Annual Report 2019 Key FiUres

ADDITIVE MANUFACTURING

DIGITIZATION

QUALIFIED PRODUCTS

AUTOMATION

DMG MORI

TECHNOLOGY EXCELLENCE

ANNUAL REPORT 2019 KEY FIURES

The onsolidated Annual Financial Statements of DM MORI 02 | ORDER INTAKE AKTIEN ESELLSHAFT as at December were prepared in million in accordance with the International Financial Reporting , . ,. ,. Standards (IFRS), as they have to be applied in the European ,. , . Union. This financial report refers exclusively to DM MORI -% AKTIEN ESELLSHAFT and its subsidiaries (in the following in comparison DM MORI). to

01 | KEY FIURES hanges in million against

Order Intake 2,563.1 2,975.6 -412.5 -14 % 03 | SALES REVENUES in million ,. Domestic 714.8 882.6 -167.8 -19 % ,. ,. ,. International 1,848.3 2,093.0 -244.7 -12 % ,. +% % International 72 70 in comparison to

Sales Revenues 2,701.5 2,655.1 46.4 2 %

Domestic 769.2 821.5 -52.3 -6 % International 1,932.3 1,833.6 98.7 5 %

% International 72 69 04 | EBIT in million . . Order Backlog * 1,197.4 1,609.9 -412.5 -26 % . . +% Domestic 458.3 515.7 -57.4 -11 % in comparison to . International 739.1 1,094.2 -355.1 -32 %

% International 62 68

EBITDA 299.8 280.8 19.0 7 %

EBIT 221.7 217.1 4.6 2 % 05 | EMPLOYEES incl. trainees EBT 219.1 214.8 4.3 2 %

EAT 154.4 149.5 4.9 3 % , , , , , Free cash flow 168.8 154.2 14.6 9 % -% in comparison hanges against to

Employees * 7,245 7,503 -258 -3 %

incl. trainees 347 396 -49 -12 % * Reporting Date 31 December Headquarters Tokyo DMG MORI COMPANY LIMITED Headquarters Bielefeld DMG MORI AKTIENGESELLSCHAFT

Sales and Service Locations Production Plants SALES AND PRODUTION PLANTS SERVIE LOATIONS

← ROUP STRUTURE DYNAMI . EXELLENE

ROUP STRUTURE // DM MORI AKTIENESELLSHAFT (as part of the “ lobal One ompany”)

ORPORATE SERVIES DM MORI AKTIEN ESELLSHAFT, Bielefeld

MAHINE TOOLS ILDEMEISTER Beteiligungen mbH, Bielefeld; Development and Production

TURNIN MILLIN ADVANED TEHNOLOIES DIITAL SOLUTIONS (Ultrasonic / Lasertec / Additive Manufacturing)

ILDEMEISTER DEKEL MAHO SAUER mbH DM MORI Software Drehmaschinen mbH Pfronten mbH (Pfronten, Idar-Oberstein) Solutions mbH (Bielefeld) (Pfronten) (Pfronten) REALIZER mbH ILDEMEISTER Italiana S.p.A. DEKEL MAHO (Bielefeld, Borchen) ISTOS mbH (Bergamo / Italy) Seebach mbH (Düsseldorf) (Seebach) WERKBLiQ mbH (Bielefeld) FAMOT Pleszew Sp. z o.o. Ulyanovsk Machine Tools ooo (Pleszew / Poland) (Ulyanovsk / Russia) RAZIANO Tortona S.r.l. (Tortona / Italy)

INDUSTRIAL SERVIES ) DM MORI Management mbH, Bielefeld; Sales and Services

SALES AND SERVIES

DM MORI DM MORI DM MORI DM MORI DM MORI ermany ) EMEA hina India Services

Markets of DM MORI OMPANY LIMITED )

DM MORI DM MORI DM MORI DM MORI Japan Asia USA Americas

) Significant business activities of Energy Solutions have been sold by DM MORI to a strategic investor as of July in order to focus on the core business. ) incl. Austria ) These markets are consolidated by DM MORI OMPANY LIMITED.

PRODUTION PLANTS | SALES AND SERVIE LOATIONS → SUSTAINABILITY REPORT → DM MORI in brief

DM MORI AKTIENESELLSHAFT is a worldwide leading manufacturer of machine tools with sales revenues of more than . billion and around , employees. As “lobal One ompany” − together with DM MORI OMPANY LIMITED − we reach sales revenues of around billion.

With dynamic and excellence we advance future technologies. Our portfolio comprises turning and milling machines, the Advanced Technologies Ultrasonic, Lasertec and Additive Manufacturing as well as consistent automation and digitization solutions. Our modular products allow quick, easy and scalable access to digital manufacturing and integrated digitization along the entire process chain – from planning and preparatory work to production and monitoring to service.

Our technology excellence is bundled within the main sectors of “Aerospace”, “Automotive”, “Die & Mold”, and “Medical”. Our partner program “DM MORI Qualified Products” (DMQP) allows us to offer perfectly matched peripheral products from a single source. Our customer-focussed services covering the entire life cycle of a machine tool include training, repair, maintenance and spare parts service. The modern customer portal “my DM MORI” digitizes service processes.

More than , employees work for the “lobal One ompany”. With ¦ sales and service locations – including production plants – we are present worldwide and deliver to more than , customers from industries in countries.

STRATEI FUTURE FIELDS ↗

Automation ↗ Digitization ↗

Additive Manufacturing ↗ Technology Excellence ↗

TO OUR BUSINESS REPORT OF SHAREHOLDERS DM MORI AKTIENESELLSHAFT

DM MORI in brief 16 § 45 The basis of the roup 50 § 57 Results of Operations, Annual Review 16 orporate Strategy and Financial Position and Net Worth Key Financial and 50 Order Intake 06 § 09 The Supervisory Board Performance Indicators 51 Sales Revenues 06 Report of the 20 Organization and Legal 52 Order Backlog Supervisory Board orporate Structure 52 Results of Operation 22 Share 53 Financial Position 10 § 13 The Executive Board 26 orporate overnance Report ↗ / 54 Net Worth 10 Letter from the hairman roup Declaration on orporate 56 Investments Management↗ 57 Annual Financial Statements of 29 Remuneration Report DM MORI AKTIEN ESELLSHAFT 36 Research and Development 60 ° 63 Segment Report 40 Purchasing 60 Machine Tools 44 Production and Logistics 62 Industrial Services 63 orporate Services 46 § 69 Report on Economic Position 66 ° 68 Non-Financial Key 46 ° 47 Business Environment Performance Indicators ↗ 46 Overall Economic Development 66 Sustainability 46 Development of the Machine Tool 67 Employees Building Industry 69 Overall Statement of the Executive Board on Financial Year

↗ business report information not reviewed for content

§ DMQP ↗ ¦§ First Quality ↗ © Service Excellence ↗

Employees ↗ § LOBE § Sustainability ↗

ONSOLIDATED FINANIAL STATEMENTS OF FURTHER DM MORI AKTIENESELLSHAFT INFORMATION

72 § 77 Opportunities and Risk Report 84 § 97 onsolidated Financial Statements 163 – 168 Further Information 72 Opportunites 85 onsolidated Income Statement 163 Multiple Year Overview Management System 86 onsolidated Statement of 167 List of raphs and Tables 73 Risk Mangement System Other omprehensive Income 168 Forward-Looking 77 Overall Statement of the 87 onsolidated ash Flow Statement Statements Executive Board to the Risk 88 onsolidated Balance Sheet Situation 90 Development of roup Equity 92 onsolidated Fixed Assets 80 § 81 Forecast Report Movement Schedule 80 Future Business Environment 96 Segmental Reporting in the 80 Future Development of onsolidated Financial Statements DM MORI I – IV over 81 Overall Statement of the 98 § 162 Notes to the onsolidated I Key Figures Executive Board on Future Financial Statements II ontact, Financial alendar Business Development 98 Accounting principles applied in the III roup Structure onsolidated Financial Statements IV Sales and Service Explanatory Notes for: Locations & 115 Income Statement Production Plants 120 Balance Sheet 145 ash Flow Statement 146 Segmental Reporting 148 Other Explanatory Notes 151 DM MORI roup ompanies 154 orporate Directory 155 Responsability Statement 156 Independent Auditor's Report 1

ANNUAL REVIEW

THE ONLINE SERVIE MANAER

JANUARY APRIL The year starts with our The new intranet, “DM MORI traditional open-house exhibition ONE”, is a global, cutting- in Pfronten. DM MORI presents edge and interactive its combined technological information platform by expertise across , m of employees for employees. exhibition space. Focus is my DM MORI: The innovative placed on the future fields, customer portal for service Automation, Digitization and 1 optimization sets new Additive Manufacturing. standards for digital and transparent communication. FEBRUARY 2

Future lab: In cooperation with Kempten University, DEKEL MAHO Pfronten opens a “digital MAY laboratory”. This digital lab develops innovative methods, solutions and At the th Annual eneral software programs for digitization Meeting, DM MORI within the machine tool industry. presents all-time record highs. The approximately DM MORI welcomes members shareholders approve of the erman Asia-Pacific Business by a large majority all the Association at its headquarters motions on the agenda in Bielefeld, helping to strengthen at Bielefeld ity Hall. erman-Japanese relations. Outstanding apprenticeship: Alexander Engel from MARH DEKEL MAHO is the best industrial mechanic in Allgäu. hristian Thönes becomes Vice President of DM MORI OMPANY LIMITED. His appointment 5 as member of the Board of Directors reflects the successful alignment of the enterprise to JUNE become “ lobal One ompany”. Despite increasingly difficult Looking to the future with DM MORI celebrates its th ood business development in market conditions, DM MORI automation and digitization: anniversary in Switzerland the first quarter according to records stable, high-level Highlights from the Bielefeld and presents innovations for plan: DM MORI increases sales business development. Order open house exhibition the future of production. revenues, earnings and free intake reaches ¸ ,. include a flow assembly Together strong: apprentices cash flow. Order intake remains million as planned. Sales line for the Robo o nd take part in the company’s stable at the high level as the revenues rise to ¸ ,. eneration, TX beta interplant football tournament, last two quarters of . million. EBIT increases to T and TX beta T. the “DM MORI Apprentice up”, ¸ . million. Free cash flow The opening of its new state-of- at the Schüco Arena in Bielefeld. improves to ¸ . million. the-art Technology and Solution enter in Veenendaal enables DM MORI to strengthen its market position in the Netherlands.

4 SEPTEMBER OTOBER

As the largest exhibitor at the FAMOT opens its “XXL EMO in Hanover, DM MORI Machining Hall” in Pleszew. presents an exciting line-up of In this state-of-the-art innovations across an exhibition 5 assembly hall covering 3 space of more than , m – , m components particularly in the future fields, weighing up to tons are Automation, Digitization and manufactured for other Additive Manufacturing. DM MORI plants.

At the EMO, DM MORI and Jungheinrich present the PH-A V NOVEMBER – their development partnership DM MORI focuses on its for driverless transport systems. DM MORI receives the BME core business and sells innovation award for exemplary significant business activities New Alliance: A cooperation digital transformation and of ILDEMEISTER energy with the US-American software the group-wide realignment solutions to a strategic investor. provider, TULIP, enables DM MORI of Purchasing. to provide its customers with 4 AUUST access to digital manufacturing. TULIP was founded by engineers DM MORI zech opens of MIT Media Lab in Boston. DEEMBER a new Technology and Partner Award: At the EMO, Solution enter in Brünn and DEKEL MAHO Seebach DM MORI awards TOP presents the future fields, receives the School Business supply partners for their Automation, Digitization Award, “That’s ot Potential” outstanding performance and Additive Manufacturing from the Institut der deutschen and innovation strength. to over customers. Wirtschaft Köln Junior mbH. The reason for this is Future shapers: Over Apprenticeship start at the “Future Day Summit” – a international experts from “ lobal DM MORI: new apprentices recognized teacher training One ompany” meet up at the will start their careers in a course providing information “ lobal Development Summit” global company in . A total about training, educational at the company’s headquarters JULY of young professionals support and youth work. in Bielefeld to develop and benefit from appealing DM MORI takes the lead promote new product ideas. was another very entry-level conditions for in the area of climate successful year for DM MORI today’s working world and The business magazine, “stern” protection by systematically with record values at sales right from the start, receive recognizes DM MORI as reducing the emission of revenues, earnings and the support they need to “enterprise with a future”. “Focus environmentally harmful free cash flow despite difficult achieve digital literacy. Money” also names DM MORI as greenhouse gases market conditions: Order intake one of “ ermany’s best training through its investment in Simon Pankratz, an apprentice reaches ¸ ,. million. enterprises” and also awards it with cutting-edge technology. from ILDEMEISTER Sales revenues increase to the title “TOP career opportunities”. Our clear goal: Drehmaschinen mbH ¸ ,. million. EBIT improves DM MORI will be in Bielefeld, is awarded a 2 ompared with the rest of the to ¸ . million. Free cash O-neutral. “Medal of Excellence” at the industry, DM MORI is able flow rises to ¸ . million. WorldSkills final in Russia to hold its ground well and and is one of the best N reconfirms its forecasts for . turners in the world.

Report of the Supervisory Board

Dr. Eng. Masahiko Mori ()

hairman of the Supervisory Board President of DM MORI OMPANY LIMITED

Dr. Eng. Masahiko Mori () has been hairman of the Supervisory Board since May and a member since . After studying engineering at Kyoto University in Japan, he received a doctorate from the University of Tokyo. Dr. Mori initially worked for a Japanese trading company before joining the family company, MORI SEIKI, in . Dr. Eng. Masahiko Mori has been president of DM MORI OMPANY LIMITED since .

In financial year , the Supervisory Board again focused elected until the end of the Annual eneral Meeting that on strategic issues. In particular, digitization with its oppor- will pass a resolution on the approval of the actions of the tunities for DM MORI and future business models, but also Supervisory Board for financial year . automation, played a key role. It also delved into business and earnings development and Executive Board matters and There was a change in the composition of the Executive discussed among others, issues such as business policy, Board in the reporting year. Dr. Maurice Eschweiler left the risk management, compliance, and group development until Executive Board with effect from April and took up financial year , including investments. his position as hief Representative. hristian Thönes and Michael Horn took over his executive responsibilities. The composition of the Supervisory Board remained unchanged. All Supervisory Board members ( shareholders’ All members of the Supervisory Board attended more than representatives and employees’ representatives) were half of the Supervisory Board and committee meetings.

Annual Report 01 To our Shareholders

The Supervisory Board The Executive Board

02 Business Report

The Basis of the Also in the reporting year, the Supervisory Board received The Supervisory Board meeting on May focused on Group Report on prompt, regular and comprehensive updates from the Exec- preparations for the Annual eneral Meeting on the fol- Economic Position Results of utive Board on all processes and events essential to the lowing day. The Supervisory Board also discussed current Operations, Financial Position company, not only at meetings, but also by telephone and business performance. and Net worth in writing. Moreover, the Supervisory Board received regular Opportunities and Risk Report updates on business performance and specifically, on the The Supervisory Board meeting on October was held Forecast Report development of the company's key performance indicators. in Tokyo. Focus was placed on business performance, as well as automation and digitization strategy issues and the The Supervisory Board performed its duties with great care outcome of the leading trade fair, the EMO. and high diligence in accordance with the Articles of Asso- ciation and statutory requirements. It met a total of four The meeting on November focused on the business times in financial year . The chairpersons of the Super- trend, the discussion and adoption of resolutions on corpo- visory Board committees, who regularly prepared the Super- rate and investment planning for and medium-term visory Board meetings, reported to the plenum on the issues planning for / . Effective January the remu- 03 Consolidated and recommendations discussed at the committee meet- neration of the Executive Board was restructured in view Financial ings. With regard to the members of the Supervisory Board, of the regulatory changes according to ARU II as well as Statements there were no conflicts of interest to report in the previous the expected changes of the erman orporate overnance Income Statement Statement of Other financial year. ode. As recommended by the Finance and Audit ommit- Comprehensive Income tee, the Supervisory Board also defined the following main Cash Flow The annual auditors also attended the balance sheet meet- focus areas for the statutory audit as of December : Statement Balance Sheet ing on March . The Supervisory Board approved the Development of roup Business Report and onsolidated Financial State- › Selected aspects from the application of IFRS “Leases” Group Equity Fixed Assets ments as well as the Business Report and Annual Finan- with regard to current discretionary judgement, especially Movement Schedule cial Statements of DM MORI AKTIEN ESELLSHAFT as when determining terms and interest rates Segmental of December and also the Sustainability Report . Reporting Notes › Impairment test for goodwill and intangible assets in The plenary meeting discussed the business development accordance with IAS “Impairment of Assets” and also the agenda for the th Ordinary Annual eneral Meeting scheduled for May , including the recom- › roup Business Report mendation for the appointment of the annual auditor as ± Presentation, content and disclosures in the proposed by the Finance and Audit ommittee. In addition, management report with regard to IDW PS n. F. 04 Further the chairpersons reported on the previous meetings of the ± Presentation of the effects of IFRS on net as-sets, Information

Personnel, Nomination and Remuneration ommittee and financial position and results of operations (Section Multiple Year the Finance and Audit ommittee. para. sentence of the erman ommercial ode (H B)). Overview List of Graphs and Tables Forward-Looking Statements

Annual Report

To our Shareholders

The Supervisory Board Report of the Supervisory Board

The Supervisory Board held detailed discussions on the Further topics covered by the committee included the results results of the invitation to tender for the statutory audit of from the compliance effectiveness check and the process the individual and consolidated financial statements of the presented by the Executive Board for accepting non-audit company in . services provided by the annual auditor that, after in-depth review and discussion, was adopted. It also prepared reso- The declaration of conformity in accordance with Section lution proposals on the declaration of conformity in accord- of the erman Stock orporation Act (Akt ) was also agreed ance with Section Akt and audit focus areas for . as recommended by the Finance and Audit ommittee. The Personnel, Nomination and Remuneration ommittee A large proportion of the Supervisory Board’s work is carried held two meetings. In particular, the committee prepared out by different committees: The Finance and Audit ommit- resolutions on the structure and form of Executive Board tee met seven times in financial year . It discussed the remuneration and discussed other Executive Board matters. company's financial status based on relevant performance It also discussed the Supervisory Board's efficiency check. indicators, including the cash flow trend and investments. Tax issues were also discussed, with particular reference The Nomination ommittee and Mediation ommittee did to tax audits. The audits and analyses focused also on the not meet during the reporting period. Quarterly Releases for the st and rd quarters and the Interim Report for the st half-year . The “orporate overnance” section on page et seqq. of the Annual Report describes the activities of the Supervi- Moreover, the Finance and Audit ommittee dealt with the sory Board with regard to the declaration of conformity in risk management, the annual audit and compliance report accordance with Section Akt . Since the last declara- as well as the sustainability report. The committee reviewed tion of conformity in November , DM MORI AKTIEN¾ the Financial Statements and onsolidated Financial State- ESELLSHAFT has complied with the recommendations ments and prepared the approval and adoption of the annual of the “ overnment ommission on the erman orporate financial statements. It also reviewed the recommendation overnance ode” in the version dated February , and for the appointment of the statutory auditor, issued the will comply with them in the future as well. invitation to tender for the audit of the individual and consolidated financial statements for and prepared the After consulting the annual auditor and following its own corresponding decision of the Supervisory Board. It moni- review and discussion, the Supervisory Board approved tored the independence of the annual auditor and obtained the Annual Financial Statements and onsolidated Finan- the auditor’s independence declaration pursuant to Section cial Statements of DM MORI AKTIEN ESELLSHAFT for .. of the erman orporate over nance ode. financial year at the balance sheet meeting on March

Annual Report

. Thus, the Annual Financial Statements of DM MORI existence of the company. No major weaknesses in the Inter- AKTIEN ESELLSHAFT were adopted pursuant to Section nal ontrol System and Early Risk Identification System Akt . The separate, non-financial roup report, which is were reported. an integral part of the Sustainability Report and complies with the legal requirements of the SR Directive Implementation The chairperson of the Finance and Audit ommittee pro- Act to implement Directive / / EU (Section H B) vided the Supervisory Board with a detailed report on the from April , was also discussed in detail. After its audit, findings of the committee as well as on the discussions the Supervisory Board had no objections. The decisions were held with the annual auditors and the Executive Board. The prepared by the Finance and Audit ommittee. Supervisory Board and the Finance and Audit ommittee conducted a detailed discussion and review of the Annual The Executive Board prepared the Business Report and Financial Statements and onsolidated Financial State- Annual Financial Statements for , as well as the roup ments, as well as the Business Reports. The Supervisory Business Report of DM MORI AKTIEN ESELLSHAFT Board approved the results of the audit based on its own in accordance with the provisions of the erman ommer- review – as did the Finance and Audit ommittee. Objec- cial ode (H B). The onsolidated Financial Statements tions were raised neither by the Supervisory Board nor by of DM MORI AKTIEN ESELLSHAFT were prepared in the Finance and Audit ommittee. accordance with International Financial Reporting Standards (IFRS), as applicable within the European Union. Pursuant to DM MORI completed financial year very successfully. the exemption provision in Section e H B, onsolidated The Supervisory Board wishes to thank the members of the Financial Statements in accordance with the erman om- Executive Board for their exceptional commitment and out- mercial ode (H B) were not prepared. The annual auditors standing strategic work, which is also reflected in the good provided detailed reports on their audit procedures and find- key figures achieved. Our special thanks go to all employ- ings and were available for any further queries. KPM A ees for their dedication and hard work throughout the past Wirtschaftsprüfungsgesellschaft, Bielefeld, issued unquali- financial year. fied audit opinions for both management reports and financial statements.

The annual auditor also stated that the Executive Board has taken all the reasonable steps required under Section para. Akt . The design and application of the appropriate information and monitoring system in line with company Dr. Eng. Masahiko Mori requirements appears suited to its purpose of providing hairman of the Supervisory Board early warning of decisions posing a threat to the continued Bielefeld, March

Annual Report

To our Shareholders

The Executive Board Letter from the Chairman

was a very successful year for DM MORI with new record values – and that in a difficult market environment. As “ lobal One ompany”, we have dynamically advanced our future fields – in particular, Automation, Digitization and Additive Manufacturing. Our exciting line-up of innovations at the EMO in Hanover was impressive. As the largest exhibitor at the world’s leading trade fair for machine tools, we presented hightech machines, automations and more than digital solutions. At a glance: DM MORI remains on course for success and is strategically well positioned for the future.

This is reflected by our business figures: Whereas the machine tool industry in part suffered significantly higher losses, our order intake performed better and reached ¸ ,. million as planned (previous year: ¸ , . million). Strong team: the DM MORI Sales revenues of ¸ ,. million once again surpassed Executive Board at the EMO . the record figure of the previous year (¸ ,. million). We also achieved further growth in earnings and reached new highs: Our EBITDA rose to ¸ . million (previous year: ¸ . million). The EBIT rose to ¸ . million (previous › We optimize our products, technologies and services year: ¸ . million), the EBIT margin stayed the same as for excellence every day. At our Polish production and in the previous year at . %. The EBT amounted to ¸ . supply plant FAMOT, we opened one of the world's most million (previous year: ¸ . million). As at December state-of-the-art production facilities for oversize and , the group reported EAT of ¸ . million (previous heavy components in : overing an area of , m , year: ¸ . million). The financial position also continued to energy-efficient and with two X XL machining centers at its develop positively: The free cash flow rose to a record figure core. Our expectations were exceeded by “my DM MORI”, of ¸ . million (previous year: ¸ . million). our new customer portal for integrated service optimization: Digital contact with the specialist responsible, a These key figures have allowed us to confirm our forecasts, clear, real-time overview of request status and access and this with increasing economic headwind: Worldwide to all important documents considerably improve service machine tool consumption continued to lose momentum efficiency. After a few weeks, more than , customers over the past year. According to provisional figures from the with over , machines were registered. By the end of erman Machine Builders’ Association (VDW) and the British the current year, this number is expected to increase to economic research institute, Oxford Economics, global con- around , customers. sumption fell by -. % to ¸ . billion in (previous year: ¸ . billion). The global economic downturn, geopolitical Dear Shareholders, with dynamic and excellence DM MORI uncertainties and industrial structural change were respon- is steadily evolving from a machine builder to a provider for sible for a fall in demand for capital goods. integrated solutions in the manufacturing environment. We supply our customers with everything from a single source: However, DM MORI stayed on course compared to the efficient, high-precision machines, end-to-end automation industry. Even in difficult times, our focus is on the future, and digitization solutions, as well as comprehensive services making us a strong, reliable and sustainable partner for our for the production of the future. Yet at the same time, the customers, suppliers and employees. This is made possible focus is still on the machine. by the combination of dynamic and excellence at our company. Together with DM MORI OMPANY LIMITED, we presented › We are dynamically advancing innovations in our future more than innovations at international trade fairs and fields. DM MORI offers its customers an unrivaled open-house exhibitions. As a result, we have set bench- range of automation and digitization solutions. In , marks in each of our strategic future fields: we expanded our portfolio even further.

Annual Report Automation is the key to flexible production systems. There From left to right: is a steadily increasing demand for automation. This provides us with the incentive to further enhance our portfolio in this Björn Biermann () ontrolling, finance, accounting, taxes, risk management, area. In the future, automation solutions will be available investor relations and compliance for almost every DM MORI machine. We already offer our customers a total of product lines with more than Björn Biermann has been member of the Executive Board since November . In the business graduate automation solutions. Three examples of our high innova- joined the group. He was head of controlling and corporate tive capacity: planning and of the transparency department for assessment of transactions with major shareholders. › Our modular building block system WH Flex connects up

to nine turning or milling machines according to individual hristian Thönes () customer requirements. This type of flexibility is unique hairman of the Executive Board in the machine tool industry. Product development, sales and services, procurement, corporate communications, personnel, legal and audit

› The driverless transport system PH¾A V moves auto- hristian Thönes has been hairman of the Executive nomously on the shop floor and allows customers the fully Board since April . The business graduate has been a member of the Executive Board since January and automated loading and unloading of workpiece pallets. headed the product development, production and technology It can be integrated effortlessly into existing production areas. He joined the group in and built up the Advanced areas. Free access to all machines is retained. Technologies Ultrasonic and Lasertec. From to , hristian Thönes was Managing Director of DEKEL MAHO Pfronten mbH. › Our Robo o is now even more easily operated using an innovative D camera system. Thus the Robo o Vision autonomously recognizes workpieces that can be freely Michael Horn () arranged on standard pallets. Production, logistics, quality and information technologies

Michael Horn has been member of the Executive Board since Digitization is the future topic for DM MORI. This is why May . Previously he was member of the Executive Board we provide digital products and solutions covering the entire of Körber A , Hamburg, and Managing Director of several international mechanical engineering companies. process chain – from planning and job preparation through production and monitoring to service.

Annual Report

To our The basic element necessary for digital production is con- Through our Technology Excellence we are specifically Shareholders nectivity. With DM MORI onnectivity we are offering the serving the leading industries of Aerospace, Automo- The Executive Board complete networking of DM MORI machines and selected tive, Die & Mold, and Medical. With eight new DM MORI Letter from the Chairman third party machines with digital products as well as with all technology cycles – of which, for the first time, three are relevant platforms. In this regard, IT security is especially from the field of Advanced Technologies – we have once important for us. We are convinced that networking will soon again increased our portfolio in . onsequently, a total completely be taken for granted. of technology cycles are available to our customers, offering them precise, fast machine programming even for The acceptance of digital products and services depends to complex processing. At the same time, we are focusing on a great extent on the added value they offer our customers. improving precision, quality and efficiency – for the benefit Our latest ELOS update therefore upgrades all existing of our customers. versions. This means that every user can access a total of apps. The APPLIATION ONNETOR, for example, enables We are also staying true to our maxim of “everything from customers to use any of their own applications directly in a single source” with our DMQP program, which we further ELOS. The DM MORI MESSEN ER provides all relevant strengthened in . DMQP stands for DM MORI Qualified information on a machine’s status at a glance. Products and is a seal of quality for the highest productivity, quality, connectivity and availability. This combines the exper- ISTOS offers an integrated digital production planning and tise of more than partners worldwide, who offer perfectly feedback. WERKBLiQ, our maintenance and servicing plat- aligned peripherals and accessories for our machine tools. form, is the perfect upgrade from “my DM MORI”: Even Since customers of our LASERTE SLM machines, for third-party machines can be integrated in the end-to-end example, have been able to use the DMQP Powder ycle. digital service optimization. And with the ADAMOS platform This means that within a few days, our customers receive we are setting the standard for the Internet of Things (IoT) in tested materials, perfectly matched to the machine, ready machine and plant building industry together with our part- for immediate use. ners. In this way we combine our know-how, can react faster to market requirements and create economies of scale, for Even when times are challenging, DM MORI continues to example in software development. push the gas – for products, quality and services as well as for the ERP project LOBE, employees and for the topic Since September, we have been a strategic partner of of sustainability. TULIP. Production solutions from this US software producer allow customers a simple entry into the digitization Our customers expect efficiency, precision, reliability and of manufacturing processes and are especially suitable a long life-cycle from our machines – in short: excellent for small and medium-sized enterprises. Users can both quality. At DM MORI this has top priority. With our ”First quickly and intuitively build their own apps – even without Quality” strategy, we drive numerous initiatives along the any programming knowledge. In our European production entire value chain in order to provide every customer with plants around TULIP stations and more than apps % satisfaction. developed in-house are already in use, for instance at the spindle assembly at DEKEL MAHO Pfronten. More service employees, data-based digital offers such as “my DM MORI”: Through numerous measures we have An important future field is Additive Manufacturing. The strengthened our claim to excellence in Services in . manufacture of complex parts using powder nozzle or Our goal is clear: We want to be the No. for our customers powder bed technology holds further enormous growth in this area, too. potential. As a global full liner, DM MORI covers the entire process chain: the design and preparatory work, the additive Every day we grow even stronger together as “ lobal One manufacturing and postproduction cutting, as well as ser- ompany”. We take the “best of both worlds” – and turn it vice, training and consultancy. We are constantly extending into something even better. Together. To share our know- our portfolio in this area. In , we launched several new ledge and benefit from each other’s strengths, we are har- products on the market, including the LASERTE D monizing systems and processes and creating central IT hybrid for the efficient processing of complex parts weighing structures. With LOBE (lobal One Business Excellence) up to , kg. we are introducing a uniform ERP system. This will form the basis for the further digitization of our own value chain.

Annual Report

Our employees are the most important key to our success – increasingly global spread of the corona virus, of which the this is true more than ever before in the digital era. We are extent, duration and negative impact on the overall econ- pursuing a premium standard that we will only meet with omy and industry are not yet foreseeable. Reliable state- the aid of highly qualified and motivated employees. For this ments about the influence on the business development reason, DM MORI places a high value on being an attractive of DM MORI are therefore difficult to quantify completely. employer. Trust, transparency and commitment are important to us. We stand for a corporate culture of diversity and Against this background and with the sale of Energy Solu- openness. Even in turbulent times we offer stability. Every tions in , we expect order intake and sales revenues of day more than , employees at “ lobal One ompany” around ¸ . – . billion for the financial year . EBIT give % for DM MORI. Our heartfelt thanks for this! should be around ¸ ° million and free cash flow should be around ¸ ° million. With respect to sustainability, we feel a particular corporate responsibility. Here, too, we take a comprehensive approach: As “ lobal One ompany”, we are well-positioned – technolo- from our products, services and buildings and our infra- gically, structurally and culturally. We have a very sound structure to our suppliers, customers and employees. In this management team, a unique combination of dynamic and way our automation and digitization solutions guarantee the excellence, and a clear strategy for the future. Above all, highly-efficient use of our machine tools around the clock. however, the confidence and trust that our customers, sup- The higher the productivity, the more advantageous the use pliers, employees and partners place in us encourages us of materials and energy is – and the better the sustainability to once again achieve all our goals in . balance. Through numerous social projects and initiatives, we are actively supporting society. For we have gone And because growth needs strong roots, we are also looking even further and set ourselves a particularly ambitious goal: back at the past: In October our company has been existing

This year DM MORI will be O-neutral. We are thus once for years and in December DEKEL MAHO Pfronten will again setting benchmarks! turn years old. We are proud of this long standing tradi- tion. Our recipe for success has remained the same all this Dear Shareholders, we are focusing on opportunities not time: motivated employees and satisfied customers. crises. The future is being shaped today. Therefore, our expenditure on research and development will also remain at For this reason, dear shareholders, we will once again a consistently high level in the current financial year. More- give our best in the current financial year – with dynamic, over, we will develop all the available potential in order to excellence and commitment. Your trust is the basis upon become even faster and stronger. To continue to impress our which DM MORI will also achieve success in . We customers. To extend our technological lead. To become an are delighted to know that you will remain at our side. even better company! Many thanks!

All of this only works as a joint project. Strong partners Yours sincerely, are a prerequisite for success more than ever before. Our special thanks therefore go to our customers, suppliers and business partners, employees and, above all, to you, our esteemed owners. On behalf of the entire Executive Board, I would like to thank you all for your trust in us. For us, it is both motivation and obligation. hristian Thönes hairman of the Executive Board A look ahead: is also a challenging year. The market Bielefeld, March environment will be noticeably more difficult. According to the forecasts of VDW and Oxford Economics, global consumption of machine tools will continue to decline in the current year to ¸ . billion (-. %). This applies especially to ermany (-. %), but also to the whole of Europe (-. %). In view of the current global uncertainties, an adjustment of the associations’ forecasts during the course of the year cannot be excluded. In addition to that there is the

Annual Report

STRATEGIC FUTURE FIELDS

Automation

WORKPIEE HANDLIN ANTRY LOADER ROBOT

PALLET HANDLIN ROUND STORAE SYSTEM LINEAR STORAE SYSTEM

Driverless transport system PHA V // moves autonomously across the shop floor and is easily integrated into existing production areas WH Flex modular automation system // % faster commissioning thanks to Digital Twin

Robo o Vision // Standard pallets usable thanks AUTOMATION to innovative camera system

STRATEGIC FUTURE FIELDS

Automation

AUTOMATION GANTRY LOADER PRODU TS virtually any DM MORI machine WORKPIEE HANDLIN can be automated.

GX / GX T SR

NEW!

Driverless transport system PHA V //

moves autonomously across the shop ROBOT floor and is easily integrated into existing production areas MATRIS WH Flex modular automation system // WH Cell

% faster commissioning thanks to Digital Twin IMTR WH Flex ROUND STORAGE SYSTEM PALLET HANDLIN

NEW! Robo Go Vision PH AWC RPS

NEW! LINEAR STORAGE SYSTEM

AUTOMATION CPP LPP PH-AGV

THE BASIS OF THE ROUP

orporate Strategy and Key Financial and Performance Indicators

DM MORI AKTIEN ESELLSHAFT and its subsidiaries form the group (hereinafter DM MORI). The operating activities of DM MORI are broken down into the “Machine Tools” and the “Industrial Services” segments. “orporate Services” essentially comprises DM MORI AKTIEN ESELLSHAFT with its group-wide holding functions.

The global manufacturing industry is facing a fundamental transformation, as well as a challenging economic situation caused by geopolitical uncertainties and trade conflicts. The automation and digitization of manufacturing and the increasing demands for tomorrow’s production lead to a market environment that is highly dynamic and driven by innovation. Alternative manufacturing processes, such as Additive Manufacturing, supplement the traditional technologies. ustomer demand for integrated solutions – including machinery, software, processes, peripherals and services – is increasing. Digital networking and simultaneous, virtual imaging of automated production enable a consistent cost and process transparency along the entire value-added Together with DM MORI OMPANY LIMITED, we act as “ lobal chain and throughout the entire product life cycle. The result One ompany” under our motto “Dynamic . Excellence”. are agile, dynamic and lean processes. We actively position ourselves in important strategic future areas of business in a highly dynamic way. At the same time, The higher customer requirements in combination with we aim for excellence in our products, processes as well as technological innovations result in fundamentally changed in quality and service. markets and business models. At the same time, the complexity and functional scope of machine tools are growing Hardware and software are increasingly becoming depen- continuously amidst shortening innovation cycles. New com- dent from each other. Our machines are already operating on petitors from other industries and regions are also trying to a high level of productivity and precision. Our objective is now gain a foothold in the market. to achieve the maximum return from our entire manufacturing system including our machines by employing perfectly DM MORI understands these times of upheaval and tech- fine-tuned software and to develop integrated solutions as nological change as an opportunity to further expand its well as automated, digitized manufacturing processes. current market position as a global leader in integrated and sustainable technology solutions for the manufacturing In the field of automation we continuously optimize our industry. Our objective: to pro-actively promote innovations portfolio and already offer our customers highly integrated for our customers in the role of a reliable and sustainable automation solutions that range from pallet and workpiece partner, and to offer comprehensive optimized technological handling to the flexible networking of machines. Automa- solutions in response to the dynamic customer requirements. tion solutions will in the future be available for virtually all From development to production and global sales and ser- DM MORI machine automation solutions. Our modular vice, we strive to be the No. for our customers world- automation system WH Flex links up to nine turning and wide with our integrated portfolio of leading-edge machine milling machines individually for each customer. tools, automation and digitization solutions as well as our DM MORI Qualified Products (DMQP). We develop our- Our integrated digitization strategy encompasses the selves consequently from a machine tool builder to an inte- entire process chain: from planning and work preparation grated solution provider in the manufacturing environment. to production, monitoring and service. DM MORI takes a

Annual Report

Dynamic . Excellence + Automation + First Quality 02 + Digitization + Service Excellence Business Report + Additive Manufacturing + GLOBE The Basis of the Group Report on + Technology Excellence + Employees Economic Position Results of Operations, + DMQP + Sustainability Financial Position and Net worth Opportunities and Risk Report Forecast Report

proactive role in shaping the digitization in the manufactur- increase their machine availability. With the open, digital ing industry. onnectivity is a fundamental component of platform ADAMOS we are setting a standard for the Internet digital manufacturing. It is the basic prerequisite for auto- of Things (IoT) in the machine and plant building industry mation and digitization. All new machines are therefore together with our partners and we are paving the way for equipped with DM MORI onnectivity as a standard fea- new business models. ture – without additional cost for the customer. DM MORI onnectivity stands for openness and flexibility while assur- The year also saw our company forming a coopera- 03 Consolidated ing a high degree of IT security. Our app-based control and tion with US-based software provider or TULIP. Together Financial operating environment ELOS integrates the digital prod- we simplify the first steps into digitization of manufacturing Statements ucts made by DM MORI in a single user interface. Our processes for our customers. Our customers can now net- Income Statement Statement of Other customers optimize their production processes with soft- work their workplaces, and its employees can create their Comprehensive Income ware solutions from ISTOS. Our modern customer portal, own digital solutions and apps without any programming Cash Flow “my DM MORI”digitizes the service processes for DM MORI skills – for the entire manufacturing shop floor. We present Statement Balance Sheet machines. An upgrade to the integrated maintenance and the manifold advantages offered by assembly lines that have Development of service platform offered by WERKBLiQ additionally allows been digitized with the help of TULIP to our customers at Group Equity Fixed Assets for the integration of machines from third-party manufac- the example of our spindle assembly in the erman town Movement Schedule turers and other equipment. This allows our customers to of Pfronten. Segmental Reporting Notes

A.01 | SEMENTS OF DM MORI

DM MORI AKTIENESELLSHAFT

MAHINE TOOLS INDUSTRIAL SERVIES ) ORPORATE SERVIES 04 Further Information

› Turning › Sales & Services › roup-wide Multiple Year Overview › Milling holding functions List of Graphs › Advanced Technologies and Tables (Ultrasonic / Lasertec / Additive Manufacturing) Forward-Looking Statements › Digital Solutions

1) Significant business activities of Energy Solutions have been sold by DM MORI to a strategic investor as of 1 July 2019 in order to focus on the core business.

Annual Report

Business The general rule is that we initially apply our solutions tools. In the DMQP program, DM MORI is bundling the Report internally before making them available externally to our technological expertise of more than partners world- The Basis of the Group customers. We therefore increase our investments in the wide. These partners complement the DM MORI portfolio Corporate Strategy and Key Financial automation and digitization of our own value chain. The great with their innovative products, technological concepts and and Performance Indicators potential of an integrated solution from DM MORI can be high quality standards. seen in our state-of-the-art production and supplier plant in Poland. As “proof of concept” for our customers, at FAMOT DM MORI will continue to focus on innovative technol- we achieve a considerable increase in productivity through ogy solutions, machine tools and services in the future. the use of the latest DM MORI technologies of automation As a basis for this, we will focus on sustainable, organic and digitization at all levels of the value-added chain. growth. Our goal is to exceed our customersʼ high expectations regarding accuracy, efficiency, reliability, durability In relation to the future topic of Additive Manufacturing, we and sustainability with excellent products, processes and cover the entire process chain – starting with the design employees. Without compromise we therefore pursue our and preparation, additive manufacturing of metal compo- “First Quality” strategy along the entire value added chain nents and machine post-processing all the way to service, and focus on customer benefit in all our activities. Our goal training and consultancy. Selective laser melting and laser is to satisfy every customer %. metal deposition allow us to bundle two important additive manufacturing processes under one roof and enable a wide We are pursuing this goal equally with the “Industrial Services” range of applications. We will continuously expand our prod- segment. Here too, the focus is on the excellence of the uct portfolio and our business model in order to participate services provided for commissioning, training, maintenance, in the growth market of additive manufacturing. An impor- spare parts service and repair. Our “ustomer First” program tant step has already been taken with the investment in is aimed at convincing customers with outstanding services INTEH, an Indian software and technology developer for throughout the entire life cycle of our products. We will do so additive manufacturing. by implementing structural measures aimed at continuously optimizing our service quality and efficiency. These include Additionally, we increasingly engage in cooperations. The the bundling of our global service in a dedicated company, selection of our cooperation partners is always aimed at a continuous improvement process, and the improvement the strategic expansion of our portfolio – especially when it of our digital service concepts. Digital, data-based services comes to our future fields. offer outstanding potential for increased customer value. The modern customer portal “my DM MORI” drives the Another important objective of DM MORI is the continuous optimization of DM MORI service processes and sets new development of our technological industry know-how, which standards in digital and transparent communications. we harness to provide even better individual advice to our customers and develop complete solutions that are perfectly In addition, we strive to achieve the best possible design of geared to their requirements. This entails the involvement our internal structures and processes, which are primarily of our experts in the development processes of our cus- the result of growing closer together with DM MORI tomers at an early stage. We already offer this service in OMPANY LIMITED. The aim here is to combine the “best of our Technology Excellence enter for the key industries both worlds”. The target image is made up of lean structures Aerospace, Automotive, Die & Mould and Medical. In the that allow a high degree of flexibility in order to be able to future, we intend to expand this offering by opening new react dynamically to future market changes. By reorganizing global Technology Excellence enters for other industries the sales and service structures and optimizing the global as well, in order to pro-actively meet globally increasing production network, DM MORI has already been able to customer needs. significantly reduce complexity, realizing efficiency advantages through increased standardization. This process will As a provider of integrated technology solutions, we continue to be advanced in the future in order to present always strive for the latest technological and highest ourselves even more strongly as “ lobal One ompany”. At quality standards. the same time, we are pushing ahead with the harmonization of systems and processes. At the heart of our activities are The DM MORI Qualified Products (DMQP) program offers the establishment of harmonized IT infrastructures and the our customers machine components, peripheral devices and implementation of a global ERP system with our “LOBE § accessories with a high degree of synergy to our machine lobal One Business Excellence” project.

Annual Report

A.02 | KEY FINANIAL AND PERFORMANE INDIATORS Targets Annual Report Facts ( March ) Facts Order intake ¸ 2,975.6 million around ¸ 2.6 billion ¸ 2,563.1 million Sales revenues ¸ 2,655.1 million around ¸ 2.65 billion ¸ 2,701.5 million EBIT ¸ 217.1 million around ¸ 200 million ¸ 221.7 million Free cash flow ¸ 154.2 million around ¸ 150 million ¸ 168.8 million Investments (tangible fixed assets / intangible assets) ¸ 81.9 million around ¸ 110 million ¸ 110.0 million Research and Development expenses ¸ 57.9 million around ¸ 60 million ¸ 57.4 million

Management System of DM MORI

The success of DM MORI is in particular based on the The Executive Board of DM MORI AKTIEN ESELLSHAFT exceptional commitment and strengths of our highly qualified manages the group via a rigidly defined organizational and employees. They will empower DM MORI to emerge from management structure, as well as by operative goals, the these turbulent times even stronger than before. With trust, achievement of which is monitored by predefined key figures. transparency and passion. This will allow DM MORI to meet With the help of our internal controlling and management its aspiration of being a premium provider, exceed the high system, as well as our standard reporting system, we expectations of our customers and attain our ambitioned monitor and manage the attainment of key performance objectives. We place great value on being an attractive indicators and the efficient use of our capital. employer, on strengthening the loyalty of our employees by a wide range of measures and to continually improve the work Important internal target and performance indicators are in environment. DM MORI believes in an open and diverse particular the order intake, sales revenues, earnings before corporate culture. We promote entrepreneurial thinking and interest and taxes (EBIT), free cash flow, as well as invest- talent through group-wide succession management con- ments and expenditure for research and development. We cepts such as the “High Potential Program”. manage the activities of the group and its individual companies in a sustainable manner. The in-house development and production of our DM MORI components gives us the opportunity to strengthen our core was a very successful year for DM MORI with new competencies, avoid dependencies and ensure the best pos- record highs for significant key performance indicators, sible quality of our products. In this way, DM MORI compo- despite tough market conditions. While some parts of the nents contribute to the cost optimization and sustainability machine tool industry suffered significantly higher losses, of our products and processes. These include the standard- our order intake developed better and reached ¸ ,. ization of components and interfaces, the streamlining of million as planned (previous year: ¸ , . million). At our product portfolio as well as consistent supplier manage- ¸ ,. million, sales revenues exceeded the previous ment and efficient internal value chains. With “DM MORI year’s record high (¸ ,. million). We have also further reen Manufacturing”, we offer a perfectly fine-tuned, fully improved our result and attained a new record performance: digitized and automated value chain. We thereby assure that EBIT reached ¸ . million (previous year: ¸ . million), our customers are able to use all production resources with the EBIT margin was . % as in the previous year. The com- a high degree of efficiency and achieve significant savings pany’s financial position also continued to improve: Free in materials and energy consumption – from planning and cash flow rose to the record value of ¸ . million (previ- preparation to manufacturing, monitoring and service. We ous year: ¸ . million). Investments in property, plant and refer to our machine- and product-specific measures by the equipment and intangible assets amounted to ¸ . mil- umbrella term “ REEN MODE”. The saving of energy as a lion. Expenditure for research and development amounted result of energy efficiency measures and the latest equip- to ¸ . million. This means that all target and perfor- ment and building technologies are combined in the term mance indicators are well within our forecasts for the full “ENER YSAVIN ”. One goal of our sustainability strategy is: financial year.

DM MORI will be O- neutral.

Annual Report

Business Report Organization and Legal orporate Structure The Basis of the Group Organization and Legal Corporate DM MORI AKTIEN ESELLSHAFT, which has its head- › In September , ILDEMEISTER Beteiligungen mbH Structure quarters in Bielefeld ( ermany), manages the group cen- acquired a % interest in Pragati Automation Pvt. Ltd., trally and across all functions as a management holding Bangalore (India). This shareholding has enabled DM MORI company. It comprises all cross-divisional key functions of to acquire a long-term partner as a quality supplier of the group. DM MORI Management mbH, Bielefeld, is the strategic core components for tool magazines. operating management company of the group’s sales and service locations. DM MORI AKTIEN ESELLSHAFT man- › In November , ILDEMEISTER Beteiligungen mbH ages the company’s home market in ermany, the EMEA founded DM MORI Digital mbH, Bielefeld. DM MORI region (Europe, Middle East, Africa) as well as the markets holds % of the shares, the remaining % are held by in hina and India. As the parent company of the group’s a cooperation partner. production sites, ILDEMEISTER Beteiligungen mbH is responsible for further holding functions. Together with DM MORI OMPANY LIMITED, we are present worldwide at sales and service locations − of which are production plants.

All companies of the group are managed as profit centers and follow clear guidelines with the aim to achieve the best possible performance and results. A group wide uniform IT infrastructure standardizes the main work processes and work flows, and thus forms an integrative link for the group. The organizational costs of DM MORI AKTIEN¾ ESELLSHAFT amounted to ¸ . million (previous year: ¸ . million). The ultimate parent company of DM MORI AKTIEN ESELLSHAFT is DM MORI OMPANY LIMITED, which has its headquarters in Tokyo, Japan.

The following changes were made to the group’s legal corporate structure: Decentralized areas of competence: › Effective from January , DM MORI lobal Service The satellite structure and uniform alignment of the digital units accelerate the path to digital production. Milling mbH, Pfronten, merged to DM MORI lobal Service Turning mbH, Bielefeld. DM MORI lobal Service Turn- ing mbH was renamed to DM MORI lobal Service mbH. The structure of the group is designed to ensure that all companies contribute towards expanding the position as a › In June , % of the shares in DM MORI Machine leading and sustainable global provider of integrated tech - Tools Trading o., Ltd., Shanghai (hina), have been trans- nology solutions for the manufacturing industry. The group ferred from DM MORI Vertriebs und Service mbH, is depicted in a matrix organization with the production Bielefeld, to DM MORI OMPANY LIMITED. plants on the one side and the sales and service companies on the other side. The supply plants are specialized › Effective from July significant business activities according to business fields and production lines. belonging to ILDEMEISTER energy solutions were sold to a strategic investor. All existing orders at Energy Solu- The DM MORI sales and service companies are respon- tions on this date were mainly processed in the reporting sible for the direct sales and services of our products year, generating sales revenues. and those of DM MORI OMPANY LIMITED. In addition, our key account management serves large international › In September , ILDEMEISTER Beteiligungen mbH customers. acquired % of TULIP Interfaces Inc, Somerville (USA). This cooperation with the US software provider TULIP has According to its last notification of voting rights of enabled DM MORI to provide its customers with access April , DM MORI OMPANY LIMITED, Nara (Japan) to digital manufacturing. indirectly held a . % share of voting rights in the share

Annual Report

capital of DM MORI AKTIEN ESELLSHAFT. In addi- › The Executive Board is furthermore authorized, with the tion, Paul E. Singer held . % of the share capital as at approval of the Supervisory Board, to exclude the statu- December through related companies according to tory subscription right in certain specifically defined cases the last notification of voting rights of November . according to the Articles of Association (authorized capital).

DM MORIʼs financial investments are listed on page › The relevant financing agreements of DM MORI AKTIEN¾ et seq. ESELLSHAFT concluded in early are subject to the condition of a change of control (meaning the acquisition Takeover Directive Implementation Act (Section a para. either of (i) % or more of the voting rights in DM MORI HB (erman ommercial ode)) AKTIEN ESELLSHAFT, if the participation interests of The following mandatory disclosures apply to the group: DM MORI OMPANY LIMITED in DM MORI AKTIEN¾ ESELLSHAFT is or falls below %, or (ii) % or more › The share capital of DM MORI AKTIEN ESELLSHAFT of the voting rights in DM MORI AKTIEN ESELLSHAFT amounts to ¸ , ,. and is divided into ,, (except by DM MORI OMPANY LIMITED) or (iii) % or no-par value bearer shares. The no-par shares respec- more of the voting rights in DM MORI OMPANY LIMITED). tively hold a calculatory ¸ . in the subscribed capital. Thus, a change of control is precluded for as long as DM MORI OMPANY LIMITED holds more than % of › Pursuant to Section of the erman Stock orpora- the voting rights in DM MORI AKTIEN ESELLSHAFT. tion Act (Akt ), the Supervisory Board is responsible for appointing and dismissing the members of the Executive The change of control conditions comply with the agree- Board. This authorization is specified in Section para. ments common in the market. They do not entail an auto- of the Articles of Association of DM MORI AKTIEN¾ matic termination of the aforementioned agreements, but ESELLSHAFT, to the effect that the Supervisory Board merely provide our contractual partners the possibility to appoints the Executive Board members, determines their cancel them in the event of a change of control. number and regulates the allocation of responsibilities. Pursuant to Section a para. of the erman ommer- › According to its last notification of voting rights on cial ode (H B), the Executive Board provides the following April , DM MORI OMPANY LIMITED indirectly held explanatory notes: a . % share of voting rights in the share capital of DM MORI AKTIEN ESELLSHAFT. › As of December , the share capital of the company amounted to ¸ , ,. divided into ,, › Pursuant to Section para. no. of the erman Stock no-par value bearer shares. Each share entitles to one orporation Act (Akt ), the Annual eneral Meeting passes vote and is decisive for the share in profits. The company resolutions on changes to the Articles of Association. The may not exercise voting rights vested in treasury shares procedural rules accordingly specified are defined in Sec- and may not participate pro-rata in the profits. tions , of the erman Stock orporation Act (Akt ), in conjunction with Article () of the Articles of Associ- › The last amendment to the Articles of Association was ation of DM MORI AKTIEN ESELLSHAFT. made in May with a revised version of Section () of the Articles of Association, thereby renewing the expired › Pursuant to Section para. of the Articles of Association, authorised capital. the Executive Board is authorized to increase the share capital of the company to up to nominal ¸ ,, . › The Executive Board has not used the mentioned author- within the period until May with the agreement izations during the reporting year. of the Supervisory Board by way of a single or several issues of up to ,, new shares against contribution in cash and / or in kind (authorized capital). At the same time, the Executive Board is empowered to issue shares in the value of ¸ ,, subject to the exclusion of pre-emptive rights, to employees of the company and to affiliates of the company.

Annual Report

Business Report Share The Basis of the Group Share The shares of DM MORI AKTIEN ESELLSHAFT are listed in the SDAX and are traded on the official market on the stock exchanges in Frankfurt / Main, Berlin and Düsseldorf, as well as on the open market stock exchanges in Hamburg, Hanover, Munich and Stuttgart. DM MORI AKTIEN¾ ESELLSHAFT continues to meet transparency requirements of the erman Stock Exchange’s “Prime Standard”. Following a regular review of the indices, the share was removed from the SDAX on March . DM MORI was re-included in the SDAX on June .

Share Performance In the stock market year , the DM MORI share was initially quoted at ¸ . ( January ) and closed at the price of ¸ . (- %; SDAX + %) as of December . Market capitalization amounted to ¸ . billion.

uaranteed Dividend Due to the domination and profit transfer agreement with DM MORI mbH – a % subsidiary of DM MORI OMPANY LIMITED ° DM MORI AKTIEN ESELLSHAFT has stopped distributing dividends since financial year . Instead, DM MORI mbH has undertaken to pay minority shareholders of DM MORI AKTIEN ESELLSHAFT compensation (“guaranteed dividend”) amounting to ¸ . gross Successful together: or ¸ . net per share – after corporation tax and before Dr. Eng. Masahiko Mori (r.) personal income tax – for each complete financial year for and hristian Thönes shape the “ lobal One the term of the agreement. ompany” together.

A.03 | KEY FIURES OF THE SHARE OF DM MORI AKTIENESELLSHAFT | ISIN: DE0005878003

Registered capital ¸ million 204.9 204.9 204.9 204.9 204.9 204.9 Number of shares million shares 78.8 78.8 78.8 78.8 78.8 78.8 losing price 1) ¸ 42.35 43.10 46.02 43.16 38.08 23.50 Annual high 1) ¸ 48.35 50.60 53.85 44.76 38.90 26.82 Annual low 1) ¸ 40.90 42.80 42.95 35.02 23.28 18.85 Market capitalization ¸ million 3,337.9 3,397.1 3,627.2 3,401.8 3,001.4 1,852.2 Dividend * ¸ – – – – 0.60 0.55 Dividend total * ¸ million – – – – 47.3 43.4 Dividend yield * % – – – – 1.6 2.3 Earnings per share 2) ¸ 1.93 1.88 1.49 0.57 1.90 1.41 Price-to-earnings ratio 3) 21.9 22.9 30.9 75.7 20.0 16.7

1) XETRA-based closing price * Due to the domination and profit transfer agreement, DM MORI AKTIENESELLSHAFT will cease paying dividends as of financial 2) Pursuant to IAS 33 year 2016. Instead, DM MORI mbH has undertaken to pay external shareholders a compensation amount (“guaranteed dividend”) of 3) losing price / earnings per share 1.17 gross per share for each full financial year.

Annual Report

Investor Relations // Financial ommunications Our Investor Relations and Financial ommunications public image. We continue to be in constant dialogue with departments aim to provide an open and ongoing exchange our shareholders and international investors, as well as the of information with the capital market. Our transpar- business press and the relevant associations, institutions ent communication sustainably strengthens DM MORI’s and decision makers.

A.04 | DM MORI AKTIENESELLSHAFT¹SHARE IN OMPARISON WITH THE SDAX ® § JANUARY TO DEEMBER 2019 in %

140 ¸ 48.35

120 ¸ 44.25 ¸ 42.35

100 *

Jan 2019 Feb March April May June July Aug Sep Oct Nov Dec 2019

* 2 January 2019 = 100, stock performances indexed XETRA; Source: Deutsche Börse roup DM MORI AKTIENESELLSHAFT SDAX 100-days-avarage

Annual Report

ELOS UPDATE: WERKBLiQ Upgrade: STRATEGIC integrated optimization of DMG MORI CONNECTIVITY FUTURE FIELDS PL-independent of

Digitization any current version service and maintenance processes – even for TULIP third-party machines DMG MORI PLANNING & CONTROL

CAD / CAM & SIMULATION

CELOS & TECHNOLOGY CYCLES

DMG MORI MESSENGER

my DMG MORI & WERKBL iiQQ

TULIP: my DM MORI: the idealideal entry to digitization – new customer portal digitize manufacturing for integrated processes yourself service optimization

DM MORI ONNE TIVITY: without extra charge in standard SECURE in every new DM MORI machine CONNECTIVITYCONNECTIVITY DIGITIZATION in every DM MORI machine

ELOS UPDATE: WERKBLiQ Upgrade: STRATEGIC PL-independent of integrated optimization of FUTURE FIELDS 1 Digitization any current version service and maintenance processes – even for DM MORI ONNE TIVITY third-party machines

TULIP – Assembly workflow

my DM MORI: + digital work instructions new customer portal + quality & defects tracking for integrated INTERATED MANUFA TURIN TE HNOLOIES + production visibility service optimization

PLANNIN PREPARATION PRODUTION MONITORIN SERVIE

DM MORI PLANNIN AD / AM SYSTEMS & my DM MORI, WERKBLiQ ELOS DM MORI MESSENER 3 & ONTROL 4 SIMULATION 5 6 7 & NETservice

+ 25 ELOS apps + integrate own systems

exclusive for also for third-party DM MORI customers machines

+ fully integrated order planning & TE HNOLOY Y LES + status of all connected + continuous optimization DIGITIZATION control system + 60 % faster programming machines at a glance of service and maintenance Virtual Machine in dialog processes

orporate overnance Report / roup Declaration on orporate Management ↗ business report information not reviewed for content

The Executive Board and the Supervisory Board of DM MORI ooperation between the Executive Board AKTIEN ESELLSHAFT always act in accordance with good and the Supervisory Board orporate overnance and report in accordance with Section The Executive Board and the Supervisory Board work closely . of the erman orporate overnance ode on orpo- together in the interests of the company. The Executive rate overnance at DM MORI. This is reflected in respon- Board agrees the strategic direction of the company with the sible and transparent corporate management and corporate Supervisory Board and informs the latter regularly, timely control. ood orporate overnance is an essential element and comprehensively of all issues of relevance to the com- of strategic thinking and acting at all levels of the group. pany relating to strategy, business development, the risk DM MORI follows the recommendations of the erman position, risk management and compliance. Any deviations orporate overnance ode. in the course of business from the established plans and targets of the group are discussed and the reasons therefore In November , the Executive Board and the Supervisory given. The Executive Board forwards the half-year reports Board once again issued a compliance statement that con- and quarterly releases to the Finance and Audit ommittee firmed the group’s compliance with all recommendations and discusses these reports and releases with the Finance of the “ overnment ommission on the erman orporate and Audit ommittee before their publication: The articles overnance ode” in the version of the code of February of association and the rules of procedure provide for the since its publication in the electronic Federal azette right of consent of the Supervisory Board to a wide range (Bundesanzeiger) on April without reservation. The of business transactions proposed by the Executive Board. Executive Board and the Supervisory Board likewise confirm that the recommendations of the “ overnment om- The remuneration of both the members of the Supervisory mission on the erman orporate overnance ode” will Board and of the Executive Board is presented in detail in also be complied with in the future. DM MORI also com- the remuneration report on page et seqq. as part of the plies with the suggestions of the erman orporate overn- business report of the onsolidated Financial Statements ance ode except for two exceptions regarding the Annual of DM MORI AKTIEN ESELLSHAFT. eneral Meeting. For organizational and cost reasons, we have waived the Internet transmission and the accessibility Objectives in the omposition of the Supervisory Board of the representatives for the instruction-bound exercise In its meeting on September , the Supervisory Board of the voting rights of shareholders during the Annual passed a resolution on the voluntary commitment pursuant eneral Meeting. to Section .. D K ( erman orporate overnance ode):

The current declaration of conformity and the orporate › The Supervisory Board should be staffed with the same overnance report are permanently accessible at our web- number of shareholder representatives with experience in site – as are the declarations of conformity of previous years. managing or governing companies with global operations; → en.dmgmori-ag.com/corporate-communications/ corporate-governance/ › Employees from key DM MORI sectors should be considered as employee representatives; Pursuant to Section para. () of the erman ommercial ode (H B), the purpose of the audit of the statements › Knowledge about DM MORI and key markets for of the group declaration on corporate management pur- DM MORI, as well as knowledge about technical con- suant to Section f para. and and Section d of the texts and technology management should be taken into H B is limited to determining whether such statements consideration; have been made. › Specialist knowledge and experience in the use of account- Responsible Management of Opportunities and Risks ing principles, internal monitoring procedures and compli- For us, part of good orporate overnance is the comprehen- ance processes should be taken into consideration; sive and systematic management of opportunities and risks within corporate management. For detailed information on › At least two male and two female members on the Super- the opportunities and risk management system, please see visory Board on the side representing the shareholders, as page et seqq. well as on the side representing the employees;

Annual Report

› At least % of all Supervisory Board members should decided to meet these legal requirements separately from be independent; each other. Since the Supervisory Board elections, there have been two female Supervisory Board members among › Avoiding conflicts of interest; the shareholders’ representatives. Since the Supervisory Board elections, there have been three female Supervisory › An upper age limit of years at the time of election to Board members among the employees’ representatives. the Supervisory Board should be observed; limit of five terms of office; Avoiding onflicts of Interest Members of the Executive Board and the Supervisory Board › Nominations for future staffing of the Supervisory Board are obliged to act in the interests of the company. In making should also look, in particular, to the interests of the com- decisions and in connection with their functions, the mem- pany, while observing the objectives mentioned above. bers of the Executive Board and of the Supervisory Board may not pursue any personal interests or business oppor- The re-election of the Supervisory Board in May meant tunities that the company is entitled to, nor may they grant that the Supervisory Board again complied with its volun- any unjustified benefits to any other persons. Any conflicts of tary commitment of setting a gender quota in financial year interest that arise out of these or any other situations must . It also again complied with its voluntary commitment be notified to the Supervisory Board without delay, assessed to ensure the independence of at least % of the Supervi- and authorized by the Supervisory Board as necessary. The sory Board members. Supervisory Board reports to the Annual eneral Meeting on any conflicts of interest and on how they are dealt with. Diversity The diversity culture lived at DM MORI empowers our Shareholders and Annual eneral Meeting employees for example to support international group Our shareholders exercise their rights at the Annual eneral projects. This cultural exchange promotes personnel diver- Meeting. The Annual eneral Meeting passes resolutions, sity and increases performance. At DM MORI, all employ- inter alia, on the approval of the actions of the Supervisory ees and job applicants are held in high esteem irrespective Board and Executive Board, as well as on the election of the of their nationality or ethnic origin, sex, age, religion, sexual annual auditor or any changes to the articles of associa- orientation or physical impairments. The Executive Board tion. Shareholders may exercise their voting right in person. emphasizes this equal opportunity through the DM MORI Shareholders who are unable to attend the Annual eneral ode of onduct. Meeting personally are given the opportunity of exercising their voting right by proxy through an authorized person of Statutory ender Quota Requirements their choice or by transfer of proxy to a representative of the Taking into account the Act on Equal Participation of Men group who will act as per their instruction. In addition, it is and Women in Executive Positions in Private Business and possible to obtain information about the Annual eneral the Public Sector, the Supervisory Board passed a resolution Meeting timely via the Internet. All documents and infor- on November specifying that a quota of % of the mation are made available to shareholders in good time Executive Board of DM MORI AKTIEN ESELLSHAFT is on our website. to be occupied by female members of staff by June . Transparency As a result of flat hierarchies, there is only one manage- We strive to ensure that our corporate communication is as ment level below that of the Executive Board at DM MORI transparent and as relevant as possible for all stakeholders, AKTIEN ESELLSHAFT. The target quota set by the Execu- such as shareholders, capital lenders, business partners tive Board on October for this management level was and employees, as well as for the general public. Our web- % for women. This target is to be achieved by June . site provides further information at any time on the group’s With regard to the Supervisory Board, the statutory % current position, and this is also where press releases and quota has been met since the Supervisory Board elections quarterly releases, annual reports and a detailed financial . The shareholders’ and employees’ representatives have calendar are published.

Annual Report

Business Report

The Basis of the Group Corporate Governance Report Remuneration Report

Highly motivated: At DM MORI, all trainees are optimally prepared from the start for the requirements of the modern working world and strengthened in digital skills.

ompliance We are aware of our responsibility towards our business eliminated. In addition, the auditor shall also immediately partners, shareholders and employees, as well as to the report any findings and events that arise during the audit of environment and to society. We therefore specifically under- the financial statements and consolidated financial state- take to uphold clear principles and values. In particular, this ments that have a significant bearing on the work of the includes observing and upholding legal requirements and Supervisory Board. Moreover, the auditor will inform the regulatory standards as well as voluntary commitments and Supervisory Board or note in the audit report if, when con- our own internal guidelines. Our compliance management ducting the audit, any facts are discovered that are inconsist- system is designed to safeguard our principles and values. ent with the declaration of conformity issued by the Executive Further information about our ompliance Management Board and the Supervisory Board under the orporate ov- System can be found in the Sustainability Report and ernance ode. on our website. Insurance for members of the Supervisory Board and Financial Accounting and Annual Audit members of the Executive Board of DM MORI We have again agreed with the annual auditors, KPM A At DM MORI D&O insurance (directors’ and officers’ liability Wirtschaftsprüfungsgesellschaft, Berlin, for this reporting insurance) and legal protection insurance have been taken period that the hairman of the Supervisory Board and the out for members of the Supervisory Board, all the Executive hairwoman of the Finance and Audit ommittee must be Board members and managing directors. The D&O insur- informed without delay of any reasons for exclusion or bias ance contains the deductible provided for in the ode and in that may arise during the audit insofar as these cannot be the pertinent statutory provisions, respectively.

Annual Report

Remuneration Report

Pursuant to Section .. of the erman orporate overnance ode, we report on the remuneration of the Supervisory Board individually and broken down into components.

Supervisory Board Remuneration The Supervisory Board’s remuneration is defined by the Annual eneral Meeting and governed by Section of the Articles of Association of DM MORI AKTIEN ESELLSHAFT. The Supervisory Board remuneration consists of several components, including the fixed remuneration that each member of the Supervisory Board receives, remuneration for committee work, and attendance fees for meetings.

In financial year , the fixed remuneration for each individual member of the Supervisory Board was ¸ ,; the chairperson receives the .-fold amount (¸ ,), but Dr. Eng. Masahiko Mori has been waiving his Supervisory Board Remuneration since May . The vice chairperson received the .-fold amount (¸ ,). Fixed remuneration totaled ¸ , (previous year: ¸ ,).

Remuneration for committee work totaled ¸ , (previous year: ¸ ,) and included the work done in the Finance and Audit ommittee, the Personnel, Nomination and Remu- neration ommittee. The individual committee members each received ¸ ,. The chairperson of a committee also received an additional fixed remuneration of a further ¸ , and the deputy chairperson a further ¸ ,.

The members of the Supervisory Board and its committees Share ownership of the Executive Board members receive an attendance fee of ¸ , for each Supervisory and the Supervisory Board members Board and committee meeting that they participate in as Only one of the members of the Supervisory Board a member. In total, attendance fees for financial year holds an interest in DM MORI AKTIEN ESELLSHAFT. amounted to ¸ , (previous year: ¸ ,). Dr. Eng. Masahiko Mori holds shares in DM MORI OMPANY LIMITED (Nara, Japan). According to its last notification of In financial year , total remuneration for the Supervisory voting rights, DM MORI OMPANY LIMITED indirectly Board amounted to ¸ , (previous year: ¸ , ,). holds a . % share of voting rights in the share capital of DM MORI AKTIEN ESELLSHAFT. Hence, Dr. Eng. Executive Board Remuneration Masahiko Mori is indirectly a shareholder of DM MORI The remuneration of the Executive Board is discussed and AKTIEN ESELLSHAFT. decided by a plenary meeting of the Supervisory Board.

Pursuant to section MMVO ( erman Misuse of Power Members of the Executive Board receive direct and indi- Regulation), members of the Supervisory Board or Executive rect remuneration. The indirect remuneration component Board, and other individuals subject to reporting require- primarily consists of pension plan expenses. The direct remu- ments, must notify both the company and the Federal Finan- neration of members of the Executive Board of DM MORI cial Supervisory Authority (BaFin) whenever they buy or sell AKTIEN ESELLSHAFT includes fixed and variable com- company shares or other company securities. The company ponents. The variable components comprise a short-term is then legally required to publish such notification without incentive (STI), an individual and performance-based remu- delay. According notifications made by DM MORI AKTIEN¾ neration, and a long-term incentive (LTI). ESELLSHAFT can be viewed on the company website at all times.

Annual Report

Business The remuneration components are designed in such a way the respective financial year must reach or exceed a certain Report that they present a clear incentive for the Executive Board specified minimum value. This promotes sustainability-fo- The Basis of the Group members to achieve the targets. cused orporate overnance. Remuneration Report In this way, they support a sustainable and value-based cor- As a long-term remuneration component, the LTI takes into porate management. The criteria for the appropriateness account the results of DM MORI AKTIEN ESELLSHAFT of the remuneration primarily include the responsibilities as the key indicator, including a bottom threshold for of the respective Executive Board members, their personal the results. performance, the performance of the entire Executive Board, also the business situation, the success and the prospects The individual performance remuneration considers how of the company within its comparative environment. well the individual Executive Board members have met their individually set goals. The STI, the LTI and the individual The Supervisory Board meeting on November and performance remuneration are variable, which means they the Annual eneral Meeting resolution from May do not represent secure remuneration. confirmed the existing structure of Executive Board remuneration comprising a fixed component, STI, individual and The LTI tranche for to represents a performance performance-oriented remuneration, LTI and contributions units model and does not include any dividend payments to pension plans. Starting in , the LTI has a term of three or voting rights. In addition, the units may not be traded years. Furthermore, as of the ° tranche, the LTI will or sold to any third party. This LTI tranche has a term of no longer take the share price into account, but rather be four years. The tranche is defined by an assumed amount guided by the result of DM MORI AKTIEN ESELLSHAFT of money that is converted into several performance units as the key indicator, including a bottom threshold for the using the average share price. After expiration of the rele- result. The Supervisory Board has set caps on the overall vant period, the amount to be paid out is calculated from the direct remuneration of the Executive Board. number of units. From the LTI tranche to , which was awarded on December and will be paid out in The following table shows the remuneration of the Executive , the resulting payment totals ¸ , K (previous year’s Board in accordance with the erman orporate overn- tranche to : ¸ , K). A cap has been set at twice ance odex (DK ). The table “Allocated grants” shows the the annual fixed salary of each Executive Board member for awarded remuneration levels for members of the Executive the year in which the award takes place. Board for the financial year in question, including minimum and maximum salaries. The table “Inflow for the financial The LTI tranches to , to and to year” details the salaries paid to the members of the Exec- are based on a model with a term of three years. After expiry utive Board for the financial year in question. of the respective term, the disbursement amount results from the respective degree of target attainment. From the For the financial year , the Executive Board was granted LTI tranche to , which was awarded on Decem- a total remuneration package of ¸ , K (previous year: ber and will be paid out in , the resulting payment ¸ , K) based on a % target attainment. In the inflow for totals ¸ K. the financial year , the total remuneration of the Execu- tive Board amounted to ¸ , K (previous year: ¸ , K). Due to the domination and profit transfer agreement between a subsidiary of DM MORI OMPANY LIMITED and The fixed remuneration is the contractually defined basic DM MORI AKTIEN ESELLSHAFT, the Supervisory Board remuneration that is paid monthly in equal amounts. The of DM MORI AKTIEN ESELLSHAFT adopted a resolution STI is based on targets relating to key figures. In , the to guarantee a stable calculation basis for the LTI in . reference values used were the volume of the order intake Imputed values were defined for the EAT parameters and and EBIT (“Earnings Before Interest and Taxes”). The target share price for the LTI to . figures are on a sliding scale and are re-specified every year. As a precondition for the payment of the STI, the group’s sus- Benefits in kind arise mainly from the values to be assessed tainability factor (total expenditures for research and devel- in accordance with applicable tax regulations for the use of opment, corporate communication incl. marketing as well company cars and individual insurance contributions. Every as for further training in relation to total sales revenues) for member of the Executive Board is contractually entitled to

Annual Report

A.05 | REMUNERATION OF THE SUPERVISORY BOARD ommittee ommittee remunera- remuneration: tion: Personnel-, Finance and Audit Nominirations and Meeting Fixed ommittee Remuneration attendance in remuneration (F&A) ommittee (PNR) fees Total Dr. Eng. Masahiko Mori 1) hairman SB – – – – 0 hairman PNR

Ulrich Hocker 90,000 0 18,000 9,000 117,000 Deputy chairman SB

Irene Bader 2) – – – – 0

Prof. Dr.-Ing. Berend Denkena 60,000 0 0 6,000 66,000

Prof. Dr. Annette Köhler 60,000 36,000 0 16,500 112,500 hairman F&A

James Victor Nudo 3) – – – – 0

Mario Krainhöfner 4) 90,000 0 18,000 9,000 117,000 1st Deputy chairman SB Stefan Stetter 90,000 18,000 0 16,500 124,500 Deputy chairman SB

Tanja Fondel 4) 60,000 0 18,000 9,000 87,000

Dietmar Jansen 4) 60,000 18,000 0 15,000 93,000

Larissa Schikowski 5) 60,000 0 18,000 9,000 87,000

Michaela Schroll 4) 60,000 18,000 0 16,500 94,500

Total 6) 630,000 90,000 72,000 106,500 898,500

1) Dr. Eng. Masahiko Mori waives the Supervisory Board Remuneration in full. Thus Dr. Eng. Masahiko Mori has not received any Supervisory Board Remuneration for 2019. 2) Irene Bader waives the Supervisory Board Remuneration in full. Thus Irene Bader has not received any Supervisory Board Remuneration for 2019. 3) Victor Nudo waives the Supervisory Board Remuneration in full. Thus Victor Nudo has not received any Supervisory Board Remuneration for 2019. 4) These employees’ representatives transfer the majority of their remuneration for Supervisory Board duties to the Hans-Böckler-Stiftung, Düsseldorf, ermany. 5) Larissa Schikowski transfers part of her remuneration for Supervisory Board activities to various charitable institutions. 6) The total amount corresponds to the expenses of DM MORI AKTIENESELLSHAFT for 2019.

benefits in kind, which may vary depending on their personal companies did not pay any remuneration directly to mem- situation and are subject to tax payable by each Executive bers of governing bodies for services personally rendered, Board member. Pension commitments for current members in particular consulting and mediation services. of the Executive Board are implemented through a defined contribution pension plan. The expenses for the financial Former members of the Executive Board and their surviv- year just ended amounted to ¸ K (previous year: ¸ K). ing dependents were paid ¸ , K in pensions (previous year: ¸ , K). The pension obligations for former mem- Advances in favor of members of the Executive Board – and bers of the Executive Board and their surviving dependents also in favor of members of the Supervisory Board – were amounted to ¸ , K (previous year: ¸ , K). not granted. The DM MORI AKTIEN ESELLSHAFT group

Annual Report

Business A.06 | ALLOATED RANTS Report in K The Basis of the Group hristian Thönes Remuneration Report hairman since 15 April 2016 // Executive Board member since 1 January 2012 2018 2019 2019 (Min) 2019 (Max) Fixum 900 900 900 900 Perquisite 24 26 26 26 Sum 924 926 926 926 STI 690 690 0 1,490 ind. performance remuneration 690 690 0 750 LTI 2018 ° 2020 300 – – – LTI 2019 ° 2021 – 300 0 360 Sum 1,680 1,680 0 2,600 Pension 1) 300 450 450 450 Total 2,904 3,056 1,376 3,976

Björn Biermann Executive Board member since 27 November 2015 2018 2019 2019 (Min) 2019 (Max) Fixum 600 600 600 600 Perquisite 19 19 19 19 Sum 619 619 619 619 STI 375 375 0 960 ind. performance remuneration 377 377 0 500 LTI 2018 ° 2020 200 – – – LTI 2019 ° 2021 – 200 0 240 Sum 952 952 0 1,700 Pension 1) 200 200 200 200 Total 1,771 1,771 819 2,519

Michael Horn Executive Board member since 15 May 2018 2018 2019 2019 (Min) 2019 (Max) Fixum 378 600 600 600 Perquisite 42 57 57 57 Sum 420 657 657 657 STI 234 375 0 960 ind. performance remuneration 236 377 0 500 LTI 2018 ° 2020 125 – – – LTI 2019 ° 2021 – 200 0 240 Sum 595 952 0 1,700 Pension 1) 150 150 150 150 Total 1,165 1,759 807 2,507

Dr. Maurice Eschweiler Executive Board member (1 April 2013 ° 31 March 2019) 2018 2019 2019 (Min) 2019 (Max) Fixum 600 150 150 150 Perquisite 20 5 5 5 Sum 620 155 155 155 STI 375 94 0 240 ind. performance remuneration 377 94 0 125 LTI 2018 ° 2020 200 – – – LTI 2019 ° 2021 – 50 0 60 Sum 952 238 0 425 Pension 1) 150 38 38 38 Total 1,722 431 193 618

1) Payments for pension provisions as defined contribution

Annual Report

A.06 | ALLOATED RANTS in K

Executive Board total 2018 2019 2019 (Min) 2019 (Max) Fixum 2,478 2,250 2,250 2,250 Perquisite 105 107 107 107 Sum 2,583 2,357 2,357 2,357 STI 1,674 1,534 0 3,650 ind. performance remuneration 1,680 1,538 0 1,875 LTI 2018 ° 2020 825 – – – LTI 2019 ° 2021 – 750 0 900 Sum 4,179 3,822 0 6,425 Pension 1) 800 838 838 838 Total 7,562 7,017 3,195 9,620

1) Payments for pension provisions as defined contribution

A.07 | INFLOW FOR THE FINANIAL YEAR in K

hristian Thönes Björn Biermann Michael Horn hairman Executive Board member Executive Board member 2018 2019 2018 2019 2018 2019 Fixum 900 900 600 600 378 600 Perquisite 24 26 19 19 42 57 Sum 924 926 619 619 420 657 STI 1,380 1,138 750 720 469 720 ind. performance remuneration 750 750 500 500 313 500 LTI 2015 ° 2018 647 – – – – – LTI 2016 ° 2019 – 517 – 517 – – LTI 2017 ° 2019 – 360 – 240 – – Sum 2,777 2,765 1,250 1,977 782 1,220 Pension 1) 300 450 200 200 150 150 Total 4,001 4,141 2,069 2,796 1,352 2,027

Dr. Maurice Eschweiler Executive Board member until 31 March 2019 Dr. Rüdiger Kapitza Dr. Thorsten Schmidt Executive Board total 2018 2019 2018 2019 2018 2019 2018 2019 Fixum 600 150 –––– 2,478 2,250 Perquisite 20 5 – – – – 105 107 Sum 620 155 –––– 2,583 2,357 STI 750 180 –––– 3,349 2,758 ind. performance remuneration 500 125 –––– 2,063 1,875 LTI 2015 ° 2018 636 – 871 – 647 – 2,801 – LTI 2016 ° 2019 – 517 ––––– 1,551 LTI 2017 ° 2019 – 240 ––––– 840 Sum 1,886 1,062 871 – 647 – 8,213 7,024 Pension 1) 150 38 –––– 800 838 Total 2,656 1,255 871 – 647 – 11,596 10,219

1) Payments for pension provisions as defined contribution

Annual Report

STRATEGIC FUTURE FIELDS LOBAL FULL LINER IN Additive Manufacturing ADDITIVE MANUFATURIN EVERYTHING FROM A SINGLE SOURCE

POWDER BED AND POWDER NOZZLE

Powder nozzle

LASERTEC 125 3D hybrid

+ Additive Manufacturing and integrated 5-axis milling in finished part quality % LIGHTER Powder nozzle holder

Powder bed

LASERTEC 30 SLM 2nd Generation

+ Additive Manufacturing with selective laser melting

OPTOMET: Parameter Additive Manufacturing by DM MORI: optimization + global full liner software + complete process chains ADDITIVE + years’ experience MANUFACTURING + comprehensive support, training & service

STRATEGIC FUTURE FIELDS LOBAL FULL LINER IN Additive Manufacturing ADDITIVE MANUFATURIN

POWDER NOZZLE HOLDER LASERTEC ¡ D hybrid % LIGHTER Powder nozzle Wheel carrier

LASERTEC 125 3D hybrid

+ Additive Manufacturing and integrated 5-axis milling in

finished part quality % LIGHTER Blow mold

Powder bed

LASERTEC 30 SLM 2nd Generation . Functional integration: Enhanced cooling performance + Additive Manufacturing with via complex interior ducts and a larger surface selective laser melting . Production of non-assembly modules by combining standard components with sealing and connecting elements. . Lightweight design: integrated honeycomb structure . omplex geometries: virtually limitless construction freedom OPTOMET: . Flexible product development via fully digital process chain % Parameter LIGHTER optimization . Work scheduling: perfect interaction between parameter software optimization and machines via the specially developed RDesigner Milling head ADDITIVE . Significant reduction in production costs through MANUFACTURING tool-less production

Research and Development

The purpose of DM MORI’s research and development is to sustainably increase the value of our products for our customers. As a leading supplier of innovative machine tools, technology and automation solutions, software products and services, we place special focus on:

› intelligent automation of machines and plants (DM MORI ell ontroller technology, Robo o Vision, WH Flex modular automation system, linear pallet pool LPP, driverless transport system PH¾A V), › integrated digital processes with DM MORI Software Solutions (ELOS Update and DM MORI onnectivity e. g. within Manufacturing Package, DM MORI Technology ycles, DM MORI Powertools), › highly efficient production planning with ISTOS, › the further development of global standards in the digitization of mechanical and plant engineering with ADAMOS, › easy access to digital manufacturing with the no-code platform TULIP, › expansion of the portfolio in the field of Additive Manu- facturing (complete process chain for manufacturing of complex components by powder nozzle and powder bed year: employees). As in the previous year, this represents technology), % of the plants’ workforce. The innovation ratio in the › Technology Excellence through industry-specific devel- “Machine Tools” segment was as in the previous year . %. opment of future-oriented and integrated production Investments in new products are listed in Segment Report solutions (Aerospace, Die & Mold, Medical and Additive as capitalized development costs. Manufacturing), › First Quality for maximum customer satisfaction, Our research and development activities are decentralized › Service-Excellence with the customer portal “my DM MORI” and coordinated by a central product development body. This and integrated service and maintenance by WERKBLiQ, structure enables the development of the highest level of › the standardization of components (SOPE) and increase product competence, while at the same time opening up in value-added depth for core components (DM MORI synergy effects through cross-plant cooperation. We are OMPONENTS). creating further synergies through our worldwide annual development conference, the “ lobal Development Summit”. Research and Development expenditure at ¸ . million was In September , international experts from various at the level of the previous year (¸ . million). A total of “ lobal One ompany” business units met at the company's employees worked on developing our products (previous headquarters in Bielefeld to develop and promote new ideas.

A.08 | RESEARH AND DEVELOPMENT IN A YEAR BY YEAR VIEW R & D employees number 583 581 525 502 510 501 Proportion of R & D employees 1) in % 15 15 15 15 14 14 R & D expense 2) ¸ million 57.4 57.9 50.4 46.8 45.9 44.1 Innovation ratio 3) in % 4.0 4.0 3.9 3.8 3.6 3.5 apitalization ratio 4) in % 8 8 13 18 18 18

1) R & D employees in relation to the number of employees in the “Machine Tools” segment 3) R & D expenses in relation to sales revenues in the “Machine Tools” segment 2) R & D expenses exclusive expense for special constructions 4) apitalized development costs in relation to R & D expenses

Annual Report

lobal Development Summit: At the Bielefeld headquarters international experts from “ lobal One ompany” came together to develop and advance new product ideas.

Together with DM MORI OMPANY LIMITED, as “ lobal The highlight of was the EMO in Hanover. As the largest One ompany”, we presented over innovations at exhibitor, DM MORI presented innovations and integrated national and international trade fairs and open-house technology solutions for the future of digital manufacturing exhibitions during the reporting year. We also presented across an exhibition space of more than , m with a wide range of new technology solutions from our future high-tech machines – including with automation solutions. fields – Automation, Digitization, Additive Manufacturing, Technology Excellence, DM MORI Qualified Products and In the Turning division, we presented the LX . It fea- Service Excellence. tures high machine rigidity for machining workpieces up to kg in weight, a turning diameter of up to mm and a footprint of just . m². In Milling, precision of the DMP was improved by % compared to the previous model. This compact and extremely rigid production machine can be automated with the WH ell transforming it into a highly dynamic manufacturing cell. The DM U duoBLOK with integrated pallet changer is a convincing choice for -axis simultaneous machining with its stable duoBLOK design and extensive equipment. In Advanced Technologies, the LASERTE Shape allows efficient surface structuring of large components.

In Additive Manufacturing, we presented the LASERTE D hybrid. With this machine, we can produce, repair and maintain large components up to a diameter of , mm and a weight of , kg by means of laser deposition welding and cutting machining. For maximum quality and process reliability, the production process can be easily monitored and controlled using the new “AM Assistant”.

Roboo Vision // use of standard pallets through innovative camera system

Annual Report

Business When implementing additive manufacturing, our customers Report receive full support with our end-to-end process expertise – The Basis of SECURE the Group from the drawing to the finished part. Key components are CONNECTIVITY Research and our practice-oriented consulting service “Additive Intelli- Development DM MORI onnectivity gence” and the innovative OPTOMET software – for quick in every DM MORI and reliable calculation of optimum process parameters. machine

In Automation, the WH Flex can be easily customized thanks loud to its modular design and can link up to lathes or milling On-Premise machines. Solutions for workpiece and pallet handling can be configured from a modular system. The “Digital Twin” allows commissioning times to be reduced by up to % through prior real-time simulation of all processes. The DM MORI onnectivity // complete networking of Robo o was made even easier to use through an innovative DM MORI and third-party machines D camera system. The Robo o Vision automatically iden- tifies workpieces that can be randomly stacked on standard pallets. The Robo o is now also available for the universal In Digitization, with the ELOS Update all existing versions lathe NLX with MAPPS and the LX with FANU control can be updated. The new ELOS version includes the follow- systems. The PH , which is easy to retrofit, the further ing new features: The APP JOB MANA ER can be used to developed LPP and the highly flexible PH ell presented at directly import jobs into ELOS from the customer's IT sys- the Pfronten open-house exhibition enrich our port- tems. The APPLIATION ONNETOR enables the customer folio with pallet handling solutions. The PH¾A V driver- to use any of his own applications in ELOS. The MESSEN¾ less transport system developed jointly with the company, ER collects machine data and provides all relevant machine Jungheinrich, moves autonomously across the shop floor status information at a glance. The PERFORMANE MONI¾ and enables workpiece pallets to be loaded and unloaded TOR APP allows easy recording, analysis and visualization of automatically. It can be easily integrated into existing pro- machine productivity. The APP POWER PROBE allows the duction areas thanks to its free layout design and convenient geometry of the component to be checked on the machine, expandable design. Machine tools can be accessed freely. so that any deviations can be detected at an early stage. Intuitive control is provided by the DM MORI ell ontroller. The new APP PRODUTION PLANNIN enables automatic

WH Flex Automation Kit // % faster commissioning thanks to Digital Twin

Annual Report

or manual production planning and control. The PRODU¾ in the form of individual component reports. This makes TION FEEDBAK function allows the status of production process development and quality control much easier. The jobs to be reported back by the machine operator, thus ena- enhanced DM MORI PowerTools – “DM MORI Technology bling quick response times to changes. In the PRODUTION Library” and “DM MORI Adaptive Machining” – ensure even OKPIT, all production- related information is clearly dis- greater process reliability and shorter throughput times in played on an individually configurable dashboard. the AD / AM area.

DM MORI onnectivity enables the secure connection of A highlight in the area of Service Excellence is our new, DM MORI and selected third-party machines. In this way, modern customer portal, “my DM MORI”. It optimizes our we ensure connection to all standard IoT platforms – includ- service processes and provides for transparent and digital ing ADAMOS, MindSphere, FANU Field – and also support communication. For example, the portal provides access to all standard protocols, such as MQTT, MTconnect as well as documents such as operating manuals, a machine-specific the industry standard, umati – the new, standard interface service history and an overview of current service activities. between machine tools and higher-level IT systems, which All users of “my DM MORI” can upgrade to the integrated DM MORI played a key role in developing. Since the EMO, service and maintenance platform WERKBLiQ which allows all newly purchased DM MORI machines are now equipped them to integrate third-party machines and other objects. with DM MORI onnectivity at no extra cost. In the area of DM MORI Qualified Products (DMQP) – our Our cooperation with the software provider, TULIP, makes seal of approval for premium components – customers of it easier for our customers to access digital manufactur- LASERTE SLM machines can now use the DMQP powder ing. Production employees can create apps themselves cycle. The DMQP coolant lubricant circuit also offers cool- via Drag & Drop without any programming skills and thus ants specially developed for DM MORI with extensive manu- digitize work processes quickly and easily. facturer expertise – from selection and ordering through to reconditioning. The full range of qualified ready-to-use With eight new DM MORI Technology ycles, we now pro- materials from various partners can be ordered quickly vide effective assistants for workshop-oriented program- and easily from the DM MORI Webshop. In the area of ming. The new cycles enable e. g. the complete technology DM MORI OMPONENTS the inlineMASTER spindle was integration of turning, milling and grinding and improve qual- presented. Its performance was enhanced by more than % ity and productivity. The new technology cycle “AM¾Evaluator” from that of its predecessor. Like all MASTER spindles, it has visualizes process data in the field of Additive Manufacturing a -month warranty – with no limitation of hours.

New customer portal “my DM MORI” for the optimization of service: After a few weeks more than , customers with more than , machines were registered.

WERKBLiQ upgrade: integrated optimization of service and maintenance processes – also for third-party machines

Annual Report

Business Report Purchasing The Basis of the Group Purchasing In the reporting year, the cost of materials and services purchased amounted to ¸ ,. million (previous year: ¸ ,. million, of which ¸ ,. million related to raw materials and consumables (previous year: ¸ ,. million). The materials ratio thus amounted to . % (previous year: . %). The real net output ratio was . % (previous year: . %).

We live and breathe digitization. Starting with purchasing, this is the only way to achieve end-to-end networking. In the reporting year, we therefore placed focus on the digital transformation and standardization of processes.

At DM MORI, innovation and change management are closely linked. In the reporting year, DM MORI realigned its global purchasing strategy and continued to pursue internal digitization measures for Purchasing. Automated ordering processes, a global matrix organization with regional purchasing units and integrated IT solutions created even more efficient processes. By integrating these solutions, we Special honor: For its successful purchasing and logistics were able to completely digitize most operational purchas- management, DM MORI receives the innovation award ing processes. from the Federal Association of Materials Management, Purchasing and Logistics e. V. This network covers the entire value-added chain. Our focus is on digital products and data-based services. We can also improve demand forecasting and form more effective relationships with our suppliers. All these steps enable Purchasing sustainably to boost its contribution to DM MORI network. At the EMO Hannover, a total of seven the company’s success. suppliers received the “DM MORI Partner Award ” before an audience of more than TOP decision-makers. This digital transformation and realignment of the company’s global purchasing strategy was rewarded by the erman Procurement at DM MORI is organized globally. This allows Federal Association of Materials, Purchasing and Logistics production material, investments in property, plant and (BME) with the Innovation Award . The award has been equipment as well as services to be procured in the quality presented annually at the BME Symposium in Berlin since required and at the best possible conditions. The close net- and is aimed at companies that implement highly suc- work of the individual procurement organizations enables cessful and innovative purchasing and logistics manage- us to achieve group-wide synergies in different procurement strategies. ment markets. Three regional purchasing units also help us to identify additional growth markets and qualify local Together with strong partners and the established “DM MORI suppliers. In this way, cost benefits can be realized for all Technology Partner” program, DM MORI is also driving its production sites. innovation strength in purchasing. Our purchasing activities include everything required to develop and manufacture By using material group management with DM MORI innovative products and end-to-end technology solutions. OMPANY LIMITED, both companies benefit from improved Supplier know-how plays a key role in establishing our tech- cost structures and synergy effects generated by multiple nological edge and creating customer-focused, competitive group-wide projects. products. We need motivated and reliable suppliers to help us achieve a high level of customer satisfaction. As strate- The new SAP Ariba cloud-based procurement platform gic partners they are an important member of the global was rolled out with the modules “Sourcing”, “Supplier

Annual Report

Partner Award : At the EMO in Hanover DM MORI awards Top-suppliers.

Lifecycle & Performance” to all production companies world- Sheets” visualize component costs – including all commer- wide in the reporting year. The automation of master data cial and technical processes. The further development of maintenance with AI-based software tools results in an PO has also resulted in lower costs. improved analysis. In the reporting year, we strengthened and developed exist- Purchasing is also constantly developing methods for the ing technology partnerships, particularly in the areas of early integration of suppliers into the development process Digitization and DM MORI Qualified Products (DMQP). At to secure key innovations for the company. In line with the the “DM MORI¾TechDays”, we launched a number of joint digital transformation of purchasing, a web-based inno- innovative projects with our technology partners in order to vation platform was introduced in the reporting year. The improve the coordination of global strategies and techno- implementation of this platform allows suppliers, customers logical focus and implement them quickly. and third-party companies to digitally present future-oriented concepts. In this way, innovations are recognized, eval- Sustainability is a must. This also applies to Purchasing. uated and integrated into DM MORI’s technology planning lobal compliance with sustainability standards is a basic at an early stage. DM MORI requirement when working with suppliers. We use standard compliance assessments for supplier pre- This early involvement of suppliers enables material cost qualification. This allows us to create an instant supplier targets to be reached more quickly. Quality can also be self-assessment, which proves suppliers’ conformity with improved from a market and customer perspective. The sustainability and compliance standards. “Product ost Optimization” program (PO) was further developed in the reporting year. For example, the new “lean

Annual Report

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Technology Excellence enter: DIE & MOLD + early involvement in development MEDICAL processes of the customer + integrative & comprehensive AUTOMOTIVE turnkey solutions + Key industries: Aerospace, Automotive, Die & Mold, Medical

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AEROSPAE FAN DISK FOR AIRRAFT EN INES MEDIAL Technology Excellence enter: Material: TiAlV BONE SREW + early involvement in development reen Button process with Dimensions: ø × mm Mill-Turn-Technology integration processes of the customer Material: TiAlV + integrative & comprehensive AUTOMOTIVE turnkey solutions SPRINT | SWISSTYPEkit + Key industries: Aerospace, Automotive, Die & Mold, Medical

DM U duoBLOK AUTOMOTIVE

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Production and Logistics

The aim of the production and logis- driverless transport systems (A Vs) NO. 2020TAKTACADEMY218 NOVEMBER 18,tics 2019 area| SEEBACH is the efficient manufac- and collaborative robots (obots). ture, assembly and delivery of our obots are industrial robots that machines. This requires compliance work alongside humans in the pro- It is a great pleasure to certify with our strict quality standards and duction process without being sepa- high on-time delivery rates. The TAKT rated from them by safety guarding. DARIOproject HUPPERTZ enables us to systematically implement our production strategy Also in production, we are cooperat- as a BLACKand BELT transfer recognizing your lighthouse personal involvement projects, in ing closely with DM MORI OMPANY building a DMG MORI culture of continual business improvement through: thestandards completion of 160 or hours process of Digital Lean optimization Six Sigma LIMITED. By using global production training and tothe allDigital production Lean Six Sigma plants. examinations Our the compo successful- ertified: In the new DM MORI TAKT capacities, we can reduce delivery execution of nenta Black strategyBelt project withstipulates significant operationalthe need to Academy, employees are trained in the times and transport costs – for the performance improvement. strengthen our core competences: By “Digital Lean Six Sigma” methodology. benefit of our customers. producing DM MORI omponents in-house, we can guarantee the highest quality standards In the reporting year, more than , ideas were submit- and minimize supplier dependency. The key principles ted across the roup on our ”DM MORI Improve” platform of our strategy are maximum capacity utilization www.productivity-engineering.eu and and around % of them were implemented. We imple-

Michael Horn sustainable production.René J Visser mented “DM MORI Improve” also at REALIZER mbH and Member of the Executive Board DM MORI A Master Black Belt Sensei DM MORI Software Solutions mbH in the reporting year. Since , our employees have been trained to use the As part of continuous improvement process management, “Digital Lean Six Sigma” methodology at our new “TAKT” this module for workshops and projects is used extensively Academy and projects have been implemented to increase at all production sites and supports the mapping of “Digital productivity, reduce lead times and eliminate waste. One focus Lean Six Sigma” projects. of our activities in the reporting year was the digitization of our processes and the integration of flexible automation solutions Our “First Quality” strategy helps us to pool the quality pro- into our own value chain. By implementing the software solu- cesses we use globally. Our goal: % customer satisfac- tions from TULIP, ISTOS and WERKBLiQ, we are also driving tion. The ongoing improvement of our quality management digital transformation internally. In addition, we are focusing system and the use of future-oriented digital systems are on introducing new assembly and intralogistics concepts with still key to achieving top product and process quality.

Partnership for flexible manufacturing solutions: hristian Digital transition made easy: DM MORI and the US software Thönes (right), TULIP boss Natan Linder (left) and co-founder, provider, TULIP, make it easy to access digital manufacturing. Rony Kubat seal the alliance between DM MORI and TULIP. Around TULIP stations and over in-house developed apps are already being used internally by DM MORI, including in the spindle assembly at DEKEL MAHO Pfronten.

Annual Report

rand Opening: In the new, state-of-the-art production hall FAMOT in Pleszew manufactures components weighing up to tons for other DM MORI plants.

In Milling, DEKEL MAHO Pfronten mbH has consist- In Turning, ILDEMEISTER Drehmaschinen mbH has rede- ently pursued our DM MORI omponents strategy and signed the Robo o and TX beta / T assembly increased motor spindle assembly capacities by over %. lines and introduced synchronized flow assembly. Through The dispatch area also underwent a major expansion. A the just-in-sequence supply of information, material and project from the TAKT Academy for maximizing material equipment to employees, we were able to achieve a signifi- flow in the logistics area was implemented. By minimizing cant improvement in lead times and productivity. disruptions and implementing a digital management system, lead times were reduced by around % and waiting times FAMOT has launched its new, state-of-the-art XXL produc- by around %. Another project involving the digitization tion hall in Pleszew (Poland). The hall’s key features are of machine test runs using the “IoT-onnector” was also two XXL machining centers from DEKEL MAHO Pfronten, successfully completed. on which components weighing up to tons can be produced for other DM MORI plants, as well as two machines from DEKEL MAHO Seebach has improved on-time delivery the DM portal series and three DM machining centers. rates in the area of mechanical production. Through the The DM machines are connected to our linear pallet pool strategic use of process optimization methods and digi- (LPP) system, which automates workpiece feeding and guar- tal tools, both the number of missing parts and the down- antees round-the-clock machining. The energy-efficient times within mechanical production were improved by % building, kept at an almost constant temperature, covers respectively. The elimination of slide unit reworking and an area of , m², making it one of the most state-of-the- improvement of the material procurement of supplier parts art oversize-part production halls at DM MORI. were also projects from the TAKT Academy.

Annual Report

Business Report REPORT ON EONOMI POSITION Report on Economic Position Business Environment

Business Environment Development of the Machine Tool Overall Economic Development Building Industry

In , the global economy continued to be marked by INTERNATIONAL DEVELOPMENT geopolitical uncertainties. The overall economic situation The global machine tools market was affected by the down- became increasingly difficult during the year. The economy turn in the overall economy in . There was a continua- showed signs of a slowdown in momentum. The industrial tion of the downward trend noticeable since autumn . sector experienced a downturn. According to preliminary The global economic downturn, trade conflict between the figures from the Kiel Institute for the World Economy (IfW) USA and hina, and industrial structural change increasingly at the University of Kiel, the economy grew by only +. % impacted business in the machine building sector. The sharp (previous year: . %). This is the lowest growth rate since decline in demand for capital goods continued. The erman the financial and economic crisis in . Machine Tool Builders' Association (VDW) and the British economic research institute Oxford Economics sharply In ermany, gross domestic product ( DP) growth of +. % reduced their forecasts in the course of the year: According fell markedly (previous year: +. %). At +. %, economic to preliminary figures from the VDW and the British economic development in the Eurozone was also down from the pre- research institute Oxford Economics global consumption in vious year (+. %). Nearly all major economies saw a slow- has fallen for the first time in three years by -. % to down in economic momentum, particularly Italy at only ¸ . billion (previous year: +. %). +. % (previous year: +. %). With a growth rate of . %, the Russian economy also remained well below the previous In Europe, demand for machine tools fell significantly by year's rate (+. %). At +. %, only reat Britain remained -. % (previous year: +. %). Asia experienced a -. % nearly at the previous year’s level (+. %). decline (previous year: -. %). North and South America also experienced a negative trend of -. % (previous year: +. %). There was a slowdown in growth in Asia (+. %) and hina (+. %) again (previous year: Asia +. %, hina +. %). At In hina, the world’s largest market, the consumption of + %, the Indian economy also experienced a downward trend machine tools fell by -. % to ¸ . billion (previous year: (previous year: +. %). The Japanese economy remained ¸ . billion). As the second most important machine tools stable despite a decline in export demand. DP rose by market with ¸ . billion, the USA recorded a -. % decline +. % (previous year: +. %). (previous year: ¸ . billion). In ermany, the third- largest market, consumption increased by +. % to ¸ . billion (pre- The US economy lost momentum at the end of the year. vious year: ¸ . billion). onsumption in Japan increased by DP increased by +. % over the whole year (previous year: +. % and at ¸ . billion, ranked fourth worldwide (previous +. %). Latin America reported a -. % decline (previous year: ¸ . billion). Despite a sharp -. % drop in consump- year +. %). tion to ¸ . billion (previous year: ¸ . billion), at ¸ . billion, Italy came in fifth, ahead of India (previous year: ¸ . The international business of DM MORI AKTIEN¾ billion). The ten largest consumption markets accounted in ESELLSHAFT is affected by euro exchange rates. The total for around % of worldwide machine tool consump- US dollar, hinese renminbi, Russian ruble and Japanese tion (previous year: %). yen play a key role in this area. The euro depreciated against all these currencies in . The VDW calculated a volume of ¸ . billion for global production (previous year: ¸ . billion). According to preliminary estimates, hina was again the worldwide largest producer of machine tools with a volume of ¸ . billion (previous year: ¸ . billion). ermany with ¸ . billion (previous year: ¸ . billion) and Japan with ¸ . billion (previous year: ¸ . billion) follow in second and third

Annual Report

EMO Hanover: At the world's largest machine tool trade fair, DM MORI as the biggest exhibitor showed a firework of innovations with automated solutions and digital products on over , m.

place respectively. Altogether, as in the previous year the As in the previous year, the USA took second place with ten largest production countries account for more than % an export volume of ¸ . billion (export share: . %). Italy of all machine tools worldwide. was the third largest export market with ¸ . billion and an export share of . % followed by France. Machine tool ERMAN MAHINE TOOL INDUSTRY imports fell by -. % to ¸ . billion (previous year: ¸ . In , the erman machine tool industry experienced a billion). With an import share of . %, about every fourth strong downward trend: At ¸ . billion, the order intake of imported machine tool came from Switzerland. Japan plants in ermany was down by -. % and thus significantly (. %) and Italy ( . %) followed in the rankings. lower than the previous year’s level (¸ . billion). Both domestic demand, which was down -. % (previous year: Domestic consumption of machines, parts and equipment +. %) and international orders, which were down -. % increased by +. % to ¸ . billion. During the year, the (previous year: -. %) saw a significant decline. Order intake capacity utilization of erman machine tool producers fell for metal-cutting machines also fell sharply by -. % from by more than . percent points. The capacity utilization of the previous year. Domestic orders were down by -. %. manufacturers of metal-cutting machines saw a marked At -. %, the figure for international orders saw an even drop to . % (previous year: . %). sharper decline. In the forming machines area, order intake fell by -. % (previous year: +. %). Order intake at the The annual average number of employees in erman foreign plants of erman manufacturers is not included in machine tool companies of around , was at the level these figures. of the previous year (,).

Sales revenues of erman machine tool manufacturers The ifo business climate index for trade and industry is the amounted to ¸ . billion (previous year: ¸ . billion). Pro- leading indicator of economic growth in ermany. Accord- duction of machines, parts and equipment reached a volume ing to the ifo publication from January , the erman of ¸ . billion and was thus -. % below the previous year’s economy was experiencing a downturn. The business cli- level (¸ . billion). mate recovered slightly at a low level in nearly all important manufacturing industries (mechanical engineering, manu- erman machine exports fell by - . % to ¸ . billion (previ- facturing of metal products and electrical equipment). How- ous year: ¸ . billion). The export ratio fell by five percentage ever, expectations for the first half of are very cautious. points to . %. hina was again the largest export market for erman machine tools, but with a sharp -. % drop to a current ¸ . billion (previous year: ¸ . billion). This constitutes . % of machine tool exports (previous year: . %).

Annual Report § ¨

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Business Report Results of Operations, Financial Position and Net Worth Report on Economic Position Results of Operations, Order Intake Financial Position and Net Worth Order intake reached ¸ ,. million as planned and was which includes Lifeycle Services (including spare parts, thus below last year’s record high (¸ , . million). While maintenance and repair) and sales commission (previous the machine tool industry in part suffered significantly year: ¸ . million). Orders for machines by DM MORI higher losses, at - %, our order intake developed better OMPANY LIMITED amounted to ¸ . million (previ- in difficult market conditions. Orders amounted to ¸ . ous year: ¸ . million). The Energy Solutions division million in the fourth quarter (previous year: ¸ . million). accounted for ¸ . million (previous year: ¸ . million).

In the “Machine Tools” segment, orders amounted to Domestic orders were ¸ . million (previous year: ¸ . ¸ ,. million (previous year: ¸ ,. million). The million). International orders amounted to ¸ ,. million “Industrial Services” segment recorded order intake of (previous year: ¸ , . million). Thus, the share of inter- ¸ , . million (previous year: ¸ , . million), of which national business was % (previous year: %). With , ¸ ,. million was attributable to the Services division machines sold, the number of orders was below the previ- (previous year: ¸ ,. million). This figure includes order ous year’s figure (,). There was a marginal increase in intake from our original Service business (¸ . million), sales prices across the entire product range.

B.01 | ORDER INTAKE BY SEMENTS B.02 | ORDER INTAKE BY REIONS in million Other countries € 1.0 million <1 % USA 7 % 2,282.8 2,369.9 2,754.8 2,975.6 2,563.1 € 213.5 million 29 % Germany 16 % € 714.8 million . Asia € 411.5 million . € 2,563.1 . , . million . . ,. , . 48 % EMEA ,. € 1,222.3 million ,. 2019

USA 8 % € 238.0 million ,. ,. 30 % ,. - % Germany in comparison Asia 18 % ,. € 882.6 million ,. to € 531.0 million € 2,975.6 million

44 % EMEA € 1,324.0 million 2015 2016 2017 2018 2019 2018

Machine Tools Industrial Services orporate Services

Annual Report

Sales Revenues

At ¸ ,. million, sales revenues rose to a new record business were at the level of the previous year (¸ . high in the company’s history. They were up ¸ . million or million). Trade revenues with products from DM MORI + % from the previous year (¸ ,. million). In the fourth OMPANY LIMITED accounted for ¸ . million (previous quarter, sales revenues increased by ¸ . million to ¸ . year: ¸ . million). Energy Solutions accounted for ¸ . million (+ %; previous year: ¸ . million). million (previous year: ¸ . million). The change is due to the completion of individual large-scale projects that are In the “Machine Tools” segment sales revenues were with still being realized by the Energy Solutions according to the ¸ ,. million on the previous year’s level (¸ ,. mil- contract. In the fourth quarter, sales revenues in the “Industrial lion). Sales revenues reached ¸ . million in the fourth Services” segment rose to ¸ . million (previous year’s quarter (previous year: ¸ . million). In the “Industrial quarter: ¸ . million). Services” segment, total annual sales revenues rose by ¸ . million to ¸ ,. million (+ %; previous year: International sales revenues increased by + % to ¸ , . ¸ ,. million). In the Services division, sales revenues million (previous year: ¸ ,. million). Domestic sales were ¸ ,. million (previous year: ¸ , . million). revenues were ¸ . million (previous year: ¸ . mil- At ¸ . million sales revenues from our core service lion). The export rate was % (previous year: %).

B.03 | SALES REVENUES BY SEMENTS B.04 | SALES REVENUES BY REIONS in million Other countries € 295.1 million 11 % <1 % 2,304.7 2,265.7 2,348.5 2,655.1 2,701.5 USA € 20.6 million 29 % Germany . . € 769.2 million Asia 24 % € 637.1 million . . . ,. ,. € 2,701.5 million ,. ,. ,. 36 % EMEA € 979.5 million 2019

Other countries € 220.0 million 8 % ,. ,. + % USA 1 % ,. in comparison 31 % ,. ,. € 25.7 million Germany to € 821.5 million Asia 23 % € 614.1 million € 2,655.1 million

37 % EMEA 2015 2016 2017 2018 2019 2018 € 973.8 million

Machine Tools Industrial Services orporate Services

Annual Report

Business Report Order Backlog Results of Operations

Report on Economic Position As of December , the roup’s order backlog amounted Results of operations also improved and reached new record Results of Operations, to ¸ , . million ( Dec : ¸ , . million). The domes- values: EBITDA rose to ¸ . million (previous year: ¸ . Financial Position and Net Worth tic order backlog was worth ¸ . million ( Dec : million). EBIT reached ¸ . million (previous year: ¸ . ¸ . million). The international order backlog amounted million). The EBIT margin was . % as in the previous year. to ¸ . million ( Dec : ¸ , . million). The lower EBT amounted to ¸ . million (previous year: ¸ . mil- order backlog value is – compared to the previous year – lion). The group reported an EAT of ¸ . million as of also attributable to a weaker order intake, as well as to a December (previous year: ¸ . million). methodological change in the determination. International orders accounted for % of the current order backlog (same The individual income statement items are discussed in date in the previous year: %). more detail below. The total work done increased to ¸ ,. million and exceeded the previous year’s figure by ¸ . mil- The order backlog for the individual segments developed as lion (¸ ,. million). The increase was primarily the result follows: In the “Machine Tools” segment, the order backlog of an increase in sales revenues by ¸ . million or % (pre- amounted to ¸ . million ( Dec : ¸ . million). The vious year: ¸ ,. million). The Energy Solutions division “Industrial Services” segment had an order backlog totaling accounted for ¸ . million (previous year: ¸ . million). ¸ . million as of December ( Dec : ¸ . million). ¸ . million of this amount were attributable to The cost of materials increased by ¸ . million to ¸ ,. the Services division ( Dec : ¸ . million). million (previous year: ¸ ,. million), primarily due to high sales revenues. The materials ratio amounted to . % The order backlog allows for the extrapolation of an average (previous year: . %). The change was in particular attrib- order backlog of around months in the “Machine Tools” utable to an increase of the material-intensive sales reve- segment (previous year: around months) − a good founda- nues from the Energy Solutions division and a modified mix tion for the current financial year. apacity utilization does of products and countries. however vary between the individual production companies. The gross profit reached ¸ ,. million (previous year: ¸ ,. million). The personnel ratio improved to . % (previous year: . %) with a higher total work done. Per- sonnel expenses of ¸ . million were slightly below the previous year's level (¸ . million).

B.05 | INOME STATEMENT hanges against in million previous year Sales revenues 2,701.5 99.8 % 2,655.1 99.5 % 46.4 1.7 % hanges in finished goods and work in progress -16.4 -0.6 % 6.5 0.3 % -22.9 352.3 % Own work capitalized 21.0 0.8 % 6.3 0.2 % 14.7 233.3 % Total work done 2,706.1 100.0 % 2,667.9 100.0 % 38.2 1.4 % ost of materials -1,524.0 -56.3 % -1,480.1 -55.5 % -43.9 3.0 % ross profit 1,182.1 43.7 % 1,187.8 44.5 % -5.7 0.5 % Personnel costs -592.4 -21.9 % -595.9 -22.3 % 3.5 0.6 % Other expenses and income -289.9 -10.7 % -311.1 -11.7 % 21.2 6.8 % EBITDA 299.8 11.1 % 280.8 10.5 % 19.0 6.8 % Depreciation -78.1 -2.9 % -63.7 -2.4 % -14.4 22.6 % EBIT 221.7 8.2 % 217.1 8.1 % 4.6 2.1 % Financial result -5.1 -0.2 % -5.7 -0.1 % 0.6 10.5 % Share of profits and losses of at equity-accounted investments 2.5 0.1 % 3.4 0.1 % -0.9 26.5 % EBT 219.1 8.1 % 214.8 8.1 % 4.3 2.0 % Income taxes -64.7 -2.4 % -65.3 -2.5 % 0.6 0.9 % EAT 154.4 5.7 % 149.5 5.6 % 4.9 3.3 %

Annual Report

Financial Position

The balance of other income and expenses improved to The financial position continued to develop positively in the ¸ - . million (previous year: ¸ -. million). The other reporting year: The free cash flow improved to ¸ . million operating income increased by ¸ . million to ¸ . mil- and thus reached a record level (previous year: ¸ . million). lion (previous year: ¸ . million). As in the previous year, this includes predominantly income from cost allocations The cash flow from operating activities (cash inflow) of ¸ . million (previous year: ¸ . million) and exchange increased to ¸ . million (previous year: ¸ . million). rate gains in the amount of ¸ . million (previous year: Substantial contributions to this cash flow came from earn- ¸ . million), which should be seen in connection with ings before taxes (EBT) in the amount of ¸ . million (pre- the exchange rate losses in the other operating expenses. vious year: ¸ . million) and depreciation of ¸ . million In financial year , an exchange rate gain in the amount (previous year: ¸ . million). The reduction of inventories of ¸ . million resulted on the balance (previous year: ¸ . by ¸ . million and trade debtors by ¸ . million also million). The share of the other operating expenses in the contributed to the improved cash flow. The cash flow was total work done improved to . % (previous year: . %). reduced by prepayments that were ¸ . million lower. With an increased total work done (+. %), other operating The change is due to the decline in orders in the “machine expenses reduced by ¸ . million to ¸ . million (pre- tools” segment and the discontinuation of project business vious year: ¸ . million). The sales-related expenses for for Energy Solutions. The payments for income taxes (¸ . outgoing freight and packaging material declined by ¸ . million) and interest (¸ . million) reduced the cash flow. million to ¸ . million, for hire personnel and contractors by ¸ . million to ¸ . million and for other exter- B.06 | ASH FLOW nal services by ¸ . million to ¸ . million. Expenses for in million trade fairs and exhibitions increased by ¸ . million to ¸ . ash flow from operating activity 234.1 230.4 million; the increase was to a large degree attributable to ash flow from investment activity -114.2 -315.1 the expenses incurred for the EMO which takes place every ash flow from financing activity -118.9 -123.5 two years. The introduction of the new accounting standard hanges in cash and cash equivalents 1.3 -210.7 IFRS “Leases” resulted in a reduction of rental and leasing Liquid funds at the start of expenses by ¸ . million. the reporting period 152.7 363.4 Liquid funds at the end of the reporting period 154.0 152.7 Depreciation amounted to ¸ . million (previous year: ¸ . million). The higher depreciation predominantly resulted from the depreciation of rights of use in an amount of ¸ . The cash flow from investment activities (cash outflow) million attributable to the introduction of the new account- amounted to ¸ -. million (previous year: ¸ -. mil- ing standard IFRS “Leases”. The depreciation includes lion). The cash outflow for investments in property, plant and impairments in an amount of ¸ . million (previous year: equipment amounted to ¸ . million (previous year: ¸ . ¸ . million), which largely relate to buildings and techni- million) and to ¸ . million for intangible assets (previous cal equipment. year: ¸ . million). The acquisition of financial fixed assets resulted in a total cash outflow of ¸ . million (previous The financial result was ¸ -. million (previous year: ¸ -. year: ¸ . million), which is predominantly attributable to million). This was, among other things, attributable to higher the participation in TULIP Interfaces Inc. and Pragati Auto- interest income (¸ . million; previous year: ¸ . million) mation Pvt. Ltd. and higher interest expenses (¸ . million; previous year: ¸ . million). The result from companies valued at equity At . million, the free cash flow was at the highest level amounted to ¸ . million (previous year: ¸ . million). Total in the company’s history (previous year: ¸ . million). The tax expenses amounted to ¸ . million (previous year: free cash flow is defined as the balance of the cash flow ¸ . million). The tax ratio improved to . % (previous from operating activities and the cash flow from investment year: . %). For more details, see the Notes to the on- activities. The outflows and inflows relating to the sale and solidated Financial Statements on page . acquisition of subsidiaries (¸ -. million; previous year: ¸ -. million), and to financial fixed assets (¸ -. million; previous year: ¸ . million), as well as to the disbursement of the loan to DM MORI mbH (¸ million; previous year: ¸ . million) remain outside of consideration.

Annual Report

oncentrated Business B.07 | FREE ASH FLOW Report financial strength: in million Over international Report on Economic Position Free cash flow from operating activity 234.1 230.4 employees took part Results of Free cash flow from investing activity -65.3 -76.2 in the DM MORI Operations, ontroller Meeting. Financial Position Free cash flow 168.8 154.2 and Net Worth

The cash flow from financing activities (cash outflow) amounted to ¸ -. million (previous year: ¸ -. million). The cash flow resulted from the profit transfer payment to DM MORI mbH for in the amount of ¸ . million (previous year: ¸ . million). Application of the new accounting standard IFRS “Leases” resulted in the recognition of lease payments in an amount of ¸ . million in the cash flow from financing activities and had a positive effect on the free cash flow. The change in cash flow as of December resulted in a balance of liquid funds of ¸ . million (previous year: ¸ . million). As of December , the company had surplus funds in the amount of ¸ . million (previous year: ¸ . million). Net Worth

DM MORI covers its capital requirements from the operat- As of December , the balance sheet total increased ing cash flow, liquid funds and short- and long-term financ- by ¸ . million to ¸ , . million (previous year: ¸ ,. ing. The amount of the agreed financing lines totaled ¸ . million). Amidst the higher balance sheet total, the equity million in financial year (previous year: ¸ . million). ratio increased to . % (previous year: . %). Its material components are a syndicated credit facility in the amount of ¸ . million concluded in February On the asset side, fixed assets increased by ¸ . million at improved conditions and with a maturity date of Febru- or . % to ¸ . million (previous year: ¸ . million). ary . This consists of a cash tranche in the amount of Property, plant and equipment increased by ¸ . million ¸ . million and a guarantee tranche in the amount of to ¸ . million (previous year: ¸ . million). The intro- ¸ . million, additional guarantee lines of ¸ . million duction of the new accounting standard IFRS “Leases” on and factoring agreements of ¸ . million. In January , January resulted in rights of use in an amount of ¸ . the maturity of the syndicated credit line was extended until million being recognized as property, plant and equipment February . As of December , the cash tranche on December . Intangible assets were ¸ . mil- had not been utilized. The company also has a number of lion (previous year: ¸ . million). Financial assets rose by short-term bilateral loan commitments to subsidiaries with ¸ . million to ¸ . million (previous year: ¸ . mil- a total volume of ¸ . million (previous year: ¸ . million). lion). The change resulted from the acquisition of the stake in TULIP Interfaces Inc. and Pragati Automation Pvt. Ltd. For Factoring remains an important component of our financing an explanation of key investments, please see the chapter mix. In addition to the financing effect, this also allows us “Investments” on page . to optimize our debtor management process. DM MORI requires guarantee lines for its operating activities in order Non-current receivables and other assets increased by to have guarantees for prepayments and warranties issued. ¸ . million to ¸ . million (previous year: ¸ . million). Deferred tax assets increased to ¸ . million (previous Thanks to this financing mix, we have sufficient financing year: ¸ . million). Inventories of ¸ . million were . % lines that allow us to make the liquidity required for our or ¸ . million lower (previous year: ¸ . million). The business activities available. Our syndicated loan agree- inventories of raw materials and consumables reduced by ment requires us to observe a market-standard covenant. ¸ . million to ¸ . million (previous year: ¸ . million) This was complied with quarterly as well as of December and by ¸ . million to ¸ . million for work in progress . Lease agreements supplement the financing. The total (previous year: ¸ . million). The inventory of finished future liabilities from the lease liabilities amount to ¸ . goods increased to ¸ . million (previous year: ¸ . mil- million (previous year: ¸ . million). lion). The inventory turnover ratio improved to . (previous year: .). The share of inventories in the balance sheet total decreased to . % (previous year: . %).

Annual Report

On the liabilities side, equity increased by ¸ . million or . % to ¸ ,. million (previous year: ¸ , . million). With a higher balance sheet total, the equity ratio reached . % (previous year: . %). As was the case on the same date in the previous year, the company has surplus funds and thus no gearing.

Long-term debts increased by ¸ . million to ¸ . million (previous year: ¸ . million). The share in the balance sheet total amounted to . % (previous year: . %). Long- term provisions declined by ¸ . million to ¸ . million. The introduction of the new accounting standard IFRS “Leases” on January resulted in long-term lease liabilities of ¸ . million as of December . ¸ . million of the non-current liabilities concerned deferred tax liabilities (previous year: ¸ . million). Long-term funding, comprising equity and long-term loan capital, increased by ¸ . million or . % to ¸ , . million in the reporting period.

Short-term funding decreased to ¸ ,. million (previ- urrent receivables and other assets declined by . % ous year: ¸ ,. million). Short-term provisions increased or ¸ . million to ¸ . million from the previous year to ¸ . million as a result of the higher total work done (previous year: ¸ . million). Despite higher sales reve- (previous year: ¸ . million). The introduction of the new nues, trade debtors declined to ¸ . million, thanks to our accounting standard IFRS “Leases” on January consistent debtor management (previous year: ¸ . mil- resulted in short-term lease liabilities of ¸ . million as lion). The turnover rate of trade receivables improved to . of December . Trade creditors increased by ¸ . mil- (previous year: .). Receivables from related parties were lion to ¸ . million (previous year: ¸ . million). Prepay- ¸ . million (previous year: ¸ . million). Other assets ments declined by ¸ . million to ¸ . million (previous amounted to ¸ . million (previous year: ¸ . million). year: ¸ . million). The change is due to the decline in orders in the “machine tools” segment and the discontinu- On the balance sheet date, liquid funds amounted to ¸ . ation of project business for Energy Solutions. Liabilities to million (previous year: ¸ . million), which equates to . % other related parties declined by ¸ . million to ¸ . mil- of the increased balance sheet total (previous year: . %). lion (previous year: ¸ . million) and include the transfer

B.08 | BALANE SHEET OF DM MORI hanges against in million Dec Dec previous year Assets Long-term assets 891.9 36.1 % 758.1 31.1 % 133.8 17.6 % Fixed assets 815.9 33.0 % 686.5 28.1 % 129.4 18.8 % Long-term receivables and other assets 76.0 3.1 % 71.6 3.0 % 4.4 6.1 % Short-term assets 1,577.7 63.9 % 1,682.4 68.9 % -104.7 6.2 % Inventories 611.8 24.8 % 625.4 25.6 % -13.6 2.2 % Short-term receivables and other assets 811.9 32.9 % 904.3 37.0 % -92.4 10.2 % Liquid funds 154.0 6.2 % 152.7 6.3 % 1.3 0.9 % Balance Sheet total 2,469.6 100.0 % 2,440.5 100.0 % 29.1 1.2 %

Equity and liabilities Long-term financing resources 1,429.1 57.9 % 1,308.9 53.6 % 120.2 9.2 % Equity 1,281.4 51.9 % 1,197.7 49.1 % 83.7 7.0 % Outside capital 147.7 6.0 % 111.2 4.5 % 36.5 32.8 % Long-term provisions 94.4 3.8 % 96.0 3.9 % -1.6 1.7 % Long-term liabilities 53.3 2.2 % 15.2 0.6 % 38.1 250.7 % Short-term financing resources 1,040.5 42.1 % 1,131.6 46.4 % -91.1 8.1 % Short-term provisions 231.4 9.4 % 209.2 8.6 % 22.2 10.6 % Short-term liabilities 809.1 32.7 % 922.4 37.8 % -113.3 12.3 % Balance Sheet total 2,469.6 100.0 % 2,440.5 100.0 % 29.1 1.2 %

Annual Report

Business of profits to DM MORI mbH ( : ¸ . million; : Initial application of the new accounting standard IFRS Report ¸ . million). This matter affecting the liabilities to other “Leases” on January did not have a significant influence Report on Economic Position related parties is recognized in cash flow from financing on the business development and the results of operations, Results of Operations, activities at the time payments are made. net worth and financial position. The effects of the initial Financial Position and Net Worth application on the onsolidated Financial Statements are In addition to the assets recognized in the consolidated bal- explained in the Notes to the onsolidated Financial State- ance sheet, DM MORI also uses off-balance-sheet assets. ments starting on page et seq. The group uses factoring for off-balance-sheet financial instruments. Our longstanding excellent and trustful relationships with our customers and suppliers are also of particular importance. They allow us to have direct access to the relevant markets and make us more independent from short-term market fluctuations.

Investments

Investments in property, plant and feeding and removing of workpieces and equipment as well as intangible assets allows for round-the-clock processing. At amounted to ¸ . million (previous year: GLOBAL ONE BUSINESS EXCELLENCE DEKEL MAHO in Pfronten ( ermany), we ¸ . million). The planned increase over are currently in the construction phase of the previous year is to the largest extent the extension and modernization of the attributable to the expansion of our pro- assembly and logistics areas. One of the duction and logistics capacities and our highlights here will be the flow-assembly line with autonomous transport systems “ LOBE ° lobal One Business Excellence” LOBE // global ERP system for project for the implementation of a new central IT-infrastructures (A Vs) for our monoBLOK machines. global ERP system. The initial application ILDEMEISTER Drehmaschinen mbH in of the new accounting standard IFRS “Leases” means that Bielefeld saw the introduction of a cyclic assembly system the investments now also include additions from rights of for the Robo ond eneration and the TX beta T series. use (¸ . million). This new system allows for significantly shorter throughput times and even more transparent assembly progress. We have completed the new ultra-modern XXL production hall in our production and supply plant FAMOT in Poland. Depreciation of fixed assets taking into account capitalized The centerpiece of the energy-efficient production hall, which development costs and leases amounted to ¸ . million offers , m and can keep a virtually constant temperature, (previous year: ¸ . million). Depreciation of capitalized are two XXL processing centers that can produce components development costs amounted to ¸ . million (previous year: with a weight of up to tons for other DM MORI plants, as ¸ . million). The additions to the financial fixed assets well as two machines from the DM Portal series and three amounted to ¸ . million and were primarily attributa- DM processing centers. The DM machines are connected ble to the stakes in TULIP and Pragati. Total investments with our linear pallet-pool-system (LPP), which automates amounted to ¸ . million (previous year: ¸ . million).

Ultra-modern XXL production hall: The FAMOT plant in Pleszew (Poland) produces components with a weight of up to tons for other DM MORI plants.

Annual Report

Annual Financial Statements of DM MORI AKTIENESELLSHAFT (Summary)

The following tables are a summary of the Annual Financial urrent assets and other assets increased to ¸ , . mil- Statements of DM MORI AKTIEN ESELLSHAFT accord- lion (previous year: ¸ ,. million). This change is mainly ing to H B ( erman ommercial ode). The complete Annual due to the increase in receivables from affiliated companies, Financial Statements and Business Report are set out in which rose to ¸ . million (previous year: ¸ . million). a separate report. DM MORI AKTIEN ESELLSHAFT’s ash and cash equivalents dropped marginally to ¸ . mil- income is largely determined by the income from domestic lion (previous year: ¸ . million). subsidiaries amounting to ¸ . million resulting from the profit transfers (previous year: ¸ . million). On the liabilities side, equity remained the same as in the previous year at ¸ . million. The equity ratio amounted B.09 | INOME STATEMENT OF to . % (previous year: . %), due to the higher balance DM MORI AKTIENESELLSHAFT sheet total. Liabilities to affiliated companies increased to (ERMAN OMMERIAL ODE § HB) ¸ . million (previous year: ¸ . million). These include in million the transfer of profits to DM MORI mbH for financial year Sales revenues 16.1 14.4 in the amount of ¸ . million, income taxes of ¸ . Other operating income 28.5 20.5 million which are charged by DM MORI mbH as a result Other expenses -72.0 -65.9 of fiscal unity, as well as finance and cost allocations with Income from financial assets 156.3 170.9 affiliated companies. Financial result 2.5 3.1 Income taxes -35.7 -43.7 B.10 | BALANE SHEET OF EAT 95.7 99.3 DM MORI AKTIENESELLSHAFT Transfer of profits to DM MORI mbH -95.7 -99.3 (ERMAN OMMERIAL ODE § HB) Net income 0 0 in million Net profit 0 0 Assets Fixed assets 792.9 794.9 Shares in affiliated companies 753.9 753.9 Other income rose to ¸ . million (previous year: ¸ . Equity investments 6.7 6.7 million). This increase is mainly due to exchange rate gains Other fixed assets 32.3 34.3 of ¸ . million (previous year: ¸ . million). urrent and other assets 1,097.0 1,072.6 Receivables from affiliated companies 998.9 964.8 Other expenses increased to ¸ . million (previous year: Other current assets and other assets 98.1 107.8 ¸ . million). This change primarily results from other Balance Sheet total 1,889.9 1,867.5 operating expenses which increased to ¸ . million (previous year: ¸ . million) and exchange rate losses in the Equity and liabilities amount of ¸ . million (previous year: ¸ . million). Equity 921.2 921.2 Provisions 30.6 33.5 The financial result was ¸ . million (previous year: ¸ . Liabilities 938.1 912.8 million). Tax expenses amounted to ¸ . million (previ- Liabilities to affiliated companies 934.4 908.2 ous year: ¸ . million). Income taxes include the taxes Other liabilities 3.7 4.6 charged by DM MORI mbH, as a result of fiscal unity. As Balance Sheet total 1,889.9 1,867.5 per domination and profit transfer agreement, EAT in the amount of ¸ . million (previous year: ¸ . million) will be transferred to DM MORI mbH.

The DM MORI AKTIEN ESELLSHAFT balance sheet total increased by ¸ . million to ¸ , . million (previous year: ¸ ,. million). Fixed assets were ¸ . million (previous year: ¸ . million).

Annual Report § ¨

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Segment Report

Our business activities comprise the “Machine Tools” and Manufacturing. In this future-oriented field, REALIZER “Industrial Services” segments. “orporate Services” mainly mbH allows us to offer powder-bed selective laser melt- comprises DM MORI AKTIEN ESELLSHAFT with its ing and through SAUER mbH, we can offer laser deposition group-wide holding functions. The selected machines of welding with powder nozzles. DM MORI OMPANY LIMITED, which we produce under license, are included in “Machine Tools”. The trade and DM MORI Software Solutions mbH pools our expertise in services for these machines are recognized under “Indus- control system and software development across the entire trial Services”. group in the Digital Solutions division. ISTOS mbH products allow production to be planned efficiently along the Machine Tools supply and value chain, enabling limited capacities to be fully maximized. Together with DM MORI Software Solu- The “Machine Tools” segment includes the group’s new tions mbH, ISTOS mbH is shaping the future of digitization machine business with the divisions Turning and Milling, in the manufacturing sector. WERKBLiQ offers an end-to- Advanced Technologies (Ultrasonic / Lasertec / Additive end, cross-manufacturer repair and maintenance platform Manufacturing) and Digital Solutions. The Turning divi- which connects everyone involved in the maintenance pro- sion comprises ILDEMEISTER Drehmaschinen mbH cess. DM MORI Digital mbH is the first point of contact and ILDEMEISTER Italiana S.p.A. Our portfolio of turn- for our customers for any digitization-related queries and ing machines covers the full range from universal turning service issues. It should support our sales and service com- machines through to turn-mill centers, vertical and hori- panies with customer-oriented consulting, implementation zontal production turning and multi-spindle machining and qualification services. TULIP Interfaces, Inc. in which we centers. DEKEL MAHO Pfronten mbH and DEKEL MAHO acquired an interest in September , makes it easier for Seebach mbH are part of the Milling division. Our range our customers to access production digitization processes includes vertical and horizontal processing centers and with employee-centered apps that can be created without -axis milling. Our universal turning and milling machines any specific programming skills. ADAMOS mbH pools of the LX and MX series are built at our plants, FAMOT expertise from machine building, production and informa- Pleszew Sp. z o.o. and RAZIANO Tortona S.r.l. Ulyanovsk tion technology. Together with global market leaders Dürr, Machine Tools ooo produces the machines of the EOLINE Software A , ZEISS and ASM PT, DM MORI is establishing series locally – in Russia for Russia. the open, manufacturer-independent IoT platform as a global industry standard – by machine tool builders for machine SAUER mbH and REALIZER mbH form the Advanced tool builders, their suppliers and customers. Since it was Technologies business division. The ultrasound-sup- founded in , fourteen additional partners have joined the ported milling and grinding process (Ultrasonic) com- project, including Engel, Karl Mayer, Mahr, Weber Maschi- prises laser processing technology (Lasertec) and Additive nenbau, Oerlikon Textile, Illig Maschinenbau, Mayer & ie,

B.11 | SEMENT KEY INDIATORS DM MORI hanges against in million previous year Order Intake 2,563.1 2,975.6 -412.5 -14 % Machine Tools 1,373.7 1,582.3 -208.6 -13 % Industrial Services 1,189.2 1,393.1 -203.9 -15 % orporate Services 0.2 0.2 0.0 0 %

Sales revenues 2,701.5 2,655.1 46.4 2 % Machine Tools 1,433.2 1,454.2 -21.0 -1 % Industrial Services 1,268.1 1,200.7 67.4 6 % orporate Services 0.2 0.2 0.0 0 %

EBIT 221.7 217.1 4.6 2 % Machine Tools 112.2 126.8 -14.6 -12 % Industrial Services 136.2 120.2 16.0 13 % orporate Services -26.2 -29.8 3.6 12 %

Annual Report

B.12 | KEY FIURES “MAHINE TOOLS” SEMENT hanges against in million previous year Order intake Total 1,373.7 1,582.3 -208.6 -13 % Domestic 370.4 487.2 -116.8 -24 % International 1,003.3 1,095.1 -91.8 -8 % % International 73 69

Sales revenues Total 1,433.2 1,454.2 -21.0 -1 % Domestic 441.4 467.7 -26.3 -6 % International 991.8 986.5 5.3 1 % % International 69 68

Order backlog * Total 612.1 901.3 -289.2 -32 % Domestic 141.9 212.9 -71.0 -33 % International 470.2 688.4 -218.2 -32 % % International 77 76 Investments 135.8 81.8 54.0 66 % EBITDA 155.5 169.9 -14.4 -8 % EBIT 112.2 126.8 -14.6 -12 % EBT 110.5 125.2 -14.7 -12 % hanges against previous year Employees * 4,077 4,120 -43 -1 % including trainees 274 284 -10 -4 %

* Reporting date 31 December

Schlenker Spannwerkzeuge, Wittenstein, eico and the Neu- At ¸ ,. million, sales revenues almost reached the pre- enhauser business group. In total, partners belong to the vious year’s level (¸ ,. million). In the fourth quarter, ADAMOS network. sales revenues amounted to ¸ . million (previous year: ¸ . million). Domestic sales revenues for the financial In our future-oriented field, Automation, we focus on end- year amounted to ¸ . million (previous year: ¸ . mil- to-end solutions. The production plants are responsible for lion). International revenues rose to ¸ . million (previous automation solutions. This means our customers receive year: ¸ . million). The export ratio amounted to % (pre- perfectly coordinated machines and automation solutions vious year: %). The “Machine Tools” segment accounted from a single source. The joint venture, DM MORI HEITE for a share of % of sales revenues (previous year: %). mbH, facilitates the development of harmonized modular solutions and offers an end-to-end automation concept, On December , the order backlog was ¸ . million especially for small and medium-sized companies. (previous year: ¸ . million). The domestic order backlog amounted to ¸ . million (previous year: ¸ . million). Order intake amounted to ¸ ,. million (previous year: At ¸ . million, international orders had a share of % ¸ ,. million). The order intake in the fourth quarter was (previous year: ¸ . million; %). ¸ . million (previous year: ¸ . million). Domestic orders for the financial year amounted to ¸ . million (pre- EBITDA reached ¸ . million (previous year: ¸ . million). vious year: ¸ . million). International orders amounted to EBIT was at ¸ . million (previous year: ¸ . million). EBT ¸ ,. million (previous year: ¸ , . million). The share amounted to ¸ . million (previous year: ¸ . million). of international business was % (previous year: %). The “Machine Tools” segment accounted for % of all orders Investments in property, plant and equipment and in intan- (previous year: %). gible assets amounted to ¸ . million (previous year:

Annual Report

¸ . million). The planned increase over the previous With first-time application of the new accounting standard Business year is mainly due to the expansion of our production and IFRS “Leases”, investments also include additions from Report logistics capacities and our “ LOBE ° lobal One Busi- rights of use (¸ . million). apitalized development costs Report on Economic Position ness Excellence” project for the implementation of a new amounted to ¸ . million (previous year: ¸ . million). Segment Report global ERP system. The additions to financial assets amounted to ¸ . million and resulted primarily from the investment in TULIP At our Polish production and supplier plant FAMOT, we and Pragati. Investments totaled ¸ . million (previous completed our new state-of-the-art and energy-efficient year: ¸ . million). XXL production hall. The hall’s key features are two XXL machining centers from DEKEL MAHO Pfronten, on which The “Machine Tools” segment had , employees at year- components weighing up to tons are produced for other end (previous year: , employees). The percentage of DM MORI plants, as well as five DM gantry machines. employees in this segment accounted for % (previous Three of these DM U are connected to our linear pallet year: %). The personnel quota was . % (previous year: pool system (LPP), which automates workpiece infeed and . %). Personnel costs amounted to ¸ . million (previ- outfeed and enables round-the-clock machining. At DEKEL ous year: ¸ . million). MAHO Pfronten, we are in the construction phase of expanding and modernizing the assembly and logistics area. The Industrial Services flow assembly line with autonomous transport systems (A Vs) for our monoBLOK machines will be a special high- The “Industrial Services” segment includes the business light. At ILDEMEISTER Drehmaschinen mbH in Bielefeld, activities of the Services and the Energy Solutions divisions. a flow assembly line was introduced for the Robo o nd en- On July , DM MORI sold key Energy Solutions business eration and the TX beta T series – for considerably shorter operations to a strategic investor. This will help DM MORI lead times and even more transparent assembly progress. to focus on its core business with machine tools and services, At DEKEL MAHO Seebach, we have installed air-condition- as well as on the expansion of its future fields, Automation, ing in the mechanical production area and thus ensured a Digitization and Additive Manufacturing. In the Services divi- stable ambient temperature in production. sion, we combine the marketing activities and the Lifeycle

B.13 | KEY FIURES “INDUSTRIAL SERVIES” SEMENT hanges against in million previous year Order intake Total 1,189.2 1,393.1 -203.9 -15 % Domestic 344.2 395.2 -51.0 -13 % International 845.0 997.9 -152.9 -15 % % International 71 72

Sales revenues Total 1,268.1 1,200.7 67.4 6 % Domestic 327.6 353.6 -26.0 -7 % International 940.5 847.1 93.4 11 % % International 74 71

Order backlog * Total 585.3 708.6 -123.3 -17 % Domestic 316.4 302.8 13.6 5 % International 268.9 405.8 -136.9 -34 % % International 46 57 Investments 17.0 6.3 10.7 170 % EBITDA 166.8 137.7 29.1 21 % EBIT 136.2 120.2 16.0 13 % EBT 130.7 113.7 17.0 15 % hanges against previous year Employees * 3,081 3,299 -218 -7 % including trainees 73 112 -39 -35 %

* Reporting date 31 December

Annual Report

Services for both our machines and those of DM MORI (previous year: ¸ . million). Investments in property, plant OMPANY LIMITED. DM MORI Life ycle Services allows and equipment and in intangible assets amounted to ¸ . our customers to maximize the productivity of their machine million (previous year: ¸ . million) and resulted essentially tools over their entire life cycle – from their commission- from the initial application of IFRS (¸ . million). We also ing to part exchange as a used machine. The wide range continued to equip our service staff with the latest tools and of service agreements, maintenance and training services measuring equipment. offered, guarantees our customers maximum cost-effectiveness for their machine tools. The innovative customer There were , employees in the “Industrial Services” seg- portal, “my DM MORI”, digitizes service processes, setting ment at the end of the financial year (previous year: , new standards for transparent communication. employees). The percentage of employees in this segment accounted for % (previous year: %). This personnel The economic headwind in the reporting year also affected adjustment is mainly attributable to the sale of key Energy orders in the “Industrial Services” segment. Order intake Solutions business operations to a strategic investor. The per- reached ¸ , . million (previous year: ¸ , . million). Of sonnel quota was . % (previous year: . %). Personnel which ¸ ,. million was attributable to the Services divi- expenditure was ¸ . million (previous year: ¸ . million). sion (previous year: ¸ ,. million). This includes orders from our original business, Lifeycle Services (inter alia orporate Services spare parts, maintenance and services), as well as from sales commissions of ¸ . million (previous year: ¸ . The “orporate Services” segment mainly comprises million). Orders for machines by DM MORI OMPANY DM MORI AKTIEN ESELLSHAFT with its group-wide LIMITED were ¸ . million (previous year: ¸ . million). holding functions. Energy Solutions accounted for ¸ . million (previous year: ¸ . million). Order intake in the fourth quarter reached Order intake and sales revenues of ¸ . million respec- ¸ . million (previous year: ¸ . million). Domestic tively mainly comprised rental income (previous year: ¸ . orders throughout the year amounted to ¸ . million (pre- million). As in the previous year, the “orporate Services” vious year: ¸ . million). International orders amounted segment accounted for less than . % of sales revenues to ¸ . million (previous year: ¸ . million). % of all in the group. EBIT increased to ¸ -. million (previous orders came from abroad (previous year: %). % of all year: ¸ - . million). The financial result was positive and orders were for “Industrial Services” (previous year: %). amounted to ¸ . million (previous year: ¸ . million). EBT went up to ¸ -. million (previous year: ¸ -. million). Sales revenues rose by % to ¸ ,. million (previous year: ¸ ,. million). The Services area contributed to this with Investments in property, plant and equipment and in intan- ¸ ,. million (previous year: ¸ , . million). At ¸ . gible assets amounted to ¸ . million (previous year: ¸ . million sales revenues from our original service business million). We have modernized specific areas of our site in were at the level of the previous year (¸ . million). Sales Bielefeld. In particular, the infrastructures of the devel- revenues from trade with products of DM MORI OMPANY opment department and staff restaurant were completely LIMITED were ¸ . million (previous year: ¸ . million). refurbished. Additions from rights of use pursuant to IFRS Energy Solutions accounted for ¸ . million (previous amounted to ¸ . million. year: ¸ . million). The change is due to the completion of individual large-scale projects that are still being realized As of December , the “orporate Services” segment by the Energy Solutions according to the contract. In the had employees (previous year: ). As in the previous year, fourth quarter, sales revenues amounted to ¸ . million this represents % of the group’s workforce. (previous year: ¸ . million). Domestic sales revenues reached ¸ . million for the financial year (previous year: B.14 | KEY FIURES

¸ . million). Foreign sales revenues increased to ¸ . “ORPORATE SERVIES” SEMENT hanges against million, mainly due to the completion of individual large- in million previous year scale projects in Energy Solutions (previous year: ¸ . Order intake 0.2 0.2 0.0 million). The share was % (previous year: %). “Industrial Sales revenues 0.2 0.2 0.0 Services” were attributed a share of % in sales revenues Investments 2.3 2.6 -0.3 (previous year: %). EBITDA -22.0 -26.7 4.7 EBIT -26.2 -29.8 3.6 As of December , order backlog amounted to ¸ . EBT -21.6 -24.0 2.4 hanges against million (previous year: ¸ . million). EBITDA in the previous year “Industrial Services“ segment amounted to ¸ . million Employees * 87 84 3

(previous year: ¸ . million). EBIT reached ¸ . million * Reporting date 31 December (previous year: ¸ . million) and EBT was ¸ . million

Annual Report

STRATEGIC FUTURE FIELDS Service Excellence QUICK SUPPORT

OPTIMUM SUPPLY

BEST CLASS SPINDLE SERVICE

UPGRADE

my DM MORI: new customer portal for integrated THIRD¥PARTY MA HINES / service optimization REARDLESS OF MANUFA TURER

Remote service: Live stream with NETservice & SERVIEcamera: quick, reliable SERVICE and intuitive EXCELLENCE DM MORI MA HINES

STRATEGIC FUTURE FIELDS

Service Excellence QUI K SUPPORT

Every day, over ª,¬¬¬ service technicians on call around the globe MORE AVAILABILITY

> ²¡ % availability > ª³¬,¬¬¬ different original spare parts on stock MORE SERVI E

®¯/ ° availability – our DM MORI service experts my DM MORI: new customer portal for integrated service optimization

-month warranty on all MASTER spindles SERVICE Over ,¬¬¬ spindles readily EXCELLENCE DM MORI MA HINES available worldwide

Non-Financial Key Performance Indicators ↗ business report information not reviewed for content

Sustainability

Sustainability is an integral part of our corporate strategy. energy consumption of our machines and production – par- In numerous projects and initiatives, we show how we are ticularly with regard to fossil fuels like coal, oil or gas. Our living up to our corporate responsibility – sustainably and energy management is an integral part of the DM MORI completely: from our suppliers to our products and employ- sustainability strategy. Our clear goal: DM MORI will

ees through to our customers. be O-neutral.

For the third consecutive time, DM MORI is reporting in Even during the development of our products there is a par- detail on measures aimed at preserving the environment ticular focus on resource and energy efficiency. We summa- and resources as well as increasing its energy efficiency rize our machine-specific and product-specific measures to in a separate sustainability report, which is enclosed with increase the energy efficiency of our machine tools under the this Annual Report and available online at the following link: term “ REENMODE”. Our “First Quality” strategy ensures a → en.dmgmori-ag.com/corporate-responsibility long service life of more than years, thereby contributing to saving resources and avoiding waste. With the Sustainability Report , which also contains the Separate Non-Financial roup Report , we are com- A perfectly fine-tuned, fully digitized and automated value plying with the statutory provisions as per the SR Direc- chain assures that our customers can utilize all productive Implementation Act for the Implementation of Directive tion resources with a high degree of efficiency and thereby / / EU (Section H B ( erman ommercial ode)) achieve significant savings in materials and energy – from dated April . Thus, the separate Non-Financial roup planning and work preparation to production, monitoring Report is not part of the roup Business Report. Moreover, and service. DM MORI compiles the Sustainability Report in accordance with the international reporting guidelines, “ RI Stand- As a partner in the VDMA sustainability initiative “Blue om- ards : ore Option” of the lobal Reporting Initiative petence”, we commit to the twelve sustainability principles ( RI) and thus provides a number of voluntary disclosures. and pro-actively promote sustainability in the machine and Therefore we are going far beyond the minimum statutory plant building industry. Our company is also taken volun- requirements. tary action for the implementation of the UN Agenda and the Paris limate onvention. This has motivated us All measures to save energy in our company are summarized to joining the “Development and limate Alliance” in the under the term “ENER YSAVIN ”. The DM MORI energy reporting year. management system is certified according to ISO . The separate Sustainability Report provides a detailed and DM MORI reduces emissions of climate-damaging comprehensive sustainability balance. Issues that have been greenhouse gases by investing in state-of-the-art techni- designated special importance in the DM MORI materi- cal systems and building technology, as well as efficient ality analysis concern the environment, human resources production systems. We continue to focus on reducing the and compliance.

ENERGYSAVING GREENMODE Saving energy in our company Maximum efficiency through energy-optimized through energy efficiency measures design and operation of our machines. CELOS and state-of-the-art plant and APPs ensure transparency and optimization of building technology. energy consumption.

Sustainability initiative: OUR OAL: The VDMA sustainability initiative “Blue ompetence” stands for innovation and DM MORI WILL technology leadership in the area of

BE O¹NEUTRAL sustainable solutions in the machine and plant building industry.

Annual Report

Successful at the “World Skills”: DM MORI was awarded the “Medal of Excellence” at the first world championship of skills held in the Russian city of Kazan.

Employees

On December , the group had , employees, includ- The personnel costs amounted to ¸ . million (previous ing apprentices (previous year: , employees, including year: ¸ . million). Wages and salaries thereby accounted apprentices). The number of employees decreased by . for ¸ . million (previous year: ¸ . million), social This is mainly attributable to the sale of key Energy Solutions insurance contributions for ¸ . million (previous year: business operations to a strategic investor. The number of ¸ . million) and the costs of retirement pensions for ¸ . agency workers employed throughout the group decreased million (previous year: ¸ . million). The personnel expenses to at the end of the financial year (previous year: ). ratio improved to . % (previous year: . %).

Annual Report

Business Report

Report on Economic Position Non-Financial Key Performance Indicators Overall Statement of the Executive Board

Together strong: trainees took part in the cross-plant football tournament “DM MORI Apprentice up” at the Schüco Arena in Bielefeld.

We have been placing a high value on the qualifications of The employee sickness rate was . % as in the previous year our employees for many years. Our qualification structure and thus again below the most recent industry average of continues to be at the same high level: As last year, % of . %. The employee fluctuation rate amounted to . % (previ- the employees have a professional qualification or is cur- ous year: . %). At the same time, the proportion of employees rently working towards a professional qualification. In total, in key positions or of high potentials who left our company expenses for vocational and further training amounted to (dysfunctional fluctuation) was . % (previous year: . %). ¸ . million (previous year: ¸ . million). Our employees’ age structure is balanced.

Attractive employer: The business magazine, “stern” recognizes DM MORI as an “Enterprise with a future”. “Focus Money” also names DM MORI as one of “ ermany’s best training enterprises” and also awards it with the title “TOP career opportunities”.

Annual Report

Overall Statement of the Executive Board on Financial Year

was a very successful year for DM MORI with new These key figures have confirmed our forecasts – despite record values – and that in a difficult market environment. the growing economic headwind. Dynamically we advance While the machine tool industry partly suffered significantly our future fields. We are optimizing our existing and proven higher losses, our order intake developed better and reached achievements sustainably for excellence. In this way, we ¸ ,. million as planned (previous year: ¸ , . mil- consistently develop from a machine tool builder to an inte- lion). According to provisional figures from the erman grated solution provider in the manufacturing environment. Machine Tool Builders' Association (VDW) and British economic research institute, Oxford Economics global machine Automation, Digitization, Additive Manufacturing, Tech- tool consumption in fell by -. % to ¸ . billion for the nology Excellence and DM MORI Qualified Products are first time in three years. DM MORI’s strategic areas of innovation. Excellence in quality and service is our highest priority. This is followed Sales revenues rose by + % to ¸ ,. million and exceeded by our commitment to being an attractive employer for our the previous year’s record value (¸ ,. million). We have highly qualified employees, the harmonization of systems also further improved our result and achieved new record and processes via the ERP “ LOBE” project, and the issue of figures: EBIT reached ¸ . million (previous year: ¸ . sustainability. We want to further expand our global market million). The EBIT margin was . % as in the previous year. shares and sustainably strengthen our strong innovation The company’s financial position also continued to develop power as a “ lobal One ompany”. positively: Free cash flow rose to the record value of ¸ . million (previous year: ¸ . million).

Annual Report

OPEN¥MINDED AND VISIONARY

STRATEGIC DMG MORI IS COMMITTED TO FUTURE FIELDS TAKING A RESPECTFUL AND Employees CONSIDERATE APPROACH TO RELIGIOUS BELIEFS AND WORLDVIEWS!

INCLUSIVE AND SUPPORTIVE PEOPLE WITH DISABILITIES ARE OFFERED JOBS WHERE THEY CAN BE PRODUCTIVE AND CONTINUE TO DEVELOP THEIR POTENTIAL.

TOLERANT AND RESPECTFUL DMG MORI VALUES ALL EMPLOYEES, IRRESPECTIVE OF THEIR GENDER IDENTITY AND SEXUAL ORIENTATION.

DIVERSE THE MANY DIFFERENT NATIONALITIES AT OUR COMPANY PROVIDE US WITH DIVERSE PROBLEM¶SOLVING APPROACHES. THEY ARE OUR SOURCE OF INSPIRATION AND THE DRIVING FORCE BEHIND OUR SUCCESS!

EXCHANGE OF KNOWLEDGE AND IDEAS YOUNG AND OLD WORK AS A TEAM AT DMG MORI. THIS AGE DIVERSITY CREATES A SUCCESSFUL COOPERATION.

EMPLOYEES

OPEN¥MINDED AND VISIONARY

STRATEGIC DMG MORI IS COMMITTED TO FUTURE FIELDS TAKING A RESPECTFUL AND Employees CONSIDERATE APPROACH TO RELIGIOUS BELIEFS AND WORLDVIEWS!

INCLUSIVE AND SUPPORTIVE PEOPLE WITH DISABILITIES ARE OFFERED JOBS WHERE THEY CAN BE PRODUCTIVE AND CONTINUE TO DEVELOP THEIR POTENTIAL.

As “ lobal One ompany”, DM MORI embraces diversity and equal opportunities. TOLERANT AND RESPECTFUL We are pursuing our goal to drive innovation, DMG MORI VALUES ALL make products better and shape the future with EMPLOYEES, IRRESPECTIVE dedication, commitment and transparency. OF THEIR GENDER IDENTITY AND SEXUAL ORIENTATION.

DIVERSE THE MANY DIFFERENT NATIONALITIES AT OUR COMPANY PROVIDE US WITH DIVERSE PROBLEM¶SOLVING APPROACHES. THEY ARE OUR SOURCE OF INSPIRATION AND THE DRIVING FORCE BEHIND OUR SUCCESS!

EXCHANGE OF KNOWLEDGE AND IDEAS YOUNG AND OLD WORK AS A TEAM AT DMG MORI. THIS AGE DIVERSITY CREATES A SUCCESSFUL COOPERATION.

EMPLOYEES

OPPORTUNITIES AND RISK REPORT

Opportunities Management System (MS)

Opportunities at DM MORI are systematically identi- focus of our research and development work is placed on our fied, analyzed and managed outside of our risk manage- five strategic future fields: Automation, Digitization, Addi- ment system and associated reporting. Alongside annual tive Manufacturing, Technology Excellence and DM MORI and medium-term planning, we draw up rolling forecasts Qualified Products. (“RF”) on an ongoing basis. Potential positive deviations from the current RF that may realize over a horizon of Strategic opportunities for DM MORI result from continu- twelve months are defined as operational opportunities. We ous product innovations and integrated technological solu- further analyze existing strategic opportunities over the next tions that support our customers on the way of digitized five years against the background of current and expected and fully automated manufacturing technologies. The high future fundamental conditions. quality of our machine tools and industrial services is also a competitive advantage. We consistently implement our qual- Our global customer relationship management system ity orientation in our entire value chain: from research and (RM) documents and analyzes our sales and service activ- development to production, through to sales and services. ities in machine tools and industrial services. This enables This provides us with the opportunity of sustainably main- us, for example, to identify individual significant opportu- taining our position in numerous markets and of continu- nities in sales and services quickly and to take appropri- ously building upon it. ate action. Our RM is based on a number of operational early indicators, such as market potential, order intake or As part of “ lobal One ompany” with clearly aligned sales trade fair evaluations. This means we can target our sales and service structures we are able to participate directly and service activities and can take advantage of opportu- in the erman home market, in the EMEA region (Europe, nities consistently. Furthermore, we continuously monitor Middle East, Africa) and in the hinese and Indian markets. our markets and can thus identify any broader economic Through DM MORI OMPANY LIMITED we are also suc- and industry-specific opportunities early on. cessful in Japan, North and South America, and regions in Asia. Together we serve more than , customers In addition, other operational opportunities are identified in different industries in countries. We achieve cost during the ongoing management process. The opportunities reductions and greater efficiency through joint development, thus defined are discussed with the Executive Board and purchasing, production and administration activities, and short-term strategies are developed on this basis. thus benefit from our close cooperation with DM MORI OMPANY LIMITED. Overall economic opportunities we can identify from our tar- geted and comprehensive activities in all the established Performance-related opportunities arise from the constant market regions and existing growth markets. DM MORI enhancement of our processes in the areas of production, is present worldwide with sales and service companies. technology, quality, purchasing and logistics. We are suc- cessively introducing fully digitized processes, particularly Our innovative product portfolio and our consistent digitiza- in the areas of production and logistics, in our manufactur- tion strategy make use of industry-specific opportunities. In ing plants. Moreover, we make sure that our services are order to meet the technological requirements, our balanced sustainable both for the environment and for society. We product portfolio includes various machine types at different believe that our sustainability strategy of making the com- price levels. Overall, DM MORI continues to record a high pany O-neutral will present opportunities to shape level of interest worldwide in its products, not only for its our profile as an environmentally responsible and sustaina- turning and milling machines but also for its Advanced Tech- ble manufacturer of capital goods and provider of integrated nologies, as impressively demonstrated at EMO Hanover. A technological solutions.

Annual Report

Risk Management System (RMS)

Our international business activities as a worldwide leading . local risk officers in any group company, who are respon- manufacturer of machine tools and supplier of integrated sible for the decentralized recording, analysis and com- technology, automation and digitization solutions expose munication of existing risks, us to potential risks. Hence, an active risk management system is essential for DM MORI. It serves the purpose of . area-specific, quarterly risk assessments based on pre- detecting, assessing and mitigating risks at an early stage defined risk areas and an inventory of related measures and starts on all organizational levels. There is a compre- for risk reduction or risk elimination with a quantita- hensive awareness of risks at all the group companies. We tive assessment, which take account of the risk-bearing are explicit in our desire for honesty when dealing with risks capacity of the group and individual companies, at DM MORI and this is actively promoted. We promote a corporate culture of openness in order to identify early on . risk reporting at group level and the individual companies any negative influences at any level of the hierarchy and to with ad-hoc reporting of relevant risks. correct these. All employees are actively involved in reducing or eliminating risk in their areas of activity. The risk early warning system is based on the generally accepted OSO concept. Its objective is the complete and We counteract potential risks with a comprehensive and reliable group-wide recording of existing potential risks integrated risk management system that operates through- together with a risk summary and assessment. The retrieval out the group, which we are constantly enhancing both and setting up of measures to reduce risk, as well as contin- technically and organizationally. It comprises the risk early uous risk monitoring and extensive reporting, is performed warning system, the internal control system (IS) and the across all business segments. central insurance management. The strategy of our existing risk early warning system is Risk early warning system based on a group-wide, systematic identification, assess- In our risk early warning system we record and manage the ment, aggregation, monitoring and notification of existing risks of any future development. We define operational risk risks and related measures to reduce or eliminate risks. as being a negative deviation from our planned earnings These risks are identified in a standardized process in the target (EBIT) within the next twelve months when compared individual group companies every quarter. with the current RF. In addition, we also take tax and interest rate risks into account. We record, assess and control At DM MORI risks are assessed as being the result of the risks whose inherent potential is dictated by environmental maximum risk potential notified and their determined prob- circumstances. ability of occurrence (gross risks), in order to then deduct the effect of the risk reduction or elimination measures Our risk early warning system consists of five elements: (net risks). The subsidiaries report to the Risk Manage- ment Department on the basis of the existing net risks, . the company-specific Risk Management Manual that with the reported risks broken down into three categories: defines the system, current risks, catalog risks and other risks. urrent risks are subjected to a prior assessment by representatives in the . a central risk management officer who develops, imple- central areas of all subsidiaries and scrutinized in “pre-risk ments and monitors the present risk management assessment meetings”. Additionally, a risk catalog is pre- concept, and who coordinates the measures for risk pared on the basis of the annual risk inventory. The reporting reduction or risk elimination, of contents is compulsory. Any additional risk inventories are allocated to the other risks.

Annual Report

Business The structure of the risk early warning system is designed Internal ontrol System (IS) Report in such a way that we can determine the individual local and The IS of DM MORI is an additional key component of the Opportunities and Risk Report central risks, as well as the effect on the group, in order to group-wide risk management system. Here, the IS consid- Risk Management System (RMS) present the overall risk situation. ers the erman statutory requirements of the Stock orporation Act (“Aktiengesetz” (Akt )) as well as the necessary › Local risks are individual risks that the group companies Japanese legal requirements of the “Japanese Financial are exposed to and that we can assess locally. Instruments and Exchange Act” in the form of documenta- › entral risks are risks that can only be assessed centrally tion in accordance with the J-SOX / Naibutousei. – at least in part. These include, for example, risks arising out of the group’s financing. The IS serves to reduce or eliminate controllable risks in › roup effects usually arise from consolidation require- the daily business processes. The aim of the IS is to ensure ments; this includes, for example, the double counting the consistent implementation of strategic and operational of risks, which then have to be adjusted correspondingly. directives from the Executive Board, to meet operational efficiency targets and to comply with all legal require- We use the following categories of risk occurrence in our ments, standards at and valued compliance requirements risk assessment: of the group.

.01 | PROBABILITY OF OURRENE In addition, the IS ensures the completeness, correctness No risk 0 % and reliability of our onsolidated Financial Statements in Low 5 % accordance with IFRS, of the local financial statements and Unlikely 25 % of the underlying accounting. It covers all organizational, Possible 50 % control and monitoring structures to ensure the legally com- pliant recording, preparation and assessment of business Risks with a probability of occurrence of more than % matters and their subsequent adoption in the annual finan- are considered with net risks directly in the ongoing corpo- cial statements. rate planning or as accruals for the provision of risks. Risks threatening the continuation of business are reported imme- Building on an annually updated analysis and the documen- diately, also outside of the periodic reporting. Risk-bear- tation of material business processes, the controllable risks ing capacity – defined as the relation of the accumulated are recorded within our IS. We eliminate or reduce these expected value of all risks identified after adjustment for risks by optimizing our structural and procedural organiza- current group effects and total group equity – is a key risk tion as well as through suitable control activities at an appro- indicator alongside the possible financial effects. priate level. Our IS includes our existing internal guidelines and instructions as well as preventive and detecting control .02 | POSSIBLE FINANIAL EFFET activities, such as authorizations and releases, plausibility checks, reviews and the four-eyes principle. The appropri- Insignificant ¸ 1 ° 10 million ate separation of functions within the business processes Moderate > ¸ 10 ° 25 million is ensured through our transparent structural and proce- Significant > ¸ 25 million dural organization.

The categories for possible financial effects were set by the The IS comprises the principles, procedures and measures risk management team based on the predefined risk strat- for ensuring the propriety of the group financial reporting. egy, taking sales revenues, EBIT and equity, as well as the We have standardized relevant regulations in guidelines risk-bearing capacity, into account. through-out the group, for example those contained in the accounting handbook. These guidelines and the financial The Supervisory Board and the Executive Board are informed statements calendar, which is applicable throughout the at regular intervals of the current overall risk situation of the group, form the basis for preparing the financial statements. group and that of the individual business units. Reporting is The local companies are responsible for compliance with the carried out for the Supervisory Board twice a year, as at relevant rules and regulations. They are supported by roup June and December, in the form of a comprehensive risk Accounting. In addition, there are local regulations, such as report. The Executive Board receives a quarterly risk report. compliance with local accounting requirements that have to The risk early warning system set up by the Executive Board be harmonized with the group accounting. onsolidation is pursuant to section para. of the erman Stock orpo- carried out centrally by the group accounting department. ration Act (Akt ) is examined by the auditors. DM MORI engages external service providers, for example,

Annual Report

for the valuation of pension obligations. Employees, who Presentation of the individual risk areas are entrusted with the financial reporting, receive regular Macroeconomic risks result from a further weakening of internal and external training. the economy with a significantly lower propensity to invest. In addition to the negative macroeconomic development, The appropriateness and effectiveness of the IS is eval- the effects of global uncertainties, such as the trade war uated based on an annual management testing at the between the United States and hina, and the consequences group affiliates and central departments of DM MORI of a worsening Middle East conflict with a direct impact on AKTIEN ESELLSHAFT. This is carried out by means of the crude oil price have to be taken into consideration. The random tests by the internal audit department. The results increasingly global spread of the corona virus represents are reported to the Supervisory Board and the Executive a high level of uncertainty. The extent, duration and neg- Board. The appropriateness and effectiveness of the IS is ative impact on the industry are not yet foreseeable. The additionally checked on a random basis during scheduled spread of the corona virus can result in specific risks from and non-scheduled audits and is subsequently evaluated. loss of demand for export-oriented companies worldwide. The Supervisory Board and Executive Board are likewise In addition, production risks can arise from an interruption informed of the results. in the supply chain, temporary factory closings and delays in delivery times. Moreover, there may be restrictions in Insurance management sales and service, which may also be due to the customer. As a further component of the risk management system, There are also uncertainties on the financial markets, which DM MORI has a centralized insurance management, which may have a strong impact locally on the respective national in close coordination with DM MORI OMPANY LIMITED economies as well as on the world economy. Overall it must strategically determines and counteracts economically be assumed that there is a likelihood of occurrence and that appropriate and insurable risks throughout the group. this situation will have a significant effect on our company’s business activities. Overview of the significant risk fields In ermany, a much weaker momentum in economic growth .03 is expected in , which may have an effect on the demand Probability of Possible for capital goods with a decline in industrial production. Type of risk occurrence financial efect

Overall economic, Slowing economic momentum is also expected in Europe, industry-specific and which may lead to increased uncertainty due to the con- sales-related Possible Significant tinuing lack of implementation of the necessary structural orporate strategy Unlikely Moderate reforms in several euro countries. Effects on investment Production Unlikely Moderate behavior and consumer confidence can already clearly be Procurement and seen. In Italy, especially, the situation could get worse in purchasing Unlikely Moderate the short-term. The effects of the withdrawal of reat Brit- Research & ain from the EU, which remains organizationally unresolved, development Unlikely Insignificant may have a negative impact in the future on our business Personnel Unlikely Insignificant located in reat Britain as well as on other countries in the IT Possible Insignificant EU. The Russian economy is still recovering slowly from Financial Unlikely Insignificant the economic slumps and sanctions of the past years. Due Legal Unlikely Insignificant to the renewed escalation of political conflicts with foreign Tax Low Insignificant countries, further sanctions are possible, which could have Other Unlikely Insignificant a negative impact on the Russian economy. In the USA it has become apparent that the president’s plans to revise the existing free trade agreements and return to protection- ism can be pursued generally, but their implementation is limited. Due to the existing uncertainties, however, considerable risks may result from the future political, fiscal and trade policy focus of the USA. A worldwide cyclical downturn could have a material impact on the market for machine tools and thus on order intake. We are counteracting these risks through constantly monitoring cyclical trends and where applicable, taking the measures required. Moreover,

Annual Report

Business changes in exchange rates resulting from political or eco- Production risks, such as production ineffectiveness or Report nomic crises may also impact our future competitive position potential quality-related risks, are subject to permanent Opportunities and Risk Report (economic currency risk). In particular, a possible devalua- control by means of key performance indicators for order Risk Management System (RMS) tion of the US dollar, hinese renminbi, Russian ruble and intake and backlog, assembly and manufacturing progress, British pound could lead to our products becoming more contribution margin per machine type and the turnover rate expensive in the countries concerned as well as in the mar- of raw materials and consumables as well as of other inven- kets that are dependent on the dollar. An appreciation of the tories. In principle, we avoid incalculable production pro- Japanese yen would further increase our costs for purchases jects, hence we consider these risks to be manageable and of machines from DM MORI OMPANY LIMITED. We coun- controllable. We strive to counteract plagiarism with our teract this risk through international sourcing as well as by innovations focused product strategy as well as with active regionalized production. IP management consisting of registering your own IPs and enforcing our rights. We thus want to which safeguard our Industry-specific and sales-related risks exist in the form technological lead. We counteract risks of technical work of continued intense competition and increased pressure safety with a consistent application and implementation on prices in the markets for machine tools, which may even of statutory work safety regulations and the highest certi- intensify further in the event of a significant economic down- fied technical standards at all sites. We conduct all legally turn. We counteract these risks with the technological lead prescribed reviews and voluntary audits. We counteract afforded by our products and by focusing strongly on our cus- environmental risks with full implementation of statutory tomers and markets. Specific sales risks may result from a environmental standards, appropriate and safe storage of strong decline in capital goods purchasing in the automotive hazardous goods, and the environmentally conscious dis- industry and associated suppliers adjusting to the current posal of hazardous goods and other waste. Furthermore, structural changes in the industry. Risks may result from we aim to ensure an efficient use of resources to conserve matters relating to export control regulations as these could scarce environmental resources in our internal business have a direct impact on the permissible delivery to coun- processes. tries, markets, industrial sectors or specific customers. Any changes as a consequence of sanctions may cause material In the area of research and development, risks exist due to short-term sales risks. possible budget excesses, failed developments, increased start-up costs for new products, and delayed market orporate strategy risks lie mainly in false estimations of launches of innovations. We are countering this risk by a future industry-specific developments and in possible mis- group-wide harmonized product development process and judgments in technological developments. We counteract involving our sales and service units as early as possible. these risks through intensive monitoring of the market and We also rely on the coordinated cooperation with DM MORI competition, regular strategy discussions with customers OMPANY LIMITED, customers, suppliers and universities. and suppliers, a comprehensive global trade fair presence We avoid incalculable research and development projects; and a company strategy focused on innovation. The group- hence we consider these risks to be manageable and wide introduction of a new ERP system may lead to unfore- controllable. seeable events that adversely affect the operational business. As a result of the domination and profit transfer agreement, Personnel risks exist due to our constant need for highly- risks for the future economic development of the company qualified managers and employees. Inadequate recruit- result from potential instructions given by DM MORI mbH. ment and retention of these employees may adversely These instructions do not necessarily have to be in the sole affect the group’s development long-term. We limit these interest of DM MORI AKTIEN ESELLSHAFT but they are risks through a modern corporate culture, employee sur- set in the interest of the group. veys, comprehensive programs for vocational training and personal development, performance-related remuneration Procurement and purchasing risks may arise in the area with a performance-based incentive scheme, early succes- of central goods due to price increases in materials for sor planning and deputizing arrangements. A permanent machine tools. In addition, the high workload experienced availability of highly qualified managers and staff could also by suppliers bears the risk of potential cost increases. Fur- be negatively affected by a high rate of illness. We counter- ther risks exist in possible supplier shortfalls and quality act this risk in particular through a preventive occupational problems. We counteract these risks through the stand- health care scheme. ardization of structural parts and components, as well as through international sourcing with a minimum of two suppliers for essential materials, and through greater in-sourcing of key components.

Annual Report

IT risks occur due to the increased networking of our inter- Legal risks may arise in particular from legal disputes with nal systems. IT risks may arise from network failure or from suppliers, the authorities and former employees, as well as data being falsified or destroyed through user and program from possible warranty claims due to customer complaints, errors or through external influences. In addition, we are which cannot always be completely prevented by our quality subject to the risks of organized data espionage, blackmail, management. To maintain the existing risks at a manage- cybercrime and fraudulent scamming. The negative trend able and calculable level, warranty and liability obligations has accelerated significantly in the financial year. It are limited both in terms of time and scope. Any deviations is clear that the concrete threat level has increased. We from this arrangement must be approved separately by the counteract these information technology risks through Executive Board. optimum security arrangements for our IT environment, regular investment in our hardware and software, by the Tax risks exist through the value of deferred tax assets on use of virus scanning programs and firewall systems, and loss carry-forwards or interest carry-forwards not being by controlling access and authorizations. In addition, we adjusted. We assume that this potential tax reduction can create appropriate awareness among our staff by regularly be used against future taxable income. We further assume training and updating them on the relevant risks and the that the tax and social insurance declarations we submit are existing threat situation. complete and correct. Nevertheless, due to differing assessments of the facts, additional charges may arise within the Financial risks across all segments result among others scope of an audit. Should it not be possible to use loss and from our international activities in the form of currency- interest carry-forwards, this could adversely impact the related risks, which we assess and hedge by means of our results of operations, financial position and net worth. currency strategy. The essential components of DM MORI financing are a syndicated loan, which comprises a cash and an aval tranche and is firmly agreed until February , and a factoring program. All financing agreements include an agreement on compliance with a standard covenant. The liquidity of the group is considered sufficient. In principle, we bear the risk of bad debt, which may result in allowances or in individual cases may even result in default. Further information on risks according to IFRS is given in the Notes on page et seq.

Overall Statement of the Executive Board to the Risk Situation

The Executive Board rates the existing risks as controllable continuously updated business development supervision and and, based on current information, does not view the con- by holding Executive Board meetings and status meetings at tinued existence of the group to be endangered by these regular intervals. The risks-bearing capacity of equity was risks. ompared with the reporting in the Annual Report calculated based on the accumulated overall expected risk the risks have increased slightly overall. The Execu- value determined. The group’s equity significantly exceeds tive Board counteracts the risk development by means of a the total risk expected value determined.

Annual Report § ¨ itecture STRATEGIC rch FUTURE FIELDS LOBE ® s A GLOBE es in , Additive Manufa LOBAL ONE BUSINESS us tion ctur B iza ing B EXELLENE git IO u Di VAT N s , NO i on n ti IN e a F s m ir s o s t t In u Q u t A P a e l l E it l y i R g e F n c

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e N Excellence in integration, innovation and performance: + harmonization of systems and processes + new, standardized ERP system + enterprise architecture with business approach GLOBE + ERP as a road to digitization § itecture STRATEGIC rch FUTURE FIELDS LOBE ® s A BUSINESS APPROAH GLOBE es itive Ma sin n, Add nufac LOBAL ONE BUSINESS u tio turi B tiza ng EXELLENE igi VATION “LOBE: the basis for digitization “User-centered management , D NO of our own value chain” and integration of mobile apps” on ti IN a m to u “End user-focused “Highly integrated system A “Real-time access to company approach for maximum design: Holistic, end-to-end and production data” added value” process concept”

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Shaping: lobal process harmonization GLOBE by SAP implementation

FOREAST REPORT

Future Business Environment

For the current financial year, the Kiel Institute for Econom- onsumption in Europe is expected to fall by -. %. In view ics (IfW) is forecasting global economic growth of +. %. For of the structural changes in the automotive industry, this ermany, a . % increase in DP is estimated for the current decline will hit ermany and France particularly hard. year. Overall, the economy in the euro zone is unlikely to gain any significant momentum and DP is only expected to grow onsumption in Asia is expected to rise by a marginal +. %. by +. %. With an expected growth rate of +. %, Asia will At country level, the hinese market is expected to grow by continue to be the region with the strongest growth in the +. %. In Japan, a further decline of -. % is expected. In current year. There is still no end in sight to the economic the USA, the VDW and Oxford Economics are also expecting slowdown in hina. Projected growth is slowing to +. %. a -. % decline in machine tool consumption. The Japanese economy continues to weaken with growth of +. %. The US economy is expected to lose further momen- lobally, the demand for capital goods is expected to lose fur- tum and grow by +. % according to IfW estimates. ther momentum. This is due to the global economic slump, the trade dispute between the USA and hina, the Middle The slump in global machine tool consumption is expected East conflict and industrial structural change. There is also to continue in . The VDW and Oxford Economics are uncertainty about the effects of the UK's exit from the EU, forecasting a -. % decline to ¸ . billion (previous year: future price developments for raw materials and energy as -. %; ¸ . billion). In view of the existing global uncer- well as the increasingly global spread of the corona virus, of tainties, these forecasts are likely to be revised during the which the extent, duration and negative impact on the overall course of the year. economy and the industry are not yet foreseeable. Against this backgound the forecasts are likely to be revised, if global According to the VDW and Oxford Economics the machine economic conditions continue to significantly deteriorate. tool consumption in ermany at -. % should decline noticeably stronger than in many other countries (previous year: +. %).

Future Development of DM MORI

As a worldwide leading supplier of end-to-end and sustain- our DMQP, our aim is to be the world’s No. for our custom- able technology solutions for the manufacturing industry, ers in the future: From development and production through our aim is to continue to expand our market position in the to the global sales and service of innovative machine tools. future. Together with DM MORI OMPANY LIMITED ° as “ lobal One ompany” – we are forging ahead with the imple- In addition to our five strategic future fields – Automation, mentation of our motto “Dynamic . Excellence”. Digitization, Additive Manufacturing and Technology Excel- lence as well as DMQP ° we are placing focus on quality Our corporate strategy is aimed at actively promoting inno- and service, the ERP-project “ LOBE”, employees and sus- vation in the manufacturing industry and, with end-to-end tainability. With dynamic and excellence, we will once again solutions, meeting dynamic customer requirements even give everything in to make our customers successful. more effectively in the future. With a comprehensive range Moreover, we have set an ambitious sustainability goal: This

of machine tools, automation and digitization solutions, and year we will be O-neutral.

Annual Report

Also will be a challenging year. The market environ- For financial year , we plan to invest around ¸ million ment will become noticeably more difficult. In addition, there in tangible and intangible assets. Our activities continue to is the increasing worldwide spread of the corona virus, the focus on the expansion and modernization of our production extent, duration and negative consequences of which for the plants in Pfronten. We are also continuing to invest in our economy as a whole and for the industry are currently not ERP project “ LOBE ° lobal One Business Excellence” to foreseeable. Reliable statements about the influence on the harmonize and optimize systems and processes and are business development of DM MORI are therefore difficult pushing ahead with the implementation of the new global to quantify completely. ERP system.

Against this background and with the sale of Energy Solu- In the area of research and development, we will sus- tions in , we expect order intake and sales revenues of tainably pursue our innovation strategy. For the current around ¸ . – . billion for the whole year. EBIT should financial year, we are again planning a wide range of inno- be around ¸ ° million and free cash flow should be vations from the areas of Automation, Digitization, Addi- around ¸ ° million. tive Manu facturing, Technology Excellence and DM MORI Qualified Products (DMQP) and are consistently pursuing Our agreed financing framework will cover the necessary our “First Quality” strategy. liquidity requirements in financial year . We therefore have sufficient financial leeway in the group at all times. We Research and development expenses are expected to amount expect market interest rates to rise moderately towards the to around ¸ million. Overall, about % of the workforce end of the year. at the plants will continue to work in the area of research and development. The financing structure remains essentially unchanged. Stra- tegic financing measures are not planned. Seasonally required liquidity can be covered from existing financial resources.

Overall Statement of the Executive Board on Future Business Development

The global economy continues to be marked by global uncer- Against this background and with the sale of Energy Solu- tainties. According to preliminary forecasts by the erman tions in , we expect order intake and sales revenues of Machine Tool Buildersʼ Association and the British economic around ¸ . – . billion for the financial year . EBIT research institute, Oxford Economics, global machine tool should be around ¸ ° million and free cash flow should consumption is expected to continue to fall at a rate of -. % be around ¸ ° million. apital expenditure on tangible in (previous year: -. %). However, in view of the current and intangible assets is expected to amount to around ¸ global uncertainties, an adjustment of the associations' fore- million and will be financed primarily from our own funds. casts during the year cannot be excluded. In addition, there is the increasing worldwide spread of the corona virus, the Our aim is to consolidate our high innovative strength extent, duration and negative consequences of which for the as “ lobal One ompany” in the long term. Dynamic and economy as a whole and for the industry are currently not excellence in technology, service and quality will also foreseeable. Reliable statements about the influence on the characterize the current financial year. We will continue to business development of DM MORI are therefore difficult drive forward our strategic future fields with dynamic and to quantify completely. sustainably optimize the existing to excellence.

Annual Report § §

STRATEGIC FUTURE FIELDS INNOVATIONS FOR Sustainability THE ENVIRONMENT TRUST AND SOIETY ENVIRONMENT RESPONSIBILITY

EMPLOYEES

QUALITY

SUSTAINABILITY §

STRATEGIC FUTURE FIELDS INNOVATIONS FOR Sustainability THE ENVIRONMENT AND SOIETY Development and limate Alliance OUR OAL: We have made a voluntary commitment to implement the UN Agenda and ¨¨ DM MORI the Paris ¡limate Treaty. This is why we have joined the “Development and WILL BE ¡limate Alliance”.

O¨¥NEUTRAL

Sustainability Initiative Blue ompetence EOs for recycled paper harta of Diversity As a member of the VDMA sustainability We support the “Pro Recycling Paper” initiative, and By signing the “¡harta of Diversity” initiative “Blue ¡ompetence” we are throughout the group, are switching to recycled paper we have made a clear stance on commited to comply with the twelve with the “Blue Angel” label. This is one of our many recognition, respect and diversity. sustainability guidelines. contributions to environmental protection.

ENERGY-SAVING GREENMODE Saving energy in Maximum efficiency through our company through the energy-optimized design energy efficiency and operation of our machines. measures and state- CELOS apps ensure transparency of-the-art plant and and optimization of energy SUSTAINABILITY building technology. consumption.

CONSOLIDATED

FINANCIAL STATEMENTS

onsolidated Income Statement for the period January to December

D. Notes K K Sales revenues 6 2,701,489 2,655,128 hanges in finished goods and work in progress -16,388 6,481 Own work capitalised 7 20,962 6,326 Total work done 2,706,063 2,667,935 Other operating income 8 83,029 74,182 Operating performance 2,789,092 2,742,117 ost of materials 9 ost of raw materials, consumables and goods for resale 1,278,463 1,264,442 ost of purchased services 245,580 215,660 1,524,043 1,480,102 Personnel costs 10 Wages and salaries 501,829 506,661 Social security contributions, pensions and other benefits 90,536 89,236 592,365 595,897 Depreciation, amortization and impairment losses 11 78,104 63,729 Other operating expenses 12 372,842 385,256 Operating result 221,738 217,133 Financial income 13 Interest income 5,431 4,280 Other income 215 170 5,646 4,450 Financial expenses 14 Interest payable 9,538 8,969 Interest expense from pension provisions 506 456 Other financial expenses 722 760 03 Consolidated 10,766 10,185 Financial Financial result -5,120 -5,735 Statements Share of profits and losses of at equity-accounted investments 15 2,548 3,388 Income Statement Statement of other Earnings before taxes 219,166 214,786 Comprehensive Income Income taxes 16 64,724 65,256 Cash Flow Annual profit 154,442 149,530 Statement Balance Sheet Of which attributed to the shareholders of DM MORI AKTIENESELLS HAFT 151,874 148,257 Development of Of which attributed to non-controlling interests 17 2,568 1,273 Group equity Fixed Assets Movement Schedule Earnings per share pursuant to IAS 33 in (undiluted) 18 1.93 1.88 Segmental Earnings per share pursuant to IAS 33 in (diluted) 18 1.93 1.88 Reporting Notes 04 Further Information

Multiple Year Overview List of Graphs and Tables Forward-Looking Statements

Annual Report

Consolidated onsolidated Statement of Other omprehensive Income Financial Statements for the period January to December Consolidated Statement of other Comprehensive D. Income Notes K K Consolidated Cash Flow Annual profit 154,442 149,530 Statement Other comprehensive income Remeasurement of benefit-oriented pension plans -6,164 5,956 FVO I Equity instruments – net change of fair value -322 0 Income taxes 1,759 -1,526 Sum of items never reclassified to income statement -4,727 4,430 Differences from currency translation 21,511 -25,217 Net investments 1,035 1,220 hanges in market value of hedging instruments 39 -49 -377 Market value of hedging instruments – reclassification to the income statement -46 585 Income taxes 29 28 -63 Sum of items which are reclassified to the income statement 22,479 -23,852 Other comprehensive income for the period after taxes 17,752 -19,422 Total comprehensive income for the period 172,194 130,108 Of which attributed to the shareholders of DM MORI AKTIENESELLS HAFT 169,215 128,956 Of which attributed to non-controlling interests 2,979 1,152

Annual Report §

onsolidated ash Flow Statement For the period January to December

D. ASH FLOW FROM OPERATIN£ ATIVITY Notes K K Earnings before taxes (EBT) 219,166 214,786 Depreciation, amortisation and impairment losses 11 78,104 63,729 Financial result 13, 14 5,120 5,735 Other income and expenses not affecting payments -6,484 -4,094 hange in provisions 30, 31 12,819 44,563 Result from the disposal of fixed assets -833 -596 Income tax refunds 1,541 2,264 Income taxes paid -77,620 -51,146 Interest received 4,349 4,599 Interest paid -9,298 -9,151 hanges in asset and liabilities items Inventories 24 18,802 -85,718 Trade debtors 23, 25 43,934 -42,832 Other assets not from investments or financing activity 27,925 -24,804 Trade creditors 34 30,767 30,428 Other liabilities not from investments or financing activity -114,165 82,615 40 234,127 230,378

ASH FLOW FROM INVESTMENT ATIVITY Amounts received from the disposal of tangible assets and intangible assets 31,379 5,722 Amounts paid out for investments in tangible assets -71,225 -60,832 Amounts paid out for investments in intangible assets -25,502 -21,104 ash flow from the takeover of control over subsidiaries 40 -5,450 -1,500 ash flow from the loss of control over subsidiaries 40 812 0 Amounts paid out for investments in financial assets 40 -44,237 -8,754 Amounts paid out for loans to other related parties 25 0 -250,000 Amounts received from disposal in financial assets 40 40 21,406 -114,183 -315,062

ASH FLOW FROM FINANIN£ ATIVITY ash outflows for repayment of financial debts 40 0 -37,765 Profit transfer to DM MORI mbH 40 -99,326 -89,865 Amounts received from changes in interests in subsidiaries 40 0 4,094 ash outflows of principal for lease liabilities -19,588 0 40 -118,914 -123,536 hanges affecting payments 1,030 -208,220 Effects of exchange rate changes on financial securities 294 -2,504 ash and cash equivalents as at 1 January 27 152,681 363,405 ash and cash equivalents as at 31 December 27 154,005 152,681

Annual Report

Consolidated onsolidated Balance Sheet Financial Statements As at December Consolidated Balance Sheet D. Dec Dec ASSETS Notes K K LON£©TERM ASSETS oodwill 19 138,082 139,399 Other intangible assets 19 61,464 50,973 Tangible assets 20 506,579 434,880 Equity-accounted investments 22 84,202 58,851 Other equity investments 21 25,595 2,403 Trade receivables from third parties 23 7 1,263 Other long-term financial assets 23 9,627 11,963 Other long-term assets 23 3,747 2,757 Deferred tax assets 28 62,555 55,606 891,858 758,095 SHORT©TERM ASSETS Inventories 24 611,810 625,381 Trade receivables from third parties 25 212,637 226,989 Receivables from at equity accounted companies 25 12,472 21,244 Receivables from other related companies 25 461,550 480,705 Receivables from other equity investments 25 33 47 Receivables from down payment invoices 6 9,060 33,260 Other short-term financial assets 26 46,740 60,241 Other short-term assets 26 69,125 81,272 Income tax receivables 276 584 ash and cash equivalents 27 154,005 152,681 1,577,708 1,682,404 Balance Sheet Total 2,469,566 2,440,499

Annual Report

D. Dec Dec EQUITY AND LIABILITIES Notes K K EQUITY Subscribed capital 29 204,927 204,927 apital reserve 29 498,485 498,485 Retained earnings and other reserves 29 563,702 489,823 Total equity of shareholders of DM£ MORI AKTIEN£ESELLSHAFT 1,267,114 1,193,235 Non-controlling equity interests 29 14,335 4,453 Total equity 1,281,449 1,197,688 LON£©TERM DEBTS Provisions for pensions 30 43,008 37,828 Other long-term provisions 31 51,389 58,180 Long-term lease liabilities 3 43,469 0 ontract liabilities 6 4,072 1,890 Other long-term financial liabilities 33 157 8,205 Other long-term liabilities 33 2,444 2,649 Deferred tax liabilities 28 3,124 2,505 147,663 111,257 SHORT©TERM DEBTS Other short-term provisions 31 231,408 209,245 Short-term lease liabilities 3 17,886 0 Trade payables to third parties 34 207,368 195,393 Liabilities to at equity accounted companies 34 7,401 2,266 Liabilities to other related companies 34 234,038 236,613 Liabilities to other equity investments 34 800 0 Tax liabilites 20,329 17,850 Payments received on account 6 214,551 342,575 ontract liabilities 6 23,698 21,532 ontract liability from down payment invoices 6 9,060 33,260 Other short-term financial liabilities 34 28,064 31,124 Other short-term liabilities 34 45,851 41,696 1,040,454 1,131,554 Balance Sheet Total 2,469,566 2,440,499

Annual Report

Consolidated Development of £roup Equity Financial Statements For the period January to December

Development of Group Equity D. Retained earnings and other reserves

Total equity of Difference Market shareholders Non- from valuation of DM£ MORI controlling Subscribed apital Revenue currency of financial AKTIEN© equity in K capital reserve reserves translation derivatives £E SELLSHAFT interests Total As at 1 Jan 2019 204,927 498,485 519,517 -29,675 -19 1,193,235 4,453 1,197,688

Total comprehensive income Annual profit 151,874 151,874 2,568 154,442 Other comprehensive income Differences from currency translation 21,100 21,100 411 21,511 Net investments 1,035 1,035 1,035 FVO I Equity instruments – net change of fair value -322 -322 -322 hange in fair value of derivative financial instruments (after taxes) -67 -67 -67 Remeasurement of benefit-oriented plans (after taxes) -4,405 -4,405 -4,405 Other comprehensive income for the period after taxes -4,727 22,135 -67 17,341 411 17,752 Total comprehensive income for the period 147,147 22,135 -67 169,215 2,979 172,194 Transactions with owners Sale of non-controlling interests without change of control -3,217 -3,217 7,311 4,094 Sale of non-controlling interests with change of control 405 405 apital contribution 1,147 1,147 Dividends -1,960 -1,960 Taxes on compensation payments pursuant to Section 16 KSt ( orporation Tax Act) 3,623 3,623 3,623 Profit transfer to DM MORI mbH for 2019 -95,742 -95,742 -95,742 Sum of transactions with owners -95,336 -95,336 6,903 -88,433 As at 31 Dec 2019 204,927 498,485 571,328 -7,540 -86 1,267,114 14,335 1,281,449

See accompanying explanations regarding equity and non-controlling equity interests in the onsolidated Financial Statements page 127 et seq.

Annual Report

Development of £roup Equity For the period January to December

D. Retained earnings and other reserves Retained earnings and other reserves

Total equity of Total equity of Difference Market shareholders Non- Difference Market shareholders Non- from valuation of DM£ MORI controlling from valuation of DM£ MORI controlling Subscribed apital Revenue currency of financial AKTIEN© equity Subscribed apital Revenue currency of financial AKTIEN © equity in K capital reserve reserves translation derivatives £E SELLSHAFT interests Total in K capital reserve reserves translation derivatives £E SELLSHAFT interests Total As at 1 Jan 2019 204,927 498,485 519,517 -29,675 -19 1,193,235 4,453 1,197,688 As at 1 Jan 2018 204,927 498,485 464,058 -5,799 -164 1,161,507 3,111 1,164,618 Adjustment from the first-time application of IFRS 9, IFRS 15 (after taxes) -1,525 -1,525 -137 -1,662 As at 1 Jan 2018 204,927 498,485 462,533 -5,799 -164 1,159,982 2,974 1,162,956 Total comprehensive income Total comprehensive income Annual profit 151,874 151,874 2,568 154,442 Annual profit 148,257 148,257 1,273 149,530 Other comprehensive Other comprehensive income income Differences from Differences from currency translation 21,100 21,100 411 21,511 currency translation -25,096 -25,096 -121 -25,217 Net investments 1,035 1,035 1,035 Net investments 1,220 1,220 1,220 FVO I Equity instruments – net change of fair value -322 -322 -322 hange in fair value hange in fair value of derivative financial of derivative financial instruments (after taxes) -67 -67 -67 instruments (after taxes) 145 145 145 Remeasurement of Remeasurement of benefit-oriented plans benefit-oriented plans (after taxes) -4,405 -4,405 -4,405 (after taxes) 4,430 4,430 4,430 Other comprehensive Other comprehensive income for the period income for the period after taxes -4,727 22,135 -67 17,341 411 17,752 after taxes 4,430 -23,876 145 -19,301 -121 -19,422 Total comprehensive income Total comprehensive income for the period 147,147 22,135 -67 169,215 2,979 172,194 for the period 152,687 -23,876 145 128,956 1,152 130,108 Transactions with owners Transactions with owners Sale of non-controlling Purchase / Sale of non- interests without change controlling interests with / of control -3,217 -3,217 7,311 4,094 without change of control 327 327 Sale of non-controlling interests with change of control 405 405 apital contribution 1,147 1,147 Dividends -1,960 -1,960 Taxes on compensation Taxes on compensation payments pursuant to payments pursuant to Section 16 KSt Section 16 KSt ( orporation Tax Act) 3,623 3,623 3,623 ( orporation Tax Act) 3,623 3,623 3,623 Profit transfer to Profit transfer to DM MORI mbH for 2019 -95,742 -95,742 -95,742 DM MORI mbH for 2018 -99,326 -99,326 -99,326 Sum of transactions Sum of transactions with owners -95,336 -95,336 6,903 -88,433 with owners -95,703 -95,703 327 -95,376 As at 31 Dec 2019 204,927 498,485 571,328 -7,540 -86 1,267,114 14,335 1,281,449 As at 31 Dec 2018 204,927 498,485 519,517 -29,675 -19 1,193,235 4,453 1,197,688

See accompanying explanations regarding equity and non-controlling equity interests in the onsolidated Financial Statements page 127 et seq. See accompanying explanations regarding equity and non-controlling equity interests in the onsolidated Financial Statements page 127 et seq.

Annual Report

Consolidated onsolidated Fixed Asset Movement Schedule Financial Statements As at December (Part of the notes) Consolidated Fixed Asset Movement D. Schedule AQUISITION AND PRODUTION OSTS hange in the Difference from group of As at currency consolidated As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Intangible assets oodwill 139,399 -6 0 -1,311 0 0 0 138,082 Assets arising from development 135,490 1 -1,859 -68 4,619 0 0 138,183 Industrial property and similar rights 137,126 76 1,248 -104 20,883 -6,009 77 153,297 412,015 71 -611 -1,483 25,502 -6,009 77 429,562 Tangible assets Land and buildings 440,606 10,433 -307 0 10,391 -47,032 16,761 430,852 Right of use Land and buildings 27,991* 940 0 -138 1,552 761 0 31,106 Technical equipment and machinery 117,317 2,510 5,433 -43 16,868 -7,086 5,634 140,633 Right of use Technical equipment and machinery 12,580* 634 0 0 2,202 -484 0 14,932 Other equipment, factory and office equipment 251,679 1,428 -3,194 -235 13,736 -13,686 1,719 251,447 Right of use Other equipment, factory and office equipment 25,718* 841 0 -39 9,571 -3,774 221 32,538 onstruction in progress 30,407 446 -17 0 30,230 -202 -24,412 36,452 906,298 17,232 1,915 -455 84,550 -71,503 -77 937,960 Financial assets Equity-accounted investments 50,961 944 0 0 21,859 0 0 73,764 Other equity investments 9,785 0 0 0 23,273 -81 0 32,977 Securities 8 0 0 0 0 0 0 8 60,754 944 0 0 45,132 -81 0 106,749 Total fixed assets 1,379,067 18,247 1,304 -1,938 155,184 -77,593 0 1,474,271

DEPREIATION Net book value

Difference from hange in the As at currency group of consolidated As at As at As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Dec Dec Intangible assets oodwill 0 0 0 0 0 0 0 0 138,082 139,399 Assets arising from development 118,552 1 -1,970 -67 7,047 0 0 123,563 14,620 16,938 Industrial property and similar rights 103,091 58 1,258 -100 8,138 -5,992 0 106,453 46,844 34,035 221,643 59 -712 -167 15,185 -5,992 0 230,016 199,546 190,372 Tangible assets Land and buildings 142,953 948 27 0 18,199 -17,772 0 144,355 286,497 297,653 Right of use Land and buildings 0 225 0 -20 3,778 -1,138 0 2,845 28,261 0 Technical equipment and machinery 78,025 897 1,017 -39 6,488 -6,750 0 79,638 60,995 39,292 Right of use Technical equipment and machinery 0 11 0 0 3,647 -385 0 3,273 11,659 0 Other equipment, factory and office equipment 183,915 931 830 -215 18,295 -12,996 0 190,760 60,687 67,764 Right of use Other equipment, factory and office equipment 0 14 0 -4 12,512 -2,250 0 10,272 22,266 0 onstruction in progress 236 2 0 0 0 0 0 238 36,214 30,171 405,129 3,028 1,874 -278 62,919 -41,291 0 431,381 506,579 434,880 Financial assets Equity-accounted investments -7,890 0 -2,548 0 0 0 0 -10,438 84,202 58,851 Other equity investments 7,384 0 0 0 0 0 0 7,384 25,593 2,401 Securities 6 0 0 0 0 0 0 6 2 2 -500 0 -2,548 0 0 0 0 -3,048 109,797 61,254 Total fixed assets 626,272 3,087 -1,386 -445 78,104 -47,283 0 658,349 815,922 686,506

* Recognition right of use according to the first-time adoption of IFRS 16

Annual Report

onsolidated Fixed Asset Movement Schedule As at December (Part of the notes)

D. AQUISITION AND PRODUTION OSTS hange in the Difference from group of As at currency consolidated As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Intangible assets oodwill 139,399 -6 0 -1,311 0 0 0 138,082 Assets arising from development 135,490 1 -1,859 -68 4,619 0 0 138,183 Industrial property and similar rights 137,126 76 1,248 -104 20,883 -6,009 77 153,297 412,015 71 -611 -1,483 25,502 -6,009 77 429,562 Tangible assets Land and buildings 440,606 10,433 -307 0 10,391 -47,032 16,761 430,852 Right of use Land and buildings 27,991* 940 0 -138 1,552 761 0 31,106 Technical equipment and machinery 117,317 2,510 5,433 -43 16,868 -7,086 5,634 140,633 Right of use Technical equipment and machinery 12,580* 634 0 0 2,202 -484 0 14,932 Other equipment, factory and office equipment 251,679 1,428 -3,194 -235 13,736 -13,686 1,719 251,447 Right of use Other equipment, factory and office equipment 25,718* 841 0 -39 9,571 -3,774 221 32,538 onstruction in progress 30,407 446 -17 0 30,230 -202 -24,412 36,452 906,298 17,232 1,915 -455 84,550 -71,503 -77 937,960 Financial assets Equity-accounted investments 50,961 944 0 0 21,859 0 0 73,764 Other equity investments 9,785 0 0 0 23,273 -81 0 32,977 Securities 8 0 0 0 0 0 0 8 60,754 944 0 0 45,132 -81 0 106,749 Total fixed assets 1,379,067 18,247 1,304 -1,938 155,184 -77,593 0 1,474,271

DEPREIATION Net book value

* Recognition right of use according to the first-time adoption of IFRS 16

Annual Report

Consolidated onsolidated Fixed Asset Movement Schedule Financial Statements As at December (Part of the notes) Consolidated Fixed Asset Movement D. Schedule AQUISITION AND PRODUTION OSTS hange in the Difference from group of As at currency consolidated As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Intangible assets oodwill 139,419 -20 0 0 0 0 0 139,399 Assets arising from development 132,116 -3 -985 0 4,434 -72 0 135,490 Industrial property and similar rights 113,417 -9 7,571 0 16,670 -580 57 137,126 384,952 -32 6,586 0 21,104 -652 57 412,015 Tangible assets Land and buildings 439,082 -9,206 95 0 15,200 -7,816 3,251 440,606 Technical equipment and machinery 120,794 -2,543 -163 0 3,441 -4,989 777 117,317 Other equipment, factory and office equipment 242,705 -1,217 375 0 13,445 -5,144 1,515 251,679 onstruction in progress 9,387 -558 -1,075 0 28,746 -493 -5,600 30,407 811,968 -13,524 -768 0 60,832 -18,442 -57 840,009 Financial assets Equity-accounted investments 39,905 1,856 746 0 8,454 0 0 50,961 Other equity investments 9,491 0 0 0 300 -6 0 9,785 Securities 8 0 0 0 0 0 0 8 49,404 1,856 746 0 8,754 -6 0 60,754 Total fixed assets 1,246,324 -11,700 6,564 0 90,690 -19,100 0 1,312,778

DEPREIATION Net book Value hange in the Difference from group of As at currency consolidated As at As at As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Dec Dec § Intangible assets oodwill 0 0 0 0 0 0 0 0 139,399 139,419 Assets arising from development 108,511 -3 -986 0 11,101 -71 0 118,552 16,938 23,605 Industrial property and similar rights 85,760 -10 8,164 0 9,489 -312 0 103,091 34,035 27,657 194,271 -13 7,178 0 20,590 -383 0 221,643 190,372 190,681 Tangible assets Land and buildings 127,214 -428 11 0 16,742 -585 -1 142,953 297,653 311,868 Technical equipment and machinery 74,167 -680 327 0 8,519 -4,272 -36 78,025 39,292 46,627 Other equipment, factory and office equipment 170,340 -435 338 0 17,878 -4,243 37 183,915 67,764 72,365 onstruction in progress 242 -6 0 0 0 0 0 236 30,171 9,145 371,963 -1,549 676 0 43,139 -9,100 0 405,129 434,880 440,005 Financial assets Equity-accounted investments -5,248 0 -2,642 0 0 0 0 -7,890 58,851 45,153 Other equity investments 7,384 0 0 0 0 0 0 7,384 2,401 2,107 Securities 6 0 0 0 0 0 0 6 2 2 2,142 0 -2,642 0 0 0 0 -500 61,254 47,262 Total fixed assets 568,376 -1,562 5,212 0 63,729 -9,483 0 626,272 686,506 677,948

Annual Report

onsolidated Fixed Asset Movement Schedule As at December (Part of the notes)

D. AQUISITION AND PRODUTION OSTS hange in the Difference from group of As at currency consolidated As at in K Jan translation Other changes companies Additions Disposals Book transfers Dec Intangible assets oodwill 139,419 -20 0 0 0 0 0 139,399 Assets arising from development 132,116 -3 -985 0 4,434 -72 0 135,490 Industrial property and similar rights 113,417 -9 7,571 0 16,670 -580 57 137,126 384,952 -32 6,586 0 21,104 -652 57 412,015 Tangible assets Land and buildings 439,082 -9,206 95 0 15,200 -7,816 3,251 440,606 Technical equipment and machinery 120,794 -2,543 -163 0 3,441 -4,989 777 117,317 Other equipment, factory and office equipment 242,705 -1,217 375 0 13,445 -5,144 1,515 251,679 onstruction in progress 9,387 -558 -1,075 0 28,746 -493 -5,600 30,407 811,968 -13,524 -768 0 60,832 -18,442 -57 840,009 Financial assets Equity-accounted investments 39,905 1,856 746 0 8,454 0 0 50,961 Other equity investments 9,491 0 0 0 300 -6 0 9,785 Securities 8 0 0 0 0 0 0 8 49,404 1,856 746 0 8,754 -6 0 60,754 Total fixed assets 1,246,324 -11,700 6,564 0 90,690 -19,100 0 1,312,778

Annual Report

Consolidated Segmental Reporting Financiall Statements In the onsolidated Financial Statements (Part of the notes) Segmental Reporting D.§ SE£MENTATION BY BUSINESS SE£MENTS

in K Sales revenues with other segments 1,117,024 1,093,591 23,433 2.1 % 72,113 60,014 12,099 20.2 % 14,802 14,707 95 0.6 % -1,203,939 -1,168,312 0 0 0 0.0 % Sales revenues with third parties 1,433,209 1,454,180 -20,971 -1.4 % 1,268,106 1,200,757 67,349 5.6 % 174 191 -17 -8.9 % 0 0 2,701,489 2,655,128 46,361 1.7 % EBIT 112,236 126,832 -14,596 -11.5 % 136,202 120,211 15,991 13.3 % -26,250 -29,829 3,579 12.0 % -450 -81 221,738 217,133 4,605 2.1 % Financial result -1,597 -1,546 -51 -3.3 % -5,464 -6,519 1,055 16.2 % 1,941 2,330 -389 -16.7 % 0 0 -5,120 -5,735 615 10.7 % thereof interest income 3,123 2,325 798 34.3 % 4,637 3,491 1,146 32.8 % 8,007 7,039 968 13.8 % -10,336 -8,575 5,431 4,280 1,151 26.9 % thereof interest expenses -4,585 -3,813 -772 -20.2 % -6,337 -6,959 622 8.9 % -7,673 -5,188 -2,485 -47.9 % 8,467 6,444 -10,128 -9,516 -612 -6.4 % Share of profit for the period of at equity accounted investments -185 -94 -91 -96.8 % 0 0 0 0.0 % 2,733 3,482 -749 -21.5 % 0 0 2,548 3,388 -840 -24.8 % EBT 110,454 125,192 -14,738 -11.8 % 130,738 113,692 17,046 15.0 % -21,576 -24,017 2,441 10.2 % -450 -81 219,166 214,786 4,380 2.0 % arrying amount of at equity accounted investments 28,984 8,411 20,573 244.6 % 1,100 0 1,100 100.0 % 54,118 50,440 3,678 7.3 % 0 0 84,202 58,851 25,351 43.1 % Segment assets 1,363,906 1,301,859 62,047 4.8 % 1,877,800 1,964,977 -87,177 -4.4 % 1,892,465 1,862,875 29,590 1.6 % -2,741,035 -2,759,261 2,393,136 2,370,450 22,686 1.0 % Investments 135,879 81,755 54,124 66.2 % 17,054 6,317 10,737 170.0 % 2,251 2,617 -366 -14.0 % 0 0 155,184 90,689 64,495 71.1 % Depreciation 43,248 43,096 152 0.4 % 30,618 17,496 13,122 75.0 % 4,238 3,137 1,101 35.1 % 0 0 78,104 63,729 14,375 22.6 % Employees 4,077 4,120 -43 -1.0 % 3,081 3,299 -218 -6.6 % 87 84 3 3.6 % 0 0 7,245 7,503 -258 -3.4 %

See accompanying explanations in notes under segmental reporting page 146 et seq.

INFORMATION ON £EO£RAPHIAL AREAS

in K Sales revenues with third parties 1,104,982 1,171,525 -66,543 -5.7 % 1,248,165 1,219,016 29,149 2.4 % 0 0 0 0.0 % 348,342 264,587 83,755 31.7 % 0 0 0 0.0 % 0 0 2,701,489 2,655,128 46,361 1.7 % Long-term assets 327,827 281,202 46,625 16.6 % 374,294 340,180 34,114 10.0 % 0 0 0 0.0 % 12,118 9,731 2,387 24.5 % 0 0 0 0.0 % -8,114 -5,861 706,125 625,252 80,873 12.9 %

Annual Report §

Segmental Reporting In the onsolidated Financial Statements (Part of the notes)

D.§ SE£MENTATION BY BUSINESS SE£MENTS

hanges against hanges against hanges against hanges against “Machine Tools” previous year “Industrial Services” previous year “orporate Services” previous year Transition £roup previous year in K Sales revenues with other segments 1,117,024 1,093,591 23,433 2.1 % 72,113 60,014 12,099 20.2 % 14,802 14,707 95 0.6 % -1,203,939 -1,168,312 0 0 0 0.0 % Sales revenues with third parties 1,433,209 1,454,180 -20,971 -1.4 % 1,268,106 1,200,757 67,349 5.6 % 174 191 -17 -8.9 % 0 0 2,701,489 2,655,128 46,361 1.7 % EBIT 112,236 126,832 -14,596 -11.5 % 136,202 120,211 15,991 13.3 % -26,250 -29,829 3,579 12.0 % -450 -81 221,738 217,133 4,605 2.1 % Financial result -1,597 -1,546 -51 -3.3 % -5,464 -6,519 1,055 16.2 % 1,941 2,330 -389 -16.7 % 0 0 -5,120 -5,735 615 10.7 % thereof interest income 3,123 2,325 798 34.3 % 4,637 3,491 1,146 32.8 % 8,007 7,039 968 13.8 % -10,336 -8,575 5,431 4,280 1,151 26.9 % thereof interest expenses -4,585 -3,813 -772 -20.2 % -6,337 -6,959 622 8.9 % -7,673 -5,188 -2,485 -47.9 % 8,467 6,444 -10,128 -9,516 -612 -6.4 % Share of profit for the period of at equity accounted investments -185 -94 -91 -96.8 % 0 0 0 0.0 % 2,733 3,482 -749 -21.5 % 0 0 2,548 3,388 -840 -24.8 % EBT 110,454 125,192 -14,738 -11.8 % 130,738 113,692 17,046 15.0 % -21,576 -24,017 2,441 10.2 % -450 -81 219,166 214,786 4,380 2.0 % arrying amount of at equity accounted investments 28,984 8,411 20,573 244.6 % 1,100 0 1,100 100.0 % 54,118 50,440 3,678 7.3 % 0 0 84,202 58,851 25,351 43.1 % Segment assets 1,363,906 1,301,859 62,047 4.8 % 1,877,800 1,964,977 -87,177 -4.4 % 1,892,465 1,862,875 29,590 1.6 % -2,741,035 -2,759,261 2,393,136 2,370,450 22,686 1.0 % Investments 135,879 81,755 54,124 66.2 % 17,054 6,317 10,737 170.0 % 2,251 2,617 -366 -14.0 % 0 0 155,184 90,689 64,495 71.1 % Depreciation 43,248 43,096 152 0.4 % 30,618 17,496 13,122 75.0 % 4,238 3,137 1,101 35.1 % 0 0 78,104 63,729 14,375 22.6 % Employees 4,077 4,120 -43 -1.0 % 3,081 3,299 -218 -6.6 % 87 84 3 3.6 % 0 0 7,245 7,503 -258 -3.4 %

See accompanying explanations in notes under segmental reporting page 146 et seq.

INFORMATION ON £EO£RAPHIAL AREAS

hanges against Rest of hanges against hanges against hanges against hanges against hanges against £ermany previous year Europe previous year North America previous year Asia previous year Other previous year Transition £roup previous year in K Sales revenues with third parties 1,104,982 1,171,525 -66,543 -5.7 % 1,248,165 1,219,016 29,149 2.4 % 0 0 0 0.0 % 348,342 264,587 83,755 31.7 % 0 0 0 0.0 % 0 0 2,701,489 2,655,128 46,361 1.7 % Long-term assets 327,827 281,202 46,625 16.6 % 374,294 340,180 34,114 10.0 % 0 0 0 0.0 % 12,118 9,731 2,387 24.5 % 0 0 0 0.0 % -8,114 -5,861 706,125 625,252 80,873 12.9 %

Annual Report

Consolidated Financial Statements NOTES TO THE ONSOLIDATED Notes Accounting principles applied FINANIAL STATEMENTS OF in the Consolidated Financial Statement DM£ MORI AKTIEN£ESELLSHAFT FOR THE FINANIAL YEAR

Accounting principles applied in the onsolidated Financial Statement

. APPLIATION OF RE£ULATIONS of cutting machine tools worldwide, the DM MORI group offers innovative machine technologies, expert services and The onsolidated Financial Statements of DM MORI needsbased software products. The onsolidated Finan- AKTIENESELLS HAFT for the Financial Year from cial Statements and the roup Management Report of £ January ¤¥£¦ to §£ December ¤¥£¦ were prepared at the end DM MORI AKTIENESELLS HAFT for the reporting period of the reporting period with mandatory use of the Interna- as at §£ December ¤¥£¦ will be available through the elec- tional Financial Reporting Standards (IFRS) as adopted by tronic Federal azette (Bundesanzeiger), the ommercial the European Union and their interpretation by the Interna- Register as well as from our website → en.dmgmori-ag.com. tional Accounting Standards Board (IASB), London, reat DM MORI OMPANY LIMITED, Nara, Japan, is the ultimate Britain, as applicable on the reporting date. The Notes to the parent company of the DM MORI group. The onsolidated onsolidated Financial Statements include further explana- Financial Statements of DM MORI AKTIEN ESELLS HAFT tions pursuant to Section §£©e of the erman ommercial are included in the onsolidated Financial Statements of ode (HB). DM MORI OMPANY LIMITED, Nara (Japan). These onsolidated Financial Statements can be found online at The following disclosures include statements and comments → www.dmgmori.co.jp. that, pursuant to the IFRS, must be included in the notes to the onsolidated Financial Statements along with the con- DM MORI mbH, a wholly owned subsidiary of DM MORI solidated income statement, the consolidated statement of OMPANY LIMITED, has concluded a domination and profit comprehensive income for the reporting period, the consol- transfer agreement with DM MORI AKTIENESELLS HAFT, idated balance sheet, the development of the group’s equity pursuant to Sections ¤¦£ et seq. of the erman Stock and the consolidated cash flow statement. orporation Act (Akt), which entered into force following entry into the commercial register on ¤° August ¤¥£®. To allow for a better presentation, individual items have been With effect from £ January ¤¥£¯, a tax allocation agreement combined in the balance sheet and the income statement; was concluded between DM MORI mbH and DM MORI these are shown separately in the notes to the onsolidated AKTIENESELLS HAFT. Financial Statements with further disclosures. The Executive Board of DM MORI AKTIENESELLS HAFT The onsolidated Financial Statements are drawn up in released the onsolidated Financial Statements and the euros. The reporting currency is the euro. Unless other- roup Management Report for publication on ¦ March ¤¥¤¥. wise specified, all amounts are shown in thousand euro (¬ K). All amounts have been rounded in accordance with standard commercial practise. . ONSOLIDATION PRINIPLES

DM MORI AKTIENESELLS HAFT with its registered office The accounting for acquired subsidiaries applies the acqui- in Bielefeld, ildemeisterstrasse ®¥, is listed at the Bielefeld sition method, provided the group has obtained a controlling District ourt, section B, under the number ¯£°° and is the interest. Transactions under joint control are also accounted parent company of the DM MORI group and is a listed for according to the acquisition method. company under erman law. As a leading manufacturer

Annual Report

The consideration transferred for the acquisition of such taken into account. Intercompany sales, as well as all other interests corresponds to the fair value of the exchanged intercompany income, are offset against the corresponding assets and the liabilities incurred or assumed at the date expenses with no effect on income. of the acquisition. Furthermore, they include the fair value of any assets or liabilities recognized arising from a contin- Other related companies to the DM MORI group are the gent consideration agreement. Subsequent adjustments to ultimate parent company DM MORI OMPANY LIMITED, the fair value of the contingent consideration are recognized Nara (Japan), and its subsidiaries and major holdings through profit or loss. osts related to the acquisition are outside the DM MORI group, with the exception of Magnes- recognized as an expense at the time of their accrual. At cale o. Ltd. and its subsidiaries, which are considered as the time of their initial consolidation, assets, liabilities and associated companies. If not shown separately, any informa- contingent liabilities that can be identified in the context of tion on other related companies refers to this group of com- a merger will be measured at their fair values at the time panies and also includes DM MORI OMPANY LIMITED. of acquisition. The applied consolidation methods remained unchanged ontingent consideration obligations are measured at fair from the previous year. value at the acquisition date.

Subsidiaries are companies controlled by the group. The . AOUNTIN£ AND VALUATION PRINIPLES group controls a company, if it is subject to fluctuating rates of return from its involvement with the company or holds a All annual financial statements of the companies that were right to such rates of return and is able to influence them included in the onsolidated Financial Statements have the utilizing its control over the company. same balance sheet dates as the onsolidated Financial Statements and are prepared in accordance with the uniform If the group loses control over a subsidiary, it de-recognizes group recognition and measurement principles. For this the subsidiary‘s assets and liabilities and all related non-con- purpose, those financial statements that were prepared trolling interest and other components of equity. Any profit or in accordance with local regulations were adjusted to the loss generated is recognized through profit or loss. uniform group recognition and measurement principles of DM MORI AKTIENESELLS HAFT. The onsolidated The group decides on an individual basis with respect to Financial Statements have been prepared on the basis of the question if the non-controlling interests in the company the historical cost of acquisition and production, with the acquired are to be recognized at their fair value or in the exception that certain financial instruments have been pro-rata amount of the net assets. accounted for at market value and pension obligations have been accounted for using the projected unit credit method. oodwill is recognized at the value that arises from the surplus of the acquisition costs, from the amount of the non-controlling The applied recognition and measurement methods are the interests in the company acquired as well as from the fair value same as those applied in the previous year. of any previously held equity interests as of the acquisition date above the equity interest of the group in the net assets hanges in accounting and valuation above fair value. Should the acquisition costs be less than the methods due to new standards acquired subsidiary’s net asset value measured at fair value, On £ January ¤¥£¦, DM MORI group initially applied the fol- the difference shall be re-evaluated and subsequently recog- lowing new and revised IFRS and IFRI standards bearing nized in the income statement. relevance for the onsolidated Financial Statements. [→ D. ]

IFRS § “Business ombinations” and IAS §® “Impairment The effects of these new standards on the onsolidated Finan- of Assets” eliminate the schedule amortization of goodwill cial Statements of DM MORI AKTIENESELLS HAFT are and instead prescribe goodwill to be written-off only in the explained below. As expected, especially the application of event of impairment. Any equity interest in the subsidiaries, the new standard, IFRS £®, has proved to have or have had no that the parent company is not entitled to, are recognized material impact on the onsolidated Financial Statements as non-controlling interests as part of equity. of DM MORI.

Mutual receivables and liabilities between the companies IFRS ³ Leases included in the consolidated financial statements are offset The DM MORI group applied IFRS £® for the first time on against each other. Profits and losses from intercompany £ January ¤¥£¦ using the modified retrospective approach. goods and services are eliminated and deferred tax assets The right-of-use asset was recognized at the amount equal to and liabilities from consolidation affecting net income are the lease liability. omparative information was not restated.

Annual Report

Consolidated D. Financial Statements IFRS 16 Leases Notes Amendments to IFRS 9 Prepayment features with negative compensation Accounting principles applied IFRI 23 Uncertainty over income tax treatment in the Consolidated Financial Amendments to IAS 28 Long term interests in associates and joint ventures Statement hanges to IAS 19 Plan amendment, curtailment or settlement Improvements to IFRS 2015 2017 Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23

When applying IFRS £® for the first time, the group elected For leases with a lease term of £¤ months or less after the not to apply the new disclosure requirements for compara- date of initial application (short-term leases) and leases tive information, but to provide this information based on the where the underlying asset has a low value, the group uses disclosure requirements of the previously applied standard, the practical expedient of not recognizing a right-of-use IAS £¯ and related interpretations. Further information on asset and a lease liability. The corresponding lease pay- the changes in accounting policies are set out below. ments continue to be recognized as expenses in the income statement. Non-lease and lease components are generally IFRS £® introduces a uniform accounting model that pre- accounted for separately. scribes how leases should be accounted for on the lessee’s balance sheet. A lessee recognizes a right-of-use asset, The application of IFRS £® changes the nature of expenses, which reflects its right to use the underlying asset and a as the group now recognizes depreciation on right-of-use lease liability, which reflects its obligation to make lease pay- assets and interest expenses from lease liabilities. Unlike ments. There are special provisions for short-term leases the previous approach, under which expenses for operating and leases for low-value assets. The lessor's accounting is leases were disclosed in full in earnings before interest and comparable with the previous standard – meaning that the taxes (EBIT), interest expenses from the compounding of the lessor continues to classify leases as either finance leases lease liability are now recognized in the financial result in or operating leases. accordance with IFRS £®.

IFRS £® replaces the existing guidelines on leases, includ- In the cash flow statement, payments of principal are rec- ing IAS £¯ “Leases”, IFRI ° “Determining whether an ognized in cash flow from financing activities, while interest Arrangement contains a lease”, SI ¶£© “Operating Leases payments for leases are presented in cash flow from oper- – Incentives” and SI ¶¤¯ “Evaluating the Substance of Trans- ating activities. All cash outflows for operating leases were actions Involving the Legal Form of a Lease”. previously recognized in cash flow from operating activities.

The group used the simplified approach with regard to retain- There were no material effects on the DM MORI group from ing the definition of a lease during transition. This means existing finance leases. that the DM MORI group applied IFRS £® to all agreements concluded prior to £ January ¤¥£¦ and identified as leases Leases where the DM£ MORI group is the lessor under IAS £¯ and IFRI °. Lessor accounting in IFRS £® remains largely unchanged from IAS £¯. Lessors must still continue to classify leases Leases where the DM£ MORI group is the lessee as finance or operating leases. The DM MORI group has recognized new assets and liabilities for its former operating leases. The rights of use recog- Transition effects on the financial statements nized in property, plant and equipment are initially measured As part of the transition to IFRS £®, assets for the right to at cost, which corresponds to the initial measurement of the use lease assets and lease liabilities of ¬ ®®,¤´¦ K were lease liability. During initial measurement of the right-of-use recognized as of £ January ¤¥£¦. asset, the DM MORI group applied the simplified approach which does not recognize initial direct costs. The difference between ¬ ®®,´§¤ K in expected future mini mum lease payments for operating leases as of §£ December ¤¥£´ The initial recognition of lease liabilities is determined as and ¬ ®®,¤´¦ K in lease liabilities recognized in the opening the present value of outstanding lease payments. These are balance sheet is mainly due to the reassessment of the obli- discounted using the interest rate implicit in the lease or, if gations to be recognized in accordance with the require- this cannot be readily determined, the incremental borrow- ments of IFRS £® and the lease terms included in the rec- ing rate. The weighted average incremental borrowing rate ognition of liabilities, the non-recognition of lease payments as at £ January ¤¥£¦ was ¤.´ %. for non-lease components, short-term and low-value leases and the effect of discounting of ¬ °,¤´¥ K.

Annual Report

The values recognized on the balance sheet in relation to The amendments do not result in any material implications first-time application on £ January ¤¥£¦ are broken down by for the onsolidated Financial Statements of DM MORI item as follows: AKTIENESELLS HAFT.

D. | RI£HT©OF©USE ASSETS Amendments to IAS ³ Long-term interests in K Jan in Associates and Joint Ventures Land and buildings 27,991 These amendments contain a clarification that IFRS ¦ must Technical equipment and machinery 12,580 be applied to long-term interests in associates and joint Other facilities, factory and office equipment 25,718 ventures that are not accounted for using the equity method. Total 66,289 The amendments do not result in any material implications

D. | LEASE LIABILITIES for the onsolidated Financial Statements of DM MORI AKTIENESELLS HAFT. in K Jan Land and buildings 27,991 Technical equipment and machinery 12,580 Amendment to IAS ³ Plan Amendment, Other facilities, factory and office equipment 25,718 urtailment or Settlement Total 66,289 Under IAS £¦, Pension obligations must be measured for plan amendments, curtailments and settlements based on updated assumptions. The application of IFRS £® resulted in lower operating expenses in financial year ¤¥£¦, while depreciation increased. The amendment clarifies that after such an event, the current This led to a rise in EBITDA and marginal improvement in service cost and net interest for the remaining period must EBIT. Further information on the individual income statement be recognized based on updated assumptions. items can be found in the notes to the income statement. The amendments do not result in any material implications Amendments to IFRS – Prepayment for the onsolidated Financial Statements of DM MORI features with negative compensation AKTIENESELLS HAFT. The adjustments relate to a narrow-scope amendment to the evaluation criteria regarding the classification of finan- Improvements to IFRS © §: Amendments cial assets. Under certain conditions, financial assets with to IFRS , IFRS , IAS and IAS a negative prepayment feature with negative compensation The annual improvements to IFRSs (¤¥£©¶¤¥£¯) amended may be directly recognized in equity at amortized cost or fair four IFRSs. value through other comprehensive income instead of at fair value in profit or loss. IFRS § clarifies that if an entity obtains domination of a business, where it previously held an interest in a joint operation, The amendments do not result in material implications the principles for successive business combinations must be for the onsolidated Financial Statements of DM MORI applied. The interest previously held by the acquirer must be AKTIENESELLS HAFT. re-measured.

IFRI ³ Uncertainty over income tax treatment IFRS ££ stipulates that if a party obtains joint control of a IFRI ¤§ clarifies how the recognition and measurement business, where it previously held an interest in a joint oper- requirements of IAS £¤ are applied when there is uncertainty ation, the interest previously held should not be re-measured. over income tax treatments. Estimates and assumptions must be made for the purposes of recognition and meas- The amendment to IAS £¤ stipulates that all income tax con- urement, e. g. whether an estimate is made separately or sequences of dividends should be accounted for in the same together with other uncertainties, a probable or expected way as the income on which the dividends are based. value is used for the uncertainty and whether changes have occurred from the previous period. Detection risk is not con- IAS ¤§ also stipulates that when determining the borrow- sidered in the recognition of uncertain balance sheet items. ing cost method, if an entity has used general borrowings Accounting is based on the assumption that the tax authori- to acquire qualifying assets, the borrowing costs that are ties will investigate the matter in question and that they have directly attributable to the acquisition of qualifying assets access to all the relevant information. should not be recognized until the acquisition is completed.

Annual Report

D. Consolidated The amendments do not result in any material implications Financial Amendments to IFRS 3 Definition of a business Statement for the onsolidated Financial Statements of DM MORI IFRS 17 Insurance contracts Notes AKTIENESELLS HAFT. Accounting Sale or contribution of assets principles applied Amendments to IFRS 10 between an investor and its in the Consolidated a) These have already received EU endorsement Financial and IAS 28 associate or joint venture Statement D. Amendments to IFRS 9, Interest Rate IAS 39 and IFRS 7 Benchmark Reform Amendments to IAS 1 and IAS 8 Definition of material Amendments to references Amendments to IFRS – Definition of a Business to the conceptual framework onceptual Framework in IFRS standards The IASB has issued this amendment to clarify that a business is a set of activities and assets that includes, at a minimum, an input and a substantive process that together Amendments to IAS and IAS – Definition of material significantly contribute to the ability to produce outputs. Fur- These amendments provide IFRSs with a more uniform and thermore, with regard to output, focus is now placed on precisely defined concept of the materiality of financial state- goods and services provided to customers – removing the ment disclosures, accompanied by illustrative examples. reference to an ability to reduce costs. The new requirements Thus, they help align the definitions used in the oncep- also include an optional concentration test that is designed tual Framework, IAS £, IAS ´ and IFRS Practice Statement ¤ to permit a simplified assessment of a business. Subject to “Making Materiality Judgements”. These amendments must EU endorsement, the amendments must be applied to busi- be initially applied as of £ January ¤¥¤¥ Early application is ness combinations where the acquisition date is on or after permitted. £ January ¤¥¤¥. Early application is permitted.

The DM MORI group does currently not expect any mate- The DM MORI group is not currently expecting any material rial ramifications for the onsolidated Financial Statements. impact on the onsolidated Financial Statements.

onceptual Framework – Amendments to references IFRS § ³ Insurance ontracts to the conceptual framework in IFRS standards IFRS £¯ replaces IFRS ° and thus, for the first time, specifies The revised conceptual framework comprises a new sub- standard requirements for the recognition, measurement, section, “Status and purpose of the conceptual framework” presentation and disclosure of and notes on insurance con- and a complete eight chapters. tracts, reinsurance contracts and investment contracts with discretionary participation features. They include chapters on “The reporting entity” and “Pres- entation and disclosure”. The issue of “Derecognition” has IFRS £¯ has no impact on the onsolidated Financial State- been added to the chapter on “Recognition”. ments of DM MORI.

The framework’s contents have also been amended: For Amendments to IFRS and IAS ³ Sale or ontribution example, the distinction between “income” with regard to of Assets between an Investor and its Associate “revenue”, on the one hand, and “gains”, on the other hand These amendments address a known inconsistency between has been abandoned. the regulations of IFRS £¥ and those of IAS ¤´ (¤¥££) when selling assets to an associated company or a joint venture The amendments to the conceptual framework were also and / or when contributing assets to an associated company accompanied by amendments to references to the concep- or joint venture. tual framework in various standards. According to IFRS £¥, a parent company is to recognize the The DM MORI group does currently not expect any mate- full amount of the profit or loss from the sale of a subsid- rial ramifications for the onsolidated Financial Statements. iary in the income statement. In contrast, the IAS ¤´.¤´ in current use demands that the disposal profit during sales b) EU Endorsements are still pending transactions between an investor and an equity accounted shareholding – whether it be an associated company or joint Furthermore, the following standards and interpretations venture – only be recognized in the amount of the investor's were issued by IASB and not yet recognized by the Euro- stake of this company. pean Union:

Annual Report

In future, the entire profit or loss arising from a transaction is the cash generating unit and, moreover, select an appropriate only to be recognized if the sold or contributed assets consti- discount rate in order to determine the cash value of this cash tute a business operation as defined by IFRS §. This is regard- flow. As of §£ December ¤¥£¦, the carrying amount of goodwill less of whether the transaction is arranged as a share or an totalled ¬ £§´,¥´¤ K (previous year: ¬ £§¦,§¦¦ K). This change asset deal. In contrast, if the assets do not constitute business from the previous year is due to a disposal and currency effects. operations, then only partial income recognition is allowed. More information about this can be found on pages £¤¥ et seq.

The IASB has indefinitely postponed the first application of Pension provisions the amendments. The amount of the provisions and the expenses from benefit-based plans are determined on the basis of actuarial Amendments to IFRS , IAS and IFRS § – calculations. The actuarial calculations take place on the Interest Rate Benchmark Reform basis of assumptions with respect to discount interest rates, These amendments are based on uncertainties arising from future wage and salary increases, the mortality rate and the IBOR-reform. Under current hedge accounting rules, future pension increases. orresponding to the long-term the forthcoming changes in reference rates would, in many focus of these plans, such assessments are subject to sig- cases, result in the discontinuation of hedging relationships. nificant uncertainties. As of §£ December ¤¥£¦, provisions for It is now possible to continue existing hedge accounting pensions amounted to ¬ °§,¥¥´ K (previous year: ¬ §¯,´¤´ K). relationships for a transitional period. For this purpose, the More information about this can be found on pages £¤´ et seq. amendments include selective mandatory exceptions from previous hedge accounting requirements, e. g. for assessing Intangible assets arising from development the highly probable requirement for forecast transactions Intangible assets arising from development are capitalized in cash flow hedges. according to the recognition and measurement methods presented on page £¥° et seq. To determine the amounts The amendments are applicable to reporting periods begin- to be capitalized, the company management must make ning on or after £ January ¤¥¤¥, subject to adoption by the assumptions as to the amount of expected future cash flow EU. Earlier application of the amendments is permitted, but from intangible assets, the interest rates to be applied, and in the EU generally requires an endorsement. the period of accrual of expected future cash flow that the intangible assets generate. As of §£ December ¤¥£¦, the The DM MORI group does currently not expect any material carrying amount of intangible assets arising from develop- ramifications for the onsolidated Financial Statements. ment amounted to ¬ £°,®¤¥ K according to the best possible assessment (previous year: ¬ £®,¦§´ K). USE OF DISRETIONARY DEISIONS AND ESTIMATES The preparation of the onsolidated Financial Statements in Discretionary decisions and estimations are additionally accordance with IFRS necessitates discretionary decisions, required for leases (see Note §©), revenue from contracts estimates and assumptions concerning the application of with customers (see Note ®) allowances for doubtful debts accounting methods and the reported amounts of assets, (see Note ¤©) as well as for contingent liabilities (see Note debts, income and expenses. Actual results may differ from §®) and other provisions (see Note §£); moreover, they are these estimates. Estimates and underlying assumptions are required for determining the fair value of long-term fixed reviewed on an ongoing basis. Revisions of estimates are assets (see Note ¤¥) and intangible assets (see Note £¦), recorded prospectively. determining the net disposal value of inventories (see Note ¤°), as well as for the assessment of deferred taxes on tax When using the recognition and measurement methods, the losses carried forward (see Note ¤´). Executive Board is required to make the following discretionary decisions and estimates, which significantly influence The main assumptions on which the respective estimates the amounts in the financial statements: are based are commented upon for the individual items in the Income Statement and Balance Sheet. Impairment of goodwill The group reviews goodwill at least once a year for impair- In individual cases the actual values may differ from the ment and whenever there is an indication to do so. This assumptions and estimates made, requiring a significant requires the creation of cash-generating units and an allo- adjustment in the book value of the assets or liabilities con- cation of goodwill to the cash-generating units as well as the cerned. Pursuant to IAS ´ “Accounting Policies, hanges in higher of the two values of fair value less selling costs and Accounting Estimates and Errors”, changes will be taken the value in use of the cash-generating units, to which the into account at the time of their discovery and recognized goodwill is allocated. To assess the value in use, the company in the income statement. The previous year’s amounts need management must assess the foreseeable future cash flow of not be adjusted and are comparable.

Annual Report

Consolidated REO£NITION AND MEASUREMENT METHODS The production costs of internally-generated equipment Financial Statement The application of specific IFRS is included in the explana- include all costs that can be directly attributed to the manu-

Notes tory notes on individual statement of financial position items. facturing process and the necessary portions of produc- Accounting principles applied In principle, the following recognition and measurement tion-related overheads. This includes production-related in the Consolidated Financial methods have been applied: depreciation, prorated administration costs and prorated Statement costs of social contributions. Borrowing costs are recognized Intangible and tangible assets as part of the acquisition or production costs, if the requirements of IAS ¤§ are fulfilled. osts of repair are immediately D. | USEFUL EONOMI LIFE OF ASSETS recognized as expense. Software and other intangible assets 1 to 5 years Assets arising from development 2 to 10 years Leases Office and factory buildings 10 to 50 years Until §£ December ¤¥£¦, the group accounted for its leases Technical equipment and machinery 2 to 30 years under IAS £¯ “Leases” and applied the following rules. Other fixed assets, factory and office equipment 1 to 23 years Leases, where a significant share of the risks and rewards There are no intangible assets with an indefinite useful life, that are associated with ownership of the lease asset remain except for the goodwill. with the lessor, were classified as operating leases under IAS £¯. In connection with an operating lease, payments were Development costs that are directly attributable to the devel- recognized on a straight-line basis for the period of the lease opment of identifiable individual machine tools, services or in the income statement. software solutions, which lie within the group’s power of disposition, are recognized pursuant to IAS §´ “Intangible The group leased specific tangible fixed assets (lease asset). Assets” if it is probable that the use of the asset is associated Leases for tangible fixed assets, where the group bore the with a future economic benefit, the completion is technically significant risks and the benefits from ownership of the lease feasible and the cost of the asset can be reliably measured. asset, were classified as finance leases under IAS £¯. Assets They were accounted for at acquisition or production costs under finance leases were recognized at the beginning of the plus borrowing costs, as long as they are qualified assets, lease term at the lower of fair value of the lease asset and reduced by regular depreciation on a straight-line basis cor- present value of the minimum lease payments. A lease lia- responding to their useful life and cumulative impairments. bility of the same amount was recognized as a liability under Production costs include all costs that can be directly and long-term liabilities. Each lease payment was divided into indirectly attributed to the development process and neces- an interest portion and a repayment portion. The interest sary portions of development-related overheads. apitalized portion of the lease payment was recognized as an expense development costs are depreciated on a straight-line basis in the income statement. Tangible fixed assets held under a from the start of production over the expected product life finance lease were depreciated over the shorter of the two cycle. Any resulting expenses are recognized under depre- following periods: the economic useful life of the asset or ciation. Research costs are recognized as expense in the the lease term. IAS £¯ “Leases” and other lease directives period in which they accrue. were replaced by IFRS £®. DM MORI applied IFRS £® for the first time on £ January ¤¥£¦. Further information on first-time Pursuant to IFRS § “Business ombinations”, scheduled application of IFRS £® and its implications for the DM MORI depreciation is not applied to goodwill, but is tested for group can be found on page ¦¦ et seq. impairment annually and whenever there is any indication to test for impairment. If an impairment requirement is deter- Leases where the DM£ MORI group is the lessee mined, goodwill is depreciated. At inception of the contract, the DM MORI group assesses whether the contract constitutes or contains a lease. This Tangible assets were evaluated at acquisition or production is the case, if the contract conveys the right to control the costs, reduced by scheduled depreciation and accumulated use of an identified asset for a period of time in exchange impairment. Borrowing costs are recognized as part of the for consideration. To assess whether a contract contains the acquisition or production costs, if the requirements of IAS ¤§ right to control the use of an identified asset, the DM MORI are fulfilled (see page ££¤ “Borrowing costs”). Depreciation group defines a lease pursuant to IFRS £®. was carried out using the straight-line method in accordance with useful life. A re-evaluation of tangible assets pur- Since £ January ¤¥£¦, the DM MORI group has, basically for suant to IAS £® “Property, Plant and Equipment” was not all leases, recognized rights to use leased assets and lia- carried out. No property was held as a financial investment bilities for the payment obligations entered on the balance pursuant to IAS °¥ “Investment Property”. sheet.

Annual Report

The right-of-use assets are initially measured at cost, which be payable under a residual value guarantee, if there are corresponds to the initial measurement of the lease liability. changes in the DM MORI group’s assessment of whether a They are subsequently adjusted for payments made on or purchase, extension or termination option will be exercised before the commitment date, plus any initial direct costs and or if there are changes in a de facto fixed lease payment. the estimated costs of dismantling, removing or restoring Adjustments are made to the carrying amount of the right- the underlying asset or the site on which it is located, less of-use asset to reflect remeasurement of the lease liability. any lease incentives received. Sale and leaseback The initial recognition of lease liabilities is determined as With regard to a sale and leaseback transaction, an entity the present value of outstanding lease payments. These are first needs to assess if the transfer of an asset should be discounted using the interest rate implicit in the lease or, recognized as a sale based on the criteria in IFRS £©. If this if this cannot be readily determined, the incremental bor- is the case, the assets leased back are presented in the rowing rate. In order to determine its incremental borrow- consolidated financial statements in accordance with the ing rate, the DM MORI group obtains interest rates from lessee accounting principles shown above. Otherwise, the various financial sources and makes specific adjustments asset continues to be accounted for and the revenue received to take into account the terms and conditions of the lease. is recognized as a financial liability under IFRS ¦.

The lease payments included in the measurement of the Leases where the DM£ MORI group is the lessor lease liability comprise: If the group acts as a lessor, it classifies each lease as a finance or operating lease at inception of the contract. › fixed payments, including de facto fixed payments, In order to classify each lease, the DM MORI group makes › variable lease payments that depend on an index or (inter- an overall assessment of whether the lease transfers sub- est) rate, initially measured using the index or (interest) stantially all the risks and rewards incidental to ownership of rate as at the commencement date, the underlying asset. If this is the case, the lease is classified as a finance lease; if not, it is an operating lease. Within the › amounts expected to be payable under a residual value scope of this assessment, the DM MORI group takes into guarantee, and account certain indicators, such as whether the lease covers the major part of the economic life of the asset. › the exercise price of a purchase option, if the group is reasonably certain to exercise that option, lease payments for The DM MORI group records the head lease and sublease an extension option, if the group is reasonably certain to separately on the balance sheet, if it acts as an interme- exercise that option, and penalties for early termination diate lessor. The sublease is classified by reference to the of the lease, unless the group is reasonably certain not right-of-use asset arising from the head lease, rather than to exercise an early termination option for such a lease. by reference to the underlying asset. If the head lease is a short-term lease to which the group applies the exception Subsequently, the right-of-use asset is depreciated on a described above, it classifies the sublease as an operating straight-line basis from the lease commencement date to lease. the end of the lease term, unless ownership of the underlying asset is transferred to the DM MORI group at the end Lease payments from operating leases are recognized by of the lease term, or if the cost of the right-of-use asset the DM MORI group as income on a straight-line basis over reflects that the DM MORI group will exercise a purchase the term of the lease. option. In this case, the right-of-use asset is depreciated over the useful life of the underlying asset, which is deter- Impairment mined in accordance with the requirements for property, Pursuant to IAS §® “Impairment of Assets”, the assets of the plant and equipment. Where required, the right-of-use asset DM MORI group, with the exception of assets as defined by is also continually adjusted for impairment losses and for IAS §®.¤, are tested for signs of impairment at each balance any remeasurements of the lease liability. sheet date. If such signs exist, the fair value of the assets will be estimated and, if required, depreciated accordingly The lease liability is measured at the amortized carrying in profit or loss. An impairment test for individual assets amount using the effective interest method. It is remeasured, is only possible if recoverable amounts can be allocated to if changes in future lease payments result from changes the individual asset. If this is not possible, the recoverable in the index or (interest) rate, if there are changes in the amount of the cash-generating unit pertaining to the asset DM MORI group’s assessment of amounts expected to must be determined (asset’s cash-generating unit).

Annual Report

Consolidated Pursuant to IAS §® “Impairment of Assets”, goodwill has to was no need for impairment. The impairment tests included Financial Statement be tested for impairment at least once a year and when- sensitivity analyses of key assumptions. The findings showed

Notes ever criteria are met for an impairment test. DM MORI that no change in key assumptions deemed possible by the Accounting principles applied AKTIENESELLS HAFT carried out an impairment test Executive Board would have led to impairment. in the Consolidated Financial on §£ December ¤¥£¦. In the impairment test, the carry- Statement ing amount of a cash-generating unit is compared with At equity accounted companies the recoverable amount. The recoverable amount of the The group's shares in financial assets accounted for using cash-generating unit is the higher of the asset’s fair value the equity method include shares in associated companies less costs to sell and its value in use. and in one joint venture.

DM MORI tests the impairment of goodwill in accordance Associates are entities over which the group can exercise with the value in use on the basis of estimated future cash significant influence but cannot exercise any control. Signifi- flows, which are derived from the DM MORI group’s three- cant influence is basically assumed to be if the DM MORI year plan approved by the responsible committees. The group has a share of at least ¤¥ % to ©¥ % of the voting assumptions made with regard to key planning parameters rights either directly or indirectly. Interests in associates reflect past experiences. The calculation of cash values for are accounted for using the equity method of accounting estimated future cash flow is based primarily on assump- and at purchase cost upon acquisition. The group’s interest tions as to future sales prices or volume and costs. The in associated companies includes the goodwill which arose assumed development of sales revenue and overall perfor- from the acquisition. mance is primarily determined on the basis of the expected order intake for machine tools (see forecast report, page ´¥ The interest of the group in the profit and loss of associ- et seq). The expenses are planned according to the expected ates is recognized from the acquisition date in the income increase in costs. Planning is based on a detailed planning statement. hanges to reserves are to be recognized pro- period extending up to financial year ¤¥¤§. portionately in revenue reserves. Accumulated changes after acquisition are offset against the book value of the invest- When estimating the value in use, the group projected a mar- ment. If the share in losses of the group in an associate cor- ginal drop in sales revenue for ¤¥¤§ in the detailed planning responds to the group’s interest in the associate, including period compared to financial year ¤¥£¦ (excluding Energy other unsecured receivables, or exceeds the interest, the Solutions business operations). group does not recognize any other losses unless it has entered into obligations on behalf of the associate or has As regards the EBIT margin, it projected a slightly higher made payments on behalf of the associate. EBIT margin for ¤¥¤§ in the detailed planning period compared to financial year ¤¥£¦ (excluding Energy Solutions busi- At every balance sheet date, the group reviews whether there ness operations). is reason to believe that impairment loss has to be taken into account when accounting for the investment in associates. A sustainable growth rate of £ % was assumed for the period In these cases, the difference between the book value and following the detailed planning period, which is in line with the recoverable amount is determined to be impairment and general expectations of future business development. recognized in the income statement item “Share of profits and losses of at equity-accounted investments”. For purposes of impairment testing, the cash-generating unit “Machine Tools” was allocated goodwill in an amount of Unrealized profits from transactions between group compa- ¬ ©¯,¥¯§ K (previous year: ¬ ©¯,¥¯§ K) and the cash-generating nies and associated companies are eliminated in accordance unit “Industrial Services” was allocated goodwill in an amount with the group’s interest in the associated company. Unreal- of ¬ ´£,¥¥¦ K (previous year: ¬ ´¤,§¤® K). ized losses are likewise eliminated, unless the transaction provides evidence of an impairment of the asset transferred. The cash flows determined were discounted at pre-tax The accounting and valuation methods of associates were – weighted cost of capital rates (WA ) of £¤.¦ % (previous insofar as necessary – changed in order to ensure uniform year: £§.¥ %) for the cash-generating unit “Machine Tools” accounting throughout the group. and £¤.° % (previous year: £¤.© %) for “Industrial Services”. The WA was derived from the application of the “ apital Joint ventures are likewise accounted for at equity pursuant Asset Pricing Model” ( APM). If the recoverable amount of a to IFRS ££.¤°. Unrealized interim gains or losses from trans- cash-generating unit is lower than its carrying amount, the actions with joint ventures are eliminated proportionately value of goodwill allocated to the cash-generating unit will, within the scope of consolidation insofar as the underlying initially, be reduced at an amount equal to the remaining assets are significant. balance. As in the previous year, in financial year ¤¥£¦ there

Annual Report §

Equity investments measured at fair value (FV). Transaction costs that are Equity investments recognise interests in enterprises, over directly attributable to acquisition or issue of the asset are which DM MORI AKTIENESELLS HAFT does not exercise recognized for any item that is not measured at fair value any significant influence. through profit or loss (FVTPL). Trade debtors without a significant financing component are initially measured at their As of £ January ¤¥£´, equity instruments not held for trading transaction price (this usually corresponds to acquisition are measured at fair value. At initial recognition, the entity cost). may elect to present any subsequent changes in the investment’s fair value in other comprehensive income. This elec- lassification and subsequent measurement tion is made for each investment on an instrument-by-in- At initial recognition, a financial asset is classified and meas- strument basis. DM MORI exercises this option. ured as follows:

Inventories › At amortised cost Measuring of inventories was carried out at the acquisition or › Debt instruments that are measured at fair value with production costs or the lower net selling price. Pursuant to value changes recognized in other comprehensive income IAS ¤ “Inventories”, elements of the production costs include (FVO I debt instruments) production material, manufacturing labor, prorated mate- › Equity instruments that are measured at fair value with rials and production overheads. Expenses for administra- value changes recognized in other comprehensive income tion and expenses arising in the social contribution area are (FVO I equity instruments) included insofar as these are allocated to production. The › At fair value with value changes recognized in profit or proportion of overheads is evaluated on the basis of ordinary loss (FVTPL) employment. Borrowing costs are recognized as part of the acquisition or production costs, if the requirements of IAS ¤§ Financial assets are not reclassified after initial recognition, are met (see page ££¤ “Borrowing costs”). When determining unless the DM MORI group changes its business model the net selling price, inventory risks arising from the period for managing financial assets. In such a case, all financial of storage and reduced usability were recognized through assets affected are reclassified on the first day of the report- appropriate reductions in values. If the causes that led to a ing period after the change in business model. reduction in value no longer exist, a reversal will be made. A financial asset is measured at amortized cost, if both of Lower values at the balance sheet date, arising from a reduc- the following conditions are met and the asset has not been tion in prices on the sales market, were recognized. Invento- designated as measured at FVTPL: ries were measured primarily using the average cost method. › It is held within a business model, whose objective is to Financial Instruments hold financial assets in order to collect contractual cash A financial instrument is an agreement, which also gives flows, and rise to a financial asset for one company and a financial › the contractual terms of the financial asset give rise on liability or equity instrument for another company. Finan- specified dates to cash flows that are solely payments cial assets include in particular cash and cash equivalents, of principal and interest (SPPI) on the principal amount and trade debtors and other originated loans and receiva- outstanding. bles as well as original and derivative financial instruments held for trading. Financial liabilities generally substantiate A debt instrument is designated as measured at FVO I, if claims for repayment in cash or other financial liabilities. both of the following conditions are met and it has not been This includes, in particular, promissory note bonds and other classified as FVTPL: securitized liabilities, liabilities to banks, trade creditors, liabilities from leasing arrangements and other original and › It is held within a business model, whose objective is to derivative financial instruments. hold financial assets in order to collect contractual cash flows and sell financial assets, and Initial recognition and measurement › its contractual terms give rise on specified dates to cash Trade debtors are recognized as of the date they origi- flows that are solely payments of principal and interest nate. All other financial assets and liabilities are initially (SPPI) on the principal amount outstanding. recognized on their trade date, if DM MORI becomes a contracting party as stipulated by the financial instrument’s Any financial assets that are not measured at amortized cost contractual provisions. or FVO I, are measured at fair value through profit or loss (FVTPL). This includes all derivative financial assets (see Note A financial asset (except for a trade debtor without a signif- §¯). At initial recognition, the entity can irrevocably elect to des- icant financing component) or financial liability is initially ignate financial assets – that otherwise meet the criteria for

Annual Report

Consolidated measurement at amortized cost or FVO I as measured at When testing whether the contractual cash flows are solely Financial Statement FVTPL, if doing so eliminates or significantly reduces account- payments of principal and interest on the principal amount,

Notes ing mismatches that would otherwise arise. the group considers the instrument’s contractual terms. Accounting principles applied This includes testing whether the financial asset contains in the Consolidated Financial Business Model Test contractual terms, which could change the timing or amount Statement DM MORI assesses the objectives of the business model of contractual cash flows, so that they no longer continue within which the financial asset is held at a portfolio level, to meet these criteria. During its assessment, the group as this best reflects the way in which business is managed considers: and information passed on to management. The information to be taken into account includes: › specific events that would change the amount or timing of the cash flows › The guidelines and targets for the portfolio and implementation of these guidelines in practice. This includes, › circumstances that would adjust the interest rate, includ- whether the management’s strategy is focused on collect- ing variable interest rates ing contractual interest income, maintaining a particular interest rate profile, matching the duration of a financial › prepayment or renewal options and asset to the duration of its liability or to its expected cash outflows or realizing cash flows through the sale of assets. › circumstances that limit the group’s claim to the cash flows from a specified asset (e. g. no right of rescission). › How portfolio performance is assessed and reported to group management A prepayment option matches the criterion of solely payments of principal and interest, if the prepayment amount › The risks that affect the performance of the business substantially represents unpaid amounts of principal and model (and the financial assets held in this business interest on the outstanding principal amount. This may also model) and how these risks are managed contain reasonable additional compensation for the early termination of the contract. › How managers are compensated – for example, whether compensation is based on the fair value of the assets Moreover, a term for a financial asset that permits or being managed or the contractual cash flows that are requires prepayment of an amount, which substantially collected – and represents the contractual par amount plus accrued (but unpaid) contractual interest, is considered to match the SPPI › The frequency, volume and timing of sales of financial criterion, if the fair value of the prepayment feature is insig- assets in prior periods and expectations about future sales nificant at initial recognition. activities. Subsequent measurement Financial asset transfers to an independent third party through Financial assets at FVTPL (Fair Value through profit and transfers that do not result in derecognition continue to be loss): These assets are subsequently measured at fair accounted for by the group and are therefore not treated as value. Net gains and losses, including any interest or div- sales. idend income, are recognized in profit or loss. For derivatives designated as hedging instruments, please see Note §¯. Financial assets held or managed for trading and their performance assessed on a fair value basis, are measured Financial assets at amortized cost: These assets are subse- at FVTPL. quently measured at amortized cost using the effective interest method. Impairment losses are deducted from amortized SPPI (Solely Payments of Principal and Interest) test cost. Interest income, exchange rate gains and losses and For the purpose of this test, the “principal amount” is defined impairments are recognized in profit or loss. A gain or loss as the fair value of the financial asset at initial recognition. is recognized in profit or loss when an asset is derecognized. “Interest” is defined as being compensation for the time value of money and default risk associated with the outstanding Debt investments at FVOI (Fair value through other com- principal amount over a specific period, as well as being prehensive income): These assets are subsequently meas- compensation for other basic credit risks, costs (e. g. liquidity ured at fair value. Interest income calculated using the effec- risk and administrative costs) and a profit margin. tive interest method, foreign exchange gains and losses and impairments are recognized in profit or loss. Other net gains

Annual Report

or losses are recognized in other comprehensive income. On Impairments in the form of individual value adjustments derecognition, the cumulative gain or loss previously rec- make adequate allowance for the expected non-payment ognized in other comprehensive income is reclassified to risks. Specific credit losses lead to de-recognition of the profit or loss. respective receivables. Within the scope of individual value adjustments, receivables, for which there is a potential Equity investments at FVOI (Fair value through other com- devaluation requirement, will be tested for impairment and, prehensive income): These assets are subsequently meas- if necessary, adjusted. The calculation of specific allowances ured at fair value. Dividends are recognized as income in for doubtful receivables is largely based on estimates and profit or loss, unless they clearly represent recovery of a measurements of individual receivables, which not only take part of the investment costs. Other net gains and losses are account of the creditworthiness and default of the respective recognized in other comprehensive income and thus, never customer, but also of current economic trends and histor- reclassified to profit or loss. ical default experience. Impairments of trade debtors are carried out in some cases using value adjustment accounts. In financial year ¤¥£¦ and in the previous year, financial asset The decision to account for non-payment risks using a value conditions were not renegotiated. adjustment account or by directly reducing the receivables will depend on the reliability of the risk assessment. Within the scope of factoring agreements, selected trade debtors are sold on a revolving basis to banks. Factoring This requires considerable judgment when assessing the is a standard financial instrument in the industry and an impact of changes in economic factors on expected credit additional component of the financing mix. As of §£ Decem- losses. The credit losses recognized for trade debtors are ber ¤¥£¦, factoring agreements were concluded, as in the calculated based on experience with actual credit losses previous year, with a total volume of ¬ £®¯.© million. As of over the past three years. redit risks within each group are the balance sheet date, receivables with a volume of ¬ £¤¥.¥ segmented by common default risk characteristics. For the million (previous year: ¬ ££®.£ million) were sold. companies, these are, for example, the credit risk assessment, e. g. based on overdue items and the geographical Trade debtors sold under these arrangements are excluded location. The default rates used for DM MORI, depending from accounts at the time of sale insofar as the risks and on the maturity (not overdue and overdue) and geographic rewards have been substantially transferred to the buyer and distribution of trade debtors, are between ¥.¥£ % and °.®¯ %. the transmission of the cash flows related to those receivables is assured. Using the general approach, the allowance for other receivables was calculated based on ratings and probabilities Impairment of default for a six-month period and reflects the short IFRS ¦ replaces the “incurred losses” model of IAS §¦ with maturities. a forward-looking “expected credit loss” model. ash and cash equivalents are deposited at banks or finan- The valuation concept based on expected credit losses over cial institutions rated A-£ to A-¤ by the S&P rating agency. the entire contractual term must be applied if the credit The allowance for cash and cash equivalents was calculated risk of a financial asset has increased significantly between based on £¤-month expected losses and reflects the short the initial journal entry and the balance sheet date; in all maturities. other scenarios, the valuation concept using £¤-month credit defaults must be used. However, the full lifetime expected Derivative financial instruments credit loss method must always be used to measure trade The hedging of risk items from currency and interest rate debtors and contract assets without significant financing fluctuations is carried out through the use of derivative components. There is also an option to use this method for financial instruments such as forward exchange transac- trade debtors and contract assets with a significant financ- tions. The hedging covers financial risks of scheduled under- ing component. DM MORI has decided to use the full life- lying transactions and, in the case of currency risks, also time expected credit loss method for all trade debtors and risks from pending supply and service transactions. contract assets (“simplified approach”). All derivative financial instruments are recognized at fair The new impairment model must be used for financial assets value at their initial measurement. The subsequent meas- measured at amortized cost or FVO I with the exception of urement is also carried out at fair value. If there is no quoted equity securities held as financial assets – and for contract price on an active market, then the fair value of derivatives assets. Under IFRS ¦, credit losses are recognized earlier corresponds to the cash value of estimated future cash flows. than under IAS §¦.

Annual Report

Consolidated hanges in the value of financial instruments, which are not Income taxes Financial Statement intended as hedging instruments within hedge accounting, DM MORI mbH, a wholly owned subsidiary of DM MORI

Notes are immediately recognized in the income statement. Pro- OMPANY LIMITED, has concluded a domination and profit Accounting principles applied vided a hedging instrument meets the requirements for hedge transfer agreement with DM MORI AKTIENESELLS HAFT, in the Consolidated Financial accounting, depending on the hedge type – it is measured as pursuant to Sections ¤¦£ et seq. of the erman Stock or- Statement follows: poration Act (Akt), which entered into force following entry into the commercial register on ¤° August ¤¥£®. Fair value hedge hanges in the fair value of hedging instruments that hedge Through the resulting entry of DM MORI AKTIENESELL¶ risk arising from changes in the fair value of recognized S HAFT and that of the domestic companies previously belong- assets or liabilities are recognized together with the change ing to the DM MORI AKTIENESELLS HAFT tax group into in fair value of the hedged underlying transaction in the the income tax group of DM MORI mbH, the income tax income statement. Fair value hedges were not made in the liability of DM MORI AKTIENESELLS HAFT expired as of reporting year. §£ December ¤¥£®. Any earnings from the domestic tax group are now legally subject to taxation at DM MORI mbH, ash flow hedge which is not included in the onsolidated Financial State- hanges in the fair value of hedging instruments that have ments of DM MORI AKTIENESELLS HAFT. With effect been concluded to hedge cash flow fluctuations are recog- from £ January ¤¥£¯, a tax allocation agreement was entered nized directly in other comprehensive income for the effec- into between DM MORI mbH and DM MORI AKTIEN¶ tive portion of the hedging instrument, taking into account ESELLS HAFT with the objective of fair and reasonable tax deferred tax effects. The ineffective portion of the change in allocation. fair value is recognized in the income statement. Amounts accumulated in equity are accounted for in the income state- IAS £¤ requirements do not contain any explicit rules on ment as soon as the hedged underlying transaction affects recognising tax expense attributable to taxable entities the income. within the DM MORI group. Deferred taxes have been recognized in the onsolidated Financial Statements based Forward exchange transactions are used to hedge future on an economic perspective. As a tax allocation agreement cash flows from expected incoming payments on the basis exists with effect from £ January ¤¥£¯, the stand-alone tax- of present order intake. Incoming payments are expected payer approach was used to determine deferred taxes. This within a period of up to one year. Derivative financial instru- approach assumes that the tax allocation is determined on ments are neither held nor issued for speculative purposes. the basis of the taxable income of the controlled company, However, derivatives are allocated to financial instruments DM MORI AKTIENESELLS HAFT, irrespective of the held for trading and measured at fair value through profit actual tax payable by the parent company, DM MORI mbH. or loss, if the pre-conditions for a cash flow hedge are not fulfilled. Thus, during preparation of the onsolidated Financial Statements of DM MORI AKTIENESELLS HAFT, all tax Assets held for sale or disposal groups held for sale expenditures by domestic taxable entities within the group Pursuant to IFRS ©, assets or groups of assets and liabili- were accounted for in the onsolidated Financial Statements ties held for sale must be classified as held for sale if their of DM MORI AKTIENESELLS HAFT, irrespective of the carrying amounts are recovered primarily through a sale actual tax liability. Thus, all the tax consequences of these transaction rather than through continued usage. These entities were accounted for in the onsolidated Financial assets are measured at the lower of their carrying amount Statements of DM MORI AKTIENESELLS HAFT. They and fair value less costs of sale and recognized separately include the recognition of current and deferred taxes, tax in the balance sheet under short-term assets or liabilities. risks and possibly tax arrears or refunds for previous periods and their effects on deferred tax items. ash and cash equivalents In addition to liquid funds, cash and cash equivalents specif- Income taxes include current and deferred taxes, which are ically include cheques, cash in hand and money on account accounted for in the onsolidated Income Statement, unless at banks, as well as short-term financial investments that they are for items immediately recognized in equity. In this can be converted to cash amounts at any time and are only case, the corresponding taxes are also recognized in equity subject to immaterial fluctuations in value. ash and cash and not in profit or loss. equivalents are measured at amortized cost.

Annual Report

urrent income taxes are the expected tax liability or receiva- for the duration of the domination and profit transfer agree- ble on the taxable income or loss for the financial year, based ment. As of §£ December ¤¥£¦, the provisions amounted to on tax rates that apply at the balance sheet date, and any ¬ ¯,¤§£ K (previous year: ¬ £¥,´©° K). adjustments to tax liabilities for previous years. The amount of the expected tax liability or tax receivable reflects the best Provisions and liabilities estimate, taking into account any tax uncertainties. urrent Provision for benefit-oriented pensions is determined tax liabilities also include all tax liabilities arising from the according to the projected unit credit method pursuant to declaration of dividends. urrent tax assets and liabilities IAS £¦ (rev. ¤¥££) “Employee Benefits”. Under this method, not are only offset under certain conditions. only those pensions and pension rights known or accrued at the balance sheet date are recognized, but also expected Pursuant to IAS £¤ “Income Taxes”, deferred taxes are future increases in pension payments and salaries by esti- assessed using the liability method. For this purpose, mating the relevant factors impacting such payments. al- deferred tax assets and liabilities were generally recog- culation is based on actuarial reports of independent experts nized for all temporary accounting and valuation differences taking into account demographic and financial calculation between the IFRS statement of financial position valuations principles. The provisions for benefit-based plans recog- for group purposes and the tax valuations (temporary dif- nized on the balance sheet correspond to the cash value of ferences), and with respect to consolidation procedures the defined benefit obligation (DBO) at the balance sheet recognized in profit or loss. Deferred tax assets for future date, less the fair value of pension plan assets. tax reduction claims arising from tax-loss carry forwards were also reported in the balance sheet. However, deferred Actuarial profits and losses, which are based on experi- tax assets for all deductible temporary differences and for ence-based adjustments and changes of actuarial assump- tax-loss carry forwards were only recognized to the extent tions, are recognized in the period they occurred in other that it is probable that future taxable income will be availa- comprehensive income and accumulated in equity. Retroac- ble against which the temporary differences or unused tax tive service cost is immediately recognized in profit or loss. losses can be offset. The deferred taxes were calculated on the basis of income tax rates that, pursuant to IAS £¤, The DM MORI group contributes to contribution-oriented “Income Taxes”, apply on the evaluation date or have been plans, either due to statutory or contractual obligations or enacted in the individual countries in accordance with the voluntary contributions to public or private pension plans. legal status on that date. Deferred tax assets and liabilities The DM MORI group has no further payment obligations were only offset, if allowed by law. Deferred tax assets and beyond the payment of these contributions. The contribu- liabilities were not discounted in accordance with the reg- tions are recognized under personnel costs as they are ulations contained in IAS £¤ “Income Taxes”. due. Paid prepayments of contributions are recognized as assets, for which exists a right to repayment or reduction In ¤¥£¦, IFRI published a clarification on the balance sheet of future payments. presentation of income taxes. According to this clarification, current tax provisions must in future be presented as Pursuant to IAS §¯ “Provisions, ontingent Liabilities and tax liabilities. For this reason, tax provisions reported as of ontingent Assets”, other provisions were only made in the §£ December ¤¥£´ were disclosed as tax liabilities on the case of an existing present obligation to third parties arising balance sheet. This change has no effect on the group‘s from an event in the past, the use of which is probable and earnings and financial position. if the anticipated amount of the required provision can be reliably estimated. In this case, the probability of occurrence The compensation payment by DM MORI mbH to the minor- must exceed ©¥ %. In each case the most probable provision ity shareholders of DM MORI AKTIENESELLS HAFT, amount was recognized. The calculation is carried out using which according to Section £® of the orporation Tax Act the best estimate of the amount required to settle the obli- (KSt) is taxable by DM MORI AKTIENESELLS HAFT as gation at the balance sheet date. The provision amount also a controlled company, results in taxes. These taxes are to included future cost increases. Provisions with a remaining be estimated for the duration of the domination and profit term of more than one year were discounted, at a rate before transfer agreement (DPTA) and the compensation payments taxes which reflects the specific risks of the obligation. probably to be made during this period and must be recognized in equity as “other non-financial liability” under the The provision for the long-term incentive (LTI) as a varia- decrease in capital reserves. Thus, in financial year ¤¥£¯, an ble remuneration component for members of the Executive amount of ¬ £°,°¯¯ K was recognized under other provisions Board was determined, until §£ December ¤¥£®, initially at

Annual Report

Consolidated fair value at the date of granting and is revaluated at the (previous year: ¬ ¥ K), which can be directly attributed to the Financial Statement balance sheet date. Any expense or revenue resulting from acquisition, construction or production of a qualifying asset.

Notes this is recognized as employee expense and is spread over As in the previous year, a borrowing cost rate of £ % was used. Accounting principles applied the term of the programme and recognized as provisions. Other borrowing costs were therefore directly recognized as in the Consolidated Financial On the basis of the domination and profit transfer agree- expense in the period. Statement ment concluded in ¤¥£®, the Supervisory Board of DM MORI AKTIENESELLS HAFT passed a resolution to ensure a Revenues from ontracts with ustomers stable calculation base for LTI tranches. For the current The group applied IFRS £© “Revenue from ontracts with LTI tranches ¤¥£©¶¤¥£´ and ¤¥£®¶¤¥£¦ , fixed imputed values ustomers” as of £ January ¤¥£´. Sales revenues from the were determined for previous variable parameters of earn- sale of machine tools in the DM MORI group normally ings after taxes (EAT) and the share price. These obligations include supplementary works. The payment terms normally are valued at the amount of the estimated expenses due. include an advance payment after receipt of the order confirmation, a payment after delivery of the machine and a Selected suppliers of the DM MORI group pre-finance trade final payment after the machine has been commissioned. debtors from individual subsidiaries on the basis of a reverse factoring agreement concluded with individual subsidiaries DM MORI uses the practical expedient in IFRS £©.®§ and and factoring companies. Through this agreement, the sub- does not adjust the amount of the promised consideration sidiaries involved are basically guaranteed longer payment by the effects of a significant financing component, if, at periods. The reverse factoring agreement leads neither contract inception, it expects the period between the trans- under civil law nor pursuant to the provisions of IFRS to a fer of a promised good or service to the customer and the reclassification of the trade liabilities nor to another type of payment of this good or service by the customer to be one liabilities, as due to the contractual arrangement, no nova- year or less. As a rule, therefore, contracts with customers tions exist under the law of obligations. As of §£ Decem- do not include a financing component. ber ¤¥£¦, a total of ¬ £¤,§®¯ K (previous year: ¬ £¯,¯£¯ K) trade liabilities had been purchased through the respective fac- Under IFRS £©, sales revenue is recognized when control of toring company. the goods is transferred to the customer. Under IFRS £©, the entity must also identify its performance obligations. The fol- £overnment grants lowing applies: A contract or the total of the aggregate con- overnment grants are recognized at fair value, if it can tracts may include multiple performance obligations, each be assumed with reasonable certainty that the grant will of them subject to individual rules in relation to the time of be made and the group fulfils the necessary conditions to realization. The DM MORI group is of the view that several receive the grant. overnment grants for costs are recog- performance obligations (sale of machine tools, transport, nized in the period in which the related costs, which the machine commissioning and training) are attributable to grants are intended to compensate, were incurred. ov- contracts from the sale of machine tools and that these ernment grants for investments are recognized as deferred obligations have their own rules regarding the realization income within other liabilities. They are amortized on a principle. This results in revenue from the sale of machine straight-line basis over the expected useful life of the tools being allocated to individual performance obligations. related assets in the income statement under other oper- The revenue for these performance obligations and related ating income. costs are recognized on completion of the service.

Borrowing costs Under IFRS £©.¦°, DM MORI recognizes, at contract incep- According to IAS ¤§.©, borrowing costs are to be capital- tion, incremental costs of obtaining a contract as an expense, ized if exist so-called qualified assets, i.e. those that take if the amortization period that DM MORI would otherwise a substantial period of time to get ready for their intended have recognized is one year or less. use or sale. At the DM MORI group, a period of more than twelve months is considered a substantial period of time. harges for deliveries and services billed to the customer and Borrowing costs in financial year ¤¥£¦ that arose from the reduced by any sales deductions, contract penalties and dis- development assets amounted to ¬ ´ K (previous year: ¬ ¯ K) counts are shown in the sales revenues. and from property, plant and equipment amounted to ¬ ¥ K

Annual Report

. ONSOLIDATION £ROUP of ¬ £¥,££§ K and contingent consideration of ¬ °,©¯° K. As of §£ December ¤¥£´, there was a residual commitment from D. | NUMBER OF FULLY the consideration agreed in an amount of ¬ ¯,¦¦© K. ONSOLIDATED OMPANIES Dec Dec National 30 32 In December ¤¥£¦, it was agreed with the seller to increase International 46 49 the group’s shares in REALIZER mbH to £¥¥ %. The out- Total 76 81 standing fixed purchase price payments of ¬ °,¥¥¥ K and a contingent payment in the amount of ¬ ´¥¥ K were paid At the balance sheet date, the DM MORI group, including in the financial year. In addition, payments in an amount of the DM MORI AKTIENESELLS HAFT, comprised ´© com- ¬ ®©¥ K that were paid in ¤¥£¦ were agreed with the seller for panies (previous year: ´¯). In addition to DM MORI AKTIEN¶ the contingent consideration in the amount of ¬ ¤,®©¥ K. The ESELLS HAFT ¯© subsidiaries (previous year: ´¥) were fair value of a remaining contingent consideration of ¬ ©¥¥ K included in the onsolidated Financial Statements as part of as of §£ December ¤¥£¦ fell to ¬ ¥ K. The changes in the contin- the full consolidation process. Nine companies (previous year: gent consideration were recognized in other operating income. six) accounted for at equity were included in the onsolidated Financial Statements. The DM MORI AKTIENESELLS HAFT In financial year ¤¥£¦, DM America Inc., Itasca (USA) was is directly or indirectly entitled to a majority of voting rights of dissolved. the fully consolidated companies. DM MORI lobal Service Milling mbH, Pfronten was Since the end of financial year ¤¥£´, the companies, merged with DM MORI lobal Service Turning mbH, Bielefeld with retroactive effect from £ January ¤¥£¦. › Pragati Automation Pvt. Ltd., Bangalore (India), DM MORI lobal Service Turning mbH has been renamed › DM MORI Digital mbH, Bielefeld, and to DM MORI lobal Service mbH. › Vershina Operation, LL ., Narimanov (Russia), The company listed below is also classified as joint venture have been added to the consolidation group. in the previous year under IFRS ££:

In September ¤¥£¦, ILDEMEISTER Beteiligungen mbH › DM MORI HEITE mbH, Erlangen. acquired a §¥ % interest in Pragati Automation Pvt. Ltd., Ban- galore (India), for a selling price of ¬ ¤¥,°´¦ K. This acqui- The companies listed below were also classified as associ- sition allows DM MORI to secure a long-term partner as ated companies under IFRS ££. Pursuant to IFRS ££.¤°, the a quality supplier of key strategic core components for tool interests were included in the onsolidated Financial State- magazines. The company’s share capital amounts to ¬ ´¦° K. ments “at equity” from the date of their acquisition:

In November ¤¥£¦, ILDEMEISTER Beteiligungen mbH › Pragati Automation Pvt. Ltd., Bangalore (India), established DM MORI Digital mbH in Bielefeld. DM MORI › DM MORI Digital mbH, Bielefeld, holds a °¥ % interest. The company’s share capital amounts › INTE H DMLS PRIVATE LIMITED, Bangalore (India), to ¬ ©¥ K. › Magnescale o. Ltd., Kanagawa (Japan), › Magnescale Europe mbH, Wernau, With effect from ® February ¤¥£¯, the group acquired a ©¥.£ % › Magnescale Americas, Inc., Davis (USA), interest in REALIZER mbH, Borchen. Between ¤¥£´ and › DM MORI Finance mbH, Wernau, ¤¥¤¥, three fixed and contractually agreed payments were › Vershina Operation, LL ., Narimanov (Russia). made in return for the acquisition of the remaining °¦.¦ % interest. Moreover, variable consideration was agreed, Disposal of subsidiaries subject to the fulfilment of contractual terms. DM MORI With effect from £ July ¤¥£¦, Energy Solutions business opera- was required to pay the contingent consideration to the tions were sold to a strategic investor (share-deal and asset- selling shareholders within a four-year period, if specific deal). The order backlog at Energy Solutions at this date was key earnings figures (number of machines sold) and tech- mainly processed in the reporting year and resulted in sales nological targets were met. revenue. All interests in

The fair value of the consideration recognized (for a £¥¥ % › ILDEMEISTER energy efficiency mbH (´¥ %), Stuttgart, interest) on the acquisition date totaled ¬ £°,®´¯ K and was › ILDEMEISTER ENERY SERVI ES IBERI A, SO IEDAD to be provided in cash. This comprised a fixed consideration LIMITADA (£¥¥ %), Madrid (Spain), › ILDEMEISTER ENERY Services UK Ltd. (£¥¥ %), Man- chester (reat Britain),

Annual Report

Consolidated and selected, contractually agreed assets and liabilities were A general overview of all companies within the DM MORI Financial Statement transferred to a strategic investor (share-deal and asset- group can be found on pages £©£ et seq.

Notes deal). Due to the low materiality of the individual companies Accounting principles applied and the amounts involved, the information is presented as a in the Consolidated Financial single total. The purchase price amounted to ¬ £§,°¦¦ K. The . FOREI£N URRENY TRANSLATION Statement shares were fully consolidated as of the date of acquisition or Explanatory Notes for Income incorporation. All assets and liabilities were deconsolidated The currency translation of all Annual Financial Statements Statement from the group at the time the shares in this company were of the international group companies that were prepared sold. Overall, the disposal of the companies with their assets in foreign currencies was carried out in accordance with and liabilities and the disposal of selected assets and liabil- the functional currency principle pursuant to IAS ¤£ “The ities resulted in a gain on disposal of ¬ ©,´´© K. There was Effects of hange in Foreign Exchange Rates”. Since all a pro rata reduction in goodwill amounting to ¬ £,§££ K. The subsidiaries operate their business independently in finan- gain on disposal is recognized under other operating income. cial, economic and organisational respects, their respective currencies represent the respective local currency. Assets The consideration received due to the loss of control of the and debts of foreign subsidiaries were translated in Euro disposed assets and liabilities and the gains or losses on at the average rate of exchange as of the balance sheet disposals are shown in the following table: date, and revenue and expenses pursuant to IAS ¤£.°¥ at the transaction exchange rate – as far as reasonably approxi- D. mated by average annual rates. The translation differences in K arising from items being translated at different rates in Intangible assets 5 the balance sheet and income statement were recognized oodwill 1,311 directly in equity. Tangible assets 4,236 Inventories 545 Foreign exchange differences from receivable or payable Trade debtors 3,762 monetary items from / to a foreign business operations, Other assets 3,771 whose fulfilment is neither planned nor probable and thus Deferred tax assets 1 are part of the net investment in these foreign business ash and cash equivalents 1,600 operations, are not recognized as net income for the period. Assets sold 15,231 The foreign exchange differences are initially recognized in other comprehensive income and transferred to equity in Provisions 702 the income statement upon their sale. Trade creditors 2,958 Other liabilities 3,959 In the individual financial statements monetary items (cash, Deferred tax liabilities 4 receivables and liabilities) in a foreign currency were valued Debt sold 7,623 at the exchange rate at the reporting date. Non-monetary items in foreign currencies were assessed at historical Net assets sold 7,608 values. The differences arising from the currency transla- onsideration received 13,499 tion of monetary items were shown in the income statement. Other comprehensive income -6 oodwill resulting from the acquisition of international com- £ains or losses 5,885 panies was recognized as assets of the foreign business operations and was translated at the exchange rates at the In the financial year, the disposal of shares resulted in a time of the transactions. cash inflow of ¬ ´£¤ K. Accounting in accordance with the regulations contained As part of the sale of Energy Solutions business operations in IAS ¤¦ “Financial Reporting in Hyper-inflationary Econ- to a strategic investor, sixteen project companies in Spain omies” was not required, as the DM MORI group has no were also disposed of. These companies were not fully con- significant subsidiaries with registered office in a hyper-in- solidated in financial year ¤¥£´ due to materiality. flationary economy.

The group of consolidated companies has changed compared The exchange rates of the major currencies developed as to the previous year as explained above. When compared follows: [→ D. ] with the onsolidated Financial Statements of §£ Decem- ber ¤¥£´, the income, financial and asset position were not significantly affected in this regard.

Annual Report

D. | URRENIES Exchange rate on reporting date = 1 Average exchange rate = 1 ISO©ode Dec Dec Australian dollars AUD 1.59950 1.62200 1.60897 1.57941 anadian dollars AD 1.45980 1.56050 1.48823 1.53108 Swiss franc HF 1.08540 1.12690 1.11235 1.15292 hinesise renminbi NY 7.82050 7.87510 7.73531 7.81262 zech crowns ZK 25.40800 25.72400 25.66377 25.67031 British pound BP 0.85080 0.89453 0.87730 0.88591 Indian rupees INR 80.18700 79.72980 78.84879 80.28468 Japanese yen JPY 121.94000 125.85000 122.25846 130.34692 Polish zloty PLN 4.25680 4.30140 4.29917 4.26195 Russian rubles RUB 69.95630 79.71530 72.79492 73.78871 Singapore dollars SD 1.51110 1.55910 1.52788 1.59062 US dollars USD 1.12340 1.14500 1.12142 1.18034

Sources: European entral Bank, Frankfurt / Main

A breakdown and explanation of the sales revenues from the NOTES TO INDIVIDUAL ITEMS IN sale of goods and provision of services are given in segment THE INOME STATEMENT reporting on page ¦® et seq. and in the “Segment Report” chapter of the roup Management Report on page ®¥ et seq. . SALES REVENUES

Sales revenues include ¬ ®¤§ K in income from sale and Broken down by sales area, that is, according to the leaseback and ¬ ¤,¤¤§ K in income from right-of-use customer’s place of business, the following distribution of subleases. sales revenues occurred: [→ D. §]

D. § The table below shows a reconciliation of sales revenue for in K ¤¥£¦ by sales territory, key product and service lines as per ermany 769,203 821,500 reporting segment. [→ D. | D. ] EU (excluding ermany) 979,531 973,778 USA 20,603 25,735 Our core service business mainly comprises Life ycle Ser- Asia 637,080 614,081 vices for our machines (spare parts, maintenance, repairs Other countries 295,072 220,034 and training etc.). 2,701,489 2,655,128

D. Industrial orporate Machine Tools Services Services £roup in K 2019 2019 2019 2019 Sales Area ermany 441,379 327,650 0 769,029 EU (excluding ermany) 468,576 510,955 0 979,531 USA 7,067 13,536 0 20,603 Asia 382,634 254,446 0 637,080 Other countries 133,553 161,519 0 295,072 Total 1,433,209 1,268,106 0 2,701,315 Key product / services lines Machine Tool sales 1,433,209 0 0 1,433,209 Trading volume with DM MORI O. Ltd. products 0 518,079 0 518,079 ore service business 0 540,024 0 540,024 Other 0 210,003 0 210,003 Total 1,433,209 1,268,106 0 2,701,315 Revenue from contracts with customers 1,433,209 1,268,106 0 2,701,315 Other sales revenue 0 0 174 174 External sales revenue 1,433,209 1,268,106 174 2,701,489

Annual Report

Consolidated D. Financial Statement Industrial orporate Machine Tools Services Services £roup Notes in K 2018 2018 2018 2018 Explanatory Notes for Income Sales Area Statement ermany 467,695 353,614 0 821,309 EU (excluding ermany) 479,662 494,116 0 973,778 USA 18,463 7,272 0 25,735 Asia 365,798 248,283 0 614,081 Other countries 122,562 97,472 0 220,034 Total 1,454,180 1,200,757 0 2,654,937 Key product / services lines Machine Tool sales 1,454,180 0 0 1,454,180 Trading volume with DM MORI O. Ltd. products 0 559,268 0 559,268 ore service business 0 539,413 0 539,413 Other 0 102,076 0 102,076 Total 1,454,180 1,200,757 0 2,654,937 Revenue from contracts with customers 1,454,180 1,200,757 0 2,654,937 Other sales revenue 0 0 191 191 External sales revenue 1,454,180 1,200,757 191 2,655,128

ontract balances The following table provides information on contract bal- the beginning of the period was recognized as sales revenue ances from contracts with customers. [→ D.] of ¬ §¦¯,§®¯ K (previous year: ¬ §£¤,¤°® K) in financial year ¤¥£¦. Payment received on account mainly include payment received from customers for machines. ontract liabilities The group expects services amounting to ¬ ¤°¯,§¥¦ K (pre- mainly include invoices for commissioning and training ser- vious year: ¬ §¦¯,§®¯ K) that were allocated to unsatisfied (or vices not yet rendered. partially unsatisfied) performance obligations at the end of the reporting period, to result in sales revenue in financial ontract liabilities from down payment invoices mainly year ¤¥¤¥. The group has applied the practical expedient relates to due and unpaid down payment invoices for which in IFRS £©.£¤£ and thus has not presented these services there is an unconditional claim for payment. There are no separately. contract assets. The group expects ¬ °,¥¯¤ K (previous year: ¬ £,´¦¥ K) in The total amount of ¬ §¦¦,¤©¯ K (previous year: ¬ §£§,£¯° K) revenues from training, commissioning, extended warranty included in the payments received on account, contract lia- periods, tool packages and maintenance contracts to result bilities and contract liabilities from down payment invoices at in sales revenue between ¤¥¤£ and ¤¥¤§.

arrying amount arrying amount as of as of in K Note December December Trade receivables from third parties 25 212,644 228,252 Receivables from at equity accounted companies 25 12,472 21,244 Receivables from other related companies 25 461,550 480,705 Receivables from other equity investments 25 33 47 Receivables from down payment invoices 9,060 33,260 Total 695,759 763,508 Payments received on account 214,551 342,575 ontract liabilities 27,770 23,422 ontract liabilities from down payment invoices 9,060 33,260 Total 251,381 399,257

Annual Report §

§. OWN WORK APITALISED for ¬ ¤,¯©´ K (previous year: ¬ §,§°¦ K). Individual performance remuneration was ¬ £,´¯© K (previous year: ¬ ¤,¥®§ K). Own work capitalised primarily results from the developed The value of the LTI amounted to ¬ ¤,§¦£ K (previous year: intangible assets for machine tools projects pursuant to ¬ £,¤´§ K). Benefits in kind accounted for ¬ £¥¯ K (previous IAS §´ “Intangible assets”. apitalised production costs year: ¬ £¥© K). In addition to direct remuneration, indirect include all costs that are directly and indirectly attributable remuneration was spent in the form of pension commit- to the development process and necessary parts of developments amounting to ¬ ´§´ K (previous year: ¬ ´¥¥ K). ment-related overheads as well as borrowing costs. Former members of the Executive Board and their surviving dependants received ¬ £,¤´¯ K (previous year: ¬ £,¤¯£ K). . OTHER OPERATIN£ INOME Pension provisions for former members of the Executive Board and their surviving dependants have been formed in the amount of ¬ §©,¯£¯ K (previous year ¬ §£,®©© K). D. | INOME UNRELATED TO AOUNTIN£ PERIOD The remuneration system for the Executive Board and the in K Supervisory Board is explained on pages ¤¦ et seq. of the Release of provisions 8,392 3,656 roup Management Report. An individual and detailed pres- Profit on asset disposals 1,576 2,185 entation of Executive Board remuneration in the financial Receipt of payments for written off receivables 1,307 84 year is set out on pages ¤¦ et seq. of the remuneration report. Other income unrelated to accounting period 3,189 3,385

14,464 9,310 Advances and loans to officers were not granted, nor were OTHER OPERATIN£ INOME any contingent liabilities assumed in favor of officers. Nor ains on currency and exchange rates 37,379 35,308 did the companies of the DM MORI group pay any remu- Refund of expenses and on-debiting 9,491 14,017 neration to officers for services personally rendered, in par- Reduction in impairment losses 3,006 2,754 ticular for consulting and introduction services. Bonuses and allowances 509 511 Letting and leasing 476 468 In the financial year ¤¥£¦, pension plan expenses in the ompensation for damages 460 1,023 group, including employer’s contributions to statutory Others 17,244 10,791 pension insurance, amounted to ¬ ¤¦,§¦¦ K (previous year: 68,565 64,872 ¬ ¤´,£®© K). This includes employers’ contributions to stat- Total 83,029 74,182 utory pension insurance amounting to ¬ ¤¯,°¥´ K (previous year: ¬ ¤®,¤°¯ K). On balance, exchange rate and currency gains occurred in the financial year ¤¥£¦ in the amount of ¬ §,´§§ K (previous In comparison with the previous year, the number of employ- year: ¬ §,©§¦ K). ees has changed as follows:

Income from rents and leases includes ¬ °¥ K in income D. Average number At the balance sheet date from right-of-use subleases. Dec Dec Wage earners 1,979 1,902 1,955 1,932 Salary earners 5,007 5,031 4,943 5,175 . OST OF MATERIALS Trainees 349 362 347 396

The purchased services relate predominantly to expenses for external production. . DEPREIATION, AMORTIZATION AND IMPAIRMENT LOSSES

. PERSONNEL OSTS A distribution of depreciation and amortization of intangible and tangible assets is provided in the asset move- In financial year ¤¥£¦, total executive remuneration from ment schedule on ¦¤ et seq. The increase in depreciation direct and indirect remuneration amounted to ¬ £¥,¤£¦ K and amortization from the previous year is mainly due to (previous year: ¬ £¥,¥¯´ K). Direct remuneration of Exec- write-downs on right-of-use assets amounting to ¬ £¦,¦§¯ K utive Board members accounted for ¬ ¦,§´£ K (previous related to the introduction of the new accounting stand- year: ¬ ¦,¤¯´ K), of which the fixed remuneration accounted ard, IFRS £® “Leases”. The following table shows a detailed for ¬ ¤,¤©¥ K (previous year: ¬ ¤,°¯´ K) and STI accounted breakdown:

Annual Report

Consolidated D. | AMORTIZATION OF RI£HT©OF©USE ASSETS Exchange rate and currency losses in connection with Financial in K Statement exchange rate and currency gains can be seen in other oper- Land and buildings 3,778 Notes ating income. On balance, exchange rate and currency gains Explanatory Technical equipment and machinery 3,647 Notes for Income occurred in an amount of ¬ §,´§§ K (previous year: ¬ §,©§¦ K). Statement Other equipment, factory and office equipment 12,512 Total 19,937 Sales commissions rose from the previous year and are related to sales, as well as to the nature, amount and region Depreciation and amortization include impairments of where these sales are generated. ¬ ©,¤¯© K (previous year: ¬ ©,®©° K) for tangible assets. The reduction in expenses for rental and leases is mainly due to the application of the new accounting standard, IFRS £®, . OTHER OPERATIN£ EXPENSES and is attributable to the related capitalization of rights of use for leases. The remaining expenses include ¬ ©,©§¤ K Expenses for corporate communication, trade fairs and other in expenses for short-term leases, ¬ £,¥¦¯ K in expenses advertising expenses have risen compared to the previous for low-value asset leases, excluding short-term, low value year. This significant rise in financial year ¤¥£¦ is due to asset leases, and ¬ ®©° K in expenses for variable lease expenses for the EMO in Hanover. This item also includes payments. expenses for product marketing and our marketing activities. [→ D.] The administration and sales costs are included proportionately in other operating expenses and personnel costs.

D. | EXPENSES UNRELATED TO AOUNTIN£ PERIOD in K Losses from the disposal of fixed assets 701 1,589 Other taxes 3,141 348 Other expenses unrelated to accounting period 3,485 2,242 7,327 4,179 OTHER OPERATIONAL EXPENSES Freight out, packaging 57,412 58,191 Travelling and entairtainment expenses 41,741 40,348 orporate communication, trade fairs and other advertising expenses 40,430 33,112 Other external services 34,538 35,451 Exchange rate and currency losses 33,546 31,769 Expenses for temporary employment and contractors 26,752 29,515 Sales commissions 18,133 17,933 Additions to provisions 14,485 12,969 Other personnel costs 14,412 15,298 Rental and leases 13,922 30,117 ost of preparation of accounts, legal and consultancy fees 13,888 14,124 Stationery, post and telecommunication expenses 8,653 8,767 Insurance 6,939 6,091 Impairment on receivables 6,484 8,078 Other taxes 5,214 4,776 Licences and trademarks 2,802 2,596 Monetary transactions and capital procurement 1,261 2,121 Investor and Public Relations 837 992 Others 24,066 28,829 365,515 381,077 Total 372,842 385,256

Annual Report

In the financial year ¤¥£¦, ¬ ´¦¦ K (previous year: ¬ £,¥¦£ K) . INOME TAXES was accrued for the total remuneration of the Supervisory Board; this was recognized under other external services. Under this item, current and deferred tax expenses and An individual and detailed presentation of Supervisory Board income from the tax allocation are disclosed as follows: remuneration in the financial year is set out on pages ¤¦ seq. of the Remuneration Report. D. in K urrent taxes 69,554 71,665 . FINANIAL INOME Tax expense for the current financial year 64,049 71,379 Interest earned and other income of the DM MORI group Tax income for previous periods -322 -697 Tax expense for previous periods 5,827 983 amounted to ¬ ©,®°® K (previous year: ¬ °,°©¥ K). These also include interest income amounting to ¬ §,¯¥¥ K (previous Deferred taxes -4,830 -6,409 year: ¬ ¤,°©¯ K) from the loan to DM MORI mbH. Losses carried forward 1,864 -2,151 Temporary differences -6,807 -4,321 Tax rate reduction 113 63 64,724 65,256 . FINANIAL EXPENSES

Financial expenses of ¬ £¥,¯®® K (previous year: ¬ £¥,£´© K) The item current taxes recognizes corporate income tax are related primarily to interest expenses and other and trade tax (including solidarity surcharge) in the case of financial expenses. domestic companies and comparable income taxes in the case of foreign companies. The assessment was performed Interest expenses of ¬ ¦,©§´ K (previous year: ¬ ´,¦®¦ K) are in accordance with the tax regulation applicable to the indi- mainly related to interest expenses for financial liabilities vidual companies. and group factoring. Due to first-time application of IFRS £®, this also includes ¬ ¦¯¦ K (previous year: ¬ ®£ K) in interest Tax expenses for the current financial year include current from leases and ¬ ®§¯ K (previous year: ¬ ©¯¯ K) in interest taxes levied in an amount of ¬ §¤,¤¦© K (previous year: expenses calculated by DM MORI mbH in the financial ¬ °§,°®¯ K) resulting from the taxable entity of DM MORI year. mbH, Bielefeld. An amount of ¬ §¤¤ K (previous year: ¬ ®¦¯ K) resulted from ongoing tax income for previous years. This This also includes an interest component of ¬ ©¥® K (pre- additionally includes current tax expenses in the amount of vious year: ¬ °©® K) from allocations to pension provisions. ¬ ©,´¤¯ K (previous year: ¬ ¦´§ K) relating to previous years.

As in the previous year, the expense amounting to ¬ ®§§ K is The deferred taxes are assessed on the basis of the tax rates disclosed under other financial expenses from the sched- applicable or expected in the individual countries based on uled amortization of transaction costs for the new syndi- their current statutory regulations. For financial year ¤¥£¦, cated credit line of DM MORI AKTIENESELLS HAFT in the domestic corporate income tax rate was £©.¥ % plus ©.© % financial year ¤¥£®. In addition, ¬ ´° K (previous year: ¬ ¦£ K) solidarity surcharge. This results in an effective corporate from the interest accrued on other long-term provisions income tax rate of £©.´ %. Taking account of £°.¥ % trade tax have been taken into account. (previous year: £°.¥ %), the overall tax rate was ¤¦.´ % (previous year: ¤¦.´ %). The result is the tax rate applicable for the valuation of deferred taxes for domestic companies. The tax . SHARE OF PROFITS AND LOSSES FROM rates applicable in foreign countries are between £® % and §£ %. OMPANIES AOUNTED FOR AT EQUITY The sale of companies resulted in a net increase in deferred Profits from companies accounted for at equity amount to tax assets of ¬ ° K. Income taxes on other comprehensive ¬ ¤,©°´ K (previous year: ¬ §,§´´ K). This mainly includes income amounted to ¬ £,¯´¯ K (previous year: ¬ -£,©´¦ K) and the income generated in financial year ¤¥£¦ from the pro relate to changes in the market values of derivative finan- rata earnings in the year under review for Magnescale o. cial instruments, the revaluation of defined benefit plans Ltd., Kanagawa (Japan) amounting to ¬ £,¯¯£ K (previous and exchange rate effects included in other comprehen- year: ¬ ¤,¦©¥ K) and the pro rata income from the interest in sive income. DM MORI Finance mbH in an amount of ¬ ¦®¤ K (previous year: ¬ ©§¤ K). The income is presented in the development The difference between current and expected income tax of fixed assets under ”other changes“ of the depreciation. expenditure is due to the following. [→ D.]

Annual Report

Consolidated D. Financial Statement in K Notes Earnings before taxes 219,166 214,786 Explanatory Notes for Income DM MORI AKTIENESELLS HAFT income tax rate in percent 29.8 29.8 Statement Expected tax income / expenditure 65,311 64,006 Explanatory Notes for Tax consequences of the following effects Balance Sheet Adjustment due to different tax rate -7,936 -5,436 Effects from the changes in tax rate 113 63 Tax reduction due to the revenues exempt from taxation -1,277 -1,010 Tax loss carried forward 957 -457 Non-recognition of temporary differences / deferred taxes previous years 433 1,080 Tax increase due to non-deductible expenses 6,112 6,201 Tax income or expenditure for prior years 5,505 286 Tax credits -5,067 0 Other adjustments 573 523 Income taxes 64,724 65,256

The reported income tax expense for the ¤¥£¦ financial year D.§ of ¬ ®°,¯¤° K (previous year: ¬ ®©,¤©® K) is ¬ ©´¯ K lower (pre- roup result excluding annual vious year: ¬ £,¤©¥ K higher) than the expected income tax net income attributable to expense of ¬ ®©,§££ K (previous year: ¬ ®°,¥¥® K), which would non-controlling interests ¬ 151,874 K ¬ 148,257 K theoretically result from applying the domestic tax rate of Average weighted number ¤¦.´ % (previous year: ¤¦.´ %) for the ¤¥£¦ financial year at of shares (pieces) 78,817,994 78,817,994 group level. Earnings per share ¬ 1.93 ¬ 1.88

The change in tax loss carried forwards mainly relates to the Earnings result exclusively from continued business. roup non-recognition of deferred tax assets for current losses in earnings after tax of ¬ £©°,°°¤ K were reduced by the results an amount of ¬ §,¤¯¤ K (previous year: ¬ ¤,¥¯® K) and adjust- of non-controlling interests in the amount of ¬ ¤,©®´ K. The ments made to deferred tax assets on losses carried forward earnings per share (undiluted) were ¬ £.¦§ in the reporting from previous years in an amount of ¬ £,¥§® K (previous year: year (previous year: ¬ £.´´). As in the previous year, there ¬ ¥ K). On the other side, deferred taxes previously not re- were no dilutive effects. cognized on losses carried forward in the amount of ¬ §,§©£ K (previous year: ¬ ¤,©§§ K) could be capitalized or utilized. NOTES TO INDIVIDUAL BALANE SHEET ITEMS

§. ANNUAL PROFIT ATTRIBUTED TO . INTAN£IBLE ASSETS NON©ONTROLLIN£ INTERESTS oodwill amounts to ¬ £§´,¥´¤ K (previous year: ¬ £§¦,§¦¦ K). A pro rata annual profit of ¬ ¤,©®´ K (previous year: ¬ £,¤¯§ K) is attributed to non-controlling interests. The item primarily The changes result from the conversion of goodwill denomi- includes the pro rata earnings from non-controlling interests nated in foreign currency into the group’s currency Euro and in ILDEMEISTER LS Beteiligungs mbH, Würzburg and a proportionate reduction in goodwill in connection with the DM MORI Machine Tools Trading o. Ltd., Shanghai ( hina). sale of key Energy Solutions business operations.

Intangible assets arising from development relate to new . EARNIN£S PER SHARE machine tool projects in domestic and international production companies, to service products and to specific soft- In accordance with IAS §§ “Earnings per Share”, the undi- ware solutions. Intangible assets arising out of develop- luted earnings per share (“basic earnings per share”) are ment recognized at the end of the financial year amounted determined by dividing the consolidated profit – excluding to ¬ £°,®¤¥ K (previous year: ¬ £®,¦§´ K). Research and devel- profit shares of other owners – by the average weighted opment costs are immediately recognized as an expense and number of ordinary shares outstanding, as follows: [→ D.§] amounted to ¬ ©¤,¯°§ K in the financial year ¤¥£¦ (previous year: ¬ ©§,°¤© K).

Annual Report

The amount stated for industrial property rights and similar office equipment and cars. In accordance with the applica- rights includes acquired patents, rights from acquired cus- tion of IFRS £®, the DM MORI group recognizes right of use tomer relations, utility models and trademarks as well as assets amounting to ¬ ®¤,£´® K under tangible assets as at data processing software. §£ December ¤¥£¦. Additions to right of use assets during financial year ¤¥£¦ amounted to ¬ £§,§¤© K. Similarly, lease A write-up on the previous year's impairment in the amount liabilities of ¬ ®£,§©© K were recognized as liabilities (see of ¬ ´°§ K was not required, as the recoverable amount page £§° et seq.). was ¬ ¥. The following items were recognized for leases on the The development and a breakdown of items in the group’s balance sheet: intangible assets are illustrated in the consolidated fixed asset movement schedule. Investments are explained in the D. | RI£HT OF USE ASSETS roup Management Report on page ©®. in K Dec Land and buildings 28,261 Technical equipment and machinery 11,659 . TAN£IBLE ASSETS Other equipment, factory and office equipment 22,266 Total 62,186 The development and a breakdown of items in the group’s tangible assets are illustrated in the consolidated fixed asset Under IAS £¯, tangible assets in the previous year included movement schedule. Investments are explained in the roup leased assets to the value of ¬ ©¦¤ K that had to be charged Management Report on page ©®. to the respective group company as the beneficial owner (“finance lease”) due to the structuring of the underlying In the financial year, impairments amounting to ¬ ©,¤¯© K lease contracts. The carrying amounts of capitalized lease (previous year: ¬ °,´££ K) were recognised in depreciation. items are broken down as follows: ¬ ¤¯£ K for technical There were no reversals of impairments recognised in the equipment and machinery and ¬ §¤£ K for other equipment, previous year. factory and office equipment.

An impairment was identified for a building with technical equipment and factory and office equipment, resulting from . EQUITY INVESTMENTS a change in the purpose of the building and vacancies. A review of the recoverable amount resulted in the recognition Equity investments are accounted for at fair value and des- of an impairment loss of ¬ °,¤£© K (previous year: ¬ §,§®¤ K), ignated as at FVO I. At initial recognition, DM MORI exer- which was allocated to depreciation and recognized under cised the option under IFRS ¦.°.£ to recognise subsequent the ‘Industrial Services’ segment. The recoverable amount changes in the fair value of equity investments in other com- at the impairment date was ¬ ¤´,§£§ K (§£ December ¤¥£´: prehensive income. ¬ §§,§¦¯ K). The building was sold to a third party at this value in April ¤¥£¦. The lease back of part of a building created a In financial year ¤¥£¦, further partners joined the strategic right-of-use asset in the amount of ¬ ©,§¯¤ K. As the addi- alliance of ADAMOS mbH. ILDEMEISTER Beteiligungen tion of this right-of-use asset is related to the disposal of mbH participated in a capital increase with a value of ¬ £.¥ the building, it was also entered in the disposal column in million. The interest held by ILDEMEISTER Beteiligungen the consolidated fixed asset movement schedule and was mbH continued to amount to £°.¤´ %. DM MORI does not offset against the disposals, “Right-of-use asset – land and exercise any signi ficant influence over the business activities buildings” (¬ -°,®££ K), resulting in a net value of ¬ ¯®£ K. of ADAMOS mbH. There were no dividend payouts during the financial year. DM MORI has identified an impairment of ¬ ´§® K for an electricity storage plant, as the plant should no longer be In September ¤¥£¦, ILDEMEISTER Beteiligungen mbH used. The amount was allocated to the item "Depreciation acquired a £©.¥¤ % interest in TULIP Interfaces Inc., Somer- and amortization" and recognized in the " orporate Services" ville (USA). The cooperation with the US software provider, segment. The plant‘s recoverable amount was ¬ ¥ K. TULIP, allows DM MORI to provide its customers with easier access to digital manufacturing. DM MORI does not exer- In the previous year, an impairment loss of ¬ £,°°¦ K was cise any significant influence over the business activities of included in depreciation and amortization and recognized TULIP Interfaces Inc. There were no dividend payouts during in the "Industrial Services" segment. the financial year.

The DM MORI group leases certain tangible assets such Moreover, the °¥ % interest of ILDEMEISTER energy solu- as land and buildings, technical equipment and machinery, tions mbH in Sonnenstromalpha mbH & o. K, Hamburg

Annual Report

Consolidated and the © % interest of ILDEMEISTER Beteiligungen The equity interests of the at equity accounted companies Financial Statement mbH in STBO mbH, Bielefeld are included. The interest correspond to the voting rights. Details of the results from

Notes in Pro-Micron mbH & o. K Modular System was sold at equity accounted companies are presented in the explan- Explanatory Notes for during the financial year. The fair value at the date of sale atory notes to the individual items on the income statement Balance Sheet was ¬ ´£ K. This resulted in a disposal loss of ¬ °£ K, which under “Share of profits and losses of at equity accounted was recorded in other comprehensive income. investments” on page ££¦. We consider Magnescale o. Ltd. and DM MORI Finance mbH to be essential. The DM MORI group does not exercise any significant influence over these companies. We consider the °°.£ % interest held in Magnescale o. Ltd., Kanagawa (Japan), a subsidiary of DM MORI OMPANY As of §£ December ¤¥£¦, the fair value of the investments LIMITED, Nara (Japan), and a manufacturer of high-preci- amounted to ¬ ¤©,©¦© K (previous year: ¬ ¤,°¥§ K). sion technologies for position measurement, with its fully owned subsidiaries Magnescale Europe mbH, Wernau, and As in the previous year, no impairment on equity investments Magnescale Americas, Inc., Davis (USA), as being a signif- was recorded in the reporting year. icant interest. Impairment tests were conducted based on the future cash flows, which were derived from company An overview of all DM MORI group companies and infor- planning. This plan was based on a marginal increase in mation on registered offices, equity and equity interests in sales revenues and EBIT margins. The cash flow calculated financial year ¤¥£¦ are shown on pages £©£ et seq was discounted using a WA rate of ´.®® %. In financial year ¤¥£¦, the company’s annual results amounted to ¬ °,¥£° K.

. EQUITY©AOUNTED INVESTMENTS The most significant items to the balance sheet and the income statement have been combined for all three com- The following overview shows aggregated key financial figures panies and presented in the following table. [→ D.] for companies accounted for at equity included in the onsolidated Financial Statements. The figures refer to equity Besides annual net profit, a currency effect of ¬ ¤,£°£ K interests, carrying amounts and notes on the balance sheet (previous year: ¬ °,¤¥® K) was recognized on a pro rata basis as well as to sales revenues, other income and expenses: in other comprehensive income. This results in total earnings of ¬ ®,£©© K (pro rata ¬ ¤,¯£® K) (previous year: ¬ £¥,´¦£ K, D. 31 Dec 2019 31 Dec 2018 pro rata ¬ °,´¥© K). Equity arrying Equity arrying interest amount interest amount % K % K D. | MA£NESALE O. LTD. in K Total at reporting date 84,202 58,851 Dec Dec of which Joint Ventures Short-term assets 44,883 46,228 Long-term assets 51,214 51,784 DM MORI HEITE mbH 50.0 676 50.0 503 Short-term liabilities 9,734 14,970 of which Associates Long-term liabilitites 6,715 9,549 DM MORI Finance Net carrying amount 79,648 73,493 mbH 42.6 11,612 42.6 10,650 Sales revenues 96,030 100,004 Magnescale o. Ltd. 44.1 42,506 44.1 39,790 Net income for the year 4,014 6,685 INTE H DMLS PRIVATE LIMITED 30.0 7,498 30.0 7,908 The values of DM MORI Finance mbH are also summa- Pragati Automation rized in the following table. Pvt. Ltd. 30.0 20,784 DM MORI Digital mbH 40.0 26 D. | DM£ MORI FINANE £MBH Vershina Operation, LL . 33.3 1,100 in K Dec Dec Short-term assets 201,812 222,705 In financial year ¤¥£¦ ILDEMEISTER Beteiligungen mbH Long-term assets 357,289 301,106 participated in capital increases for the joint venture, Short-term liabilities 200,198 175,047 DM MORI HEITE mbH, Erlangen, in accordance with Long-term liabilities 331,612 323,734 the articles of association. ILDEMEISTER Beteiligungen Net carrying amount 27,291 25,030 mbH holds a ©¥ % interest in the company. The carrying Sales revenues 168,991 137,031 amount at the reporting date amounts to ¬ ®¯® K (previous Net income for the year 2,261 1,251 year: ¬ ©¥§ K). DM MORI HEITE mbH, Erlangen was classified as a jointly controlled entity and has been consolidated at equity since the date of acquisition.

Annual Report

The reconciliation of the carrying amounts at the reporting Other long-term assets include the following items: date is as follows: D. D. | MA£NESALE O. LTD. in K Dec Dec in K Dec Dec Tax refund claims 1,475 1,462 Net carrying amount at 1 January 73,493 62,602 Other assets 2,272 1,295 Results after taxes 4,014 6,685 3,747 2,757 Other comprehensive income 2,141 4,206 Net carrying amount at The tax refund claims do not contain receivables for income 31 December 79,648 73,493 taxes. Proportional equity 35,141 32,425 onsolidation / other 7,365 7,365 arrying amount at equity . INVENTORIES accounted interests 42,506 39,790 Inventories are made up as follows: D. | DM£ MORI FINANE £MBH in K Dec Dec D.§ Net carrying amount at 1 January 25,030 23,779 in K Dec Dec Results after taxes 2,261 1,251 Raw materials and consumables 275,831 282,909 Net carrying amount at Work in progress 138,453 164,107 31 December 27,291 25,030 Finished goods and Proportional equity 11,612 10,650 goods for resale 197,526 167,357 arrying amount at equity Payments on account 0 11,008 accounted interests 11,612 10,650 611,810 625,381

Finished goods and goods for resale include machines in . LON£©TERM REEIVABLES AND OTHER ASSETS an amount of ¬ ®¤,®§¦ K (previous year: ¬ ©°,©¤´ K) acquired from DM MORI OMPANY LIMITED for trading purposes. Of inventories shown in the balance sheet on §£ Decem- D. ber ¤¥£¦, ¬ £©¯,©´° K (previous year: ¬ £¥¦,¥§´ K) were rec- in K Dec Dec ognized at their net realisable value. In the financial year; Trade debtors 7 1,263 impairment of inventories in an amount of ¬ §£,¦¦¤ K (pre- Other long-term financial assets 9,627 11,963 vious year: ¬ ¤§,°§¥ K) were recognized as cost of materials. Other long-term assets 3,747 2,757 13,381 15,983 In the financial year, revaluations amounting to ¬ ¤,©´° K (previous year: ¬ §,°¤§ K) arose primarily resulting from the Trade debtors are to be assigned to financial assets. As in increase in net realisable values; they also were recognized the previous year, there were no receivables from associated as cost of materials. companies included in the long-term trade debtors.

D. Trade receivables from other related companies include in K Dec Dec receivables from DM MORI OMPANY LIMITED amounting Security deposits and to ¬ ¯¦,£©° K (previous year: ¬ ¦£,§£° K). In addition, as in the other security payments 653 1,826 previous year, other receivables from other related companies Other assets 8,974 10,137 include receivables from DM MORI mbH from the issue of 9,627 11,963 a loan amounting to ¬ §¯¥,¥¥¥ K and from accrued interest in an amount of ¬ ®£¯ K (previous year: ¬ §¯¥,®°° K) less the Other financial assets include the fair value of an option impairment from using the “general approach” method. The for purchasing shares in a company amounting to ¬ ¤,¦££ K loan bears interest at market rates. [→ D. ] (previous year: ¬ §,¤§§ K). During the financial year, a write- down was made in an amount of ¬ §¤¤ K (previous year: addi- In the reporting year, DM MORI group has continued the tion of ¬ §§ K) and recognized in other comprehensive income. unchanged use of factoring programmes. As in the previous

Annual Report

Consolidated D. Financial Statement in K Dec Dec

Notes Trade receivables Explanatory Notes for from third parties 212,637 226,989 Balance Sheet from at equity accounted companies 12,472 21,244 from other related companies 90,978 110,070 from other equity investments 33 47 Total trade debtors 316,120 358,350 Other receivables from other related companies 370,572 370,635 Total 686,692 728,985

year, these agreements enabled domestic receivables in the Expenses relating to allowances and write-off of trade amount of up to ¬ ¦¥,¥¥¥ K and foreign receivables in the debtors are reported under other operating expenses. These amount of ¬ ¯¯,©¥¥ K to be sold. As of the balance sheet date, concern a large number of individual cases. erman receivables with a value of ¬ ®¯,¯©¥ K (previous year: ¬ ®©,¦¦¦ K) and foreign receivables with a value of ¬ ©¤,¤©¥ K Please see point §´ for information on the calculation of (previous year: ¬ ©¥,£°¥ K) were sold without recourse and were impairment and credit risks. thus no longer part of the receivables at the reporting date.

The gross carrying amounts of trade debtors by geograph- . OTHER ASSETS ical region, including receivables amounting to ¬ §£®,§®¥ K (previous year: ¬ §©´,©©¤ K), for which no specific allowance Other assets include the following items: has been made, are broken down as follows: [→ D.] D. D. in K Dec Dec in K 31 Dec 2019 31 Dec 2018 Other short-term financial assets 46,740 60,241 ermany 74,013 94,629 Other short-term assets 69,125 81,272 Europe 146,272 139,020 115,865 141,513 Asia 24,822 33,823 America 0 251 Other short-term financial assets include the following DM MORI O. roup 91,527 110,676 items: Total 336,634 378,399 D. The allowances of trade debtors have developed as follows: in K Dec Dec Discounted customers' bills 14,407 25,760 D.40 Security deposits and other in K 2019 2018 security payments 7,044 6,613 Allowances as of 1 January 18,786 15,746 Receivables from factoring 5,901 7,305 Write-offs -1,688 -2,285 reditors with debit balance 4,147 6,899 Net remeasurement in financial year 3,478 5,325 Fair market value of derivative Allowances as of 31 December 20,576 18,786 financial instruments 2,551 1,964 Purchase price receivables from asset disposal 2,185 0 A separate statement of impairments on trade receivables and Receivables from employees other assets in accordance to IAS £.´¤ (ba) was not included and former employees 648 754 in the income statement due to the immateriality of the items. Loans to third parties 52 11 Other short-term financial assets 9,805 10,935 Trade debtor write-offs are recognized, if it is considered highly 46,740 60,241 unlikely that the debtors will meet their payment obligations in the foreseeable future. No financial assets were provided as collateral either in the At the end of financial year ¤¥£¦, there were derecognized reporting year or in the previous year. trade receivables with a contract value of ¬ ©£© K (previous year: ¬ §,¯©¦ K), but which are currently pending an enforce- ment measure.

Annual Report

Other short-term assets include the following items: . DEFERRED TAXES

D. Deferred tax assets and liabilities and deferred tax expense in K Dec Dec are allocated to the following items: [→ D. | D.] Tax refund claims 28,121 28,109 Prepayments 19,450 32,982 The deferred taxes are assessed on the basis of the tax rates Other assets 21,554 20,181 applicable or expected in the individual countries based on 69,125 81,272 their current statutory regulations. Taking into account the trade income tax as well as the corporate income tax and Tax refund claims primarily include receivables from value the solidarity surcharge, a tax rate of ¤¦.´ % is calculated for added tax. deferred taxes of domestic companies (previous year: ¤¦.´ %).

A determining factor for the valuation of the recoverability of §. ASH AND ASH EQUIVALENTS deferred tax assets is the assessment of the probability of sufficient future taxable income. Based on past experience At the reporting date, bank credit balances amounted to and the expected taxable income situation, it is assumed ¬ £©°,¥¥© K (previous year: ¬ £©¤,®´£ K). Information on the that the corresponding advantages from the deferred tax calculation and recognition of impairments can be found assets can be realised. under note §´. As at §£ December ¤¥£¦, deferred tax assets on losses The development of cash and cash equivalents constituting carried forward amounted to ¬ §,¤´¦ K (previous year: the financial fund pursuant to IAS ¯ “ ash Flow Statement” ¬ ©,£©§ K) and were allocated as follows: as in the previ- is illustrated in the onsolidated ash Flow Statement on ous year, for the erman tax group there were no erman page ´¯. corporate tax and trade tax loss carry forwards as well as

D.44 31 Dec 2019 31 Dec 2018

in K Assets Liabilities Assets Liabilities Intangible assets 14,860 7,767 17,897 7,921 Tangible assets 9,786 4,089 10,449 4,326 Financial assets 109 0 296 0 Inventories 15,783 1,647 12,622 2,030 Receivables and other assets 17,359 2,225 10,991 2,391 Provisions 16,827 8,273 12,337 7,004 Liabilities 9,202 3,783 9,004 1,976 Tax loss carried forward 3,289 - 5,153 - 87,215 27,784 78,749 25,648 Balancing -24,660 -24,660 -23,143 -23,143 Total 62,555 3,124 55,606 2,505

Deferred tax Deferred tax in K expense / -income expense / -income Intangible assets 2,929 517 Tangible assets 463 -1,179 Financial assets 188 -254 Inventories -3,453 -1,407 Receivables and other assets -7,091 -4,016 Provisions -1,406 1,485 Liabilities 1,676 596 Tax loss carried forward 1,864 -2,151 Total -4,830 -6,409

Annual Report

Consolidated interest carry forwards due to the erman interest barrier. It is divided into ¯´,´£¯,¦¦° no-par value shares with a the- Financial Statement Deferred tax assets on losses carried forward are attributa- oretical par value of ¬ ¤.®¥ per share. Each share carries

Notes ble to foreign subsidiaries in an amount of ¬ §,¤´¦ K (previ- the right to one vote. Explanatory Notes for ous year: ¬ °,££¯ K). In the reporting year, deferred tax assets Balance Sheet on losses carried forward amounting to ¬ ®¥° K (previous The following statements have essentially been taken year: ¬ §,¥¥¥ K) were re-capitalized, ¬ £,°§¤ K (previous year: from the articles of association of DM MORI AKTIEN¶ ¬ ´°¦ K) was offset with current taxable income and ¬ £,¥§® K ESELLS HAFT (version May ¤¥£¦). was written off due to the entry of a domestic company into the erman tax group. The tax losses carried forward The Executive Board is authorized, with the approval of the amount to a total of ¬ ´®,¥§© K (previous year: ¬ £¥¤,©¥£ K), Supervisory Board, to increase the share capital by up to a of which ¬ ¯£,§¯¥ K (previous year: ¬ ´¥,¦°¥ K) were not rec- nominal amount of ¬ £¥¤,°®§,§¦¤.¤¥ until ¦ May ¤¥¤° through ognized. Out of the unrecognized tax losses brought forward, the issue of up to §¦,°¥´,¦¦¯ new no-par value bearer shares ¬ ¤¯,¤££ K (previous year: ¬ ¤°,®§¦ K) are available for utiliza- for contributions in cash and / or in kind (authorized capital). tion for an indefinite period, while ¬ °¥,¥§¦ K (previous year: This authorization can be exercised once or several times ¬ °§,°®§ K) must be used within the next five years. More- in partial amounts. over, the rest of the tax loss carry forwards not recognized in an amount of ¬ °,£¤¥ K (previous year: ¬ £¤,´§´ K) expire For cash contributions, the new shares may be taken over within ® to £¥ years. by one or more banks or companies, as defined by Section £´® para. © (£) of the erman Stock orporation Act (Akt), With regard to subsidiaries which had tax losses in the current designated by the Executive Board, with the obligation to year or in the previous year, deferred tax asset amounting to offer them to the shareholders (indirect subscription right). ¬ §© K (previous year: ¬ £,°£¦ K) were capitalized. The real- In all cases, shareholders must be granted subscription ization of these assets depends on future taxable income rights. However, the Executive Board is authorized, with the which is higher than the earnings effects of the dissolution approval of the Supervisory Board, to disapply shareholders' of existing taxable differences. Due to substantial indicators, subscription rights in the following cases: the DM MORI group assumes that on the basis of future business activities and tax planning there will be sufficient a) with respect to a proportionate amount of share capital positive taxable income available to realise the tax assets. of up to ¬ ©,¥¥¥,¥¥¥ for the issue of shares to company employees and to employess of the companies affili- For passive temporary differences associated with interest ated with the company as per Section £© Akt (erman in subsidiaries in the amount of ¬ £¦,£®§ K (previous year: Stock orporation Act), ¬ £´,©¥® K), no deferred taxes have been recognized because the requirements of IAS £¤.§¦ are met. b) capital increases for contribution in kind, to acquire, in suitable cases, companies, parts of companies or inter- The deferred tax assets recognized directly in equity rose by ests in companies, or other assets in return for shares, ¬ £,¯´¯ K to ¬ £¥,´§´ K as of the reporting date (previous year: ¬ ¦,¥©£ K). These break down into deferred tax assets amount- c) capital increases for cash contributions, if the issuing ing to ¬ £¥,´¥¤ K (previous year: ¬ ¦,¥°§ K) on actuarial gains price of the new shares is not significantly lower, in and losses recognised in equity, as well as ¬ §® K relating to the accordance with Section ¤¥§, para.£ and ¤, and Section valuation of financial instruments in equity (previous year: ¬ ´ K). £´® para. § (°) of the erman Stock orporation Act, than the stock market price on the final effective date of the issuing price determined by the Executive Board . EQUITY and if the total pro rata amount of the share capital attributable to the new shares, for which the share- The movement of individual components in group equity for holders' subscription rights are excluded, neither on financial years ¤¥£¦ and ¤¥£´ is presented in the onsolidated the effective date nor on the date of exercise of this Statement of hanges in Equity on page ¦¥ et seq. Business authorization exceeds £¥ percent of the share capital. transactions are presented under “Transactions with owners” Shares that are issued or sold during the validity of the in which the owners have acted in their capacity as owners. authorized capital with the exclusion of shareholders' subscription rights, in direct or analogous application Subscribed capital of Section £´® para. § (°) of the erman Stock orpo- The share capital of DM MORI AKTIENESELLS HAFT ration Act, are to be included in the maximum limit of amounts to ¬ ¤¥°,¦¤®,¯´°.°¥ and is fully paid up. £¥ % of the share capital,

d) to exclude any fractional amounts from the subscription right.

Annual Report §

All the shares issued on the basis of the aforementioned equity. Deferred taxes recognised directly in equity in con- authorization disapplying subscription rights of sharehold- nection with the valuation of financial instruments recog- ers pursuant to point b) and c) above may not exceed ¤¥ % nized directly in equity amount to ¬ §® K as of §£ Decem- of the share capital either at the time of the authorisation ber ¤¥£¦ (previous year: ¬ ´ K). taking effect or at the time of its utilization. Included in this ¤¥ % limit are those shares that are issued during the term of A detailed overview on the composition of, or changes in, the aforementioned authorization from any other authorized other reserves in the financial year ¤¥£¦ and in the previ- capital disapplying the subscription rights of shareholders, ous year is included in the Development of roup Equity excluded from the aforementioned figure is the disappli- statement. cation of subscription rights to compensate for fractional amounts or the issue of shares to company employees and Appropriation of profits to employees of affiliated companies. In accordance with the erman ommercial ode (HB), the Annual Financial Statements of DM MORI AKTIEN¶ The Executive Board is authorized, with the approval of the ESELLS HAFT form the basis for the appropriation of Supervisory Board, to lay down further details for the capital profits of the financial year. increase and its implementation. The Supervisory Board is authorized to adjust the articles of association according to Between DM MORI mbH and DM MORI AKTIENE¶ each individual utilization of the authorized capital and, if the SELLS HAFT exists a domination and profit transfer agree- authorized capital is not utilized or not fully utilized before ment, which was approved by the Annual eneral Meeting on ¦ May ¤¥¤°, to cancel this after this date. £© July ¤¥£®. The agreement entered into force on ¤° August ¤¥£®, following entry into the commercial register. apital reserve As of §£ December ¤¥£¦, the capital reserves were unchanged The ¤¥£¦ financial year of DM MORI AKTIENESELLS HAFT at ¬ °¦´,°´©,¤®¦. The group's capital reserve includes the closes with a result pre-profit transfer of ¬ ¦©,¯°£,¦´© (previ- premiums for the issue of shares of DM MORI AKTIEN¶ ous year: ¬ ¦¦,§¤©,®£©). The entire profit will be transferred ESELLS HAFT in the previous years. to DM MORI mbH. According to IFRS regulations, this is a transaction with equity providers. The transaction costs directly attributable for capital procurement, reduced by the related income tax benefits, have As at §£ December ¤¥£¦, no retained earnings as stipulated each been deducted from the capital reserve. by the erman ommercial ode is recognized by DM MORI AKTIENESELLS HAFT. RETAINED EARNIN£S AND OTHER RESERVES Non-controlling equity interests Statutory provision Non-controlling equity interests include the minority inter- The disclosure does not affect the statutory reserve of ests in the consolidated equity of the companies included DM MORI AKTIENESELLS HAFT in an amount of in the annual accounts and, as at §£ December ¤¥£¦, ¬ ®´¥,©§¥. amount to ¬ £°,§§© K (previous year: ¬ °,°©§ K). The change from the previous year is mainly due to the net profit from Retained earnings non-controlling interests and transfer of the °¦ % interest in Other retained earnings include prior-period profits gener- DM MORI Machine Tools Trading o. Ltd, Shanghai ( hina), ated by the companies included in the onsolidated Finan- to DM MORI OMPANY LIMITED in June ¤¥£¦. cial Statements as far as they were not distributed. Retained earnings also include the offset of liabilities-side differences APITAL MANA£EMENT DISLOSURE from the consolidation of investments of those subsidiaries that were consolidated before £ January £¦¦©, and the A strong equity capital base is an important pre-condition adjustments directly in equity in accordance with the first for the DM MORI group in order to ensure the ongoing application of IFRS-rules. Additionally, this item contains existence of the company. The Executive Board’s goal is to the changes from the revaluation of defined benefit plans. maintain its strong capital base and improve its equity ratio in order to preserve the trust of investors, creditors and Other reserves markets and to ensure the sustainable development of the The other reserves contain the differences arising from company. The capital is regularly monitored on the basis of foreign currency translation recognized directly in equity various key figures. The ratio of net indebtedness to bal- of international subsidiaries and the post-tax effects from anced equity (gearing) and the equity ratio are key figures the valuation of financial instruments recognised directly in for this. As of §£ December ¤¥£¦, the syndicated credit line

Annual Report

Consolidated had not been used and there was no financial debt. The For domestic subsidiaries, besides current pension plans, Financial Statement syndicated credit line requires that the group comply with a there are no defined benefit plans for new employees. The

Notes customary covenant that stipulates a defined financial ratio. employees of Swiss subsidiaries participate in defined benefit Explanatory Notes for The covenant was met as of §£ December ¤¥£¦. pension plans. In Switzerland, employers are obligated to give Balance Sheet a minimum contribution to their employees' pension plans. In The domination and profit transfer agreement between addition to this, there are no minimum guarantees. These plans DM MORI mbH and DM MORI AKTIENESELLS HAFT burden the group with actuarial risks, such as risk of longevity, means it is no longer possible for the company to actively currency exchange risk, interest and market (investment) risk. shape the DM MORI group’s equity base via a dividend policy. In the DM MORI group, pension commitments are financed Surplus funds are determined as the sum of financial debt by transfers to provisions and plan assets. The investment less cash and cash equivalents. strategy for global pension assets is based on the objective of securing pension payments in the long term. In ermany, D. plan assets comprise insurance contracts or contracts and in K Dec Dec are held by a legally independent entity whose sole purpose ash and cash equivalents 154,005 152,681 is to hedge and fund employee benefit liabilities. In Swit- Financial debt 0 0 zerland, external plan assets are invested in a customary Surplus fund 154,005 152,681 pension fund. Plan assets in Switzerland are subject to cus- Total Equity 1,281,449 1,197,688 tomary minimum funding requirements. The amount of the Equity ratio 51.9 % 49.1 % pension obligation (present value of future pension commit- earing – – ments or defined benefit obligation) was calculated on the basis of actuarial methods by estimating the relevant factors Total equity has increased in absolute terms by ¬ ´§,¯®£ K. impacting the pension commitment. In ermany, Klaus Heu- The equity ratio as of §£. December ¤¥£¦ rose to ©£.¦ % (pre- beck’s “¤¥£´ guideline tables” were used as a biometric vious year: °¦.£ %) accounting basis. In Switzerland, the “BV ¤¥£© technical principles, generation tables” were used to calculate values. They are based on the latest available observations of mor- . PROVISIONS FOR PENSIONS tality rates, mostly by private pension funds, and take into account future changes in mortality rates over time. Pension provisions are set up for obligations arising from legal rights to future pension payments and from current Along with the assumptions on life expectancy, the following pension payments to those active and former employees premises for the parameters to be applied to the actuarial of companies within the DM MORI group entitled to such, calculations in the reports were defined: and to their surviving dependants. According to the respective legal, economic and tax conditions prevailing in each D.§ Rest of the Rest of the country, there are different forms of old age protection that £ermany world £ermany world in % are usually based among other things on the duration of employment and the employees’ remuneration. In ermany Discount interest rate 0.68 0.27 1.51 0.78 the commitments are dependent upon wages or salary and Salary trend 0.00 2.60 0.00 2.90 are paid as a pension; there is no minimum guarantee. Pension trend 2.00 0.00 2.00 0.00

Employee pension schemes are based as a rule either on defined contribution plans or defined benefit plans. The discount interest rate of the pension obligations for entitled active and former employees was determined on the basis In the case of defined contribution plans the respective of the yield which was achieved on the balance sheet date company does not assume any further obligations which of high-quality, fixed-interest industrial bonds on the market. go beyond the payment of contributions into an earmarked reserve fund. Expenses for this amounted to ¬ £,¦¦£ K in The salary trend includes expected future increases in salary financial year ¤¥£¦ (previous year: ¬ £,¦£´ K). that are assessed annually and are subject to, amongst other things, inflation and the duration of employment at In the case of defined benefit plans, it is the company’s the company. A future average salary increase of ¤.®¥ % obligation to pay the promised benefits to active and former was taken into account for our foreign companies. Since the employees, whereby a distinction is made between pension pension commitments that were entered into at the national plans that are financed through provisions and those that subsidiaries are not subject to future increases in salary, are financed through a fund. In general the pensions paid salary development was not taken into account when deter- correspond to the promised benefits. mining the relating company pension provisions.

Annual Report

Due to increases or reductions in the cash value of defined The following table shows the reconciliation of the opening benefit obligations, actuarial gains or losses may arise, balance to the final balance for the net debt (net assets) from which may result, amongst others, from changes in the the defined benefit pension plans and their components. calculation parameters or changes in the risk develop- [→ D. | D. ] ment assessment relating to the pension commitments. The pension provisions net value can be derived from the Over the past five years, the funded status, consisting of the following: [→ D. ] cash value of all pension commitments and the fair value of plan assets, has changed as follows: [→ D.] The plan assets take into account on the one hand risk payments that depend on the insured salary. On the other hand, Payments to beneficiaries from pension plans not financed they include retirement benefits that are dependent on the by funds in ¤¥¤¥ are expected in an amount of ¬ ¤,§°£ K accumulated retirement assets at the time of retirement. It (previous year for ¤¥£¦: ¬ ¤,§®£ K), while payments to funded is composed of the following values: [→ D.] pension plans in the financial year ¤¥¤¥ are estimated to amount to about ¬ §°© K (previous year for ¤¥£¦: ¬ ©¤£ K). The calculation of the typological interest of the plan assets is made in the amount of the discount interest rate of the The average weighted duration of pension obligations pension obligations at the beginning of the period. Actual in ermany is around thirteen years and in Switzerland income for plan assets amounts to ¬ ¦°© K (previous year: between twenty-one and twenty-three years. Income ¬ £,°¯¤ K). Key assumptions for calculating the pension obligation were Payments from insurance companies are accounted for as based on sensitivity analyses. The discount factor, assumed benefits received and the benefits actually granted are dis- value of wage trends and life expectancy were reduced or closed as benefits paid. increased by a fixed % rate respectively one year.

Pension provisions for former members of the Executive Board and their surviving dependants have been formed in the amount of ¬ §©,¯£¯ K (previous year: ¬ §£,®©© K).

D. 31 Dec 2019 31 Dec 2018

Rest of the Rest of the in K £ermany world £ermany world ash value of pension commitments not financed by funds 33,909 1,523 32,167 1,243 + ash value of funded pension commitments 19,998 14,599 18,267 15,090 – urrent value of pension plan assets -16,248 -10,773 -16,305 -12,634 = Net value of amounts shown in the balance sheet on the reporting date 37,659 5,349 34,129 3,699 of which pensions 43,008 37,828 of which assets (–) 0 0

D. 2019 2018 in K in % in K in % Stock exchange listed ash and cash equivalents 97 0.36 0 0.00 Shares 2,706 10.02 0 0.00 Obligations 4,352 16.11 0 0.00 Property 2,776 10.27 0 0.00 Other 842 3.11 0 0.00 Not stock exchange listed Qualifying insurance poilicies (Life insurance) 16,248 60.13 16,305 56.34 Other 0 0.00 12,634 43.66 Total plan assets 27,021 100.00 28,939 100.00

Annual Report

Consolidated D. Financial Statement Net debt (net asset) Defined benefit obligation Fair value of plan assets from defined benefit plans Notes Explanatory Notes for Balance Sheet Rest of the Rest of the Rest of the in K £ermany world £ermany world £ermany world As at 1 January 50,434 16,333 -16,305 -12,634 34,129 3,699 Included in profit and loss urrent service cost 0 997 0 0 0 997 Past service cost 294 0 0 0 294 0 Interest expense (income) 739 142 -242 -115 497 27 Exchange rate changes 0 598 0 -486 0 112 1,033 1,737 -242 -601 791 1,136 Included in other comprehensive income Loss (profit) from remeasurements Actuarial losses (profits) from: – financial assumptions 5,160 2,123 0 0 5,160 2,123 – experience adjustments 331 -863 0 0 331 -863 Effects on plan assets excluding interest income 0 0 -279 -308 -279 -308 5,491 1,260 -279 -308 5,212 952 Other ontributions paid by the employer 0 0 -2,308 -869 -2,308 -869 Pension payments made -3,051 -2,009 2,886 2,440 -165 431 Other (derecognition of actuarial reserves for pensioners) 0 -1,199 0 1,199 0 0 -3,051 -3,208 578 2,770 -2,473 -438 As at 31 December 53,907 16,122 -16,248 -10,773 37,659 5,349

Net debt (net asset) Defined benefit obligation Fair value of plan assets from defined benefit plans

2018 2018 2018 2018 2018 2018

Rest of Rest of Rest of in K £ermany the world £ermany the world £ermany the world As at 1 January 54,941 18,249 -16,370 -12,240 38,571 6,009 Included in profit and loss urrent service cost 0 1,092 0 0 0 1,092 Past service cost 547 0 0 0 547 0 Interest expense (income) 632 111 -191 -78 441 33 Exchange rate changes 0 653 0 -472 0 181 1,179 1,856 -191 -550 988 1,306 Included in other comprehensive income Loss (profit) from remeasurements Actuarial losses (profits) from: – financial assumptions -1,996 -899 0 0 -1,996 -899 – experience adjustments -1,288 -1,035 0 0 -1,288 -1,035 – demographic adjustments 663 -198 0 0 663 -198 Effects on plan assets excluding interest income 0 0 -316 -887 -316 -887 -2,621 -2,132 -316 -887 -2,937 -3,019 Other ontributions paid by the employer 0 0 -2,341 -1,195 -2,341 -1,195 Pension payments made -3,065 -1,640 2,913 2,238 -152 598 -3,065 -1,640 572 1,043 -2,493 -597 As at 31 December 50,434 16,333 -16,305 -12,634 34,129 3,699

Annual Report

D. in K 2019 2018 2017 2016 2015 ash value of all pension commitments 70,029 66,767 73,190 85,104 75,412 urrent value of the pension plan assets of all funds -27,021 -28,939 -28,610 -36,232 -34,626 Funding status 43,008 37,828 44,580 48,872 40,786

Under unchanged other assumptions, the changes that Provisions for personnel expenses in the group include obli- would reasonably have been possible at the balance sheet gations for profit-sharing and staff bonuses of ¬ °®,¦´£ K date in the event of a significant actuarial assumption would (previous year: ¬ °¦,§®¦ K), part-time retirement pay- have impacted on the defined benefit obligation in the fol- ments of ¬ ©,¦£° K (previous year: ¬ °,©¦¤ K), holiday pay lowing amounts. of ¬ £¯,°¥¯ K (previous year: ¬ £®,¦££ K) and anniversary payments of ¬ £¤,¯§° K (previous year: ¬ £¥,´¦§ K). Most The effects on the entitlement present value are as follows: of the provision should be paid in the coming year. Provi- [→ D.] sions for anniversary bonuses and part-time retirement are discounted and carried as liabilities at their present value. D. Obligations arising from part-time retirement are secured Effects on the entitlements against potential insolvency through a mutual trust relation- at Dec ship. To secure the pension plan, cash assets are transferred in K in % into a trust property. The members of this trust property are

ash value of the entitlement obligations 70,029 domestic group companies. The assets are defined as “plan In the case of: assets” in accordance with IAS £¦.¯ and balanced against the reduction of the discount rate related provisions. Any proceeds arising from the pension by 0.25 %-points 72,387 3.37 plan assets are balanced against the related expenses. As of increase of the discount rate §£ December ¤¥£¦, liquid assets of ¬ ¤,¯®¥ K (previous year: by 0.25 %-points 67,770 -3.23 ¬ §,££§ K) were transferred to the trust property. reduction of the pension trend by 0.25 %-points 68,425 -2.29 Risks arising from warranties and retrofitting relate to increase of the pension trend by 0.25 %-points 71,643 2.31 present obligations to third parties, the use of which is prob- reduction of the life expectancy by 1 year 66,821 -4.58 able and the anticipated amount of which can be reliably increase of the life expectancy by 1 year 73,256 4.61 estimated. The measurement of provisions was carried out on the basis of previous experience, taking into account the conditions and taking into account possible price increases In the presented sensitivities, it should be taken into account on the balance sheet date. The obligations from the sales that due to actuarial effects, the change as a percentage is area are included in the liabilities for commissions, con- not and / or does not have to be linear. Thus, increases and tractual penalties and other liabilities. Most of the provision decreases in terms of per cent do not react with the same should be paid in the coming year. absolute amount. There are no demographic effects. The other provisions primarily include risks from legal disputes, obligations for commissioning to be carried out and . OTHER PROVISIONS other various services, for which uncertainties exist regarding dates and required future expenses and whose expected The following lists the major contents of provisions: [→ D.] amounts can be reliably estimated. The risk of further

D. 31 Dec 2019 31 Dec 2018

of which of which in K Total short-term Total short-term Obligations arising from personnel 112,211 85,908 112,599 83,233 Risks arising from warranties and retrofitting 58,033 47,863 52,097 43,406 Obligations arising from sales 55,762 54,906 40,826 39,626 Legal and consultancy fees and costs of preparation of accounts 4,216 4,216 4,785 4,785 Other 52,575 38,515 57,118 38,195 Total 282,797 231,408 267,425 209,245

Annual Report

Consolidated D. Financial Statement hange in the group of Notes consolidated in K Explanatory Jan Additions Used Reversal companies Other changes Dec Notes for Balance Sheet Obligations arising from personnel 112,599 69,291 59,741 10,063 -56 181 112,211 Risks arising from warranties and retrofitting 52,097 35,692 26,113 3,975 0 332 58,033 Obligations arising from sales 40,826 33,089 12,462 6,175 0 484 55,762 Legal and consultancy fees and costs of preparation of accounts 4,785 3,135 2,636 1,054 -6 -8 4,216 Other 57,118 34,612 22,534 16,194 0 -427 52,575 Total 267,425 175,819 123,486 37,461 -62 562 282,797

outflows beyond these provisions is considered unlikely as As in the previous year, short-term financing commitments of §£ December ¤¥£¦. For the short-term provisions, it can were not utilized as of the reporting date. The average cost be assumed that a significant part of the obligations will be of borrowing amounts to £.¥ % as in the previous year. fulfilled in financial year ¤¥¤¥. Since §£ December ¤¥£¦, the DM MORI group has had The movement in the other provisions is illustrated in the access to a syndicated credit line with a total volume of breakdown of provisions: [→ D.] ¬ ©¥¥.¥ million and due in February ¤¥¤¤. It comprises a usable revolving cash tranche of ¬ ¤¥¥.¥ million and a bank The other changes include currency adjustments and book guarantee tranche of ¬ §¥¥.¥ million. The syndicated loan transfers. Obligations arising from personnel include pro- agreement was concluded with an international bank syn- visions for the long-term incentive, a remuneration com- dicate at market conditions and has an interest rate based ponent with a long-term incentive effect, totaling ¬ §,§©¤ K on the current money market rate (£ to ®-month EURIBOR) (previous year: ¬ °,´©© K). A detailed description of the long- plus a mark-up. This interest mark-up may change depend- term incentive can be found in the “Remuneration report” ing on group key figures. The syndicated credit line also chapter of the roup Management Report on page ¤¦. requires the DM MORI group to comply with a customary covenant, which provides a defined financial ratio. The covenant had been complied with on a quarterly basis and as . FINANIAL DEBTS of §£ December ¤¥£¦. The syndicated loan is classified as short-term as it can only be drawn down over a maximum As of §£ December ¤¥£¦, DM MORI AKTIENESELLS HAFT period of six months. As in the previous year, there were no has no financial debts. drawdowns as of §£ December ¤¥£¦.

Short and medium-term working capital requirements For the financing of the syndicated credit line, the lending for DM MORI AKTIENESELLS HAFT and, within the banks have completely waived the right to collateral. The scope of intercompany cash management, for the major- companies DE KEL MAHO Pfronten mbH, DE KEL MAHO ity of domestic subsidiaries, are covered by operating cash Seebach mbH, ILDEMEISTER Drehmaschinen mbH, flow and short and long-term loans. Approved credit lines DM MORI Spare Parts mbH, SAUER mbH, ILDE¶ amount to ¬ ´©¥.¯ million (previous year: ¬ ´¥¤.° million). MEISTER Partecipazioni S.r.l., FAMOT Pleszew Sp. z o.o., This mainly comprises a syndicated credit line amounting raziano Tortona S.r.l. sowie ILDEMEISTER Italiana S.p.A. to ¬ ©¥¥.¥ million (previous year: ¬ ©¥¥.¥ million), guaran- continue to be guarantors for the credit line. tee credit lines amounting to ¬ £¯¯.§ million (previous year: ¬ £¤¦.¥ million) and factoring agreements, another part of As at the balance sheet date, open credit lines amounted to the financing mix, amounting to ¬ £®¯.© million as in the ¬ °¯§.¦ million (previous year: ¬ °£©.£ million). As in the pre- previous year. vious year, these comprise free cash lines of ¬ ¤¥©.¦ million and additional open lines of credit (bank guarantees, factor- In addition to the syndicated credit, there are a number of ing) of ¬ ¤®´.¥ million (previous year: ¬ ¤¥¦.£ million). short-term bilateral financing commitments to individual subsidiaries with a total volume of ¬ ©.¦ million, as in the previous year.

Annual Report

Long-term liabilities are shown as follows: Short-term financial liabilities are shown as follows:

D. D. in K 31 Dec 2019 31 Dec 2018 in K 31 Dec 2019 31 Dec 2018 Other long-term financial liabilities 157 8,205 Trade creditors to third parties 207,368 195,393 Other long-term liabilities 2,444 2,649 Liabilities to at equity 2,601 10,854 accounted companies 7,401 2,266 Liabilities to other related companies 234,038 236,613 Other long-term financial liabilities include the following Liabilities to other equity investments 800 0 items: Other short-term financial liabilities 28,064 31,124 D.§ 477,671 465,396 in K 31 Dec 2019 31 Dec 2018 Fair value of derivative financial Liabilities to other related parties arise from goods and instruments 0 7 services supplied as part of the business relationship to Other long-term financial liabilities 157 8,198 DM MORI OMPANY LIMITED and its affiliated companies. 157 8,205 These include liabilities to DM MORI OMPANY LIMITED in an amount of ¬ ´®,¦¤© K (previous year: ¬ ¯´,§£¯ K). A liability In the previous year, other long-term financial liabilities amounting to ¬ ¦©,¯°¤ K (previous year: ¬ ¦¦,§¤® K) results included ¬ ¯,¦¦© K in out-standing consideration payments from the transfer of profit to DM MORI mbH. for the purchase of shares in REALIZER mbH. All information and notes on contract liabilities and contract In other long-term financial liabilities, the fair value of liabilities from down payment invoices can be found in the long-term liabilities corresponds to the values shown on section on Sales Revenue. the balance sheet. Other short-term financial liabilities are shown as follows: D. in K 31 Dec 2019 31 Dec 2018 D. Deferred income 2,233 2,400 in K 31 Dec 2019 31 Dec 2018 Liabilities relating to social insurance 211 249 Debtors with credit balance 8,951 8,882 2,444 2,649 Factoring liabilities 7,737 5,137 Fair market values of derivative The deferred income accounted for in other long-term lia- financial instruments 1,224 2,223 Other short-term financial liabilities 10,152 14,882 bilities include the guaranteed investment grants from the funds of the joint aid programme “Improvement of the 28,064 31,124 Regional Economic Structure” and investment subsidies and grants pursuant to the erman Investment Subsidy Act in The fair value of derivative financial instruments involves a total amount of ¬ ¤,¤§§ K (previous year: ¬ ¤,°¥¥ K) as the fair value for forward exchange transactions amount- applied under IAS ¤¥ “Accounting for overnment rants ing to ¬ £,¤¤° K (previous year: ¬ ¤,¤¤§ K) in particular in and Disclosure of overnment Assistance”. USD, BP and JPY. Other financial liabilities include liabilities from bills of exchange amounting to ¬ ®,£¥§ K (previous As in the previous year, no investment subsidies were paid year: ¬ ££,´´¥ K). in financial year ¤¥£¦. Deferred income will be amortized in accordance with the depreciation procedure for subsidized In the previous year, liabilities arising from finance leases capital assets and recognized in the income statement. amounted to ¬ ®£® K and presented the discounted value of future payments from finance leases. The amount is shown in the other short-term financial liabilities.

Annual Report

Consolidated Short-term liabilities arising from finance leases were rec- . LEASIN£ Financial Statement ognized without consideration of future interest expenses.

Notes Leases acting as a lessee Explanatory Notes for In the previous year, all future payments arising from finance The DM MORI group leases specific tangible assets such Balance Sheet leases totaled ¬ ´§¥ K. as land and buildings, technical equipment and machinery, office equipment and cars. Under IAS £¯, the minimum lease payments for the respective lease contracts were as follows: As of §£ December ¤¥£¦, the DM MORI group recognizes right-of-use assets in an amount of ¬ ®¤,£´® K in property, D. plant and equipment. The corresponding lease liabilities of in K 31 Dec 2018 ¬ ®£,§©© K are presented separately on the balance sheet. TOTAL FUTURE MINIMUM LEASE PAYMENTS UNDER IAS 17 When determining lease terms, the DM MORI group takes Due within one year 690 into account all facts and circumstances that create an eco- Due within one and five years 140 nomic incentive to exercise extension options or not to exer- Due in more than five years 0 cise termination options. hanges to terms resulting from 830 exercising extension options or not exercising termination INTEREST PORTION INLUDED IN FUTURE options are only included in the term of the contract if the MINIMUM LEASE PAYMENTS group is reasonably certain to extend or not to exercise a Due within one year 74 termination option. If, e.g. by exercising a termination option Due within one and five years 2 or not exercising an extension option, the DM MORI group Due in more than five years 0 is subject to significant penalties, it is generally consid- 76 ered reasonably certain that the group will not terminate NET PRESENT VALUE OF FUTURE or extend the contract. Moreover, other economic factors MINIMUM LEASE PAYMENTS are taken into account, which play a key role in deciding Due within one year 616 whether to exercise extension options or not to exercise Due within one and five years 138 termination options. The assessment is reviewed, when a Due in more than five years 0 significant event or change in circumstances occurs that 754 could influence the previous assessment – provided this is within the lessee's control. In the previous year, the DM MORI group acted as a lessor for finance lease contracts under IAS £¯. The minimum lease The group estimates that if extension options are exercised, payments for ¤¥£¦ from subleases amounted to ¬ £¯© K. potential future lease payments would result in a lease lia- These contracts are mainly related to the leasing of machine bility of ¬ §,©¤¯ K. tools. The application of IFRS £® resulted in lower other operating Other short-term liabilities include the following items: expenses and a rise in depreciation in financial year ¤¥£¦. There was also a rise in EBITDA and a slight improvement D. in EBIT. in K 31 Dec 2019 31 Dec 2018 Tax liabilities 27,001 25,869 Further information on lessee accounting can be found in Deferred income 6,120 5,255 the corresponding notes on individual items in the income Liabilitites relating to statement and on the balance sheet. social insurance 5,760 5,473 Payroll account liabilities 3,453 3,338 Leases acting as a lessor Other liabilities 3,517 1,761 45,851 41,696 Finance leases In financial year ¤¥£¦, the DM MORI group acted as a lessor Tax liabilities refer to liabilities arising primarily due from for finance lease contracts, especially in buildings. value added tax amounting to ¬ £¥,¯®® K (previous year: ¬ £¥,££¤ K) as well as liabilities arising from wage and church There was no capital gain from these leases in financial tax in the amount of ¬ ¦,´§© K (previous year: ¬ £¥,£¤© K). year ¤¥£¦.

Annual Report

In ¤¥£¦, the DM MORI group recognized ¬ £¯© K in payments . ONTIN£ENT LIABILITIES AND from subleases for finance leases and ¬ £¥ K in interest OTHER FINANIAL OBLI£ATIONS income on lease receivables. No provisions were set up for the following contingent lia- The following table presents a maturity analysis of the lease bilities, as the risk of utilization is considered relatively receivables and shows the undiscounted lease payments to improbable: be received after the balance sheet date. D. | ONTIN£ENIES D. | FINANE LEASES UNDER IFRS 16 in K 31 Dec 2019 31 Dec 2018 in K 31 Dec 2019 uarantees 1,563 50 Less than one year 413 Warranties 1,475 2,610 One to two years 227 Other contingencies 4,250 3,382 Two to three years 227 7,288 6,042 Three to four years 227 Four to five years 227 The guarantees primarily include advance payment guaran- More than five years 4,836 tees to foreign group companies. Other contingencies com- Total 6,157 prise, in particular, guarantees for framework agreements and contract performance guarantees. Operating leases In financial year ¤¥£¦, the DM MORI group acted as a lessor During financial year ¤¥£¦, the DM MORI group concluded for operating lease contracts. agreements on the purchase of property, plant and equipment in ¤¥¤¥ worth ¬ £¥.¯ million (previous year for ¤¥£¦: These contracts mainly relate to the leasing of machine tools. ¬ §§.¯ million). The DM MORI group has classified these leases as operating leases, as they do not substantially transfer all the risks Under IAS £¯, other financial obligations mainly comprised and rewards incidental to ownership. lease contracts and long-term tenancy agreements. In operating lease contracts, the beneficial owner of the lease items In ¤¥£¦, the DM MORI group recognized ¬ ¤,¯§¦ K in lease was the lessor, which means the risks and rewards were income from operating leases including income from sub- substantially borne by the lessor. leases. Lease income, which accrued in the course of the ordinary business activities of the DM MORI group, was The total minimum lease payments from permanent sub- recognized in sales revenue. Other lease income was rec- leases and leases were broken down by due dates as shown ognized in other operating income. below. The contracts had terms from between two to thirty three years and some included extension or purchase The following table provides a maturity analysis of the undis- options. counted lease payments to be received after the balance sheet date: D. | TOTAL FAE VALUE OF FUTURE MINIMUM LEASE PAYMENTS UNDER IAS § D. | OPERATIN£ LEASES UNDER IFRS 16 in K 31 Dec 2018 in K 31 Dec 2019 Due within one year 23,804 Less than one year 2,277 Due within one and five years 33,648 One to two years 1,407 Due in more than five years 10,210 Two to three years 917 67,662 Three to four years 533 Four to five years 306 Of which operating lease arrangements account for: More than five years 127 Total 5,567 D.§ | TOTAL FAE VALUE OF FUTURE MINIMUM LEASE PAYMENTS UNDER IAS § in K 31 Dec 2018 Due within one year 23,114 Due within one and five years 33,508 Due in more than five years 10,210 66,832

Annual Report

Consolidated Operating leases under IAS £¯ existed for the financing of The DM MORI group uses the “spot-to-spot” method. The Financial Statement buildings for DE KEL MAHO Pfronten mbH and FAMOT effects from forward components are recognized in profit

Notes Pleszew Sp. z o.o., Pleszew (Poland). The operating lease or loss. Explanatory Notes for contracts for the buildings included a purchase option upon Balance Sheet expiry of the basic rental period. On the reporting date, the DM MORI group also had forward exchange contracts that do not meet the strict requirements Other operating lease contracts existed at various group of hedge accounting under IFRS ¦, but effectively contrib- companies, especially for vehicle fleets (¬ ¤§.© million), ute towards hedging the financial risk in accordance with machinery, other facilities and factory and office equipment. the principles of risk management. In order to hedge the Some of the agreements contained purchase options upon foreign currency risks of monetary assets and liabilities rec- expiry of the basic rental period. The operating leases had ognized in the balance sheet, the DM MORI group does not a minimum term of between two and fifteen years. There use any hedge accounting, as the underlying transactions’ were no permanent subleases to be included in the sum of gains and losses from the currency translation to be rec- future minimum lease payments. There were no contingent ognized in profit or loss under IAS ¤£ are disclosed in the rental payments to be recognized in the income statement. income statement together with the gains and losses from the derivatives used as hedging instruments.

§. FINANIAL INSTRUMENTS In the event that third parties do not fulfil their obligations arising from forward exchange contracts, as at the reporting At the balance sheet date, forward exchange contracts were date, the DM MORI group had a deficit risk amounting to held by the DM MORI group primarily in USD, BP, RUB ¬ ¤,©©£ K (previous year: ¬ £,¦®° K). and JPY. The nominal and fair values of derivative financial instruments existing at the balance sheet date are set out As of the balance sheet date, existing forward exchange below: [→ D. ] contracts in cash flow hedges with a nominal volume of ¬ °,£¥¦ K have a residual term of up to one year (previ- The nominal values correspond to the sum of all unbalanced ous year: ¬ ¤¯,£¤§ K). The cash flows from these forward purchase and sales amounts from derivative financial trans- exchange transactions will eventuate within the next twelve actions. The fair market values recognized constitute the months. For the most part, it must be assumed that these price at which, as a rule, third parties would assume the will be recognized as income in the profit and loss state- rights or obligations arising from the financial instruments ment within the next twelve months. In the previous year, as of the balance sheet date. It cannot generally be assumed forward exchange transactions with a nominal volume of that this assessed value may actually be achieved upon liq- ¬ ©°© K had a remaining term of more than one year on the uidation. The fair market values are the current values of balance sheet date. the derivative financial instruments excluding any adverse trends in value from underlying transactions. In financial year ¤¥£¦, expenses arising from the fair value recognition of financial instruments attributable to cash flow The fair values of forward exchange contracts are recog- hedges in an amount of ¬ -°¦ K (previous year: ¬ -§¯¯ K) nized in the balance sheet as other long-term or short- were allocated to equity and not recognized in the income term financial assets or other long-term and short-term statement and an amount of ¬ -°® K (previous year: ¬ ©´© K) financial liabilities. was removed from equity and recognized in revenue (previous year: expenses). Forward exchange transactions were Since £ January ¤¥£´, DM MORI has been applying IFRS ¦ recognized in the income statement as exchange rate and to hedge accounting. In general, all hedging relationships currency profits or exchange rate and currency losses. in hedge accounting under IAS §¦ can be continued under During the financial year, no ineffectiveness rose frome IFRS ¦. forward exchange transactions (previous year: ¬ ¥ K). To

D. 31 Dec 2019 31 Dec 2018

Nominal Fair market Nominal Fair market in K value Asset Debt value Total value value Forward exchange contracts as cash flow hedges 4,109 0 135 -135 27,668 -80 Forward exchange contracts held for trading purposes 227,082 2,551 1,089 1,462 215,134 -186 231,191 2,551 1,224 1,327 242,802 -266

Annual Report §

measure ineffectiveness, underlying transactions amount- DM MORI group centralises these risks as far as possible ing to ¬ °®£ K (previous year: ¬ ¤§£ K) and related hedging and manages them with a view to the future and by using transactions amounting to ¬ °®£ K were used (previous year: derivative financial instruments. Risk management is based ¬ ¤§£ K). on guidelines that apply throughout the group and in which objectives, principles, responsibilities and competencies D. are defined. Further information on the risk management in K 2019 2018 system is presented in detail in the Management Report on As of 1 January 2019 (before tax) -27 -235 pages ¯¤ et seq. in the risk and opportunity report. hange in value of forward exchange contracts recognised in other urrency risks comprehensive income -49 -377 In its global business activities, the DM MORI group is Amount reclassified from hedging reserve to profit or loss (recycling) -46 585 exposed to currency risks. Transaction risks arise through As of 31 December 2019 (before tax) -122 -27 changes in the value of future foreign currency payments due to exchange rate fluctuations in the individual financial statements. In the DM MORI group, both purchases and The group concluded derivative transactions pursuant to sales are made in foreign currencies. To hedge currency global netting agreements (framework agreement) of the risks arising from these activities within the DM MORI “International Swaps and Derivative Association” (ISDA) group, forward exchange transactions are used. Derivative and other corresponding national framework agreements. financial instruments are concluded and handled, based on In these netting agreements, the right to settle net is con- binding internal guidelines defining scope, responsibilities, tingent upon future events, such as default or bankruptcy reporting and controls. of the group or its rivals. The netting agreements thus do not fulfil the offsetting criteria of IAS §¤. The group hedges at least ¦¥ % of its estimated foreign exchange risks from contracted orders and expected acqui- The following table provides an overview of financial assets sitions and disposals over the next £¤ months. To hedge and financial liabilities, which are subject to netting agree- against the foreign exchange risk, forward exchange trans- ments or similar agreements. [→ D.§ | D.§ ] actions with a maturity of less than one year from the date of the financial statement are used predominantly. Hedging transactions are only permitted with specified counterparties. . RISKS FROM FINANIAL INSTRUMENTS DM MORI defines the existence of an economic relation- Risks from financial instruments ship between the hedging instrument and the hedged item urrency and interest rate fluctuations can lead to con- based on the currency, amount and timing of their respec- siderable profit and cash flow risks. For this reason, the tive cash flows. The hypothetical derivative method is used

D.§ £ross amounts of Potential offsetting financial instruments assets subject to global in the balance sheet netting agreements Net amount

in K Dec Dec Dec Financial assets Forward exchange contracts 2,551 1,222 1,329

Financial liabilities Forward exchange contracts 1,224 1,222 2

D.§ £ross amounts of Potential offsetting financial instruments assets subject to global in the balance sheet netting agreements Net amount

in K Dec Dec Dec Financial assets Forward exchange contracts 1,964 1,711 253

Financial liabilities Forward exchange contracts 2,230 1,711 519

Annual Report

Consolidated to assess whether the derivative designated in the hedging The following table presents the possible impact of finan- Financial Statement relationship is expected to be effective or has been effec- cial instruments on the reserve for derivatives or the other

Notes tive with regard to changes in the hedged item’s cash flows. reserves in equity as well as the impact on earnings as Explanatory Notes for of §£ December ¤¥£¦ or §£ December ¤¥£´. If the euro had Balance Sheet The main causes of ineffectiveness in these hedges are appreciated (depreciated) against the major currencies USD, defaults on receivables, changes in the timing of hedged BP, RUB and JPY by £¥ % respectively, the reserve for deriv- items or changes in hedged cash flows. atives or the other reserves in equity and the fair value of forward exchange transactions with a hedging relationship In the financial year, the following average hedging rates would have been ¬ £¤° K lower (higher) in total (previous for our main currencies were used for derivatives in hedge year: ¬ £,¥©§ K higher (lower)). The results and fair value of accounting: forward exchange transactions without a hedging relationship would have been ¬ §,§¥© K higher (lower) (previous year: D.§ ¬ °,£§© K lower (higher)). [→ D.§]

Average hedging rates Average hedging rates in in 2019 in 2018 Interest rate risks USD 1.38 1.19 Interest rate risks include any potential positive or nega- JPY 120.26 128.50 tive impact of interest rate changes on earnings, equity or BP 0.89 0.89 cash flow during the current or any future reporting periods. At the DM MORI group, interest rate risks are essentially The DM MORI group determines foreign currency sensitiv- related to financial assets and debts. The entire Executive ity through aggregating all foreign currency items that are Board will decide in each individual case on whether interest not represented in the functional currency of the respective rate risks will be hedged using interest rate hedging instru- company and sets these against hedging. The fair values of ments on the basis of a proposal drafted by the board’s FO. the basic items and hedges included are measured once at the actual exchange rates and once using sensitivity rates. As of §£ December ¤¥£¦, the DM MORI group has no net The difference between the two values represents the effects deficit, so that interest rate increases would present an oppor- on equity and earnings. tunity for higher interest income. A £ % increase in interest rates pertaining to the portfolio at the reporting date would The following table shows the net currency risk from trans- result in an increase in interest income of ¬ £.¦ million (pre- actions in ¬ K for major currencies as at §£ December ¤¥£¦ vious year: ¬ ¤.° million). As this mainly relates to interest and ¤¥£´: [→ D.§] on current account overdrafts, we do not expect any material

D.§ | URRENY 31 Dec 2019 31 Dec 2018 in K USD JPY £BP USD JPY £BP urrency risk from balance sheet items -739 -7,439 5,665 1,716 -6,172 4,021 urrency risk from pending transactions 1,255 -572 4,186 9,084 -6,938 12,406 Transaction-related currency items 516 -8,011 9,851 10,800 -13,110 16,427 Financially hedged item through derivatives -145 7,692 -8,780 -10,819 10,892 -14,912 Open currency items 371 -319 1,071 -19 -2,218 1,515

D.§ Profit or loss Net equity in K Increase Decrease Increase Decrease 31 December 2019 USD (10 % change) -1,487 1,487 0 0 JPY (10 % change) 705 -705 -53 53 BP (10 % change) 866 -866 23 -23 RUB (10 % change) 3,221 -3,221 -94 94 3,305 -3,305 -124 124 31 December 2018 USD (10 % change) -3,571 3,571 291 -291 JPY (10 % change) 2,031 -2,031 -236 236 BP (10 % change) -117 117 926 -926 RUB (10 % change) -2,478 2,478 72 -72 -4,135 4,135 1,053 -1,053

Annual Report

effects on the portfolio at the reporting date, if the interest Liquidity risks rate level continues to fall. Interest income would have fallen Liquidity risk is the risk that the DM MORI group may not by ¬ ¥ K (previous year: ¬ ¥ K), if the interest rate had fallen be able to meet its financial obligations. ash outflows result by © base points. As in the previous year, there would be no primarily from financing working capital, capital investments equity effects. The following table shows the nominal volumes and covering the financial requirements of sales financing. of fixed and variable rate financial instruments: The management is regularly informed about cash inflows and outflows as well as about financing sources. The liquidity D.§ Nominal volume risk is mitigated by creating the necessary financial flexibility in K 31 Dec 2019 31 Dec 2018 within the scope of existing financing operations and through Fixed-rate instruments effective cash management. Liquidity risk at the DM MORI Financial assets 8,007 8,587 group is governed by financial planning over twelve months. Financial liabilities 0 0 This makes it possible to finance predictable deficits under 8,007 8,587 normal market conditions at standard market terms. On Variable-rate instruments the basis of current liquidity planning, no liquidity risks are Financial assets 515,991 514,094 identifiable at present. A ¬ ©¥¥.¥ million syndicated credit Financial liabilities -120,000 -116,140 facility with various banks and bilateral loan commitments of 395,991 397,954 ¬ ©.¦ million, as in the previous year, are in place to provide liquidity insurance. The syndicated credit line is due in Feb- Fixed interest rates have been mainly agreed for financial ruary ¤¥¤¤. Loan facilities have not been cancelled either in assets and liabilities bearing interest. hanges in the inter- financial year ¤¥£¦ or in the previous year. est rate would only have an effect if these financial instruments were recognized at their fair value. As this is not The financing agreements for the syndicated loan obli- the case, fixed-rate instruments are not subject to inter- gate the DM MORI group to comply with customary cov- est-change risks as defined by IFRS ¯. The fair value of enants. The covenant was met on a quarterly basis and as forward exchange contracts is not altered significantly by of §£ December ¤¥£¦. changes in the interest rate. As of December ¤¥£¦, the DM MORI group has access to The interest sensitivities are shown below: cash and cash equivalents amounting to ¬ £©°.¥ million (previous year: ¬ £©¤.¯ million) and available lines of credit in D.§ Profit or loss the amount of ¬ ¤®´.¥ million (previous year: ¬ ¤¥¦.£ million) Increase by 100 Decrease by 5 and additional available credit lines (bank guarantees and in K base points base points factoring) in the amount of ¬ ¤¥©.¦ million (previous year: 31 December 2019 ¬ ¤¥©.¦ million). Variable-rate instruments 1,926 0 Profit sensitivity (net) 1,926 0 The following table shows contractually agreed (non-discounted) interest and repayments of original financial liabil- 31 December 2018 ities as well as of the derivative financial instruments with Variable-rate instruments 2,352 0 negative fair values: [→ D.§§] Profit sensitivity (net) 2,352 0

D.§§ ash flows 2020 ash flows 2021 ³ 2024 ash flows 2025 et seq.

arrying amount in K Dec Interest Repayment Interest Repayment Interest Repayment Liabilities to banks 0 0 0 0 0 0 0 Liabilities arising from lease arrangements 61,355 857 17,886 1,470 29,317 2,831 14,152 Trade creditors 449,607 0 449,607 0 0 0 0 Other financial liabilities 26,997 0 26,840 0 140 0 17 Subtotal 537,959 857 494,333 1,470 29,457 2,831 14,169 Liabilities from derivatives 1,224 0 1,224 0 0 0 0 539,183 857 495,557 1,470 29,457 2,831 14,169

Annual Report

Consolidated This includes all instruments that were held as at §£ Decem- Historical actual credit losses have been adjusted using Financial Statement ber ¤¥£¦ and §£ December ¤¥£´ respectively, and for which scaling factors to reflect the differences between the eco-

Notes payments have been contractually agreed. Forecast figures nomic conditions at the time the historical data was col- Explanatory Notes for for future new liabilities have not been included. Amounts in lected, the current conditions and the group's view of the Balance Sheet foreign currencies were translated at the exchange rate on economic conditions over the expected life of the receivables. the reporting date. The variable interest payments for finan- The scaling factors are based on historical trends and fore- cial instruments were determined on the basis of the last casts of gross domestic product (DP), country risks and fixed interest rate before §£ December ¤¥£¦ and §£ Decem- the long-term interest rate / base rate trend. ber ¤¥£´ respectively. Financial liabilities that can be repaid at any time are always allocated to the earliest possible date. For ¤¥£¦ and ¤¥£´, the underlying default rates for DM MORI For the proportion of the financial assets from derivatives depending on the maturity (not overdue and overdue) of the in the amount of ¬ ¥ K (previous year: ¬ ¤§´ K) as well as trade debtors for which no specific allowances have been the proportion of liabilities from derivatives in the amount made and with no impaired credit history are shown in the of ¬ £§© K (previous year: ¬ §£´ K), which have been clas- tables below: [→ D.§ | D. ] sified as cash flow hedges, it must be generally assumed that they will be recognized in the income statement in the With regard to impairment, trade debtors from the DM MORI next twelve months and thus will affect net income. [→ D.§ ] O. group are viewed as a separate item. In order to calculate impairment, the group uses the rating of DM MORI redit risks OMPANY LIMITED and the maturities of the receivables. A credit risk is the unexpected loss of payment funds or income. Such a credit risk occurs if the customer is not able In the financial year, expenses for the complete write down to meet his obligations within the due date. The objective of receivables totalled ¬ £,®´´ K (previous year: ¬ ¤,¤´© K). of the company is to mitigate or avoid these credit risks. Further details on financial risk assessment can be found Receivables management with global guidelines and regular in the section “Opportunities and risk report” of the roup analysis of the age structure of trade debtors ensures the Management Report on page ¯¤ et seq. continuous monitoring and mitigation of risks and, in this way, minimises losses from receivables. Due to the broad The expected credit losses, which may occur within twelve business structure within the DM MORI group, there is no months of the reporting date resulting from possible loss particular concentration of credit risks, either for customers events, are used to measure the impairments of other or individual countries. The DM MORI group is generally financial assets. enerally, other financial assets in the exposed to default risks which may cause impairments or DM MORI group have a low credit risk on the reporting date. in individual cases even bad debt. ash and cash equivalents are deposited at banks or finan- The credit losses recognised for trade debtors are calculated cial institutions, which have been rated A-£ to A-¤ by the based on experience with actual credit losses over the past S&P rating agency. The allowance for cash and cash equiv- three years. redit risks within each group are segmented alents was calculated based on £¤-month expected losses based on common default risk characteristics. For the com- and reflects the short maturities. panies, these are, for example, the credit risk assessment, e. g. based on overdue items and the geographical location. As of §£ December ¤¥£¦, this impairment amounted ¬ ®¦¥ K (previous year: ¬ ©´£ K).

D.§ ash flows 2019 ash flows 2020 ³ 2023 ash flows 2024 et seq.

arrying amount in K Dec Interest Repayment Interest Repayment Interest Repayment Liabilities to banks 0 0 0 0 0 0 0 Liabilities arising from lease arrangements 754 74 616 2 138 0 0 Trade creditors 434,272 0 434,272 0 0 0 0 Other financial liabilities 36,345 0 28,285 0 8,047 0 13 Subtotal 471,371 74 463,173 2 8,185 0 13 Liabilities from derivatives 2,230 0 2,223 0 7 0 0 473,601 74 465,396 2 8,192 0 13

Annual Report

D.§ 31 Dec 2019

£ross carrying amount in K Default rate in % of trade debtors Impairment Impaired credit history Not overdue 0.01 0.21 292,787 313 no Overdue 0.01 4.67 23,573 290 no Total 316,360 603

D. 31 Dec 2018

£ross carrying amount in K Default rate in % of trade debtors Impairment Impaired credit history Not overdue 0.01 0.10 330,911 164 no Overdue 0.01 1.37 27,641 243 no Total 358,552 407

Within the DM MORI group, cash deposits are managed and For financial instruments accounted at fair value, the fair coordinated centrally by DM MORI AKTIENESELLS HAFT. value is always determined from stock market prices. If stock Financial contracts are only entered into with banks that market prices are not available, this is measured by apply- have been carefully selected by us. We monitor credit rating ing standard economic methods (measurement methods), (external rating) on a regular basis; cash deposits are distrib- taking instrument-specific market parameters as a basis. uted at different banks, mainly our syndicated banks. With respect to derivative financial instruments, the DM MORI Financial assets are measured at fair value. The fair value of group is exposed to a credit risk arising from the non-per- the equity instruments amounts to ¬ ¤´.© million and is com- formance of contractual agreements by the other party to posed primarily to an investment in TULIP Interfaces Inc., the agreement. This credit risk is only mitigated by enter- Somerville (USA), and some other not material companies. ing into transactions with parties with good credit ratings. Fair value is determined using the discounted cash flow Pursuant to IFRS ¯.§®, the carrying amount of the financial method, using estimated cash flows, where individual assets represents the maximum credit risk. credit ratings and other market circumstances in the form of standard market credit or solvency spreads are taken No securities received or other credit enhancements existed into account in the cash value assessment. For an invest- in the financial year or previous year. ment acquired in financial year ¤¥£¦, no valuation model for determining fair value as of §£ December ¤¥£¦ is yet available. Therefore, the acquisition cost of the investment is the . OTHER DISLOSURES ON FINANIAL INSTRUMENTS best possible estimate of fair values as of §£ December ¤¥£¦.

The carrying amounts and fair value of financial assets and Other financial assets include the fair value of an option on liabilities are shown in the table below: [→ D. | D. ]. the purchase of shares in a company operating a solar park. The valuation model takes into account the present value The table does not contain any information about the fair of expected payments, discounted at the risk-adjusted dis- value of financial assets and liabilities that have not been count rate (WA ). The expected payments are calculated measured at fair value, if the carrying amount is a reason- by taking into account possible scenarios for planned sales able approximation of fair value. Financial assets include revenues (based on market prices for electricity) and the those investments that were classified as “measured at fair EBIT. The main unobservable inputs used in ¤¥£¦ are the value with changes in value recognized in other comprehen- risk-adjusted discount rate of ©.§¤ % (previous year: ©.£§ %) sive income (FVO I)” under IFRS ¦. Trade debtors include and the expected annual sales revenues (between ¬ ¦¯¤ K receivables from third parties, other related parties, com- and ¬ £,£®¯ K) based on market prices for electricity and pro- panies accounted for at equity and associated companies. ductivity (output). The estimated fair value would rise (fall), Other receivables from other related parties are shown sep- if the annual sales revenues (based on market prices) rose arately. The same disclosure applies to trade payables (see (fell); if the risk-adjusted discount rate was lower (higher); page £§§ et seqq). Information on other financial assets and if the degradation was lower (higher). liabilities is shown in the tables on pages £¤° and £§§.

Annual Report

Consolidated D. Valuation and fair value in accordance with IFRS 9 Financial Statement

Notes At fair value At fair value No measure- through other com- through profit ment category Explanatory Notes for At amortised prehensive income or loss specified by Fair value in K ) Balance Sheet cost (FVOI) (FVTPL) IFRS Total Dec Assets Financial assets 1) 28,506 28,506 28,506 ash and cash equivalents 154,005 154,005 154,005 Trade debtors 98,311 217,816 316,127 316,127 Receivables from down payment invoices 9,060 9,060 9,060 Other receivables from other related companies 370,572 370,572 370,572 Receivables from factoring 5,901 5,901 5,901 Other financial assets 3) 45,004 45,004 45,004 Derivative financial assets 2,551 2,551 2,551 682,853 246,322 2,551 0 931,726 931,726 Equity and Liabilities ontract liabilities 27,770 27,770 27,770 ontract liability from down payment invoices 9,060 9,060 9,060 Trade creditors 321,303 321,303 321,303 Other financial liabilities to other related companies 128,304 128,304 128,304 ontingent consideration 0 0 0 Factoring liabilities 7,737 7,737 7,737 Lease liabilities 61,355 61,355 61,355 Other financial liabilities 19,260 19,260 19,260 Derivative financial liabilities 1,089 135 1,224 1,224 476,604 0 1,089 98,320 576,013 576,013

1) On the balance sheet, 25,595 K is reported under investments and 2,911 K under other long-term financial assets. 2) This includes derivative financial instruments in hedge accounting, lease liabilities, contract liabilities and contract liabilities from advance invoices. 3) An explanation of the breakdown of other financial assets can be found on page 123 et 124.

No liquid markets exist for loans and receivables, which Fair Value Hierarchy are measured at amortized costs. For short-term loans and As of §£ December ¤¥£¦, the group held the financial assets receivables, it is assumed that the fair value corresponds and liabilities presented in the following table and measured to the carrying amount. All other loans and receivables are at fair value. [→ D. ] assessed at fair value through the deduction of accrued interest on future expected cash flows. Thus, the interest The measurement and disclosure of the fair value of finan- rates applied to loans are the same as those used for new cial instruments is based on a fair value hierarchy, which loans with a similar risk structure, original currency and term. takes into account the significance of the input data used in the measurement and is broken down as follows: Trade creditors and other current financial liabilities generally have a maturity of less than one year, so that the car- Level £: Quoted prices (adopted unadjusted) in active markets rying amount corresponds approximately to the fair value. for identical financial assets and liabilities;

For liabilities to banks and other long-term liabilities, the Level ¤: Input data other than the quoted prices included fair values are determined as present values of the liability within Level £ that are observable for the asset or liability, payments based on market interest rates and risk surcharge. either directly (as prices) or indirectly (derived from prices);

Level §: Input data used for measuring the asset or liability data not based on observable market data (unobservable input data).

Annual Report

D.82 Valuation and fair value in accordance with IFRS 9

At fair value At fair value No measure- through other com- through profit ment category At amortised prehensive income or loss specified by Fair value in K cost (FVOI) (FVTPL) IFRS ) Total Dec Assets Financial assets 1) 5,636 5,636 5,636 ash and cash equivalents 152,681 152,681 152,681 Trade debtors 94,467 265,146 359,613 359,613 Receivables from down payment invoices 33,260 33,260 33,260 Other receivables from other related companies 370,635 370,635 370,635 Receivables from factoring 7,305 7,305 7,305 Other financial assets 3) 59,702 59,702 59,702 Derivative financial assets 1,726 238 1,964 1,964 718,050 270,782 1,726 238 990,796 990,796 Equity and Liabilities ontract liability 23,422 23,422 23,422 ontract liability from down payment invoices 33,260 33,260 33,260 Trade creditors 287,386 287,386 287,386 Other financial liabilities to other related companies 146,886 146,886 146,886 ontingent consideration 3,882 3,882 3,882 Factoring liabilities 5,137 5,137 5,137 Liabilities from finance lease arrangements 754 754 754 Other financial liabilities 27,326 27,326 27,326 Derivative financial liabilities 1,912 318 2,230 2,230 466,735 0 5,794 57,754 530,283 530,283

1) On the balance sheet, 2,403 K is reported under investments and 3,233 K under other long-term financial assets. 2) This includes derivative financial instruments in hedge accounting, finance lease liabilities, contract liabilities and contract liabilities from advance invoices 3) An explanation of the breakdown of other financial assets can be found on page 123.

D. 31 Dec 2019 31 Dec 2018 in K Level Level Level Level Level Level Financial assets Measured at fair value Financial assets (recognized in equity) 1) 28,506 5,636 Trade debtors in FVO I category 2) 217,534 282 263,979 1,436 Derivatives with hedge relationship (recognized in equity) 238 Derivatives without hedge relationship (recognized in P&L) 2,551 1,726 Financial liabilities Measured at fair value ontingent consideration 0 3,882 Derivatives with hedge relationship (recognised in equity) 135 318 Derivatives without hedge relationship (recognised in P&L) 1,089 1,912

1) An amount of 25,595 K (previous year: 2,403 K) is recognised on the balance sheet in investments and an amount of 2,911 K (previous year: 3,233 K) in other long-term financial assets. 2) Trade debtors in the FVOI category that were classified at Level 3 are based on individual allowances.

Annual Report

Consolidated In the financial year, no reclassification was made between A possible change in one of the key unobservable inputs, Financial Statement Levels £ and ¤ in the measurement of fair value and no while retaining the other inputs, would have the following

Notes reclassification was made on or from Level § with respect effects on the fair values of the purchase option for shares Explanatory Notes for to the measurement of fair value. Financial assets include in a company: Balance Sheet the fair value of an option to purchase shares in a company. Explanatory D. | PROFIT OR LOSS Notes on the Cash The carrying amount was ¬ ¤,¦££ K (previous year: ¬ §,¤§§ K). Flow Statement In the financial year, a net change in the fair value amounting in K Increase Decrease to ¬ §¤¤ K (previous year: ¬ §§ K) was recognized in other 31 December 2019 comprehensive income. Under IFRS ¦, the group has clas- WA (1.00 % change) -399 472 sified the option to purchase shares in a company as FVO I Degradation (0.50 % change) -244 253 and allocated it to Level § (see page £°£ for information on Market price for electricity the measurement method). (0.50 % change) 257 -239

The following table shows the additions of the investments D. | PROFIT OR LOSS in K in the reporting year in Level § of the fair value hierarchy: Increase Decrease 31 December 2018 D. | EQUITY INVESTMENTS LEVEL WA (1.00 % change) -469 557 in million 2019 Degradation (0.50 % change) -292 303 Opening balance 5,63 Market price for electricity Additions 23,28 (0.50 % change) 272 -252 hanges in value -0,32 Disposals -0,08 The net results of the financial instruments are shown below Final balance 28,51 by measurement categories under IFRS ¦: [→ D. § | D. ]

As of §£ December ¤¥£¦, there was a contingent considera- Interests from financial instruments are recognized in inter- tion with a fair value of ¬ ¥ K (previous year: ¬ §,´´¤ K). An est results. increase / decrease of £ % in the risk-adjusted discount rate would not have resulted in any gain / loss. Fulfilment of the Allowances on trade debtors are recognized in other oper- contingent consideration depends on defined key earnings ating expenses. Interest results from financial liabilities in figures (number of machines sold). If the contractual con- the measurement category “liabilities measured at amor- dition is met, payment is made in full; if the condition is not tized cost” mainly result from expenses for commission on met, no payment is made. guarantees and commitment fees.

D. § From subsequent measurement

Foreign currency in K From interest At fair value translation Allowance 2019 Assets in the category: At amortised cost 5,362 23,966 1,149 30,477 Debt instruments – at fair value through other comprehensive income (FVO I) -2,599 641 -1,958 Equity instruments – at fair value through other comprehensive income (FVO I) -322 -322 At fair value through profit or loss (FVTPL) 825 825 Liabilities in the category: At amortised cost -7,102 -19,182 -26,284 At fair value through profit or loss (FVTPL) 3,327 3,327 Total -1,740 3,830 2,185 1,790 6,065

Annual Report

D. From subsequent measurement

Foreign currency in K From interest At fair value translation Allowance 2018 Assets in the category: At amortised cost 4,263 25,448 -418 29,293 Debt instruments – at fair value through other comprehensive income (FVO I) -2,292 -2,622 -4,914 Equity instruments – at fair value through other comprehensive income (FVO I) 33 33 At fair value through profit or loss (FVTPL) 1,115 1,115 Liabilities in the category: At amortised cost -6,592 -19,858 -26,450 At fair value through profit or loss (FVTPL) -183 -183 Total -2,329 965 3,298 -3,040 -1,106

NOTES ON THE non-cash items and all other items showing cash flows ASH FLOW STATEMENT in the investment or financing areas. Due to the first-time application of IFRS £®, payments of principal for leases are . ASH FLOW STATEMENT recognized in cash flow from financing activities. The total cash flow for lease obligations carried as liabilities in ¤¥£¦ The statement of cash flows pursuant to IAS ¯ “Statement amounted to ¬ ¤¥,©®¯ K thereof payments of principal for of ash Flows” records the payment flow in a financial year leases amounted to ¬ £¦,©´´ K and of interests to ¬ ¦¯¦ K. and provides information on the inflow and outflow of the ash outflows for short-term leases and leases above a company’s liquid funds. The payment flows are broken down low-value asset are not included here. into cash flow from current operations and cash flow from investment and financing activities. The changed entry in the cash flow statement led to an increase in free cash flow in financial year ¤¥£¦. ash flow In addition to liquid funds, cash and cash equivalents from financing activities changed accordingly. specifically include cheques, cash in hand and money on account at banks, as well as short-term financial ash flows from investment and financing activities were investments that can be converted to cash amounts at any each calculated in terms of actual sums paid. Effects from time and are only subject to immaterial fluctuations in value. foreign currency translation and changes in the consolidated ash and cash equivalents are measured at amortized cost. group were adjusted accordingly.

The cash flow from current operations was calculated using The reconciliation between the change in liabilities from the indirect method through adjusting earnings before tax financing activities and in cash flow from financing activ- for changes in inventories, trade debtors and creditors, ities is shown in the table below: [→ D. ]

Liabilities Liabilities to Liabilities from leasing other related in K to banks arrangements companies Total As at 1 January 2019 0 66,289 236,613 302,902 hanges in cash flow from financing activities Transfer of profit to DM MORI mbH -99,326 -99,326 Payments of principal for lease liabilities -19,588 -19,588 Total changes in cash flow from financing activities 0 -19,588 -99,326 -118,914

Effects of changes in foreign exchange rates 317 110 427 Other changes 14,337 96,641 110,978 As at 31 December 2019 0 61,355 234,038 295,393

Annual Report

Consolidated The other changes in liabilities to related parties are mainly due In financial year ¤¥£¦, ILDEMEISTER Beteiligungen mbH Financial Statement to the outstanding profit transfer payment to DM MORI mbH participated in capital increases for the joint venture,

Notes for financial year ¤¥£¦ (¬ ¦©,¯°¤ K) and the tax allocation for DM MORI HEITE mbH, Erlangen, in accordance with the Explanatory Notes on the Cash financial year ¤¥£´ of ¬ °§,°®¯ K paid to DM MORI mbH in articles of association. Payments in an amount of ¬ ¤©¥ K Flow Statement ¤¥£¦ and taxes of DM MORI mbH for financial year ¤¥£¦ (previous year: ¬ °©¥ K) were recognized in cash flow from Explanatory Notes for (¬ §¤,¤¦© K), which have been charged but not yet paid due to investing activities. Segmental Reporting the tax allocation agreement. The other change (¬ £¤,¥¯£ K) was due to the increase in liabilities to related parties from The proceeds from changes in ownership interests in subsid- operating activities. iaries in the previous year relate to the sale of a °¦ % interest in DM MORI Machine Tools Trading o., Ltd., Shanghai, The profit and loss transfer to DM MORI mbH for finan- ( hina), to DM MORI OMPANY LIMITED, which took place cial year ¤¥£´ resulted in a cash outflow of ¬ ¦¦,§¤® K in ¤¥£¦, for financial year ¤¥£¦. recognized in cash flow from financing activities. In addition, the purchase of shares in INTE H DMLS Pvt. Ltd, The profit transfer to DM MORI mbH for financial year Bangalore (India), amounting to §¥ % of the purchase price ¤¥£¦ amounting to ¬ ¦©,¯°¤ K did not result in a cash outflow of ¬ ´,¥¥° K was also recognized as a payment in cash flow in ¤¥£¦. from investing activities in the previous year.

In January ¤¥£´, DM MORI increased its interest in In November ¤¥£´, ILDEMEISTER Beteiligungen mbH REALIZER mbH to ¯©.£ %. The purchase price for the addi- acquired a © % interest in STBO mbH. This payment in tional shares amounted to ¬ £,©¥¥ K and was paid in ¤¥£´ the amount of ¬ §¥¥ K was recognised in cash flow from and recognized in cash flow from investing activities in the investing activities. previous year. In the reporting year, DM MORI sold its interest in pro- In ¤¥£¦, the interest in REALIZER mbH was increased micron mbH. This resulted in a payment receipt of ¬ °¥ K, to £¥¥ %. The purchase price for the additional interest which was recognized in cash flow from investing activities. amounted to ¬ ©,°©¥ K. In the previous year, a cash inflow was recognized in cash In the reporting year, DM MORI sold its interest in ILDE¶ flow from investing activities for the sale of the £¦% inter- MEISTER ENERY SERVI ES IBERI A, S.L., ILDEMEISTER est in DM MORI Manufacturing USA, Inc. to DM MORI ENERY Services UK Ltd. and ILDEMEISTER energy effi- OMPANY LIMITED (purchase price of ¬ ¤£,°¥¥ K). ciency mbH to a strategic investor. The purchase price of ¬ ¤,®©¦ K resulted in a cash inflow in ¤¥£¦. An amount of The ¬ ¤©¥,¥¥¥ K increase in the loan from DM MORI ¬ £,´°¯ K was also transferred and recognized in cash flow AKTIENESELLS HAFT to DM MORI mbH to ¬ §¯¥,¥¥¥ K from investing activities. was paid in full in ¤¥£´ and recognized in cash flow from investing activities. DM MORI acquired £©.¥¤ % of TULIP Interfaces, Inc. in the reporting year. The purchase price resulted in a cash outflow Joint ventures are accounted for in the consolidated financial in ¤¥£¦, which was recognized in cash flow from investing statements using the equity method and thus only have an activities. impact on cash flows, if dividends are paid.

In addition, the purchase of shares in Pragati Automation Pvt. Ltd. (India), amounting to §¥ % of the purchase price of NOTES ON SE£MENT REPORTIN£ ¬ ¤¥,°´¦ K was also recognized as a payment in cash flow from investing activities. . EXPLANATORY NOTES ON THE SE£MENTS

The purchase price of ¬ £,£¥¥ K for §§.§° % of Vershina Within the scope of segment reporting, pursuant to the Operation, LL . and the purchase price of ¬ ¤¥ K for °¥ % of IFRS ´ regulations, the business activities of the DM MORI DM MORI Digital mbH were also recognized as a payment group are categorised into the business segments of Machine in cash flow from investing activities in the reporting year. Tools, Industrial Services and orporate Services. Essential

Annual Report §

in the differentiation between the business segments is the with each other. ILDEMEISTER Beteiligungen mbH as information that the so-called “chief decision-maker” is reg- the parent company of all production plants, and along with ularly provided with for the purposes of decision-making on ILDEMEISTER Partecipazioni S.r.l., Brembate di Sopra, the allocation of resources and the evaluation of profitabil- Bergamo (Italy), is also part of this segment. Additionally, ity. The segment differentiation follows internal manage- the group's uniform IT is concentrated here. ment and reporting on the basis of the different products and services. The key performance indicators for evaluating The “Industrial Services” segment comprises both the Ser- profitability of each business segment are the sales reve- vices and Energy Solutions segments nues and EBIT. The Services division, which covers all areas with its pro- A tabular presentation as part of the notes can be found on ducts and services, is directly related to machine tools. It page ¦® et seq. includes the business operations of DM MORI Vertriebs und Service mbH, Bielefeld, and its subsidiaries, as well The “Machine Tools” segment includes the group’s new as DM MORI Management mbH, Bielefeld, the operat- machine business and consists of Turning, Milling, Advanced ing management company of the group’s Sales and Service Technologies (Ultrasonic / Lasertec / Additive Manufacturing) sites. DM MORI AKTIENESELLS HAFT manages the and Digital Solutions (previously Software Solutions). The domestic market ermany, the EMEA region (Europe, growing importance and expansion of our digital competen- Middle East, Africa) as well as the markets hina and India. cies are reflected in this business unit’s change of name. DM MORI OMPANY LIMITED is responsible for its home market in Japan, the USA and the other regions in Asia and The “Machine Tools” segment includes the lathes and the Americas. turning centres of › ILDEMEISTER Drehmaschinen mbH, Bielefeld, In the Services division we combine our marketing activities › ILDEMEISTER Italiana S.p.A., Brembate di Sopra and Life ycle services for both our machines and DM MORI (Bergamo), Italy, OMPANY LIMITED. DM MORI Life ycle Services help our › RAZIANO Tortona S.r.l., Tortona, Italy, customers to maximize the productivity of their machine › FAMOT Pleszew Sp. z o.o., Pleszew, Poland, tools over their entire life cycle – from commissioning › DE KEL MAHO ILDEMEISTER (Shanghai) Machine through to part exchange as used machines. The wide range Tools o., Ltd., Shanghai, hina, of service agreements, maintenance and training services › ULYANOVSK MA HINE TOOLS OOO, Ulyanovsk, Russia, offered, guarantees our customers maximum cost-effectiveness for their machine tools. This includes placement the milling machines and machining centres of and consulting activities. Another area is the key accounting › DE KEL MAHO Pfronten mbH, Pfronten, for major international customers, which is concentrated › DE KEL MAHO Seebach mbH, Seebach, cross-region and cross-product. › FAMOT Pleszew Sp. z o.o., Pleszew, Poland, › DE KEL MAHO ILDEMEISTER (Shanghai) Machine The Energy Solutions division includes the business activities Tools o., Ltd., Shanghai, hina, of ILDEMEISTER energy solutions mbH and the company › ULYANOVSK MA HINE TOOLS OOO, Ulyanovsk, Russia, responsible for sales and service in Italy. Effective from £ July ¤¥£¦ business activities belonging to Energy Solutions were the Ultrasonic- and Lasertec-Machines of Advanced sold to a strategic investor. All existing orders at Energy Technologies Solutions on this date were mainly processed in the report- › SAUER mbH, Idar-Oberstein / Kempten, ing year, generating sales revenues. › REALIZER mbH, Borchen The “ orporate Services” segment primarily comprises the and the products of DM MORI AKTIENESELLS HAFT with its group wide › DM MORI SOFTWARE SOLUTIONS mbH, Pfronten, holding functions. DM MORI AKTIENESELLS HAFT is › ISTOS mbH, Bielefeld, assigned with corporate functions, such as group strategy, › WERKBLiQ mbH, Bielefeld, development and purchasing coordination, management › DM MORI Digital mbH, Bielefeld. of overall projects in the production and logistics areas, financing, corporate controlling and corporate personnel All machines produced are classified as cutting machine management. The holding functions across the group gen- tools, and all business segments are highly concurrent erate expenses and sales revenues.

Annual Report

Consolidated . EXPLANATORY NOTES ON SE£MENT DATA In financial year ¤¥£¦ and in the previous year, no transac- Financial Statement tions carried out with any one customer were more than £¥ %

Notes The definition of terms used in individual segment informa- of the sales revenues of the DM MORI roup. Explanatory Notes for tion is in line with the management principle for the value- Segmental Reporting oriented corporate management of the DM MORI roup. The “Transition” column shows the elimination of intra- Other Explanatory Segment data is generally based on the same accounting group receivables and liabilities, income and expenses, as Notes and valuation methods that form the basis for the onsoli- well as the elimination of intercompany profits between dated Financial Statements. segments.

Segmental assets include all operating assets including The information on geographical areas is based on the reg- goodwill and deferred income or expenses; it does not istered office of the group companies and is broken down include income tax claims. In order to assess the profit- into regions comprising ermany, the rest of Europe, North ability of group segments, prorata revenue for brokerage America, Asia and the rest of the world. The data is deter- and consulting activities from the sale of machine tools are mined on the basis of geographical sub-groups. reclassified from the “Machine Tool” segment to the “Indus- trial Services” segment. Sales between the segments are Long-term assets are mainly attributable to fixed assets; made at standard market transfer prices. they do not include financial instruments or deferred tax claims. As of §£ December ¤¥£¦, the region of “Rest of Pursuant IFRS § “Business ombinations”, existing good- Europe” contains long-term assets in Italy in an amount will was allocated to the segments as follows: goodwill is of ¬ £¤£,¤®¥ K (previous year: ¬ ££®,§©° K) in Russia in the attributed to the “Machine Tools” segment amounting to amount of ¬ ´¤,°¤¤ K (previous year: ¬ ¯©,©¤´ K) as well ¬ ©¯,¥¯§ K (previous year: ¬ ©¯,¥¯§ K), to the “Industrial Ser- as in Poland in the amount of ¬ ¦´,°¤´ K (previous year: vices” segment in an amount of ¬ ´£,¥¥¦ K (previous year: ¬ ©®,´£¤ K). In Europe, third-party revenue amounted to ¬ ´¤,§¤® K), and to the “ orporate Services” segment in an ¬ ¤§¤,©¯§ K (previous year: ¬ ¤©¯,®´¤ K) in Italy, ¬ ¤¤£,©´´ K in amount of ¬ ¥ K as in the previous year. As in the previous Russia (previous year: ¬ £¤¦,¦´´ K) and ¬ ¯©,©©¤ K in Poland year, no impairment of goodwill was recorded for the finan- (previous year: ¬ ®®,´£© K). cial year.

Investments include additions to intangible assets, tangible OTHER EXPLANATORY NOTES fixed assets and additions to financial assets. . AUDITOR’S FEES AND SERVIES Intersegment sales revenues show sales revenues made between the segments. The transfer prices for intra-group The auditor, KPM A Wirtschaftsprüfungsgesellschaft, sales revenues are determined in line with the market (arm’s Berlin, was commissioned to audit the Annual and the length principle). onsolidated Financial Statements of DM MORI AKTIEN¶ ESELLS HAFT and the companies included in the on- Scheduled depreciation relates to segmental fixed assets. solidated Financial Statements.

EBT for the “Machine Tools” segment includes income from The fees and charges for the services provided by the annual the reversal of provisions amounting to ¬ ¤,¤¦¦ K (previous auditor, KPM A Wirtschaftsprüfungsgesellschaft, recog- year: ¬ £,¤¤¤ K). In the previous year, impairments were rec- nized as expenses in financial year ¤¥£¦, relate to ¬ £,¯¤° K ognized in the amount of ¬ ´°§ K. EBT for the “Industrial (previous year: ¬ £,¯©¥ K) for statutory auditing services and Services” segment included in the financial year income ¬ °¦¯ K (previous year: ¬ ¤¯§ K) for other audit-related ser- from the reversal of provisions amounting to ¬ ®,¥§§ K (pre- vices. These also include tax advisory services amounting to vious year: ¬ £,´°¥ K). Depreciation includes impairments of ¬ £°£ K (previous year: ¬ £¯© K) and other services amounting ¬ °,¤£© K (previous year: ¬ °,´££ K), mainly relating to build- to ¬ £®¦ K (previous year: ¬ ¤©§ K). ings. DM MORI has identified an impairment of ¬ ´§® K for an electricity storage plant, as the plant should no longer Only services that are consistent with the engagement as be used. The depreciation was recognized in the " orporate auditor of the Annual and the onsolidated Financial State- Services" segment. The “ orporate Services” segment rec- ments of DM MORI AKTIENESELLS HAFT were provided. ognises ¬ ®§§ K (previous year: ¬ ®§§ K) in expenses from the scheduled amortisation of transaction costs for the syn- The auditing services mainly related to audits of the Annual dicated credit line of DM MORI AKTIENESELLS HAFT. and onsolidated Financial Statements of DM MORI

Annual Report

AKTIENESELLS HAFT and various annual and IFRS DM MORI group, with the exception of Magnescale o. Ltd Reporting Package audits of its subsidiaries for inclusion and its subsidiaries. Unless otherwise indicated, the infor- in the onsolidated Financial Statements of DM MORI mation on other related parties refers to this group of com- AKTIENESELLS HAFT, including statutory extensions panies and also includes DM MORI OMPANY LIMITED. and audit focus areas agreed with the Supervisory Board. DM MORI HEITE mbH is considered a joint venture. The audit also included audit reviews of quarterly and hal- fyear reports and project-related accounting I S and IT DM MORI AKTIENESELLS HAFT has granted DM MORI audits. Other assurance services relate to the audit of the mbH a loan in the amount of ¬ §¯¥,¥¥¥ K which has been ompliance Management System and statutory or contrac- paid in full. Interest is charged at a market rate of £.¥¥ %. tual audits, such as e. g. confirmation of compliance with covenants or the EMIR audit in accordance with Section ¤¥ A domination and profit transfer agreement exists between WpH (Securities Trading Act). Tax advisory services included DM MORI mbH, Bielefeld, a wholly owned subsidiary support services relating to transfer pricing system issues of DM MORI OMPANY LIMITED and DM MORI AKTIEN¶ and VAT advice on individual tax matters. Other services ESELLS HAFT and became effective on ¤° August ¤¥£®. relate to training on current accounting developments, advi- Furthermore, with effect from £ January ¤¥£¯, a tax alloca- sory services regarding initial application of new accounting tion agreement was concluded between DM MORI mbH standards and quality assurance support services. Project- and DM MORI AKTIENESELLS HAFT. The profit trans- related quality assurance support services mainly relate to fer to DM MORI mbH for financial year ¤¥£¦ amounted the ompliance System. to ¬ ¦©,¯°¤ K (previous year: ¬ ¦¦,§¤® K). The tax debited by DM MORI mbH as a result of the tax allocation agreement amounted to ¬ §¤,¤¦© K (previous year ¬ °§,°®¯ K). . EVENTS OURRIN£ AFTER THE REPORTIN£ DATE In June ¤¥£¦, DM MORI transferred a °¦ % interest in A key event after the balance sheet date was the increas- DM MORI Machine Tools Trading o. Ltd, Shanghai ( hina), ing worldwide spread of the corona virus, which resulted in to DM MORI OMPANY LIMITED. DM MORI AKTIEN¶ a three-day business interruption at the Pfronten site. No ESELLS HAFT and DM MORI ompany Ltd. had agreed other events occurred before the financial statements were some years ago that in future, sales in the People's Repub- authorized for issue by the Executive Board on ¦ March ¤¥¤¥. lic of hina would be solely handled by a subsidiary of DM MORI AKTIEN ESELLS HAFT, DM MORI Machine Tools Trading o. The sales company of DM MORI ompany . RELATED PARTY DISLOSURES Ltd. in hina was dissolved in ¤¥£´ and ¬ °.£ million was paid to DM MORI in ¤¥£´ as the purchase price for a °¦ % Related parties as defined by IAS ¤° “Related Party Dis- interest in DM MORI Machine Tools Trading o. The cash closures” are, in principle, members of the Executive and received was reported as liabilities to other related parties Supervisory Boards, close members of their families and in the consolidated financial statements as of §£ December, subsidiaries that are not fully consolidated. Excluding remu- ¤¥£´. After official permit the equity of DM MORI Machine neration and pension plans, these related parties were not Tools Trading o. Ltd. was increased in ¤¥£¦ and the shares involved in any significant or unusual transactions with com- were transferred. Thus, in the consolidated financial state- panies of the DM MORI group. All transactions with related ments for ¤¥£¦, the °¦ % interest is presented in the amount parties have been carried out under normal market condi- of the company’s proportionate net assets. The difference tions, as between external third parties. to the liability to related parties of ¬ §.¤ million, resulting from the change in net assets during the period between the DM MORI Finance mbH and Magnescale o. Ltd. are con- agreement and final transfer of the shares, is recognized in sidered associates. The financial year of Magnescale o. retained earnings. Ltd. and its subsidiaries is, as is the case for the other significant consolidated companies of DM MORI OMPANY In the previous year, a cash inflow for the sale of the £¦ % LIMITED, in line with the reporting period of DM MORI interest in DM MORI Manufacturing USA, Inc., to DM MORI group (§£. December). OMPANY LIMITED (purchase price of ¬ ¤£,°¥¥ K) was recognized in cash flow from investing activities. Other related parties to the DM MORI group are the ultimate parent company, DM MORI OMPANY LIMITED, Nara In the reporting year, impairments or provisions for doubt- (Japan), and its subsidiaries and major holdings outside the ful receivables in connection with outstanding balances for

Annual Report

Consolidated other related parties amounted to ¬ ©°¥ K (previous year: Detailed disclosures on the remuneration structure for Financial Statement ¬ ®£© K). In financial year ¤¥£¦, no expenses were recognized members of the Executive and Supervisory Boards can be

Notes for bad debts or doubtful accounts from other related parties found in the remuneration report on pages ¤¦ seqq. of the Other Explanatory Notes and persons (previous year: ¬ ´ K) and for associated com- Management Report. The management in key positions DMG MORI Group panies were recognized. No expenses were recognized for comprises the members of the Executive and Supervisory Companies bad debts or doubtful accounts from joint ventures. Boards.

As in the previous year, no licences were acquired from other Remuneration is explained in the section on employee related companies during the reporting year. expenses (page ££¯); note that indirect remuneration includes benefits after the end of the employment relationship, LTI The following transactions were carried out with related and other long-term benefits and all other remuneration companies: components include short-term benefits.

D. | £OODS AND SERVIES RENDERED TO . STATUTORY NOTIFIATION in K 2019 2018 PURSUANT TO SETION WPH£ Associates 110,733 116,402 Joint ventures 1 0 The statutory notifications pursuant to Section ¤® WpH DM MORI OMPANY LIMITED 286,783 315,313 are stated in the onsolidated Financial Statements of Other related companies (excluding DM MORI AKTIENESELLS HAFT. DM MORI OMPANY LIMITED) 36,429 25,925

D. | £OODS AND §. ORPORATE £OVERNANE SERVIES REEIVED OF in K 2019 2018 The declaration of conformity in accordance with Section £®£ of Associates 12,337 10,319 the erman Stock orporation Act (Akt) and the orporate Joint ventures 2,072 0 overnance Report was made in November ¤¥£¦ and has been DM MORI OMPANY LIMITED 322,798 310,184 made permanently accessible on our website at: Other related companies (excluding → en.dmgmori-ag.com/corporate-communications/ DM MORI OMPANY LIMITED) 84,938 86,886 corporate-governance/

The goods and services rendered and received with other related parties are primarily attributable to the purchase . SHAREHOLDER STRUTURE and sale of machine tools and other services. The disclosure of receivables and liabilities from related companies is According to its voting right notification from ® April ¤¥£®, shown under the corresponding notes on the balance sheet DM MORI OMPANY LIMITED, Nara (Japan), held a direct items. The balances are normally settled within a three- voting share of ¯®.¥§ % in the share capital of DM MORI month period. No guarantees and securities were granted AKTIENESELLS HAFT. In addition, Paul Singer held ¦.©§ % to or received by related companies. of share capital through affiliated companies as per the last notification of voting rights dated ¤® November ¤¥£¦.

Annual Report

DM£ MORI £roup ompanies

D. | PRODUTION PLANTS, SALES AND SERVIES OMPANIES Equity )

Participation National quota Subsidiaries (fully consolidated companies) currency in K in % ILDEMEISTER Beteiligungen mbH, Bielefeld 2 / 3 / 4) 273,866 100.0 DE KEL MAHO Pfronten mbH, Pfronten 3 / 5 / 6) 83,427 100.0 SAUER mbH, Stipshausen / Idar-Oberstein 3 / 4 / 7 / 8) 12,455 100.0 Alpenhotel Krone mbH & o. K, Pfronten 3 / 7) 2,629 100.0 Alpenhotel Krone Beteiligungsgesellschaft mbH, Pfronten 3 / 7) 29 100.0 ILDEMEISTER Drehmaschinen mbH, Bielefeld 3 / 5 / 6) 24,000 100.0 ILDEMEISTER Partecipazioni S.r.l., Brembate di Sopra (Bergamo), Italy 5) 92,220 100.0 ILDEMEISTER Italiana S.p.A., Brembate di Sopra (Bergamo), Italy 9) 37,266 100.0 RAZIANO Tortona S.r.l., Tortona, Italy 9) 38,754 100.0 DM MORI lobal Service Turning S.r.l., Brembate di Sopra (Bergamo), Italy 9) 2,525 100.0 ARLINO FTV 3.2 S.R.L., Bozen, Italy 9) 10,171 100.0 DE KEL MAHO Seebach mbH, Seebach 3 / 5 / 6) 43,000 100.0 DM MORI Software Solutions mbH, Pfronten 3 / 4 / 5 / 6) 1,100 100.0 DM MORI Spare Parts mbH, eretsried 3 / 4 / 5 / 6) 25,000 100.0 ISTOS mbH, Bielefeld 3 / 5 / 6) 1,000 85.0 Ulyanovsk Machine Tools ooo, Ulyanovsk, Russia 5) RUB K 8,054,015 115,129 100.0 Realizer mbH, Borchen 5 / 6 / 24) -261 100.0 WERKBLiQ mbH, Bielefeld 3 / 5 / 6) -1,180 100.0 MITIS rundstücks-Vermietungsgesellschaft mbH & o. Objekt Bielefeld K, Bielefeld 3) 372 100.0 MITIS rundstücks-Vermietungsgesellschaft mbH, Bielefeld 3) 190 100.0 DM MORI Vertriebs und Service mbH, Bielefeld 2 / 3) 398,646 100.0 DM MORI Management mbH, Bielefeld 3 / 4 / 10 / 11) 24 100.0 DM MORI Deutschland mbH, Leonberg 3 / 4 / 10 / 11) 63,968 100.0 DM MORI München mbH, Munich 3 / 4 / 12 / 13) 5,000 100.0 DM MORI Hilden mbH, Hilden 3 / 4 / 12 / 13) 4,200 100.0 DM MORI Bielefeld mbH, Bielefeld 3 / 4 / 12 / 13) 2,800 100.0 DM MORI Berlin Hamburg mbH, Bielefeld 3 / 4 / 12 / 13) 5,500 100.0 DM MORI Frankfurt mbH, Bad Homburg 3 / 4 / 12 / 13) 2,700 100.0 DM MORI Stuttgart mbH, Leonberg 3 / 4 / 12 / 13) 7,000 100.0 DM MORI Services mbH, Bielefeld 3 / 10 / 11) 29,635 100.0 DM MORI lobal Service mbH, Bielefeld 3 / 4 / 14 / 15) 5,200 100.0 DM MORI Academy mbH, Bielefeld 3 / 4 / 14 / 15) 4,000 100.0 DM MORI Used Machines mbH, eretsried 3 / 4 / 14 / 15) 17,517 100.0 DM MORI Netherlands Holding B.V., Veenendaal, Netherlands 10) 567,265 100.0 antiquitas Verwaltungsgesellschaft mbH, Klaus, Austria 16) 5,590 100.0 DM MORI Sales and Service Holding A, Winterthur, Switzerland 16) HF K 551,574 508,176 100.0 DM MORI Europe A, Winterthur, Switzerland 17) 116,715 100.0 DM MORI Schweiz A, Winterthur, Switzerland 18) HF K 36,718 33,829 100.0 DM MORI Balkan mbH, Klaus, Austria 17) 2,150 100.0 DM MORI Austria mbH, Klaus, Austria 19) 19,241 100.0

Annual Report

Consolidated D. | PRODUTION PLANTS, SALES AND SERVIES OMPANIES Financial Statement Equity )

Notes Participation DMG MORI Group Company National quota Subsidiaries (fully consolidated companies) currency in K in %

DM MORI Netherlands B.V., Veenendaal, Netherlands 17) 8,075 100.0 DM MORI BeLux BVBA SPRL., Zaventem, Belgium 17) 4,696 100.0 DM MORI zech s.r.o., Brno, zech Republic 17) ZK K 343,299 13,511 100.0 DM MORI DENMARK ApS, openhagen, Denmark 17) DKK K 23,991 3,211 100.0 DM MORI FRAN E SAS, Paris, France 17) 19,674 100.0 DM MORI Hungary Kft., Budapest, Hungary 17) 8,896 100.0 DM MORI IBERI A S.L., Ripollet, Spain 17) 13,968 100.0 DM MORI Italia S.r.l., Milan, Italy 17) 48,502 100.0 DM MORI MIDDLE EAST FZE, Dubai, United Arab Emirates 17) 3,007 100.0 DM MORI Israel Ltd., Tel Aviv, Israel 17) ILS K 0 0 100.0 DM MORI POLSKA Sp. z o.o., Pleszew, Poland 17) PLN K 66,026 15,511 100.0 DM / MORI REE E M.E.P.E., Thessaloniki, reece 17) 1,032 100.0 DM MORI Sweden AB, öteborg, Sweden 17) SEK K 114,249 10,936 100.0 DM MORI NORWAY AS, Langhus, Norway 17) NOK K 12,987 1,317 100.0 DM MORI Finland Oy Ab, Tampere, Finland 17) 3,129 100.0 DM MORI UK Limited, Luton, reat Britain 17) BP K 26,403 31,033 100.0 DM MORI ROMANIA S.R.L., Bucharest, Romania 17) RON K 27,789 5,810 100.0 DM MORI BULARIA EOOD, Sofia, Bulgaria 17) BN K 1,211 619 100.0 DM MORI ISTANBUL MAKINE TI ARET VE SERVIS LIMITED SIRKETI, Istanbul, Turkey 17) TRY K 20,888 3,125 100.0 DM MORI Rus ooo, Moscow, Russia 17) RUB K 3,917,606 56,001 100.0 DM Egypt for Trading in Machines Manufactured LL , Kairo, Egypt 17) EP K 200 11 100.0 Mori Seiki Egypt for Trading in Machines & Equipments LL , airo, Egypt 17) EP K 200 11 100.0 DM MORI Africa for Trading in Machines & Services (S.A.E.), airo, Egypt 20) EP K 15,450 857 100.0 DM MORI Asia Pte. Ltd., Singapore 17) 27,524 100.0 DM MORI Machine Tools Spare Parts (Shanghai) Ltd., Shanghai, hina 17) NY K 31,784 4,064 100.0 DM MORI India Private Limited, Bangalore, India 17) INR K 485,790 6,058 51.0 DE KEL MAHO ILDEMEISTER (Shanghai) Machine Tools o., Ltd., Shanghai, hina 17) NY K 83,160 10,634 100.0 FAMOT Pleszew Sp. z o.o., Pleszew, Poland 17) PLN K 599,847 140,915 100.0 DM MORI Machine Tools Trading o., Ltd., Shanghai, hina 10) NY K 107,300 13,720 51.0

Annual Report

D. | PRODUTION PLANTS, SALES AND SERVIES OMPANIES Equity )

Participation National quota Subsidiaries (fully consolidated companies) currency in K in % ILDEMEISTER energy solutions mbH, Würzburg 3 / 4 / 10 / 11) 9,100 100.0 ILDEMEISTER TURKEY SOLAR ENERJI ANONIM SIRKETI, Istanbul, Turkey 21) TRY K -284 -42 100.0 ILDEMEISTER LS Beteiligungs mbH, Würzburg 21) 4,165 51.0 ILDEMEISTER LS Solar Australia Pty Ltd., Brisbane, Australia 22) AUD K 4,120 2,576 100.0 ILDEMEISTER LS Solar RUS OOO, Moscow, Russia 22) RUB K 153,531 2,195 100.0 ILDEMEISTER ENERY SERVI ES ITALIA S.R.L., Milan, Italy 21) 2,426 100.0 Joints ventures DM MORI HEITE mbH, Erlangen 5) 1,738 50.0 Associates Magnescale o. Ltd., Kanagawa, Japan JPY K 8,806,000 72,216 44.1 Magnescale Europe mbH, Wernau 23) 2,966 44.1 Magnescale Americas, Inc., Davis, USA 23) USD K 1,192 1,061 44.1 DM MORI Finance mbH, Wernau 25,139 42.6 DM MORI Digital mbH, Bielefeld 5) 64 40.0 Vershina Operation, LL ., Narimanov, Russia 22) RUB K 16,191 231 33.3 INTE H DMLS Pvt. Ltd., Bangalore, India 5) INR K 375,688 4,685 30.0 Pragati Automation Pvt. Ltd., Bangalore, India 5) INR K 929,528 11,592 30.0

1) The figures correspond with the financial statements prepared in accordance with local regulations; they do not show the respective companies’ contribution to the onsolidated Financial Statements. Foreign currencies with respect to equity were translated at the market price on reporting date. 2) with profit and loss transfer and control agreement with DM MORI AKTIENESELLSHAFT 3) T he domestic subsidiary has complied with the conditions required by Section 264 paragraph 3 HB (erman ommercial ode) regarding the application of the exemption regulations and therefore waives the disclosure of its annual financial statements and relating documents. 4) The domestic subsidiary has complied with the conditions required by Section 264 paragraph 3 HB (erman ommercial ode) regarding the application of the exemption regulations and therefore waives the preparation of a management report. 5) equity investment of ILDEMEISTER Beteiligungen mbH 6) with profit and loss transfer and control agreement with ILDEMEISTER Beteiligungen mbH 7) equity investment of DEKEL MAHO Pfronten mbH 8) with profit and loss transfer and control agreement with DEKEL MAHO Pfronten mbH 9) equity investment of ILDEMEISTER Partecipazioni S.r.l. 10) equity investment of DM MORI Vertriebs und Service mbH 11) with profit and loss transfer and control agreement with DM MORI Vertriebs und Service mbH 12) equity investment of DM MORI Deutschland mbH 13) with profit and loss transfer and control agreement with DM MORI Deutschland mbH 14) equity investment of DM MORI Services mbH 15) with profit and loss transfer and control agreement with DM MORI Services mbH 16) equity investment of DM MORI Netherlands Holding B.V. 17) equity investment of DM MORI Sales and Service Holding A 18) equity investment of DM MORI Europe A 19) equity investment of DM MORI Balkan mbH 20) subsidiary of DM Egypt for Trading in Machines Manufactured LL (51 %), DM MORI Sales and Service Holding A (47.7 %) and Mori Seiki Egypt for Trading in Machines & Equipments LL (1.3 %) 21) equity investment of ILDEMEISTER energy solutions mbH 22) equity investment of ILDEMEISTER LS Beteiligungs mbH 23) subsidiary of Magnescale o. Ltd. 24) The domestic subsidiary has complied with the conditions requited by section 264 paragraph 3 HB (erman ommercial ode) regarding the application of the exemption regulations and makes use of the exemption.

Annual Report

Consolidated Financial Statement orporate Directory

Notes Corporate Directory Responsibility Statement Supervisory Board

Dr. Eng. Masahiko Mori Prof. Dr.-Ing. Berend Denkena Larissa Schikowski Nara, born £¦®£ Wedemark, born £¦©¦ (Employee representative) hairman, Managing Director of the Institute of Pfronten, born £¦®¦ President of DM MORI Production Engineering and Machine Member of the Works ouncil of OMPANY LIMITED, Nara Tools (IFW) at Leibniz University Hanover DM MORI lobal Service mbH, Service Development employee of Mario Krainhöfner Tanja Fondel DM MORI lobal Service Milling mbH (Employee representative) (Employee representative) Pfronten, born £¦®° Frankfurt / Main, born £¦¯® Michaela Schroll £st Deputy hairman Union Secretary, I Metall (Employee representative) Head of Idea Management at Management Board, Frankfurt / Main Bielefeld, born £¦¯® DE KEL MAHO Pfronten mbH RAMMER A, Amberg, Member of the Works ouncil of Member of Supervisory Board ILDEMEISTER Drehmaschinen mbH, Ulrich Hocker (until £©.¥¦.¤¥£¦) Electrician in the Installation Department Düsseldorf, born £¦©¥ at ILDEMEISTER Drehmaschinen mbH Deputy hairman, Dietmar Jansen Attorney and President of Deutsche (Employee representative) Schutzvereinigung für Wertpapierbesitz e.V., Memmingen, born £¦®© FERI A, Bad Homburg, Deputy hairman £st Director (Managing Director) of the Supervisory Board and Treasurer of the I Metall office Allgäu • Phoenix Mecano A, Stein am Rhein, • A O mbH, Marktoberdorf, Switzerland, Member of the Board of Deputy hairman of the Supervisory Board Directors, Independent Lead Director ENIE Deutschland A, Berlin, Member of the Supervisory Board Stefan Stetter (Employee representative) Prof. Dr. Annette £. Köhler, M.A. Durach, born £¦®´ Düsseldorf, born £¦®¯ Deputy hairman Professor & hair of the Accounting, Head of ontrolling of Auditing & ontrolling Department at the DE KEL MAHO Pfronten mbH University of Duisburg-Essen Senior Executives’ representative Uni redit Bank A, Munich, Member of the Supervisory Board Irene Bader Villeroy & Boch A, Mettlach, Feldafing, born £¦¯¦ Member of Supervisory Board Director lobal Marketing of (until ¤¦.¥¤.¤¥¤¥) DM MORI lobal Marketing mbH, Munich, • DKSH Holding A, Zurich, Managing Director of Member of the Board of Directors DM MORI Sport Marketing SAS, Roissy-en-France, James Victor Nudo Executive Officer of Illinois (USA), born £¦©° DM MORI OMPANY LIMITED, Nara President of DM MORI USA IN ., hicago Executive Officer of DM MORI OMPANY LIMITED, Tokyo

Supervisory mandate as per § £¥¥ Akt • Membership in comparable domestic and foreign control bodies of business enterprises

Annual Report

Executive Board

Dipl.-Kfm. hristian Thönes Bielefeld hairman

Dipl.-Kfm. Björn Biermann Bielefeld

Michael Horn, M.B.A. Dipl.-Kfm. Dr. Maurice Eschweiler Bielefeld Bielefeld, Executive Board member until §£ March ¤¥£¦

Responsibility Statement

To the best of our knowledge, and in accordance with review of the development and performance of the business the applicable accounting and reporting principles, the and the position of the group, together with a description consolidated financial statements give a true and fair view of the principal opportunities and risks associated with the of the results of operations, financial position and net worth expected development of the group. of the group, and the group business report includes a fair

Bielefeld, ¦ March ¤¥¤¥ DM MORI AKTIENESELLS HAFT The Executive Board

Dipl.-Kfm. hristian Thönes Dipl.-Kfm. Björn Biermann Michael Horn, M.B.A.

Annual Report

Note: This is a translation of the erman original. Solely the original text in erman language is authoritative.

Consolidated Financial Statement Independent Auditorʼs Report

Notes Independent Auditor's Report

To DM£ MORI AKTIEN£ESELLSHAFT, Bielefeld

Report on the Audit of the onsolidated Financial Statements and of the £roup Management Report

Opinions We have audited the consolidated financial statements Pursuant to Section §¤¤ (§) sentence £ HB, we declare that of DM MORI AKTIENESELLS HAFT, Bielefeld, and its our audit has not led to any reservations relating to the legal subsidiaries (the roup), which comprise the consolidated compliance of the consolidated financial statements and of balance sheet as of December §£, ¤¥£¦, and the consoli- the group management report. dated income statement, the consolidated statement of comprehensive income, consolidated statement of changes Basis for the Opinions in equity and the consolidated statement of cash flows for We conducted our audit of the consolidated financial state- the financial year from January £ to December §£, ¤¥£¦, and ments and of the group management report in accordance notes to the consolidated financial statements, including a with Section §£¯ HB and EU Audit Regulation No ©§¯/¤¥£° summary of significant accounting policies. In addition, we (referred to subsequently as "EU Audit Regulation") and in have audited the group management report of DM MORI compliance with erman enerally Accepted Standards AKTIENESELLS HAFT, Bielefeld, for the financial year for Financial Statement Audits promulgated by the Insti- from January £ to December §£, ¤¥£¦. In accordance with tut der Wirtschaftsprüfer (IDW) [Institute of Public Audi- erman legal requirements, we have not audited the content tors in ermany]. Our responsibilities under those require- of those components of the group management report speci- ments and principles are further described in the "Auditor's fied in the "Other Information" section of our auditor's report. Responsibilities for the Audit of the onsolidated Financial Statements and of the roup Management Report" section In our opinion, on the basis of the knowledge obtained in of our auditor's report. We are independent of the group the audit, entities in accordance with the requirements of European law and erman commercial and professional law, and we › the accompanying consolidated financial statements have fulfilled our other erman professional responsibili- comply, in all material respects, with the IFRSs as adopted ties in accordance with these requirements. In addition, in by the EU, and the additional requirements of erman accordance with Article £¥ (¤)(f) of the EU Audit Regulation, commercial law pursuant to Section §£©e (£) HB [Han- we declare that we have not provided non-audit services delsgesetzbuch: erman ommercial ode] and, in com- prohibited under Article © (£) of the EU Audit Regulation. pliance with these requirements, give a true and fair view We believe that the evidence we have obtained is sufficient of the assets, liabilities, and financial position of the roup and appropriate to provide a basis for our opinions on the as of December §£, ¤¥£¦, and of its financial performance consolidated financial statements and on the group man- for the financial year from January £ to December §£, ¤¥£¦, agement report. and Key Audit Matters in the Audit of the › the accompanying group management report as a whole onsolidated Financial Statements provides an appropriate view of the roup's position. In all Key audit matters are those matters that, in our profes- material respects, this group management report is con- sional judgment, were of most significance in our audit sistent with the consolidated financial statements, com- of the consolidated financial statements for the financial plies with erman legal requirements and appropriately year from January £ to December §£, ¤¥£¦. These matters presents the opportunities and risks of future develop- were addressed in the context of our audit of the consoli- ment. Our opinion on the group management report does dated financial statements as a whole, and in forming our not cover the content of those components of the group opinion thereon, we do not provide a separate opinion on management report specified in the "Other Information" these matters. section of the auditor's report.

Annual Report §

› Revenue recognition cut-off For global supplies of goods, agreements are made by the group entities with customers, with some of these agree- For information on the accounting principles applied, please ments containing complex contractual provisions. see the disclosures in Section § "Accounting and valuation principles" and Section ® "Revenue" in the notes to the con- Owing to the use of varied contractual provisions in the dif- solidated financial statements. ferent markets and the judgments involved in determining and assessing the indicators to evaluate the time at which The Financial Statement Risk control is transferred, there is the risk for the financial DM MORI AKTIENESELLS HAFT recognized revenue of statements that revenue is incorrectly recognized as of the EUR ¤,¯¥£.© million in the consolidated income statement. reporting date. Revenue is a significant financial and performance indicator. Revenue is generated from the sale of goods and the Our Audit Approach provision of services. In order to assess whether revenue is recognized on an accrual basis, we assessed the design, setup and effective- In the DM MORI A roup, revenue is recognized when ness of internal controls relating to order acceptance, out- it fulfils a performance obligation through the transfer of going goods and invoicing, in particular the determination a promised asset to a customer. An asset is considered and verification of the correct or actual transfer of control. transferred at the time when the customer obtains control of that asset. In line with the transfer of control, revenue Owing to the application of IFRS £©, a focus for our audit is to be recognized either at a point in time or over time in was defined as the evaluation of management's interpreta- the amount to which DM MORI A expects to be entitled. tion and weighting of indicators to assess the time at which control is transferred. To this end, we assessed the require- DM MORI A has determined based on the following indi- ments of the group-wide accounting policy. Based on a rep- cators that the performance obligation is fulfilled at the time resentative selected sample of contracts and a risk-based the goods are transferred to the customer, and thus that selection of contracts, we assessed the proper implemen- revenue is recognized at a point in time: tation of the accounting policy.

› DM MORI A has a current entitlement to receive Furthermore, by means of control-based and substan- payment for the asset tive procedures, we assessed revenue recognition cut-off through methods including reconciling invoices with the › The customer has legal title to the asset related orders, external delivery or performance records and incoming payments. We also inspected revenue entries › DM MORI A has transferred physical possession of the for a fixed period before the closing date that are based on asset complex international trade clauses and thus constitute a greater risk as concerns revenue recognition cut-off. The › The significant risks and rewards of ownership of the asset agreed-upon procedures focused on revenue entered in the have been transferred to the customer period from January £ to December §£, ¤¥£¦, as well as for a specific period after the reporting date, selected based › The customer has accepted the asset on a statistical technique either randomly or according to risk criteria. The roup's key markets are in ermany and Europe.

Annual Report

Consolidated Revenue recognition cut-off was also assessed by obtain- declined in ¤¥£¦ for the first time in three years by -¤.´% Financial Statement ing third-party confirmations. This assessment focused on to EUR ¯¤.£ billion. The global machine tools market is

Notes trade receivables as of December §£, ¤¥£¦, selected based expected to decline further in ¤¥¤¥ by -¥.®%. Independent Auditor's Report on a statistical technique either randomly or according to risk criteria, and thus also the associated revenue for finan- Based on the impairment tests conducted, DM MORI A cial year ¤¥£¦. did not identify any need to recognize impairment losses. The ompany's sensitivity analysis showed that a reasonably Our Observations possible change in the discount rate, earnings performance DM MORI roup's procedure for revenue recognition or the long-term growth rates would not cause impairment cut-off is appropriate. in any business segment, as the carrying amount of the respective goodwill is below the respective recoverable › Impairment testing of goodwill amount even in the respective scenarios analyzed.

Please refer to Section § of the notes to the consolidated There is the risk for the consolidated financial statements financial statements for information on the accounting and that impairment existing as at the reporting date was not valuation principles applied and the assumptions used. identified. There is also the risk that the related disclosures Disclosures on the amount of goodwill can be found under in the notes on IAS §® are not appropriate. Section £¦ of the notes and information on the economic development of the Machine Tools and Industrial Services Our Audit Approach operating segments can be found on page ®¥ et seqq. of the With the involvement of our valuation experts, we assessed group management report. the appropriateness of the key assumptions and calculation methods of the ompany, among other things. For this The Financial Statement Risk purpose, we discussed the expected business and earn- oodwill amounted to EUR £§´.£ million in total as of Decem- ings development and the assumed long-term growth rates ber §£, ¤¥£¦, representing ££% of roup equity and thus having with those responsible for planning. We also reconciled this a quite significant influence on the ompany's financial information with other internally available forecasts and the position. budget prepared by the Executive Board and approved by the Supervisory Board. Furthermore, we evaluated the con- Impairment of goodwill is tested annually at the level of the sistency of assumptions with external market assessments. Machine Tools and Industrial Services business segments. For this purpose, the carrying amount of goodwill for the We also confirmed the accuracy of the ompany's previous respective business segment is compared with its recovera- forecasts by comparing the budgets of previous financial ble amount. If the carrying amount exceeds the recoverable years with actual results and by analyzing deviations. We amount of the respective goodwill, there is a need for impair- compared the assumptions and parameters underlying the ment. The recoverable amount is the higher of fair value less discount rate, in particular the risk-free rate, the market risk costs to sell and value in use of the business segment. The premium and the beta coefficient, with our own assumptions reporting date for the impairment test is December §£, ¤¥£¦. and publicly available data.

Impairment testing of goodwill is complex and based on a To ensure the computational accuracy of the valuation model range of assumptions that require judgment. These include used, we verified the ompany's calculations on the basis the expected business and earnings development of the of selected risk-based elements. business segments for the next four years, the assumed long-term growth rates and the discount rate used. In order to take forecast uncertainty into account, we examined the impact of potential changes in the discount rate, According to preliminary information from the erman earnings performance and the long-term growth rate on Machine Tool Builders' Association (VDW) and the British the recoverable amount by calculating alternative scenar- economic research institute Oxford Economics of Febru- ios and comparing these with the values determined by the ary ¤¥¤¥, the global market for machine tools consumption ompany (sensitivity analysis).

Annual Report

Finally, we assessed whether the disclosures in the notes Our Audit Approach regarding impairment of goodwill are appropriate. Based on our understanding of the process, we assessed the establishment, design and structure of the internal controls Our Observations regarding the determination of the expected net realizable The calculation method used for impairment testing of good- values for raw materials and supplies, taking account of the will is appropriate and in line with the accounting policies expected cost of production of finished goods in which raw to be applied. materials and supplies are used, as well as in consideration of discounts for range of coverage and non-marketability for The ompany's assumptions and parameters used for meas- raw materials and supplies. urement are appropriate. We assessed the measures of management to determine The related disclosures in the notes are appropriate. write-downs on raw materials and supplies (such as analysis of range of coverage and marketability) and, taking account › Recoverability of raw materials and supplies of their planned use for the production of finished goods as of the reporting date, evaluated whether the write-downs We refer to section § in the notes to the consolidated finan- for raw materials and supplies recognized as of December cial statements for information on the accounting policies §£, ¤¥£¦, are appropriate. applied as well as to note ¤° for information on the write- down of inventories. We verified the computational accuracy of the calculations to determine impairment losses for items of raw materials The Financial Statement Risk and supplies selected according to risk. The consolidated balance sheet of DM MORI A as of December §£, ¤¥£¦, includes raw materials and supplies at Our Observations a cost of EUR §¤°.¤ million and impairment losses of EUR The assumptions underlying the determination of the net °´.§ million, resulting in a residual carrying amount of EUR realizable value for raw materials and supplies as well as the ¤¯©.¦ million. judgments exercised by the Executive Board are appropriate.

Raw materials and supplies, which are initially recorded at Other Information cost, are written down in value if they are damaged, obsolete Management and/or the Supervisory Board are/is responsi- in whole or in part or if the expected net realizable values no ble for the other information. The other information includes longer cover cost. Raw materials and supplies held for use the following parts of the group management report, which in the production of inventories are not written down below were not audited for content: cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. › the non-financial group management report, which is ref- erenced in the group management report, The determination of the net realizable values of raw materials and supplies – taking account of the cost of produc- › the roup's corporate governance statement included on tion and net realizable values of the finished goods in which page ¤® et seqq. of the group management report, and the raw materials and supplies are used in production – as the upper limit requires judgment and future-oriented esti- › information extraneous to the group management report mates in respect of the amounts, which can be expected to and marked as unaudited. be realized upon the sale of finished goods. The age of raw materials and supplies and their technical useful life as well The other information also includes the remaining parts of as their planned used in the production of finished goods the annual report. and the current economic development of the machine tool industry play a significant role in this regard. There is the The other information does not include the consolidated risk that the raw materials and supplies are overstated due financial statements, the group management report infor- to a possible unidentified need to recognize an impairment. mation audited for content and our auditor's report thereon.

Annual Report

Consolidated Our opinions on the consolidated financial statements and considered necessary to enable the preparation of a group Financial Statement on the group management report do not cover the other management report that is in accordance with the applicable

Notes information, and consequently we do not express an opinion erman legal requirements, and to be able to provide suf- Independent Auditor's Report or any other form of assurance conclusion thereon. ficient appropriate evidence for the assertions in the group management report. In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether The Supervisory Board is responsible for overseeing the the other information roup's financial reporting process for the preparation of the consolidated financial statements and of the group man- › is materially inconsistent with the consolidated financial agement report. statements, with the group management report information audited for content or our knowledge obtained in the Auditorʼs Responsibilities for the Audit of audit, or the onsolidated Financial Statements and of the £roup Management Report › otherwise appears to be materially misstated. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole Responsibilities of Management and the are free from material misstatement, whether due to fraud Supervisory Board for the onsolidated Financial or error, and whether the group management report as a Statements and the £roup Management Report whole provides an appropriate view of the roup's position Management is responsible for the preparation of the con- and, in all material respects, is consistent with the consol- solidated financial statements that comply, in all material idated financial statements and the knowledge obtained in respects, with IFRSs as adopted by the EU and the addi- the audit, complies with the erman legal requirements and tional requirements of erman commercial law pursuant appropriately presents the opportunities and risks of future to Section §£©e (£) HB and that the consolidated financial development, as well as to issue an auditor's report that statements, in compliance with these requirements, give a includes our opinions on the consolidated financial state- true and fair view of the assets, liabilities, financial position, ments and on the group management report. and financial performance of the roup. In addition, management is responsible for such internal control as they Reasonable assurance is a high level of assurance, but have determined necessary to enable the preparation of con- is not a guarantee that an audit conducted in accordance solidated financial statements that are free from material with Section §£¯ HB and the EU Audit Regulation and in misstatement, whether due to fraud or error. compliance with erman enerally Accepted Standards for Financial Statement Audits promulgated by the Institut der In preparing the consolidated financial statements, manage- Wirtschaftsprüfer (IDW) will always detect a material mis- ment is responsible for assessing the roup's ability to con- statement. Misstatements can arise from fraud or error and tinue as a going concern. They also have the responsibility for are considered material if, individually or in the aggregate, disclosing, as applicable, matters related to going concern. they could reasonably be expected to influence the economic In addition, they are responsible for financial reporting based decisions of users taken on the basis of these consolidated on the going concern basis of accounting unless there is an financial statements and this group management report. intention to liquidate the roup or to cease operations, or there is no realistic alternative but to do so. We exercise professional judgment and maintain professional skepticism throughout the audit. We also: Furthermore, management is responsible for the preparation of the group management report that, as a whole, pro- › Identify and assess the risks of material misstatement of vides an appropriate view of the roup's position and is, in all the consolidated financial statements and of the group material respects, consistent with the consolidated financial management report, whether due to fraud or error, design statements, complies with erman legal requirements, and and perform audit procedures responsive to those risks, appropriately presents the opportunities and risks of future and obtain audit evidence that is sufficient and appro- development. In addition, management is responsible for priate to provide a basis for our opinions. The risk of not such arrangements and measures (systems) as they have detecting a material misstatement resulting from fraud

Annual Report

is higher than for one resulting from error, as fraud may › Evaluate the consistency of the group management report involve collusion, forgery, intentional omissions, misrep- with the consolidated financial statements, its conformity resentations, or the override of internal controls. with [erman] law, and the view of the roup's position it provides. › Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of › Perform audit procedures on the prospective informa- arrangements and measures (systems) relevant to the tion presented by management in the group management audit of the group management report in order to design report. On the basis of sufficient appropriate audit evi- audit procedures that are appropriate in the circum- dence we evaluate, in particular, the significant assump- stances, but not for the purpose of expressing an opinion tions used by management as a basis for the prospective on the effectiveness of these systems. information, and evaluate the proper derivation of the prospective information from these assumptions. We do not › Evaluate the appropriateness of accounting policies used express a separate opinion on the prospective informa- by management and the reasonableness of estimates tion and on the assumptions used as a basis. There is a made by management and related disclosures. substantial unavoidable risk that future events will differ materially from the prospective information. › onclude on the appropriateness of management's use of the going concern basis of accounting and, based on the We communicate with those charged with governance audit evidence obtained, whether a material uncertainty regarding, among other matters, the planned scope and exists related to events or conditions that may cast signif- timing of the audit and significant audit findings, including icant doubt on the roup's ability to continue as a going any significant deficiencies in internal control that we iden- concern. If we conclude that a material uncertainty exists, tify during our audit. we are required to draw attention in the auditor's report to the related disclosures in the consolidated financial We also provide those charged with governance with a state- statements and in the group management report or, if ment that we have complied with the relevant independence such disclosures are inadequate, to modify our respective requirements, and communicate with them all relationships opinions. Our conclusions are based on the audit evidence and other matters that may reasonably be thought to bear obtained up to the date of our auditor's report. However, on our independence, and where applicable, the related future events or conditions may cause the roup to cease safeguards. to be able to continue as a going concern. From the matters communicated with those charged with › Evaluate the overall presentation, structure and content governance, we determine those matters that were of most of the consolidated financial statements, including the significance in the audit of the consolidated financial state- disclosures, and whether the consolidated financial statements of the current period and are therefore the key audit ments present the underlying transactions and events in a matters. We describe these matters in our auditor's report manner that the consolidated financial statements give a unless law or regulation precludes public disclosure about true and fair view of the assets, liabilities, financial posi- the matter tion and financial performance of the roup in compliance with IFRSs as adopted by the EU and the additional requirements of erman commercial law pursuant to Section §£©e (£) HB.

› Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the roup to express opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

Annual Report

Consolidated Financial Other Legal and Regulatory Requirements Statement

Notes Independent Auditor's Report Further Information pursuant to Article Further of the EU Audit Regulation Information Multiple Year Overview We were elected as group auditor at the annual general meeting on May £¥, ¤¥£¦. We were engaged by the Super- visory Board on November ¤¯, ¤¥£¦. Taking into account the transitional provision of Article °£ (£) of the EU Audit Regulation, we have been the group auditor of DM MORI AKTIENESELLS HAFT without interruption for more than ¤© years.

We declare that the opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article ££ of the EU Audit Regulation (long-form audit report).

£erman Public Auditor Responsible for the Engagement

The erman Public Auditor responsible for the engagement is Hendrik Koch.

Bielefeld, March ¦, ¤¥¤¥

KPM A Wirtschaftsprüfungsgesellschaft

Koch Dübeler Wirtschaftsprüfer Wirtschaftsprüfer [erman Public Auditor] [erman Public Auditor]

Annual Report

Multiple Year Overview

D. | DM£ MORI £ROUP IFRS

hanges against previous § year in % Sales revenues K 2,054,219 2,229,013 2,304,721 2,265,709 2,348,451 2,655,128 2,701,489 2 Domestic ¬ K 676,483 779,218 762,079 737,069 712,094 821,499 769,203 -6 International ¬ K 1,377,736 1,449,795 1,542,642 1,528,640 1,636,357 1,833,629 1,932,286 5 % International % 67 65 67 67 70 69 72 Total work done K 2,060,978 2,262,302 2,351,957 2,262,352 2,367,881 2,667,935 2,706,063 1 ost of materials ¬ K 1,086,677 1,190,026 1,211,417 1,157,498 1,263,576 1,480,102 1,524,043 3 Personnel costs ¬ K 465,232 506,145 545,457 571,971 550,655 595,897 592,365 -1 Depreciation ¬ K 46,345 49,883 57,181 65,720 72,833 63,729 78,104 23 Financial result ¬ K -13,449 -7,892 30,763 -10,507 -5,248 -5,735 -5,120 11 Earnings before taxes K 135,014 175,313 217,261 94,120 176,382 214,786 219,166 2 Annual profit / loss K 93,205 121,065 159,585 47,484 118,363 149,530 154,442 3 Adjusted results EBITDA K 193,944 232,512 243,039 169,666 252,978 280,862 299,842 7 EBIT K 147,599 182,629 185,858 103,946 180,145 217,133 221,738 2 EBT K 135,014 175,313 217,261 94,120 176,382 214,786 219,166 2 Profit share of shareholders in DM£ MORI A£ K 85,077 110,575 149,396 44,820 117,442 148,257 151,874 2 Fixed assets K 718,447 810,927 742,773 749,526 677,948 686,506 815,922 19 Intangible assets ¬ K 192,817 213,981 209,911 195,276 190,681 190,372 199,546 Tangible assets ¬ K 317,341 395,232 463,733 486,370 440,005 434,880 506,579 Financial assets ¬ K 208,289 201,714 69,129 67,880 47,262 61,254 109,797 urrent assets incl. deferred tax and deferred income K 1,291,598 1,418,882 1,541,102 1,589,652 1,563,350 1,753,993 1,653,644 -6 Inventories ¬ K 483,840 495,297 522,259 505,041 547,662 625,381 611,810 Receivables incl. deferred tax assets + prepaid expenses ¬ K 436,609 490,589 466,716 687,886 652,283 975,931 887,829

ash and cash equivalents ¬ K 371,149 432,996 552,127 396,725 363,405 152,681 154,005 Equity K 1,164,441 1,266,151 1,357,474 1,187,663 1,164,618 1,197,688 1,281,449 7 Subscribed capital ¬ K 200,234 204,927 204,927 204,927 204,927 204,927 204,927 apital provisions ¬ K 480,383 498,485 498,485 498,485 498,485 498,485 498,485 Retained earnings and other reserves ¬ K 389,442 427,982 507,487 444,346 458,095 489,823 563,702 Non-controlling equity interests ¬ K 94,382 134,757 146,575 39,905 3,111 4,453 14,335 Outside capital K 845,604 963,658 926,401 1,151,515 1,076,680 1,242,811 1,188,117 -4 Provisions ¬ K 258,984 276,644 293,830 305,122 286,199 305,253 325,805

Liabilities + deferred income ¬ K 586,620 687,014 632,571 846,393 790,481 937,558 862,312 Balance Sheet total K 2,010,045 2,229,809 2,283,875 2,339,178 2,241,298 2,440,499 2,469,566 1 04 Further Information Employees (annual average) 6,410 6,815 7,034 7,102 6,637 6,933 6,986 Multiple Year Employees (31 Dec) 6,497 6,918 7,142 6,964 6,742 7,107 6,898 Overview List of Graphs Trainees 225 248 320 318 359 396 347 and Tables Total employees 6,722 7,166 7,462 7,282 7,101 7,503 7,245 Forward-Looking Statements

Annual Report

Consolidated D. | DM£ MORI £ROUP IFRS Financial Statement hanges Further against Information previous Multiple Year § year in % Overview

Efficiency ratios Profit on sales (EBIT) = EBIT / Sales revenues % 7.2 8.2 8.1 4.6 7.7 8.2 8.2 0 Profit on sales (EBT) = EBT / Sales revenues % 6.6 7.9 9.4 4.2 7.5 8.1 8.1 0 Profit on sales (Annual result) = Annual result / Sales revenues % 4.5 5.4 6.9 2.1 5.0 5.6 5.7 2 Equity return = Annual result / Equity (as of 1 Jan) % 12.0 10.4 12.6 3.5 9.8 12.8 12.9 1 Return on total assets = EBT + interest on borrowed capital / average total assets % 8.1 8.8 10.1 4.6 8.1 9.6 9.4 -2 ROI Return on Investment = EBT / average total capital % 7.4 8.3 9.6 4.1 7.7 9.2 8.9 -3 Sales per employee = Sales revenues / average number of employees (exc. trainees) ¬ K 320.5 327.1 327.7 319.0 353.8 383.0 386.7 1 EBIT per employee = EBIT / average number of employees (exc. trainees) ¬ K 23.0 26.8 26.4 14.6 27.1 31.3 31.7 1 RO E Return on capital employed = EBIT / apital Employed % 13.8 15.7 16.1 9.0 15.9 16.1 15.3 -5

Balance Sheet ratios apitalisation ratio of fixed assets = fixed assets / total assets % 35.7 36.4 32.5 32.0 30.2 28.1 33.0 17 Working intensity of current assets = current assets / total assets % 61.3 60.8 64.6 65.0 66.9 68.9 63.7 -8 Equity ratio = equity / total capital % 57.9 56.8 59.4 50.8 52.0 49.1 51.9 6 Borrowed capital ratio = borrowed capital / total assets % 42.1 43.2 40.6 49.2 48.0 50.9 48.1 -6 Assets and liabilities structure = fixed assets / current assets % 58.4 59.8 50.3 49.3 45.2 40.8 51.8 27 apital structure = equity / outside capital % 137.7 131.4 146.5 103.1 108.2 96.4 107.9 12

Annual Report

D. | DM£ MORI £ROUP IFRS

hanges against previous § year in %

Ratios pertaining to financial position 1st class liquidity = liquid funds (from balance sheet) / short-term liabilities (up to 1 year) % 60.2 62.5 83.4 45.9 56.0 28.3 19.9 -30 2nd class liquidity = (liquid funds + short-term receivables) / short-term liabilities (up to 1 year) % 121.2 124.4 144.1 117.5 146.9 189.8 123.0 -35

3rd class liquidity = (liquid funds + short-term receivables + inventories) / short-term liabilities (up to 1 year) % 175.7 175.9 202.9 157.6 186.6 242.3 174.2 -28 Net financial liabilities = bank liabilities + bond / borrower’s note – liquid funds ¬ million -356.4 -380.8 -500.3 -342.1 -316.9 -152.7 -154.0 1 earing = net financial liabilities / equity %––––––– Working apital = current assets – short-term borrowed capital ¬ million 466.6 525.5 681.1 574.3 540.3 326.5 291.4 -11 Net Working apital 1) = inventories + payments on account – customer prepayments + trade debtors – trade creditors – notes payable ¬ million 196.8 189.5 261.6 270.0 317.1 343.2 386.0 12 apital Employed = equity + provisions + net financial liabilities ¬ million 1,067.0 1,161.9 1,151.0 1,150.7 1,133.9 1,350.2 1,453.2 8

Structural analysis ratios Turnover rate of raw materials and consumables = cost for raw materials and consumables / average inventories of raw materials and consumables 4.8 5.5 5.5 5.1 5.4 5.2 4.6 -12 Turnover rate of inventories = sales revenues / inventories 4.2 4.5 4.4 4.5 4.3 4.2 4.4 5 Turnover rate of receivables = sales revenues (incl. 19 % VAT on domestic revenues) / average trade debtors 10.1 10.3 9.8 10.0 8.8 8.3 8.4 1 Total capital-sales ratio = sales revenues / total capital (incl. deferred tax and deferred income) % 1.0 1.0 1.0 1.0 1.0 1.1 1.1 0 DSO (Days sales outstanding) = average trade debtors / (sales revenues (incl. 19 % VAT on domestic revenues)) × 365 % 36.1 35.6 37.4 36.7 41.3 44.1 43.3 -2

Productivity ratios Intensity of materials = ost of materials / Total work done % 52.7 52.6 51.5 51.2 53.4 55.5 56.3 1 Intensity of staff = Personnel costs / Total work done % 22.6 22.4 23.2 25.3 23.3 22.3 21.9 -2 1) since 1 January 2012 including notes payable

Annual Report

Consolidated D. | DM£ MORI £ROUP IFRS Financial Statement hanges Further against Information previous Multiple Year § year in % Overview ash flow & Investments List of Graphs and Tables ash flow from operating activity ¬ million 171.1 170.6 142.7 124.0 171.7 230.4 234.1 2 ash flow from investment activity ¬ million -160.1 -145.3 18.9 -198.3 -9.7 -315.1 -114.2 64 ash flow from financing activity ¬ million 189.5 39.0 -44.3 -52.5 -190.7 -123.5 -118.9 4 Free ashflow = cash flow from operating activity + cash flow from investment activity (exc. ash flow from financial investments and payments to plant, property and equipment which are financed with loans) ¬ million 67.3 86.1 32.0 42.5 142.4 154.2 168.8 9 Investments ¬ million 213.5 159.0 130.6 88.1 41.8 90.7 155.1 71

Share & valuation Market capitalisation ¬ million 1,824.6 1,852.2 3,001.4 3,401.8 3,627.2 3,397.1 3,337.9 -2

ompany value = Market capitalisation + bank liabilities + bills of exchange + other liabilities + pension provisions – liquid funds ¬ million 1,585.0 1,597.5 2,624.0 3,187.4 3,414.9 3,370.1 3,301.2 -2 Earnings per share = result after minority interests / number of shares ¬ 1.33 1.41 1.90 0.57 1.49 1.88 1.93 3 Price-to-earnings ratio (P / E) = market capitalisation / EBT 13.5 10.6 13.8 36.1 20.6 15.8 15.2 -4 ompany value-EBITDA-ratio = company value / EBITDA 8.2 6.9 10.8 18.8 13.5 12.0 11.0 -8 ompany value-EBIT-ratio = company value / EBIT 10.7 8.7 14.1 30.7 19.0 15.5 14.9 -4 ompany value sales ratio = company value / sales revenues 0.8 0.7 1.1 1.4 1.5 1.3 1.2 -4

Annual Report §

List of graphs and tables

BUSINESS REPORT DM£ MORI AKTIEN£ESELLSHAFT A. THE BASIS OF THE £ROUP Page A.01 Segments of DM MORI 17 A.02 Key financial and performance indicators 19 A.03 Key figures of the DM MORI AKTIENESELLS HAFT share | ISIN: DE0005878003 22 A.04 DM MORI AKTIENESELLS HAFT share in comparison with the SDAX® January to December 2019 23 A.05 Remuneration of the Supervisory Board of DM MORI AKTIENESELLS HAFT 31 A.06 Allocated grants 32 A.07 Inflow for the financial year 33 A.08 Research and development in a year by year view 36

B. REPORT ON EONOMI POSITION B.01 Order intake by segments 50 B.02 Order intake by regions 50 B.03 Sales revenues by segments 51 B.04 Sales revenues by regions 51 B.05 Income statement 52 B.06 ash flow 53 B.07 Free cash flow 54 B.08 Balance sheet of DM MORI 55 B.09 Income statement of DM MORI AKTIENESELLS HAFT (erman ommercial ode – (HB)) 57 B.10 Balance Sheet of DM MORI AKTIENESELLS HAFT (erman ommercial ode – (HB)) 57 B.11 Segment key indicators DM MORI 60 B.12 Key figures “Machine Tools” segment 61 B.13 Key figures “Industrial Services” segment 62 B.14 Key figures “ orporate Services” segment 63

. OPPORTUNITIES AND RISK REPORT .01 Probability of occurrence 74 .02 Possible financial effect 74 .03 Overview of the significant risk fields 75

ONSOLIDATED FINANIAL STATEMENTS OF DM£ MORI AKTIEN£ESELLSHAFT D. ONSOLIDATED FINANIAL STATEMENT D.01 onsolidated income statement 85 D.02 onsolidated statement of other comprehensive income 86 D.03 onsolidated cash flow statement 87 D.04 onsolidated balance sheet 88 D.05 Development of group equity 90 D.06 onsolidated fixed assets movement schedule 92 D.07 Segmental reporting in the consolidated financial statements 96

OVER 01 Key figures I 02 Order intake I 03 Sales revenues I 04 EBIT I 05 Employees I

Annual Report

Consolidated Financial Statement Forward-Looking Statements

Forward-Looking Statements Financial Calendar Contact This report contains forward-looking statements, which are growing volatility on the capital markets and a deterioration based on current estimates by the management regarding in the conditions for the credit business as well as a deteri- future developments. Such statements are based on the oration in the future economic success of the core business managementʼs current expectations and specific assump- areas in which we operate; challenges in integrating major tions. They are subject to risks, uncertainties and other acquisitions and in implementing joint ventures and achiev- factors, which could lead to the actual future circumstances ing the expected synergy effects and other essential port- including the assets, liabilities, financial position and profit folio measures; the introduction of competing products or or loss of DM MORI AKTIENESELLS HAFT differing technology by other companies or the entry onto the market materially from or being more negative than those expressly of new competitors; a change in the dynamics of competi- or implicitly assumed or described in these statements. The tion (primarily on developing markets); a lack of acceptance business activities of DM MORI AKTIENESELLS HAFT of new products and services in customer target groups are subject to a series of risks and uncertainties, which may of DM MORI; changes in corporate strategy; interrup- result in forward-looking statements estimates or forecasts tions in the supply change, including the inability of a third becoming inaccurate. party, for example due to natural catastrophes, to supply pre-fabricated parts, components or services on schedule; DM MORI AKTIENESELLS HAFT is strongly affected, in the outcome of public investigations and associated legal particular, by changes in general economic and business disputes as well as other measures of public bodies; the conditions (including margin developments in the most potential effects of these investigations and proceedings important business areas as well as the consequences of a on the business of DM MORI AKTIENESELLS HAFT and recession) as these have a direct effect on processes, suppli- various other factors. ers and customers. Due to their differences, not all business areas are affected to the same extent by changes in Should one of these factors of uncertainty or other unfore- the eco nomic environment; significant differences exist with seeable event occur, or should the assumptions on which respect to the timing and extent of the effects of any such these statements are based prove incorrect, the actual changes. This effect is further intensified by the fact that, results may differ materially from the results stated, as a global entity, DM MORI AKTIENESELLS HAFT oper- expected, anticipated, intended, planned, aimed at, esti- ates in various markets with very different economic rates mated or projected in these statements. DM MORI AKTIEN¶ of growth. Uncertainties arise inter alia from the risk that ESELLS HAFT neither intends to nor does DM MORI customers may delay or cancel orders or they may become AKTIEN ESELLS HAFT assume any separate obligation insolvent or that prices become further depressed by a per- to update any forward-looking statements to reflect any sistently unfavorable market environment than that which change in events or developments occurring after the end we are expecting at the current time; developments on the of the reporting period. Forward-looking statements must financial markets, including fluctuations in interest rates not be understood as a guarantee or as assurances of future and exchange rates, in the price of raw materials, in borrow- developments or events contained therein. ing and equity margins as well as financial assets in general;

There are two companies using the name “DM MORI”: DM MORI AKTIENESELLS HAFT with registered office in Bielefeld, ermany, and DM MORI OMPANY LIMITED with registered office in Nara, Japan. DM MORI AKTIENESELLS HAFT is (indirectly) controlled by DM MORI OMPANY LIMITED. This report refers exclusively to DM MORI AKTIENESELLS HAFT. If reference is made in this report to “DM MORI”, this refers exclusively to DM MORI AKTIENESELLS HAFT and its controlled companies within the meaning of Section £¯ of the erman Stock orporate Act (Aktiengesetz – Akt). If reference is made to “lobal One ompany”, this refers to the joint activities of DM MORI OMPANY LIMITED and DM MORI AKTIENESELLS HAFT including all subsidiary companies.

Annual Report Financial alendar

10 March 2020 Annual Press onference Publication of the Annual Report 2019 Analysts' onference

28 April 2020 Release for the 1st Quarter 2020 (1 January to 31 March)

15 May 2020 118th Annual eneral Meeting

4 August 2020 Report for the 1st Half-Year 2020 (1 January to 30 June)

29 October 2020 Release for the 3rd Quarter 2020 (1 January to 30 September)

7 May 2021 119th Annual eneral Meeting

Subject to alteration

ONTAT

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Annual Report 2019 Key FiUres

Annual Report 2019 Key FiUres