Half-Year Report 2021

HALF-YEAR REPORT

2021

HWA AG - HALF-YEAR REPORT 2021

INTERIM MANAGEMENT REPORT

DEAR SHAREHOLDERS,

For HWA AG, as for many other companies, the first half of 2021 was dominated by the fact that the hard lockdown and the associated restrictions, including in HWA AG's fields of activity, could be lifted. Activities that were significantly restricted in the previous year due to COVID-19 and had a major impact on HWA AG's economic situation, such as GT customer sports, have been taking place almost without restriction since the beginning of the year. This has resulted in a recovery of sales revenues in these areas and played a key role in allowing the previous year's high monthly losses to be brought to a stop. In addition, HWA AG's general cost-cutting programme is continuing at full steam, and its effects are also clearly visible. The savings here relate, for example, to optimizations in the IT infrastructure, general consulting services and also personnel.

HWA AG has forecast a return to profitability for 2021 as a whole and has planned slightly positive EBIT in the low single-digit millions. We are pursuing this goal as a top priority and consider ourselves to be well on track - while of course keeping a necessary sharp eye on developments relating to the pandemic.

In the year to date, i.e. also including July and August, the Formula 2 and Formula 3 racing series and the ABB FIA Formula E championship were held. They did not take place entirely as originally planned, but also by no means with the same restrictions as in the previous year. Spare parts and service business and production for the Mercedes-AMG GT racing vehicles saw a satisfactory development in the first six months of 2021. Unfortunately, the start of some planned development projects, particularly in the area of Mercedes-AMG customer sports, could not be implemented as planned in the first half of the year. As a result, the use of short-time work as a tool was increased again and applied to a greater extent than anticipated at the start of the year.

HWA AG still has the goal of starting new development projects in the second half of 2021, and has so far succeeded in this with projects in Mercedes-AMG customer sports, among others. It thereby intends to achieve the earnings target for 2021. This has the follow-up goal of being stable and more broadly positioned in the years ahead, too. We see the discontinuation of the Formula E project and the rapidly changing market requirements as both an opportunity and a risk.

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HWA AG - HALF-YEAR REPORT 2021

In summary, we therefore currently still consider it realistic that we will achieve the sales revenue and earnings targets set for 2021 from our operating activities.

1. BACKGROUND INFORMATION ON THE GROUP

LEGAL AND ECONOMIC POSITION OF THE COMPANY IN 2021

HWA AG was founded in 1998 under the name H.W.A. GmbH. It became a stock corporation (AG) under German law in 2006. The shares of HWA AG have been traded on the Open Market segment of the Frankfurt Stock Exchange since 19 April 2007. The company operates in Germany as an individual entity.

As the parent company, HWA AG, Affalterbach, holds the majority of the voting rights in and exercises joint management over the following legal entities:

• HWA US Inc., Wilmington, Delaware, USA (100%)
• HWA AUS Pty Ltd., Mornington, Victoria, Australia (100%)
• HYRAZE GmbH, Affalterbach, Germany (100%)

The first two above-mentioned legal entities serve as sales companies for the respective local markets.

HYRAZE GmbH is to operate in the field of the development of manned and unmanned hydrogen- powered vehicles (particularly racing vehicles) and the development, marketing and implementation of manned and unmanned, real and virtual racing series and events.

As at the reporting date, there is a 50% stake in the following legal entity, which is included in the consolidated statements using the equity method:

• PACETEQ GmbH, Affalterbach (50%)

PACETEQ GmbH operates in the field of software development and strategy services.

The parent company, the US company HWA US Inc., the company HWA Pty Ltd. in Australia and HYRAZE GmbH are fully consolidated in the consolidated financial statements.

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HWA AG - HALF-YEAR REPORT 2021

In the two segments in which it operates - Motor Racing and Vehicles/Vehicle Components - HWA AG develops, builds and produces high-performance technological products deployed in the respective racing series and provides extensive services.

The core business of Motor Racing in the first half of 2021 consisted of participation in the ABB FIA Formula E championship, Season 7, as operations and development team for the Mercedes-Benz EQ Formula E Team, as well as deployment as a Formula 2 and Formula 3 racing team under the name of HWA RACELAB.

HWA ended Season 7 of the ABB FIA Formula E championship with the manufacturer and driver world champion titles.

The second segment, Vehicles/Vehicle Components, focuses on development, production and other services for the automotive industry and other customer groups. As a highly specialised service provider, HWA AG applies its specific racing expertise to carry out development and production orders for a variety of customers.

For example, it developed an electric caravan (KNAUS E.POWER DRIVE) together with the company KNAUS Tabbert, which was successfully presented at the Caravan Salon in Düsseldorf in August 2021.

Spare parts and services continue to be provided at the Affalterbach location and worldwide on a localised basis.

RESEARCH AND DEVELOPMENT

Across all its activities and business areas, HWA AG has comprehensive resources at its disposal which it requires for the competitive development of racing vehicles, customer sports vehicles and small-scale series vehicles, as well as vehicle assemblies and components. For example, the use of cutting-edge IT solutions in simulation and design work ensures that all developments are state- of-the-art. The company also possesses comprehensive expertise and a wide range of resources for developing electrics and electronics in racing and small-scale series vehicles and vehicle components - specifically, independently and individually tailored to the intended application. This includes both creating and programming corresponding control electronics in addition to their simulation and analysis.

To be able to guarantee a suitable level of service for its global customers in the GT customer sports business, HWA AG has built up an excellent infrastructure which has worked superbly over

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HWA AG - HALF-YEAR REPORT 2021

the years and allows the thorough testing and maintenance of vehicles on the race track, in-house or directly on site.

HWA AG will be dedicating special attention to research and development in the future so as to open up new business areas and opportunities, also outside motor sports, as well as to be able to uphold the high standard of all current and future products and the competitive edge this bestows.

One specific example of this is a research project together with the DLR and the state of Baden- Württemberg to develop a drive axle with zero emissions and zero particulate matter.

2. ECONOMIC REPORT

GENERAL ECONOMIC CONDITIONS

In the first half of 2021, the global economy was characterised by recovery effects in comparison to 2020, the peak year of COVID-19 to date. Although the economic effects of the COVID-19 pandemic can still be felt, they are far less severe than in the previous year.

This recovery is taking place in both the industrial sector and the service sector.

Industrial production and also global demand for passenger cars have recovered worldwide, but are still characterised by a high level of uncertainty due to the pandemic.

The impact of the pandemic on the global economy currently still varies considerably from region to region. As a result, global economic interdependencies are also influenced to varying degrees. This can be seen in the example of China. In the first half of 2021, almost no racing events were held in China, which in turn affected HWA AG's operations.

Unprecedented measures to support the economy were implemented in many countries to counteract the steep economic downturn, which has prevented the pandemic from incurring an even more drastic impact.

AUTOMOTIVE MARKET AND OTHER RELEVANT MARKETS

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