ANNUAL REPORT 2019/20 ZEISS Group Key Figures (IFRS) 2019/20 2018/19 2017/18 € m % € m % € m % Revenue 6,297 100 6,428 100 5,817 100 » Germany 598 9 663 10 610 10 » Other countries 5,699 91 5,765 90 5,207 90 Research and development expenses 812 13 705 11 642 11 EBIT 922 15 1,063 17 772 13 Consolidated profit 616 10 748 12 535 9 Cash flows from operating activities 783 770 576 Cash flow from investing activities -339 -635 -334 Cash flow from financing activities -313 -234 -89 30 Sep 20 30 Sep 19 30 Sep 18 € m % € m % € m % Total assets 9,171 100 9,142 100 7,903 100 Property, plant and equipment 1,623 18 1,466 16 1,028 13 » Capital expenditures 484 437 244 » Depreciation 256 234 164 Inventories 1,736 19 1,622 18 1,391 18 Equity 4,287 47 3,990 44 3,763 48 Net liquidity 1,531 1,548 2,120 30 Sep 20 30 Sep 19 30 Sep 18 Employees 32,201 31,260 29,309 » Germany 13,692 13,310 12,067 » Other countries 18,509 17,950 17,242 For more information, go to: www.zeiss.com/annualreport Table of Contents Fiscal Year 2019/20 Key Figures 2 Executive Board of Carl Zeiss AG 4 Foreword by the Executive Board 6 Solutions to Shape the Future 8 At Home across the Globe 9 A Global Strategy to Beat a Global Pandemic 10 Highlights from Fiscal Year 2019/20 12 Sustainable Development 14 Carl Zeiss Foundation 16 Corporate Governance 16 Report by the Supervisory Board 17 Supervisory Board of Carl Zeiss AG 20 Group Management Report The ZEISS Group 22 Report on Economic Position 24 Non-Financial Key Performance Indicators 34 Risk and Opportunity Report 37 Report on Expected Developments 42 Consolidated Financial Statements Consolidated Income Statement 46 Consolidated Statement of Comprehensive Income 46 Consolidated Statement of Financial Position 47 Consolidated Statement of Changes in Equity 48 Consolidated Statement of Cash Flows 49 Notes to the Consolidated Financial Statements 50 List of Shareholdings of the Group 101 Independent Auditor’s Report 107 Legal Information/Disclaimer 111 Executive Board of Carl Zeiss AG Dr. Matthias Metz Dr. Markus Weber Dr. Jochen Peter Head of the Consumer Markets Head of the Semiconductor Head of the Industrial Quality & segment Manufacturing Technology segment Research segment 4 Dr. Karl Lamprecht Dr. Christian Müller Dr. Ludwin Monz President and CEO CFO Head of the Medical Technology segment 5 Foreword by the Executive Board Ladies and Gentlemen, Dear Readers, The last few months have been unusual to say the least. This is true for all countries, companies and industries – the COVID-19 pandemic has impacted all of us both personally and financially. For this reason, on behalf of the entire ZEISS Executive Board team I would like to express my sincere gratitude to our customers and partners for continuing to place their trust in us and enabling our successful collaborations. At the same time, I would also like to thank our over 32,000 employees for their exceptional and unwavering commitment, and the tremendous flexibility they have shown. Together, we have ensured that ZEISS can look back on a very good fiscal year 2019/20 overall and emerge from this global crisis stronger than ever. The ZEISS Group has generated revenue of 6.3 billion euros, which closely approximates the prior year's level. However, the pandemic has meant that we have fallen short of our Dr. Karl Lamprecht initial expectations. The EBIT for the ZEISS Group stood at a relatively high 922 million euros (prior year: 1.1 billion euros). ZEISS had been working on a resilience program prior to the COVID-19 pandemic. The program comprises a series of measures that aim to shore up the company's resilience in the event of an economic downturn. And these measures have proven their worth in the current unusual circumstances. ZEISS is pursuing four aims to limit the impact of the crisis: To protect its employees' health, ensure smart business continuity to the greatest possible extent, and support its customers worldwide. At the same time, the company will be demonstrating its resilience in combating the economic impact of the pandemic as best it can, and leveraging the market opportunities that arise from the current changes. This year's results in detail The four ZEISS segments have developed differently in the past fiscal year due to the COVID-19 pandemic. However, thanks to its innovative EUV lithography, the Semiconductor Manufacturing Technology segment was largely unaffected by the economic impact of the COVID-19 pandemic. Meanwhile, the Industrial Quality & Research, Medical Technology and Consumer Markets segments were faced with different challenges as a result of the pandemic: weak development in the automobile industry, the postponement of non-essential surgeries and the lockdown meant business in these segments suffered a great deal. Innovative power is a success factor for ZEISS as a global technology leader. This also becomes evident if we consider its sizeable expenditure in research and development. We have not put the brakes on spending in these areas in the past fiscal year. They account for 13 percent of revenue and are a key investment in the future. ZEISS' focused investment strategy is one of the company's cornerstones. We will continue to invest in the ramped-up digitalization – that is, in providing digital solutions for our customers – and in digitalization at the company. In March 2020 we successfully acquired software company Saxonia Systems AG (Munich). This has allowed ZEISS to systematically expand its software know-how and secure further expertise and resources to realize digital projects of strategic significance. 6 Particularly during the lockdown it was important to remain in close contact with our customers and be able to offer them the level of service they have come to expect. Virtual technology conferences and trade shows were very well received as new communication formats. Our remote services will enable software installation, updates and real-time support for ZEISS products without the need for an on-site appointment. Furthermore, remote services will play an even bigger role in the future as smart services, i.e. real-time system monitoring and preventive maintenance, become increasingly commonplace. We will continue with these digital formats until it is possible to meet in person again. As a foundation-owned company, we also bear a special responsibility for training our employees – and for helping them achieve further qualifications. Due to the dynamic situation induced by the COVID-19 pandemic, many ZEISS employees were forced to adapt to new working conditions with very little warning. We have also continued to expand the offering on our digital learning platform ZEISS CurioZ. The company is thus investing in employee qualification in the current situation. After all, additional skills will help both ZEISS and its employees to emerge from the COVID-19 crisis stronger than ever. At the end of the reporting period on 30 September 2020, 473 apprentices and students in Germany were doing their training at ZEISS – 19 more than in the prior year. A positive outlook The ability to adapt, be flexible, learn new things and apply your own core strengths all go hand in hand. And the resilience programs we've established have already begun to bear fruit. We will pursue these in order to continue bolstering the company's ability to adapt and be resilient. And we can see and feel the great opportunities that such a major blow like the COVID-19 pandemic can have on our daily business. The work behind this is taking place increasingly in the digital realm – and the tools to accompany this are working very well indeed. The COVID-19 pandemic has accelerated this development. And perhaps this has given us the push we needed to consistently deploy digital methods throughout the company. We have certainly picked up the pace, and will continue to power ahead – with digital topics, digital solutions, digital products, remote services and web-based communication formats that will take ZEISS and our customers into the future. The ZEISS Group will continue down the course it has charted – and it will emerge from the crisis stronger than ever. Of course, it is still difficult to predict the full economic impact that the COVID-19 pandemic will have on ZEISS. But thanks to our clear strategic alignment, as set out in the ZEISS Agenda, and a portfolio guided by megatrends the company‘s global footprint and additional opportunities created by the crisis, the entire ZEISS Executive Board team and I have every reason to be optimistic about the future. At the same time, 2020 is a cause for celebration at ZEISS: 175 years ago, Carl Zeiss laid the foundations for a company that has grown into a technology leader and, as expressed in our tagline "Seeing Beyond," proves time and again that it can excel through its innovative strength and certainly think outside the box. Stay healthy. Sincerely, Dr. Karl Lamprecht President & CEO of Carl Zeiss AG 7 Solutions to Shape the Future Segments of the ZEISS Group The ZEISS Group is one of the world’s leading technology companies. It has a balanced portfolio that is geared toward attractive future-oriented markets in optics, precision mechanics and optoelectronics. For nearly 175 years, the company has been shaping technological progress, advancing the world of optics with solutions from its four segments and meeting its customers' needs. Semiconductor Industrial Quality & Manufacturing Technology Research • Semiconductor • Industrial Manufacturing Optics Quality Solutions • Semiconductor • Research Mask Solutions Microscopy Solutions • Process Control Solutions Medical Technology Consumer Markets • Ophthalmic Devices • Vision Care • Microsurgery • Consumer Products Semiconductor Industrial Quality & Medical Technology Consumer Markets Manufacturing Technology Research A large proportion of all ZEISS ensures quality standards With its products and solu- As one of the world’s leading microchips are produced and enables scientific research tions for ophthalmology, manufacturers of eyeglass using ZEISS technologies.