, which amounts to € 43.23 and therefore

cannot serve as lower limit for measuring an appropriate cash compensation.

- 53 -

3.4.2 Assessing the appropriateness of the compensation

210 The cash compensation to be paid by Terex to the shareholders of Demag Cranes amounts

to € 45.52 and corresponds to the average price of the Demag Cranes shares in the three

months period prior to the announcement of the compensation. The cash compensation per

share exceeds the amount determined by the dividend discount method. Therefore, the

amount determined by the dividend discount method may not be used to assess the

compensation. As a result of our audit, we have found that the compensation offered is

appropriate.

211 In case of any material changes in the net assets, financial position, or results of operations,

or any other basis used for the valuation of Demag Cranes in the period between completion

of our audit on February 1, 2012 and the date on which the shareholder meeting of Demag

Cranes passes a resolution on the conclusion of a domination and profit and loss transfer

agreement, these material changes would also have to be considered in the measurement of

the cash compensation.

3.5 Appropriateness of the guaranteed dividend pursuant to Sec. 304 AktG

212 According to Sec. 304 (2) Sent. 1 AktG a settlement must assure an annual payment

(guaranteed dividend) of the amount that would likely be available without conclusion of a

domination and profit and loss transfer agreement, as the average profit distribution per

share based on the performance of the company to date and its profit projections for the

future taking account of appropriate depreciation and impairments, without creating other

revenue reserves. In this case, the compensation should take the form of a recurring cash

payment (guaranteed dividend) on the share held in issued capital.

213 The valuer has determined the annual guaranteed dividend in accordance with Sec. 304

AktG. Based on Sec. 304 AktG the enterprise value of Demag Cranes and the value per

share have to be calculated per October1, 2011. By using the discount rate, the valuer has

applied the principles laid down in recent court rulings (BGH, ruling dated July 21, 2003, II

ZB 17/01, NZG 2003, p. 1017ff.) and taken an interest rate of 5.376% after income tax,

representing the mean between the fully risk-adjusted discount rate of 8.726% after income

tax and the risk-free rate of 2.025% after income tax (see OLG Munich, ruling dated July 17,

AG 2008, p. 28ff.).

214 The recipient of the settlement receives a gross payment that is subject to capital gains tax.

The net yield derived in this manner needs to be adjusted upwards by the amount of capital

gains tax of 26.375%.

- 54 -

215 The method used to derive the discount rate corresponds to the customary methods used in

professional valuation practice. The discount rate can be summarized as follows:

Risk-free rate after personal income tax 2.025%

Risk-adjusted discount rate 8.725%

Mean value = interest rate applied after personal income tax 5.376%

Increase in capital gains tax plus solidarity surcharge (26.375%) 1.925%

Annuity rate before personal income tax 7.301%

216 The following table shows the calculation of the guaranteed dividend on the basis of the

equity value as of the technical valuation date, October 1, 2011:

Guaranteed Dividend Oct.1, 2011

Business value in € millon. 881.8

Number of shares 21,172,993

Business value per share in € 41.6

Annuitization rate 7.301%

Guaranteed dividend per share in € 3.04

217 In its ruling on July 21, 2003 the Federal Court of Justice also decided that, in contrast to

customary practice, the guaranteed dividend as defined by Sec. 304 (1) Sent. 1, (2) Sent. 1

AktG payable to the minority shareholders should be composed of the distributable projected

earnings per share before tax, less the corporate income tax to be paid by the company (on

the distribution) at the tax rate valid for the respective periods.

218 According to this ruling from the Federal Court of Justice, the earnings should be based on

earnings before corporate income tax because the company has no influence over the

amount of corporate income tax to be paid, as this amount is simply a function of earned

profits. In particular, if the corporate income tax rate declines in future, due to a change in

the law, the Federal Court of Justice believes there is an unjustified advantage for the

company, or its parent, under the previous treatment of securing a guaranteed dividend on

the basis of the net income after tax to the detriment of the minority shareholders because a

higher amount would be available for distribution compared to the guaranteed dividend once

set as fixed net amount. If the tax rate were reduced, then there would indeed no longer be a

full distribution of the average distributable earnings before tax.

219 The projected average distributable earnings before tax must therefore be broken down into

a component that is subject to corporate income tax and a component that is not subject to

corporate income tax. This is because, generally, not all components of earnings are subject

to German corporate income tax. The report on the agreement adds that the breakdown

should be effected using the alternative derivation of the business value of Demag Cranes

- 55 -

taking account, or not, respectively, corporate income tax and the associated solidarity

surcharge. As such, the gross settlement (guaranteed dividend) to be transferred by Demag

Cranes is derived from the settlement payment (before income tax) by adding the corporate

income tax burden at the currently valid rate of 15% plus solidarity surcharge. We believe

that this is the correct approach.

220 The settlement payment before corporate income tax and before capital gains tax can

therefore be summarized as follows:

Guaranteed Dividend Pre-tax guaranteed

dividend

./. CIT Guaranteed dividend

in €

Proportionate guaranteed dividend (from earnings burdend with German CIT and solidarity surcharge)

1.83 0.29 1.54

Proportionate guaranteed dividend (from earnings not burdend with German CIT and solidarity surcharge)

1.50 0.00 1.50

Total guaranteed dividend 3.33 0.29 3.04

221 Finally, the guaranteed dividend after corporate income taxes and before capital gains tax is

the result of annuitizing the value per share recalculated from the enterprise value of € 41.64

by multiplying it with the above factor of 7.301% plus CIT and solidarity surcharge:

€ 3.04

222 The guaranteed dividend has been rounded up to the nearest cent to the benefit of the

minority shareholders.

223 On this basis, Terex guarantees to pay its minority shareholders of Demag Cranes in

accordance with Sec. 304 (1) sentence 1 AktG an annual dividend of € 3.04 per share less

the German corporate income tax plus solidarity surcharge at the applicable tax rates for

each full fiscal year and for the entire duration of the domination agreement. We have

verified the calculation of the settlement and are of the opinion that it is correct and

appropriate.

224 Alternatively, the valuer calculated the settlement using a risk-free rate of 2.5%. Owing to the

fact that the risk-free rate has a contrary effect on the enterprise value and also the annuity

rate, this calculation does not result in any changes of the settled amount of € 3.02 per share

which corresponds to a decrease of 2 cents per share. The analysis of this calculation is

accurate.

- 56 -

4 Conclusion

225 As the final results of our audit pursuant to Sec. 293b AktG of the deeds, accounts and other

written documents submitted to us and the information and substantiations provided to us,

we conclude that the cash compensation of € 45.52 per share and the guaranteed dividend

of € 3.33 before tax and € 3.04 after corporate income tax and solidarity surcharge are

appropriate.

226 The enterprise value and the resulting value per share of € 43.23 by Ebner Stolz have been

correctly derived using the dividend discount method, which is the authoritative valuation

method recognized by the courts and in the technical literature. The annual settlement

(guaranteed dividend) has been correctly derived by annuitizing the equity value.

227 The average share price of Demag Cranes AG in the three months prior to announcement of

the corporate intention to enter into a domination and profit and loss transfer agreement was

€ 45.52 per bearer share according to a notice from BaFin in accordance with Sec. 5 (3)

WpÜG-AngebotsVO. Due to the fact that the share price is above the value per share

derived in the business valuation, the share price should not be used to set the lower limit of

the full cash compensation, as required by the rulings of the Federal Court of Justice.

228 No particular difficulties arose in the sense of Sec. 293e AktG during the valuation of Demag

Cranes.

229 Should there be any material changes to the net assets, financial position and earnings or

any other used in the valuation of Demag Cranes AG in the period between conclusion of

our audit of the fairness of the cash compensation and the settlement payment and the date

on which the annual general meeting of Demag Cranes AG passes a resolution approving

the domination and profit and loss transfer agreement (scheduled for 16 March 2012), these

changes will need to be considered in the measurement of the cash compensation and the

settlement.

- 57 -

230 On the the basis of the above, we issue the following declaration pursuant to Sec. 293e

AktG:

231 “Based on the findings of our audit and for the reasons described above, we are of the

opinion that the cash compensation of € 45.52 and the guaranteed annual settlement for the

minority shareholders of Demag Cranes AG of € 3.33 per share before tax and € 3.04 per

share (after deducting corporate income tax and solidarity surcharge at the currently

applicable rates) are fair and appropriate.”

Düsseldorf, February 1, 2012

I-ADVISE AG Wirtschaftsprüfungsgesellschaft

Dr. Beumer Stens

Wirtschaftsprüfer Wirtschaftsprüfer

[German public auditor] [German public auditor]