Annual Report 2018 siemens-healthineers.com Table of contents Page 02 Report of the Supervisory Board Page 10 To our shareholders A. B. C. Combined Consolidated Additional management financial information report statements Page 16 Page 58 Page 104 A.1 Business environment B.1 Consolidated C.1 Responsibility statements of statement Page 18 income A.2 Economic environment Page 105 Page 59 C.2 Independent auditor’s Page 20 B.2 Consolidated report A.3 Financial performance statements of system comprehensive Page 110 income C.3 Corporate Governance Page 21 A.4 Results of operations Page 60 Page 118 B.3 Consolidated C.4 Notes and Page 23 statements of forward-looking A.5 Assets position financial position statements Page 24 Page 61 A.6 Financial position B.4 Consolidated statements of Page 26 cash flows A.7 Overall assessment of Page 62 the economic position B.5 Consolidated Page 27 statements of changes in equity A.8 Nonfinancial matters Page 63 Page 28 B.6 Notes to consolidated A.9 Report on expected financial statements developments Page 30 A.10 Report on material risks and opportunities Page 37 A.11 Siemens ­Healthineers AG Page 39 A.12 ­Remuneration report Page 52 A.13 ­Takeover-relevant information and explanatory report Siemens Healthineers Annual Report 2018 Report of the Supervisory Board “ Thanks to the depth and breadth of its portfolio, ­­Siemens Healthineers is ideally positioned to meet the challenges of worldwide population growth and increasing life expectancies.” Michael Sen Chairman of the Supervisory Board 02 Siemens Healthineers Annual Report 2018 Report of the Supervisory Board Fiscal year 2018 represented a milestone in the corporate history of both, Siemens and ­­Siemens Healthineers. For the first time since Siemens AG was established in 1966, Siemens took one of the original constituent companies public, placing ­­Siemens Healthineers on the path toward greater entrepreneurial independence. „ The rationale behind The rationale behind the IPO – the world’s largest in the healthcare sector to date – has the IPO – the world’s been to open up opportunities for a focused med-tech company that can compete largest in the health- effectively in the growing and constantly changing healthcare market. In doing so, care sector to date – Siemens AG chose to adequately balance business stability and entrepreneurial has been to open up freedom by retaining an 85 % stake in ­­Siemens Healthineers. Siemens AG as an anchor opportunities for a shareholder can thus provide a long-term orientation to evolve the business and allow focused med-tech for sustainable value creation. This will ultimately serve all shareholders’ interests. company that can compete effectively ­­Siemens Healthineers has the freedom to shape its own business structures and processes to meet the unique needs of their respective healthcare industry. With in the growing and direct access to the capital markets, ­­Siemens Healthineers is set to address the para- constantly changing digm shift in healthcare and to shape the healthcare industry out of a position of healthcare market.“ strength and long-term profitability. Both the company’s business performance and share price, which has increased significantly since it was first listed, validate the sound reasoning behind our milestone IPO. Thanks to the depth and breadth of its portfolio, ­­Siemens Healthineers is ideally positioned to meet the challenges of worldwide population growth and increasing life expectancies – along with the associated societal, technological and economic consequences. These challenges can only be addressed by innovations, many of which will be disruptive. Fundamental technologies of the 21st century, such as digitalization and artificial intelligence, will play prominent roles by enabling new developments in precision medicine and personalized therapies. At the same time, new digital technologies will transform patients from passive recipients of healthcare to active “managers” of their own health. ­­Siemens Healthineers has captured its vision of 21st century healthcare in the form of Strategy 2025, which defines both a framework for action and a strategic approach to future development. “Siemens ­ Healthineers In the course of the IPO of ­­Siemens Healthineers AG, the Supervisory Board held has captured its vision its constitutive meeting with its current composition of nine members on of 21st century health- March 2, 2018. The nine members of the Supervisory Board have many years of care in the form of experience in management and leadership, and possess a broad range of Strategy 2025, which expertise. At the same time, the Board’s composition ensures that independent defines both a frame- shareholder representatives’ voices are heard in the Supervisory Board of work for action and a Siemens Healthineers AG. I myself as Chairman, Dr. Norbert Gaus as Deputy Chairman, strategic approach to Dr. Andreas C. Hoffmann, Dr. Nathalie von Siemens and Dr. Ralf P. Thomas joined the Supervisory Board as representatives of the company’s majority shareholder, future development.” Siemens. Dr. Marion Helmes, Dr. Philipp Rösler, Dr. Gregory Sorensen and Karl-Heinz Streibich were elected as independent members. At the beginning of their terms, the members of the Supervisory Board were familiarized with Siemens­­ ­Healthineers’ fields of activity in a structured introduction process. 03 Siemens Healthineers Annual Report 2018 Report of the Supervisory Board During the period under report, the Supervisory Board performed, in accordance with its obligations, the duties assigned to it by law, the ­­Siemens Healthineers’ articles of association and the bylaws for the Supervisory Board. We regularly advised the Managing Board on the management of ­­Siemens Healthineers and monitored the Managing Board’s activities. We were directly involved at an early stage in all major decisions regarding the company. In written and oral reports, the Managing Board regularly provided us with timely and comprehensive information on company planning and business operations as well as on the strategic development and current state of the company. On the basis of reports submitted by the Managing Board, we considered in detail business development and all decisions and transactions of major significance to the company. Deviations from business plans were explained to us in detail and intensively discussed. The Managing Board coordinated the company’s strategic orientation with us. The Supervisory Board and / or the relevant Supervisory Board committees thoroughly examined and deliberated on the proposals made by the Managing Board. In my capacity as Chairman of the Supervisory Board, I was also in regular contact with the Managing Board and, in particular, with the President and Chief Executive Officer and was kept up to date immediately on current developments in the company’s business situation and on key business transactions. In the name of the Supervisory Board, I wish to thank all the employees of Siemens­­ Healthineers for their commitment and hard work in the past year. I also wish to thank the members of the Managing Board, who have successfully guided the company through a demanding year. And I especially wish to thank you, our shareholders, for the trust and confidence you placed in our company and its management, employees and technologies in the past year. Topics at the plenary meetings of the Supervisory Board Matters for the current Supervisory Board The Supervisory Board, with its current nine-member composition, held three regular meetings in fiscal year 2018 and adopted one resolution by written circu- lation. Topics of discussion at our regular plenary meetings were revenue, profit and employment development at ­­Siemens Healthineers, as well as the financial position and the results of its operations. We also concerned ourselves when required with certain risks to the company. The constitutive meeting of the Supervisory Board was held on March 2, 2018. At this meeting, the Chairman and Deputy Chairman of the Supervisory Board were elected, and the Board’s various committees were appointed. We addressed questions of the remuneration of members of the Managing Board and concerned ourselves with the German Corporate Governance Code; its recommendations and suggestions have become applicable to ­­Siemens Healthineers AG as a result of the IPO. At our meeting on May 2, 2018, the Managing Board reported to us on the ­­Siemens Healthineers’ current business and financial position following the con- clusion of the second quarter, as well as the organizational refocusing of the 04 Siemens Healthineers Annual Report 2018 Report of the Supervisory Board company, which is structured in three segments ( Imaging, Advanced Therapies, Diagnostics ), three business horizontals ( Digital Services, Enterprise Services, Customer Services ) and three regions. We concerned ourselves with monitoring the company’s compliance with the law, regulations and internal guidelines, and the related activities of the internal audit unit. We addressed questions of remuneration of the members of the Managing Board and discussed the targets for the share of women on the Managing Board and Supervisory Board. At our meeting on July 27, 2018, the Managing Board reported to us on the company’s business development during the third quarter of fiscal year 2018, and presented us with the Strategy 2025 corporate strategy. We concerned ourselves with the declaration of conformity with the German Corporate Governance Code and set the targets