ANNUAL REPORT RHEINMETALL GROUP KEY FIGURES 2019 I RHEINMETALL GROUP 2019 2018 20171 2016 2015 2014 2013 RHEINMETALL GROUP Sales € million 6,255 6,148 5,896 5,602 5,183 4,688 4,417 Operating result € million 505 491 400 353 287 160 211 Operating result margin % 8.1 8.0 6.8 6.3 5.5 3.4 4.8 EBIT € million 512 518 385 353 287 102 121 EBIT margin % 8.2 8.4 6.5 6.3 5.5 2.2 2.7 EBT € million 477 485 346 299 221 22 45 Net income € million 354 354 252 215 160 21 22 Return on capital employed (ROCE)2 % 15.4 17.1 13.8 12.3 10.6 3.9 4.7 CASH FLOW Cash fl ow from operating activities € million 602 242 546 444 339 102 211 Cash fl ow from investments € million (288) (277) (270) (283) (310) (284) (191) Operating free cash fl ow € million 314 (35) 276 161 29 (182) 20 BALANCE SHEET Total equity € million 2,272 2,173 1,870 1,781 1,562 1,197 1,339 Total assets € million 7,415 6,759 6,101 6,150 5,730 5,271 4,866 Equity ratio % 30.6 32.1 30.7 29.0 27.3 22.7 27.5 Cash and cash equivalents € million 920 724 757 616 691 486 445 Total assets less cash and cash equivalents € million 6,496 6,035 5,344 5,534 5,039 4,785 4,421 Net fi nancial debt (-)/Net liquidity(+)3 € million (52) (30) 230 19 (81) (330) (147) Leverage ratio4 % 0.8 0.5 (4.3) (0.3) 1.6 6.9 3.3 Net gearing5 % 2.3 1.4 (12.3) (1.1) 5.2 27.6 11.0 HUMAN RESOURCES Employees (Dec. 31), according to capacity 23,780 22,899 21,610 20,993 20,676 20,166 20,264 Domestic 11,587 11,077 10,394 10,181 10,070 9,827 9,729 Foreign 12,193 11,822 11,216 10,812 10,606 10,339 10,535 RHEINMETALL AUTOMOTIVE Sales € million 2,736 2,930 2,861 2,656 2,592 2,448 2,262 Operating result € million 184 262 249 223 216 184 158 Operating result margin % 6.7 8.9 8.7 8.4 8.3 7.5 7.0 Research & Development € million 210 193 186 142 126 112 114 Capital expenditure (Net investments) € million 143 161 154 149 167 158 142 RHEINMETALL DEFENCE Order Income € million 5,186 5,565 2,963 3,050 2,693 2,812 3,339 Order Backlog (Dec. 31) € million 10,399 8,577 6,416 6,656 6,422 6,516 6,050 Sales € million 3,522 3,221 3,036 2,946 2,591 2,240 2,155 Operating result € million 343 254 174 147 90 (9) 60 Operating result margin % 9.8 7.9 5.7 5.0 3.5 (0.4) 2.8 Research & Development € million 145 143 109 74 73 65 74 Capital expenditure € million 166 101 89 95 96 76 62 SHARE Stock price (Dec. 31) € 102.40 77.16 105.85 63.90 61.48 36.27 44.85 Earnings per share € 7.77 7.10 5.24 4.69 3.88 0.47 0.75 Dividend per share € 2.40 2.10 1.70 1.45 1.10 0.30 0.40 1 Carrying amounts adjusted due to the change in measurement of operating land. 2 EBIT/average capital employed 3 Financial liabilities less cash and cash equivalents 4 Net fi nancial liabilities / total assets adjusted for cash and cash equivalents 5 Net fi nancial liabilities / equity RHEINMETALL GROUP 2019 1 RHEINMETALL 2 CORPORATE SECTORS 6 DIVISIONS 6.3 SALES € BILLION CUSTOMER143 COUNTRIES LOC129ATIONS WORLdwIDE 25,767EMPLOYEES OUR LOCATIONS ARE ALL OVER THE WORLD 83 14 06 EUROPE GERMANY Düsseldorf (Headquarters) · Aschau am Inn · Berlin · Bonn · Bremen Dormagen · Düren · Flensburg · Gardelegen (Letzlingen) · Gera · Hall - bergmoos · Hamburg · Hartha · Harzgerode (Silberhütte) · Heilbronn Ismaning · Jena · Kassel · Koblenz · Kiel · Krefeld · Langen hagen Lohmar · Mainz · Munich · Neckarsulm · Neuen burg · Neuenstadt Neuss · Oberndorf · Papenburg · Rostock · Röthenbach (Pegnitz) Schneizlreuth (Fronau) · St. Leon-Rot · Stockach · Tamm · Trittau Unterlüß · Walldürn · Wedel EUROPE BELGIUM I Brussels · FRANCE I Le Blanc Mesnil · Meyzieu · Paris Roissy (Villepinte) · Thionville · ITALY I Bagnolo Mella · Domus- novas · Ghedi · Lanciano · Livorno · Pescara · Rome · LITHUANIA I Vilnius · NETHERLANDS I Ede · Hengelo · NORWAY I Nøtterøy AUSTRIA I Schwanenstadt · Vienna · POLAND I Gliwice · Warsaw 18 ROMANIA I Campia Turrzi · RUSSIAN FEDERATION I Moscow SWEDEN I Stockholm · SWITZERLAND I Altdorf · Bern · Lohn-Am- mannsegg · Studen · Urdorf · Wimmis · Zurich · SPAIN I Abadi- ano · Amorebieta · CZECH REPUBLIC I Trmice · Ústí nad Labem Chabařovice · UNITED KINGDOM I Bristol · Isle of Wight · Kirtlington London · Swindon · Telford AFRICA SOUTH AFRICA I Boskop · Maitland · Potchefstroom (Boksburg) Pretoria · Somerset West · Wellington AMERICAS BRASIL I Nova Odessa · CANADA I Ottawa · Saint-Jean-sur- Richelieu · MEXICO I Celaya · Mexico-City · USA I Auburn Hills/MI Biddeford/ME · Dover/DE · East Camden/AR · Greensburg/IN 08 Greenville/SC · Marinette/WI · Sta ord/VA · Wilmington/DE ASIA CHINA I Chongqing · Kunshan · Beijing · Shanghai · Yantai INDIEN I Mumbai · Pune (Takwe) · Supa · JAPAN I Hiroshima (Takaya) · Odawara (Kanagawa) · MALAYSIA I Malacca · SAUDI ARABIA I Riyadh · SINGAPORE I Singapore · SOUTH KOREA I Seoul TURKEY I Ankara · Istanbul · UAE I Abu Dhabi · SAIF Zone, Sharjah AUSTRALIA AUSTRALIA I Adelaide · Brisbane · Bundaberg · Canberra · Mary - borough · Melbourne · Townsville · NEW ZEALAND I Wellington CONTENTS LETTER TO SHAREHOLDERS 2 Supervisory Board of Rheinmetall AG 3 Report of the Supervisory Board 12 Statements by the Executive Board 14 Rheinmetall on the capital markets COMBINED MANAGEMENT REPORT FOR 2019 21 BASIC INFORMATION ON THE RHEINMETALL GROUP 22 Corporate structure 23 Corporate management and control 24 Business model 32 Strategy ECONOMIC REPORT 36 Executive Board statement on the general economic situation 37 General economic conditions 44 Business performance 74 Financing 76 Risks and opportunities 100 Notes on Rheinmetall AG 102 Report on expected developments NON-FINANCIAL ASPECTS OF BUSINESS ACTIVITIES 109 Technology und innovation 110 Environmental protection and conservation 111 Employees 117 Procurement and the supply chain 120 Compliance 124 Social responsibility 126 Energy management CORPORATE GOVERNANCE 128 Corporate governance report 140 Disclosures required by takeover law REMUNERATION REPORT 144 Remuneration of the Executive Board 156 Remuneration of the Supervisory Board SUPPLEMENTARY REPORT 158 Events after the end of the reporting period CONSOLIDATED FINANCIAL STATEMENTS 2019 159 160 Balance Sheet 161 Income statement 162 Cash flow statement 163 Statement of changes in equity 164 Notes 223 Responsibility statement 224 Auditor’s report and opinion ADDITIONAL INFORMATION 233 234 Balance sheet of Rheinmetall AG 235 Income statement of Rheinmetall AG 236 Offices held by Supervisory and Executive Board members 239 Representative Director, Chief Compliance Officer Letter to shareholders Supervisory Board of Rheinmetall AG Shareholder representatives Born Nationality Committee First elected Mandate membership Until expiry of the ordinary Annual General Meeting Ulrich Grillo Chairman of the Supervisory 1959 German May 2016 2021 Board Dr.-Ing. Dr.-Ing. E.h. 1956 German May 2017 2022 Klaus Draeger Professor Dr. Andreas 1957 German June 2002 2022 Georgi Professor Dr. Susanne 1964 German May 2012 2022 Hannemann Dr. Franz Josef Jung 1949 German May 2017 2022 Detlef Moog 1948 German July 2010 2021 Klaus-Günter Vennemann 1954 German May 2016 2021 Univ.-Prof. Dr. Marion A. 1966 German May 2016 2021 Weissenberger-Eibl Employee representatives Born Nationality Committee First elected Mandate membership Until expiry of the ordinary Annual General Meeting Dr. Rudolf Luz Vice Chairman 1956 German January 2001 2022 of the Supervisory Board Roswitha Armbruster 1954 German May 2012 2022 Dr. Daniel Hay 1979 German May 2014 2022 Dr. Michael Mielke 1964 German September 2010 2022 Reinhard Müller 1960 German May 2017 2022 Dagmar Muth 1961 German July 2015 2022 Markus Schaubel 1963 German July 2014 2022 Sven Schmidt 1975 German July 2014 2022 Chairman Strategy Committee Audit Committee Personnel Committee Nomination Committee Mediation Committee RHEINMETALL AG | ANNUAL REPORT 2019 3 Letter to shareholders Report of the Supervisory Board Supervisory Board of Rheinmetall AG Left to right: Dr.-Ing. Dr.-Ing. E. h. Klaus Draeger, Dr. Rudolf Luz (Deputy Chairman), Professor Dr. Andreas Georgi, Univ.-Prof. Dr. Marion A. Weissenberger-Eibl, Reinhard Müller, Professor Dr. Susanne Hannemann, Ulrich Grillo (Chairman), Klaus-Günter Vennemann, Dr. Franz Josef Jung, Dr. Daniel Hay, Detlef Moog, Roswitha Armbruster, Dr. Michael Mielke, Markus Schaubel, Dagmar Muth, Sven Schmidt Consultation and monitoring as part of ongoing dialogue with the Executive Board During the year under review, as in previous years, we performed all the tasks and duties assigned to us in accordance with the law, Articles of Association and Rules of Procedure with commitment, re- sponsibility and conscientiousness. We regularly advised the Executive Board on the management of the company and diligently monitored its management activities. Cooperation between the Supervisory Board and Executive Board is characterized by trust, openness and constructive dialogue. The Supervisory Board was involved at an early stage in all decisions of key strategic, economic and organizational importance to the Rheinmetall Group. We received detailed written documentation from the Executive Board to help us to prepare for our meetings, which meant that we always had sufficient opportunity to look critically at the reports, presentations and proposed resolutions in the plenary as- sembly and in the committees and contribute our own suggestions before, following thorough exami- nation and detailed discussion, passing resolutions where our approval was required in accordance with the law, Articles of Association or Rules of Procedure for measures or transactions of the Executive Board. Members of the Executive Board attended the meetings of the Supervisory Board and committees in order to discuss the matters in hand and answer our questions.