A PERFECT MATCH IN DIAGNOSTICS

Annual Report 2021

MISSION STATEMENT

As the innovative and technological market leader for automation and instrumentation solutions in in-vitro diagnostics, we seek to offer our worldwide partners first class solutions and thereby share responsibility towards their customers and patients.

Our success is based on the talents and skills of our employees and their commitment to always perform the extraordinary. Their performance allows for the successful and sustainable development of our company in the interest of all its stakeholders.

Our partnerships are built on mutual trust, continuity and professionalism and with our partners we share a common mission to develop safe, innovative, market-leading products that consistently fulfill customer expectations.

For STRATEC, partnership means responsibility, passion and commitment, to both our customers and our products, that goes well beyond the duration of the product life cycle.

STRATEC GROUP AT A GLANCE

GROUP KEY FIGURES

Sales, earnings, and dividend

	2021	2020	Change
Sales (in € thousand)	287,335	250,099	+14.9%
Gross R&D expenses (in € thousand)	49,113	43,370	+13.2%
Gross R&D expenses as % of sales	17.1	17.3	-20 bps
Adjusted EBITDA (in € thousand)1	66,606	51,978	+28.1%
Adjusted EBITDA as % of sales1	23.2	20.8	+240 bps
Adjusted EBIT (in € thousand)1	54,273	41,713	+30.1%
Adjusted EBIT as % of sales1	18.9	16.7	+220 bps
Adjusted consolidated net income (in € thousand)1	45,122	35,218	+28.1%
Adjusted basic earnings per share (in €)1	3.73	2.92	+27.7%
Basic earnings per share IFRS (in €)	3.30	2.36	+39.8%
Dividend per share (in €)	0.952	0.90	+5.6%

¹ For comparison purposes, adjusted figures exclude amortization resulting from purchase price allocations in the context of acquisitions, an impairment loss recognized on a proprietary development project in the Diatron segment in Q2/2021, and other non-recurring items. 2 Subject to approval by the Annual General Meeting on May 20, 2022.

bps = basis points

Balance sheet

	12.31.2021	12.31.2020	Change
Shareholders' equity (in € thousand)	205,759	172,545	+19.2%
Total assets (in € thousand)	368,525	331,904	+11.0%
Equity ratio (in %)	55.8	52.0	+380 bps
bps = basis points

QUARTERLY OVERVIEW 2021

Sales and earnings

	1st quarter (01.01. – 03.31.)	2nd quarter (04.01. – 06.30.)	3rd quarter (07.01. – 09.30.)	4th quarter (10.01. – 12.31.)
Sales (in € thousand)	71,995	83,770	69,655	61,915
Adjusted EBIT (in € thousand)1	16,045	18,412	14,233	5,583
Adjusted EBIT as % of sales1	22.3	22.0	20.4	9.0
Adjusted consolidated net income (in € thousand)1	13,147	15,400	12,016	4,559
Adjusted basic earnings per share (in €)1	1.09	1.27	0.99	0.38
Basic earnings per share IFRS (in €)	0.95	1.12	0.92	0.30

LETTER FROM THE BOARD OF MANAGEMENT

DEAR SHAREHOLDERS, DEAR PARTNERS AND FRIENDS OF STRATEC,

Like many other companies, STRATEC was again confronted with major hurdles in 2021. Among others, these included the wide variety of challenges presented by the COVID-19 pandemic and the ongoing highly tense situation in global supply chains. Thanks to the exceptional performance, flexibility, and dedication shown by the whole of STRATEC's team, however, we once more managed to avoid any significant interruptions to our production and thus to meet increased demand from our customers in their efforts to combat the pandemic.

In view of these factors and thanks to numerous product launches, we again achieved double-digit percentage sales growth in all company segments in the 2021 financial year. For consolidated sales, we can report growth of 14.9%, while our adjusted EBIT rose disproportionately by 30.1%. This means that we again significantly exceeded our financial guidance communicated at the beginning of 2021.

Given our well-filled deal and development pipeline and the growing awareness of in-vitro diagnostics solutions in national healthcare systems, the medium and long-term growth prospects for our company are just as positive as ever. In the short term, however, we too face significant forecasting uncertainties. These relate on the one hand to the further course of the pandemic, which can only be forecast to a limited extent, and on the other hand to the situation in supply chains, which remain extremely tense, and potential indirect effects of the conflict in Ukraine. In view of our young product portfolio, further upcoming product launches, and our focus on western markets, we nevertheless expect 2022 to be another successful financial year. Constant-currency sales should more or less match the record set in 2021, while the adjusted EBIT margin is forecast at around 16.5% to 18.5%.

MARCUS WOLFINGER (54) Chairman of the Board of Management

DR. ROBERT SIEGLE (54) Member of the Board of Management, Finances and Human Resources

DR. CLAUS VIELSACK (54) Member of the Board of Management, Product Development

Another area in which we made further advances in 2021 is that of factoring sustainability aspects into our corporate strategy and achieving related self-imposed objectives. We are a signatory to the UN Global Compact and officially committed to its goals and its ten principles in the areas of human rights, labor norms, environment, and combating corruption. Not only that: since 2019, we have reduced our greenhouse gas emissions by 63%.

In light of our strong business performance and solid balance sheet structure, we are also delighted to offer our shareholders a further increase in our dividend to a new record level of € 0.95 per share (previous: € 0.90 per share). Subject to approval by the Annual General Meeting in May 2022, this would mark the eighteenth consecutive increase in our dividend since payment of the first dividend in 2004.

The responsibility we bear towards our employees, customers, shareholders, and partners, who rely on the high quality of our products, will continue to determine our actions as a company in future as well. We would like to thank you very sincerely for the trust you have placed in our company. Together with you, we look forward to shaping STRATEC's ongoing future success.

Birkenfeld, March 2022 The Board of Management of STRATEC SE

Marcus Wolfinger Dr. Robert Siegle Dr. Claus Vielsack

REPORT OF THE SUPERVISORY BOARD

DEAR SHAREHOLDERS,

STRATEC can report a decidedly pleasing business performance, and that although conditions were again exceptionally challenging in 2021, not least due to the ongoing COVID-19 pandemic and the tense situation in numerous international supply chains. In 2021, the company was again able to meet its partners' need for additional analyzer systems to help combat the pandemic.

In the 2021 financial year, the Supervisory Board of STRATEC SE once again dealt closely with the company's situation and its prospects. It worked together with the Board of Management on a basis of trust, advised the Board of Management, and exercised its own supervisory function. The Supervisory Board performed the duties required by law, the Articles of Association, and its Code of Procedure at all times in full awareness of its responsibility. With only a few exceptions, it also complied with the recommendations of the German Corporate Governance Code. The Supervisory Board was directly involved in all decisions or measures of fundamental significance, particularly those involving corporate strategy, grouprelated matters, and the asset, financial, and earnings position of the company and the Group, as well as those transactions requiring its approval in the Code of Procedure for the Board of Management. The Board of Management provided the Supervisory Board with regular, timely, and comprehensive written and oral information concerning all issues of relevance to the company.

The individual members of the Board of Management were available to discuss specific topics with members of the Supervisory Board in various one-to-one meetings, also outside the framework of Supervisory Board meetings.

The members of the Supervisory Board take responsibility for undertaking any training or professional development measures necessary for them to fulfil their duties. The new member of the Supervisory Board, Dr. Rudolf Eugster, also received a suitable introduction to assist him in meeting the requirements of his new position.

SUPERVISORY BOARD MEETINGS, FORMATION OF COMMITTEES, MEETING ATTENDANCE, AND KEY FOCUSES OF DISCUSSION

The Supervisory Board held 12 meetings in the 2021 financial year. All meetings of the Supervisory Board were attended by all of its members and – unless the topics involved matters relating to the Board of Management or internal Supervisory Board matters – also by all members of the Board of Management.

On January 28, 2021, the Supervisory Board for the first time established a permanent Audit Committee, which held two meetings in 2021. These meetings were also attended by all members of the Supervisory Board, who are simultaneously the members of the committee.

Due to COVID-19-related measures, the meetings of the Supervisory Board and its committees in the 2021 financial year were held partly by way of electronic communications and partly as in-person meetings.

At its meetings on March 26, 2021, June 25, 2021, September 24, 2021, and December 17, 2021, the Supervisory Board focused on the risk report, topics relating to corporate social responsibility, the company's sales and earnings performance, its financial situation, the status of individual development projects and of the company's negotiations for material contracts. Further focuses included discussions concerning the business performance of subsidiaries, the company's organizational structure, the impact of new legislative requirements, and the long-term corporate strategy. Moreover, the Board of Management regularly reported on the company's situation with regard to the COVID-19 pandemic and on the existing, and in some cases intensified measures to protect employees and maintain operations, as well as on the measures taken to secure supply chains and the company's supply capacity.

At its first meeting in the period under report, held on January 18, 2021, the Supervisory Board discussed various topics, also in preparation for the Supervisory Board meetings to be held and resolutions adopted in the further course of the year. Topics discussed included the formation of an Audit Committee, target achievement for the remuneration of the Board of Management for 2020, and the new remuneration system for the Board of Management, which was submitted for approval by the Annual General Meeting on May 20, 2021 and subsequently adopted.

At the meeting on January 28, 2021, the Supervisory Board determined the degree of target achievement and discretionary components for the respective members of the Board of Management for the 2020 financial year pursuant to the individual additional agreements (medium-term incentive agreements – MTI). Alongside further potential focus topics for future meetings, the Supervisory Board again discussed the formation of an Audit Committee. Subsequent to these deliberations and the adoption of a corresponding resolution, this committee was established and held its first meeting on the same day. The Supervisory Board also adopted the amendments thereby required to the Code of Procedure for the Supervisory Board which, in updated form, was then made permanently available to shareholders on the company's website.

At its meeting on March 8, 2021, the Supervisory Board again dealt with the remuneration of the Board of Management and set individual targets for its members within the medium-term incentive agreement (MTI) for 2021. The objectives thereby agreed also include sustainability-related targets.

On March 9, 2021, the Supervisory Board approved the corporate governance statement with the corporate governance report, which was then made permanently available to shareholders on the company's website. Furthermore, it dealt with the non-financial group declaration submitted by the Board of Management, whose contents it reviewed and approved without objection.

As well as addressing general focus topics, at its meeting on March 26, 2021 the Supervisory Board approved the annual financial statements and management report and the consolidated financial statements and group management of STRATEC SE for the 2020 financial year following due preparation by the Audit Committee at its own meeting the same day. In addition, the Supervisory Board approved the proposal made by the Board of Management to hold the upcoming Annual General meeting on a purely virtual basis again in the second year of the COVID-19 pandemic. Moreover, the proposal submitted by the Board of Management in respect of the appropriation of profit was approved, as were the resolutions to be proposed to the Annual General Meeting. The Report of the Supervisory Board was also approved for publication.

The Supervisory Board meeting on May 20, 2021 was held directly after the virtual Annual General Meeting and, after the election of Dr. Vornhagen to the Supervisory Board, focused in particular on electing a new Chair. Further information about this can be found below in the section on 'Changes in the Supervisory Board'.

Alongside the recurring focus topics, the meeting on June 25, 2021 concentrated on an interim review of the targets agreed with the Board of Management for 2021, on information provided to the Supervisory Board on the general situation on the labor market and the current practice of target agreements and employee retention, as well as on the future regulations governing mobile work at the STRATEC Group.

The meeting on September 24, 2021 focused on discussions and deliberations concerning a potential enlargement in the Supervisory Board, the internal control mechanisms in place across the Group, and existing and planned security measures in the field of IT.

At its meeting on October 21, 2021, the Supervisory Board established that its activities were efficient overall. In advance of the meeting, an external service provider held one-to-one discussions with the Supervisory Board members on the basis of structured catalog of questions.

The meeting on November 3, 2021 included elections within the Supervisory Board. Further information about this can be found below in the section on 'Changes in the Supervisory Board'.

At the meeting on November 26, 2021, the Supervisory Board and Board of Management renewed the Declaration of Compliance pursuant to § 161 of the German Stock Corporation Act (AktG). This was made permanently available to shareholders on the company's website. Furthermore, the Supervisory Board adopted amendments to the company's Articles of Association to account for the subscription shares issued in 2021 in connection with existing stock option plans. Moreover, the procedure for setting targets and establishing target achievement for the medium-term incentive agreement (MTI) of the Board of Management was laid down in writing.

At the annual strategy meeting, which was held on December 17, 2021, the main focus was on presentations and discussions concerning the status quo and further potential strategic alignment of the Group. Alongside these strategic topics, the Supervisory Board also approved transactions requiring its consent: the modification and extension of an existing master credit facility and the foundation of two second-tier subsidiaries. Moreover, the Supervisory Board adopted the budget and the annual financing plan for the 2022 financial year.

ACTIVITIES OF THE SUPERVISORY BOARD AUDIT COMMITTEE

On January 28, 2021, the Supervisory Board for the first time established a permanent Audit Committee, which addresses in particular the review of the accounting, the monitoring of the accounting process, the effectiveness of the internal control system, the risk management system, the internal audit system, the audit of the financial statements, and compliance. At its constitutive meeting on January 28, 2021, Dr. Rolf Vornhagen was designated as the Chair of the committee; the other members of the Audit Committee at this point in time were Prof. Dr. Stefanie Remmele and Dr. Frank Hiller.

At its meeting on March 26, 2021, the Audit Committee discussed the annual and consolidated financial statements as of December 31, 2020 with representatives of the auditor, who explained the key audit findings and answered all questions raised by the Audit Committee.

REVIEW OF POTENTIAL CONFLICTS OF INTEREST AND INDEPENDENCE OF SUPERVISORY BOARD MEMBERS

One important aspect of good corporate governance is the independence of Supervisory Board members and the absence of any conflicts of interest on their part. The Supervisory Board bases its assessment of its members' independence on the recommendations made by the German Corporate Governance Code and the additional criteria for assessing the independence of Supervisory Board members laid down in the competence profile for the Supervisory Board. No conflicts of interest requiring immediate disclosure to the Supervisory Board and immediate notification of the Annual General Meeting arose among members of the Board of Management or the Supervisory Board. No material transactions were performed with any member of the Board of Management or with any person or company closely related to such. Based on the Supervisory Board's assessment, all three of its members, and thus all members of the Audit Committee, are currently to be viewed as independent.

CHANGES IN THE SUPERVISORY BOARD

By court appointment dated July 21, 2020, Dr. Rolf Vornhagen was appointed for the period through to the next Annual General Meeting, was proposed by the Supervisory Board for election by the Annual General Meeting on May 20, 2021 and subsequently elected. At the constitutive meeting of the Supervisory Board held directly after the Annual General Meeting, the Supervisory Board held elections among its members and elected Prof. Dr. Stefanie Remmele as its Chair and Dr. Frank Hiller as its Deputy Chair. The Supervisory Board member Dr. Rolf Vornhagen was designated as the financial expert pursuant to § 100 (5) AktG.

The Supervisory Board Chair Prof. Dr. Stefanie Remmele stood down from her position due to personal reasons as of October 22, 2021. The Supervisory Board would like to thank Prof. Remmele for her contribution, which was at all times characterized by trust and competence. Dr. Rudolf Eugster was appointed by court on October 26, 2021 as her successor on the Supervisory Board through to the next Annual General Meeting. At the Supervisory Board meeting on November 3, 2021, the Supervisory Board elected Dr. Rudolf Eugster as its Chair and Dr. Frank Hiller as its Deputy Chair. The Supervisory Board member Dr. Rolf Vornhagen was again designated as the financial expert pursuant to § 100 (5) AktG.

AUDIT OF ANNUAL AND CONSOLIDATED FINANCIAL STATEMENTS; AUDIT OF NON-FINANCIAL GROUP DECLARATION

Consistent with the proposal submitted by the Supervisory Board, the Annual General Meeting held on May 20, 2021 elected Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Stuttgart, as auditor and group auditor for the 2021 financial year.

DR. RUDOLF EUGSTER (56) Chairman of the Supervisory Board DR. FRANK HILLER (55) Deputy Chairman of the Supervisory Board

DR. ROLF VORNHAGEN (68) Member of the Supervisory Board

Ebner Stolz has audited the annual and consolidated financial statements of STRATEC SE since the 2015 financial year. The auditor responsible for the audit of the annual financial statements from 2015 to 2018 was Linda Ruoss while Philipp Lessner was responsible for the annual financial statements from 2019 to 2021. Linda Ruoss was responsible for the audit of the consolidated financial statements from 2015 to 2019, while Philipp Lessner was responsible for the 2020 and 2021 consolidated financial statements.

At a meeting held on March 28, 2022, the Audit Committee dealt in detail with the annual financial statements and management report, as well as with the consolidated financial statements and group management report, together with the non-financial group declaration, of STRATEC SE for the 2021 financial year. Both sets of financial statements had previously been audited and provided with unqualified audit opinions by the auditor. Furthermore, in its assessment of the risk management system the auditor confirmed that the Board of Management had taken the measures required by the German Stock Corporation Act (AktG) for the early identification of any risks to the company's continued existence. In addition to the statutory audit of the financial statements, Ebner Stolz was commissioned by the Supervisory Board to perform a limited assurance audit on the non-financial group declaration, which is a constituent component of the group management report, and, on this basis, did not raise any objections to the reporting in the non-financial group declaration or its compliance with the legal requirements applicable to such.

The annual financial statements and management report, consolidated financial statements and group management report with the non-financial group declaration, proposal submitted by the Board of Management in respect of the appropriation of profit, and auditor's audit reports were forwarded to all members of the Supervisory Board in good time for their own review. Representatives of the auditor attended the discussion of the annual and consolidated financial statements at the Supervisory Board meeting on March 28, 2022 and explained the key audit findings.

The audit of the annual financial statements and management report and of the consolidated financial statements and group management report with the non-financial group declaration of STRATEC SE by the Audit Committee did not result in any objections being raised. Following preparation in the Audit Committee, the Supervisory Board concurred with the findings of the audit conducted by the auditor in accordance with legal requirements and approved the annual financial statements and management report, as well the consolidated financial statements and group management report, in a meeting held by conference call on March 29, 2022. The annual financial statements are thus adopted.

The Supervisory Board endorsed the proposal submitted by the Board of Management in respect of the appropriation of profit. Subject to approval by shareholders at this year's Annual General Meeting, the company plans to distribute a total dividend of € 11.5 million (€ 0.95 per share) to shareholders of STRATEC SE.

THANKS

The Supervisory Board would like to thank the members of the Board of Management and all employees of STRATEC SE and its subsidiaries worldwide for their exceptional commitment and superb achievements in the 2021 financial year.

Birkenfeld, March 2022 On behalf of the Supervisory Board

Dr. Rudolf Eugster Chairman of the Supervisory Board

TOUCHDOWN IN CTE DIAGNOSTICS

NEW OPPORTUNITIES FOR EARLY DIAGNOSIS AND TREATMENT

The latest developments in medical science and technology are leading to approaches that were previously considered impossible, particularly when it comes to treating diseases that are difficult to diagnose. Numerous innovations in blood-based in-vitro diagnostics are currently referred to with the term 'liquid biopsy'. Hundreds of often extremely rare molecules, known as 'biomarkers', can be found in just a few drops of blood and other bodily fluids. The variety and large number of allocable molecules and proteins provide information not only about potential blood diseases, but also regarding the condition of peripheral tissues and organs. Previously, this could only be analyzed by taking samples (biopsies). Liquid biopsies therefore facilitate diagnosis and treatment of diseases at an early stage of emergence. An additional meaningful benefit is the great sensitivity of the latest analytical methods and minimal burden on the patient during the sample acquisition; after all, liquid biopsies reduce the need for complicated and often risky invasive biopsies to obtain specimens.

One example that shows how liquid biopsies could lead to a crucial breakthrough in both diagnosis and prevention is chronic traumatic encephalopathy (CTE), which manifests itself as a permanent brain dysfunction due to recurring neuronal tissue injuries. This article will look at CTE and its key role in preventive healthcare for sportspeople (footballers, soccer players, or boxers). Moreover, it will address how research in this area can also help patients with cancer or other chronic diseases and the important role played by Smart Consumables in the latest analytical methods.

BIOMARKERS AND THEIR ROLE IN THE NFL

DIFFICULT TO ACCESS: BRAIN AND CENTRAL NERVOUS SYSTEM

One organ and group of tissues that could not be adequately examined using blood diagnostics previously is the brain and the entire central nervous system. Due to its enormous importance, most parts of the central nervous system (brain and spinal cord) are embedded in bony structures – the cranial bone and the spine – and are only in exchange with the blood circulation via selective barriers that are strictly controlled by specialized cells (blood-brain barrier).

If a neurological disease or injury is suspected by a clinician, the traditional approach was sampling some spinal fluid (cerebrospinal fluid; in short 'liquor') by performing a lumbar puncture. This procedure involves great risks, as the sampling itself is very painful for patients and the removal of cerebrospinal liquid reduces brain pressure, frequently leading to severe headaches, dizziness, and fatigue lasting several days. In healthy people, the liquor contains hardly any immune cells, or none at all. This means that any bacteria and viruses are initially free to multiply and induce severe inflammation, eventually leading to permanent brain damage.

NEUROFILAMENTS CAN SERVE AS INDICATORS OF EARLY STAGE BRAIN DAMAGE

Research performed in recent years has shown that, despite exact control by the blood-brain barrier, minimal amounts of proteins and molecules from the central nervous system reach the blood and can actually be associated with diseases and injuries. It has been possible to validate new highly specific biomarkers, which offer the chance to spare neurological patients complicated imaging procedures and spinal cord punctures. Not just that: Certain proteins facilitate continuous monitoring of chronic injuries and inflammation and their decline – and that without timeintensive and costly imaging processes.

One of these protein biomarkers is the group of neurofilaments. These are important structural proteins in the extensions (axons) of nerve cells (neurons) that help to stabilize the axons in the spinal cord, which may be as long as one meter, and contribute to nerve impulse transmission. As soon as nerve cells become stressed and damaged, the axons may break: Small sub-fragments of the neurofilaments, the neurofilament light chain (NfL) are released firstly into the spinal fluid, and from there in very small quantities into the blood, eventually. The only way to detect them here in qualitative and quantitative terms is by applying innovative ultra-sensitive in-vitro diagnostics methods.

The detection of chronic traumatic encephalopathy (CTE) can therefore be performed based on a small amount of blood serum.

Alongside applications aimed at examining victims of accidents or crime, the novel neurofilament biomarkers are particularly relevant for sportspeople involved in high-contact sports, such as American Football.

CONCUSSION – A FILM CREATES AWARENESS

Dr. Bennet Omahu achieved fame in 2015, when he was portrayed in the film 'Concussion'. Of Nigerian background, this forensic neuropathologist spent years examining the brains of dead people and was struck by some features in the tissue samples taken from several American football players. During their active careers, the players shown in the film suffered several bouts of concussion that initially did not seem to have any drastic consequences. However, over time, the players developed behavioral disorders, such as increased aggression, anxiety and depression. Together with other physicians, Dr. Omahu revealed the connection between repetitive concussions, combined with a lack of recovery time, and chronic traumatic encephalopathy (CTE) in deceased footballers. The findings of his research were dramatic: The damages he identified in certain areas of the brain were equivalent to boxers suffering from dementia or 80-year-old Alzheimer patients.

SHOCKING! INJURIES IN AMERICAN FOOTBALL

CONCUSSION IN SPORT – WHAT IS BEHIND IT?

Massive shocks to the head, which lead the brain to be suddenly shaken back and forth will irritate or damage tissue and impair the precisely regulated transmission of impulses between neurons and other cells in the brain. People mostly notice the effects in the form of dizziness, headaches, scotoma or other impairments to their vision, shivering, fatigue, and generally feeling unwell. Unless major structural damage, such as bleeding, bone fractures, or soft tissue injuries have arisen, these symptoms mostly recede of their own accord after a few days of rest and the brain cells revitalize. If this happens repeatedly and without suitable periods of recovery, the symptoms eventually become persistent. As already mentioned, this may then lead to psychomotoric changes, such as restrictions on mobility, perceptual disorders, and changes in behavior.

A review article published by a US-based research team in 2009 analyzed a total of 51 cases of chronic traumatic encephalopathy (CTE) which had been neuro-pathologically confirmed by way of autopsy or imaging. Of these 51 cases investigated precisely, 46 (90%) arose among professional sportspeople. These in turn included 39 boxers (85%), five American footballers (11%), one professional wrestler, and one soccer player. One of the largest recent studies showed that, of 202 deceased football players, 87% had indications of chronic traumatic encephalopathy (CTE), with the degree of severity intensifying in line with the length of their careers.

THE VALUE OF HEALTH

To reduce the risk of brain damages in sportspeople playing high-contact sports, numerous physicians have called for a noninvasive and easy-to-use monitoring system. This system is supposed to provide direct information about the neuro-physiological health status of the players, right after each training session, match or fight.

Furthermore, there is ever greater focus on offering individualized healthcare to the players with the aim of making high-contact sports such as American football safer. Notably, that is an important issue not just for professional players but especially for children or teenagers in high-contact sports and their often very worried parents. Easily performed, patient-friendly, and reliable blood tests are therefore invaluable. After all, early detection of concussion is the only way to ensure that the sportsperson affected can obtain the rest and recuperation phases needed for physiological and mental health.

87%of all football players develop CTE during their active careers

Concussion arises when the brain is suddenly and quickly pressed from inside against the skull. This may create massive stress and irritation in the brain nerve cells. The scalp or cranial bone are not necessarily injured after these impacts. Frequent repetition of such concussions may lead to permanent damage and trigger CTE.

Point-of-care tests are becoming ever more important in patient care. Certain diagnoses can be made directly and quickly on site, at the local physician or in emergency rooms. Thanks to the latest developments in biotechnology and medical sciences, biomarkers have become detectable in easily accessible bodily fluids (blood serum).

A STRONG OFFENSIVE IN CTE DIAGNOSTICS

EACH BOUT OF CONCUSSION DAMAGES MORE NERVES AND MORE NEUROFILAMENTS LEAK INTO LIQUOR

Neurofilaments have a key role in the early detection of potential (chronic) damage to the central nervous system. One particularly important factor here is the composition of the neuron's neurofilaments in the boundaries of Schwann cells or astrocytes (stellate cells) where their stabilizing character is required. These wrap the axons (neuronal cell extensions) with myelin layers and thus enable electrical impulses to be transmitted at enormous speed between the nodes of Ranvier and along the nerve conduits.

Numerous clinical and preclinical studies which suggest that neurofilaments, or fragments and sub-units of such, may be able to provide direct information about the condition of patients after traumatic brain injury (TBI) have been underway for several years now. Chronic traumatic encephalopathies (CTEs), which are a subset of TBI, are particularly interesting in this respect. That is because, as explained at the outset, they emerge over time due to repeated bouts of concussion. Each blow and jolt leads the neurons thereby irritated to leak more neurofilaments into the cerebrospinal fluid and then into the blood stream through the weakened blood-brain barrier. There, they can be characterized and quantified using novel, ultra-sensitive in-vitro diagnostic detection methods. One major advance in detecting and developing neurofilaments as biomarkers involved late-stage developments in one of the most important group of methods in clinical diagnostics, namely immunological detection methods.

A STRONG

OFFENSIVE

IN CTE DIAGNOSTICS

When nerve cells are stressed (severely bent or stretched etc. without being completely destroyed), this may detach the myelin layer, tear microtubules and allow light (smaller) neurofilament (NfL) fragments to escape through the impaired actin layer and enter the cerebrospinal fluid. From there, the tiniest quantities may cross to the blood and be detected using highly sensitive detection methods. The volume of NfL directly correlates to the severity of the concussion, trauma, or neurodegeneration.

FROM LIQUOR TO BLOOD PLASMA: FIND THE NEUROFILAMENT USING IMMUNOASSAYS!

First and foremost, the development of neurofilaments as biomarkers requires a profound understanding of the underlying genetics, in which the latest 'digita' PCR methods play a major role. The PCR method multiplies genetic material and makes the biomarker's underlying genes measurable and analyzable. Furthermore, advances in cell culture and histological methods to evaluate the (patho-) physiology of the biomarkers are making an essential contribution. At present, immunological detection methods are mostly used to track down these sometimes very rare protein-based biomarkers in the blood, in this case neurofilament light chains. When immunoassays are used, antibodies are deployed to detect the presence of functional proteins or protein fragments (or antigens when the target molecule is an antibody) with a marking molecule (color or fluorescence signal or an enzyme that splits a further color molecule). Immunological detection methods have become so sensitive that they can detect single molecules and proteins in complex bodily fluids such as blood serum and plasma.

MONITORING AS KEY TO PREVENTION

According to the latest studies, just a few drops of blood are enough to provide information about the course of a disease for certain neurological injuries. Additionally, patient recovery, and thus also treatment success, may be monitored with little effort and in little time. It is particularly worth mentioning that the volume and type of neurofilaments detected in the blood serve not only to diagnose a chronic traumatic encephalopathy or concussion, but can also serve as biomarkers for the early detection of other well-known neurodegenerative diseases: Alzheimer, Parkinson's, multiple sclerosis, certain brain tumors, and even rare forms of dementia.

It is important to note, however, that other pathological proteins (again, biomarkers), such as tau proteins or beta/alpha amyloids, and proven tumor markers are still indispensable to any established clinical diagnostic methodology, as are physical examinations by specialized and welltrained neurologists. For chronic traumatic encephalopathy in particular, the development of new generations of microfluidic Smart Consumables has nevertheless promoted advances in the field of single molecule detection technologies based on immunological assays from liquid biopsies.

DIGITAL PCR USING MICROFLUIDICS

A digital PCR (polymerase chain reaction), or dPCR, is an enhanced version of the traditional PCR: The individual molecules to be detected (RNA, DNA fragments in cells or bodily liquids) are separated by borderline dilution using specialized microfluidic chips. The sample is packaged in femtoliter (!) drops and individually amplified and analyzed. As each droplet may or may not contain the single target molecule (amplification yes or no), this is referred to as a digital PCR. This method reduces variances while significantly increasing sensitivity. dPCR is therefore particularly suitable for detecting very rare RNA or DNA molecules.

IMMUNOASSAYS USING SMART CONSUMABLES

Single molecule bio-affinity tests (bead-based ELISA), such as those published several years ago by STRATEC's partner Quanterix, use Smart Consumables (made by STRATEC) that contain micro-well structures and facilitate the detection of extremely rare proteins, such as neurofilament light chains (NfL) for CTE and other biomarkers. Some of these ultrasensitive methods often deploy so-called aptamers (short single-strand DNA or RNA oligonucleotide) instead of antibodies, also in combination with magnetic nanoparticles that often work even without labels. Immunoassays are primarily used to detect intact entire proteins and are limited only by affinity – the binding strength of the aptamer or antibody to the target protein.

Detecting very rare and small molecules is challenging. Nano-particles on the surface of Smart Consumables allow the detection of even the tiniest volumes/numbers of biomarkers with little technical effort.

Complex elements work together efficiently to compile 'hybridoma cell lines'. These are used to manufacture monoclonal antibodies that are essential to develop new detection methods and novel biomarkers, or to manufacture medicines.

Smart molecular detection systems, such as digital PCR (dPCR), facilitate the discovery of novel genetic markers and diagnosis of potential molecular-biological changes in the genes underlying the physiology of biomarkers. As these changes may sometimes be only minimal, yet essential for detection, digital PCRs are a very effective enhancement of this now well-established molecular detection method.

SHARP MOVE: IMPLEMENTING SMART CONSUMABLES

HIGH-PRECISION, MICRO-STRUCTURED CHIPS OPEN UP UNIMAGINED POSSIBILITIES

Microfluidic Smart Consumables are special receptacles made of certain polymers (plastics), silicon, or glass. They support functionality or even facilitate specific biochemical tests, here immunoassays, in the first place and are able to set new standards. At STRATEC, most consumables developed are based on highly specific plastics – still developed as single-use devices due to patient safety regulations.

Making a consumable 'smart' requires various factors to interact successfully: the design of the fluidic channels, microstructures (pillars or wells), filters, valves, and reagent mixers, the coating and surface processing, the storage of reagents, and specifically defined regions to read and interpret the signals from the (bio-) chemical reaction.

As its name implies, STRATEC's Smart Consumables business unit specializes in exactly this area. Importantly, complex biochemical processes, such as the specific bonding of an antibody to its target protein, are first understood and elaborated in the partner's laboratory. Subsequently, the assay is translated into a microfluidic chip to reduce reagent and sample volume and facilitate standardization. Successful developments correspond to a miniature version of a laboratory in a consumable and are mostly referred to as 'lab-on-chip' consumables.

TECHNOLOGIES ADVANCE BEYOND ESTABLISHED ANTIBODY DETECTION

Today's clinical operations and research would be unimaginable without Smart Consumables. Showing that the rarest molecules, such as neurofilaments, are detectable reliably and selectively in highly complex solutions such as blood, needs technologies that go far beyond previously established antibody detection methods. For example, the Simoa™ Consumable and its associated analyzer system were developed in cooperation between STRATEC and its partner firm Quanterix. The consumable contains hundreds of thousands of small recesses (wells), each of which only a few micrometers in diameter. In each well, marked magnetic nanoparticles capture individual neurofilaments from the blood plasma using immunological reactions and immobilize them to allow visualization and enumeration with high-resolution microscopes. Joint development efforts are the only feasible way to develop innovative analytical processes as complex as these.

The aim is to make diagnostics easy, secure, and reliable for users and ensure high sample throughput in consistent quality. The advantage of using such smart lab-on-chip solutions is, as indicated above, the drastic reduction in reagent consumption on the one hand and the minimized amount of biological sample material required. This benefits patients (minimal invasive bodily fluid collection), the environment (reduction in liquid chemical waste), and pharmaceutical and academic research and laboratory facilities (cost savings).

In the field of Smart Consumables, STRATEC supports its project partners by offering innovative approaches to single cell analysis, biomarker detection, and molecular biology in order to open up new paths and make the latest lab-on-chip solutions available to researchers and patients – and that with just one drop of blood, saliva, or buffer solution.

The shape and size of the consumable determines for whom and, in respect of point-of-care applications, where a technology can be made available. The possibility of processing multiple samples and increasing throughput volumes is ideal for broad application in specialized laboratories and large hospitals. Single-use applications are suitable for applications in large clinics but primarily in small facilities or at home. Knowing the user and the patient is essential to the successful development of Smart Consumables.

SUCCESSFUL PASS TO PERSONALIZED MEDICINE

NOVEL OPPORTUNITIES TO DIAGNOSE AND TREAT NEUROLOGICAL DISEASES

One essential factor in personalized medicine is the ability to analyze proteins and molecules in noninvasive ways that are as inexpensive as possible and thus allow disease progression to be closely monitored. Numerous studies have shown that preventive health checks and early detection made possible by specific biomarkers play a crucial role in the patient's early diagnosis and potential recovery.

Motivated by this perspective together with the great advances achieved in developing Smart Consumables, innovative technologies have become reality. Results from biological research have on the one hand reduced the blood volume required for an examination (the famous 'drop of blood') and on the other hand facilitated accessibility to other source materials (saliva and urine) for further areas of application within clinical diagnostics. Furthermore, they have helped to increase the sensitivity and specificity of detection (digital PCR, single molecule detection using immunoassays, or high-resolution microscopy). This is essential for many patients right now and will be relevant to most people during their lifetimes. Whether it is a matter of genetically caused neurodegenerative diseases (such as Chorea Huntington, age-related dementia diseases, such as Alzheimer) or the sport injuries outlined above – the same rule applies for all: The earlier changes are detected and the better the (patho-) physiology of the biomarkers is understood, the more precisely prevention, medication, and rehabilitation measures can be adjusted and the wellbeing of the person affected ensured.

Broad point-of-care platforms are versatile and can be adapted and easy applied to biomarkers. These mark the next step towards personalized medicine.

RESEARCH AND PREVENTION TO THE BENEFIT OF ALL PATIENTS

Especially precarious: Sport can prevent the onset of many diseases described above, as exercise increases muscle tone, stabilizes nerve extensions, and improves the supply of oxygen to tissues, which slows down ageing processes. If exercise is performed too intensively and over extended periods of time, however, certain types of sport can also trigger degenerative processes and cause damage. Some clinicians may see this as a reason to ban these sports, but for football and others this cannot be considered realistic at present. The focus is rather on professional support and precisely monitoring people's state of health, not least in close collaboration with research facilities, and on the new technological developments outlined here.

Initiatives to raise awareness and inform people on the one hand and investments in research on the other. These offer the best chances of creating decisive benefits for sportspeople and patients alike. Close cooperation between technology firms such as STRATEC and its partners, hospitals, basic researchers, and sports groups like the NFL are the only way to discover medically valuable biomarkers, and suitable highly sensitive and groundbreaking detection methods. These in turn generate health benefits not only for specific target groups such as football players, but eventually for us all.

Specialized consumables for clinical diagnostics allow broad screening in the population or high-risk groups and therefore facilitate the early detection of any pathological changes in the body such as cancer. For example, point-of-care tests for prostate-specific antigens (PSA) make it possible to detect prostate cancer at an early stage and monitor the treatment success as the disease progress. This can be done either with just a few drops of blood or now even on the basis of a simple urine sample.

ANNUAL REPORT OF STRATEC SE

STRATEC's Share | 31 Group Management Report | 36 Consolidated Financial Statements | 86 Notes to the Consolidated Financial Statements | 94

STRATEC'S SHARE

Review of 2021 on the stock markets

ANNUAL REPORT

OF STRATEC SE

Capital markets continued to be dominated by the coronavirus pandemic in 2021 and were also influenced by rapidly rising rates of inflation and worldwide supply shortages which led to a slowdown in the global economic recovery. The emergence of various coronavirus mutations as the year progressed also had an adverse impact on macroeconomic developments. The Omicron variant prevalent since the end of 2021, for example, has led to a renewed rise in pandemic-related economic risks.

Despite numerous adversities throughout the year, global stock markets proved robust in 2021 and posted strong performances. Latching onto the strong recovery seen in 2020, indices set new records worldwide, with Western indices clearly outperforming their Asian counterparts in this respect. In the course of the year, the DAX, for example, reached a new all-time high at 16,290 points (11.18.2021), while the S&P 500 also set a new record at 4,793 points (12.29.2021). The DAX select indices performed very positively in 2021: Measured in terms of year-end prices in 2020, by the end of the year the DAX gained 15.5%, the MDAX 14.1%, and the SDAX 11.2%, while the TecDAX rose by 22.0%. STRATEC's share, which is listed in the SDAX, rose by 12.2% during the year.

STRATEC's share price performance in 2021 (€)

STRATEC's share – annual highs and lows in 2021 (€)

Listing, stock market turnover, and index membership

STRATEC's shares are listed in the Regulated Market of the Frankfurt Stock Exchange (marketplaces: Xetra and Frankfurt) and meet the transparency requirements of the Prime Standard. Its shares are also traded on the regional stock markets in Berlin, Düsseldorf, Hamburg, Hanover, Munich, and Stuttgart, as well as on Tradegate, the electronic over-the-counter trading system at the Tradegate Exchange.

Measured in terms of simple order book turnover, STRATEC shares worth € 759.4 million changed hands on the aforementioned marketplaces (excluding Tradegate) in 2021 (previous year: € 561.0 million). The Xetra and Frankfurt marketplaces alone accounted for 89.8% of these volumes (previous year: 89.4%).

The company's shares have also witnessed brisk trading on multilateral trading systems, which are gaining increasing market share from the regulated marketplaces with which they compete. A multilateral trading system is a market-like trading platform set up and operated by a financial services provider, securities companies, or market operator. This kind of system brings together buy and sell orders for shares and other financial instruments in accordance with specific regulations and thus generates contract agreements.

STRATEC's share is listed in the SDAX, a select index of the German Stock Exchange which comprises 70 small cap companies.

Trading data for STRATEC's share (status: December 31)

	2021	2020	2019	2018	2017
Year-end price previous year (€)	122.80	61.00	50.30	64.84	45.79
Annual low (€)	100.40	46.40	49.30	43.55	44.52
Annual high (€)	147.40	144.60	77.60	80.30	70.33
Year-end price (€)	137.80	122.80	61.00	50.30	64.84
Performance (%)	+12.2	+101.3	+21.3	-22.4	+41.6
Market capitalization (€ million)	1,671.2	1,486.2	733.8	602.1	773.0
Trading volumes (€ million)	759.4	561.0	81.9	148.8	187.6
Average daily trading volume (€)	2,978,058	2,217,521	326,410	593,010	744,490
Average daily trading volume (number of shares)	24,081	22,615	5,124	9,252	13,504

Virtual Annual General Meeting approves further dividend increase

On May 20, 2021, STRATEC's Board of Management and Supervisory Board welcomed the company's shareholders to the virtual Annual General Meeting.

All of the agenda items submitted for resolution were approved by shareholders with substantial majorities. Overall, 84.5% of the company's share capital was represented at the virtual Annual General Meeting.

Shareholders approved the actions of the Board of Management and the Supervisory Board and elected Ebner Stolz GmbH & Co. KG, Stuttgart, as auditors for the 2021 financial year. Furthermore, Dr. Rolf Vornhagen was elected to the Supervisory board of STRATEC SE, the remuneration system for members of the Board of Management was approved, and the remuneration system for members of the Supervisory Board was confirmed.

The dividend was increased for the seventeenth consecutive year and, with a total distribution of € 10.9 million, corresponding to € 0.90 per share, reached a new record level. In 2020, the company distributed a total of € 10.1 million, or € 0.84 per share, to its shareholders.

Further information about the Annual General Meeting, such as detailed voting results, can be found at www.stratec.com/agm.

The next Annual General Meeting is scheduled to take place on May 20, 2022 and will once again be held on a virtual basis.

Eighteenth consecutive dividend increase proposed

STRATEC pursues a continuity-based dividend policy which aims to enable shareholders to participate appropriately and sustainably in the company's performance. Consistent with this approach, based on current planning STRATEC's Board of Management and Supervisory Board will propose a dividend payment of € 0.95 per share for approval by the Annual General Meeting on May 20, 2022. This corresponds to a total distribution of € 11.5 million and a dividend yield of 0.7% based on the closing price of € 137.80 for STRATEC's share on December 30, 2021.

Shareholder structure remains stable

The largest shareholders in the company are still its founder, Hermann Leistner, his family, and their investment companies, which hold a combined stake of 40.55%. A further 0.02% of the shares are held by the company itself, while 59.42% are attributable to large numbers of retail and institutional investors both in Germany and abroad. Institutional investors holding at least 3% of the voting rights are:

Juno Investment Partners B.V., The Hague, Netherlands, with 3.017%
Allianz Global Investors GmbH, Frankfurt am Main, Germany, with 4.98%
Ameriprise Financial, Inc., Wilmington, Delaware, US, with 6.31%.

Key figures for STRATEC's share (status: December 31)

	2021	2020	2019	2018	2017
Number of shares issued (million)	12.1	12.1	12.0	12.0	11.9
Number of shares with dividend entitlement (million)	12.1	12.1	12.0	12.0	11.9
Cash dividend per share (€)	0.951	0.90	0.84	0.82	0.80
Total distribution (€ million)	11.51	10.9	10.1	9.8	9.5
Dividend yield (%)	0.71	0.7	1.4	1.6	1.2

¹ Subject to approval by the Annual General Meeting

Further information about STRATEC's share

ISIN	DE000STRA555
WKN	STRA55
Ticker	SBS
Reuters Instrument Code	SBSG.DE
Bloomberg Ticker	SBS:GR
Segment	Prime Standard
Market	Regulated Market

Select index	SDAX since April 30, 2020
Share type and class	No-par registered ordinary shares
Share capital (€)	12,127,995
Share capital (number of shares)	12,127,995
Initial listing	August 25, 1998
Marketplaces	Xetra; Frankfurt, and further regional stock exchanges in Germany
Designated sponsors	Hauck & Aufhäuser Privatbankiers AG (since 11.01.2021) Pareto Securities AS

Investor Relations

STRATEC maintains an ongoing dialog with existing and potential investors, analysts, and business and financial journalists. When communicating with market participants, the company adheres to the principle that all information should be provided simultaneously, openly, and transparently. With its active and ongoing reporting, it aims to enable all capital market players to form their own realistic assessment of the company's performance. The financial calendar keeps interested parties regularly informed about important dates with sufficient advance notice.

Furthermore, we also regularly inform capital market participants about the company's strategic development and business performance by publishing financial reports, ad-hoc announcements, and press releases.

One core component of STRATEC's investor relations activities involves holding conference calls upon the publication of results and occurrence of other major events at the company. These calls are also made available on the company's website. As well as holding numerous one-to-one talks, at capital market conferences the company gives presentations and thus informs investors and analysts from Germany and abroad about its current situation and business performance. At present, a total of eight institutions regularly cover STRATEC in extensive studies and brief analyses: Berenberg Bank, Deutsche Bank, Kepler Cheuvreux, Landesbank Baden-Württemberg, Metzler Capital Markets, ODDO BHF, SRH AlsterResearch, and Warburg Research.

The latest information about STRATEC and its share can be found on the company's homepage at www.stratec.com.

Financial calendar

03.30.2022	2021 Annual Report
05.05.2022	Quarterly Statement Q1 2022
05.20.2022	Virtual Annual General Meeting
08.05.2022	Half-Year Financial Report H1 2022
11.03.2022	Quarterly Statement 9M 2022
11.29.2022	German Equity Forum, Frankfurt/Main, Germany

Subject to amendment

GROUP MANAGEMENT REPORT FOR THE 2021 FINANCIAL YEAR OF STRATEC SE

A.	The STRATEC Group / 37 Business model and strategy / 37
	Group structure / 40
	Management of the STRATEC Group / 43
	Market / 44
	Research and development / 46
B.	Business Report / 48
	Macroeconomic and sector-specific framework / 48
	Business performance / 51
	Position / 51
	Earnings position / 51
	Financial position / 54
	Asset position / 55
	Non-financial performance indicators / 57
C.	/ 59 Outlook
D.	Opportunities and Risks / 60
	Opportunities / 60
	Risks / 61
	Risk management system / 66
	Risk report in respect of use of financial instruments / 69
E.	Takeover-relevant Disclosures / 70
F.	(Group) Corporate Governance Declaration / 73
G.	Non-financial Group Declaration / 73

A. THE STRATEC GROUP

Business model and strategy

Basic features of business model

GROUP MANAGEMENT

FOR THE 2021 FINANCIAL

YEAR OF STRATEC SE

REPORT

STRATEC (hereinafter also 'the STRATEC Group') designs and manufactures automation solutions for highly regulated laboratory markets. STRATEC acts as an OEM partner to leading players in the in-vitro diagnostics and life sciences markets. The Group's product range includes hardware and software solutions, as well as related consumables. These are mostly combined into fully integrated system solutions and often receive market approval together with partners' reagents.

STRATEC's partners predominantly operate in markets in which a relatively small number of companies determine industry trends and developments. This being so, it is crucial for STRATEC to position itself as a partner to these global players and to gain their trust with its reliability and performance. The experience, expertise, and power of development STRATEC has built up since its foundation in 1979 have enabled it to grow into a major player in various market niches. STRATEC aims to further boost this position and enable all parties involved to generate growth rates ahead of the industry average by offering a well-calibrated mix of cost efficiency, expertise, and innovation.

The core competence of the STRATEC Group involves compiling and implementing concepts and requirements in the automation and instrumentation of biochemical processes using hardware and software solutions. STRATEC also has comprehensive knowledge of quality and documentation requirements, particularly for the approval of medical technology solutions by the relevant national and international authorities. STRATEC accompanies its customers in an advisory capacity from the very outset. Drawing on its longstanding experience, it offers valuable tips when it comes to compiling specifications and determining suitable system alignments. These include tips on user-friendliness, a factor which promotes acceptance of the resultant system among end customers. Due to its existing technology pool and its experience in the approval process, STRATEC is also able to shorten the development times for its partners.

By continually developing new technologies and making targeted company acquisitions, the STRATEC Group has consistently extended its product range in recent years and thus aligned itself ever more closely to the needs of its customers and partners – generally global leaders in the fields of diagnostics and research. That is why in addition to pure instrumentation the STRATEC Group covers virtually the entire value chain for complex analyzer system solutions. The value chain ranges from compiling initial system specifications to approval processes through to serial production, including the development of complex consumables. It also includes connectivity and remote service solutions over and above the instrument software.

Given the breadth of its product range and the innovative strength of its R&D employees, STRATEC is able to react swiftly to any changes in the market. STRATEC continues to observe an ongoing trend towards consolidation in laboratory structures in its most important markets, for example. The increasing focus on small numbers of large central laboratories will not only increase demand for high throughput appliances but also create a need to assess time-critical parameters on a closeto-patient basis. Due to its ever broader product portfolio, STRATEC is now very well positioned to benefit from the growth opportunities presented by this polarization in the market.

Core of corporate strategy

At core, STRATEC's corporate strategy involves supporting its customers in implementing their growth strategies in the fields of in-vitro diagnostics and life sciences. By acting as a competent partner, offering expertise, and supplying innovative and safe product solutions, STRATEC provides customers with a basis for building a successful end customer business. The objective is to enable both our customers and STRATEC itself to generate growth that is sustainably ahead of the long-term market average. Sustainability-related topics such as environmental concerns and social aspects are becoming ever more important both for STRATEC and for its customers and suppliers.

STRATEC's strategy addresses five dimensions:

1. Focusing on high-growth market segments

To achieve the growth targets it has formulated, STRATEC focuses in particular on those market segments within in-vitro diagnostics that show above-average, high growth rates.

2. Continually expanding the technology and product portfolio

To extend its market position vis-à-vis its competitors and partners on a long-term basis, STRATEC focuses on continually expanding its technology and product portfolio and on securing this as appropriate with industrial property rights. Alongside organic instruments such as in-house developments, this may also involve making acquisitions. The aim here is to position the company as a full-service provider to its partners and to take responsibility for those areas that customers do not view as forming part of their core competencies. STRATEC strictly ensures that it only takes over those parts of the value chain that do not allow any situation of competition to arise with its partners.

3. Expanding and securing long-term customer relationships

Given the very long product lifecycles involved in clinical analyzer systems, STRATEC has numerous long-term customer relationships. STRATEC has earned the high level of trust these partners place in the company thanks to the reliability, performance, and high quality of the products it designs and manufactures, and that over many years. This strong basis of trust provides a key foundation for STRATEC to receive additional development and production orders for new generations of appliances from existing customers in future as well.

4. Raising the share of recurring sales

STRATEC aims to increase the share of its sales generated with recurring revenues. The business with related polymer-based consumables, such as complex micro-fluid chips, harbors particularly high growth potential in this respect. To access this potential even more closely, in 2016 STRATEC supplemented its in-house activities by acquiring what is now STRATEC Consumables GmbH. This company is a manufacturer of smart consumables and has outstanding capabilities in nano-structuring, micro-structuring, various coating technologies, polymer science applications, and automated production.

5. Increasing diversification

The market for in-vitro diagnostics is highly concentrated, with the twenty largest players in terms of sales already accounting for nearly 80% of market volumes. This situation is usually reflected in high concentrations of customers at OEM providers. To minimize risks to its future sales and earnings performance, STRATEC aims to further reduce its customer concentration in the long term without missing any growth opportunities with existing customers. Among others, one instrument enabling STRATEC to achieve this goal is the newly developed KleeYa platform which, unlike dedicated systems, can be sold to several customers. Other conceivable ways of increasing diversification include acquisitions aimed at accessing new customer groups and market segments, such as the acquisition in 2016 of what is now the Diatron business unit.

Production and locations

In manufacturing its products, STRATEC has to meet especially strict quality requirements, compliance with which is regularly audited by internal specialists, customers, and external authorities. Analyzer systems are manufactured in accordance with the highest standards at the locations in Beringen (Switzerland), Birkenfeld (Germany), and Budapest (Hungary). The location in Anif (Austria) manufactures polymer-based smart consumables in a controlled ISO Class 7 production environment. The Group's largest development capacities can be found at its headquarters in Birkenfeld (Germany), in Budapest (Hungary), and in Cluj-Napoca (Romania).

Production capacities have been continually expanded at the respective locations in recent years. As a result of these measures, STRATEC now already has sufficient capacities in its production departments to guarantee the highly efficient production of existing and future appliance lines in accordance with internal and external requirements.

Given its high quality standards, STRATEC has deliberately decided to base its production in Germany, Switzerland, Hungary, and Austria and also sees this as the basis for the company's ability to comply with all necessary regulations and standards. Overall, STRATEC is represented with its solutions and qualified contact partners at its subsidiaries on three continents.

In view of its development capacities, which are currently well utilized, STRATEC expects to see further expansion in its workforce in the years ahead. To account for this growth, in the 2018 financial year the company began work on converting and substantially expanding the buildings at its Birkenfeld location. The first round of construction was completed and the new space occupied on schedule in mid-2019. The second stage of construction was completed in the second half of 2020. With the completion of this extensive construction work, the company now has significantly more space for research and development, prototype manufacturing, warehousing, and administration.

Supply Chain

To enhance flexibility, reduce capital intensity, and optimize its cost structures on a long-term basis, the STRATEC Group generally works with a very low level of vertical integration and often outsources upstream production activities to highly specialized contractual suppliers. Final assembly and testing generally takes place at the STRATEC Group's production locations, with these activities being performed by employees with the highest level of qualification and training. Testing procedures are based on actual subsequent applications.

Working with integrated procurement management, STRATEC purchases the functional modules and individual components from strategic suppliers that stand out on account of their quality and compliance management systems. Integrating these suppliers into an early stage of product development ensures access in each case to the latest production methods and procedures. Master agreements provide a commercial framework for these cooperations, with use being made of state-of-the-art production and logistics strategies.

In many cases, STRATEC supplies the finished analyzer systems directly to the logistics distribution centers of large diagnostics companies, which then market the systems together with the relevant reagents as system solutions under their own names and brands. As the STRATEC Group's customers largely supply their country outlets and customers directly from these distribution centers, the regional sales reported in the STRATEC Group's figures do not correspond to the actual geographical distribution or final destinations of the analyzer systems produced by the STRATEC Group.

Quality management

Most of STRATEC's products are supplied to partners operating in strictly regulated markets. Quality management therefore represents a core aspect of STRATEC's business model and forms the basis for the success both of the company and of its partners.

STRATEC is committed to permanently improving the quality of its processes and services. Most of its products are subject not only to the strict requirements of the German Medical Products Act, but also to numerous national and international regulations that have to be complied with when entering the respective markets.

To satisfy these requirements, STRATEC has established a high-performance, certified quality management system. This accounts for the ever growing body of regulatory requirements in international markets and the ever more extensive number of requirements on national level. At the same time, it is the prerequisite for ensuring consistently high product quality.

Among others, the tasks performed by the Quality Management and Regulatory Affairs department include ensuring that the products comply with all necessary regulatory requirements for medical products, supplier evaluation and qualification, and continuously improving the quality management system.

The design and manufacture of an analyzer system also involves regular audits by customers, the authorities, certification bodies, and internal company departments at our development and production locations. These are prepared and accompanied by our quality management team.

STRATEC is committed to and certified under the following standards:

EN ISO 9001
EN ISO 13485
MDSAP Certificate
FDA Registered Establishment, QM System Compliant with 21 CFR part 820
NRTL Registered (NEMKO, UL)
Compliance with GMP Requirements of Taiwan (TCP Participation), USA, Brazil and South Korea
Foreign Manufacturer Accreditation by PDMA/Japan

Consistent with the motto 'one world – one company – one quality', STRATEC has set itself the target of largely harmonizing its quality management system. Due account is taken of the specific needs of individual locations resulting from their different focuses (product types, development, production, etc.). STRATEC employees at the various locations form teams of experts for individual specialisms to promote the sharing of information within the company, support one another with their skills and experience, and ensure a coordinated approach.

Group structure

The organizational structure of the STRATEC Group is aligned and optimized in three business units.

The primary objective here is to be able to react to customers' requirements in an efficient and coordinated manner and to offer the Group's solutions and products from across the respective business units. Not only that, by fostering group-wide communications and ensuring flat hierarchies, STRATEC aims to be able to react swiftly and across all of its locations to any developments in the market or changes in the regulatory framework. The company's strategic alignment, with its organizational structure focusing on three business units, can be presented as follows:

STRATEC Instrumentation

The instruments designed and manufactured by STRATEC and marketed by its partners can be found worldwide.

Even though the instrumentation comes from STRATEC, in virtually all cases it is the partner's brand name that is displayed on the systems themselves. While the specifications are in most cases jointly defined by the partners, the development stage is characterized by parallel development processes. During this time, STRATEC focuses on developing the automation solution, the corresponding software, consumables and quality management, as well as on preparing system approval. New market requirements, such as connectivity or smart consumables, form a key basis for STRATEC's permanently evolving technology portfolio. This means that customers can focus all their energies on developing their reagent menus, as well as on their market expertise, access to end customers, and support measures. Throughout the development stage, however, the various activities often running in parallel have to be closely coordinated. As soon as the first prototypes are complete, work already begins on integrating the reagents into the automation process. This complex process, which is performed with close cooperation between the two partners, is one of the key foundations for the functionality of the resultant systems.

One key success factor for the STRATEC Group involves providing its customers with the solutions they need in the fields of automation and software development for them to implement their own objectives. Alongside patents and internally developed technologies, it is the company's wide variety of expertise in different scientific and technological disciplines that offers the basis for the shared success it aims to achieve with its partners. STRATEC can look back on 40 years of development and production activity. Equally relevant to the subsequent success of jointly developed products is the in-depth understanding which STRATEC's partners have of end customers' requirements and thus of the market, as are the measures they take with their own service and sales activities to ensure suitably prepared market access. In view of this, STRATEC focuses on business-to-business and OEM relationships and does not maintain any significant proprietary sales network to its end customers. The product specialists at STRATEC's partners are individually supported in their activities. This particularly takes the form of training, but in exceptional cases also involves providing specific services on location.

STRATEC is continually extending its range of products and services and its value chain. This way, it aims to relieve its partners of responsibility for major parts of the development, approval, and production of system solutions, and thus to assume a major share of the associated risks. One core principle of the company's philosophy is nevertheless only to cover those sections of the value chain which allow it to operate without entering into competition with its partners.

Within the Instrumentation segment, a basic distinction is made between two approaches towards developing systems and cooperating with partners.

Partnering Business

With this type of development, STRATEC targets both existing and new customers. The company works together with its partner to define the specifications for a new analyzer system for the customer at a very early stage of planning. The cooperation between the company and its partner is very close throughout the entire development phase, which usually lasts between 24 and 48 months. STRATEC is responsible for developing hardware and software and draws here on its constantly growing pool of proprietary innovative technologies, patents, rights, and know-how. This way, the development work is faster, more cost-effective and involves fewer risks, an approach from which both partners benefit. This gives rise to systems that are more reliable and require less maintenance. In close cooperation with the partner, the reagents menu is integrated into the automation processes. As soon as the system has been fully developed and approved by the regulatory authorities together with the reagents and software package, it is launched onto the market and serial production begins. In this stage, the partner focuses on marketing and selling the product to end customers, generally laboratories, blood banks, and research institutes, and also provides subsequent customer support and other services. STRATEC provides an ongoing supply of maintenance and service parts and discusses ongoing improvements in the system with the customer, particularly with regard to software applications, user-friendliness and activities to extend the reagents menu.

System developments in the partnering business place certain minimum requirements in a customer. On the one hand, a suitable development budget has to be available for allocation, on the other hand the partner must have appropriate distribution channels enabling it to exploit turnover potential and thus make the project interesting for both partners. By analogy with the printing industry, which works with low-margin printers and high-margin ink cartridges, the partner generates its return on capital employed by selling the tests. STRATEC earns its share from the sale of appliances and service parts (maintenance and replacement parts) to the partner. The success achieved by its partners enables STRATEC to generate the growth targeted for this business field. In view of this, in its serial production activities the company attaches great value to providing customers with those instruments they need to ensure the best possible cost-input ratio. This approach is reflected in particular at the production locations in Switzerland, Germany, and Hungary, where highly qualified employees implement production and testing processes that are subject to close regulatory definition and monitoring and are performed in an audited and certified environment. The selection of the right partners and products plays a crucial role in determining STRATEC's growth in this area.

Platform development

A STRATEC platform is a system developed internally by the company. It is not designed in cooperation with a specific partner but, given its general design scheme, is suitable for marketing to several customers. This merely involves adapting the platform to the specific requirements of customer reagents and corporate design schemes. These platforms are particularly suited to partners aiming to enter a market very rapidly – and thus draw on a platform solution – or who on account of their size and market access are not yet able to place the volume of systems needed to amortize the high level of development expenses. STRATEC chiefly develops such platforms for areas with potential for generating multiplier effects.

In developing proprietary technologies and solutions, STRATEC aims to ensure a calculable balance between innovation and sales potential. Here in turn, it is important to develop the right applications that offer market players relevant additional benefits or to cooperate with the right partners to gain early market presence with applicable solutions when it comes to developing next-generation technologies.

Diatron

The Diatron business unit designs and manufactures analyzer systems for use in human and to a minor extent veterinary diagnostics, as well as complementary products such as consumables and services. Diatron's customers include prestigious diagnostics and life science companies with global operations. The system solutions for human diagnostics which Diatron predominantly manufactures in Hungary are used in the fields of hematology and clinical chemistry. Diatron mainly distributes its solutions as an OEM provider and via distributors, of which a small share is directly marketed under the Diatron brand. Its platform-based development approach and its market access based on OEM partnerships are similar to the approach taken in the Instrumentation business unit.

Diatron's OEM portfolio consists in particular of analyzer systems, system components, consumables and tests in the low throughput segment. Throughput is the term used to describe the frequency of tests which can be performed in a given period, typically a single laboratory shift. By contrast, the Instrumentation business unit generally focuses on medium to high throughput ranges. The extension in the value chain in the field of decentralized laboratory solutions – typically small to medium-sized hospitals, group practices, and laboratories – therefore represents a far-reaching addition to the expertise and product portfolio at the Instrumentation business unit.

STRATEC Smart Consumables

The STRATEC Smart Consumables business unit designs and manufactures polymer-based 'smart' consumables. These includes polymer chips and single-molecule arrays in the field of micro-fluids. This area represents a key component of STRATEC's technology and product spectrum and has extended the company's product range to include an important part of the value chain. This reduces customers' project risks and the associated project supervision input. STRATEC is able to offer substantial added value to its customers, particularly by assuming responsibility across the various interfaces involved. Not only that, important aspects of test process development and the corresponding automation components can be harmonized far more closely.

The change in conventional consumables into complex smart consumables is making it possible to 'outsource' various test process steps in a targeted manner to the consumable. For low test volumes, this 'loss' of process steps makes it possible to significantly reduce the size, complexity, and cost of instruments. That is a crucial factor, particularly for point-of-care applications. Furthermore, by offering greater flexibility it opens up new possibilities to develop test processes.

The Smart Consumables business unit has diverse skills and applications in the fields of nano-structuring and micro-structuring, various coating technologies, polymer science applications, and the automated and industrial production of smart consumables. The business unit can build on its longstanding experience in the high-precision production of optical storage media. Consumables are developed in close cooperation with the relevant partners and in line with their requirements for the development of reagents and instrumentation.

Management of the STRATEC Group

Given its size and the dovetailing of its business fields, the STRATEC Group is managed by reference to a matrix organizational structure. The business fields are grouped in business units across locations and together reflect STRATEC's value chain.

The business units receive targets set by the Group's Board of Management, on which basis they are managed and also report in the course of the financial year. These targets are chiefly of a quantitative nature and relate to sales and profitability. In addition, legal units and divisions are provided with targets that include qualitative, quantitative, and strategic elements. These are based on factors such as risk management, employee management, and customer relationships, as well as M&A activities.

As well as traditional management figures such as sales, EBIT, EBITDA, liquidity, key development, production, marketing figures, and product quality, STRATEC is increasingly focusing on sustainability-related topics such as environmental and social aspects, not least to do justice to our claim of being a reliable partner and an attractive employer as the company continues to grow.

Alongside ongoing organizational adjustments to the company's structure in line with its growth, the objective of the company's management is to uphold its sustainable sales growth in excess of average growth rates in the in-vitro diagnostics industry while simultaneously improving the company's profitability, safeguarding its liquidity position at all times, and detecting and averting any erroneous developments in good time.

In addition to quantitative reporting structures, regular assessments of current project developments and risks are additionally reported by individual location managers and project directors to the respective heads of department or the Board of Management.

Central support and administration functions are pooled at corporate headquarters and work closely together with employees in the relevant specialist departments at the subsidiaries.

Furthermore, the regular exchange of information in conference calls and meetings with the management of subsidiaries ensures that all matters relating to the Group's current business performance are discussed. These measures also include regular visits on location.

A further management instrument is the variable remuneration paid to local managers at the subsidiaries, the heads of business units, employees in senior positions or key functions, and sales employees. This variable remuneration is largely dependent on the key figures achieved, especially operating earnings, but also on strategic objectives, including numerous aspects in the field of corporate social responsibility. This raises awareness of cost structures and efficiency enhancements, and thus of the company's long-term business performance, among employees in those company divisions not able to directly influence sales.

The most important performance indicators referred to in managing the company are sales, the adjusted EBIT(DA) margin, and the number of employees. More detailed information about these key management figures can be found in the Business Report and the Outlook.

Market

IVD instrumentation market

The overall market for in-vitro diagnostics solutions currently has a volume of more than USD 80 billion. It has shown strong above-average growth in the past two years due to high demand for in-vitro diagnostics tests on account of the COVID-19 pandemic. Instrumentation solutions have also significantly increased their share of the overall market. This is due in particular to the fact that, given the availability of additional budgets, a higher share of systems were sold by STRATEC's customers rather than, as previously, being placed in laboratories on the basis of rental or leasing agreements. The predominant share of market volumes is nevertheless still generated by selling test reagents, while instrumentation solutions account for around 20% of the overall market. The global market for instrumentation solutions in the field of in-vitro diagnostics (IVD) therefore has sales volumes of around USD 17 billion. It is worth noting that, based on estimates, fewer than half of instrumentation solutions are currently developed by outsourcing partners such as STRATEC (IVD OEM market). The remaining share of system

solutions continues to be designed by the largest diagnostics companies themselves (IVD in-house market). Due to ever stricter regulatory requirements, improved cost efficiency, and shorter development times, STRATEC nevertheless expects the global share of system solutions designed and manufactured by outsourcing partners to increase further in the years ahead.

The instrumentation market relevant to the STRATEC Group currently has estimated annual sales volumes of more than USD 2.0 billion for in-vitro diagnostics (IVD) alone. This figure is derived from relevant throughput segments and areas of application. The application technologies and market segments relevant to STRATEC particularly include the immunoassay, molecular diagnostics, immunohematology, clinical chemistry, microfluidic, and hematology applications. Alongside these areas, there are also interesting niche markets, both within and outside IVD, in which STRATEC is performing targeted projects or concluding development cooperations with established or innovative partners.

IVD market by product category

STRATEC's main technologies

Increasing regulation of diagnostics industry

The increasing regulation of the diagnostics industry continues to generate growing demand for automated process solutions. Manual and semi-automated processes are increasingly being superseded by fully automated methods. Due to the routine processes involved and the lower error rate compared with manual processes, such methods offer a high degree of security, great precision, and highly reproducible results. Not only that, fully automated methods enable the tiniest volumes of liquids to be processed. In recent years, ever more countries have begun introducing their own control mechanisms and requirements for IVD products and processes. To meet these increasingly strict requirements around the world, many laboratories are opting for automated solutions. Automated instrumentation solutions are in turn subject to a high degree of regulation, and this presents a barrier to new players entering the market. STRATEC's long track record of dealing with these regulatory requirements, broad pool of technology, and longstanding experience mean that it is very strongly positioned in this market.

Alongside increasing regulation, STRATEC also benefits from the fact that there is a shortage of qualified laboratory personnel in many countries. This factor increases demand for automated systems that are easy to use and do not require highly qualified laboratory staff.

Outsourcing

STRATEC is benefiting not only from increasing regulatory efforts on the part of the relevant authorities, but also in particular from the growing trend towards outsourcing in the diagnostics industry. Alongside market access, the core competence of large diagnostics groups largely involves developing and providing reagents. These are used to perform the diagnostic tests in fully automated systems. Acting as an OEM partner, STRATEC designs and manufactures the system with all of its hardware and software components. Here, the customers assign almost all of the responsibility for the system, and thus also a large share of the related risk, to STRATEC. Working in close cooperation, a system is developed that is based on jointly compiled specifications and automates all of the analytical process steps. Within this cooperation, STRATEC performs various activities along the entire value chain – from development of the specifications through to approval of the resultant products by the relevant authorities. The partners benefit from STRATEC's extensive technology portfolio and its far-reaching experience in product approval processes, as well as from the resultant cost benefits and shorter development times.

When it comes to the growing trend towards outsourcing in diagnostics, comparisons are often made with the automotive industry, where automakers have long outsourced the development and production of complex components and modules to specialist partner companies. A very similar trend is observable in the diagnostics industry.

General market developments

Alongside the specific developments outlined above for the in-vitro diagnostics instrumentation market, the overall in-vitro diagnostics market – our partners' target market – is also viewed as a growth market. The COVID-19 pandemic in particular has once again underlined the great importance of in-vitro diagnostics for healthcare systems around the world. Key growth drivers particularly include global megatrends and ongoing technological advances:

Further growth in the volume of investments channeled into expanding national healthcare systems is increasing the number of people worldwide with access to healthcare services. Higher numbers of patients are resulting in greater demand for the products and services offered by the diagnostics industry. Together with rising life expectancies, the increasing prevalence of diseases such as cancer, diabetes, and cardiovascular diseases will also lead to growing demand in healthcare systems and consequently for in-vitro diagnostics products. Not only that, rapid technological advances in recent years have significantly expanded the areas of application in in-vitro diagnostics. The technological progress currently underway gives reason to expect the launch and increased market penetration of new and innovative tests in the years ahead as well. Areas worth mentioning in this respect are the tests newly available in oncology, personalized medicine, and prenatal medicine.

Research and development

The STRATEC Group's long story of sustainable success is based on its development of innovative technologies that satisfy the requirements of strictly regulated markets and those of its partners in terms of safety, reliability and user-friendliness. For the development of complex systems, consumables, and laboratory software, STRATEC's development teams comprise numerous experts from various areas of activity who are supplemented by developers from our partners. As a general rule, the interdisciplinary teams of experts draw on employees from various areas of activity. In the field of research, where new technologies, processes and software solutions are developed, feasibility and market studies are performed or referred to at an early stage already. These enable qualified assessments to be made while at the same time minimizing any associated risks.

At a research and prototype laboratory at the Anif location, STRATEC is working in cooperation with the University of Salzburg to link state-of-the-art plastic and coating technology with biotechnological processes. This involves manufacturing and testing biochip prototypes intended for inclusion in customer products at a later date.

In the development projects category, the underlying processes, the achievement of development milestones, and the relevant targets are all stipulated in detail. The development activities follow precisely defined technical specifications and project plans and involve milestones and target data. In the context of analyzer system development, different appliance generations are supplied to the partner and then accepted once the respective development milestones have been met. These range from the first development appliance status ('bread boards') via prototypes through to validation and pre-serial appliances on which the tests are validated and whose results are referred to by the relevant authorities when approving the appliances. In the final development stage, the customer then accepts the serial appliance and related service components.

Within STRATEC, development activities are based on the following aspects:

• Development of new systems for customers and system platform development

STRATEC's growth is largely driven by its constantly growing range of new OEM products. These therefore remain a key focus of development activities. Here, STRATEC can offer an extensive range of technologies and services to its customers.

As already outlined in Section '2. Group structure - Instrumentation', in its development of new systems STRATEC distinguishes between platform development and the partnering business. In platform development, STRATEC works in a way similar to the automobile industry by developing a platform or module concept internally and then in the second stage adapting this to individual customer needs. In its partnering business, by contrast, STRATEC works closely with the customer from a very early stage of development and, based on a library concept, develops a system precisely tailored to the customer's needs.

• Support for existing systems and product lifecycle management

Strict regulatory requirements and the resultant expense required to obtain approval are leading to longer system lifecycles, which generally amount to well over ten years. To facilitate such long lifecycles for systems on the market, permanent system modernization is required. This factor is accounted for above all in software development and verification activities. This is one of the main reasons for the disproportionate growth in these areas and the associated number of employees within STRATEC's development division.

• Development of new technologies

To boost its competitiveness and leading position as an independent system provider, STRATEC not only monitors ongoing changes in its customers' needs in terms of technologies and processes, but also constantly analyzes innovations and developments in the relevant markets. The insights thereby gained are correspondingly factored into the development of new technologies. One key focus here is on gaining early experience with processes resulting from research, and in particular with technologies and processes which harbor potential for routine applications in in-vitro diagnostics.

• Development of platform technologies

A further focus of STRATEC's development activities involves further developing and enhancing platform technologies for relevant systems. These platform technologies are of key significance. After all, they are not only one of the main factors determining the performance of our systems, but also account for the greatest cost item in their production. They also form the basis for the continually growing technology pool, which significantly reduces both the times and the costs involved in our partners' market launches of these kinds of systems.

• Development of (smart) consumables

STRATEC also develops the consumables used with a given analyzer system. This development work is also based on proprietary industrial property rights. The products range from simple consumables through to complex, so-called smart consumables. These complex consumables present part of the test process that is otherwise often performed within the instrument. They may be developed and manufactured together with an analyzer system or on a standalone basis to meet the individual requirements of our partners.

The overall package of proprietary platform technologies, a good understanding of potential opportunities available from research and in the in-vitro diagnostics environment, and the tools and processes optimized for use in this area enable STRATEC to offer all-round solutions with comparatively attractive development periods. Not least as a result of these factors, STRATEC retains control of the key industrial property rights and patents for the systems thereby developed. This is another way in which the company secures its long-term cooperation with its partners and customers.

Within the STRATEC Group a total of 668 employees were allocable to research and development and development support at the balance sheet date on December 31, 2021 (previous year: 653 employees). This corresponds to around 50% of the total workforce.

B. BUSINESS REPORT

Macroeconomic and sector-specific framework

Macroeconomic framework

The improved ability to control the COVID-19 pandemic and the monetary and fiscal policy measures introduced by numerous countries to stimulate the economy had a significantly positive impact on global economic growth in 2021. The 2021 Economic Outlook published by the OECD in December 2021 forecast global gross domestic product (GDP) growth of 5.6% in 2021. GDP in the euro area is expected to have grown by 5.2% in 2021 while, with GDP growth of 2.9%, Germany is expected to have fallen notably short of the euro area. By contrast, China, the world's second-largest economy, is forecast to have grown by 8.1%. For the world's largest economy, the US, the OECD forecast GDP growth of 5.6%.

The global economy remains on an upward path; however, the pace of recovery is slowing and becoming increasingly imbalanced. Furthermore, uncertainty remains as to new virus variants and the possibility of prolonged supply shortages and any further rise in inflation. Against this backdrop, in its forecast dated December 2021 the OECD assumed that the global economy would grow by 4.5% in 2022 and by 3.2% in 2023. For 2022, growth of 4.3% was forecast for the euro area, 5.1% for China, and 3.7% for the US.

Given its long-term project and product lifecycles, STRATEC and the decisions its customers take concerning joint development projects are only affected by macroeconomic fluctuations to a limited extent. Having said this, the macroeconomic climate nevertheless plays a major role in STRATEC's business activity and is therefore extensively factored into the company's assessments and planning.

Sector-specific framework

Based on various estimates, the in-vitro diagnostics (IVD) markets will continue to show very healthy rates of sustainable growth. According to various estimates, the global IVD market currently has a volume of more than USD 80 billion. Consistently ageing populations, the increased prevalence of chronic diseases, more frequent occurrence of infectious diseases, and the ever growing significance of personalized treatment – these are key market growth drivers that are also sustainable. Over and above that, the research being performed on innovative technologies, such as specific biomarkers, will create new opportunities for future market growth.

The various segments within IVD have different growth rates. STRATEC particularly operates in those segments which generate above-average high growth rates. These include molecular diagnostics, for example, as well as highly sensitive procedures within immunodiagnostics. STRATEC offers products and solutions in numerous key areas of the IVD market.

Due not least to the increasing complexity of IVD tests, it is difficult for any one company to develop proprietary products in all technology and market segments. In view of this, diagnostics groups frequently procure specific technologies to maintain their technological leadership and survive in the market. As a result, a process of consolidation has been apparent in the IVD market for years now and is expected to continue in future as well.

At the same time, the constant rise in regulation recently seen in the diagnostics industry also represents an increasingly high barrier to potential competitors to STRATEC entering the market. There are only very few comparable companies with the ability to offer a comparable range of products and services from compiling specifications, through development, approval, and production of the respective instruments and solutions. The competitive situation therefore remains very limited and, alongside in-house development departments, is restricted to a handful of specialist companies. With the companies acquired in recent years, STRATEC has further extended the range of products and services it can offer to customers and accessed new market segments. This has further improved the company's competitive situation.

Overall, the markets served by STRATEC's customers are viewed as growth markets for the years ahead as well. This growth will be driven in particular by the following factors:

Development and expansion in healthcare systems, especially in developing and emerging economies
Expansion in global infrastructure leading to improved access to medical care

POLITICAL TECHNOLOGICAL SOCIAL

Fast-growing niche markets due to new medical findings and new diagnostics possibilities
Increasing degree of automation
Development of new tests and treatment options, such as personalized medicine
Demographic change towards an increasingly elderly population with growing diagnostics requirements
Rising life expectancy and resultant need for diagnostics
Increased prevalence of chronic and infectious diseases

Veterinary diagnostics

As well as human diagnostics systems, the Diatron business unit also offers systems for use in veterinary diagnostics.

According to various studies, turnover in the global veterinary diagnostics market currently amounts to between USD 2.5 billion and USD 3.0 billion. Average annual growth (CAGR) of around 9% is expected in the coming years. Veterinary diagnostics has taken over numerous technologies and methods from human diagnostics. A range of key standard diagnostics applications in the fields of immunodiagnostics, molecular diagnostics, hematology, and clinical chemistry is thus available for the veterinary supervision of domestic and farm animals.

Life sciences

Life sciences is taken here as particularly comprising academic research and pharmaceuticals research, with the latter area accounting for by far the larger share of the market. The global life sciences instrumentation market currently has a volume of around USD 60 billion to USD 65 billion. By 2025, it is expected to have reached a volume of around USD 80 billion to USD 90 billion.

The Smart Consumables business unit in particular has numerous customers in the field of life sciences. Furthermore, the field of translational research, which involves translating the results of basic research into clinical applications, is also increasingly significant to STRATEC.

Business performance

STRATEC increased its consolidated sales by 14.9 % to € 287.3 million in the 2021 financial year (previous year: € 250.1 million). On a constant-currency basis, this corresponds to organic sales growth of 16.7%. This substantial sales growth was driven by dynamic developments in all three company segments (Instrumentation, Diatron, Smart Consumables). In particular, the company generated significant growth in its sales with Systems and with Service Parts and Consumables. Among other factors, these areas benefited from growing sales contributions from the products newly launched onto the market in recent years and from ongoing high demand for in-vitro diagnostics solutions in connection with the COVID-19 pandemic.

The adjusted EBIT margin improved by 220 basis points from 16.7% in the previous year to 18.9% in the 2021 financial year.

The guidance initially provided in the outlook in the 2020 Annual Report forecast constant-currency sales growth in a medium single-digit percentage range and an adjusted EBIT margin of around 17.0% to 18.0%. This guidance was corrected upwards in each case by ad-hoc announcements released on April 26, July 21, and October 28, 2021. The figures actually achieved in the 2021 financial year are comparable with the most recent guidance, which forecast constant-currency sales growth of at least 16.0% and an adjusted EBIT margin of around 19.0% to 20.0%.

Together with its partners, STRATEC launched new products onto the market once again in the 2021 financial year, while also extending its well-filled deal and development pipeline with further projects for partners. Moreover, the company also reached a number of important development targets. One such target worth mentioning here is the achievement of a major development milestone in a project for a partner in the field of molecular diagnostics.

STRATEC's liquidity and financing position was at all times secured. As of December 31, 2021, the company had a long-term master credit facility with a total volume of up to € 70 million, of which a total of € 35.5 million had been drawn down.

The workforce of the STRATEC Group grew to 1,398 employees as of December 31, 2021, up 6.0% from 1,319 at the previous year's balance sheet date.

Position

Earnings positions

Overview of key items in consolidated statement of comprehensive income (€ 000s)

	2021	2020	Change
Sales	287,335	250,099	+14.9%
Adjusted EBITDA	66,606	51,978	+28.1%
Adjusted EBITDA margin	23.2%	20.8%	+240 bps
Adjusted EBIT	54,273	41,713	+30.1%
Adjusted EBIT margin	18.9%	16.7%	+220 bps
Adjusted consolidated net income from continuing operations	45,122	35,218	+28.1%

bps = basis points

Sales

Consolidated sales increased by 14.9% to € 287.3 million in the 2021 financial year (previous year: € 250.1 million). On a constantcurrency basis, this corresponds to organic sales growth of 16.7%. Among other factors, this sales growth was driven by ongoing high demand for in-vitro diagnostics solutions to contain the COVID-19 pandemic and by rising sales contributions from products launched onto the market in recent years.

STRATEC divides its sales into four operating divisions.

Sales in the Systems operating division rose year-on-year by 16.9% (constant-currency: +18.9%) to € 167.3 million (previous year: € 143.1 million). The sales performance was positively influenced in particular by the high volume of additional demand for molecular diagnostics systems created by the COVID-19 pandemic, as well as by rising sales contributions from new product launches.

Sales in the Service Parts & Consumables operating division grew by 18.8 % (constant-currency: +20.7 %) from € 79.6 million in the previous year to € 94.5 million in the 2021 financial year. This dynamic sales growth resulted from the significantly higher number of systems on the market and their high capacity utilization rates.

Sales in the Development and Services operating division decreased by 8.3% (constant-currency: -7.9%) to € 24.5 million (previous year: € 26.8 million). Compared with the original budget, the recognition of development services as sales has in some cases been postponed to 2022.

Sales in the Other Activities division rose from € 0.7 million in the previous year to € 1.0 million in 2021 (+49.9%; constant-currency: +53.0%).

Consolidated sales by operating division (€ 000s)

				Constant currency
	2021	2020	Change	change
Systems	167,283	143,106	+16.9%	+18.9%
Service Parts & Consum ables	94,530	79,585	+18.8%	+20.7%
Development and Services	24,545	26,757	-8.3%	-7.9%
Other Activities	976	651	+49.9%	+53.0%
Consolidated sales	287,335	250,099	+14.9%	+16.7%

Development in share of sales by operating division

	2021	2020	2019
Sales in € million	287,335	250,099	214,157
Systems share of sales in %	58.2%	57.2%	47.8%
Service Parts & Consumables share of sales in %	32.9%	31.8%	31.5%
Development and Services share of sales in %	8.5%	10.7%	20.4%
Other Activities share of sales in %	0.3%	0.3%	0.3%
Analyzer systems supplier (total number)	10,941	10,163	8,274

Gross profit and gross margin

Gross profit increased by 27.1% from € 69.0 million in the previous year to € 87.7 million in 2021. The gross margin therefore rose from 27.6% in the previous year to 30.5% in 2021.

Research and development expenses

Due to the ongoing high level of development activity, gross development expenses showed a further increase to € 49.1 million in the 2021 financial year, up from € 43.4 million in the previous year. Of this total, € 39.8 million was recognized in cost of sales or capitalized (previous year: € 35.7 million), while € 9.3 million was expensed (previous year: € 7.7 million).

Sales-related expenses

Due among other factors to higher freight costs, sales-related expenses increased from € 8.8 million in the previous year to € 9.8 million in the 2021 financial year.

General administration expenses

At € 18.5 million in the 2021 financial year, general administration expenses were at around the same level as in the previous year (€ 18.9 million).

Other operating income and expenses

The net balance of other operating income and expenses stood at € -1.9 million in the 2021 financial year, compared with € 42k in the previous year. This figure was affected year-on-year by higher expenses for interest hedges and impairment losses recognized on a proprietary development project in the Diatron segment.

Earnings performance

Adjusted EBIT for the 2021 financial year grew year-on-year by 30.1% to € 54.3 million (previous year: € 41.7 million). As a result, the adjusted EBIT margin improved by 220 basis points to 18.9%, up from 16.7% in the previous year. The margin was positively influenced in particular by positive benefits of scale, as well as by a strong sales and product mix. Moreover, the charge of € 1.6 million resulting from measurement items for stock appreciation rights was lower than in the previous year (€ 5.2 million).

Adjusted consolidated net income increased from € 35.2 million to € 45.1 million in the 2021 financial year. At 14.7%, the adjusted tax rate was slightly higher than the previous year's figure of 14.2%. Adjusted EPS (diluted) amounted to € 3.73, as against € 2.92 in the previous year.

Year-on-year comparison of EBIT and EBIT margin (€ 000s)

	2021	2020	Change
Adjusted EBIT	54,273	41,713	+30.1%
Adjusted EBIT margin	18.9%	16.7%	+220 bps

bps = basis points

Segments

The business activities of the STRATEC Group are divided into three reporting segments.

In its Instrumentation segment, STRATEC pools its business with designing and manufacturing fully automated analyzer systems, including service parts and consumables, for its clinical diagnostics and biotechnology customers.

The Diatron segment comprises the business with systems, system components, consumables and tests in the low throughput segment, including for hematology and clinical chemistry applications.

The Smart Consumables segment includes the business with developing and manufacturing smart consumables in the fields of diagnostics, life sciences, and medical technology.

Instrumentation segment

Sales in the Instrumentation segment grew by 14.1% (constant-currency: +16.2%) from € 176.5 million in the previous year to € 201.3 million in the 2021 financial year, with doubledigit constant-currency growth rates reported both for sales with Systems and for sales with Service Parts and Consumables. Notwithstanding the ongoing high level of development activity, sales with Development and Services showed a slight reduction. Compared with the original budget, the recognition of sales here has in some cases been postponed to 2022.

Adjusted EBIT rose by 21.3% to € 34.3 million, up from € 28.3 million in the previous year. This corresponds to an increase in the adjusted EBIT margin by 100 basis points from 16.0% in the previous year to 17.0%. The development in the margin was positively influenced in particular by benefits of scale, as well as by a strong sales and product mix. Moreover, the charge resulting from measurement items for stock appreciation rights was lower than in the previous year.

Diatron segment

The Diatron segment increased its sales by 18.5 % (constant-currency: +19.4%) to € 66.9 million in the 2021 financial year (previous year: € 56.5 million). Here, the business with Service Parts and Consumables in particular posted a very dynamic performance. In addition, Diatron witnessed higher callup totals for systems in the fields of molecular diagnostics, hematology, and clinical chemistry. Given a strong sales and product mix, the adjusted EBIT margin in this segment rose to 29.1%, up from 25.9% in the previous year.

Segment Smart Consumables

The Smart Consumables segment increased its sales by 11.5% (constant-currency: +13.2%) to € 19.1 million in the 2021 financial year, compared with € 17.1 million in the previous year. Adjusted EBIT stood at € 0.5 million, as against the negative figure of € 1.2 million still reported in the previous year. Here, the sales mix, and thus also the earnings performance, were positively affected by rising sales figures with products already established, as well as by a number of new product launches.

Overview of performance of reporting segments (€ 000s)

201,349	176,517	+14.1% (cc: +16.2%)
42,900	35,221	+21.8%
34,121	28,277	+20.7%
34,296	28,277	+21.3%
17.0%	16.0%	+100 bps

66,910	56,479	+18.5% (cc: +19.4%)
20,943	15,934	+31.4%
15,493	8,734	+77.4%
19,452	14,619	+33.1%
29.1%	25.9%	+320 bps

19,076	17,103	+11.5% (cc: +13.2%)
2,588	823	+214.3%
-1,437	-3,334	n/a
525	-1,183	n/a
2.8%	-6.9%	+970 bps

bps = basis points cc = constant-currency

Reconciliation of adjusted EBIT and consolidated net income

In the interests of comparability, key earnings figures have been adjusted to exclude amortization resulting from purchase price allocations in the context of acquisitions and other non-recurring items. The reconciliation of the adjusted earnings figures with the earnings figures reported in the consolidated statement of comprehensive income is presented in the following tables:

Reconciliation of adjusted EBIT (€ 000s)

	2021	2020
Adjusted EBIT	54,273	41,713
Adjustments:
PPA amortization	-4,874	-8,036
Impairment	-1,047	0
Other	-175	0
EBIT	48,177	33,677

Reconciliation of adjusted consolidated income

(€ 000s)

	2021	2020
Adjusted consolidated net income	45,122	35,218
Adjusted earnings per share in € (basic)	3.73	2.92
Adjustments:
PPA amortization	-4,874	-8,036
Impairment	-1,047	0
Other	-175	0
Taxes	932	1,253
Consolidated net income	39,958	28,435
Earnings per share in € (basic)	3.30	2.36

Financial position

Liquidity analysis

The cash flow statement of the STRATEC Group shows the origin and utilization of the cash flows generated within the financial year. A distinction is made between the cash flow from operating activities and the cash flows from investing and financing activities.

Overview of key figures in consolidated cash flow statement (€ 000s)

	2021	2020	Change
Cash flow from operating activities	63,473	31,849	+99.3%
Cash flow from investing activities	-20,127	-21,845	n/a
Cash flow from financing activities	-34,329	5,223	n/a
Cash-effective change in cash	9,017	15,227	n/a

The inflow of funds from operating activities grew by 99.3% from € 31.8 million in the previous year to € 63.5 million in the 2021 financial year. This increase was mainly attributable to the higher level of consolidated net income, as well as to an increase in trade payables and other liabilities.

At € 20.1 million, the outflow of funds for investing activities in the 2021 financial year was slightly lower than the previous year's figure (€ 21.8 million). Of this total, € 10.3 million involved investments in intangible assets (previous year: € 11.0 million), while € 9.9 million related to property, plant and equipment (previous year: € 14.6 million). The year-on-year reduction in investments in property, plant and equipment was due to the construction work now completed at the company's headquarters in Birkenfeld.

The outflow of funds from financing activities totaled € 34.3 million, as against an inflow of funds of € 5.2 million in the previous year. This outflow of funds comprised net repayments of € 24.7 million for financial liabilities and the payment of a dividend of € 10.9 million to shareholders. STRATEC received an inflow of € 1.3 million in connection with employee stock option plans.

On a constant-currency basis, the total of all inflows and outflows of funds in the year under report led cash at the end of the period to increase to € 47.2 million, up from € 37.6 million in the previous year.

At the balance sheet date on December 31, 2021, STRATEC had credit lines in an amount of up to € 70 million and a term through to 2023. These offer the company flexibility to offset potential fluctuations in liquidity. Of these credit lines, a total amount of € 35.5 million had been drawn down as of the balance sheet date.

Investment and depreciation policies

Among other items, the investments of € 9.9 million in property, plant and equipment involved own work capitalized for prototypes and test equipment, as well as outlays for production and building fittings. The investments of € 10.3 million in intangible assets, on the other hand, mainly related to capitalized development work.

The capex ratio, i.e. total investments in property, plant and equipment and in intangible assets as a percentage of sales, amounted to 7.0% in 2021 (previous year: 10.2%) and was thus within the target range of 6.0% to 8.0% communicated in the previous year's outlook. The investments of € 20.2 million made in property, plant and equipment and in intangible assets exceeded the depreciation and amortization of € 18.3 million. These investments thus secure the company's long-term v alue and expansion and will enable STRATEC to uphold its position as an innovation leader and continue making a valuable contribution to technological advances in the field of medical technology.

Key figures on financial position (€ 000s)

Key figure	Definition	12.31. 2021	12.31. 2020	Change
Cash	Cash holdings and credit balances at banks	47,184	37,561	+25.6%
Net working capital	Current assets ./. cash ./. current debt	95,166	83,054	+14.6%
Operating cash flow per share	Operating cash flow/ number of shares (basic)	5.24	2.64	+98.5%
Capex ratio	(Investments in property, plant and equipment and in intangible assets) ./. consolidated sales	7.0%	10.2%	-320 bps

bps = basis points

Asset position

Total assets grew from € 331.9 million in the previous year to € 368.5 million as of December 31, 2021. This expansion in total assets was driven in particular by increases in inventories and in cash. The rise in inventories is due among other factors to the higher sales performance, as well to increased stocking requirements to safeguard the company's supply capability in view of the COVID-19 pandemic and the tense situation in global supply and logistics chains. Property, plant and equipment also rose, in this case from € 55.4 million in the previous year to € 58.7 million as of December 31, 2021. The increase in property, plant and equipment largely results from the positive net balance of investments amounting to € 9.9 million (previous year: € 14.6 million) and depreciation and amortization of € 6.7 million (previous year: € 6.1 million).

Structure of consolidated balance sheet:

assets (€ 000s)

	2021	2020	Change
Intangible assets	89,366	88,613	+0.8%
Non-current assets (excluding intangible assets)	91,142	87,010	+4.7%
Current assets	188,017	156,281	+20.3%
Consolidated total assets	368,525	331,904	+11.0%

Given the positive development in consolidated net income and net of the dividend distribution in the year under report (€ 10.9 million), shareholders equity rose by 19.2% from € 172.5 million at the previous year's balance sheet date to € 205.7 million as of December 31, 2021.

The equity ratio therefore amounts to 55.8% (previous year: 52.0%) and thus remains at a solid level.

Structure of consolidated balance sheet: equity and debt (€ 000s)

	2021	2020	Change
Shareholders' equity	205,759	172,545	+19.2%
Non-current debt	117,099	123,693	-5.3%
Current debt	45,667	35,666	+28.0%
Consolidated equity and debt	368,525	331,904	+11.0%

Non-current debt decreased from € 123.7 million to € 117.1 million in the 2021 financial year. This reduction was mainly due lower financial liabilities, while contract liabilities showed a significant increase due to prepayments received and milestone payments in connection with development projects.

Current debt increased to € 45.7 million, up from € 35.7 million at the previous year's reporting date. This was due in particular to an increase in contract liabilities, as well as in trade payables due to higher stocking levels.

	2021	2020	Change
Total assets	368,525	331,904	+11.0%
Shareholders' equity	205,759	172,545	+19.2%
Equity ratio in %	55.8	52.0	+380 bps
Financial liabilities	99,627	120,238	-17.1%
Financial liabilities as % of total assets	27.0	36.2	-920 bps
Debt/equity ratio in %	79.1	92.4	-1,330 bps

Key figures on asset position (€ 000s)

bps = basis points

Non-financial performance indicators

Further growth at STRATEC SE is crucially dependent on the availability of adequate development capacities. Even though in practice many factors are relevant to the company's growth, the following section presents those non-financial performance indicators which are of key importance to the company in managing its growth.

Employees and their interests

STRATEC's sustainable success is driven by the performance of its highly qualified and motivated employees, who work in partnership with global players, often market leaders, to develop innovative technologies and solutions that enable the company's partners to shape their markets with reliable, safe, and user-friendly products. STRATEC therefore views the number of employees as a key non-financial performance indicator.

This awareness that their internally developed solutions are contributing to further advances in global diagnostics is a further motivation for STRATEC's team.

One of STRATEC's primary objectives is to provide its workforce, which has grown consistently in recent years, with a modern and attractive working environment by offering new career challenges and ensuring professional dealings with colleagues and partners. This in turn should motivate employees to continue giving of their very best and help retain them at the company on a permanent basis. Further information about employees and their interests can be found in the Non-Financial Group Declaration within this report.

Number of employees

The workforce of the STRATEC Group grew further in 2021. As of December 31, 2021, STRATEC had a total of 1,398 employees. This corresponds to a year-on-year increase of 6.0%, which is consistent with the forecast issued in the previous year.

Number of employees

Development in employee totals

Employees at balance sheet date

Total employees	1,398 1,319	+6.0%
Permanent employees	1,282 1,223	+4.8%
Temporary employees	116 96	+20.8%
Employees in Germany	544 515	+5.6%
Employees abroad	854 804	+6.2%
Trainees and interns	48 45	+6.7%
Employees working in R&D and development support	668 653	+2.3%
Share of female employees	30.7% 29.6%	+110 bps
2021 2020

bps = basis points

One of STRATEC's core activities and competencies involves developing complex technological systems that combine biochemical processes with highly integrated hardware and software. This is reflected, among other factors, in the fact that 668 of our employees, corresponding to around 50% of all staff, work in research and development. This share is expected to remain high in the years ahead as well. Given the interdisciplinary nature of the work involved, many employees in this area contribute both technical and scientific expertise.

Excluding temporary employees, personnel expenses amounted to € 79.6 million in the 2021 financial year (previous year: € 77.0 million).

C. OUTLOOK

Global megatrends, such as ageing populations or the increasing prevalence of chronic and infectious diseases, are leading to consistently growing demand for in-vitro diagnostics tests. Not only that, major technological advances and increasing sensitivities mean that ever more areas of application are becoming available for in-vitro diagnostics processes. The COVID-19 pandemic further sustainably raised awareness of in-vitro diagnostics processes and once again underlined the great importance of these processes for national healthcare systems. Not only that: The shortage of highly qualified laboratory staff in many countries is additionally boosting demand for highly automated solutions. Furthermore, STRATEC is benefiting from the growing interest in and willingness shown by customers to outsource the design and manufacture of automation solutions to specialist partners. This is reflected on the one hand in the large number of market launches seen in recent years and in the company's well-stocked development pipeline. In light of these factors, the long-term growth prospects for the markets targeted by STRATEC and its customers are still assessed positively.

Based on current orders and order forecasts received from customers, as well as upcoming product launches, STRATEC expects sales in the 2022 financial year to match the previous year's level on a constant-currency basis. For its adjusted EBIT margin, the company is forecasting a figure of around 16.5% to 18.5% (2021: 18.9%). The year-on-year decrease in the adjusted EBIT margin hereby implied is attributable to the weaker product mix assumed, as well as to a further rise in input costs in connection with the global shortage of transport capacities, commodities, and upstream products.

The short-term development in demand for product groups relevant to COVID-19 will continue to be shaped by the future course of the pandemic. Overall, STRATEC expects the high volume of global test volumes at the beginning of the year to fall to significantly lower levels during the second and third quarter of 2022. Any assessment of the further course of the pandemic, particularly from the fall onwards, and associated demand for in-vitro diagnostics products is nevertheless subject to great uncertainties.

STRATEC's budget scenario for the 2022 financial year includes a higher than normal number of assumptions and risk adjustments. Furthermore, the situation in global supply chains also remains tense and increasingly difficult to predict, with this being due not least to the war in Ukraine.

For 2022, STRATEC has budgeted investments in property, plant and equipment and in intangible assets at 6.0% to 8.0% of its sales (2021: 7.0%). Subject to approval by shareholders at the Annual General Meeting, a total dividend distribution of € 11.5 million is foreseen for shareholders in STRATEC SE. This corresponds to a dividend of € 0.95 per share (previous year: € 0.90).

Depending on its ability to recruit adequate numbers of suitably qualified employees, STRATEC plans a further moderate expansion in its workforce in the years ahead and thus to meet the continuing high demand for development services.

STRATEC's financial forecast is based on budgets that account for the specific features of its business model, as well as for numerous internal and external factors, and that weight such factors in accordance with their significance. New order figures, our customers' forecasts and their order behavior, and their stocking of service parts play a superordinate role here, as do the numbers of projects in development and negotiation. This forecast does not account for additional opportunities resulting from external growth. Given the long-term nature of its business relationships, macroeconomic developments are of subordinate significance for STRATEC. The macroeconomic factor is therefore weighted less prominently in the company's forecasts.

D. OPPORTUNITIES AND RISKS

In the dynamic but in most cases highly regulated markets in which STRATEC and its subsidiaries operate, lawmakers and approval authorities attempt to minimize many risks with strict legislation and detailed approval processes. As a result of this, numerous processes and procedures are reflected at the companies involved and actively lived in the corporate cultures. These range from the requirement to ensure precise documentation of the design and manufacture of in-vitro diagnostics instruments and consumables through to sophisticated quality assurance processes that can be found in virtually all areas of the company.

Furthermore, entrepreneurial actions, particularly in rapidly growing markets, result in various risks and opportunities which STRATEC monitors with anticipatory and supervisory measures and structures.

Within its opportunity and risk management activities, the STRATEC Group assesses and continually monitors both opportunities and risks.

STRATEC's growth in recent years has been based on entrepreneurial decisions that involved weighing up the associated opportunities and risks. STRATEC regularly reviews and adjusts its opportunity and risk management to facilitate ongoing sustainable growth in future as well and enable the company to prepare in good time for any changes in the environment in which it operates. Changes in the regulatory environment are also viewed as opportunities to draw on the company's longstanding experience and in-depth quality management to further expand its competitive advantages.

As the business models of the individual segments, which focus almost exclusively on the OEM business, are highly similar and the resultant opportunities and risks are largely identical or even overlap, no distinction has been made between the individual business units in the following presentation of opportunities and risks.

Opportunities

Market growth

A major share of the products offered by or in development at STRATEC are used in in-vitro diagnostics (IVD). Having said this, the number of systems deployed in research laboratories in the life science sector is also not insignificant. Within the IVD sector, there are some segments that are forecast to generate growth above the overall sector average in the years ahead. STRATEC has focused on some of these segments with corresponding development projects. The segments of molecular diagnostics and highly sensitive immunoassays processes are particularly noteworthy in this respect.

Furthermore, in the medium term geopolitical, infrastructure and demographic developments should also help ensure that ever more people around the world have access to greater numbers of diagnostics tests. The resultant ongoing rise in test volumes should generate sustainable growth in the IVD market.

Opportunities due to new projects and customers

STRATEC still has numerous customer and proprietary projects in development. The resultant products will be launched by STRATEC's customers onto the market in the years ahead and will provide one major foundation for the future growth of the STRATEC Group. Before entering into new development and supply agreements, STRATEC evaluates the potential projects in terms of their opportunity/risk profiles and the customer's future potential to place the resultant products in the corresponding target markets. On this basis, the company expects to be able to generate further growth with new products.

Growth opportunities due to outsourcing

Demand for instrumentation solutions from independent providers such as STRATEC is still on the increase, a development due not least to the fact that many diagnostics companies are increasingly focusing on developing their reagents and thus do not or no longer view instrument development as forming part of their core businesses. Outside the diagnostics industry, there are also areas in which similarly specific product qualities are called for and where similar underlying conditions apply. Research laboratories are particularly worthy of mention in this respect. Not only that, pharmaceuticals development processes also require precisely these conditions. As a result, STRATEC continues to benefit from above-average opportunities of participating in these developments, and in particular from the trend towards outsourcing. The emergence of new areas of research that move over time from pure research to diagnostics processes and pharmaceuticals products will further increase demand for laboratory automation solutions.

Opportunities due to global pandemics

Pandemics such as COVID-19 present countries around the world and their healthcare systems with immense challenges. It is soon apparent that few countries are prepared for crises of this kind, with medical infrastructures and laboratory test capacities reaching their limits even in leading industrialized countries. Providers of diagnostics applications therefore face great opportunities to participate in the global development and expansion of diagnostics infrastructures and, in parallel, of laboratory test capacities expected in the years ahead.

Consolidation

The ongoing consolidation in the IVD market presents STRATEC with the opportunity to generate higher sales figures with established systems due to its established partners gaining broader market access. In recent years, various diagnostics groups have been seen to enter cooperations or take over competitors in order to offer their customers broader product portfolios or enter new markets. This enables STRATEC's systems to be sold to a broader customer base. At the same time, consolidation nevertheless also involves the risk that the merger of customer product portfolios may result in the discontinuation by customers of individual product series.

Increasing market regulation

Ever increasing regulation of the IVD market is creating ever greater demand for standardized automation solutions. Standards in terms of the precision and reliability of IVD tests have been rising continually for years now. Automated solutions offer clear benefits in this respect when compared with manual processes. As a company that operates in highly regulated markets, such as instrumentation and automation and the development and production of consumables for in-vitro diagnostics, STRATEC requires extensive expertise to meet the requirements and regulations in force in the respective markets. Not only that, the test and process structures, which involve close interaction between specialisms as varied as mechanics, software, electronics, and biochemical reactions, require the utmost precision and calibration. The corresponding quality assurance and process documentation steps are foundations for functional and marketable development. Successfully combining all these qualities in a complex and permanently reliable, but also user-friendly product, is currently only possible for a small number of companies that are in most cases highly specialized. As a result, the number of service providers able to cover all areas of the value chain from development through to serial production is very limited. With its broad technology pool, STRATEC is one of the few companies able to do justice to these requirements. The increasing complexity of the instruments and consumables makes it necessary for companies to permanently adapt to this development and research new technologies. At the same time, this development also acts as an ever higher barrier to market entry for potential competitors.

Technological opportunities

As a market, in-vitro diagnostics is highly dependent on the financing provided to healthcare systems. Approval by the authorities and financing commitments for individual diagnostics tests from health insurance companies or bodies is a highly complex process. As a general rule, technological advances or entirely new applications can therefore only rarely be introduced at short notice. In view of this, STRATEC is largely relying on the further development of proven technologies and process enhancements. Having said this, STRATEC nevertheless also cooperates and conducts its own research in the field of new technologies. Together with partners, various development projects are currently underway that are thought to have the potential to sustainably influence their target markets due to new areas of application or technological advances.

Alongside molecular diagnostics, the key focus of these projects is on point-of-care. Here, STRATEC is benefiting from the trend towards smaller systems working with complex consumables.

Risks

Given its business model, which is based on very long periods of cooperation with customers, STRATEC is exposed to some risk factors to a notably lesser extent than is customary at many other companies that are dependent on macroeconomic cycles, or on technological and demand trends. As a general rule, customers' long-term planning for the development of an analyzer system is dependent on their market presence and the lifecycles of existing products, but not on macroeconomic cycles and economic crises. The period required for planning, specification and development ranges from around two to five years, while the lifecycle of a system launched onto the market lasts some 15 to 20 years. A further five to eight years often pass before the final support and service activities are discontinued. The total project lifecycle thus often amounts to more than 25 years.

Irrespective of this, the company is exposed to a variety of risks in connection with its operating business, the environment in which it operates, and its customer relationships. STRATEC evaluates these risks by reference to their estimated probability of occurrence and their potential implications for the company's earnings, assets, financial position, and reputation. Where possible, such risks are covered by insurance policies. STRATEC's activities nevertheless involve some risks that cannot be insured, or only in part, and whose probability of occurrence and scope are limited by being monitored as closely as possible and with suitable countermeasures. Accordingly, the potential implications are evaluated following the implementation of risk mitigation measures.

To enhance presentation, the various risks have been subdivided into three categories.

Market and product risks: These include risks which may be caused by the market, customers, or the product and for which the damages mostly emerge on a downstream basis.
Financial risks: These involve risks which, if they materialize, result in direct, measurable financial damages.
Infrastructure and other risks: These include risks relating to STRATEC's internal and external infrastructure.

The evaluation of the probability of the risks occurring is based on the following criteria:

Assessment of probability of occurrence
0% –25%	Unlikely
25% –50%	Possible
50% –75%	Likely
75% –100%	Very likely

The evaluation of the potential financial implications is based on the following criteria:

Estimated implications on asset and earnings position of STRATEC Group in event of risk materializing

Degree of implications	Definition of amount of damages
Low	€ 0 million to € 1.0 million
Medium	> € 1.0 million to € 11.0 million
High	> € 11.0 million to € 37.0 million
Very high	> € 37.0 million

The degree of implications is derived on the basis of the STRATEC Group's asset and earnings strength.

Overview of risks and their implications for the asset and earnings position

following the implementation of risk mitigation measures (risks in the respective category ordered by probability of occurrence, starting with the most likely, and then by degree of potential implications):

	Probability of occurrence	Potential implications short-term (up to 1 year) medium-term (1–3 years)
Market and product risks
Supplier risks	Possible	Medium	Medium
Production risks	Possible	Medium	Medium
Project risks	Possible	Medium	Medium
Competition risks	Possible	Low	Medium
Key customer project loss risks	Unlikely	Medium	High
Patent infringement risks	Unlikely	Medium	Medium
Financial risks
Exchange rate risks	Likely	Medium	Medium
Interest rate risks	Likely	Low	Low
Product liability risks	Unlikely	Medium	High
Liquidity risks	Unlikely	Medium	Medium
Credit default risks	Unlikely	Medium	Low

	Probability of occurrence	Potential implications short-term (up to 1 year) medium-term (1–3 years)
Infrastructure and other risks
Personnel risks	Possible	Medium	Medium
IT risks	Possible	Medium	Medium
Environmental risks	Possible	Medium	Medium

Individual risks and the corresponding countermeasures are presented in detail in the following section:

Supplier and procurement risks

The STRATEC Group has reacted to the increase in development expenses, particularly for higher complexity and higher throughput systems, by introducing strict project controlling procedures coupled with an effective target cost management system. The complexity of production processes means that, for reasons of economy and to safeguard quality levels, the STRATEC Group focuses on as small a number of suppliers as possible. The high cost of supervising logistics activities, such as securing procurement prices in the long term, and of monitoring quality standards, necessitates this degree of concentration in terms of suppliers. This risk is knowingly entered into in a controlled manner, but is nevertheless minimized with an individual catalog of measures tailored to the respective situations, such as close supplier supervision, maintaining inventory stocks, and forward-looking logistics planning together with clear contract structures and regular supplier audits.

Due not least to the impact of the pandemic, significant tension was observed in global supply chains, particularly for semiconductors and electronics components, in the 2021 financial year. Where possible, the company has therefore continued to stock emergency supplies. The period of time for which suppliers of key modules and materials remain able to deliver is difficult to plan and control. In its efforts to ensure that supply chain interruptions can be bridged and that components can continue to be procured over and above the emergency stocks, the company is in some cases obliged to accept massive price premiums. In the worst case, supply shortages may result in production downtime. In addition to these factors, the situation in global supply chains remains tense and increasingly unpredictable, with this being due not least to the war in Ukraine.

Production risks

STRATEC is exposed to production risks in connection with its production of analyzer systems at its production sites. Above all, these risks relate to factors that could potentially lead to temporary downtime or delays in production, such as a loss of personnel, damage to production equipment or infrastructure due to external factors, or a lack of production material resulting from supply bottlenecks.

On a temporary basis, risks of this nature can be mitigated by stocking supplies or the possibility of transferring individual product lines to other production sites. In particular, the company worked to counter those risks impacting on production due to the COVID-19 pandemic and global supply shortages by stockpiling components and, where possible, by compiling emergency plans. Potential restrictions or downtime in production due to employees being sick or in quarantine or due to a lack of materials can only be controlled to a limited extent. Downtime in production due to natural disasters is insured to the extent possible.

Project risks

STRATEC generates a major share of its sales with development projects that may be influenced by numerous factors. Although negative implications resulting from potential damages are already accounted for and secured when structuring the respective project contracts, certain risks cannot always be excluded. In this respect, residual technological risks are reduced by performing feasibility studies. Furthermore, STRATEC is exposed to the risk that a partner may cancel a project once it has started, that unforeseen technical difficulties arise, or that approval is not granted for a product, or only after a delay, and that planned sales are therefore postponed or lost entirely. Moreover, it is important for STRATEC to make sure that the costs of a project remain within the stipulated budget.

In general, both STRATEC and the respective customer have a great interest in the project succeeding and as a general rule therefore allocate the resources necessary for a development project to succeed. Finally, active project management by experienced project managers additionally serves to minimize project risks.

Competitive risks

Broadly speaking, STRATEC's competitors can currently be limited to two groups. On the one hand, there are internal development groups maintained by the diagnostics companies themselves. For a variety of reasons, many diagnostics companies have moved in recent years to outsource these development services to specialist companies such as STRATEC. This move is motivated, among other factors, by the lower costs generally achievable due to the shorter development times resulting from specialization and due to the technology pool available at this kind of company. On the other hand, STRATEC's competitors also include those companies that focus on the development of automation solutions in highly regulated markets. As this specialization requires highly in-depth expertise, the market entry period for potential competitors is relatively long and arduous. The risk that any competitor newly entering the market would gain market share increases in the medium term, as such competitor benefits from its growing experience and resultant expertise. The number of competitors is therefore still comparatively low. As far as STRATEC is aware, the company has gained, rather than lost market share in recent years.

Dependency on key customers / risk of key customer project loss

One main component of STRATEC's business model is its focus on cooperations with OEM partners who are among the market or technology leaders in their respective fields. By definition, this only applies to a limited number of potential partners, a factor that can result in a high degree of dependency in some cases. The resultant concentration of sales on a limited number of key customers and projects (key customer risk) may – in in the event of volatilities in sales of analyzer systems resulting, for example, from customers reducing their stocks – lead to fluctuations in STRATEC's performance. Any reduction in a customer's market share or the termination of one or several projects by a customer may also lead to a loss of planned sales and thus have a direct impact on the company's earnings position that cannot be offset, or only in part. Any unplanned premature termination of a project by a customer would result in compensation payments being made to STRATEC.

STRATEC will continue to work with existing and new partners in the field of new technologies in order to generate sustainable growth and further minimize any 'cluster risks'.

Patent infringement risks

STRATEC's competitiveness depends not only on the longstanding experience and expertise of its employees but also on the protection of its technologies and innovations. The company therefore protects its own expertise directly or indirectly with numerous international patents and property right registrations. Furthermore, STRATEC always ensures that the development, production, or planned market launch of its own products does not infringe any third-party property rights.

Exchange rate risks

Of those sales not invoiced in euros, the only currency to play a major role at the STRATEC Group is the US dollar. Due to movements in exchange rates on the currency markets, these foreign-currency sales may be subject to great fluctuations involving risks in the form of exchange rate losses. Wherever possible and economically experience, income in US dollars is neutralized with procurement expenses in US dollars, thus benefiting from natural hedging. A portion of the remaining US-dollar volumes is hedged with forward exchange transactions.

As of the balance sheet date on December 31, 2021, the company had forward exchange transactions of USD 28.0 million. No cash flows in other foreign currencies were hedged in the 2021 financial year.

Interest rate risks

STRATEC is exposed to interest rate risks on account of the debt capital it has taken up. The company closely monitors developments on the international financial markets. A portion of STRATEC's financial liabilities comprises fixed-interest loans, which are thus secured against the risk of sharp rises in interest rates. The company considers hedging portions of the remaining share of floating-rate financial liabilities depending on its respective market assessment.

The STRATEC Group did not have any interest hedges as of December 31, 2021.

Product liability risks

STRATEC's analyzer systems are deployed in highly regulated markets. Erroneous diagnoses could have drastic implications for the individuals affected. Before any system is put to use in a laboratory, various test and validation phases take place to ensure that strict process and safety requirements are fully met. These are supplemented by several levels of process monitoring during the sample handling process, such as technical, chemistry-inherent, or software-based supervisory mechanisms. In practice, suppliers and manufacturers of diagnostics products are nevertheless exposed to liability risks, not all of which can be fully excluded even by complying with legal requirements and performing extensive quality checks.

Although STRATEC would not be the primary addressee for potential liability claims, the company covers itself against liability risks by concluding suitable product liability insurance policies. The possibility nevertheless cannot be excluded that potential liability claims would exceed the existing insurance cover and that matters of culpability and damages would have to be clarified in lengthy proceedings, with the result that any potential damages might increase in the medium term.

Liquidity risks

To safeguard its ability to meet its payment obligations and uphold its financial flexibility, STRATEC monitors its liquidity risks on a centralized basis and manages its liquidity on the basis of rolling planning. Thanks to a master credit facility with a term running through to January 2027 and various fixed-rate and development loans with differing terms, the company has sufficient liquidity and flexibility to offset any potential fluctuations in its liquidity.

Credit default risks

Although STRATEC's customers and partners generally involve companies that are strongly positioned in their respective markets and solidly financed, the risk still remains that a customer may be unable to meet its payment obligations, or only in part, as a result of a deterioration in its financial situation.

STRATEC counters this risk by taking up trade credit and receivables default insurance and, if warranted, by screening customers and taking suitable further measures to limit any increase in credit default risk. As a result, this risk is limited to a manageable (short) period.

Personnel risks

At STRATEC, personnel risks relate in particular to the recruitment and retention of well-qualified specialist and management staff. The company's success is determined to a significant extent by its employees' competence, motivation, and willingness to perform. This being so, STRATEC aims to offer its employees an attractive and highly varied working environment and to actively promote their further development.

Demand for qualified personnel remains high, especially in technical fields. In attracting staff, STRATEC has to compete with other regional and international companies. The company counters this risk by upholding and extending its image as an attractive employer and by establishing contacts with young specialists at an early stage, for example at careers fairs. Furthermore, various activities, such as those in the field of software development, are performed across several locations to enable use to be made of the resources available at the respective locations. The availability of various professional skills at other locations is thus put to targeted use to avert any shortage of suitable personnel.

IT risks

STRATEC is exposed to various IT and data security risks due to the interfaces within the Group and with the outside world and not least as a result of cyberattacks. The company counters these risks by investing in qualified staff, in hardware and software, authorization concepts, and training and prevention measures. Furthermore, an external service provider performs a weak point analysis on a quarterly basis and a penetration test each year. These tests are documented, evaluated, and the findings backed up with measures. The security standards and the information security management system are being continually developed further. In 2021, for example, a new enhanced firewall system was installed. Implementation of the requirements of ISO/IEC 27001 is scheduled to be completed by the end of 2022.

Environmental risks

The group companies of STRATEC SE are located in different countries with a variety of geographical and ecological conditions. Extreme weather events, such as storm, drought, fires, or floods may impede STRATEC and its suppliers on a temporary and locally restricted basis. By working with forward-looking planning, STRATEC attempts to contain the potential implications in advance already. Where possible and economically expedient, direct implications are countered with insurance policies covering damage caused by water, fire, and storm, as well as the resultant loss of earnings.

One factor that is still difficult to assess involves the transition risks resulting from measures taken to contain climate change. For example, laws and regulations may be imposed that impact on the prices of certain raw materials, such as energy prices, packaging, or logistics.

Other risks

The managers responsible for the early warning risk identification system have identified the following points as potential challenges which should be averted to avoid risks materializing:

Risk that customers will be unable to place the expected numbers of units on the market and that this may result in potential write-downs of capitalized development expenses
Supply capacity risks for components relevant for regulatory approval or for highly complex proprietary components.

Overall assessment of risk situation at the STRATEC Group

The risk management system and ongoing reporting mean that STRATEC's Board of Management has an overview of risks consistent with the respective areas and their relevance to the business. These risks have changed compared with the previous year to the extent that, against the backdrop of global supply shortages, particularly for electronics components, it is necessary to accept massive price rises in order to maintain production capability.

In response to the COVID-19 pandemic and global supply shortages, STRATEC has continued to take and uphold numerous measures to minimize risks. These focus to the greatest extent possible both on securing the company's production and supply capability and on ensuring that all its employees are suitably protected. The implications in terms of customers' order behavior had a predominantly positive impact on STRATEC's sales performance. From a current perspective, the medium-term impact on demand is also expected to remain positive, as expansion in medical infrastructures is currently observable in numerous national healthcare systems, even if customer order patterns are now fluctuating more significantly between individual quarters than prior to the pandemic. The company remains exposed to an increased degree of risks due to interruptions in its supply and production chain, as well as to the aforementioned price rises in its procurement activities.

Upon the preparation of this report, it was not yet possible to foresee the extent to which the conflict in Ukraine and the resultant sanctions imposed on Russia will impact on the global economy, and thus also on supply chains. Implications are already apparent in terms of commodities prices and energy costs, as well as on the interest and currency markets. The possibility cannot be excluded that these will also have a longer-term impact on STRATEC's costs and earnings.

Based on the overall assessment of risks, the Board of Management currently cannot discern any risks that could threaten the company's ongoing existence or have any materially negative impact on its asset, financial, or earnings position.

Risk management system

STRATEC's risk management system is an active component of the company's management system and combines several aspects of risk detection, monitoring and management. Alongside statutory requirements, the system implements processes into the day-to-day business which make it possible to deploy system-based processes and raise awareness among employees. This way, the company aims to achieve the broadest possible basis of protection against the risks outlined above. The risk management system is centrally managed and is largely based on three pillars:

RISK MANAGEMENT SYSTEM

INTERNAL CONTROL SYSTEM

STRATEC has established an internal control system to protect the company's assets and information and ensure compliance with the relevant legal requirements and the company's business policy.

The internal control system is based on:

Internal guidelines
Requirements and processes
Relevant legislation
Ad-hoc instructions

CORPORATE COMPLIANCE

STRATEC has pooled its group-wide codes of conduct, ethical principles, and other guidelines in its Corporate Compliance Policy. This is binding for all employees and is regularly supplemented by updated risk analyses.

This policy is based on:

Relevant legislation
Norms
Guidelines

EARLY WARNING RISK IDENTIFICATION SYSTEM

An early warning risk identification system is established in the risk management system at the STRATEC Group. This has been implemented in a risk handbook enabling potential areas of risk to be assessed. It serves to analyze and assess risks at the company and in its environment.

Consistent with § 91 (2) AktG, the system in place at the STRATEC Group offers an all-round instrument for monitoring elementary processes and identifying potential risks at an early stage:

Stock Corporation Act
Risk Handbook
Internal instructions

Internal control system

STRATEC has an internal control system (IKS) which contains audit processes also covering its (group) financial reporting process, lays down suitable company structures and work processes, and is implemented within the company's organizational structures. The objective of the IKS is to detect and, as far as possible, exclude any risk of errors and damages resulting from the company's own personnel or from criminal third parties. In general, the IKS encompasses the following measures:

Execution of internal and external audits on the basis of checklists
Detection of regulatory omissions and infringements based on a structured, risk-oriented approach
Compiling of audit reports for forwarding to the Board of Management
Auditing the implementation of corrective measures
Regular information and warning messages to employees.

This sustainably secures and increases the efficiency of the company's operating processes. Furthermore, it also enhances awareness of control-related topics at the company.

Internal control system and risk management system in respect of the group financial reporting process

The (group) financial reporting process is designed to ensure that the Group's financial reports provide a true and fair view of the net asset, financial and earnings position of the STRATEC Group in accordance with the relevant laws and norms. It should nevertheless be noted that no internal control system, regardless of its specific structure, can provide absolute certainty that material accounting misstatements have been avoided or detected.

STRATEC's internal control system is further required to ensure the uniform, correct and prompt accounting treatment of all business transactions to ensure compliance with legal norms, accounting requirements and the company's internal accounting guidelines, which are binding for all of the companies included in the consolidated financial statements.

The following key measures have been introduced to limit risks as far as possible and to detect any misstatements or erroneous disclosures in the consolidated financial statements, or any fraudulent actions:

Regular supervisory measures integrated into, but independent of processes, such as the segregation of duties, compliance with the dual control principle, and the implementation of access restrictions and payment guidelines
Ensuring uniform accounting treatment by way of group-wide standards
Inspection and analysis of local financial statements.

STRATEC's internal control system is also responsible for ensuring that individual companies within the STRATEC Group prepare their financial statements in accordance with the relevant requirements, while also complying with group-wide standards. Local companies are supported throughout this financial reporting process by trained contact partners at the parent company. These partners also perform a quality check function for the financial data thereby taken over and assist the companies with any complex questions thereby arising. The consolidated accounts are prepared centrally and in line with uniform accounting policies based on the data from the subsidiaries included in the scope of consolidation. The specialist managers responsible check the processes in place to monitor compliance with the relevant requirements when this data is included in the consolidated financial statements. The company also draws on expertise from external consulting companies when preparing its consolidated financial statements. As a publicly listed company, STRATEC monitors and analyzes all changes in legislation, IFRS accounting standards and other pronouncements in terms of their relevance and implications for the consolidated financial statements so as to enable these to be implemented promptly.

Corporate Compliance

STRATEC's Compliance Policy is binding for all employees and is updated at set intervals to account for the regularly updated risk analysis. At STRATEC, an understanding of corporate compliance is viewed as a key cornerstone of day-to-day business operations both within the company and in its external dealings. In this respect, compliance with a variety of legal systems and statutory regulations is just as important as compliance with ethical principles.

These guidelines have been communicated in training sessions and one-to-one meetings to all employees, managers, and members of the Board of Management.

An awareness and understanding of the applicable requirements is the only way to ensure overall compliance by all of the persons involved and only this way can the company ensure that its international business dealings are compliant with the necessary standards.

To standardize the compliance culture throughout the company, regular targeted training is also provided to local compliance officers at all of STRATEC's subsidiaries. Corporate Compliance Summits are also held to enable managers to share their experiences. The aim here is to maintain a uniform compliance management system across the Group and support local officers in implementing the relevant requirements.

As well as providing training to new employees, the company also holds regular refresher training sessions within the departments in order to familiarize all employees with our understanding of compliance.

STRATEC's Corporate Compliance Policy includes the following elements:

A basic explanation of STRATEC's understanding of compliance, as well as an explanation of the compliance management system; preventing corruption, i.e. upholding the integrity necessary in business dealings, and in particular the prohibition of any illegitimate exercising of influence; information and assistance for compliance with all requirements set by the law and the respective authorities, as well as with internal requirements; the obligation to provide a fair and respectful working environment at the company; assistance to avoid conflicts of interest between private and business matters; compliance with the requirements of capital market, antitrust, and tax laws; copyright and license conformity; regular training of employees and information material on the intranet and on information boards; respectful and professional conduct at the company; opportunities to report suspected breaches of compliance.

STRATEC's compliance management system is continually extended to address topics of current relevance and further optimized. This enables managers on various levels to detect specific risks and, by taking suitable measures, to reduce or avert these risks entirely. These processes are supplemented by regular discussions between managers and the relevant compliance officer. These discussions enable potential conflicts or questionable matters to be identified and clarified at an early stage. The compliance officer reports the findings of these discussions with managers directly to the Board of Management. The Board of Management discharges its reporting obligations towards the Supervisory Board.

One aspect of the corporate compliance management system also involves regularly monitoring tax-related risks within the Group by way of a tax control system (Tax CMS). This is intended to monitor, promptly identify, and evaluate potential tax risks, with the aim of minimizing and averting such risks.

Furthermore, STRATEC has established a Compliance Board comprising permanent members from various risk-related areas as well as alternating positions. The aim here is to achieve greater transparency and diversity when it comes to identifying risks and to work together as a board when setting the compliancerelated targets for the respective year.

STRATEC expects all its employees to adhere to its compliance requirements and thus ensure that all decisions and actions taken in their areas of responsibility are always consistent with the Corporate Compliance Policy.

An anonymous whistleblower system enabling employees or other parties to notify the company of any breaches of regulations or legal requirements has been in place since 2017. To this end, an anonymous whistleblower system has been integrated into the intranet.

STRATEC SE signed the UN Global Compact in 2021. This represents an important milestone in STRATEC's activities as a sustainable company. The commitment thereby made enables STRATEC to continue aligning the strategies and processes within the company to the ten principles of the UN Global Compact on human rights, labor standards, environmental protection, and measures to combat corruption.

Early warning risk identification system

The early warning risk identification system in place at STRATEC is consistent with the legal requirements set out in § 91 (2) of the German Stock Corporation Act (AktG). The processes in place to monitor risks require the relevant heads of specialist and other departments, as well as the managers responsible at subsidiaries, to compile regular reports to assess the risks in their areas of responsibility The resultant reports are reviewed and evaluated by a Risk Committee comprising members of operating divisions and of the Finance department, which then forwards them to the Board of Management, which in turn reviews and evaluates them before reporting to the Supervisory Board. Furthermore, possible countermeasures and monitoring measures are derived and implemented in cooperation with the relevant departments. Independently of this process, exceptional developments require immediate ad-hoc report.

At the various levels of aggregation, the decision makers and directors and officers are provided with a risk handbook to serve as a controlling instrument. The risk handbook is intended to provide an adequate framework that enables users to implement the steps and measures necessary to meet internal and legal requirements.

This enables any risks to the company's continued existence to be identified at an early stage and the conceivable consequences of such risks, including those arising over time, to be viewed and assessed alongside any change in their probability of occurrence. Risk analysis and reporting also account for the individual companies within the STRATEC Group, as well as for any interdependencies between group companies.

To manage risks, the company generally deploys the following measures:

Increased allocation of resources
Shorter monitoring intervals
Increased management attention
Agreement of measures to eliminate risks.

The risk management system at STRATEC SE is safeguarded by integrating the subsidiaries into the Group's risk management system.

Risk report in respect of use of financial instruments

STRATEC's financial strategy is based on the availability of the funds needed to finance its targeted organic and potential acquisitions-driven growth.

The STRATEC Group is financed by the cash flows generated from its operating activities and by medium to long-term financing provided by various banks, particularly in the context of a master loan agreement and various fixed-interest loans. Investment programs and development loans are integrated into the financing mechanisms as far as possible.

The principal objectives of the STRATEC Group's financial management involve a basically conservative financing policy aimed at guaranteeing permanent availability of the liquidity required, for example for new development and research projects or for external growth, as well as effective risk management. These objectives are chiefly met by planning and managing liquidity and by optimizing financing costs. Furthermore, STRATEC has a dividend policy that is based on continuity and the Group's longterm, sustainable business performance, with a distribution quota of 40% to 60% of consolidated net income. At the same time, STRATEC will continue to focus on exploiting external and internal growth opportunities, which may also involve temporarily deviating from this quota.

Financial risks basically arise from currency and interest rate fluctuations. As already mentioned (see Section Risks – Foreign currency risks), currency risks in procurement and sales markets are increasing within the STRATEC Group. To counter this risk, the Group is therefore making targeted use of derivative hedging instruments.

A financial instrument is a contract simultaneously resulting in a financial asset at one company and in a financial liability or equity instrument at another company. For financial assets, a distinction is made between:

Primary financial instruments, such as trade receivables or payables, or financial receivables and liabilities
Derivative financial instruments not involving a hedging relationship with a hedged item
Derivative financial instruments, such as hedges used to hedge risks resulting from movements in exchange or interest rates.

Financial instruments are held for the exclusive purpose of hedging underlying transactions and not for trading or speculative purposes.

The treasury managers review the expediency of currency hedging transactions at regular intervals. The risks resulting from exchange rate movements, and thus the volumes of corresponding hedging transactions concluded, are expected to increase further. Financial derivatives are generally deployed in cases where it is necessary to hedge risks in the operating business or currency holding risks. The conclusion of such transactions is governed by very strict standards laid down in the Code of Procedure for the Board of Management and was agreed with the Supervisory Board. In the 2021 financial year, no currency hedges were concluded at STRATEC SE.

Interest rate risks are countered on the basis of the internal requirements of the risk management system. Depending on the internal risk assessment, these also involve covering such risks by means of derivative financial instruments. Derivative financial instruments to optimize interest rates may be deployed in cases where financing needs render such measures opportune and where they relate to a general transaction. STRATEC SE did not conclude any interest rate derivatives in the 2021 financial year.

E. TAKEOVER-RELEVANT DISCLOSURES1

Composition of share capital

The company's share capital amounted to € 12,127,995 as of December 31, 2021 and was divided into 12,127,995 individual registered shares. This total includes 1,899 treasury stock shares as of December 31, 2021. All shares involve the same rights and obligations and each share confers one vote.

Restrictions on voting rights or the transferability of shares

Restrictions on share voting rights may result in particular from the requirements of the German Stock Corporation Act (AktG). In specific circumstances set out in § 136 AktG, for example, shareholders are subject to a prohibition on voting, while pursuant to § 71b AktG the company is not entitled to exercise any voting rights for treasury stock shares. We are not aware of any contractual restrictions relating to voting rights or the transferability of shares.

Pursuant to § 67 (2) AktG, only those shareholders registered as such in the Share Register are deemed shareholders from the company's perspective. According to § 4 (4.2) of the Articles of Association, to be entered in the Share Register shareholders must submit their name, address and date of birth if they are natural persons and their company names, commercial address and legal domicile if they are legal entities, as well as the number of shares they hold and their electronic mail address, should they have one, in both cases. Shareholders are required to inform the company without delay of any change in their address. Entries by a shareholder acting under its own name and relating to shares owned by another party are only permitted and effective from the company's perspective when the fact that the shares belong to another party and the name and address of the owner are entered in the company's Share Register. The same applies when the party thereby entered or the owner transfer their ownership of the shares to another party following such entry. Pursuant to § 67 (4) AktG, the company is entitled to request information from the party entered in the Share Register concerning the extent to which it actually owns the share for which it is entered as the bearer in the Share Register and, should this not be the case, to convey the information necessary to maintain the Share Register to the party on behalf of which it holds the shares. Should such request for information not meet with any response then, pursuant to § 67 (2) AktG, no voting rights may be exercised for the shares concerned.

Direct or indirect capital shareholdings exceeding 10% of voting rights

Based on the notifications available to us pursuant to § 33 of the German Securities Trading Act (WpHG), as of December 31, 2021 no shareholder directly held more than 10% of the voting rights in the company. We have received notifications from Bettina Siegle, Tanja van Dinter, Ralf Leistner, Hermann Leistner, Doris Leistner, Herdor Beteiligungs GmbH, and Herdor GmbH & Co. KG (all in Germany) that, due to the allocation of voting rights, they each hold more than 25% of the voting rights in the company.

The Board of Management is not aware of any other direct or indirect capital shareholdings exceeding 10% of voting rights.

Bearers of shares with special rights conferring powers of control

There are no shares in the company with special rights conferring powers of control.

Type of voting right control when employees hold shareholdings in the capital and do not directly exercise their control rights

Any shares granted by the company to its employees within the framework of its employee share program or as share-based remuneration are transferred directly to the employees. Like other shareholders, the employees benefiting from such programs can exercise the voting and control rights resulting from their employee shares in accordance with statutory requirements and the provisions of the Articles of Association.

Statutory requirements and provisions of the Articles of Association in respect of the appointment and dismissal of members of the Board of Management and amendments to the Articles of Association

The appointment and dismissal of members of the Board of Management are governed by Article 9 of the SE Regulation, § 84 and § 85 of the German Stock Corporation Act (AktG) and § 5 of the company's Articles of Association. Pursuant to § 84 (1) AktG, the Supervisory Board appoints members of the Board of Management for a maximum term of five years and may also dismiss members; repeated appointments and extensions in terms in office, in each case by a maximum of five years, are permitted. Pursuant to § 5 (5.1) of the Articles of Association, the Board of Management comprises one or several persons. § 5 (5.2) stipulates that the Supervisory Board determines the number of members of the Board of Management. Pursuant to § 84 (2) AktG and § 5 (5.2) of the Articles of Association, the Supervisory Board may appoint a Chair and – pursuant to § 5 (5.2) – a Deputy Chair of the Board of Management.

Consistent with Article 9 of the SE Regulation and § 179 AktG, amendments to the Articles of Association require a resolution by the Annual General Meeting. § 12 (12.2) of the Articles of Association allows the Supervisory Board to make amendments only affecting the respective wording. Furthermore, the Supervisory Board is authorized by resolutions adopted by the Annual General Meetings on June 6, 2013, May 30, 2018, and June 8, 2020 to amend § 4 of the Articles of Association in line with the execution of Authorized Capital 2020/I and in accordance with utilization of Conditional Capital VI/2013, Conditional Capital VIII/2018, and Conditional Capital IX/2020 or upon the expiry of the authorization period governing the utilization of conditional capitals.

Pursuant to § 179 (2) AktG in conjunction with § 15 (15.3) of the Articles of Association, all resolutions adopted by the Annual General Meeting to amend the Articles generally require a simple majority of the votes cast and, unless otherwise mandatorily stipulated in legal requirements, a simple majority of the share capital represented upon the adoption of the resolution. Legal requirements call for larger majorities of three quarters of the share capital represented upon the adoption of the resolution in several cases, such as for any amendment in the object of the company's activities (§ 179 (2) Sentence 2 AktG), for specific capital-related measures, and for the exclusion of subscription rights.

Powers of the Board of Management to issue or buy back shares

Pursuant to § 4 (4.5) of the Articles of Association, STRATEC SE had authorized capital of € 2.4 million as of December 31, 2021:

The Annual General Meeting held on June 8, 2020 created authorized capital (Authorized Capital 2020/I). The Board of Management is authorized, subject to approval by the Supervisory Board, to increase the company's share capital by a total of up to € 2.4 million by issuing new shares in return for contributions in cash and/or in kind on one or several occasions up to June 7, 2025. Shareholders must generally be granted subscription rights. In certain circumstances set out in the Articles of Association, however, the Board of Management is entitled to exclude subscription rights for a total of amount of up to 10% of the share capital existing upon the authorization taking effect or – if lower – of the share capital existing upon the authorization being acted on. To date, no use has been made of this authorization.

Pursuant to § 4 (4.6) and § 4 (4.7) of its Articles of Association, STRATEC SE had conditional capitals amounting to up to € 1,633,250 in total as of December 31, 2021:

Conditional Capital VI/2013 (amounting to up to € 23,250) serves to grant subscription rights (stock option rights) through to June 5, 2018 in accordance with the resolution adopted by the Annual General Meeting on June 6, 2013. The conditional capital increase is only executed to the extent that the bearers of stock options actually exercise their subscription rights. The new shares have profit participation rights from the beginning of the financial year in which they are issued.

Conditional Capital VIII/2018 (amounting to up to € 810,000) serves to grant subscription rights (stock option rights) through to May 29, 2023 in accordance with the resolution adopted by the Annual General Meeting on May 30, 2018. The conditional capital increase is only executed to the extent that the bearers of stock options actually exercise their subscription rights. The new shares have profit participation rights from the beginning of the financial year in which they are issued.

Conditional Capital IX/2020 (amounting to up to € 800,000) serves exclusively to grant new shares to the bearers or creditors of convertible or warrant bonds issued in accordance with the resolution adopted by the Annual General Meeting on June 8, 2020 in the period through to June 7, 2025 by the company or by a domestic or foreign company in which STRATEC SE directly or indirectly holds a majority of the voting rights and capital. Shares are issued in accordance with the aforementioned resolution and with the resolutions to be adopted by the Board of Management and the Supervisory Board in respect of the conversion and option prices to be set in each case. The conditional capital increase is only executed to the extent that the bearers or creditors of the convertible or warrant bonds actually exercise their rights to convert their conversion or option rights into shares in the company or that the conversion obligations relating to such bonds are met. To the extent that they arise due to the exercising of conversion or subscription rights through to the beginning of the company's Annual General Meeting, the new shares have profit participation rights from the beginning of the previous financial year and otherwise from the beginning of the financial year in which they arise due to the exercising of conversion or subscription rights. To date, no use has been made of this authorization.

In the cases governed by law in § 71 of the German Stock Corporation Act (AktG), STRATEC SE is authorized to buy back shares and to sell any shares thereby bought back. Furthermore, by resolution adopted by the Annual General Meeting on June 8, 2020 the company is authorized until June 7, 2025 to acquire treasury stock on one or several occasions and in total or in partial amounts up to a total of 10% of current share capital for every purpose permitted within the statutory limitation and consistent with the conditions stipulated in greater detail in Agenda Item 10 of the Annual General Meeting on June 8, 2020. The authorization may not be drawn on to trade in treasury stock. Together with the treasury stock already acquired and still possessed by the company, the treasury stock acquired may not at any time exceed 10% of the respective share capital. The shares should be usable for one or several of the purposes set out in greater detail in Agenda Item 10 of the Annual General Meeting on June 8, 2020, which in some cases also permit the exclusion of subscription rights. To date, the company has not made any use of the authorization to buy back treasury stock.

Material company agreements subject to change of control as a result of a takeover bid

Individual agreements include change of control provisions that entitle the contractual partner to terminate the agreement in the event of a change of control over the company or that grant other special rights potentially detrimental to the company or make the continuation of the contract dependent on approval by the contractual partner.

Remuneration agreements reached by the company with members of the Board of Management for the event of a takeover bid

Members of the company's Board of Management have special resignation rights in the event of a change of control over the company. They are thus entitled within six months from the change of control taking effect to stand down from their positions with a notice period of three months to the end of the month and to terminate their employment contracts on an exceptional basis with a notice period of three months to the end of the month. Should this special termination right be exercised, then the member's position on the Board of Management and employment relationship both end prematurely upon expiry of the three-month notice period. A change of control pertains when one shareholder holds at least 30% of the shares in the company, whether directly or indirectly (allocation pursuant to German Securities Trading Act [WpHG] and German Securities Takeover Act [WpÜG]), or if the company becomes a dependent company due, for example, to the conclusion of a corporate agreement or to contribution of the company. The member of the Board of Management receives remuneration amounting to 150% of the severance pay cap agreed for mutually agreed premature termination of activity on the Board of Management. This amounts to a maximum of two annual remuneration packages.

F. (GROUP) CORPORATE GOVERNANCE STATEMENT

STRATEC has published the (Group) Corporate Governance Statement required by § 289f and § 315d of the German Commercial Code (HGB) respectively, including the declaration on the German Corporate Governance Code required by § 161 of the German Stock Corporation Act (AktG), together with its Corporate Governance Report in the Investors section of its website (www.stratec.com).

G. NON-FINANCIAL GROUP DECLARATION

Introduction

This Non-Financial Group Declaration has been compiled in accordance with the relevant requirements of the German Commercial Code (HGB) and includes the disclosures required by the European CSR Directive concerning the topics of environmental, employee, and social concerns, respect for human rights, and measures to combat corruption and bribery. Information about STRATEC's business model (The STRATEC Group) and additional non-financial risks relevant to the aspects presented in this report (Opportunity and Risk Report) can be found in the other sections of the Management Report. Furthermore, this Non-Financial Group Declaration for the first time includes the disclosures required by the EU Taxonomy Regulation (Taxonomy Regulation) in respect of taxonomy-eligible economic activities. Unless otherwise indicated, the data provided in this declaration refers to all companies included in the scope of consolidation. The period under report is the 2021 financial year. STRATEC has based its CSR reporting on the Global Reporting Initiative (GRI) standards in the 'Core' application level.

Corporate Social Responsibility

Since its foundation more than 40 years ago, a responsible mindset and sustainable operations have been one of the foundations enabling STRATEC to grow from a small startup into what is now a company with global operations. By implementing sustainability topics in its corporate strategy, STRATEC is accounting for its responsibility towards society. Given the high priority accorded to them, corporate social responsibility topics are managed at the STRATEC Group by the Board of Management, which discusses these and formulates suitable targets with and on behalf of the members of the first management tier and for the management at subsidiaries. Within the Supervisory Board, Dr. Hiller has been appointed as the member responsible for topics relating to corporate social responsibility. Furthermore, in 2021 STRATEC planned an ESG (Environmental Social Governance) Board that will meet several times a year in future. The Board comprises the managers responsible for those company divisions that are especially relevant to sustainability aspects (Supply Chain, Human Resources, Manufacturing, Legal & Compliance, Project Management, Investor Relations & Corporate Communications).

STRATEC divides the topics relevant to corporate social responsibility into three dimensions. Based on a materiality analysis, the individual matters requiring report and key performance indicators have been derived for each dimension. The dimensions relevant to STRATEC are:

ECONOMIC OPERATIONS
for long-term growth • ECOLOGICAL RESPONSIBILITY for tomorrow's world
SOCIAL RESPONSIBILITY towards people and society

Economic operations

We see economic operations as a core element of our company's long-term business success. Our strategic objective is to generate growth that is sustainable, ecological, socially responsible, and permanently higher than the sector average. At the same time, as an innovation leader STRATEC aims to make a valuable contribution towards further technological advances in various areas of life sciences and diagnostics.

Ecological responsibility

STRATEC has implemented extensive measures enabling it to meet its ecological responsibility. STRATEC's business activities are performed in compliance with current environmental legislation, local laws and ordinances, and recommended guidelines.

The company ensures that resources are put to economical use in all relevant processes – from forward-looking, resource-efficient product design, via measures to reduce greenhouse gas emissions, through to environmentally-friendly waste disposal. STRATEC's objective here is to detect savings potential and render this measurable for the purpose of assessing target achievement by working with defined key figures.

Social responsibility

STRATEC's success is driven by its employees with their individual skills, wealth of ideas, and outstanding motivation. It is their work and the resultant innovations that facilitate the company's successful and sustainable development. As a group of companies with operations worldwide and around 1,400 employees (including temporary staff and trainees), STRATEC is aware of its social and ecological responsibilities.

Stakeholder engagement

STRATEC defines its stakeholders as those persons, companies, institutions, and interest groups that may influence the company's performance or themselves be influenced by its decisions. These include customers, employees, shareholders, lenders, suppliers, other business partners, local authorities/residents, the media, authorities, associations, research institutions, and lawmakers.

STRATEC attaches great importance to remaining regularly in dialog with its stakeholders. Only this way is it possible to identify the interests of the respective stakeholders and address important concerns. This dialog with stakeholders is conducted, for example, by way of active investor relations and press activities, specialist fairs, social media, regional and national newspapers, membership in industry associations, employee events, questionnaires, and endowed professorships at and cooperations with universities.

Signatory to the UN Global Compact

STRATEC is a signatory to the UN Global Compact of the United Nations, the world's largest initiative for sustainable and responsible corporate governance. As a signatory, STRATEC is committed to upholding the ten principles of the UN Global Compact, which include the topics of human rights, work, environment, and combating corruption. Furthermore, STRATEC supports the UN's 2030 Agenda for Sustainable Development and the 17 associated goals (Sustainable Development Goals). The activities and information presented in this report have therefore been designated with one of the following symbols in cases where they are significant to, or associated with one of the 17 Sustainable Development Goals.

Producer of medical products

The right to a standard of living that ensures good health and well-being is a fundamental human right under the Universal Declaration of Human Rights of the United Nations. As a designer and manufacturer of automation solutions for in-vitro diagnostics, STRATEC supports its partners in their mission to improve the health of people around the world. Providing innovative, reliable, and high-quality healthcare products is therefore part of the core business at the STRATEC Group. STRATEC accounts for this responsibility with its comprehensive and certified quality management system. Details about the quality management system can be found in the preceding sections of this management report.

Environmental concerns

Ecological responsibility enjoys high priority at the STRATEC Group and forms a fundamental aspect of our quality management – from forward-looking resource-efficient product design, via measures to avoid and offset greenhouse gas emissions, through to environmentally-friendly waste disposal.

Key risks to the company's own business activities as a result of environmental concerns particularly include interruptions to production or disruptions in the supply chain due to increasing numbers of extreme weather events in connection with global climate change.

Climate protection and emissions

One of the greatest risks and challenges of the 21st century is the further advance of climate change and the resultant implications for current and future generations. Examples worth mentioning in this respect are rising sea levels, extreme heatwaves, drought, and the resultant loss of harvests and water shortages. STRATEC therefore attaches great importance to protecting the climate and the associated need to cut greenhouse gas emissions.

STRATEC records, analyzes, and manages its greenhouse gas emissions on a group-wide basis. It bases its recording of greenhouse gas emissions on the internationally recognized Greenhouse Gas Protocol (GHG) and therefore breaks its emissions down into the following three categories:

Scope 1: Direct emissions from proprietary sources or sources controlled by STRATEC. At STRATEC, this category includes emissions in connection with building heating and its vehicle pool.

Scope 2: Indirect emissions resulting from external energy procurement. At STRATEC, this involves the procurement of electricity.

Scope 3: Other emissions sources that are not within the company's control but which are associated with its business activities. In this category, STRATEC records emissions arising in connection with purchased goods, upstream logistics, the upstream energy chain, work-related flights, waste disposal, and its employees' journeys to and from work.

STRATEC is committed to the climate target in the Paris Climate Agreement, namely to limit global warming to significantly less than 2 °C. Consistent with this commitment, the company's climate target is based on the internationally recognized requirements of the Science-Based Targets initiative. Excluding offsetting measures, the STRATEC Group thus aims to reduce its absolute greenhouse gas emissions (Scopes 1 and 2) by 30% by 2030 compared with 2019.

One key aspect of the company's efforts to achieve this emissions target involves procuring electricity from renewable sources. At its Birkenfeld location (DE), the company has generated green electricity with photovoltaics systems since 2011 already. In the 2021 financial year, the nominal capacity here was significantly increased by installing a further photovoltaics system with a capacity of 200 kilowatt peak (KWp). Overall, solar modules with nominal capacities of 330 kWp are now installed at the Birkenfeld location. Operations with the newly installed system are scheduled to begin in 2022. At the Beringen location (CH), green electricity has been supplied since 2016 by a photovoltaics system with a nominal capacity of 95 kWp. These systems generated a total of 206,900 kWh of green electricity in the 2021 financial year. Of this, the proportion of own use amounted to around 35% in the 2021 financial year. Moreover, in the 2020 financial year the Group already converted nearly all of its electricity supply to CO2-neutral green electricity from alternative energy sources (mainly wind power and hydroelectricity).

Not only that, since 2020 STRATEC has offset all of its unavoidable Scope 1 and 2 emissions by supporting certified climate protection projects. In selecting the climate projects to support, the company strictly ensures that these meet high, certified standards for climate protection projects, such as the Gold Standard or the Verified Carbon Standard (VCS) and the Climate, Community and Biodiversity Standards (CCBS).

Alongside the procurement of green electricity, another aspect that plays a key role in the STRATEC Group's efforts to reduce its CO2 emissions in absolute terms is that of building energy efficiency. In planning the new building and extensions at the company's headquarters in Birkenfeld (construction period: 2018 to 2020), for example, STRATEC ensured optimized exterior insulation and energy-efficient light systems. Furthermore, windows with enhanced heat insulation and a central air-conditioning system with a supply air heat exchanger were installed. Moreover, an energy audit was performed in the year under report at the production location in Beringen (Switzerland) in order to detect and implement potential improvements. The next regular energy audit at the company's headquarters in Birkenfeld is scheduled for the 2023 financial year.

In addition, in the 2021 financial year STRATEC drew up a concept for gradually electrifying the company vehicle pool at the company's headquarters in Birkenfeld and decided to significantly expand the charging infrastructure. The aim is to increase the share of partly and fully electric vehicles from its current level of 20% to 50% by 2024 and to ensure that the share of fully electric vehicles is as high as possible.

Energy consumption1

	2021	2020	Change
Gas consumption (MWh)	2,767.2	2,863.7	-3.4%
per 1,000 employees2	1,995.1	2,179.4	-8.5%
Electricity consumption (MWh)	6,069.0	5,081.5	+19.4%
per 1,000 employees2	4,375.7	3,867.2	+13.1%
Total (MWh)	8,836.2	7,945.2	+11.2%
per 1,000 employees2	6,370.8	6,046.6	+5.4%

1 Data partly based on estimates, as not all data was yet available for some subsidiaries at the reporting date due to the respective invoicing periods

2 Based on average number of employees in financial year including temporary staff and trainees

The STRATEC Group consumed energy totaling 8,836.2 MWh in connection with building heating and electricity in the financial year under report. Its energy consumption therefore rose yearon-year by 11.2%, a development which was due among other factors to higher electricity consumption resulting from increased production volumes in the Smart Consumables business unit.

Scope 1 and scope 2 emissions in tonnes (CO2 equivalents)1

	2021	2020	Change
Scope 1
Gas consumption • of which offset • per 1,000 employees2 (excluding offsetting)	581.1 581.1 419.0	578.9 578.9 440.5	+0.4% – -4.9%
Vehicle pool • of which offset • per 1,000 employees2 (excluding offsetting)	181.9 181.9 131.1	214.2 214.2 163.0	-15.1% – -19.6%
Scope 2
Electricity consumption • of which offset • per 1,000 employees2 (excluding offsetting)	31.0 31.0 22.4	20.6 20.6 15.7	+50.5% – +42.7%
Total Scope 1 and 2 • of which offset • per 1,000 employees2 (excluding offsetting)	794.0 794.0 572.5	813.7 813.7 619.3	-2.4% – -7.6%
Total Scope 1 and 2 (excluding offsetting)	0.0	0.0	–

1 Data partly based on estimates, as not all data was yet available for some

subsidiaries at the reporting date due to the respective invoicing periods 2 Based on average number of employees in financial year including temporary

staff and trainees

Thanks in particular to the conversion to electricity from renewable energies (photovoltaics, wind power, and hydroelectricity) at nearly all of the Group, since the 2019 financial year the STRATEC Group has managed to reduce its total Scope 1 and Scope 2 emissions excluding offsetting measures by 63.0% to 794.0 tonnes of CO2 equivalents. Overall, the STRATEC Group offset 1,800 tonnes of CO2 equivalents with certified climate protection projects in the financial year under report. From this overall budget, corresponding sub-volumes were allocated to Scope 1 and Scope 2 emissions, meaning that these too were fully offset in the 2021 financial year. The allocation of the remaining budget of offset CO2 equivalents to the individual sources of Scope 3 emissions can be seen in the schedule below.

Three-year comparison: total scope 1 and 2 emissions in tonnes (CO2 equivalents)

Scope 3 emissions in tonnes (CO2 equivalents)1

	2021	2020	Change
Purchased goods2 • of which offset • per € 1,000,000 sales	3,221.6 573.8	2,865.7 573.1	+12.4% –
(excluding offsetting)	11.2	11.5	-2.6%
Upstream logistics • of which offset • per € 1,000,000 sales	1,434.8 255.5	481.9 96.4	+197.7% –
(excluding offsetting)	5.0	1.9	+163.2%
Upstream energy chain • of which offset • per 1,000 employees4	284.2 50.6	272.2 54.4	+4.4% –
(excluding offsetting)	204.9	207.2	-1.1%
Employee work travel • of which offset • per 1,000 employees4	422.6 75.3	301.7 60.3	+40.1% –
(excluding offsetting)	304.7	229.6	+32.7%
Business flights3 • of which offset • per 1,000 employees4	278.1 49.5	214.5 42.9	+29.7% –
(excluding offsetting)	200.5	163.2	+22.9%
Waste volumes • of which offset • per 1,000 employees4	7.1 1.3	5.1 1.0	+39.2% –
(excluding offsetting)	5.1	3.9	+30.8%
Total Scope 3 • of which offset • per € 1,000,000 sales	5,648.4 1,006.0	4,141.1 828.2	+36.4% –
(excluding offsetting) • per 1,000 employees4	19.7	16.6	+18.7%
(excluding offsetting)	4,072.4	3,151.5	+29.2%
Total Scope 3 (excluding offsetting)	4,642.4	3,312.9	+29.2%

1 When recording data and calculating Scope 3 emissions, reference was made to estimates and assumptions. In calculating Scope 3 emissions, the external service provider commissioned for this purpose referred, among other sources, to numerous internationally recognized databases, such as UBA (Probas) 2021, DEFRA 2021, Ecoinvent 3.8.1, GEMIS 5.0, International Energy Agency Data Services.

² The figure stated accounts for circuit boards, printed circuit boards, injection-molded parts, metal or electrical modules (motors, pumps, valves), and plastic granulates from the top 5 respective suppliers. The figure stated does not include items such as welded constructions and casings.

³ The figure stated includes flights for the headquarters in Birkenfeld and the locations in Budapest and Anif.

⁴ Based on average number of employees in financial year including temporary staff and trainees

The STRATEC Group's Scope 3 emissions increased by 36.4% to 5,648.4 tonnes of CO2 equivalents in the 2021 financial year. This growth was due in particular to increased volumes of purchased goods and upstream logistics. The rise in emissions from upstream products was largely due to higher production volumes in the financial year under report. The growth in logistics emissions was caused by a high share of upstream products imported from the US due to product mix considerations. Furthermore, due to significant bottlenecks in container ship transport, greater use had to be made of more CO2-intensive air freight solutions.

In the 2021 financial year, 1,006.0 tonnes of CO2 equivalents, or around 18% of Scope 3 emissions, were offset by certified climate protection projects.

Waste and recycling

STRATEC aims to ensure that resources are treated as sparingly as possible and to use a high share of recyclable materials and packaging.

Careful and correct waste separation is a matter of course for STRATEC, as is the suitable disposal of hazardous goods.

STRATEC distinguishes between several categories of waste to facilitate classification of their environmental relevance. Since 2015, uncritical waste has been separated into municipal waste, cardboard packaging/paper, metal, and timber waste. Waste materials with electronic components, chemicals, and oils are disposed of separately, as is laboratory waste, such as blood samples. For the disposal and recycling of its waste, STRATEC works together closely with specialist waste disposal companies.

In its supply chain as well, STRATEC attaches great value to avoiding waste by working with recyclable materials. To this end, STRATEC has obliged its suppliers to use recyclable packaging. Any exceptions to this requirement have to be explicitly approved by the company. STRATEC also makes use of reusable shuttle containers which are returned to suppliers for renewed use following receipt of a delivery.

Waste volumes in year-on-year comparison in tonnes1

	2021	2020	Change
Waste volumes	233.4	220.3	+5.9%
per 1,000 employees2	168.3	167.7	+0.4%
per € 1,000,000 sales	0.81	0.88	-8.0%
of which non-hazardous waste (municipal waste, paper and cardboard, metals, timber)	165.4	159.9	+3.4%
of which hazardous waste (electronics, laboratory waste, waste oil, chemicals, other (e.g. fluorescent lamps))	67.9	60.4	+12.4%

1 Data partly based on estimates, as not all data was yet available for some subsidiaries at the reporting date due to the respective invoicing periods

2 Based on average number of employees in financial year including temporary staff and trainees

Group-wide waste volumes rose year-on-year by 5.9% to 223.4 tonnes in the 2021 financial year. This increase was due in particular to the significant growth in production volumes in the year under report.

Water and wastewater

STRATEC's production sites (Birkenfeld, Beringen, Anif, Budapest) are all located in regions that according to the Aqueduct Water Risk Atlas of the World Resources Institute do not constitute risk areas (Overall Water Risk: Low [0-1]). Furthermore, apart from the production site in Hungary, STRATEC's production processes only use a relatively low volume of water. Moreover, this water does not remain in the finished products. The volume of wastewater thus corresponds to the volume of water used at all locations with the exception here too of the Hungarian location, which fills a notable volume of reagents and other liquids.

Group-wide water consumption volumes per 1,000 employees amounted to 11,433 m³ in the 2021 financial year and were thus at around the previous year's level (11,363 m3 ).

Water consumption (fresh water) in cubic meters1

	2021	2020	Change
Water consumption	15,858	14,931	+6.2%
per 1,000 employees2	11,433	11,363	+0.6%

1 Data partly based on estimates, as not all data was yet available for some subsidiaries at the reporting date due to the respective invoicing periods

2 Based on average number of employees in financial year including temporary staff and trainees

Product-related environmental protection

During appliance development, STRATEC already ensures that its products have a lean and resource-efficient design scheme and that they are made of forward-looking, recyclable materials.

• Smart design reduces material input

When developing product designs, resource input is minimized by working with light construction and limiting the design scheme to the most important components. This has the beneficial side-effect of reducing the cost of materials.

• Recyclable materials

When using stainless steel and aluminum, STRATEC avoids coatings wherever possible, as these mostly involve harmful or critical substances. STRATEC frequently uses thermoplastics as materials due to their good properties in terms of thermal usability. Due to potential contamination, these plastics may not be recycled.

• Development of consumables

When developing consumables, such as pipette tips, reagent vessels or reaction cuvettes, STRATEC generally only uses thermoplastics with good thermal properties and only containing a minimum share of contaminants. Due to potential contamination, however, these plastics may also not be recycled.

• Development of flat modules

In developing flat modules (printed circuit board assemblies – PCBAs), STRATEC ensures that the PCB surface area selected is very small and that the circuit design is optimized in such a way that only two or four copper layers are required. Furthermore, to avoid separate assembly printing the desired information is included in the copper layer. This increases efficiency in module production, reduces the use of machinery, accelerates the galvanic processes, and thus results in a more sustainable approach to using raw materials.

• Recycling of used consumables

When disposing of used consumables, STRATEC ensures that liquid wastes are strictly separated in order to optimize incineration. For all appliances, the residual liquids are sucked out before the plastic components are disposed of as solid waste.

When selecting materials and technologies and procuring components, STRATEC ensures strict compliance with EU Directive 2011/65/EU. This RoHS (Restriction of Hazardous Substances) Directive serves to limit the use of specific hazardous substances in electrical and electronics appliances.

In designing and manufacturing appliances, STRATEC has complied with the necessary substance restrictions since the entry into force of the previous directive 2002/95/EC, which has now been replaced by the new requirements. This means that STRATEC's products already conformed to the RoHS Directive even before this required mandatory application in in-vitro diagnostics. STRATEC identifies further materials limitations in the context of 2011/65/EU, such as those published in the form of delegated legislation, and factors these into its product design, change management, and procurement processes.

STRATEC pursues an analogous proactive approach to materials compliance with regard to European Regulation No. 1907/2006 (REACH Regulation; Registration, Evaluation, Authorisation and Restriction of Chemicals). This way, the company ensures that the materials used to construct appliances do not pose any risk to the people processing, using, or disposing of them and also safeguards the long-term approval, availability, and usability of the appliances on the market. The main components of the products manufactured by STRATEC include aluminum, steel, and semiconductors.

Employee concerns

STRATEC's employees – with their individual skills, wealth of ideas, and outstanding motivation – are the source of the company's success. STRATEC therefore attaches great importance to personnel development, occupational health and safety, and health-related topics. STRATEC has set itself the long-term objective of continually extending its personnel development opportunities and permanently enhancing its occupational health and safety and health promotion activities. A further self-evident aspect of STRATEC's approach involves positioning the company in the labor market as an open, tolerant, and flexible company, and thus as an attractive employer.

Attractiveness as employer and measures to attract employees

STRATEC is making every effort to position itself as an attractive employer both for its existing and for its future employees. One key task for human resources therefore involves offering STRATEC's employees an interesting and attractive working environment. The tools we draw on to evaluate the success of various measures and identify potential improvements include performing surveys to assess our employees' satisfaction. Due to the COVID-19 pandemic, however, these could unfortunately only be held at highly irregular intervals.

One way in which we act early to present STRATEC as an attractive employer to young people is by taking part in careers' fairs to raise awareness of the wide variety of activities on offer at the company. Furthermore, STRATEC offers training posts to young people in a variety of areas and employs students in the context of internships, student research projects, and dual training and study programs. Diverse cooperations with universities also serve to arouse students' interest in STRATEC as a potential employer at an early stage. One example worth mentioning here is the close cooperation with Pforzheim University, where STRATEC co-finances an endowed professorship for medical technology. STRATEC also supports a number of student competitions in robotics, especially in the field of software development, on local and international level.

With 187 new hires, the STRATEC Group successfully attracted a large number of highly qualified employees once again in the 2021 financial year (previous year: 160). Women accounted for 37.4% of the employees newly hired in 2021 (previous year: 31.2%). A further criterion referred to by STRATEC to assess the attractiveness of its working environment is the personnel turnover rate. Excluding employees whose temporary contracts expired and those entering retirement, this key figure amounted to 9.7% in 2021, as against 4.9% in the previous year. Among other factors, this increase was due to catch-up effects after the very low level reported for the previous year on account of the pandemic.

New hires

	2021	2020
Total new hires	187	160
of which Women	70	50
of which Men	117	110
of which Employees aged below 30	76	56
of which Employees aged between 30 and 50	81	96
of which Employees aged 50 and older	30	8

Personnel turnover rate

	2021	2020
Personnel turnover rate1	9.7%	4.9%

1 Excluding employees whose temporary contracts expired and employees entering retirement

Further training

The wealth of new ideas and willingness to perform shown by our employees are the driving force for developing new, innovative technologies. STRATEC therefore accords high priority to promoting its employees. The company offers its employees individually tailored further development programs which include training for all employees on general topics as well as training courses tailored to the functions and tasks performed in individual departments. Managers also receive a variety of training on personnel management at regular intervals.

As well as being recommended or instructed to take part in training by their managers, employees may themselves also apply to participate in specific training sessions or courses. Further training is also a fixed item at the regular feedback meetings and annual appraisals between employees and their managers.

In the 2021 financial year, STRATEC once again created various new employee programs while also further developing existing programs. In 2021, for example, the company designed a new talent management and next-generation management program on a uniform group-wide basis.

Occupational health and safety

Occupational health and safety is one key element of STRATEC's responsibility towards its employees and part of its Corporate Compliance Policy. The company's top safety objective is to ensure a working environment that is free of injury and illness, and one that benefits all employees, suppliers, partners, and customers.

STRATEC achieves this by ensuring forward-looking occupational health and safety management. To this end, the company has appointed a safety engineer who is responsible for the topic of occupational safety and a company healthcare management officer. The company regularly offers special health protection programs for first-aiders and evacuation assistants, as well as occupational health and training sessions. Work-related accidents are recorded and accident logbook entries are documented to enable suitable measures to be taken to further enhance workplace safety.

The Corporate Compliance Policy obliges all STRATEC Group employees to adhere to the occupational health and safety guidelines and adopt the company's basic approach to these areas. Employees are also required to immediately report any potential safety risks.

In terms of health promotion, the company also implements preventative measures, programs, and courses to the extent permitted by the pandemic. These include voluntary annual eye checks, various sports programs, advice on healthy nutrition, exercise during the lunchbreak, and ways to relax and cope with stress. Not only that, medical checks tailored to employees' specific workplaces are also offered, as are special vaccinations for employees (COVID-19 and influenza).

One factor of overriding importance once again in 2021 was to make sure that our employees were protected during the COVID-19 pandemic. STRATEC introduced suitable measures at a very early stage of developments to reduce as far as possible the infection risks faced by employees in connection with their work activities. Among others, these included introducing separate production shifts, strict travel restrictions, extending flexible working hours regulations, and comprehensive use of mobile work.

Work-related accidents

	2021	2020
Total work-related accidents	12	20
per 1,000 employees3	8.7	15.2
of which accidents leading to absence on day after	7	7
per 1,000 employees3	5.0	5.3
Lost time injury frequency (LTIF) rate1	2.5	2.8
of which severe work-related accidents2	0	0

1 Number of work-related accidents leading to absence on day after per million

working hours (including temporary staff and trainees) 2 Work-related accidents in which the employee does not regain his/her previous

state of health within six months

3 Based on average number of employees in financial year including temporary staff and trainees

The total number of work-related accidents leading to absence on the day after the accident per 1,000 employees showed a slight year-on-year reduction from 5.3 to 5.0 in 2021 and still remains at a low level. The resultant accident frequency rate amounts to 2.5 per million working hours. No severe work-related accidents were reported in the 2021 financial year or the previous year. To maintain a low number accidents in future as well, individual accidents are analyzed and suitable measures taken to minimize the risk of such accidents recurring.

Sickness quota

	2021	2020
Sickness quota in %	3.8	3.5

The sickness quota for the STRATEC Group, i.e. the number of working days missed due to sickness as a proportion of planned working time, remained relatively stable compared with the previous year and amounted to 3.8% in the 2021 financial year. The development in the sickness quota is particularly dependent on seasonal factors, such as the varying intensity, frequency, and duration of any influenza outbreaks.

Working hour regulations, family and work

The STRATEC Group offers its employees flexible working hours and flexi-time arrangements. Part-time models are also available and particularly benefit employees with children. This makes it easier for them to return to work and may lead to full-time employment at a later date. Throughout the STRATEC Group, employees who find themselves in unforeseeable situations are supported by being granted individual working hour models. During the COVID-19 pandemic, extended regulations were introduced for employees with children to provide them with flexible working hours and facilitate mobile work. This way, they were assisted in meeting their work and family commitments at times when childcare services were not always available. In the 2021 financial year, a total of 20 female and 31 male employees took parental leave or comparable periods of leave.

Diversity

Innovation driven by diversity – STRATEC views a diverse workforce as a great source of added value. A wide range of personal and cultural diversity is seen as a force driving innovation and enabling the company to respond more closely and swiftly to technological changes and customers' needs. Maintaining an open and tolerant corporate culture is therefore a matter of course for STRATEC. It also makes it easier for the company to attract highly qualified employees, particularly at times when specialists are in short supply.

STRATEC treats all employees equally and provides them with the same career opportunities irrespective of their age, disability, chronic illnesses, ethnic origin, religious affiliation, gender, sexual identity, or of any other reasons for potential discrimination. The Corporate Compliance Policy obliges all employees worldwide to behave with respect and in compliance with legal requirements towards their employees, colleagues, business partners, customers, and the authorities.

In practice, diversity is lived on a top-down basis

STRATEC is aware that its managers have a key role to play in promoting diversity and inclusion. In view of this, diversity is actively promoted in practice by STRATEC's Board of Management.

One key focus here as well is on raising the share of management positions held by women. To this end, in 2020 the company set targets for the share of women on the first and second management tiers below the Board of Management at the parent company of the STRATEC Group. The share of women in the first management tier is to be increased to 25.0% by December 31, 2024. As of December 31, 2021, women accounted for 25.0% of managers in the first management tier. For the second management tier below the Board of Management, the company has set a target of 20.0% to be achieved by December 31, 2024; this target had not yet been met as of December 31, 2021.

To further raise the share of women in management tiers, the company is continually taking additional measures. In 2019, for example, a training program aimed at raising awareness for diversity and inclusion among all of the Group's managers was held for members of the first and second management tiers. The rollout of further diversity and inclusion training for the human resources departments at subsidiaries, which was already put back from 2020 to 2021, was further postponed due to the ongoing COVID-19 pandemic.

Percentage of female employees

	2021	2020
Female employees in %	30.7	29.6

The female share of the STRATEC Group's total workforce rose from 29.6% in the previous year to 30.7% in the 2021 financial year.

With regard to the diversity concept for the composition of the Board of Management and Supervisory Board, reference is made to the Corporate Governance Statement, which is available at the company's website at www.stratec.com > Investors > Corporate Governance.

Social commitment

As a company with global operations but regional roots, the STRATEC Group is aware of its social responsibility on both global and local levels. STRATEC therefore supports both regional and global charities, healthcare and education organizations, conservation organizations, and associations. In 2021, STRATEC supported these kinds of organizations with a total of € 131,772. Organizations worth mentioning here include: Ärzte ohne Grenzen e.V., Plan International, Erde der Kinder e.V., Kinderhospiz Sterneninsel e.V., Deutsches Rotes Kreuz e.V., Deutsche Krebshilfe, DKMS, Familienherberge Lebensweg, Flutopferhilfe Aktionsbündnis Katastrophenhilfe, and Pforzheim University.

Furthermore, STRATEC supports its employees in their commitment to charitable organizations or voluntary activities. The company offers leave to employees for the time they need to donate blood or thrombocytes, as well as for training sessions and deployment at aid organizations.

Not only that, the company maintains an open and constructive dialog with a wide variety of stakeholders in the fields of politics, business, science, and society at all of our locations. This dialog is intended to improve the competitiveness of the individual regions and to inform local populations about activities and developments which affect them. To this end, and also with the aim of reducing transport-related CO2 emissions, STRATEC is also pursuing the objective of increasingly working with suppliers in its respective regions.

Donations and benefit payments in €

	2021	2020
Donations / benefit payments	131,772	122,289

Corporate Compliance and measures to combat corruption and bribery

Any incidence of corruption, bribery or other illegal actions within the STRATEC Group may have severe implications for the company's reputation and for its existing and future business relationships. Corruption also has enormously negative implications for society as a whole, as well as for political integrity, and general prosperity.

Measures to prevent corruption, bribery, and any other violations of the law therefore form an integral component of STRATEC's understanding of compliance and of its compliance management system. At STRATEC, compliance-related measures are summarized in its Corporate Compliance Policy, which is binding for all employees and is communicated in regular mandatory training. In this respect, compliance with a variety of legal systems and statutory regulations is just as important as adherence to ethical principles. Core elements of STRATEC's Corporate Compliance Policy include the following:

A basic explanation of STRATEC's understanding of compliance, as well as an explanation of the compliance management system
Preventing corruption, i.e. upholding the integrity necessary in business dealings, and in particular the prohibition of any illegitimate exercising of influence
Information and assistance for compliance with all requirements set out by the law and the respective authorities, as well as with internal requirements
Assistance to avoid conflicts of interest
The obligation to provide a fair and respectful working environment at the company
Assistance to avoid conflicts of interest between private and business matters
Compliance with the applicable legal requirements in Germany and abroad
Copyright and license conformity
Regular training of employees and information material on the intranet and on information boards
Respectful and professional conduct at the company
Opportunities to report suspected breaches of compliance.

The Corporate Compliance Policy can be viewed on the company's website at www.stratec.com/company/about-us/ corporate-compliance.

STRATEC expects all of its employees to adhere to compliance requirements and to ensure that all business decisions and actions taken in their areas of responsibility are consistent with relevant legal requirements and the Corporate Compliance Policy and also serve the company's best interests. To this end, soon after they join the company all new employees are trained in person by the Global Compliance Officer or the local compliance officer with regard to the Corporate Compliance Policy. Training is provided to all full-time and part-time employees, as well as to all interns, trainees, and freelance employees at all locations. Furthermore, managers are obliged to provide compliance-related training to their employees once a year. To detect and remedy any omissions on the part of the managers at an early stage, the provision of this training is monitored and documented.

STRATEC's compliance system is subject to permanent enhancement and optimization. To this end, the Compliance Officer is provided with regular training by external service providers. Furthermore, one-to-one meetings are held at regular intervals between all managers and the relevant compliance officer. These talks are intended to identify any potential risks at an early stage, continually raise awareness of compliance among the management teams, and address any current topics. This enables STRATEC's management teams to detect specific risks, avoid risks by analyzing situations and developing suitable strategies, comply with operational imperatives, and take any necessary measures. The Compliance Officer reports the findings of his or her talks with managers directly to the Board of Management. The Board of Management discharges its reporting duties towards the Supervisory Board.

An anonymous whistleblowing system enabling employees or other parties to notify the company of any breaches of regulations or legal requirements has been in place since 2017.

Respecting human rights

STRATEC is committed to the Human Rights' Charter of the United Nations and is a signatory of the UN Global Compact. It provides employees throughout the Group with a high degree of social security and performance-based remuneration. The group-wide Corporate Compliance Policy ensures that all employees behave with respect and in compliance with legal requirements within the STRATEC Group and in their dealings with employees, colleagues, business partners, customers, and the authorities. The company's approach towards human rights and employee rights is laid down in guidelines that are mandatory throughout the Group.

Even though STRATEC's suppliers predominantly operate in western industrial economies, it is not possible to fully exclude the risk of human rights' breaches, particular in the upstream supply chain. STRATEC therefore expects its suppliers to meet the same standards in terms of safeguarding and complying with human rights.

To this end, all suppliers relevant to the company's production activities have been contractually obliged to abide by STRATEC's generally valid Code of Conduct, which is based on the guidelines of the UN Global Compact, the conventions of the ILO, the UN Declaration of Universal Human Rights and Children's Rights, and the OECD Guidelines for Multinational Enterprises. Compliance with the Code of Conduct is also reviewed in the context of regular audits. Furthermore, sanction list, watch list and blacklist screenings are performed whenever contracts are initiated with new business partners.

No breaches of human rights were identified within the STRATEC Group or its supply chain in the 2021 financial year or the preceding financial years.

Reporting pursuant to eu taxonomy regulation

One key objective of the EU's Action Plan on Sustainable Finance is to steer capital flows towards sustainable investments. Against this backdrop, Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, and amending Regulation (EU) 2019/2088 (hereinafter 'Taxonomy Regulation') has now taken effect. This provides a uniform and legally binding system of classification to determine which economic activities in the EU are to be considered as 'environmentally sustainable'. The results of this classification have to be reported annually on a company-specific basis.

Article 9 of the Taxonomy Regulation lists the following six environmental objectives:

Climate change mitigation
Climate change adaptation
Sustainable use and protection of water and marine resources
Transition to a circular economy
Pollution prevention and control
Protection and restoration of biodiversity and ecosystems.

For two of the environmental objectives (climate change mitigation and climate change adaptation), the EU has currently published requirements governing sustainable economic activities as defined in the EU Taxonomy Regulation.

In classifying an economic activity as 'environmentally sustainable' as defined in the EU Taxonomy Regulation, a distinction has to be made between 'taxonomy eligibility' and 'taxonomy alignment'. The first step involves checking whether the respective economic activity is described in the Delegated Regulation and thus taxonomy eligible. Only taxonomy-eligible economic activities may count as 'environmentally sustainable', and then only if specific criteria are met. Accordingly, the second step involves evaluating whether the specific economic activity satisfies the listed technical screening criteria and whether minimum social safeguards are complied with; this is a prerequisite for classifying an economic activity as taxonomy-aligned.

For the 2021 year under report, it is only necessary to disclose the shares of turnover (sales), capital expenditure (CapEx), and operational expenditure (OpEX) that are attributable to taxonomy-eligible and taxonomy-non-eligible economic activities.

The amounts used to calculate the turnover, CapEx, and OpEx key figures are based on the figures reported in the consolidated financial statements. This calculation basically includes all fully and proportionately consolidated group companies.

As a result of § 315b in conjunction with § 289b (1) of the German Commercial Code (HGB) and Article 8 of the Taxonomy Regulation, STRATEC is obliged to apply the regulatory provisions of the Taxonomy Regulation. Pursuant to § 315e (1) HGB, the consolidated financial statements of STRATEC as of 31 December 2021 have been prepared in accordance with IFRS. The IFRS consolidated financial statements therefore serve as a basis for calculating the following figures.

Turnover KPI

The turnover key performance indicator presents the turnover (sales) from taxonomy-eligible economic activities in a given financial year as a proportion of the total sales in this financial year.

The total sales of € 287,335k in the 2021 financial year provide the denominator for the turnover KPI and are presented in the consolidated income statement.

The sales reported in STRATEC's consolidated income statement are investigated across all group companies to ascertain whether they were generated with taxonomy-eligible economic activities pursuant to Annex I (Substantial Contribution to Climate Change Mitigation) and Annex II (Substantial Contribution to Climate Change Adaptation) of Delegated Regulation 2021/2139 to the Taxonomy Regulation. Based on detailed analysis of the constituent items, the respective sales are allocated to taxonomy-eligible economic activities.

Based on the current status of the regulatory framework, no relevant economic activities could be identified for STRATEC in the Delegated Regulations. As a result, no taxonomyeligible turnover was identified.

Turnover key performance indicator (in € 000s)

	2021
Taxonomy-eligible activities	0
Taxonomy-non-eligible activities	287,335
Total	287,335
Share of taxonomy-eligible activities	0%

CapEx KPI

Pursuant to the Delegated Regulation (EU) 2021/2178 Annex I No. 1.1.2.2 to the Taxonomy Regulation, the CapEx key performance indicator presents the proportion of the capital expenditure of an economic activity that is already associated with a taxonomy-eligible economic activity, is part of a credible plan to extend or reach an environmentally sustainable economy activity, or refers to the acquisition of products and services from a taxonomy-eligible economic activity.

The calculation of capital expenditure is based on additions to property, plant and equipment, intangible assets, and IFRS 16 right-of-use assets before depreciation, amortization, and any remeasurements for the respective financial year and excluding changes in fair values. Total capital expenditure pursuant to Delegated Regulation (EU) 2021/2178 Annex I No. 1.1.2.1 to the Taxonomy Regulation amounts to € 20,860k (see relevant disclosures in the Group Asset Schedule).

Based on a project description of the additions, these items are analyzed to ascertain their taxonomy eligibility and compared with Annex I (Substantial Contribution to Climate Change Mitigation) and Annex II (Substantial Contribution to Climate Change Adaptation) of Delegated Regulation (EU) 2021/2139 to the Taxonomy Regulation. The total volume of additions reflecting taxonomy-eligible capital expenditure forms the nominator for the CapEx KPI. At € 1,125k, these additions relate to the acquisition of taxonomy-eligible services and products in the fields of buildings, vehicle pool management, and photovoltaics systems.

Capex kpi (in € 000s)

	2021
Taxonomy-eligible activities	1,125
Taxonomy-non-eligible activities	19,735
Total	20,860
Share of taxonomy-eligible activities	5%

OpEx KPI

The OpEx key performance indicator presents the proportion of operational expenditure as defined in the EU Taxonomy Regulation that is associated with taxonomy-eligible economic activities, with a CapEx plan as outlined above, or with the acquisition of products from a taxonomy-eligible economic activity.

The calculation of this KPI is based on total expenditure on direct, non-capitalized research and development expenses, building renovation measures, short-term leases, and maintenance and repairs. Total operational expenditure meeting the definition in Delegated Regulation (EU) 2021/2178 Annex I No. 1.1.3.1 to the Taxonomy Regulation amounts to € 10,261k.

Pursuant to Delegated Regulation (EU) 2021/2178 Annex I No. 1.1.3.2 to the Taxonomy Regulation, the nominator of the OpEx KPI is obtained by analyzing the taxonomy eligibility of the expenditure recognized in the aforementioned accounts. Expenses of € 31k for building management measures have been classified as taxonomy eligible.

When calculating the aforementioned key performance indicators, various audit steps were taken to avoid any double counting of economic activities. These included documenting data generation and safeguarding the reconcilability of the figures with the other financial information.

More far-reaching analyses to meet specific criteria in respect of the identified economic activities will be necessary from the 2022 financial year. Alongside the evaluation in respect of the conformity criteria, these will also include assessing whether the taxonomy-eligible economic activities make a substantial contribution to any of the environmental objectives defined in the Taxonomy Regulation and establishing that no significant harm is done to any other environmental objective. Furthermore, it will have to be ensured that the activities comply with minimum social safeguards as set out in the OECD – Guidelines for Multinational Enterprises, UN – Guiding Principles on Business and Human Rights, ILO Core Labour Standards and International Human Rights Charter.

Birkenfeld, March 28, 2022

STRATEC SE

The Board of Management

Marcus Wolfinger Dr. Robert Siegle

Dr. Claus Vielsack

Opex kpi (in € 000s)

	2021
Taxonomy-eligible activities	31
Taxonomy-non-eligible activities	10,230
Total	10,261
Share of taxonomy-eligible activities	<1%

CONSOLIDATED FINANCIAL STATEMENTS FOR THE 2021 FINANCIAL YEAR OF STRATEC SE

Consolidated Balance Sheet / 88 Consolidated Statement of Comprehensive Income / 90 Consolidated Cash Flow Statement / 91 Consolidated Statement of Changes in Equity / 92

CONSOLIDATED BALANCE SHEET as of December 31, 2021

Assets

€ 000s	Note	12.31.2021	12.31.2020
Non-current assets
Goodwill	(01)	37,996	37,860
Other intangible assets	(01)	51,370	50,753
Right-of-use assets	(02)	8,720	10,099
Property, plant and equipment	(03)	58,738	55,370
Non-current financial assets	(07)	3,574	581
Non-current contract assets	(05)	18,208	19,498
Deferred taxes	(11)	1,902	1,462
		180,508	175,623
Current assets
Inventories	(04)	88,768	68,025
Trade receivables	(06)	37,184	34,782
Current financial assets	(07)	1,539	2,812
Current other receivables and assets	(08)	9,077	8,247
Current contract assets	(05)	4,053	3,144
Income tax receivables	(11)	212	1,710
Cash	(27)	47,184	37,561
		188,017	156,281



Total assets		368,525	331,904

Shareholders' equity and debt

€ 000s	Note	12.31.2021	12.31.2020
Shareholders' equity	(09)
Share capital		12,128	12,103
Capital reserve		32,217	29,866
Revenue reserves		165,121	136,052
Treasury stock		-35	-65
Other equity		-3,672	-5,411
		205,759	172,545
Non-current debt
Non-current financial liabilities	(12)	83,774	106,324
Non-current contract liabilities	(15)	19,164	4,373
Provisions for pensions	(10)	5,373	5,620
Deferred taxes	(11)	8,788	7,376
		117,099	123,693
Current debt
Current financial liabilities	(12)	15,853	13,914
Trade payables	(13)	11,401	8,485
Current other liabilities	(14)	6,332	6,985
Current contract liabilities	(15)	7,040	1,902
Provisions	(16)	1,637	1,606
Income tax liabilities	(11)	3,404	2,774
		45,667	35,666
Total shareholders' equity and debt		368,525	331,904

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the Period from January 1 to December 31, 2021

€ 000s	Note	2021	2020
Sales	(17)	287,335	250,099
Cost of sales	(18)	-199,623	-181,110
Gross profit		87,712	68,989
Research and development expenses	(19)	-9,281	-7,670
Sales-related expenses	(20)	-9,806	-8,808
General administration expenses	(21)	-18,455	-18,876
Other operating income and expenses	(22)	-1,993	42
Earnings before interest and taxes (EBIT)		48,177	33,677
Net financial expenses	(23)	-1,345	-656
Earnings before taxes (EBT)		46,832	33,021
Taxes on income	(11)	-6,874	-4,586
Earnings from continuing operations		39,958	28,435
Earnings from discontinued operations	(24)	0	-3,260
Consolidated net income		39,958	25,175
Items that may not be reclassified to profit or loss:
Remeasurement of defined benefit pension plans		234	-458
Items that may be subsequently reclassified to profit or loss:
Currency translation differences from translation of foreign operations		1,505	-4,584
Other comprehensive income (OCI)		1,739	-5,042
Comprehensive income		41,697	20,133
Basic earnings per share in €	(25)	3.30	2.09
from continuing operations		3.30	2.36
from discontinued operations		0.00	-0.27
No. of shares used as basis (undiluted)		12,111,028	12,061,730
Diluted earnings per share in €	(25)	3.28	2.07
from continuing operations		3.28	2.34
from discontinued operations		0.00	-0.27
No. of shares used as basis (diluted)		12,181,289	12,152,665

CONSOLIDATED CASH FLOW STATEMENT for the 2021 Financial Year

€ 000s	Note	2021	2020
I. Operations
Consolidated net income (after taxes)		39,958	25,175
Depreciation and amortization		18,254	22,590
Current income tax expenses	(11)	6,061	4,885
Income taxes paid less income taxes received		-4,063	-1,613
Financial income	(23)	-108	-45
Financial expenses	(23)	1,431	1,130
Interest paid		-1,677	-1,091
Interest received		114	29
Other non-cash expenses		5,202	3,669
Other non-cash income		-1,773	-5,259
Change in net pension provisions through profit or loss	(10)	-397	515
Change in deferred taxes through profit or loss	(11)	812	333
Profit (-)/loss (+) on disposals of non-current assets		-14	2
Increase (-)/decrease (+) in inventories, trade receivables and other assets		-25,569	-22,521
Increase (+)/decrease (-) in trade payables and other liabilities		25,242	4,050
Cash flow from operating activities		63,473	31,849
II. Investments
Incoming payments from disposals of non-current assets • Property, plant and equipment • Financial assets		81 24	49 837
Outgoing payments for investments in non-current assets • Intangible assets • Property, plant and equipment • Financial assets Incoming payments from sale of companies previously consolidated,		-10,300 -9,932 0	-11,010 -14,571 -5
less cash funds thereby ceded Cash flow from investing activities		0 -20,127	2,855 -21,845
III. Financing
Incoming funds from taking up of financial liabilities		10,000	32,000
Outgoing payments for repayment of financial liabilities	(12)	-34,705	-19,480
Incoming payments from issue of shares for employee stock option programs		1,265	2,804
Dividend payments		-10,889	-10,101
Cash flow from financing activities		-34,329	5,223
IV. Cash-effective change in cash (net balance of I– III)		9,017	15,227
Cash at start of period		37,561	22,708
Impact of exchange rate movements		606	-374
Cash at end of period	(27)	47,184	37,561

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the 2021 Financial Year

€ 000s	Note	Share capital	Capital reserve
January 1, 2020	(09)	12,030	26,457
Equity transactions with owners
• Dividend payment
• Issue of subscription shares from stock option programs, less costs of capital issue after taxes		73	2,731
Allocations due to stock option programs			593
Allocations due to employee participation program			85
Comprehensive income
December 31, 2020	(09)	12,103	29,866
Equity transactions with owners
• Dividend payment
• Issue of subscription shares from stock option programs, less costs of capital issue after taxes		25	1,240
Allocations due to stock option programs			919
Allocations due to employee participation program			192
Comprehensive income
December 31, 2021	(09)	12,128	32,217

Other equity

		Other equity
Group equity	Currency translation	Pension plans	Treasury stock	Revenue reserves
159,007	1,487	-1,856	-89	120,978

-10,101				-10,101
2,804
593
109			24
20,133	-4,584	-458		25,175
172,545	-3,097	-2,314	-65	136,052

-10,889				-10,889
1,265
919
222			30
41,697	1,505	234		39,958
205,759	-1,592	-2,080	-35	165,121

NOTES TO THE CON-SOLIDATED FINANCIAL STATEMENTS FOR THE 2021 FINANCIAL YEAR OF STRATEC

A. General Disclosures / 95
B. Accounting Policies Applied / 98
C. Notes to the Consolidated Balance Sheet / 114
D. Notes to the Consolidated Statement of Comprehensive Income / 139
E. Notes to the Consolidated Cash Flow Statement / 145
F. Segment Reporting / 147
G. Financial Instruments / 149
H. Risk Management / 154
I. Other Disclosures / 158

A. GENERAL DISCLOSURES

General information

NOTES TO THE CON-

STATEMENTS

OF STRATEC

SOLIDATED FINANCIAL

FOR THE 2021 FINANCIAL YEAR

STRATEC SE designs and manufactures fully automated systems for its partners in the fields of clinical diagnostics and biotechnology. Furthermore, the STRATEC Group (hereinafter also 'STRATEC') provides complex consumables for diagnostics and medical applications. In this, the company covers the entire value chain – from development and design through to production and quality assurance. The partners market the systems, software and consumables, in general together with their own reagents, as system solutions to laboratories, blood banks and research institutes around the world. STRATEC develops its products on the basis of its own patented technologies.

STRATEC SE, whose legal domicile is at Gewerbestrasse 37, 75217 Birkenfeld, Germany, is a publicly listed corporation under European law and is registered in the Commercial Register in Mannheim, Germany, with the number HRB 732007.

These consolidated financial statements were approved for publication by the Board of Management of STRATEC SE on March 28, 2022.

Basis of preparation

The consolidated financial statements compiled by STRATEC SE as the topmost parent company as of December 31, 2021 have been prepared with due application of § 315e (1) of the German Commercial Code (HGB) in accordance with the requirements of the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), London, and the Interpretations of the International Financial Reporting Interpretations Committee (IFRS IC) valid and endorsed by the European Union as of the balance sheet date, as well as with the supplementary requirements of German commercial law.

The consolidated financial statements have been compiled in thousand euros (€ 000s). Unless otherwise stated, the amounts reported in the notes to the consolidated financial statements are denominated in thousand euros (€ 000s). Due to numbers being rounded and presented in € 000s, individual figures in the consolidated financial statements of STRATEC SE may not add up exactly to the totals stated and percentage figures may not correlate exactly with the absolute figures to which they refer.

The financial year for the consolidated financial statements corresponds to the calendar year. The financial statements of all companies included in the consolidated financial statements have been prepared as of the balance sheet date for the consolidated financial statements and based on uniform accounting policies.

The consolidated statement of comprehensive income has been prepared using the cost of sales method. This involves presenting sales alongside the expenses incurred to generate such, which are generally allocated to the functional areas of production, research and development, sales, and general administration.

In the interests of clarity, individual items have been aggregated in the consolidated balance sheet, the consolidated statement of comprehensive income, the consolidated cash flow statement, and the consolidated statement of changes in equity. These are explained in the notes to the consolidated financial statements. The consolidated balance sheet has been structured in line with the maturities of the respective assets and liabilities. All assets and liabilities maturing or due to be sold within the next twelve months are classified as current. Assets and liabilities earmarked for realization in the company's usual course of business are also classified as current, even when their maturities exceed twelve months. Liabilities for which STRATEC has a substantive right to defer settlement by at least twelve months after the balance sheet date are classified as non-current. Deferred taxes must generally be recognized as non-current items.

Unless reported otherwise below, the accounting policies applied have not changed since the previous year.

Accounting standards requiring mandatory application for the first time in the current financial year

The following accounting standards and interpretations required mandatory application for the first time in the 2021 financial year:

Standard	Title	Effective date1	EU endorsement
New and amended standards and interpretations
IFRS 16	Amendments: COVID-19-Related Rent Concessions	04.01.2021	08.30.2021
IFRS 4	Amendments: Deferral of IFRS 9	01.01.2021	12.15.2020
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16	Amendments: Interest Rate Benchmark Reform (Phase 2)	01.01.2021	01.13.2021

1 For companies like STRATEC whose financial year corresponds to the calendar year

The application of these standards and interpretations in the 2021 financial year was consistent with the respective transition requirements. Unless explicitly required by individual standards and interpretations and explained separately below, the respective requirements have generally been applied retrospectively, i.e. the information has been presented as if the new accounting methods had always been applied in the past. In these cases – and where called for by the respective standard – the comparative figures have been adjusted accordingly.

The aforementioned amendments did not have any implications for these consolidated financial statements.

Amendment to accounting estimates

In the 2021 financial year, STRATEC made amendments to accounting estimates pursuant to IAS 8.32 (d) in conjunction with IAS 38.104 et seq. in respect of determining the useful life and expected amortization pattern of certain internally generated intangible assets. Up to and including the 2020 financial year, the period and method of amortization for internally generated intangible assets was based on the methodology presented in detail in the following sections of the 2020 Annual Report: 'Other intangible assets' (Page 95) and 'Discretionary decisions and forward-looking assumptions' in subsection '9. Determining the period and method of amortization applicable to intangible assets capitalized in the context of development cooperations in the OEM partnering business model' (Page 108).

In this approach, intangible assets resulting from 'proprietary development projects' were amortized over five years, while those resulting from development cooperations in the OEM partnering business model were basically amortized over the expected product lifecycle, generally ranging from 12 to 15 years, depending on the number of units. From the 2021 financial year, by contrast, STRATEC will act in accordance with the 'doubtful case rule' in IAS 38.97 and in all cases recognize 'minimum amortization' determined using the straight-line method over the expected product lifecycle. Here, the amortization for the respective period under report is determined by comparing (accumulated) minimum amortization over the expected product lifecycle and the (accumulated) amortization required based on the expected number of units, with application of the higher of the two figures.

For the existing development cooperations in the OEM partnering business model affected by this amendment to accounting estimates, the amendment resulted in € 5k higher amortization in 2021 and, based on the currently forecast number of units, will result in € 5k lower amortization in 2022 compared with retention of the method previously applied.

Furthermore, the aforementioned method applied from 2021 will also be used to determine the amortization for a 'proprietary development project' which, similar to the development cooperations in the OEM partnering business model, should lead to direct sales from the marketing of appliances to external customers. In this respect, it differs significantly from existing internally generated intangible assets in the 'proprietary development projects' category, which previously consisted exclusively of 'internal developments' that did not involve the direct generation of sales. This new category did not previously exist at STRATEC, as a result of which it has been necessary to determine a suitable amortization method for this category for the first time. Given the material similarity between this category and the intangible assets recognized for development cooperations in the OEM partnering business model, STRATEC concluded that amortization for the respective period under report should be determined by comparing the (accumulated) minimum amortization over the expected useful life and (accumulated) amortization required based on the expected number of units, with application of the higher of the two figures, and that this approach best reflects the expected pattern of economic use for the intangible asset. Amortization began as of March 1, 2021 and the expected useful life and period of amortization have been estimated at 12 years. Due to 'minimum amortization' and the existing and currently forecast number of units, this approach is expected to have the following impact on earnings in the financial years from 2021 to 2033, with the figures from 2022 being estimated, compared with amortization based solely on the number of units: € -539k (2021), € -522k (2022) and € -295k (2023) due to higher amortization; € 129k (2024), € 272k (2025 to 2028), and € 139k (2029) due to lower amortization.

Addition of the individual items presented above results in the following impact on earnings in the financial years 2021 to 2029, with the figures from 2022 being estimated: € -544k (2021), € -517k (2022), € -295k (2023), € 129k (2024), € 272k (2025 to 2028), and € 139k (2029).

Accounting requirements already published but not yet applied

The IASB and IFRS IC have issued the following standards, amendments and revisions to standards and interpretations which do not yet require mandatory application. Application of the new and revised standards and interpretations is dependent, among other factors, on their acceptance by the European Union within its IFRS endorsement procedure.

Standard	Title	Effective date1	EU endorsement
New and amended standards and interpretations
IFRS 3	Amendments: Reference to the Conceptual Framework	01.01.2022	06.28.2021
IAS 16	Amendments: Proceeds before Intended Use	01.01.2022	06.28.2021
IAS 37	Amendments: Onerous Contracts: Cost of Fulfilling a Contract	01.01.2022	06.28.2021
Diverse	Annual Improvements to IFRS, 2018-2020 Cycle	01.01.2022	06.28.2021
IFRS 17	Insurance Contracts	01.01.2023	11.19.2021
IAS 1	Amendments: Classification of Liabilities as Current or Non-current	01.01.2023	Outstanding
IAS 1, IFRS Practice Statement 2	Amendments: Disclosure of Accounting Policies (including Amendments to IFRS Practice Statement 2)	01.01.2023	Outstanding
IAS 8	Amendments: Accounting Policies, Changes in Accounting Estimates and Errors	01.01.2023	Outstanding
IAS 12	Amendments: Deferred Tax related to Assets and Liabilities arising from a Single Transaction	01.01.2023	Outstanding

1 For companies like STRATEC whose financial year corresponds to the calendar year

STRATEC does not intend to make any voluntary, premature application of these standards and interpretations or of the relevant amendments.

In the interests of reporting efficiency, only those standards and interpretations have been outlined below which, based on the information currently available and given the business model and business transactions customary at STRATEC, are very likely to have implications for the accounting policies or for the reporting and disclosure of information in STRATEC's consolidated financial statements in future financial years.

B. ACCOUNTING POLICIES APPLIED

Consolidation principles

Capital consolidation at STRATEC has been performed using the purchase method by offsetting the carrying amounts of investments against the prorated equity of the subsidiaries. This involves accounting for the assets and liabilities identifiable at the subsidiaries at the time of acquisition at fair value and for deferred taxes pursuant to IAS 12 (Income Taxes). Any remaining credit difference from capital consolidation is recognized as goodwill.

Intercompany profits and losses, sales, income and expenses have been eliminated, as have receivables and liabilities between the companies included in the consolidated financial statements. The income tax implications of consolidation entries have been accounted for by recognizing deferred taxes.

Scope of consolidation

In accordance with the requirements of IFRS 10 (Consolidated Financial Statements), the consolidated financial statements of STRATEC SE (parent company) basically include all companies controlled by STRATEC SE (subsidiaries).

Subsidiaries whose implications, both individually and aggregately, are of immaterial significance for the asset, financial, and earnings position are included in the consolidated financial statements at cost, less any impairments, and recognized as investments in associates in the consolidated balance sheet. The financial data of those subsidiaries of immaterial significance cumulatively account for less than 1% of consolidated sales, group equity, group earnings and total group assets respectively.

Subsidiaries are deconsolidated as soon as STRATEC SE can no longer exercise control. The assets and liabilities of the subsidiary are derecognized in the month of deconsolidation. In the consolidated statement of comprehensive income, earnings from deconsolidation of the subsidiary are presented in the line item '(24) Earnings from discontinued operations'.

In addition to STRATEC SE the consolidated financial statements as of December 31, 2021 and as of December 31, 2020 include the following subsidiaries by way of full consolidation:

		Shareholding
Company	Domicile		12.31.2021 12.31.2020
Germany
STRATEC Capital GmbH	Birkenfeld, Germany	100%	100%
STRATEC PS Holding GmbH	Birkenfeld, Germany	100%	100%
European Union
STRATEC Biomedical S.R.L	Cluj-Napoca, Romania	100%	100%
STRATEC Consumables GmbH	Anif, Austria	100%	100%
RE Medical Analyzers Luxembourg 2 S.à r.l.	Luxembourg, Luxembourg	100%	100%
Diatron Medicinai Instrumentumok Laboratóriumi Diagnosztikai Fejlesztö-Gyártó Zrt	Budapest, Hungary	100%	100%
Mod-n-More Kft.	Budapest, Hungary	100%	100%
Other
STRATEC Biomedical UK, Ltd.1	Burton upon Trent, UK	0%	0%
STRATEC Switzerland AG	Beringen, Switzerland	100%	100%
STRATEC Biomedical USA, Inc.	Glendale, US	100%	100%
STRATEC Services AG	Beringen, Switzerland	100%	100%
Medical Analyzers Holding GmbH	Zug, Switzerland	100%	100%
STRATEC Biomedical Inc.	Southington, US	100%	100%
Diatron (US), Inc.	Delaware, US	100%	100%

¹ STRATEC Biomedical UK, Ltd. was deconsolidated as of May 4, 2020.

Due to its immaterial significance, the following subsidiary has not been included in the consolidated financial statements by way of full consolidation:

Company, domicile	Share capital	Shareholding	Annual earnings1
STRATEC
Biomedical
(Taicang) Co. Ltd.,			CNY 644,738
Taicang, China	CNY 814,940	100%	(Vj. CNY 638,421)

1 The earnings figures reported are based on the annual financial statements prepared in accordance with national accounting requirements as of December 31, 2021 and December 31, 2020.

Discontinued operations

By contract signed on May 4, 2020, all shares held in STRATEC Biomedical UK, Ltd., Burton upon Trent, UK, all shares held in Sanguin International Inc., Southington, US, and all loans granted by STRATEC SE to STRATEC Biomedical UK, Ltd. were sold. Due to the loss of control resulting from this transaction, STRATEC Biomedical UK, Ltd. was deconsolidated as of May 4, 2020. The earnings from this operation are presented in a separate line item in the consolidated statement of comprehensive income: 'Earnings from discontinued operations'. STRATEC Biomedical UK, Ltd. was allocated to the 'Other Activities' segment.

In the previous year, the disposal of the shares in STRATEC Biomedical UK, Ltd. impacted as follows on the asset, financial, and earnings position:

Currency translation

Transactions in foreign currencies

Transactions in foreign currencies have been translated into the functional currency using the rate on the date of the transaction. On the balance sheet date, monetary items have been translated using the reporting date rate, while non-monetary items have been translated at the rate on the date of the transaction. Differences arising upon currency translation have been recognized through profit or loss in the consolidated statement of comprehensive income, provided that the item in question does not form part of a net investment in a foreign operation.

Translation of financial statements of foreign group companies

With the exception of Medical Analyzers Holding GmbH, Zug, Switzerland, whose functional currency is the euro, the functional currency of all other foreign group companies is the respective national currency, as the companies operate independently in financial, economic and organizational terms.

Assets and liabilities at group companies with functional currencies other than the euro have been translated into euros at the reporting date rate, while income and expenses have been translated into euros using annual average exchange rates. Equity components have been translated at historic rates upon the respective dates of addition from the Group's perspective. The translation difference arising compared with the reporting date rates has been recognized directly in equity in the 'Other equity – Foreign currency translation' item.

The exchange rates between major currencies and the euro developed as follows:

	Figures upon deconsolidation € 000s
Agreed sale price for the shares	3,403
Purchase price retention	-827
Payments expected from purchase price retention	662
Likely consideration	3,238
Net assets	2,961
Costs of disposal	-21
Difference between actual payment and likely consideration	266
Deconsolidation result	522

1 €/		Reporting date rate		Average rate
		2021	2020	2021	2020
GBP	UK	0.840	0.899	0.860	0.890
USD	US	1.133	1.227	1.183	1.142
CHF	Switzerland	1.033	1.080	1.081	1.071
RON	Romania	4.949	4.868	4.922	4.838
HUF	Hungary	369.190	363.890	358.520	351.250

Upon the deconsolidation date for STRATEC Biomedical UK, Ltd. in the previous year, the Euro / GBP exchange rate stood at 0.869 (spot rate) and 0.865 (average rate).

Other intangible assets

Other intangible assets are recognized upon addition at cost. The purchase costs of a separately purchased intangible asset particularly comprise the purchase price, less any reductions in the price, plus costs directly attributable to preparing the asset for its intended use. The construction costs of an internally generated intangible asset comprise all costs directly attributable to create, produce and prepare the asset to be capable of operating in the manner intended by the management.

Subsequent measurement is based on the cost model. As all other intangible assets apart from those not yet ready for use currently have limited useful lives, their cost has been amortized in accordance with these, generally using the straight-line method unless the actual decline in their value requires another form of amortization. Furthermore, account is also taken where necessary of impairments (see 'Impairment tests'). If the reasons for impairment no longer apply, the respective assets are written back to a maximum of amortized cost.

Amortization of other intangible assets has been based on the following useful lives:

	Useful lives in years 2021	Useful lives in years 2020
Acquired technologies	7–15	7 – 15
Internally generated intangible assets • Proprietary development projects • Development cooperations	5–12 *	5 *
Acquired patents	12–19	12 – 19
Acquired trademarks	10	10
Acquired customer relationships	5–12	5 – 12
Other rights and values • Software and licenses	1–8	1–8

* In respect of the accounting treatment of development cooperations within the OEM partnering business model, reference is made to the comments in 'Recognition of sales, cost of sales, research and development expenses' in this section. The period and method of amortization applied to the intangible assets resulting from development cooperations within the OEM partnering business model is based on the methodology presented under 'Amendment to accounting estimates' in this section.

Property, plant and equipment

Property, plant and equipment are measured upon initial recognition at cost in accordance with IAS 16.15 et seq.

Subsequent measurement is based on the cost model. Accordingly, in subsequent periods the costs recognized are reduced by depreciation, in general using the straight-line method, where the respective assets are depreciable. Furthermore, account is also taken where necessary of impairments (see 'Impairment tests' below). If the reasons for impairment no longer apply, the respective assets are written back to a maximum of amortized cost.

Costs incurred to repair or maintain items of property, plant and equipment have generally been recognized through profit or loss. Costs incurred for measures expected to lead to an inflow of economic benefits in future have been capitalized as retrospective costs.

Depreciation of property, plant and equipment has been based on the following useful lives:

	Useful lives in years 2021	Useful lives in years 2020
Buildings	25–33	25 – 33
Outdoor facilities	10–30	10 – 30
Technical equipment and machinery	3–20	3 – 20
Vehicles	3–6	3 – 6
Tools	3 –7	3 – 7
IT components	2–5	2 – 5
Other plant and office equipment	1–20	1– 20

Gains or losses incurred upon the sale, decommissioning or scrapping of items of property, plant and equipment have been recognized in other operating income or expenses in the amount of the difference between the potential proceeds on disposal and the residual carrying amount.

Leases

A lease is a contract, or part of a contract, that conveys the right to use an identified asset for a period of time in exchange for consideration.

In its capacity as a lessee, STRATEC recognizes right-of-use assets for leased items and liabilities for the payment obligations thereby entered into at present value for basically all leases in its balance sheet. Exemptions apply for low-value leases (for which no expenses were recognized in the 2021 financial year; previous year: € 1k), short-term leases (for which expenses of € 68k were recognized in the 2021 financial year; previous year: € 70k) and leases of intangible assets. The lease installments payable for these leases are expensed on a straight-line basis in line with their allocation to individual functional areas in the consolidated statement of comprehensive income. For contracts including lease and non-lease components, STRATEC has drawn on the option of not separating these components. When determining the contract term, extension and termination options have only been accounted for when the exercising or non-exercising of such options is sufficiently certain.

As of the provision date, lease liabilities comprise the lease payments listed in IFRS 16.27 and are discounted using the interest rate implicit in the lease, where this can be determined, and otherwise using the lessee's incremental borrowing rate. Subsequent to the provision date, lease liabilities are increased by interest expenses and reduced by the lease payments made. Lease liabilities are revalued to account for changes in lease payments.

Right-of-use assets are measured at cost and, alongside the respective lease liabilities, also include the components listed in IFRS 16.24 as of the provision date. These assets are subsequently measured at amortized cost. Depreciation is recognized on a straight-line basis over the term of the respective contract.

Depreciation of right-of-use assets is based on the following useful lives:

	Useful lives in years 2021	Useful lives in years 2020
Land and buildings	2–10	2 – 10
Vehicles	2–4	2 – 4
Other plant and office equipment	5 –6	5– 6

In the land and buildings category, STRATEC chiefly leases production and office buildings, as well as warehouse and parking space. The lease arrangements include conditions that basically conform to customary practice in the industry. The lease arrangements provide for extension and termination options in some cases and thus provide STRATEC with the greatest possible flexibility. Further future outflows of funds may arise due to lease payments which are indexed or based on utilization volumes.

Specifically, potential future outflows of funds not accounted for in the measurement of lease liabilities include:

	2021 € 000s	2020 € 000s
Due to extension and termination options	0	330
Due to variable lease payments	2,765	2,776
Due to low-value assets	0	1
Due to short-term leases	17	0
Total	2,782	3,107

Future outflows of funds which STRATEC has entered into in its capacity as lessee, but which had not begun as of the balance sheet date, amounted to € 264k (previous year: € 126k).

Further details about leases can be found in our comments in Section 'C. Notes to the consolidated balance sheet (2) Rightof-use assets' and Section 'C. Notes to the consolidated balance sheet (12) Non-current and current financial liabilities'.

As in the previous year, STRATEC did not have any leases in which the company acted as lessor as of December 31, 2021.

Borrowing costs

Where a significant period of time is required to manufacture a respective asset (so-called qualifying asset), the borrowing costs incurred through to completion are capitalized as a component of cost where the requirements of IAS 23 (Borrowing Costs) are met. At STRATEC, qualifying assets may relate in particular to intangible assets and property, plant and equipment. Borrowing costs of € 18k were capitalized in the 2021 financial year (previous year: € 263k). The financing rate used to determine borrowing costs eligible for capitalization amounted to 1.4% (previous year: 1.3%).

Subsidies and grants

Government grants intended to promote investment and directly allocable to the respective investments have been deducted from the amount capitalized for the object of investment. Non-repayable grants received as project subsidies for research and development projects are linked to the respective expenses and are initially recognized as liabilities and subsequently offset through profit or loss in the consolidated statement of comprehensive income in the financial year in which the associated expenses are incurred.

Impairment tests

Impairment tests pursuant to IAS 36 (Impairment of Assets) are performed on goodwill and other intangible assets with unlimited or indefinite useful lives, as well as on intangible assets not yet ready for use, at least once a year and, in the case of other intangible assets with limited useful lives and property, plant and equipment, if there are specific indications of impairment.

Impairment losses have been recognized through profit or loss in the consolidated statement of comprehensive income to the extent that the recoverable amount of the asset, i.e. the higher of its fair value less costs to sell and its value in use, falls short of its carrying amount.

A review is performed at least once a year to ascertain whether there is any indication that the reason for impairment losses already recognized no longer applies or that the amount of impairment has reduced. In this case, the recoverable amount is newly determined and the impairment losses already recognized, unless they involve goodwill, are correspondingly reversed.

In principle, the recoverable amount has been determined for each individual asset. Where this is not possible, the recoverable amount has been determined on the basis of a group of assets representing a cash generating unit.

The cash generating units determined for goodwill impairment testing are unchanged on the previous year's balance sheet date. The cash generating units thereby defined are 'laboratory automation', 'manufacturing parts & services', 'Diatron', and 'smart consumables'.

The recoverable amount for the cash generating units as of December 31, 2021 (previous year: December 31, 2020) has been determined by reference to their value in use, defined as the present value of future net inflows of cash. The forecast future net inflows of cash have been based on STRATEC's current budgets. As in the previous year, the detailed budget period covers three years. Future net inflows of cash are budgeted in the functional currency. The budgets have in turn been based on assumptions concerning future sales volumes and sales prices, as well as on expected costs. Raw materials prices are accounted for on their given terms. Net inflows of cash beyond the detailed budget period have been presented as perpetuity, taking due account of growth rates based on current market information. Should the value in use fall short of the carrying amount of the cash generating unit, then the fair value less costs to sell has to be determined.

Net inflows of funds have been discounted at capital cost rates. The capital costs of cash generating units have been calculated as the weighted average of their equity and debt capital costs (WACC). To calculate the weighted capital costs, reference has been made on the one hand to the costs of equity, which comprise the risk-free base rate and the risk premium (market risk premium, multiplied by a beta factor based on a peer group analysis) and on the other hand on the cost of borrowing, which corresponds to the average cost of borrowing at the peer group companies. Equity and debt capital costs have been weighted based on the average capital structure at the peer group companies. Given the risk and return profiles of the cash generating units thereby reviewed, the costs of capital have been calculated on an individual basis. The key parameters are as follows:

Cash generating unit	Pre-tax WACC %
Laboratory automation 2021 2020	6.39 6.40
Manufacturing, parts & services 2021 2020	5.59 5.61
Diatron 2021 2020	6.07 5.87
Smart consumables 2021 2020	5.92 5.91

Of the goodwill recognized in the amount of € 37,996k (previous year: € 37,860k), € 569k (previous year: € 569k) results from the acquisition of STRATEC Biomedical UK, Ltd. in the 2006 financial year, € 1,467k (previous year: € 1,467k) from the acquisition of STRATEC Molecular GmbH in the 2009 financial year, € 2,736k (previous year: € 2,525k) from the acquisition of STRATEC Biomedical USA, Inc. in the 2010 financial year, € 24,616k (previous year: € 24,691k) from the acquisition of the Diatron Group in the 2016 financial year, and € 8,608k (previous year: € 8,608k) from the acquisition of STRATEC Consumables GmbH in the 2016 financial year. The changes compared with the previous year are due to currency translation. For impairment testing purposes, the goodwill has been allocated to those cash generating units benefiting from the synergies.

For impairment testing purposes, the goodwill resulting from the aforementioned acquisitions has been allocated as follows to the 'laboratory automation', 'manufacturing, parts & services', and 'Diatron', cash generating units on the basis of the respective EBITs. The table presents the carrying amounts of significant goodwill items:

€ 000s	Laboratory automation		parts & services	Manufacturing,	Diatron
	2021	2020	2021	2020	2021	2020
Carrying amount of goodwill	14,987	14,800	15,924	15,960	6,550	6,565

As in the previous year, in line with IAS 36 (Impairment of Assets) STRATEC performed the annual impairment test for these goodwill items as of December 31. Also as in the previous year, this did not lead to the recognition of any impairment loss in the year under report.

The following key assumptions have been used to determine the recoverable amounts of these cash generating units:

Assumptions used to calculate recoverable amounts of cash generating units

The sensitivity analysis assumed a reduction in the future cash flow and an increase in weighted costs of capital by 10% each, as changes on this scale would appear reasonable and possible, especially from a long-term perspective. On this basis, STRATEC concluded that there were no indications of any potential impairment in the goodwill reported for any of the cash generating units at STRATEC.

An amount of € 535k, and thus not material compared with the total carrying amount of goodwill, was allocated to a further cash generating unit in the year under report (previous year: € 535k). For the goodwill thereby allocated as well, the annual impairment test did not identify any indications of impairment.

Inventories

Inventories include assets held for sale in the normal course of business (finished products and merchandise), assets currently in the process of being manufactured for sale (unfinished products and contract fulfilment costs), and assets consumed during the manufacturing process or in the performance of services (raw materials and supplies).

Inventories are measured at cost or, if lower, at net realizable value.

The acquisition costs of raw materials, supplies, and merchandise are based on average procurement prices. The manufacturing costs for unfinished and finished products include both directly allocable manufacturing wage and material expenses and a prorated share of material and production overheads, including depreciation. The manufacturing costs for contract fulfilment costs include both directly allocable manufacturing wage expenses and prorated production overheads. Administration expenses are also included to the extent that they can be directly allocated to production. Sales-related expenses are not included. Consistent with STRATEC's business model, contract fulfilment costs also include development cooperations or other contracts with customers. In respect of the accounting policies applied for development cooperations, reference is made to the information in 'Recognition of sales, cost of sales, research and development expenses' in this section.

Inventory risks resulting from lower turnover rates or diminished usability have been accounted for with additional write-downs.

Financial instruments

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial instruments are recognized and measured in accordance with IFRS 9 (Financial Instruments).

Accordingly, financial assets or financial liabilities are recognized in the consolidated balance sheet as soon as STRATEC becomes a party to the contractual requirements of the financial instrument. Trade receivables are recognized at the time at which they arise.

First-time measurement of financial assets and financial liabilities is based on their respective fair values. Transaction costs are accounted for, unless the financial instrument is measured at fair value through profit or loss. Trade receivables without any significant financing component are measured at their respective transaction prices.

Depending on its allocation upon first-time recognition to the various categories provided for by IFRS 9 (Financial Instruments), a financial asset (debt or equity instruments) is subsequently measured either at amortized cost or at fair value. The allocation to the categories provided for by IFRS 9 (Financial Instruments) is based in each case on the objectives of the business model and characteristics of the respective cash flows.

Unless it is designated as FVTPL, a debt instrument is measured at amortized cost (AC debt instrument) when it is held within a business model whose objective involves holding financial assets to collect contractual cash flows and the contractual terms result in cash flows at fixed times that are solely payments of interest and principal on the principal amount outstanding. In accordance with the requirements of IFRS 9 (Financial Instruments), amortized cost is determined using the effective interest method and taking account of any expected impairments. Interest income, exchange rate gains and losses, and impairments are recognized through profit or loss. Gains or losses arising upon derecognition are also recognized through profit or loss.

Unless it is designated as FVTPL, a debt instrument is measured at fair value with any changes in its value being recognized through other comprehensive income (FVTOCI debt instrument) when it is held within a business model whose objective involves holding financial assets both to collect contractual cash flows and to sell these and its contractual terms result in cash flows at fixed times that are solely payments of interest and principal on the principal amount outstanding. Interest income, exchange rate gains and losses, and impairments are recognized through profit or loss. Other net gains or losses are recognized in other comprehensive income (OCI). Upon retirement, the accumulated OCI is reclassified to profit or loss.

Unless it is held for trading, an equity instrument is measured at fair value with any changes in its value being recognized through other comprehensive income (FVTOCI equity instrument) if STRATEC has irrevocably elected upon initial recognition to present subsequent changes in the fair value of the equity instrument in other comprehensive income. This election may be made on a case-by-case basis for each equity instrument. Dividends are generally recognized as income through profit or loss. Other net gains or losses are recognized in other comprehensive income. Upon retirement, accumulated OCI is reclassified to revenue reserves.

Financial assets (debt or equity instruments) not measured at amortized cost or at FVTOCI are measured at fair value with any changes in their value being recognized through profit or loss (FVTPL). Measurement also includes derivative financial instruments, except for those designated as hedging instruments and effective as such, and financial assets held or managed for trading and whose value changes are assessed by reference to their fair values. Furthermore, upon initial recognition companies may irrevocably designate financial assets that otherwise meet the conditions for measurement at amortized cost or at FVTOCI as measured at FVTPL ('fair value option'). As in the previous year, STRATEC did not exercise this option. Net gains and losses, including all interest and dividend income, are recognized through profit or loss.

Financial liabilities are measured at amortized cost unless they are measured at fair value through profit or loss (FVTPL). Measurement at fair value through profit or loss begins as soon as a financial liability is classified as held for trading, is a derivative financial instrument, except for those designated as hedging instruments and effective as such, or is designated as such upon initial recognition. Net gains or losses, including interest expenses, are recognized through profit or loss. Other financial liabilities are measured at amortized cost using the effective interest method. Interest expenses and exchange rate gains and losses are recognized through profit or loss. Gains or losses arising upon derecognition are also recognized through profit or loss.

Financial assets are derecognized when the contractual rights to payment from the financial assets no longer exist or the financial asset has been transferred with all of its material risks and rewards. Financial liabilities are derecognized when the contractual obligations have been settled, rescinded or have expired.

Financial assets and liabilities are netted and presented in the consolidated balance sheet as net amounts when STRATEC currently has a legally enforceable right to offset the amounts thereby recognized and intends either to obtain settlement on a net basis or to simultaneously settle the liability upon recovery of the respective asset.

STRATEC deploys derivative financial instruments, and particularly forward exchange transactions, to reduce its currency risks. Derivatives are measured at fair value both upon initial recognition and when measured subsequently. Changes in their fair value are recognized through profit or loss in other operating income or expenses, as STRATEC has to date not designated any derivatives as hedge instruments.

Taxes

Taxes levied on taxable profit in individual countries and changes in deferred tax items are reported as taxes on income. The income taxes reported have been calculated in accordance with the country-specific tax legislation valid or enacted as of the balance sheet date, and in the amount at which they are expected to be paid or refunded. Other taxes levied on items other than income have been recognized within the individual functional areas in the consolidated statement of comprehensive income and in other operating expenses.

Deferred taxes have been calculated using the liability method for temporary differences between the amounts recognized for assets and liabilities in the IFRS and tax balance sheets (except for goodwill), as well as for consolidation entries and tax-reducing claims on loss carryovers likely to be recoverable in subsequent years.

Deferred tax assets on temporary differences and tax loss carryovers have been capitalized to the extent that sufficient future taxable income will likely be available to utilize these deferred tax assets. The assessment of the recoverability of deferred tax assets has been based on the impact on earnings of reversing taxable temporary differences, short and mediumterm forecasts concerning the future earnings situation of the respective group company, and potential tax strategies. In making this assessment, STRATEC is further bound by the tax law norms valid or enacted as of the balance sheet date. Future legislative amendments may thus make it necessary to adjust the respective values through profit or loss.

Pursuant to German tax law, deferred taxes have been recognized on 5% of the differences resulting from translating foreign financial statements denominated in foreign currencies. No further deferred taxes have been recognized in connection with temporary differences for interests in subsidiaries as STRATEC is able to manage the timing of any reversal of these differences and these are unlikely to be reversed in the foreseeable future.

Current and deferred tax assets and liabilities have been reported on a net basis in cases where they refer to the same taxable entity and the same tax authority. Where gains and losses have been recognized directly in equity, the same applies for the relevant deferred tax assets and liabilities.

Should relevant indications arise, STRATEC reviews tax items with regard to their uncertainty and, in the event of a corresponding assessment, recognizes an appropriate amount of risk provision. As such assessments may change over time, this also has implications for the amount of risk provision deemed necessary. The amounts stated for expected tax liabilities and tax assets reflect the best estimates taking due account of any existing tax-related uncertainties.

Provisions for pensions and similar obligations

Pension provisions at STRATEC involve both defined contribution and defined benefit schemes and are structured in accordance with legal requirements in the various countries and based on individual commitments.

In defined contribution pension schemes, STRATEC is obliged to pay contributions to state or private pension companies in accordance with statutory or contractual requirements. Apart from these contributions, STRATEC is not subject to any further payment obligations. Current contributions have been recognized as expenses in the consolidated statement of comprehensive income.

At STRATEC, the defined benefit pension schemes take a variety of forms due to the different country-specific requirements in Germany, Austria, and Switzerland. To cover the commitments made, STRATEC makes contributions to external plan assets in some cases. In line with IAS 19 (Employee Benefits), the present value of pension obligations has been calculated using the projected unit credit method. This involves future obligations being measured using actuarial methods. The calculations at STRATEC have mainly been based on statistical data concerning mortality and invalidity rates, on assumptions concerning the discount rate, on future increases in incomes and pensions, personnel turnover rates, and the expected income from plan assets. The discount rate and the expected return on plan assets have basically been determined by reference to the yields on high-quality corporate bonds with congruent terms, or additionally by reference to the yields on appropriate government bonds. The currency and terms of the underlying bonds are congruent with the currency and expected maturities of the post-employment pension obligations to be satisfied. The fair value of the plan assets has been deducted from the present value of the pension obligations. The obligations and plan assets are measured annually. Actuarial calculations are performed as of the balance sheet date. Remeasurements for actuarial items are recognized directly in 'Other comprehensive income'.

Other provisions

Other provisions have been recognized to cover legal or constructive obligations to third parties resulting from past events which are likely to lead to a future outflow of resources and for which the expected amount of the obligation can be reliably estimated.

Such obligations have been recognized at the present values of the expected outflow of resources where this is expected to occur later than in the following year. Refund claims due from third parties have been recognized separately from provisions to the extent that their realization is virtually certain.

At STRATEC, other provisions include those stated for obligations resulting from guarantees and warranties. The calculation of the scope of obligation for guarantees and warranties has been based on the sales involving such guarantees thereby generated, on the respective contractual warranty periods, as well as on past empirical values, which are adapted on the basis of the implications of currently observable information and data, thus supplementing the implications of historic values by reference to current information and data.

Share-based payment transactions

IFRS 2 (Share-based Payment) makes a distinction between transactions that are cash-settled and those that are equitysettled. As in the previous year, STRATEC recognizes two arrangements that are within the scope of IFRS 2 (Share-based Payment):

Cash-settled stock appreciation rights (SARs), equity-settled stock options for employees, and an equity-settled employee participation program based on the 2021 financial year.

Goods and services received for cash-settled share-based payments (stock appreciation rights – SARs) have been measured at each reporting date and settlement date at the fair value of the respective liability, which is determined using recognized option pricing models. Changes in fair value are recognized through profit or loss.

Given the lack of a separately determinable fair value for the services involved, goods and services received for equity-settled share-based payments (stock options, employee participation program) have been measured at the fair value of the equity instruments as of the grant date and, in the case of stock options, using recognized option pricing models. Where the exercising of equity instruments granted or of the right to cash payment is dependent on the performance by the contractual party of a specific period of service, it is assumed that the services to be performed by the counterparty as consideration will be received during the vesting period in future. The payment expenses are therefore recognized over the vesting period within which the beneficiaries acquire an unrestricted claim to the instruments thereby committed.

Contingent liabilities

Contingent liabilities are potential obligations resulting from past events whose existence is conditional on the materialization or otherwise of one or several uncertain future events not fully within STRATEC's control. Such obligations are not recognized in the balance sheet, as the outflow of resources is deemed unlikely or the scope of obligations cannot be reliably estimated.

Recognition of sales, cost of sales, research and development expenses

The core principles governing the recognition of sales, as well as of cost of sales and research and development expenses, in respect of STRATEC's business model are as follows:

If they relate to development projects without a customer contract (proprietary development projects), the development expenses incurred in this context are generally recognized as expenses in the period in which they are incurred, with the exception of research and development projects acquired upon company acquisitions and development expenses cumulatively meeting the criteria stipulated in IAS 38.57. Capitalized development expenses are tested for impairment at least once a year in line with IAS 36 (Impairment of Assets) in cases where they are not yet ready for their intended use. Impairment losses are recognized when the carrying amount of the capitalized assets exceeds the recoverable amount. Once ready for their intended use, assets relating to 'proprietary development projects' which are not comparable with development cooperations are amortized, generally over a period of five years. For 'proprietary development projects' which are comparable with development cooperations, reference is made to the information provided under 'Amendment to accounting estimates' in this section.

In the 2021 financial year, development expenses in connection with aforementioned development projects were capitalized as internally generated intangible assets in an amount of € 8,671k (previous year: € 10,443k).

Pursuant to IAS 38.54, expenses attributable to research expenses are recognized as expenses in the period in which they are incurred.

For development projects with customer contracts (development cooperations) or other contracts with customers, STRATEC recognizes sales for development and other services and for sales of analyzer systems, service parts, and consumables. These are based on STRATEC's customer contracts and the performance obligations contained therein, which are individually identified and presented separately for the purpose of recognizing sales. Sales are recognized when or as STRATEC transfers control over goods or services to customers either at a given point in time or over a given period of time. For sales of analyzer systems, service parts, and consumables, the respective sales are generally recognized at a point in time determined by taking account of the transfer of ownership and assignment of the related risks and rewards. Sales for other services are generally recognized over the time in which they are performed in accordance with the percentage of completion. Depending on contractual requirements, sales for development performance obligations are recognized over time or at a given point in time. When recognizing development cooperations and associated development performance obligations in the OEM partnering business, which is the business model with the greatest significance for STRATEC in both quantitative and qualitative terms, distinctions – based on whether the development expenses are covered by (milestone) payments or remuneration clauses, and/or whether minimum collection volumes were agreed – can be made between four case groups:

Case groups for recognition of development cooperations

CASE 1	CASE 2	CASE 3	CASE 4
• Development perfor mance obligation satisfied at a point in time (IFRS 15.38) – Development expenses covered by payments = contract fulfilment costs – Development expenses not covered by payments = intangible asset pursuant to IAS 38 – Payments received before transfer of development work = contract liabilities	• Development perfor mance obligation satisfied at a point in time (IFRS 15.38) – Transaction price allocated from appliance delivery obligations for minimum acceptance volumes to development work = contract asset – Development expenses covered by payments = contract fulfillment costs – Development expenses not covered by payments = intangible assets pursuant to IAS 38 – Payments received before transfer of development work = contract liabilities	• Development perfor mance obligation satisfied over time (IFRS 15.35(c)) – Transaction price allocated from appliance delivery obligations for minimum acceptance volumes to development work = contract asset – Payments received before transfer of development work = contract liabilities	• Development perfor mance obligation satisfied over time (IFRS 15.35(c)) – Transaction price not allocated from appliance delivery obligations for minimum acceptance volumes to develop ment work – Payments received before transfer of development work = contract liabilities

Sales are recognized in the amount which STRATEC expects to receive for satisfying the performance obligations. Fee components that have to be withheld for third parties, such as sales taxes and revenue reductions, e.g. discounts and bonuses, are deducted from the sales recognized. STRATEC adjusts the amount of promised consideration to account for the effects of significant financing components when the period between satisfaction of a performance obligation and payment for such is expected to amount to more than one year. STRATEC usually has significant financing components when development performance obligations are satisfied over a period of time and consideration is only received upon completion of development. Financing components are evaluated for each contract and are only significant when factors such as a lower cash purchase price and the combined effect of the passage of time and market interest rates give reason to expect a significant variance from the agreed consideration.

Additional contract acquisition costs are directly expensed when the amortization period does not amount to more than one year. As a general rule, STRATEC does not incur any additional costs that would not have arisen without corresponding contractual agreements. The costs incurred by STRATEC to acquire contracts are therefore recognized as expenses at the time at which they are incurred.

Costs incurred to satisfy performance obligations ('contract fulfilment costs') that are within the scope of IFRS 15 (Revenue from Contracts with Customers) are capitalized as assets and recognized in inventories when the costs lead to the creation or improvement of resources that will be used in future to satisfy performance obligations and are expected to be settled.

At the time at which a contract is agreed, STRATEC does not recognize an asset or liability for the resultant pending transaction. Only when one of the parties to the contract meets its obligation does STRATEC recognize a contract asset or contract liability in its consolidated balance sheet. A contract liability exists when the customer has already paid all or part of the consideration due for the promised services before STRATEC has transferred these to the customer. In STRATEC's business model, this situation may arise, for example, with development service obligations satisfied at a point in time when the customer makes milestone payments during the development phase. In this case, STRATEC recognizes the milestone payments as contract liabilities until the development work is transferred to the customer and the associated sales are recognized. In the reverse case, in which STRATEC provides its services and the customer has not yet paid consideration, STRATEC reviews whether its claim to payment of the consideration is conditional or unconditional. A conditional claim leads to the recognition of a contract asset, while an unconditional claim leads to the recognition of a trade receivable. In STRATEC's business model, this may be the case for a development performance obligation satisfied over time for which the costs of satisfying the development performance obligation exceed the consideration paid by the customer during the period in which the service is performed. Furthermore, the arising of an unconditional payment claim in connection with the development service obligation may also depend on the satisfaction of further contractually agreed performance obligations.

Should STRATEC be contractually obliged to transfer several performance obligations to a customer, the contractually promised consideration is divided on the basis of the standalone selling price at the time at which the contract was concluded. Standalone selling prices are not directly observable within STRATEC's development cooperation business model, i.e. STRATEC does not separately transfer similar goods and services to similar customers. In this case, the standalone selling price for a good or service must be estimated using a suitable method. For this purpose, STRATEC generally uses the 'expected-cost-plus-a-margin' approach.

Discretionary decisions and forward-looking assumptions

The preparation of the consolidated financial statements requires a certain number of discretionary decisions and forward-looking assumptions to be made which have implications for the method of statement and volume of assets, liabilities, expenses, income and contingent liabilities thereby recognized.

The most important discretionary decisions and forward-looking assumptions, as a result of which there may be a substantial risk of significant adjustments being required in the assets and liabilities thereby recognized in the coming financial year, are presented in greater detail below:

Discretionary decisions

1. Capitalization of internally generated intangible assets in connection with the development, or development stage, of a proprietary development project

The assessment as to whether the requirements for capitalization have been met in each individual case is subject to significant discretionary decisions. Given the empirical values available in the fields of development and project management, STRATEC assumes that the estimates in terms of technical feasibility, expected overall costs and market conditions are sufficiently reliable.

2. Recognition of development cooperations and recognition of sales

With regard to the discretionary decisions relating to the recognition of development cooperations and recognition of sales pursuant to IFRS 15 (Revenue from Contracts with Customers), reference is made to the information provided under 'Recognition of sales, cost of sales, research and development expenses' in this section.

3. Allocation of goodwill to cash generating units for impairment testing purposes

The allocation of goodwill acquired upon company acquisitions to cash generating units for impairment testing purposes pursuant to IAS 36 (Impairment of Assets) is subject to significant discretionary decisions. From the takeover date onwards, STRATEC allocates the goodwill resulting from any company acquisition to each cash generating unit at the company intended to benefit from the synergies expected to arise on account of the business combination. STRATEC works with appropriate key figures (EBIT factors) to determine the potential synergies expected in each case.

4. Identification of functional currency

When determining the functional currency of a foreign business operation and deciding whether its functional currency is identical with that of the reporting company, reference has to be made to the indicators specified in IAS 21 (The Effects of Changes in Foreign Exchange Rates). When these indicators provide a mixed picture and the functional currency is not immediately apparent, STRATEC determines at its own discretion which functional currency best reflects the economic implications of the underlying business transactions, events and circumstances. In the case of foreign group companies, the respective national currencies have accordingly been chosen as the functional currencies with the exception of Medical Analyzers Holding GmbH, Zug, Switzerland, whose functional currency is the euro.

5. Assessing whether the exercising or non-exercising of an extension or termination option for a lease is sufficiently certain

Numerous lease contracts, particularly for buildings, include extension and termination options. The extensions to terms resulting from the exercising or non-exercising of such options may only be accounted for when determining the lease contract term if they are sufficiently certain. The assessment as to whether the exercising or non-exercising of such options is sufficiently certain is subject to discretionary decisions. STRATEC accounts for all significant facts and circumstances that would provide the company with an economic incentive to exercise or not exercise the respective option, as well as for decisions taken in the past.

Forward-looking assumptions

1. Determination of the recoverable amount when testing goodwill for impairment under IAS 36 (Impairment of Assets)

Due to the large number of variables involved, as well as to dynamic developments in the underlying framework, the goodwill impairment test (carrying amount as of December 31: € 37,996k; previous year: € 37,860k) is subject to a difficult assessment involving a significant degree of uncertainty in the estimates used. The principal assumptions underlying the impairment test performed at each balance sheet date are outlined under 'Impairment tests' in this section. When performing sensitivity analyses for goodwill impairment tests, a reduction in the future cash flow and an increase in the weighted costs of capital by 10% each has been assumed, as changes on this scale would appear possible from a long-term perspective. On this basis, STRATEC has concluded that there are no indications of potential impairment in the goodwill of any of its cash generating units.

2. Determination of the recoverable amount when testing other intangible assets for impairment under IAS 36 (Impairment of Assets)

Other intangible assets (e.g. capitalized development expenses) are tested for impairment either upon the occurrence of a triggering event (where the respective assets are subject to scheduled amortization) or at least once a year (where the respective assets are not subject to scheduled amortization) (carrying amount as of December 31: € 51,370k; previous year: € 50,753k). These impairment tests are also basically subject to the same difficulties and discretionary scope as the goodwill impairment test. When performing sensitivity analyses for these impairment tests, a reduction in the future cash flows and an increase in the weighted costs of capital by 10% each has been assumed, as changes on this scale would appear possible from a long-term perspective. Based on the sensitivity analyses performed for the impairment tests, STRATEC concluded that there are no indications of potential impairment in these assets.

3. Determination of the 'expected credit losses' upon subsequent measurement of financial assets

At STRATEC, the 'expected credit losses' upon subsequent measurement of trade receivables (carrying amount as of December 31: € 37,184k; previous year: € 34,782k) and contract assets (carrying amount as of December 31: € 22,261k; previous year: € 22,642k) are determined on the basis of a sophisticated method which accounts for the creditworthiness of the debtor, the number of days overdue, and the trade credit insurance policies concluded to minimize default risk. Given the dynamic development in the underlying framework, this calculation involves significant estimation uncertainties with regard to the credit default risk resulting from the debtor's creditworthiness.

4. Determination of the interest rate implicit in a lease

To calculate lease liabilities (carrying amount as of December 31: € 9,460k; previous year: € 10,685k), the future lease payments are discounted using an interest rate. This interest rate corresponds to the interest rate implicit in the lease, where this can be determined. Should this not be possible, the lessee should refer to its own incremental borrowing rate.

As the interest rate implicit in the lease is viewed from the perspective of the lessor, this rate is often not available to the lessee. In many cases, lessees therefore have to refer to their own incremental borrowing rate (hereinafter also 'IBR'). The IBR is an interest rate that is specific to each company and, as a rule, specific to each individual lease agreement and legal unit. For this purpose, comparable leased items may be aggregated into groups of leased items, such as lease arrangements for comparable vehicles on comparable terms and in a comparable setting. The main factors determining the IBR are the term of the lease, the currency in which it is executed, the creditworthiness of the lessee, the credit amount, the economic environment in which the leased item is deployed, collateral by way of the leased item, the specific features of the leased item, and the valuation date.

STRATEC generally determines its IBR using the build-up approach and calculates this rate as the total of the following components:

(a) A term-specific, risk-free base rate based on the yields of government bonds (mostly based on an established currency with a reliable basis of data)
(b) Premiums/discounts for currency risks compared with the currency of the base rate, for example based on inflation data if the IBR is in a currency different to that of the base rate
(c) Premiums for country risks in cases where the country is different to that of the base rate
(d) Premiums for the creditworthiness of the individual lessee (legal unit), for example based on rating and term-specific credit spreads
(e) Discounts for the collateral provided by way of the leased item, and
(f) Premiums/discounts due to the specific features of the leased item.

In determining the term-specific base rate, STRATEC took due account of the fact that the yields on government bonds with congruent terms cannot simply be applied without further reflection. Due to the interest payments made during the term and repayment of the nominal amount at the end of the term, such bonds have different payment structures to typical leases, which involve constant payments each year of the term. To account for this, duration-adequate discount rates were applied to derive the IBR. Significant estimation uncertainties still apply, particularly when determining the premiums and discounts for the degree of collateral and the specific features of the leased item, not least as relatively little reliable empirical data is available.

5. Measurement of the stock appreciation rights (SARs) granted and determination of the resultant personnel expenses pursuant to IFRS 2 (Sharebased Payment)

The stock appreciation rights (SARs) granted (carrying amount as of December 31: € 3,976k; previous year: € 4,121k) have been measured by an independent surveyor specializing in option valuations. This surveyor used the binomial tree method to measure the SARs. The principal parameters subject to estimates (term, expected volatility, risk-free interest rate) have been presented in Section 'C. Notes to the consolidated balance sheet (12) Non-current and current financial liabilities – Stock appreciation rights (SARs)'.

6. Measurement of post-employment defined benefit plans pursuant to IAS 19

The defined benefit plans pursuant to IAS 19 (Employee Benefits) (carrying amount as of December 31: € 5,373k; previous year: € 5,620k) have been measured by an independent company specializing in employee benefits. These measurements are based on actuarial assumptions which, given the long-term nature of these plans, involve uncertainties. With regard to the significant assumptions used in this respect, reference is made to the information provided in Section 'C. Notes to the consolidated balance sheet (10) Provisions for pensions'.

7. Calculation of provision for guarantee and warranty obligations pursuant to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets)

When calculating the provision for guarantee and warranty obligations (carrying amount as of December 31: € 1,637k; previous year: € 1,606k), STRATEC takes due account of historic values from the past, which are adapted on the basis of the implications of currently observable information and data, thus supplementing the implications of the historic values by reference to this current information and data. The insights gained in the 2021 financial year did not lead to any material change in the provision for guarantee and warranty obligations. Actual expenses in future financial years may deviate from the estimated figures.

8. Recognition of deferred taxes for temporary differences and tax loss carryovers pursuant to IAS 12 (Income Taxes)

In its assessment that the – predominantly short-term – differences between the figures recognized for tax purposes and the figures recognized in the IFRS consolidated financial statements will reverse in subsequent financial years, STRATEC is bound pursuant to IAS 12 (Income Taxes) by the requirements of tax law valid or enacted as of the balance sheet date. Future legislative amendments could therefore make it necessary to adjust these figures through profit or loss. In its assessment that it will be possible to offset the deferred tax assets recognized for tax loss carryovers (carrying amount as of December 31: € 4,707k; previous year: € 4,707k) against future profits, STRATEC relies on sources including its short and medium-term budget forecasts. The actual materialization of future profits is based on discretionary estimates. The carrying amounts of the deferred tax assets and liabilities recognized and not recognized in the consolidated financial statements, as well as their arising and changes in the 2021 financial year compared with the previous year have been explained in detail in Section 'C. Notes to the consolidated balance sheet (11) Taxes on income'.

9. Determining the period and method of amortization applicable to intangible assets capitalized in the context of development cooperations in the OEM partnering business model

For intangible assets with limited useful lives (carrying amount as of December 31: € 51,370k; previous year: € 50,753k), IAS 38.97 requires the amortizable amount to be allocated over the respective useful life. According to the definition provided in IAS 38.8, the useful life is either the period over which the asset is expected to be of use to the company or the number of production or similar units which the asset is expected to generate at the company. Pursuant to IAS 38.97, the method of amortization has to correspond to the expected pattern of use for the future economic benefits accruing to the company from the asset. According to IAS 38.98, reference may be made to various methods of amortization when determining the scheduled allocation of the amortizable amount. Alongside the straight-line and decreasing balance methods, these also include the units of production method. Pursuant to IAS 38.98B, when selecting an appropriate method of amortization as required by IAS 38.98 the company can determine the inherent predominant limiting factor relevant to the intangible asset. This may serve as the starting point for determining the appropriate amortization base. In the case of the development cooperations in STRATEC's OEM partnering business model, the decision as to whether the inherent predominant limiting factor is time-based or based on the number of units produced over the product lifecycle represents a discretionary assessment. Following renewed appraisal of all circumstances, STRATEC concluded overall that the number of units to be produced over the entire product lifecycle, taking due account of the expected product lifecycle, is the inherent predominant limiting factor. The amortization method selected by STRATEC on this basis from the 2021 financial year, under which the amortization required for the respective period under report is measured by reference to the higher of accumulated straight-line amortization based on the expected product lifecycle and of accumulated amortization based on the number of units to be produced, takes suitable account of this circumstances. Based on past experience, the product lifecycles for the appliances can currently be expected to range from 12 to 15 years.

There are no other significant forward-looking assumptions and sources of uncertainty concerning estimates at the balance sheet date which involve any substantial risk of material adjustments being required in the assets and liabilities thereby recognized within the coming financial year.

Supplementary disclosures

In addition to the disclosures required by IFRS, for purposes of comparison STRATEC also reports its EBIT and EBITDA figures following adjustment for one-off items. Together with sales, these adjusted earnings figures represent the key figures referred to for internal management purposes. One-off items are defined in this respect as significant income and expense items incurred outside the framework of customary business activities and/or of a non-recurring nature. Further details can be found in section 'B. Business report – Position' in the Group Management Report.

C. NOTES TO THE CONSOLIDATED BALANCE SHEET

(1) Goodwill and other intangible assets

Intangible assets developed as follows in the 2021 financial year:

Balance at 12.31.2021	37,996	19,068	61,159	5,023	2,515	24,685	6,969	146	157,561
Currency differences	136	-72	-53	0	-37	130	26	0	130
Disposals	0	4,437	0	0	0	0	2,301	0	6,738
Additions	0	0	9,637	0	0	0	536	127	10,300
Acquisition and manufacturing costs Balance at 01.01.2021	37,860	23,577	51,575	5,023	2,552	24,555	8,708	19	153,869
	Goodwill € 000s	Acquired technologies € 000s	Internally generated intangible assets € 000s	Acquired patents € 000s	Acquired trademarks € 000s	Acquired customer bases € 000s	Other rights and values € 000s	Advance payments € 000s	Total € 000s

	Goodwill € 000s	Acquired technologies € 000s	Internally generated intangible assets € 000s	Acquired patents € 000s	Acquired trademarks € 000s	Acquired customer bases € 000s	Other rights and values € 000s	Advance payments € 000s	Total € 000s
Accumulated amortization and impairments Balance at 01.01.2021	0	15,198	20,032	1,499	1,212	20,552	6,763	0	65,256
Additions to amortization	0	2,071	2,545	334	259	1,893	1,411	0	8,513
Impairments	0	0	1,047	0	0	0	0	0	1,047
Disposals	0	4,437	0	0	0	0	2,301	0	6,738
Currency differences	0	-59	65	0	-25	112	24	0	117
Balance at 12.31.2021	0	12,773	23,689	1,833	1,446	22,557	5,897	0	68,195
Carrying amounts at 12.31.2021	37,996	6,295	37,470	3,190	1,069	2,128	1,072	146	89,366

The goodwill results from the acquisitions of the companies in the Diatron Group, STRATEC Consumables GmbH, STRATEC Biomedical USA, Inc., STRATEC Biomedical UK, Ltd., and STRATEC Molecular GmbH.

The carrying amount of technologies includes the technologies relating to technical solutions for decentralized laboratory analyses in the field of hematology and clinical chemicals identified upon the acquisition of the Diatron Group and the technologies for smart consumables, particularly in the fields of nanostructuring, micro-structuring, coating, and plastics production, identified upon the acquisition of STRATEC Consumables.

The carrying amount for internally generated intangible assets includes both development expenses capitalized for proprietary development projects (€ 35,531k; previous year: € 30,161k), and development expenses capitalized for development cooperations within the OEM partnering business model (€ 1,939k; previous year: € 1,382k). Of the intangible assets recognized for proprietary development projects, an amount of € 15,885k (previous year: € 3,656k), of which € 300k (previous year: € 706k) for development cooperations, was completed as of the balance sheet date. Reference is also made to the information in Section 'B. Accounting policies applied – Recognition of sales, cost of sales, research and development expenses'.

The carrying amount for other rights and values includes software and licenses acquired.

Borrowing costs of € 18k were recognized as a component of costs in accordance with IAS 23 (Borrowing Costs) in the 2021 financial year (previous year: € 80k).

In the consolidated statement of comprehensive income, amortization on internally generated intangible assets, technologies, and other rights and values has been recognized under cost of sales or within the individual functional divisions in line with its causation.

In the 2021 financial year, an impairment loss of € 1,047k was recognized on internally generated intangible assets associated with proprietary development projects. This item was attributable to the Diatron segment. The events and circumstances leading to this impairment result from the decision taken by the Board of Management to initially suspend one development project and, if appropriate, to continue with it at a later point in time. This decision was taken to account for the fact that the project would not meet the technical and economic performance capacity expected of it by STRATEC in the medium term and to optimize the allocation of resources.

Individual intangible assets with carrying amounts of more than € 2.0 million at the balance sheet date on December 31, 2021 and thus, alongside goodwill and the intangible assets acquired upon the acquisition of the Diatron Group and STRATEC Consumables GmbH, of material significance for the consolidated financial statements of STRATEC comprise the following items:

	Carrying amount € 000s	Project phase
Proprietary development projec	9,626	in amortization
Proprietary development projec	5,618	in development
Proprietary development projec	4,350	in development
Proprietary development projec	2,657	in development
Proprietary development projec	2,066	in development
Proprietary development projec	2,300	in development
Total	26,617

Intangible assets developed as follows in the 2020 financial year:

			Internally
	Goodwill € 000s	Acquired technologies € 000s	generated intangible assets € 000s	Acquired patents € 000s	Acquired trademarks € 000s	Acquired customer bases € 000s	Other rights and values € 000s	Advance payments € 000s	Total € 000s
Acquisition and manufacturing costs Balance at 01.01.2020	40,674	25,005	46,982	5,023	2,809	26,280	8,609	21	155,403
Additions	0	0	10,448	0	0	0	562	0	11,010
Disposals	0	0	1,193	0	0	0	450	0	1,643
Reclassifications	0	0	0	0	0	0	33	0	33
IFRS 5 reclassifications	-99	0	-4,216	0	0	0	0	0	-4,315
Currency differences	-2,715	-1,428	-446	0	-257	-1,725	-46	-2	-6,619
Balance at 12.31.2020	37,860	23,577	51,575	5,023	2,552	24,555	8,708	19	153,869

Carrying amounts at 12.31.2020	37,860	8,379	31,543	3,524	1,340	4,003	1,945	19	88,613
Balance at 12.31.2020	0	15,198	20,032	1,499	1,212	20,552	6,763	0	65,256
Currency differences	0	-887	-77	0	-105	-1,432	-34	0	-2,535
IFRS 5 reclassifications	0	0	-211	0	0	0	0	0	-211
Reclassifications	0	0	0	0	0	0	0	0	0
Disposals	0	0	240	0	0	0	450	0	690
Additions to amortization	0	2,106	1,598	333	264	4,827	1,253	0	10,381
Accumulated amortization and impairments Balance at 01.01.2020	0	13,979	18,962	1,166	1,053	17,157	5,994	0	58,311
	Goodwill € 000s	Acquired technologies € 000s	Internally generated intangible assets € 000s	Acquired patents € 000s	Acquired trademarks € 000s	Acquired customer bases € 000s	Other rights and values € 000s	Advance payments € 000s	Total € 000s

(2) Right-of-use assets

Right-of-use assets showed the following developments in the 2021 financial year: Other equipment, plant and office equipment

	Land and buildings € 000s	Vehicles € 000s	Office equipment € 000s	Total € 000s
Cost of acquisition Balance at 01.01.2021	12,874	635	121	13,630
Additions	294	334	0	628
Disposals	48	204	0	252
Currency differences	-47	1	0	-46
Balance at 12.31.2021	13,073	766	121	13,960

	Other equipment, plant and office equipment
	Land and buildings € 000s	Vehicles € 000s	Office equipment € 000s	Total € 000s
Accumulated depreciation Balance at 01.01.2021	3,168	316	47	3,531
Additions	1,713	232	23	1,968
Disposals	48	183	0	231
Currency differences	-28	0	0	-28
Balance at 12.31.2021	4,805	365	70	5,240

Carrying amount at 12.31.2021	8,268	401	51	8,720

Right-of-use assets showed the following developments in the 2020 financial year:

	Other equipment, plant and office equipment
	Land and buildings € 000s	Vehicles € 000s	Office equipment € 000s	Total € 000s
Cost of acquisition Balance at 01.01.2020	9,793	558	121	10,472
Additions	4,954	172	0	5,126
Disposals	72	94	0	166
IFRS 5 reclassifications	-1,381	0	0	-1,381
Currency differences	-420	-1	0	-421
Balance at 12.31.2020	12,874	635	121	13,630
Accumulated depreciation Balance at 01.01.2020	1,681	185	23	1,889
Additions	1,776	227	24	2,027
Disposals	19	94	0	113
IFRS 5 reclassifications	-187	0	0	-187
Currency differences	-83	-2	0	-85
Balance at 12.31.2020	3,168	316	47	3,531
Carrying amount at 12.31.2020	9,706	319	74	10,099

For information about the corresponding lease liabilities, please see Section 'C. Notes to the consolidated balance sheet (12) Non-current and current financial liabilities'.

(3) Property, plant and equipment

Property, plant and equipment developed as follows in the 2021 financial year:

				Prepayments made and
	Land and buildings € 000s	Technical equipment and machinery € 000s	Other equipment, plant and office equipment € 000s	assets under construction € 000s	Total € 000s
Acquisition and manufacturing costs Balance at 01.01.2021	41,406	12,434	35,983	6,025	95,848
Additions	2,013	1,880	3,197	2,842	9,932
Disposals	0	0	902	0	902
Reclassifications	63	573	1,311	-1,947	0
Currency differences	399	-27	140	-10	502
Balance at 12.31.2021	43,881	14,860	39,729	6,910	105,380

	Land and buildings € 000s	Technical equipment and machinery € 000s	Other equipment, plant and office equipment € 000s	Prepayments made and assets under construction € 000s	Total € 000s
Accumulated depreciation and impairments Balance at 01.01.2021	6,419	9,648	24,411	0	40,478
Additions to depreciation	1,435	1,270	4,021	0	6,726
Disposals	0	0	827	0	827
Reclassifications	0	0	0	0	0
Currency differences	135	-9	139	0	265
Balance at 12.31.2021	7,989	10,909	27,744	0	46,642
Carrying amounts at 12.31.2021	35,892	3,951	11,985	6,910	58,738

No borrowing costs were capitalized as a component of cost in accordance with IAS 23 (Borrowing Costs) in the 2021 financial year (previous year: € 183k).

As in the previous year, it was not necessary to recognize any impairment losses in the 2021 financial year.

Property, plant and equipment developed as follows in the 2020 financial year:

	Land and buildings € 000s	Technical equipment and machinery € 000s	Other equipment, plant and office equipment € 000s	Prepayments made and assets under construction € 000s	Total € 000s
Acquisition and manufacturing costs Balance at 01.01.2020	30,122	11,673	31,940	8,684	82,419
Additions	7,022	331	2,981	4,176	14,510
Disposals	0	39	255	0	294
Reclassifications	4,298	556	1,928	-6,815	-33
IFRS 5 reclassifications	0	0	-393	0	-393
Currency differences	-36	-87	-218	-20	-361
Balance at 12.31.2020	41,406	12,434	35,983	6,025	95,848

				Prepayments made and assets under
		Technical equipment and machinery	Other equipment, plant
	Land and buildings		and office equipment	construction	Total
	€ 000s	€ 000s	€ 000s	€ 000s	€ 000s
Accumulated depreciation and impairments Balance at 01.01.2020	5,415	8,429	21,237	0	35,081
Additions to depreciation	1,011	1,285	3,782	0	6,078
Disposals	0	29	200	0	229
Reclassifications	0	0	0	0	0
IFRS 5 reclassifications	0	0	-285	0	-285
Currency differences	-7	-37	-123	0	-167
Balance at 12.31.2020	6,419	9,648	24,411	0	40,478
Carrying amounts at 12.31.2020	34,987	2,786	11,572	6,025	55,370

(4) Inventories

Raw materials and supplies

Raw materials and supplies amounted to € 43,232k as of December 31, 2021 (previous year: € 35,857k). In the 2021 financial year, income of € 765k (previous year: € 134k) and expenses of € 1,227k (previous year: € 594k) were recognized through profit or loss under cost of sales for changes in writedowns of raw materials and supplies. The resultant earnings items were attributable to diminished usability risks.

Unfinished products and contract fulfilment costs

These items are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Unfinished products	15,384	14,938
Contract fulfilment costs	18,754	9,369
Total	34,138	24,307

Income of € 364k (previous year: € 698k) and expenses of € 471k (previous year: € 24k) resulting from changes in writedowns of unfinished products were recognized through profit or loss under cost of sales in the 2021 financial year.

Information about the accounting treatment of contract fulfilment costs in connection with development cooperations can be found in Section 'B. Accounting policies applied – Recognition of sales, cost of sales, research and development expenses'.

Finished products, merchandise and prepayments made

These items are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Finished products	9,460	5,847
Merchandise	650	1,006
Prepayments made	1,288	1,008
Total	11,398	7,861

Income of € 80k (previous year: € 40k) and expenses of € 526k (previous year: € 53k) resulting from changes in writedowns of finished products were recognized through profit or loss under cost of sales in the 2021 financial year.

Of the items recognized within inventories, the overwhelming share is expected to be realized within a period of twelve months after the balance sheet date. One exception relates to contract fulfilment costs of € 15,792k (previous year: € 7,768k), whose realization is only expected after more than twelve months.

(5) Contract assets

The contract assets of € 22,261k (previous year: € 22,642k) involve STRATEC's claims to consideration for work that is completed but not yet invoiced as of the balance sheet date. Contract assets are reclassified as trade receivables when such rights become unconditional. This is generally the case when STRATEC issues or has issued an invoice to the customer.

The change in contract assets in the 2021 financial year was due to the increase in the sales recognized over time for a development cooperation allocated to the Instrumentation segment, as well as to the reduction resulting from customer payments and netting with contract liabilities.

(6) Trade receivables

Of trade receivables (€ 37,184k; previous year: € 34,782k), an amount of € 37,184k (previous year: (€ 34,782k) is due for payment within one year. Customer credit balances have been recognized under financial liabilities.

Trade receivables include receivables of € 13k due from associates (previous year: € 13k). The receivables are structured as follows:

Company providing service	Company receiving service	12.31.2021 € 000s	12.31.2020 € 000s
STRATEC SE	STRATEC Biomedical (Taicang) Co. Ltd.	13	13
Total		13	13

The allowances schedule for trade receivables and contract assets developed as follows:

	2021 € 000s	2020 € 000s
Accumulated allowances at 01.01.	1,285	1,662
Expenses in period under report	200	245
Reversal	-351	-508
Utilized	-12	-7
Currency differences	2	-107
Accumulated allowances at 12.31.	1,124	1,285

Of the accumulated allowances recognized as of December 31, 2021, € 39k relate to contract assets (previous year: € 102k).

As in the previous year, no expenses were recognized through profit or loss in the 2021 financial year for the complete writedown of trade receivables. Also as in the previous year, no writebacks were required.

All income and expenses resulting from changes in allowances and the derecognition of trade receivables were, as in the previous year, recognized under sales-related expenses.

The time band structure of trade receivables and of the allowance recognized for 'expected credit losses' is presented in the following table:

€ 000s	Gross amount	of which: not overdue at balance sheet date		of which: overdue at balance sheet date within following time bands
			up to 60 days	between 60 and 90 days	more than 90 days
12.31.2021	38,256	27,988	6,966	1,469	1,833
Expected credit loss			228	90	767
12.31.2020	35,952	31,077	2,808	534	1,533
Expected credit loss			240	96	847

At STRATEC, 'expected credit losses' have been calculated using a sophisticated process that accounts in particular for different country-specific circumstances, e.g. in terms of overdue items. Furthermore, due account was taken of the fact that STRATEC SE in particular concluded trade credit insurance to minimize default risk and that this covers part of the default risk at subsidiaries. The (expected) premium for the trade credit insurance was referred to as the basis for calculating (expected) credit losses.

(7) Financial assets

Financial assets are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Investments in associates	100	100
Investments in listed companies	1,226	1,248
Forward exchange transactions	0	1,226
Other	3,787	819
Total	5,113	3,393

Investments in associates of € 100k (previous year: € 100k) and other financial assets of € 3,475k (previous year: € 481k) have been recognized under non-current financial assets.

Investments in associates

The composition of investments in associates is presented in Section 'B. Accounting policies applied – Scope of consolidation'. The amounts recognized in the balance sheet developed as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Carrying amount at 01.01.	100	160
Disposals	0	-59
Currency differences	0	-1
Total	100	100

The disposals in the 2020 financial year resulted from the transfer of the shares held in Sanguin International Inc. in connection with the disposal of STRATEC Biomedical UK, Ltd.

Investments in listed companies

The shares held in listed companies have been measured at their closing prices at the balance sheet date on the stock market with the highest trading volumes.

As in the previous year, no shares in listed companies were acquired in the 2021 financial year.

Of the shares held in listed companies, no shares were sold in the 2021 financial year. In the previous year, shares were sold at a disposal price of € 72k. The profit of € 11k resulting from the sale was recognized through profit or loss in the 'Other financial result' in the consolidated statement of comprehensive income.

The net expenses of € 22k (previous year: income of € 402k) resulting from the measurement of investments in listed companies as of the balance sheet date has been recognized through profit or loss in the 'Other financial result' in the consolidated statement of comprehensive income.

Forward exchange transactions

For information about the measurement of forward exchange transactions as of the balance sheet date in the 2021 financial year, please see Section 'C. Notes to the consolidated balance sheet (12) Non-current and current financial liabilities'. The financial assets from forward exchange transactions reported in the previous year resulted from the measurement as of the balance sheet date of those derivative financial instruments used to hedge exchange rate risks. The gains of € 1,237k resulting from measurement as of the balance sheet date in the previous year were recognized through profit or loss under 'Other operating income' in the consolidated statement of comprehensive income.

Other

The 'Other' line item mainly includes payments of € 3,000k (previous year: € 0k) to secure trade receivables. These payments received are subject to contractually agreed restrictions on disposal, as a result of which STRATEC may only access the funds if certain conditions materialize. Corresponding liabilities of the same amount have been recognized under non-current financial liabilities. Furthermore, this line item includes claims of € 459k for rental deposits (previous year: € 463k), receivables of € 60k due from employees (previous year: € 90k), loans of € 26k (previous year: € 29k), and creditors with debit balances of € 13k (previous year: € 60k).

(8) Other receivables and assets

Other receivables and assets are structured as follows:

Sales tax	€ 000s 6,940	€ 000s 6,207
Deferred expenses	1,868	1,767
Other	269	273
Total	9,077	8,247

The other receivables and other assets are neither impaired nor overdue.

(9) Shareholders' equity

The individual components of shareholders' equity, their development in 2020 and 2021, and dividends paid have been presented in the consolidated statement of changes in equity.

Share capital

The share capital of STRATEC SE amounted to € 12,128k at the balance sheet date (previous year: € 12,103k). The share capital is divided into 12,127,995 ordinary shares (previous year: 12,102,945 ordinary shares). The shares have been paid up in full and are registered shares. Each share entitles its holder to one voting right.

The increase in share capital by € 25k (previous year: € 73k) was due to the issue of 25,050 shares for subscription from conditional capitals in the context of stock option programs (previous year: 72,650).

Authorized capital

Pursuant to § 4 (4.5) of the Articles of Association, the Board of Management is authorized, subject to approval by the Supervisory Board, to increase the company's share capital on one or more occasions prior to June 7, 2025 by a maximum amount of up to € 2,400,000.00 by issuing up to a maximum of 2,400,000 new shares in return for cash or non-cash contributions (Authorized Capital 2020/I). In general, shareholders must be granted subscription rights. In specific circumstances outlined in the Articles of Association, however, the Board of Management is entitled to exclude such subscription rights for a total amount of up to 10% of existing share capital upon this authorization becoming effective or, if lower, of the equivalent amount upon this authorization being acted on. Authorized Capital amounted to € 2,400,000.00 as of December 31, 2021.

Conditional capitals

§ 4 (4.6) Paragraph 1 of the Articles of Association provides for Conditional Capital VI/2013. This conditional capital increase serves to grant subscription rights (stock options) up to June 5, 2018 on the basis of the resolution adopted by the Annual General Meeting on June 6, 2013. Pursuant to the resolution adopted by the Annual General Meeting on May 30, 2018, Conditional Capital VI/2013 was reduced to € 190,000.00 and the authorization to grant stock options dated June 6, 2013 rescinded to the extent that no further new option rights may be granted; only existing option rights may be exercised. The new shares have profit entitlement from the beginning of the financial year in which they are issued. Conditional Capital VI/2013 amounted to € 5,000.00 as of December 31, 2021.

Furthermore, § 4 (4.6) Paragraph 2 of the Articles of Association provides for Conditional Capital VIII/2018. This conditional capital increase serves exclusively to grant subscription rights (stock options) up to May 29, 2023 on the basis of the resolution adopted by the Annual General Meeting on May 30, 2018. The conditional capital increase is only executed to the extent that bearers of stock options exercise their subscription rights. The new shares have profit entitlement from the beginning of the financial year in which they are issued. Conditional Capital VIII/2018 amounted to € 810,000.00 as of December 31, 2021.

Furthermore, § 4 (4.7) of the Articles of Association provides for Conditional Capital IX/2020 of € 800,000.00. This conditional capital increase serves exclusively to grant up to 800,000 new shares to the bearers or creditors of convertible or warrant bonds issued by the company or by direct or indirect majority shareholdings of the company by June 7, 2025 on the basis of the resolution adopted by the Annual General Meeting on June 8, 2020. Conditional Capital IX/2020 amounted to € 800,000.00 as of December 31, 2021.

Total conditional capital therefore amounted to € 1,615,000.00 as of December 31, 2021 (previous year: € 1,643,550.00).

Stock option programs

As in the previous year, the company had two stock option programs (equity-settled share-based payment) as of December 31, 2021. These programs are especially well-suited to provide a sustainable performance incentive for members of the Board of Management, employees of STRATEC SE, and for members of the management and employees of companies associated with STRATEC SE. They thus help increase the value of the company in the interests both of the company and of its shareholders.

In the financial years 2015 to 2017, the individual members of the Board of Management were not granted any stock options. Rather than stock options, they were granted stock appreciation rights (cash-settled share-based payment – SARs) as a variable remuneration component of a long-term incentive nature. Since the 2018 financial year, a modification to this approach means that the company no longer exclusively grants stock appreciation rights (SARs), but has once again granted stock options at a ratio of 75% (SARs) to 25% (stock options).

The following specific conditions apply in respect of qualifying periods, performance targets, and the lapsing of rights:

The stock options granted may be exercised in full at the earliest following the expiry of a qualifying period of four years and provided that STRATEC's share has risen in value by at least twenty percent compared with the exercise price between the date of the option rights being granted and the date marking the expiry of the qualifying period. Following the expiry of a seven-year term after being granted, the option rights lapse without compensation.

The individual stock option programs, fair value calculations using the Black-Scholes option pricing model and using Monte Carlo simulations, and the calculation of the related personnel expenses in the individual periods (taking due account of personnel turnover) have mainly been based on the following key parameters (with expected volatility derived from historic volatility figures):

Granted in:	2021	2020	2019	2018	2017
Option rights granted (number of shares)	43,850	43,100	47,350	47,850	31,550
Weighted exercise price (in €)	119.66	76.81	59.76	60.05	51.73
Expected share price volatility in %	39.29 to 40.40	35.63 to 38.39	35.78 to 36.20	33.72 to 35.83	29.70 to 34.18
Expected dividend yield in %	0.60 to 0.78	0.66 to 1.28	1.11 to 1.54	1.09 to 1.45	1.69
Risk-free interest rate in %	-0.68 to -0.44	-0.77 to -0.51	-0.70 to -0.07	0.08 to 0.34	0.22 to 0.37
Assumed turnover of subscription beneficiaries in %	0.50 to 5.00	0.50 bis 5.00	0.50 to 5.00	0.50 to 5.00	5.00
Fair value of option rights at grant date (in € 000s)	1,608	1,016	731	787	151

The weighted average share price has been accounted for at € 118.56 in the fair value calculation of the option rights granted in the 2021 financial year (previous year: € 80.38).

In respect of the exercise behavior shown by the program participants, it has been assumed that they will exercise their options in line with their economic interests.

The following options schedule provides an overview of the development in stock option rights in the 2020 to 2021 financial years:

	Board of Management			Employees		Total
Stock option rights	No. of options	Weighted exercise price in €	No. of options	Weighted exercise price in €	No. of options	Weighted exercise price in €
Outstanding on 12.31.2020	30,000	58.91	129,850	63.87	159,850	6.94
of which exercisable	0	n/a	500	52.61	500	52.61
Granted	10,000	113.00	33,850	121.47	43,850	119.54
Exercised	0	n/a	25,050	50.51	25,050	50.51
Lapsed	0	n/a	0	n/a	0	n/a
Forfeited	0	n/a	10,500	62.93	10,500	62.93
Outstanding on 12.31.2021	40,000	72.43	128,150	81.77	168,150	79.55
of which exercisable	0	n/a	0	n/a	0	n/a

		Board of Management		Employees		Total
Stock option rights	No. of options	Weighted exercise price in €	No. of options	Weighted exercise price in €	No. of options	Weighted exercise price in €
Outstanding on 12.31.2019	60,000	40.30	140,400	55.17	200,400	50.72
of which exercisable	40,000	31.87	10,600	41.07	50,600	33.80
Granted	10,000	62.40	33,100	81.17	43,100	76.81
Exercised	40,000	31.87	32,650	46.83	72,650	38.59
Lapsed	0	n/a	1,500	31.32	1,500	31.32
Forfeited	0	n/a	9,500	59.31	9,500	59.31
Outstanding on 12.31.2020	30,000	58.91	129,850	63.87	159,850	62.94
of which exercisable	0	n/a	500	52.61	500	52.61

The fair value of the stock option rights has been expensed over the agreed qualifying periods and has resulted in an endowment of the same amount in the capital reserve. This led to expenses of € 919k in the 2021 financial year (previous year: € 593k). Given the consistent, low level of personnel turnover, it has not been necessary in subsequent periods to adjust the expenses calculated upon the respective rights being granted.

No stock option rights were exercisable as of December 31, 2021. The 500 stock option rights exercisable in the previous year entitled their bearers to acquire a total of up to 500 shares at a total exercise price of € 26k.

The weighted average listed price on the Frankfurt Stock Exchange of those stock options exercised in the period under report since their respective issue amounted to € 130.34 (previous year: € 110.01).

The weighted exercise prices and weighted average remaining contractual terms of the stock options outstanding at the end of the period under report have been presented in the following table:

2021

Range in €	Number of stock options	Weighted exercise price in €	Weighted remaining contractual term in months
55.01 – 60.00	59,050	56.51	49.5
60.01 – 65.00	32,750	62.19	60.9
65.01 – 70.00	17,150	67.59	57.4
70.01 – 75.00	5,000	71.18	37.6
80.01 – 85.00	1,000	82.36	66.9
110.01 – 115.00	30,000	113.00	75.3
120.01 – 125.00	2,800	120.48	70.0
125.01 – 130.00	9,350	125.92	74.3
130.01 – 135.00	7,050	134.08	83.2
135.01 – 140.00	4,000	138.84	74.1
Total	168,150	79.55	60.6

2020

Range in €	Number of stock options	Weighted exercise price in €	Weighted remaining contractual term in months
45.01 – 50.00	17,000	48.13	37.5
50.01 – 55.00	4,300	51.82	43.3
55.01 – 60.00	66,300	56.79	60.4
60.01 – 65.00	36,250	62.12	71.2
65.01 – 70.00	20,650	67.83	68.3
70.01 – 75.00	5,000	71.18	49.7
80.01 – 85.00	1,000	82.36	79.1
120.01 – 125.00	2,800	120.48	82.1
125.01 – 130.00	6,550	126.12	83.2
Total	159,850	62.94	62.1

Employee participation program

As in the previous year, all eligible employees at STRATEC SE received four employee shares within the employee participation program as part of their remuneration in the 2021 financial year. This involved transferring a total of 1,680 treasury stocks held by STRATEC SE to the respective accounts of the participating employees (previous year: 1,416 treasury stocks). In connection with the employee participation program, an amount of € 222k was recognized both as expenses and in the capital reserve (previous year: € 109k). Due to the transfer of treasury stocks, the capital reserve was subsequently reduced by € 30k (previous year: € 24k).

Capital reserve

The capital reserve of € 32,217k (previous year: € 29,866k) mainly includes the premium from the issuing of shares, less the costs of equity procurement after taxes. Moreover, the capital reserve also includes the benefit from the granting of stock options and from the employee participation program recognized as expenses, as well as the differential amount from the buyback and reissue of treasury stock.

Revenue reserves

Revenue reserves include accumulated net income generated in the past, to the extent that this has not been distributed, transfers from other equity, as well as free revenue reserves. The free revenue reserves arose due to allocations made in the context of the statutory authorization of the Board of Management and Supervisory Board of STRATEC SE to determine the appropriation of profit pursuant to § 58 (2) of the German Stock Corporation Act (AktG).

Revenue reserves are thus structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Free revenue reserves	19,392	19,392
Accumulated net income	145,729	116,660
Total	165,121	136,052

Accumulated net income developed as follows in the year under report:

	€ 000s
Accumulated net income at 12.31.2020	116,660
Consolidated net income in 2021	39,958
Distribution (dividend for 2020)	-10,889
Accumulated net income at 12.31.2021	145,729

Other equity

The other equity of € -3,672k (previous year: € -5,411k) includes the currency translation reserve, accumulated actuarial gains and losses from the remeasurement of pensions, and the resultant deferred taxes.

The currency translation reserve of € -1,592k reported as of the balance sheet date (previous year: € -3,097k) mainly relates to currency differences arising upon the translation of the separate financial statements of companies with functional currencies other than the euro, as well as to the translation of group-internal net investments within equity as of the balance sheet date. The change is recognized in the 'Currency translation differences from the translation of foreign operations' line item in the consolidated statement of comprehensive income. In connection with the deconsolidation of STRATEC Biomedical UK, Ltd., an amount of € 1,278k was deducted from the currency translation reserve in the 2020 financial year and recognized with a due charge on earnings in the 'Earnings from discontinued operations' line item.

The amounts recognized in other comprehensive income (OCI) within equity are structured as follows:

	Balance at 01.01.2021 € 000s	OCI € 000s	Balance at 12.31.2021 € 000s
Pensions	-2,726	299	-2,427
Deferred taxes	412	-65	347
Currency reserve	-3,157	1,595	-1,562
Deferred taxes	60	-90	-30
Total	-5,411	1,739	-3,672

	Balance at 01.01.2020 € 000s	OCI € 000s	Balance at 12.31.2020 € 000s
Pensions	-2,325	-401	-2,726
Deferred taxes	469	-57	412
Currency reserve	1,606	-4,763	-3,157
Deferred taxes	-119	179	60
Total	-369	-5,042	-5,411

Treasury stocks

By resolution of the Annual General Meeting held on June 8, 2020, STRATEC SE was authorized until June 7, 2025 to acquire treasury stocks on one or several occasions and in total or in partial amounts up to a total of ten percent of existing share capital as of June 8, 2020 and to use these for every purpose permitted within the statutory limitation and consistent with the respective conditions. The authorization may not be drawn on to trade in treasury stocks. Together with the treasury stocks already acquired on the basis of previous authorizations and still possessed by the company, the treasury stocks acquired on the basis of this authorization may not at any time account for more than ten percent of the respective share capital. The treasury stocks may be acquired on the stock market, by way of a public offer, by way of a public request to submit sales offers, or by issuing pre-emptive rights to shareholders.

As in the previous year, STRATEC SE made no use of this authorization to acquire treasury stocks in 2021. The company currently has no plans to retire the shares already acquired, but rather intends to retain the financial scope to make acquisitions and safeguard its growth strategy. Furthermore, STRATEC SE reserves the right to use the treasury stocks already acquired for other purposes consistent with the authorization provided by the Annual General Meeting.

STRATEC SE held 1,899 treasury stocks at the balance sheet date (previous year: 3,579). The change of 1,680 was due to treasury stocks being surrendered in connection with the employee participation program. The treasury stocks have been recognized at cost at a total amount of € 35k (previous year: € 65k) as a separate line item within equity.

Appropriation of earnings

The German Stock Corporation Act (AktG) requires the dividends to be distributed to shareholders to be calculated on the basis of the net income reported in the annual financial statements of STRATEC SE prepared in line with the German Commercial Code (HGB).

In the 2021 financial year, a dividend of € 0.90 (previous year: € 0.84) was paid per share with dividend entitlement for the 2020 financial year, corresponding to a total distribution of € 10,889k (previous year: € 10,101k).

With the approval of the Supervisory Board, the Board of Management proposes that, of the net income of € 79,360k calculated for STRATEC SE in line with the German Commercial Code, an amount of € 11,519,791.20, equivalent to € 0.95 per share with dividend entitlement, should be distributed, and that the remaining amount of € 67,840k should be carried forward. The proposed dividend is dependent on approval by the Annual General Meeting and has not been recognized as a liability in the consolidated financial statements.

As in the previous year, upon preparing the annual financial statements of STRATEC SE in line with the German Commercial Code (HGB) as of December 31, 2021, the Board of Management and Supervisory Board did not allocate any amount from the net income for 2021 to the free revenue reserves.

(10) Provisions for pensions

The company pension scheme can basically be divided into defined contribution plans and defined benefit plans.

In defined contribution plans, STRATEC does not enter into any legal or constructive obligations over and above its obligation to pay contributions to an external state or private pension provider. These contributions are recognized within personnel expenses upon becoming due for payment. The related expenses totaled € 4,671k in the 2021 financial year (previous year: € 4,456k). This total includes employer contributions of € 2,715k to the German state pension system (previous year: € 2,589k).

Furthermore, as of the balance sheet date STRATEC had defined benefit plan commitments for members of the Board of Management in Germany and for employees in Austria and Switzerland. Reinsurance policies have been concluded in some cases to cover the pension obligation in Germany. The pension plans in Switzerland are executed in accordance with legal requirements on the basis of an external pension fund. In connection with defined benefit plans, STRATEC is exposed not only to general actuarial risks, such as interest rate risk, pension and income growth risks, and risks resulting from rising life expectancy, but also to capital market risks resulting from the investment of plan assets.

The pension obligation is offset against the pledged assets of the reinsurance policies and stated on a net basis in the consolidated balance sheet.

The present value of pension obligations is calculated using the actuarial procedure known as the projected unit credit method. In this, future obligations are measured on the basis of the prorated vested claims attained by the end of the financial year, taking due account of assumed trends.

The calculation of the present value of pension obligations has been based on the following actuarial assumptions:

	Germany 12.31.2021	Austria 12.31.2021	Switzerland 12.31.2021
Discount rate	1.08%	1.00%	0.40%
Future income increases	0.00%	2.00%	1.80%
Future pension increases	0.00%– 1.00%	0.00%	0.00%
Personnel turnover rate	0.50%– 1.50%	0.00%	*
Average duration	* * *	12.0 years	* *

	Germany 12.31.2020	Austria 12.31.2020	Switzerland 12.31.2020
Discount rate	0.57%	0.70%	0.20%
Future income increases	0.00%	1.50%	1.80%
Future pension increases	0.00%– 1.00%	0.00%	0.00%
Personnel turnover rate	0.50%– 1.50%	0.00%	*
Average duration	* * *	12.5 years	* *

* Personnel turnover rate graded for men, women, and age groups. Pursuant to the Swiss Federal Act on Retirement, Dependant Care, and Invalidity Pensions (BVG), the turnover rate for men ranges from 1.66% to 31.00% (previous year: 1.30% to 28.53%); the rate for women ranges from 2.15% to 27.58% (previous year: 1.52% to 24.12%).

* * The range of average duration amounts to 19.0 years at STRATEC Switzerland AG (previous year: 22.0 years) and to 18.8 years at STRATEC Services AG (previous year: 22.3 years).

* * * The average duration for pension commitments with insurance-based execution channels amounts to 21.5 years (previous year: 22.9 years) while that for direct pension commitments amounts to 10.8 years (previous year: 11.8 years).

As in the previous year, the main life expectancy assumptions for Germany have been taken from the biometric '2018 G Guidelines' published by Prof. Dr. Klaus Heubeck. For Austria, also as in the previous year, these assumptions have been based on the 'AVÖ 2018-P Pagler & Pagler Generationentafel'. For Switzerland they have been based on the 'BVG 2020 Generationstafel' (previous year: 'BVG 2015 Generationstafel').

The assumptions stated for the calculation of the present value of pension obligations as of the previous year's balance sheet date also apply for the calculation of interest expenses and current service cost in the following financial year.

The present value of the vested defined benefit obligations (DBO) and plan assets changed as follows in the financial year under report:

	2021 € 000s	2020 € 000s
Present value of defined benefit obligations (DBO) as of 01.01.	13,345	11,008
Transfers due to change of employer	1,049	651
Current service cost	986	911
Retrospective service cost	-356	-28
Compounding of pension obligations	46	62
Payments made	-30	-162
Employee contributions to pension plan	404	316
Remeasurement of pension obligations Actuarial gains (-) / losses (+) due to changes in
• financial assumptions	-646	299
• demographic assumptions	-620	0
• experience adjustments	621	271
Currency differences	476	17
Present value of defined benefit obligations (DBO) as of 12.31.	15,275	13,345

	2021	2020
	€ 000s	€ 000s
Fair value of plan assets
as of 01.01.	7,725	5,931
Transfers due to change of employer	1,049	651
Employer contributions to plan assets	716	615
Employee contributions to plan assets	404	316
Interest income on plan assets	26	33
Remeasurement of plan assets
• Expenses for (previous year: income from) plan assets (excluding interest income)	-346	169
Currency differences	328	10
Fair value of plan assets as of 12.31.	9,902	7,725

To calculate the financing status and the net obligation, the present value of the externally financed obligations is compared with the fair value of the plan assets.

The pension expenses recognized through profit or loss in the income statement for defined benefit commitments in the period under report comprise the following items:

	31.12.2021 € 000s	31.12.2020 € 000s
Pension plans in Germany • Pension plans in Germany • Fair value of plan assets	2,802 2,403	2,774 2,340
Financing status = net obligation	399	434
Pension plans in Austria • Present value of pension obligations • Fair value of plan assets	1,553 0	1,481 0
Financing status = net obligation	1,553	1,481
Pension plans in Switzerland • Present value of pension obligations • Fair value of plan assets	10,920 7,499	9,090 5,385
Financing status = net obligation	3,421	3,705
Total • Present value of pension obligations • Fair value of plan assets	15,275 9,902	13,345 7,725
Financing status = net obligation	5,373	5,620

	2021 € 000s	2020 € 000s
Current service cost	986	911
Retrospective service cost	-356	-28
Compounding of pension obligations	46	62
Interest income on plan assets	-26	-33
Share of pension expenses recognized in income statement	650	912

Service cost is included in the individual functional areas, while other components of the share of pension expenses recognized in the income statement are included in the financial income or financial expense line items within net financial expenses.

The following amounts have been recognized in equity under 'Other comprehensive income' in the consolidated statement of comprehensive income:

The net obligation developed as follows:

	2021 € 000s	2020 € 000s
Net obligation at 01.01.	5,620	5,077
Share of pension expenses recognized in income statement	650	912
Amounts recognized in OCI	-299	401
Payments made	-30	-162
Employer contributions to plan assets	-716	-615
Currency differences	148	7
Net obligation at 12.31.	5,373	5,620

	2021 € 000s	2020 € 000s
Remeasurement of net obligation:
Income from plan assets (excluding interest income)	346	-169
Actuarial gains (-) / losses (+) due to changes in
• financial assumptions • demographic assumptions • experience adjustments	-646 -620 621	299 0 271
Amounts recognized in OCI	-299	401

The plan assets relate to pension plans in Germany and Switzerland. In Germany, these reinsurance policies predominantly invest in fixed-income securities. When selecting such securities, the rating and equity resources of the issuer are accounted for, among other factors. The investment strategy predominantly aims to generate ongoing interest income and to ensure capital preservation with a low degree of volatility. No prices listed on an 'active market' are available for the reinsurance policies. The Swiss companies are affiliated to the comprehensive insurance contract for the BVG collective foundation ('Sammelstiftung') at Allianz Suisse, while a reinsurance contract is in place between the Sammelstiftung and the life insurer Allianz Suisse Lebensversicherungs-Gesellschaft.

Depending on the specific country, the key actuarial assumptions used to calculate the pension obligations at STRATEC include the parameters presented in the sensitivity analyses below, namely the discount rate, future income increases, and the interest rate on retirement assets. The sensitivity analyses show how the defined benefit obligation would have been influenced by potential changes in the corresponding assumptions if all other assumptions had remained unchanged.

In Germany, any variation in the respective parameters by 50 basis points would result in the following sensitivities in the present value of the defined benefit obligation:

Germany	2021 € 000s	2020 € 000s
Discount rate +0,50%	-258	-273
Discount rate -0,50%	294	312

In Austria, any variation in the respective parameters by 50 basis points would result in the following sensitivities in the present value of the defined benefit obligation:

Austria	2021 € 000s	2020 € 000s
Discount rate +0,50%	-89	-89
Discount rate -0,50%	97	102
Future income increases +0,50%	94	100
Future income increases -0,50%	-88	-88

In Switzerland, any variation in the respective parameters by 25 basis points would result in the following sensitivities in the present value of the defined benefit obligation:

Switzerland	2021 € 000s	2020 € 000s
Discount rate +0,25%	-493	-480
Discount rate -0,25%	536	525
Future income increases +0,25%	85	108
Future income increases -0,25%	-85	-107
Interest rate on retirement assets +0,25%	214	192
Interest rate on retirement assets -0,25%	-208	-186

Plan asset endowments by STRATEC of € 1,219k (previous year: € 959k) are expected for the following 2022 financial year. No outgoing payments from plan assets are expected.

(11) Taxes on income

Taxes on income comprise the income taxes paid or owed and deferred taxes in the individual countries. Interest on tax-related back payments and reimbursements are recognized under net financial expenses.

Income tax expenses can be broken down in terms of their origin as follows:

	2021 € 000s	2020 € 000s
Current tax expenses	6,061	4,495
Deferred tax expenses (previous year: income)	813	91
Total	6,874	4,586

Of the deferred tax expenses of € 813k recognized in the consolidated statement of comprehensive income (previous year: income of € 91k), € 210k results from income due to temporary valuation differences (previous year: € 202k) and € 1,023k from expenses due to the recognition through profit or loss of changes in deferred tax assets on tax loss carryovers (previous year: € 293k).

The changes in the deferred tax assets on tax loss carryovers are structured as follows:

	2021 € 000s	2020 € 000s
Income from recognition	0	-432
Income from adjustments	-140	0
Expenses due to utilization	886	47
Expenses due to impairments	277	678
Expenses due to changes	1,023	293
Currency translation	-41	46
Total	982	339

As in the previous year, deferred tax assets of € 3,725k (previous year: € 4,707k) were recognized on tax loss carryovers at STRATEC SE and at two subsidiaries in the 2021 financial year. In the 2021 financial year, deferred tax assets of € 277k on loss carryovers were written down (previous year: € 678k). As in the previous year, these related to STRATEC Consumables GmbH. Given the existence of deferred tax liabilities, the deferred tax assets still recognized at STRATEC Consumables GmbH are deemed to have retained their value. The nominal amount of loss carryovers for which no deferred tax assets were recognized amounts to € 11,720k (previous year: € 9,913k). The unused tax loss carryovers for which no deferred tax assets have been recognized in the balance sheet relate to STRATEC Biomedical USA, Inc., STRATEC Consumables GmbH, and RE Medical Analyzers Luxembourg 2 S.à r.l. Their eligibility to be carried forward is as follows:

	1 to 10 years € 000s	11 to 15 years € 000s	16 to 20 years € 000s	Un limited € 000s	Total € 000s
Loss carryover	941	5,198	605	4,976	11,720
(previous year)	(0)	(3,926)	(2,132)	(3,855)	(9,913)

The tax expenses of € 6,874k reported for the 2021 financial year (previous year: € 4,586k) deviate by € 5,949k (previous year: € 4,455k) from the tax expenses of € 12,823k (previous year: € 9,041k) expected to result from application of the overall tax rate for STRATEC SE (27.38%; previous year: 27.38%) to the Group's earnings before taxes. The overall tax rate results from the corporate income tax rate of 15.00% (previous year: 15.00%), the solidarity surcharge of 5.50% of corporate income tax (previous year: 5.50%), and an average trade tax rate of 11.55% (previous year: 11.55%).

The difference between the tax expenses expected and those reported is attributable to the following items:

	2021 € 000s	2020 € 000s
Earnings before taxes on income	46,832	33,021
Overall tax rate	27.38%	27.38%
Expected tax expenses (-) / income (+)	-12,823	-9,041
Deviations in German and foreign tax rates	6,778	5,581
Impact of increase (-) / decrease (+) in effective tax rates	9	-371
Tax-exempt income (+) / expenses (-) from investments, securities price gains/losses, and dividends	-248	-10
Expenses not deductible for tax purposes less tax settlements	-62	167
IFRS personnel expenses (stock options)	-251	-162
Tax back payments/refunds for previous years and non-period tax expenses/income	-102	241
Write-down of deferred tax assets	-277	-678
Sundry	102	-313
Reported tax expenses (-) / income (+)	-6,874	-4,586

The income tax receivables of € 212k (previous year: € 1,710k) are attributable to prepayments and refunds of taxes on income. The income tax liabilities of € 3,404k (previous year: € 2,774k) relate to current income tax obligations.

Deferred taxes are recognized for the following balance sheet items and factors:

	12.31.2021		12.31.2020
	Deferred tax assets € 000s	Deferred tax liabilities € 000s	Deferred tax assets € 000s	Deferred tax liabilities € 000s
Intangible assets	399	11,632	312	10,747
Right-of-use assets	0	1,764	0	2,015
Property, plant and equipment	156	142	135	224
Non-current financial assets	0	517	0	501
Non-current other receivables and assets	93	0	99	0
Non-current contract assets	371	906	314	1,425
Inventories	348	1,051	320	559
Trade receivables	1,132	615	1,539	233
Receivables from associates	46	765	41	708
Current financial assets	0	16	0	187
Other receivables and assets	31	0	32	0
Current contract assets	4	439	1	862
Non-current financial liabilities	1,772	0	1,930	0
Provisions for pensions	936	43	985	52
Non-current contract liabilities	674	0	146	0
Current financial liabilities	570	41	492	0
Liabilities from associates	446	0	221	0
Current other liabilities	150	0	135	10
Provisions	20	216	6	127
Current contract liabilities	418	0	259	0
Tax loss carryovers	3,725	0	4,707	0
Net investment in foreign operation	22	69	48	28
Currency translation	148	131	126	84
Subtotal	11,461	18,347	11,848	17,762
Netting	-9,559	-9,559	-10,386	-10,386
Amount recognized in consolidated balance sheet	1,902	8,788	1,462	7,376

(12) Non-current and current financial liabilities

Non-current financial liabilities are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Liabilities to banks	71,122	95,524
Lease liabilities	7,441	8,751
Liabilities for personnel-related items	2,055	2,049
Accrued trade payables	0	0
Other	3,156	0
Total	83,774	106,324

Current financial liabilities are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Liabilities to banks	4,713	3,369
Lease liabilities	2,019	1,934
Liabilities for personnel-related items	6,017	5,801
Accrued trade payables	2,704	2,755
Other	400	55
Total	15,853	13,914

Financial liabilities to banks

Liabilities to banks include liabilities of € 36 million (previous year: € 65 million) in connection with a master credit facility with a revolving credit line of up to € 70 million that was concluded with three banks and has a term through to January 31, 2023. The interest payable on the amount effectively drawn down from the master credit facility is based on customary market reference rates plus a margin. The margin is increased by a premium should the company not comply with specified key financials. A commitment fee is payable on amounts not drawn down from the master credit facility.

For the predominant share of financial liabilities to banks, the relevant financing contracts include agreements concerning compliance with specific key financial figures (covenants), particularly with regard to the debt/equity ratio and the equity ratio. These covenants have to be calculated at the end of each quarter, half-year, and full-year and were complied with in each case in the 2021 financial year. Furthermore, the company has entered into various obligations in this regard involving restrictions on assets and provisos concerning further borrowing. In particular, no collateral securities exceeding an amount of € 10 million may be provided to third parties (or specific group companies not party to the guarantee concept for the financing arrangement) unless securities in the same amount are provided to the financing banks.

The aforementioned master credit facility was prematurely replaced by a new master credit facility on January 24, 2022. The new facility has a term until January 22, 2027 and a revolving credit line of up to € 55 million. The new facility has not been included in the maturities and the analysis of such, interest risks, or the sensitivity analysis of cash flows for financial instruments with floating interest rates.

Lease liabilities

In the 2021 financial year, lease liabilities of € 1,836k were repaid (previous year: € 1,847k), while lease interest of € 497k was paid (previous year: € 453k). Leases resulted in a total outflow of funds amounting to € 2,790k in the 2021 financial year (previous year: € 2,765k). With regard to the interest expenses recognized for lease liabilities under net financial expenses in the 2021 financial year, reference is made to the information provided in Section 'C. Notes to the consolidated statement of comprehensive income (23) Net financial expenses'.

Expenses of € 389k for variable lease payments were not included in the measurement of lease liabilities in the 2021 financial year (previous year: € 394k).

Financial liabilities for personnel-related items

Financial liabilities for personnel-related items chiefly comprise obligations of € 7,390k in connection with profit participation schemes (previous year: € 7,031k).

Obligations for profit participation schemes include obligations for short-term performance-related remuneration for employees (€ 1,369k; previous year: € 1,122k), and obligations for short, medium, and long-term performance-related remuneration for the Board of Management (€ 6,021k; previous year: € 5,909k). The obligations for long-term performance-related remuneration for the Board of Management (€ 3,976k; previous year: € 4,121k) correspond to the fair value of the payments expected for the stock appreciation rights (SARs) granted. The fair value has been determined using the binomial tree method based on the measurement principles of a risk-neutral valuation using the Black/Scholes method.

Stock appreciation rights (SARs)

The fair value of the stock appreciation rights (SARs) as of the measurement date on December 31, 2021 was determined on the basis of the following parameters:

Stock appreciation rights (SARs) model parameters	Tranche 1 2021 financial year	Tranche 1 2020 financial year
Issue date	03.08.2021	01.23.2020
Average share price on issue date	107.20 €	64.80 €
Term
Overall term	60.0 months	60.0 months
Remaining term as of 12.31.	50.3 months	36.8 months
Minimum qualifying period
Overall term	24.0 months	24.0 months
Remaining term as of 12.31.	14.3 months	0.8 months
Share price at measurement date	137.80 €	137.80 €
Expected volatility	41.97%	43.26%
Risk-free interest rate	-0.55%	-0.62%
Fair value on issue date	38.05 €	17.55 €
Fair value as of 12.31.	54.40 €	78.14 €

The development in the total number of stock appreciation rights (SARs) in the reporting period is presented below:

Absolute figures	Total at 01.01.2021	Granted	Exercised, lapsed, forfeited	Total at 12.31.2021
Tranche 1 2019	30,000	0	-30,000	0
Tranche 1 2020	30,000	0	0	30,000
Tranche 1 2021	0	30,000	0	30,000
Total	60,000	30,000	-30,000	60,000

The total expenses recognized in the 2021 financial year for equity-settled share-based payments amounted to € 919k (previous year: € 593k) – further information can be found in '(9) Shareholders' equity' in this section – while total expenses for cash-settled share-based payments amounted to € 1,580k (previous year: € 5,151k).

Other

The 'Other' line item includes financial liabilities of € 234k (previous year: € 0k) resulting from the measurement as of the balance sheet date of forward exchange transactions intended to hedge exchange rate risks. The losses of € 1,449k resulting from measurement as of the balance sheet date (previous year: € 0k) have been recognized through profit or loss under 'Other operating expenses' in the consolidated statement of comprehensive income. Furthermore, this line item include the liability corresponding to the payments received to secure trade receivables.

Maturities

Financial liabilities have the following maturities:

Maturity1	12.31.2021 € 000s
2022	15,853
2023	44,190
2024	6,905
2025	9,200
2026	5,940
2027 and later	17,539
Total	99,627

¹ The calculation of the maturity of stock appreciation rights (SAR) has been based on the shortest possible term for the rights in each case. With regard to the utilization of the revolving credit facilities, it has been assumed that the amounts drawn down as of the balance sheet date continue to apply through to the end of the credit agreement.

Maturity1	12.31.2020 € 000s
2021	13,914
2022	72,609
2023	5,449
2024	5,427
2025	4,775
2026 and later	18,064
Total	120,238

(13) Trade payables

By analogy with the previous year, the trade payables of € 11,401k (previous year: € 8,485k) mostly involve goods and services provided in November and December 2021. Also as in the previous year, these items are due for payment within one year.

Trade payables include liabilities of € 55k to associates (previous year: € 13k). These liabilities are structured as follows:

Company providing service	Company receiving service	12.31.2021 € 000s	12.31.2020 € 000s
STRATEC
Biomedical	STRATEC SE	25	13
(Taicang) Co. Ltd.	Mod-n-More Kft.	30	0
Total		55	13

(14) Non-current and current other liabilities

Other liabilities are structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Liabilities for personnel-related items	3,261	3,310
Other tax liabilities	1,188	1,333
Social security liabilities	1,415	1,863
Other	468	479
Total	6,332	6,985

Liabilities for personnel-related items mainly consist of liabilities for outstanding vacation (€ 2,081k; previous year: € 2,112k) and employee working time credits (€ 1,178k; previous year: € 1,074k).

The tax liabilities relate to transaction taxes and employee payroll settlement. Social security liabilities chiefly relate to social security contributions still to be transferred.

In the 2021 financial year, STRATEC received government grants of € 538k (previous year: € 1,159k). These relate to grants for research purposes. Total accrued liabilities for government grants amount to € 228k (previous year: € 271k). This figure includes a repayment allowance of € 158k (previous year: € 0k) which has been reported under other financial liabilities.

Other liabilities have the following maturities:

Maturity	12.31.2021 € 000s
2022	6,332
2023	0
2024	0
2025	0
2026	0
2027 and later	0
Total	6,332

Maturity	12.31.2020 € 000s
2021	6,985
2022	0
2023	0
2024	0
2025	0
2026 and later	0
Total	6,985

(15) Contract liabilities

Contract liabilities mainly relate to prepayments received from customers for development services and product deliveries. In line with their respective maturities, the overwhelming share of contract liabilities will be recognized as sales in subsequent financial years.

Contract liabilities were structured as follows:

	12.31.2021 € 000s	12.31.2020 € 000s
Development and services	24,110	5,902
Other	2,094	373
Total	26,204	6,275

Contract liabilities have the following maturities:

Maturity	12.31.2021 € 000s
2022	7,040
2023	8,550
2024	1,110
2025	9,050
2026	174
2027 and later	280
Total	26,204

Maturity	12.31.2020 € 000s
2021	1,902
2022	1,620
2023	101
2024	2,072
2025	145
2026 and later	435
Total	6,275

(16) Provisions

Current provisions mainly include provisions for guarantees and warrantees (€ 1,637k; previous year: € 1,606k).

Provisions developed as follows:

	2021 € 000s	2020 € 000s
01.01.	1,606	1,138
Added	0	475
Reversed	-8	0
Utilized	0	0
Currency differences	39	-7
Total	1,637	1,606

There is uncertainty in respect of the amount and maturity of the provisions recognized. This has been duly accounted for by way of best estimates.

D. NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(17) Sales

The sales generated from contracts with customers are presented below, broken down by the type of goods or services, geographical regions, and point or period of time at which the respective sales are recognized.

Sales from contracts with customers for the period from January 1, 2021 to December 31, 2021 are structured as follows:

Segments	Instrumentation € 000s	Diatron € 000s	Smart Consumables € 000s	Total € 000s
Type of goods or services
Analyzer systems	126,914	40,370	0	167,284
Service parts and consumables	57,623	25,210	11,697	94,530
Development and services	16,632	534	7,379	24,545
Other	180	796	0	976
Total	201,349	66,910	19,076	287,335
Geographical regions
Germany	26,316	19,694	387	46,397
European Union	94,851	17,128	6,072	118,051
Other	80,182	30,088	12,617	122,887
• of which UK	223	35	1,270	1,528
• of which US	64,571	21,506	9,978	96,055
Total	201,349	66,910	19,076	287,335
Time at which sales are recognized
Recognized at a point in time	198,662	66,910	17,595	283,167
Recognized over time	2,687	0	1,481	4,168
Total	201,349	66,910	19,076	287,335

Sales from contracts with customers for the period from January 1, 2020 to December 31, 2020 are structured as follows:

Segments	Instrumentation € 000s	Diatron € 000s	Smart Consumables € 000s	Total € 000s
Type of goods or services
Analyzer systems	106,240	36,866	0	143,106
Service parts and consumables	52,648	18,432	8,505	79,585
Development and services	17,614	545	8,598	26,757
Other	15	636	0	651
Total	176,517	56,479	17,103	250,099
Geographical regions
Germany	26,509	16,446	460	43,415
European Union • of which UK	72,325 1,647	15,020 77	4,898 839	92,243 2,563
Other • of which US	77,683 61,037	25,013 17,825	11,745 7,870	114,441 86,732
Total	176,517	56,479	17,103	250,099
Time at which sales are recognized
Recognized at a point in time	169,915	56,479	16,643	243,037
Recognized over time	6,602	0	460	7,062
Total	176,517	56,479	17,103	250,099

For analyzer systems, service parts, and consumables, the allocation of sales to geographical regions has been based on the delivery locations from STRATEC's perspective. In view of the fact that STRATEC's customers partly supply their country outlets and customers from central distribution centers, however, this breakdown of sales does not necessarily reflect the final operating locations of the analyzer systems, service parts, and consumables supplied by STRATEC.

List of major customers pursuant to IFRS 8.34: in the year under report, as in the previous year, two customers with sales of € 97.4 million and € 56.3 million (previous year: € 77.9 million and € 48.2 million). These figures in all cases include sales for several analyzer system lines, development activities, and services and consumables. The sales generated with these customers are allocable to the Instrumentation and Diatron segments.

STRATEC's performance obligations are described in summarized form below:

Supply of analyzer systems, service parts, and consumables

The performance obligations for supplying analyzer systems, service parts, and consumables are generally satisfied upon delivery. The payment terms vary from advance payment through to a payment target of a maximum of 120 days.

Development and other services

The performance obligations for development and other services are satisfied, taking due account of the respective customer contracts, at a point in time or over time. As a general rule, customers make non-refundable milestone payments during the development phase. In some contracts, consideration for the development performance obligation is transferred to STRATEC in connection with other contractual performance obligations. The payment targets for invoiced development work usually amount to between 30 and 60 days.

Sales include the following amounts:

	2021 € 000s	2020 € 000s
Sales from amounts included in contract liabilities at the beginning of the financial year	1,378	843
Sales from performance obligations satisfied in previous financial years	0	0
Total	1,378	843

(18) Cost of sales

Cost of sales, amounting to € 199,623k (previous year: € 181,110k), include production-related manufacturing expenses incurred for the products, maintenance and spare parts sold, and for development and services.

(19) Research and development expenses

Research and development expenses not meeting the criteria for capitalization pursuant to IAS 38 (Intangible Assets) totaled € 9,281k (previous year: € 7,670k) and mainly involved cost of materials and personnel expenses.

Gross development expenses were structured as follows:

Research and development expenses	€ 000s 49,113	€ 000s 43,370
of which development expenses recognized as revenues or capitalized	-39,832	-35,700
Total	9,281	7,670

In the financial year under report, an amount of € 580k from grants was recognized as a reduction to research and development expenses (previous year: € 1,161k).

(20) Sales-related expenses

Sales-related expenses amounted to € 9,806k (previous year: € 8,808k) and included direct sales expenses and sales overheads. These basically include all expenses incurred for personnel, materials, and other expenses for sales (including prorated depreciation and amortization). These partly involve expenses arising in connection with product launches.

(21) General administration expenses

At € 18,455k (previous year: € 18,876k), administration expenses include the personnel and material expenses incurred in central administration departments (including corporate management, controlling, finance and accounting, legal affairs, investor relations, and personnel) that are not directly attributable to production, sales, or R&D.

(22) Other operating expenses and income

Other operating expenses are structured as follows:

	2021 € 000s	2020 € 000s
From exchange rate losses	12,486	8,928
From forward exchange transactions	1,449	0
From impairments	1,047	0
Other	54	211
Total	15,036	9,139

Other operating income is structured as follows:

	2021 € 000s	2020 € 000s
From exchange rate gains	12,710	7,312
From forward exchange transactions	0	1,237
From reversals of provisions and liabilities	44	35
Other	289	597
Total	13,043	9,181

With regard to the other operating income and other operating expenses from forward exchange transactions, reference is made to the information provided in Section 'C. Notes to the consolidated balance sheet (7) Financial assets' and 'C. Notes to the consolidated balance sheet (12) Non-current and current financial liabilities'.

Other than that, other operating income and other operating expenses also included numerous standalone items which, viewed individually, were only of subordinate significance.

(23) Net financial expenses

Financial income is structured as follows:

	2021 € 000s	2020 € 000s
Interest income on cash	1	4
Other financial income	107	40
Total	108	44

Financial expenses are structured as follows:

	2021 € 000s	2020 € 000s
Interest expenses on loan liabilities to banks	864	637
Interest expenses for leases	497	436
Net interest from pension provisions	20	29
Interest expenses for compounding of liabilities and provisions	3	5
Other interest expenses	47	6
Total	1,431	1,113

Other financial income/expenses include gains and losses for financial assets and financial liabilities measured at fair value and are structured as follows:

	2021 € 000s	2020 € 000s
Gains / losses on financial assets measured at fair value through profit or loss: • Gains (+) / losses (-) on retirement • Gains (+) / losses (-) on measurement at balance sheet date	0 -22	11 402
Total	-22	413

(24) Earnings from discontinued operations

Overall, the earnings from the discontinued operation reported in the previous year were structured as follows:

	2020
	€ 000s
Sales	6,153
Current income and expenses	-5,196
Current earnings from discontinued operation (before taxes on income)	957
Taxes on income	-208
Expenses from measurement at fair value less costs to sell1 ) and from disposal of operation	-4,009
Earnings from discontinued operation (after taxes on income)	-3,260

¹ of which impairments of non-current assets: € 4,104k

(25) Earnings per share

Earnings per share have been calculated pursuant to IAS 33 (Earnings per Share) by dividing the consolidated net income by the average weighted number of shares in STRATEC SE in circulation in the past financial year.

The treasury stock held by STRATEC AG has been excluded from the calculation of the number of shares in circulation. The year-on-year increase in the number of shares was due to the issue of new shares upon the exercising of option rights within stock option programs. Changes in the number of shares within the financial year have been accounted for by weighting the respective figures on a prorated basis. The resultant weighted average number of outstanding shares used to calculate (basic) earnings per share amounts to 12,111,028 (previous year: 12,061,730).

Pursuant to IAS 33 (Earnings per Share), the consolidated net income of € 39,958k (previous year: € 25,175k) reported in the consolidated statement of comprehensive income has been used as the unaltered basis for the calculation.

Due to the option rights outstanding as of December 31, 2021, both basic earnings per share (€ 3.30; previous year: € 2.09) and diluted earnings per share (€ 3.28; previous year: € 2.07) have been calculated. Diluted earnings per share have been calculated on the assumption that all outstanding options not yet exercised are actually exercised. The number of additional shares to be accounted for is calculated by comparing the proceeds generated by such exercising of options with the proceeds which could theoretically be generated by issuing new shares on customary market terms.

The allocation or exercising of option rights within the financial year has been accounted for using prorated weighting. The resultant weighted average number of outstanding shares with a diluting effect accounted for in the calculation of (diluted) earnings per share amounts to 12,181,289 (previous year: 12,152,665).

(26) Additional disclosures on the consolidated statement of comprehensive income

Cost of materials

The functional divisions include the following cost of materials:

	2021 € 000s	2020 € 000s
Costs of raw materials and supplies	141,291	114,739
Costs of purchased services	3,872	6,995
Total	145,163	121,734

In the previous year, discontinued operations accounted for € 18k of the costs of raw materials and supplies and € 3,474k of the costs of purchased services.

Personnel expenses

The functional divisions include the following personnel expenses:

	2021 € 000s	2020 € 000s
Wages and salaries	67,436	67,804
Social security contributions and pension and welfare expenses	12,140	10,524
Total	79,576	78,328

Furthermore, expenses of € 3,072k (previous year: € 2,996k) were incurred for wages and salaries for third-party employees (personnel leasing).

In the previous year, an amount of € 1,110k of personnel expenses for wages and salaries was attributable to the discontinued operations, while an amount of € 187k of the social security contributions and pension and welfare expenses were attributable to these operations. None of the expenses incurred for wages and salaries for third-party employees was attributable to the discontinued operations.

Number of employees

The average number of individuals employed by the Group during the financial year (including temporary employees from personnel agencies) was as follows:

	2021 Number	2020 Number
Employees	1,218	1,172
Trainees	50	54
Employees in permanent employment	1,268	1,226
Temporary employees	117	102
Total	1,385	1,328

Of permanent employees, 497 (previous year: 473) were in Germany, and 721 (previous year: 699) abroad. Of temporary employees, 24 (previous year: 17) were in Germany, and 93 (previous year: 85) abroad.

Of permanent employees, none in Germany and 17 abroad were attributable to the discontinued operations in the previous year.

Disclosures concerning the auditor's fee pursuant to § 314 (1) No. 9 HGB

The total fees recorded for the group auditor in the financial year under report pursuant to § 314 (1) No. 9 of the German Commercial Code (HGB) are structured as follows:

	2021 € 000s	2020 € 000s
Fee for
a) Auditing	202	177
- of which for the previous year	0	0
b) Other certification services	0	0
c) Tax advisory services	0	0
d) Other services	22	20
Total auditor's fee	224	197

Other services relate to an audit review pursuant to ISAE 3402.

E. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

General disclosures

Inflow / outflow of funds from operating activities

The consolidated cash flow statement shows how the liquidity of the STRATEC Group has changed due to inflows and outflows of funds during the financial year. A distinction is made between the cash flows from operating, investing and financing activities.

The amounts reported for foreign group companies have generally been translated at annual average exchange rates. One exception involves cash which, like in the consolidated balance sheet, has been recognized at the exchange rate on the reporting date. The impact of changes in exchange rates on cash is presented separately.

The outflows of funds for leases are divided, with the amount attributable to the capital repayments share of lease liabilities being allocated to the cash flow from financing activities and the interest portion of lease liabilities being allocated to the cash flow from operating activities. Outflows of funds for low-value leases, short-term leases, and for variable lease payments not accounted for when measuring the lease liabilities are allocated to the cash flow from operating activities.

The cash flow from operating activities has been calculated using the indirect method. This involves eliminating non-cash earnings components from consolidated net income after taxes.

Interest income and expenses have been allocated to operating activities, as have the components of the 'Other financial result'. Dividend payments are presented in the cash flow from financing activities.

Tax payments have been reported under operating activities in their entirety, as their allocation to individual business divisions is not practically feasible.

The interest paid/received and income taxes paid/refunded items in the cash flow from operating activities have been presented using the direct method. In the first stage, this involves adjusting consolidated net income to account for income and expenses recognized in the consolidated statement of comprehensive income. After this, the interest and income taxes paid or received are reported separately.

			Non-cash-effective changes
	Balance at 01.01.2021 € 000s	Cash-effective changes € 000s	Exchange rates € 000s	New leases € 000s	Other1 € 000s	Balance at 12.31.2021 € 000s
Non-current liabilities to banks	95,524	-21,932	0	0	-2,470	71,122
Non-current lease liabilities	8,751	0	3	532	-1,845	7,441
Current liabilities to banks	3,369	-937	0	0	2,281	4,713
Current lease liabilities	1,934	-1,836	2	74	1,845	2,019
Total	109,578	-24,705	5	606	-189	85,295

Change in liabilities for financing activities

¹ The 'Other' column includes the effects of reclassifications from the non-current share of liabilities for financing activities

	Non-cash-effective changes
	Balance at 01.01.2020 € 000s	Cash-effec tive changes € 000s	Exchange rates € 000s	New leases € 000s	IFRS 5 reclassifications € 000s	Other1 € 000s	Balance at 12.31.2020 € 000s
Non-current liabilities to banks	82,893	13,256	0	0	0	-625	95,524
Non-current lease liabilities	6,914	0	-32	4,922	-1,119	-1,934	8,751
Current liabilities to banks	1,633	1,111	0	0	0	625	3,369
Current lease liabilities	1,821	-1,847	4	119	-97	1,934	1,934
Total	93,261	12,520	-28	5,041	-1,216	0	109,578

Change in liabilities for financing activities

¹ The 'Other' column includes the effects of reclassifications from the non-current share of liabilities for financing activities

arising due to the passage of time as well as the repayment allowance of € 189k granted in the 2021 financial year.

Presentation of implications of IFRS 5 in the 2020 financial year

As there are various options for meeting the requirements of IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations) and IAS 7 (Statement of Cash Flows) with regard to the presentation of cash flows, STRATEC has selected the following presentation:

The cash flow statement includes all cash flows, i.e. both from continuing operations and from the discontinued operation.
The cash flows relating to the discontinued operation (cash flows from operating, investing, and financing activities) are stated below.

	2020 € 000s
Cash from operating activities	2,286
Cash flow from investing activities	-283
Cash flow from financing activities	-26

STRATEC Biomedical UK held cash of € 649k as of its deconsolidation date.

Depreciation and amortization of € 185k and impairments of € 4,104k for non-current assets were attributable to the discontinued operation in the 2020 financial year.

The incoming payments from the sale of discontinued operations, less the cash funds thereby ceded, have been presented as a separate line item within the cash flow from investing activities, while the income from deconsolidation has been included in other non-cash income and expenses within the cash flow from operating activities.

(27) Cash

Cash comprises cash holdings and demand deposits at banks. As of December 31, 2021, cash amounted to € 47,184k (previous year: € 37,561k).

F. SEGMENT REPORTING

STRATEC is managed by reference to a matrix organizational structure which aggregates individual areas of activity in business units across various locations. Business units are aggregated on the basis of the products and services thereby offered. These units therefore basically constitute operating segments pursuant to IFRS 8 (Operating Segments). Separate segment reporting is provided where the quantitative thresholds pursuant to IFRS 8 (Operating Segments) are exceeded.

The following business units have been identified as reporting segments: 'Instrumentation', 'Diatron', and 'Smart Consumables'. In its 'Instrumentation' segment, STRATEC designs and manufactures fully automated analyzer systems for its clinical diagnostics and biotechnology customers. The Diatron Group represents a standalone segment ('Diatron') and extends STRATEC's offering to include products and customer services for analyzer systems, system components, consumables, and tests in the lower throughput segment. The 'Smart Consumables'

segment includes the development and production of smart consumables in the fields of diagnostics, life sciences, and medical technology.

The operation discontinued in the 2020 financial year was allocated to the 'Other Activities' and 'Smart Consumables' segments respectively. Existing supply and delivery relationships between STRATEC and STRATEC Biomedical UK, Ltd. were allocated to the 'Instrumentation' segment.

The accounting policies applied to the reporting segments are consistent with the accounting policies set out in Section 'B. Accounting policies applied.' The reconciliation of segment data to the relevant group data therefore mainly involves accounting for consolidation entries and, in the previous year, amounts relating to the business units recognized as held for sale in accordance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations).

	Instrumentation (includes service parts and consumables allocable to business unit) € 000s	Diatron (includes service parts and consumables allocable to business unit) € 000s	Smart Consumables € 000s	Total € 000s	Reconciliation1 € 000s	Total € 000s
Sales with external customers	201,349	66,910	19,076	287,335	0	287,335
Inter-segmental sales	2,377	6,947	653	9,977	-9,977	0
Depreciation, amortization, and impairments	8,779	5,450	4,025	18,254	0	18,254
EBITDA	42,900	20,943	2,588	66,431	0	66,431
Adjusted EBITDA	43,075	20,943	2,588	66,606	0	66,606
EBIT	34,121	15,493	-1,437	48,177	0	48,177
Adjusted EBIT	34,296	19,452	525	54,273	0	54,273
Interest income	2,461	1	51	2,513	-2,405	108
Interest expenses	959	2,175	702	3,836	-2,405	1,431
Assets	372,121	282,706	51,117	705,944	-337,419	368,525
Additions to non-current assets	14,855	4,092	1,913	20,860	0	20,860
Average number of employees	784	308	176	1,268	0	1,268

Segment data by operating segment for 2021

1 With regard to the reconciliation of the figures adjusted for one-off items with the Group figures, reference is made

to the information provided in the Group Management Report in Section 'B. Business Report – Position'.

Segment data by operating segment for 2020

	Instrumentation (includes service parts and consumables allocable to business unit) € 000s	Diatron (includes service parts and consumables allocable to business unit) € 000s	Smart Consumables € 000s	Total1 € 000s	Reconciliation2 € 000s	Total € 000s
Sales with external customers	176,517	56,479	17,103	250,099	0	250,099
Inter-segmental sales	1,629	5,509	1,010	8,148	-8,148	0
Depreciation, amortization, and impairments	6,944	7,200	4,157	18,301	4,289	22,590
EBITDA	35,221	15,934	823	51,978	0	51,978
Adjusted EBITDA	35,221	15,934	823	51,978	0	51,978
EBIT	28,277	8,734	-3,334	33,677	0	33,677
Adjusted EBIT	28,277	14,619	-1,183	41,713	0	41,713
Interest income	2,469	0	29	2,498	-2,454	44
Interest expenses	666	2,296	605	3,567	-2,454	1,113
Assets	354,919	59,572	31,286	445,777	-113,873	331,904
Additions to non-current assets	21,523	4,387	4,514	30,424	283	30,707
Average number of employees	760	273	177	1,209	17	1,226

1 Excluding segment data for the operations disposed of pursuant to IFRS 5

2With regard to the reconciliation of the figures adjusted for one-off items with the Group figures, reference is made

to the information provided in the Group Management Report in Section 'B. Business Report – Position'.

Of non-current assets at the reporting segments, excluding financial instruments and deferred taxes, € 73,508k are located in the country of origin of STRATEC SE (previous year: € 66,555k) and € 83,316k in other countries (previous year: € 91,366k). Further disclosures on company level have been presented in Section 'D. Notes to the consolidated statement of comprehensive income (17) Sales'.

G. FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of individual financial assets and liabilities for each individual class of financial instruments pursuant to IFRS 9 (Financial Instruments) and reconciles these with the corresponding balance sheet items.

As financial liabilities also include the financial instruments covered by IFRS 2 (Share-based Payment), which are exempted from the scope of IFRS 7 (Financial Instruments: Disclosures), the 'Not in scope of IFRS 7' column provides a corresponding reconciliation of these items.

Abbreviations for measurement categories

AC	Measured at amortized cost
FVTPL	Measured at fair value through profit or loss
FVTOCI	Measured at fair value through OCI
n/a	Not attributable to any measurement category

	IFRS 9	Carrying	Amortized		Fair value		Not	Total	Fair
12.31.2021 (12.31.2020)	cate gory	amount	cost	of which Level 1	of which Level 2	of which Level 3	allocable to any measure ment category		value
		€ 000s	€ 000s	€ 000s	€ 000s	€ 000s	€ 000s	€ 000s	€ 000s
Non-current assets
Financial assets
• Investments		100					100	100	100
in associates	n/a	(100)					(100)	(100)	(100)
• Other financial assets	AC	3,474 (481)	3,474 (481)					3,474 (481)	3,474 (481)
Current assets
Trade		37,184	37,184					37,184	37,184
receivables	AC	(34,782)	(34,782)					(34,782)	(34,782)
Financial assets
• Amortized		313	313					313	313
cost	AC	(338)	(338)					(338)	(338)
• Fair value through		1,226		1,226	0			1,226	1,226
profit or loss	FVTPL	(2,474)		(1,248)	(1,226)			(2,474)	(2,474)
Cash	AC	47,184 (37,561)	47,184 (37,561)					47,184 (37,561)	47,184 (37,561)
Total financial assets
• Amortized		88,155	88,155	0	0	0	0	88,155
cost	AC	(73,162)	(73,162)	(0)	(0)	(0)	(0)	(73,162)
• Fair value through profit or loss	FVTPL	1,226 (2,474)	0 (0)	1,226 (1,248)	0 (1,226)	0 (0)	0 (0)	1,226 (2,474)
• Fair value through OCI	FVTOCI	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)
• Not in scope of IFRS 7	n/a	100 (100)	0 (0)	0 (0)	0 (0)	0 (0)	100 (100)	100 (100)
Non-current debt
Financial liabilities
• Amortized		82,142	74,701				7,441	82,142	76,674
cost	AC	(104,323)	(95,572)				(8,751)	(104,323)	(103,051)
• Not in scope of IFRS 7	n/a	1,632 (2,001)					1,632 (2,001)	1,632 (2,001)	1,632 (2,001)
Current debt

Financial liabilities
• Amortized cost	AC	13,275 (11,794)	11,255 (9,860)				2,020 (1,934)	13,275 (11,794)	14,051 (12,747)

• Fair value through profit or loss	FVTPL	234 (0)			234 (0)			234 (0)	234 (0)
• Not in scope		2,344					2,344	2,344	2,344
of IFRS 7	n/a	(2,120)					(2,120)	(2,120)	(2,120)
Trade payables	AC	11,401 (8,485)	11,401 (8,485)					11,401 (8,485)	11,401 (8,485)
Total financial liabilities
• Amortized		106,818	97,357	0	0	0	9,461	106,818
cost	AC	(124,602)	(113,917)	(0)	(0)	(0)	(10,685)	(124,602)
• Fair value through		234	0	0	234	0	0	234
profit or loss	FVTPL	(0)	(0)	(0)	(0)	(0)	(0)	(0)
• Fair value through OCI	FVTOCI	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)	0 (0)
• Not in scope of IFRS 7	n/a	3,976 (4,121)	0 (0)	0 (0)	0 (0)	0 (0)	3,976 (4,121)	3,976 (4,121)

The fair value of those financial instruments that are not recognized at fair value is calculated as the present value of future inflows and outflows of cash. Discounting is based on a market interest rate with a congruent term and risk structure. Where a listed price on an active market is available, this has been taken as the fair value.

Given the predominantly short-term maturities of trade receivables, cash, trade payables, and some of the other financial assets and liabilities, their carrying amounts approximate to their fair values.

The net results on financial instruments broken down into their respective measurement categories were as follows:

	IFRS 9 category	From From From subsequent measurement invest interest				From disposals	Net results
2021		ments		Fair value through profit	Fair value through OCI	Currency translation	Impair ment
		€ 000s	€ 000s	or loss € 000s	€ 000s	€ 000s	€ 000s	€ 000s	€ 000s
Financial assets measured at amortized cost	AC	0	53	0	0	119	151	0	323
Financial assets measured at fair value (not designated)	FVTPL	7	0	-1,237	0	0	0	0	-1,230
Financial liabilities measured at fair value (not designated)	FVTPL	0	0	-234	0	0	0	0	-234
Financial liabilities measured at amortized cost	AC	0	-914	0	0	105	0	0	-809
Total		7	-861	-1,471	0	224	151	0	-1,950

	IFRS 9 category	From invest	From interest			From subsequent measurement		From disposals	Net results
2020		ments € 000s		Fair value through profit or loss € 000s	Fair value through OCI € 000s	Currency translation	Impair ment	€ 000s
			€ 000s			€ 000s	€ 000s		€ 000s
Financial assets measured at amortized cost	AC	0	37	0	0	-496	263	0	-196
Financial assets measured at fair value (not designated)	FVTPL	7	0	1,639	0	0	0	11	1,657
Financial liabilities measured at fair value (not designated)	FVTPL	0	0	0	0	0	0	0	0
Financial liabilities measured at amortized cost	AC	0	-648	0	0	-1,120	0	0	-1,768
Total		7	-611	1,639	0	-1,616	263	11	-307

Interest expenses of € 497k for lease liabilities have been recognized in the other financial result (previous year: € 436k).

No interest income or interest expenses were generated or incurred in connection with financial instruments measured at fair value through profit or loss. Of the net result for financial instruments measured at fair value, an amount of € -22k has been recognized in the other financial result (previous year: € 413k), while € -1,449k (previous year: € 1,237k) has been recognized under 'Other operating expenses' and 'Other operating income'.

The income and expenses resulting from translation through profit or loss of financial assets and liabilities at average exchange rates on the balance sheet date have been recognized under other operating income or expenses, as have the results of foreign currency translation performed within the financial year. The translation of cash at the balance sheet date resulted in currency income of € 299k (previous year: € 253k) recognized through profit or loss under other operating income. Currency expenses of € 142k (previous year: € 547k) have been recognized under other operating expenses in connection with the translation of cash at the balance sheet date.

Fair value hierarchy

To ensure the comparability and consistency of fair value measurements and related disclosures, IFRS 13 (Fair Value Measurement) stipulates a fair value hierarchy that allocates the input factors used in valuation methods to calculate fair value to three levels. The hierarchy grants the highest priority to prices (taken over without amendment) on active markets for identical assets or liabilities (Level 1 input factors) and the lowest priority to non-observable input factors (Level 3 input factors). The following specific definitions apply:

Input factors: Assumptions that would be used by market participants when determining the price of an asset or liability, including risk assumptions, such as:

The risk involved in a specific valuation method used to calculate fair value (such as a price model), and
The risk involved in the input factors used in the valuation method.

Input factors may be observable or non-observable.

Level 1 input factors: Listed prices (taken over without amendment) on active markets for identical assets or liabilities to which the company has access on the valuation date.

Level 2 input factors: Input factors other than the listed prices included in Level 1 that are either directly or indirectly observable for the asset or liability.

Level 3 input factors:Input factors not observable for the asset or liability.

Observable input factors: Input factors derived from market data, such as publicly available information about actual events or transactions, which reflect those assumptions that would be used by market participants when determining the price of the asset or liability.

Non-observable input factors: Input factors for which no market data is available and which are derived from the best information available concerning the assumptions that would be used by market participants when determining the price of the asset or liability.

As in the previous year, no items were reclassified within the three input factor levels in the 2021 financial year. The financial assets allocated to Level 1 involve shares in listed companies, which have been measured at the closing price on the stock market with the highest trading volumes as of the balance sheet date. The financial liabilities allocated to Level 2 involve forward exchange transactions intended to hedge currency risks.

Overall, this had the following implications for the consolidated statement of comprehensive income:

	Level 1 € 000s	Level 2 € 000s	Level 3 € 000s
Balance at 01.01.2020	907	0	0
Total gains or losses recognized through profit or loss
• Other operating income	0	1,237	0
• Other operating expenses • Other financial result	0 413	0 0	0 0
Total gains or losses recognized in OCI • Changes in value	0	0	0
• Reclassifications out of OCI into profit or loss	0	0	0
Additions	0	0	0
Retirements
• Due to sale	-72	0	0
• Due to derecognition	0	0	0
Currency differences	0	-11	0
Balance at 12.31.2020	1,248	1,226	0
Total gains or losses recognized through profit or loss
• Other operating income	0	0	0
• Other operating expenses	0	-1,449	0
• Other financial result	-22	0	0
Total gains or losses recognized in OCI • Changes in value • Reclassifications out of OCI	0	0	0
into profit or loss	0	0	0
Additions	0	0	0
Retirements
• Due to sale	0	0	0
• Due to derecognition	0	0	0
Currency differences	0	-11	0
Balance at 12.31.2021	1,226	-234	0

Maturity analysis

The liquidity risk to which STRATEC is exposed in connection with its financial instruments consists of obligations due to future interest and principal payments for financial liabilities. Future payments are structured as follows:

	Carrying amount 12.31.2021		Cash flows 2022		Cash flows 2023		Cash flows 2024 – 2025		Cash flows 2026 and later
Figures in € 000s		Interest	Principal	Interest	Principal	Interest	Principal	Interest	Principal
	99,627	1,226	15,853	776	44,190	1,053	16,103	855	23,481
Financial liabilities
• of which lease liabilities	9,460	418	2,019	324	1,997	371	3,175	127	2,269
Trade payables	11,401	0	11,401	0	0	0	0	0	0
Total	111,028	1,226	27,254	776	44,190	1,053	16,103	855	23,481

	Carrying amount 12.31.2020		Cash flows 2021	Cash flows 2022		Cash flows 2023 – 2024		Cash flows 2025 and later
Figures in € 000s		Interest	Principal	Interest	Principal	Interest	Principal	Interest	Principal
	120,238	1,525	13,914	1,054	72,609	1,119	10,876	1,074	22,839
Financial liabilities
• of which lease liabilities	10,685	539	1,934	403	1,785	536	3,589	265	3,377
Trade payables	8,485	0	8,485	0	0	0	0	0	0
Total	128,723	1,525	22,399	1,054	72,609	1,119	10,876	1,074	22,839

Financing contracts with banks and with remaining terms of up to five years charge interest at a weighted average of 0.92% (previous year: 0.92%), while financing contracts with terms of more than five years charge interest at a weighted average of 1.24% (previous year: 1.19%). This calculation has been based on the nominal interest rates applicable as of the balance sheet date.

H. RISK MANAGEMENT

Risk management principles

STRATEC's assets, liabilities and future activities are subject to liquidity risks, default risks, and market risks resulting from changes in exchange rates, interest rates and stock market prices. The objectives and methods used by STRATEC to deal with the financial risks listed below form the object of the Group's risk management activities. The principles underlying the Group's risk management policies are presented in Section 'D. Opportunities and risks' of the Group Management Report.

The objective of financial risk management is to limit these risks primarily by means of its operating activities. In assessing individual risks, the Board of Management takes account of the volume of such risks arising across the Group as a whole. These activities are supplemented by finance-based measures. The primary objective is to limit the risks of relevance to the cash flow. The basic principles of the company's financial policy are reviewed by the Board of Management annually and revised to account for new developments. The Supervisory Board is informed at regular intervals of the financial position of the Group and the assessments made by the Board of Management.

The following risks could in principle arise for the company in connection with financial instruments:

Liquidity risks

For STRATEC, liquidity risks involve the risk of not being able to meet payment obligations due to insufficient cash. To safeguard the company's solvency, sufficient liquid funds and fixed-term credit lines are reserved via STRATEC SE on the basis of rolling liquidity planning which provides current information as to the expected development in liquidity on company and currency level.

STRATEC had cash of € 47,184k at the balance sheet date (previous year: € 37,561k). As of December 31, 2021, unutilized committed credit lines totaling € 34 million were available to STRATEC (previous year: € 15 million).

Default risks

The principal default risks faced by STRATEC are to be found in its operating activities. They involve the risk of contractual partners failing to meet their obligations, which at STRATEC relate in particular to the settlement of trade receivables. The risk volumes considered by the Board of Management for default risk management purposes includes all creditor items due from customers in connection with supplies and services. Default risk is countered by means of receivables management, such as trade credit insurance policies and strict monitoring measures. Remaining default risks are accounted for with suitable allowances for 'expected credit losses'.

Liquid funds are deposited solely on current accounts at financial service providers with high-quality ratings.

The maximum default risk is reflected by the carrying amounts of the financial assets reported in the consolidated balance sheet. However, these figures do not account for the hedging measures outlined above.

Foreign currency risks

On account of its international business activities, STRATEC is exposed to foreign currency risks resulting from the impact of exchange rate movements on business transactions and the foreign currency receivables and liabilities as of the balance sheet date (transaction risks). Furthermore, the translation of the financial statements of foreign subsidiaries into the group currency (EUR) also involves foreign currency risks (translation risks). These latter risks do not require separate analysis for IFRS 7 (Financial Instruments: Disclosures) purposes.

The principal foreign currency transactions performed by STRATEC relate to export transactions and the payment of development services in US dollars and intragroup loan relationships in US dollars. Translation risks arise due to the translation of the financial statements of foreign group companies from Swiss francs (CHF), US dollars (USD), Romanian leis (RON), and Hungarian forints (HUF) into the group reporting currency (EUR).

As in the previous year, to secure its foreign currency risks STRATEC deployed forward exchange transactions. With regard to the accounting treatment, reference is made to the information in Section 'B. Accounting policies applied – Financial Instruments'.

With regard to its reporting on the type and scope of risks resulting from financial instruments, to avoid redundancies STRATEC makes partial use of IFRS 7.B6 by making the disclosures thereby required in its Group Management Report. Reference is made to the following sections of that report: Section 'C. Outlook' and Section 'D. Opportunities and risks: Risk reporting in respect of use of financial instruments'.

Sensitivity to exchange rate movements

(transaction risk)

STRATEC had the following transaction risk exposure as of the balance sheet date:

Material foreign currency items translated into € 000s	12.31.2021				12.31.2020
	GBP	CHF	USD	HUF	RON	GBP	CHF	USD	HUF	RON
Cash	70	4,766	13,164	11,282	678	19	5,359	11,774	5,819	663
Trade and other receivables	1	5,340	15,407	4,074	55	1	2,705	15,982	4,366	30
Receivables from associates	0	7,997	4,517	674	14	0	8,147	3,980	1,104	391
Financial assets	0	0	0	469	0	0	0	1,226	388	0
Forward exchange transactions	0	0	-24,316	0	0	0	0	-31,849	0	0
Trade payables	7	387	1,200	2,243	0	0	1,131	651	1,360	0
Liabilities to associates	0	6,648	229	1,198	2,500	0	8,404	137	2,062	2,700
Financial liabilities	0	0	234	3,279	0	0	0	0	3,801	0
Net risk exposure	64	11,068	7,109	9,779	-1,753	20	6,676	325	4,454	-1,616

Exchange rate gains and losses resulting from the measurement of financial assets and financial liabilities as of the balance sheet date have been presented in Section 'G. Financial instruments'.

Were the euro (or the respective functional currency of the individual group company) to have moved by +10%/-10% compared with the following currencies as of the balance sheet date, then this would have impacted as follows on consolidated net income before income taxes in the consolidated statement of comprehensive income:

Material foreign currency items translated into € 000s	2021				2020
	GBP	CHF	USD	HUF	RON	GBP	CHF	USD	HUF	RON
Change in currency by +10% Change in consolidated net income (€ 000s)	-6	-1,006	-646	-889	159	-2	-607	-39	-405	147
Change in currency by -10% Change in consolidated net income (€ 000s)	7	1,230	448	1,087	-195	2	742	48	495	-180

In the 2021 financial year, income from currency translation totaling € 12,710k (previous year: € 7,312k) and expenses for currency translation totaling € 12,486k (previous year: € 8,928k) were recognized through profit or loss in other operating income and other operating expenses respectively.

Interest rate risks

Interest rate risks involve the risk of fluctuations in the value of a financial instrument or in future cash flows as a result of changes in market interest rates.

STRATEC is subject to interest rate risks in terms of its interest-bearing/interest-charging financial instruments.

Given that interest rates are extremely low by historical standards, the cash at STRATEC now only generates interest income of immaterial significance and the resultant interest rate risk is also of subordinate significance. This item has therefore not been accounted for in the following analysis. However, any rise in interest rates would have a positive impact on earnings.

STRATEC reported the following interest-bearing assets and interest-charging liabilities as of the balance sheet date:

	2021 € 000s	2020 € 000s
Interest-bearing medium and long-term financial assets • of which with floating interest rates • of which with fixed interest rates	26 0 26	49 0 49
Interest-charging financial liabilities • of which with floating interest rates • of which with fixed interest rates	75,835 35,500 40,335	98,893 65,000 33,893

Sensitivity of fair values for fixed-interest financial instruments

Changes in market interest rates have no implications for the measurement of fixed-interest financial instruments at STRATEC as of the balance sheet date, as these items are measured at amortized cost using the effective interest method. The fair values based on market interest rates as of the balance sheet date have been presented in Section 'G. Financial instruments'.

Sensitivity of cash flows for floating-interest financial instruments

Changes in market interest rates have no implications for the measurement of floating-interest financial instruments at STRATEC as of the balance sheet date, as these items are measured at amortized cost using the effective interest method. Unlike fixed-interest financial liabilities, however, financial liabilities with floating interest rates involve the risk of fluctuations in future cash flows for payments of interest and principal due to changes in market interest rates. STRATEC had financial liabilities with a nominal volume of € 35,500k with floating interest rates at the balance sheet date as of December 31, 2021 (previous year: € 65,000k).

The following table presents the future interest and principal payments assumed for the remaining term of the floating-rate loan liability as of the balance sheet date. The figures are based on the market interest rate prevalent at this time.

€ 000s	Carrying amount 12.31.2021	Cash flows 2022		Cash flows 2023
		Interest	Principal	Interest	Principal
Financial liabilities with floating interest rates (1-month EURIBOR)
Actual	35,500	325	0	27	35,500
+100 basis points	35,500	680	0	57	35,500
-100 basis points	35,500	247	0	21	35,500

The change in the cash flow from interest presented here simultaneously corresponds to the hypothetical impact on consolidated net income before taxes on income in the consolidated statement of comprehensive income.

Other price risks

The financial assets requiring measurement in Level 1 of the fair value hierarchy are subject in particular to price risks. Had fair values been 10% higher (lower) than their balance sheet date levels, then consolidated net income before taxes on income would have been € 123k (previous year: € 125k) higher (lower).

Capital management

The objectives of capital management at STRATEC are:

To safeguard the company's continued existence to enable it to continue generating income for shareholders and benefits for other stakeholders, and
To generate an adequate return for shareholders by setting prices for products and services that are suitable to the market and the degree of risk involved.

STRATEC determines its level of capital in proportion to risk. To this end, the company manages its capital structure and makes adjustments to be able to react to changes in the macroeconomic framework and the risk characteristics of its underlying assets. To maintain or adjust its capital structure, STRATEC may adjust the level of dividends paid to its shareholders, repay capital to its shareholders, issue new shares, or reduce debts by making repayments or selling assets.

The main key figures referred to by the management are the equity ratio and the dynamic gearing ratio (net financial liabilities as a proportion of EBITDA). The equity ratio amounted to 55.8% at December 31, 2021 (previous year: 52.0%). The current target corridor for this figure amounts to between 50 percent and 75 percent.

I. OTHER DISCLOSURES

Related party disclosures

Closely related companies and persons as defined in IAS 24 (Related Party Disclosures) are persons and companies in a position to exert influence on STRATEC SE and/or its subsidiaries or subject to control or significant influence by STRATEC SE or its subsidiaries. Such parties particularly include unconsolidated subsidiaries, directors and officers at STRATEC SE, and persons and companies closely related to such.

The receivables and liabilities due to and from unconsolidated subsidiaries as of the balance sheet date have been presented under the respective balance sheet items.

In the 2021 financial year, STRATEC SE purchased services of € 315k from STRATEC Biomedical (Taicang) Co. Ltd. (previous year: € 309k).

In the 2020 financial year, Mod-n-More Kft. purchased services of € 164k from STRATEC Biomedical (Taicang) Co. Ltd. (previous year: € 95k).

STRATEC Services AG generated revenues of € 2k from transactions with STRATEC Biomedical (Taicang) Co. Ltd. in the previous year.

DITABIS Digital Biomedical Imaging Systems AG is no longer a related party pursuant to IAS 24 (Related Party Disclosures). In the 2020 financial year, STRATEC SE generated revenues of € 37k from transactions with this company and purchased services of € 1,823k from it. Services were performed on customary contractual conditions. STRATEC Services AG purchased services of € 1,045k from DITABIS Digital Biomedical Imaging Systems AG in the 2020 financial year. As of December 31, 2020, STRATEC SE had liabilities of € 2k due to DITABIS Digital Biomedical Imaging Systems AG. Services were performed on contractual terms customary to the market.

Directors and officers

The Board of Management of STRATEC SE comprised the following members in the year under report:

Marcus Wolfinger, Remchingen, Germany (CEO) Graduate in Business Administration
Dr. Robert Siegle, Birkenfeld, Germany (Director of Finance and Human Resources) Attorney-at-law
Dr. Claus Vielsack, Birkenfeld, Germany (Director of Product Development) Graduate in Chemistry

The members of the Board of Management are authorized to solely represent the company.

Marcus Wolfinger has been a member of the management of STRATEC Capital GmbH since November 2015 and a member of the management of STRATEC PS Holding GmbH since May 2016.

Dr. Robert Siegle has been a member of the management of STRATEC PS Holding GmbH since May 2016.

Dr. Claus Vielsack has been a member of the management of STRATEC PS Holding GmbH since May 2016.

The remuneration of members of the Board of Management consists of fixed basic remuneration and variable components dependent, among other factors, on the achievement of individual performance targets.

Moreover, members of the Board of Management are entitled to participate in the stock option program subject to the limitation that no further stock options were granted to them in the financial years from 2015 to 2017. Since the 2018 financial year, they have once again participated in the stock option program. Among other conditions, the exercising of the options is dependent on the achievement of performance targets outlined in greater detail in Section 'C. Notes to the consolidated balance sheet (9) Shareholders' equity – Stock option programs'. Furthermore, members of the Board of Management receive stock appreciation rights (SARs).

The members of the Board of Management received total remuneration of € 4,202k for their activity on the Board of Management in the 2021 financial year (previous year: € 3,133k). As of December 31, 2021, the net balance of performance-related payments outstanding for members of the Board of Management amounted to € 6,021k (previous year: € 5,909k).

The Supervisory Board members received total remuneration of € 130k in the 2021 financial year for their activities on the Supervisory Board (previous year: € 132k). The specific structure of overall remuneration was as follows:

	2021 € 000s1	2020 € 000s1
Short-term benefits	2,009	1,757
Post-employment benefits2	282	269
Other long-term benefits3	439	388
Share-based remuneration4	1,473	719
Total	4,203	3,133

¹ The amounts disclosed refer to members of the Board of Management active in the respective reporting year and to their activities on the Board of Management.

² The amount disclosed refers to the service cost recognized in the 2021 financial year. ³ The amount disclosed refers to the mid-term incentive agreement for 2019 (2018), which covers 2019, 2020, and 2021 (2018, 2019, and 2020) and is due for payment in

2022 (2021). ⁴ The amount disclosed corresponds to the fair value upon issue of the stock appreciation rights (SARs) granted in 2021 (2020) and calculated in accordance with IFRS 2 (Share-based payment) as well as the fair value upon issue of the stock options granted in 2021 (2020), although these were in some cases not yet vested as of the balance sheet date.

The Supervisory Board of STRATEC SE comprised the following individuals in the year under report:

Dr. Rudolf Eugster, Uetikon am See, Switzerland Management Consultant (Supervisory Board member since October 26, 2021; Supervisory Board Chair since November 3, 2021)
Dr.-Ing. Frank Hiller, Feldafing, Germany CEO of Deutz AG, Cologne, Germany (Supervisory Board member since May 29, 2019; Deputy Chair of Supervisory Board since November 26, 2020)
Dr. Rolf Vornhagen, Langen, Germany Biologist (Supervisory Board member since July 21, 2020)
Prof. Dr. Stefanie Remmele, Landshut, Germany Professor of Medical Technology at the University of Applied Sciences in Landshut, Germany (Supervisory Board member and Supervisory Board Chair until October 22, 2021)

The Supervisory Board members Dr. Rudolf Eugster, Dr.-Ing. Frank Hiller, and Dr. Rolf Vornhagen do not hold positions on any other supervisory boards or supervisory bodies as defined in § 125 (1) Sentence 5 of the German Stock Corporation Act (AktG). Prof. Dr. Stefanie Remmele also did not hold any other such positions during her membership of the Supervisory Board.

	2021 € 000s	2020 € 000s
Fixed remuneration	113	116
Meeting allowance	17	16
Total	130	132

In addition to this total remuneration, each member of the Supervisory Board also has his or her expenses reimbursed and benefits from a pecuniary damage liability insurance policy taken out at the company's expense at suitable terms customary to the market.

Contractual obligations not recognized in the balance sheet

The unrecognized contractual obligations mainly involve master agreements with suppliers.

The unrecognized contractual obligations mature as follows:

	2021 € 000s	2020 € 000s
Due within one year	121,794	77,128
Due in between one and five years	39,820	40,661
Due in more than five years	0	0
Total	161,614	117,789

As of the balance sheet date, unrecognized contractual obligations involving obligations for orders placed amounted to € 161,239k (previous year: € 117,561k).

Of unrecognized contractual obligations, € 9k relates to property, plant and equipment (previous year: € 22k) and € 366k to intangible assets (previous year: € 204k).

Contingent assets and liabilities

As in the previous year, STRATEC has no contingent assets or liabilities.

Disclosures pursuant to § 160 (1) No. 8 AktG at STRATEC SE

STRATEC SE received the following voting right notifications from shareholders who hold a share of at least 3% of the voting rights:

Notifying party	Date on which threshold was met	Share of voting rights		Allocable voting right share of at least 3%
		in%	absolute
Herdor GmbH & Co. KG, Unterschleißheim, Germany	04.27.2014	25.40	2,990,000	Tanja van Dinter, Bettina Siegle and Ralf Leistner
Herdor Beteiligungs GmbH, Unterschleißheim, Germany	04.27.2014	25.40	2,990,000	Herdor GmbH & Co. KG, Tanja van Dinter, Bettina Siegle and Ralf Leistner
Hermann Leistner, Germany	04.27.2014	25.79	3,035,456	Herdor GmbH & Co. KG, Herdor Beteiligungs GmbH, Tanja van Dinter, Bettina Siegle and Ralf Leistner
Doris Leistner, Germany	04.27.2014	25.74	3,030,235	Herdor GmbH & Co. KG, Herdor Beteiligungs GmbH, Tanja van Dinter, Bettina Siegle and Ralf Leistner
Tanja van Dinter, Germany	04.27.2014	29.53	3,476,286	Herdor GmbH & Co. KG, Bettina Siegle and Ralf Leistner
Bettina Siegle, Germany	04.27.2014	29.68	3,493,954	Herdor GmbH & Co. KG, Tanja van Dinter and Ralf Leistner
Ralf Leistner, Germany	04.27.2014	29.73	3,499,343	Herdor GmbH & Co. KG, Tanja van Dinter and Bettina Siegle
Juno Investment Partners B.V., Den Haag, Netherlands	05.20.2020	3.017	362,998
Allianz Global Investors GmbH, Frankfurt am Main, Germany	06.12.2020	4.98	599,428	Allianz Global Investors Fund SICAV
Ameriprise Financial, Inc., Wilmington, Delaware, US1	11.18.2020	6.31	762,639	Threadneedle (Lux)
Threadneedle (Lux), Bartringen, Luxembourg	11.18.2020	5.001	604,811

1 Voluntary group notification due to the threshold being met within the group of notifying parties

Information about voting right notifications can also be found in the Investors section of the company's website at www.stratec.com.

Events after the balance sheet date

On January 24, 2022, the existing master credit facility was prematurely replaced with a new master credit facility. The new facility has a term until January 22, 2027 and a revolving credit line of up to € 55 million. This long-term financing safeguards and enhances the company's planning of its liquidity and financial position.

It is currently not possible to foresee the effects of the conflict in Ukraine. STRATEC does not have any locations in Ukraine or in Russia; however, implications on supply chains and developments in the prices of raw materials and upstream products relevant to STRATEC cannot be excluded or are already apparent. This situation gives rise to additional forecasting uncertainties.

Apart from this, no other events of particular significance expected to materially impact on the company's earnings, financial, or net asset position have occurred since the balance sheet date.

Declaration in respect of the German Corporate Governance Code

The declaration in respect of the German Corporate Governance Code ('Declaration of Compliance') required by § 161 of the German Stock Corporation Act (AktG) has been submitted by the Board of Management and Supervisory Board of STRATEC SE and made permanently available to shareholders in the Investors section of the company's homepage (www.stratec.com)).

Birkenfeld, March 28, 2022

STRATEC SE The Board of Management

Marcus Wolfinger Dr. Robert Siegle Dr. Claus Vielsack

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable reporting principles for financial reporting, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.

Birkenfeld, March 28, 2022

STRATEC SE The Board of Management

Marcus Wolfinger Dr. Robert Siegle Dr. Claus Vielsack

INDEPENDENT AUDITORS' REPORT

TO STRATEC SE, BIRKENFELD

Report on the Audit of the Consolidated Financial Statements and the Group Management Report

Audit Opinions

We have audited the consolidated financial statements of STRATEC SE, Birkenfeld, and its subsidiaries (the Group) – which comprise the consolidated statement of financial position as at 31 December 2021, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the financial year from 1 January to 31 December 2021, and the notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of STRATEC SE, Birkenfeld, for the financial year from 1 January to 31 December 2021. In accordance with the German legal requirements, we have not audited the content of the (Group) Declaration on Corporate Governance published on the website of the Company, which is referred to in section F. of the group management report, or the Non-Financial Statement of the Group in section G. of the group management report.

In our opinion, on the basis of the knowledge obtained in the audit,

the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB ['Handelsgesetzbuch': German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities and financial position of the Group as at 31 December 2021, and of its financial performance for the financial year from 1 January to 31 December 2021, and
the accompanying group management report as a whole provides an appropriate view of the Group's position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion on the group management report does not cover the components of the group management report whose content we, as described above, have not audited.

Pursuant to Sec. 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.

Basis for the Audit Opinions

We conducted our audit of the consolidated financial statements and of the group management report in accordance with Sec. 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as 'EU Audit Regulation') and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the 'Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report' section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management report.

Key Audit Matters in the Audit of the Consolidated Financial Statements

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon, we do not provide a separate audit opinion on these matters.

We summarize what in our view are the key audit matters below:

Impairment testing of goodwill
Accounting treatment of development costs

Re 1) Impairment testing of goodwill

a) The risk for the financial reporting

Goodwill of EUR 38.0 million is carried in the consolidated financial statements of STRATEC SE, Birkenfeld, under the line item 'Goodwill'. This corresponds to 10.3% of the balance sheet total. Goodwill is subject to an impairment test as at 31 December of each respective financial year.

The valuation was performed using the discounted cash flow method. The findings of the impairment test are highly dependent on the estimates made by the executive directors of future cash flows, the operating margins and the discount rate applied and are therefore subject to substantial uncertainty. In light of this circumstance and the complexity of the valuation, this issue was considered to be a key audit matter.

The disclosures of the Company regarding goodwill are contained in sections B. and C. of the notes to the consolidated financial statements.

b) Auditor's response and conclusions

We verified that the future cash flows used in the valuations are appropriate by comparing them to the latest budgets derived from the three-year planning drawn up by the executive directors and approved by the Supervisory Board and reconciling them with expectations for the specific industrial sector or general market expectations.

The reliability of the business planning was assessed using a retrospective comparison of the deviations between the budget figures underlying the valuation performed in the prior year and the actual figures posted in financial year 2021. Where any significant deviations were identified we discussed these with the executive directors in terms of their relevance for the financial statements of the reporting year.

Based on the knowledge that relatively small changes in the discount rate used can have a significant impact on the enterprise value determined in this way, we also placed a focus of our audit on the parameters used to determine the discount rate and the weighted average cost of capital and verified the formula used in the calculation.

Due to the material significance of goodwill and the fact that the valuation of goodwill also depends on the macroeconomic environment, which lies outside the sphere of influence of the Company, we also performed sensitivity analyses of the cash generating units with lower coverage (carrying amount compared to net present value) and found that the goodwill carried in the books is suitably covered by discounted future cash surpluses and has been suitably discounted. Overall, the valuation parameters and assumptions applied by the executive directors agree with our expectations.

Re 2. Accounting treatment of development costs

a) The risk for the financial reporting

Where the development project is one of the Company's own development projects, the development expenditure incurred in connection with the project is expensed in the period in which it is incurred. This excludes research and development projects acquired in the course of business combinations and development expenditure that cumulatively meets the recognition of IAS 38.57. Capitalized development expenses recognized under intangible assets are subject to an impairment test at least once a year in accordance with IAS 36 until they are put into an operating condition. As soon as they are put into an operating condition, they are amortized, generally over 5 to 12 years.

If the project is a development cooperation involving a contract or other contracts with customers, the first step is to identify the performance obligations and determine whether revenue has to be recognized at a point in time or over time for the respective performance obligations. For sales of analysis systems, service parts and consumables, revenue is generally recognized at a point in time. Revenue from other services is generally recognized over time, measuring progress towards complete satisfaction of the performance obligation. Revenue from development performance obligations is recognized over time or at a point in time, depending on the contract.

Revenue is recognized at the expected amount. Consideration components and sales deductions to be withheld for third parties are deducted from revenue. The consideration to be taken into account is adjusted for the effects of significant financing components, if the period between satisfaction of the performance obligation and payment is more than one year.

Costs of obtaining a contract are expensed immediately if the amortization period is less than one year. Costs to fulfill a contract are recognized as an asset if the costs generate or enhance resources that will be used in satisfying performance obligations and the costs are expected to be recovered. They are reported in inventories.

The pending transaction resulting upon conclusion of the contract is not recognized as an asset or a liability. When one of the contractual parties meets its obligation, a contract asset or a contract liability is recognized in the consolidated statement of financial position. A contract liability exists when the customer has already paid the consideration in full or in part before it is transferred to the customer. In cases where the performance obligation has been satisfied and the customer has not yet transferred the consideration, the existence of a conditional or an unconditional right is verified. A conditional right leads to recognition of a contract asset, while an unconditional right leads to recognition of trade receivables.

In the event that several performance obligations must be transferred to a customer, the contractually agreed consideration is allocated based on the stand-alone selling price at the time of concluding the contract. Stand-alone selling prices are not directly observable in the business model for development cooperations. The stand-alone selling prices are estimated using an appropriate method, generally the expected cost plus margin approach.

As at 31 December 2021, internally generated intangible assets of EUR 35,532k (prior year: EUR 30,161k) were recognized in association with own development projects and EUR 1,939k (prior year: EUR 1,382k) in association with development cooperations. Expenditures qualifying as research expenditure in the sense of IAS 38.54 are expensed in the period in which they are incurred. Due to the different individual contracts and the significance of internally generated intangible assets in the consolidated financial statements, this matter was of particular significance for our audit.

The disclosures of the Company on the accounting treatment of development expenditure on internal development projects and for development cooperations, and its impact on the consolidated financial statements, are included in sections B. and C of the notes to the consolidated financial statements.

b) Auditor's response and conclusions

In a first step we satisfied ourselves that the accounting policies required by IFRS described in a) above were applied systematically. This involved a critical appraisal of whether the recognition criteria in IAS 38.57 were met as well as of the applicability of the rules in IFRS 15 relating to recognition over time or at a point in time.

We audited the recognition, presentation and measurement of internal development projects and development cooperations by means of substantive testing using consciously selected samples. If new development cooperations were arranged in the financial year, the contractual documents were examined to determine whether the respective project was allocated on the basis of the methodology presented under a) above. In particular, an audit focus was placed on revenue recognition in the various development categories and the annual impairment testing of development expenditure capitalized under intangible assets. We also audited the transition to recognition, presentation and measurement in accordance with IFRS 15 using consciously selected samples. We were able to verify the assumptions and estimates made by the executive directors with regard to the recognition of development expenses as intangible assets, and determined that these are suitably documented and agree with our expectations.

Other Information

The executive directors and the Supervisory Board are responsible for the other information. The other information comprises:

The non-financial group declaration included in section G. of the group management report,
the (consolidated) statement on corporate governance published (in German) on the website of the Company, which is referred to in section F. of the group management report
the report of the Supervisory Board
the remaining parts of the annual report, with the exception of the consolidated financial statements, the audited components of the group management report and our respective auditor's report
the confirmation pursuant to Sec. 297 (2) sentence 4 HGB regarding the consolidated financial statements and the confirmation pursuant to Sec. 315 (1) sentence 5 HGB regarding the group management report.

The Supervisory Board is responsible for the report of the Supervisory Board. The executive directors and the Supervisory Board are responsible for the Declaration of Compliance with the German Corporate Governance Code pursuant to Sec. 161 AktG ['Aktiengesetz': German Stock Corporation Act] contained in the (Group) Declaration on Corporate Governance published on the Company's website. In all other respects, the executive directors are responsible for the other information.

Our audit opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the aforementioned other information and, in so doing, to consider whether the other information

is materially inconsistent with the consolidated financial statements, the elements of the group management report whose content was audited, or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Executive Directors and the Supervisory Board for the Consoli- dated Financial Statements and the Group Management Report

The executive directors are responsible for the preparation of the consolidated, financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, and financial performance of the Group. In addition the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.

The Supervisory Board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report of the Company and the Group as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated financial statements and on the group management report of the Company and the Group.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sec. 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report of the Company and the Group, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report of the Company and the Group in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.
Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express audit 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 audit opinions.
Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with [German] law, and the view of the Group's position it provides.
Perform audit procedures on the prospective information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

Other Legal and Regulatory Requirements

Report on the assurance on the electronic rendering of the consolidated financial statements and the group management report prepared for publication purposes in accordance with Sec. 317 (3a) HGB

Audit Opinion

We have performed assurance work in accordance with Sec. 317 (3a) HGB to obtain reasonable assurance about whether the rendering of the consolidated financial statements and the group management report (hereinafter the 'ESEF documents') contained in the attached file 'STRATEC_SE_KAuKLB_ESEF-2021-12-31.zip' (hereinafter also referred to as 'ESEF documents') and prepared for publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format ('ESEF format'). In accordance with German legal requirements, this assurance work extends only to the conversion of the information contained in the consolidated financial statements and the group management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any other information contained in the file identified above.

In our opinion, the rendering of the consolidated financial statements and the group management report contained in the file identified above and prepared for publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format. Beyond this assurance opinion and our audit opinions on the accompanying consolidated financial statements and the group management report for the financial year 1 January to 31 December 2021 contained in the 'Report on the audit of the consolidated financial statements and of the group management report' above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the file identified above.

Basis for the Audit Opinion

We conducted our assurance work on the rendering of the consolidated financial statements and the group management report contained in the file identified above in accordance with Sec. 317 (3a) HGB and the IDW Assurance Standard: Assurance on the Electronic Rendering of Financial Statements and Management Reports Prepared for Publication Purposes in Accordance with Sec. 317 (3a) HGB (IDW AsS 410) (10.2021). Our responsibility in accordance therewith is further described in the 'Auditor's responsibilities for the assurance work on the ESEF documents' section. Our audit firm applies the IDW Standard on Quality Management 1: Requirements for Quality Management in the Audit Firm (IDW QS 1).

Responsibility of the Executive Directors and the Supervisory Board for the ESEF Documents

The executive directors are responsible for the preparation of the ESEF documents including the electronic rendering of the consolidated financial statements and the group management report in accordance with Sec. 328 (1) Sentence 4 No. 1 HGB and for the tagging of the consolidated financial statements in accordance with Sec. 328 (1) Sentence 4 No. 2 HGB.

In addition, the executive directors of the Company are responsible for such internal control as they have determined necessary to enable the preparation of ESEF documents that are free from material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB for the electronic reporting format.

The Supervisory Board is responsible for overseeing the process for preparing the ESEF documents as part of the financial reporting process.

Auditor's Responsibilities for the Assurance Work on the ESEF Documents

Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB. We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion.
Obtain an understanding of internal control relevant to the assurance on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls.
Evaluate the technical validity of the ESEF documents, i.e., whether the file containing the ESEF documents meets the requirements of Commission Delegated Regulation (EU) 2019/815, in the version in force at the date of the financial statements, on the technical specification for this file.
Evaluate whether the ESEF documents enable an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited group management report.
Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in accordance with the requirements of Arts. 4 and 6 of Commission Delegated Regulation (EU) 2019/815, in the version in force at the date of the financial statements, enables an appropriate and complete machine-readable XBRL copy of the XHTML rendering.

Further information pursuant to Art. 10 of the EU Audit Regulation

We were elected as auditor of the consolidated financial statements by the annual general meeting on 20 May 2021. According to Sec. 318 (2) HGB, we qualify as the independent auditors of the consolidated financial statements, as no other auditor has been appointed. We were engaged by the Supervisory Board on 25 November 2021. We have been the independent auditor of the consolidated financial statements of STRATEC SE, Birkenfeld, without interruption since financial year 2015.

We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the Supervisory Board pursuant to Article 11 of the EU Audit Regulation (long-form audit report).

Other Matter – Use of the Auditor's Report

Our auditor's report must always be read together with the audited consolidated financial statements and the audited group management report as well as the assured ESEF documents. The consolidated financial statements and the group management report converted to the ESEF format – including the versions to be published in the Bundesanzeiger [German Federal Gazette] – are merely electronic renderings of the audited consolidated financial statements and the audited group management report and do not take their place. In particular, the ESEF report and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form.

German Public Auditor Responsible for the Engagement

The German Public Auditor responsible for the engagement is Mr. Philipp Lessner.

Stuttgart, 28 March 2022

Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Linda Ruoß Wirtschaftsprüferin (German Public Auditor) Philipp Lessner Wirtschaftsprüfer (German Public Auditor)

INDEPENDENT ASSURANCE PRACTITIONER'S REPORT ON A LIMITED ASSURANCE ENGAGEMENT ON THE NON-FINANCIAL REPORT-ING OF A GROUP OF COMPANIES

TO THE STRATEC SE, BIRKENFELD

We have performed a limited assurance engagement on the consolidated non-financial statement of STRATEC SE; Birkenfeld; (the 'parent company') for the period from 1 January to 31 December 2021 (the 'consolidated non-financial statement') included in section 'G. Non-financial group declaration' of the group management report.

Not subject to our assurance engagement are the external sources of documentation or expert opinions mentioned in the consolidated non-financial statement.

Responsibility of the Executive Directors

The executive directors of the parent company are responsible for the preparation of the consolidated non-financial statement in accordance with §§ [Articles] 315c in conjunction with 289c to 289e HGB ['Handelsgesetzbuch': German Commercial Code] and Article 8 of REGULATION (EU) 2020/852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18. June 2020 on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter the 'EU Taxonomy Regulation') and the Delegated Acts adopted thereunder, as well as for making their own interpretation of the wording and terms contained in the EU Taxonomy Regulation and the Delegated Acts adopted thereunder, as set out in section 'Reporting pursuant to EU Taxonomy Regulation' of the consolidated non-financial statement.

This responsibility includes the selection and application of appropriate non-financial reporting methods and making assumptions and estimates about individual non-financial disclosures of the group that are reasonable in the circumstances. Furthermore, the executive directors are responsible for such internal control as the executive directors consider necessary to enable the preparation of a consolidated non-financial statement that is free from material misstatement, whether due to fraud or error.

The EU Taxonomy Regulation and the Delegated Acts issued thereunder contain wording and terms that are still subject to considerable interpretation uncertainties and for which clarifications have not yet been published in every case. Therefore, the executive directors have disclosed their interpretation of the EU Taxonomy Regulation and the Delegated Acts adopted thereunder in section 'Reporting pursuant to EU Taxonomy Regulation' of the consolidated non-financial statement. They are responsible for the defensibility of this interpretation. Due to the immanent risk that indeterminate legal terms may be interpreted differently, the legal conformity of the interpretation is subject to uncertainties.

Independence and Quality Assurance of the Assurance Practitioner's Firm

We have complied with the German professional requirements on independence as well as other professional conduct requirements.

Our audit firm applies the national legal requirements and professional pronouncements - in particular the By-laws Regulating the Rights and Duties of Wirtschaftsprüfer and vereidigte Buchprüfer in the exercise of their Profession and the IDW Quality Assurance Standard issued by the Institute of Public Auditors in Germany (IDW): Requirements for Quality Management in the Audit Firm (IDW QS 1). and accordingly maintains a comprehensive quality management system that includes documented policies and procedures with regard to compliance with professional ethical requirements, professional standards as well as relevant statutory and other legal requirements.

Responsibility of the Assurance Practitioner

Our responsibility is to express a conclusion with limited assurance on the consolidated non-financial statement based on our assurance engagement.

We conducted our assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised): 'Assurance Engagements other than Audits or Reviews of Historical Financial Information' issued by the IAASB. This standard requires that we plan and perform the assurance engagement to obtain limited assurance about whether any matters have come to our attention that cause us to believe that the group's consolidated non-financial financial statement, other than the external sources of documentation or expert opinions mentioned in the consolidated non-financial financial statement, are not prepared, in all material respects, in accordance with §§ 315c in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the interpretation by the executive directors disclosed in section 'Reporting pursuant to EU Taxonomy Regulation' of the consolidated non-financial statement.

In a limited assurance engagement, the procedures performed are less extensive than in a reasonable assurance engagement, and accordingly, a substantially lower level of assurance is obtained. The selection of the assurance procedures is subject to the professional judgment of the assurance practitioner.

In the course of our assurance engagement we have, among other things, performed the following assurance procedures and other activities:

Gain an understanding of the structure of the Group's sustainability organisation and stakeholder engagement.
Inquiries of relevant employees involved in the preparation of the consolidated non-financial statement about the preparation process, about the internal control system related to this process and about disclosures in the consolidated non-financial statement
Identification of likely risks of material misstatement in the consolidated non-financial statement
Analytical procedures on selected disclosures in the consolidated non-financial statement
Reconciliation of selected disclosures with the corresponding data in the consolidated financial statements and group management report
Evaluation of the presentation of the consolidated non-financial statement
Evaluation of the process to identify taxonomy-eligible economic activities and the corresponding disclosures in the consolidated non-financial statement

In determining the disclosures in accordance with Article 8 of the EU Taxonomy Regulation, the executive directors are required to interpret undefined legal terms. Due to the immanent risk that undefined legal terms may be interpreted differently, the legal conformity of their interpretation and, accordingly, our assurance engagement thereon are subject to uncertainties.

Assurance Opinion

Based on the assurance procedures performed and the evidence obtained, nothing has come to our attention that causes us to believe that the consolidated non-financial statement of the group for the period from 1 January to 31 December 2021 is not prepared, in all material respects, in accordance with §§ 315c in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the interpretation by the executive directors as disclosed in section 'Reporting pursuant to EU Taxonomy Regulation' of the consolidated non-financial statement.

We do not express an assurance opinion on the external sources of documentation or expert opinions mentioned in the consolidated non-financial statement.

Restriction of Use

We draw attention to the fact that the assurance engagement was conducted for the parent company's purposes and that the report is intended solely to inform the parent company about the result of the assurance engagement. Consequently, it may not be suitable for any other purpose than the aforementioned. Accordingly, the report is not intended to be used by third parties for making (financial) decisions based on it. Our responsibility is to the parent company alone. We do not accept any responsibility to third parties. Our assurance opinion is not modified in this respect.

Stuttgart, 28 March 2022

Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Linda Ruoß Wirtschaftsprüferin (German Public Auditor) Björn Maier Wirtschaftsprüfer (German Public Auditor)

FINANCIAL CALENDAR

Subject to amendment

CONTACT

STRATEC SE

Gewerbestr. 37 75217 Birkenfeld Germany Phone: +49 7082 7916-0 [email protected] www.stratec.com

Head of Investor Relations & Corporate Communications

Jan Keppeler Phone: +49 7082 7916- 6515 [email protected]

IMPRINT

Published by STRATEC SE Gewerbestr. 37 75217 Birkenfeld Germany Phone: +49 7082 7916-0 [email protected] www.stratec.com

Board of Management

Marcus Wolfinger (Chairman), Dr. Robert Siegle and Dr. Claus Vielsack

Chairman of the Supervisory Board Dr. Rudolf Eugster

Registration Court Mannheim HRB 732007

Value Added Tax Identification Number DE812415108

Editorial Responsibility STRATEC SE

Concept and Design STRATEC SE Bartenbach AG, Mainz, Germany

Illustrations

STRATEC SE is the exclusive holder of all image rights.

Notice

Forward-looking statements involve risks: This annual report contains various statements concerning the future performance of STRATEC. These statements are based on both assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, we can provide no guarantee of this. This is because our assumptions involve risks and uncertainties which could result in a substantial divergence between actual results and those expected. It is not planned to update these forward-looking statements.

This annual report contains various disclosures that from an economic point of view are not required by the relevant accounting standards. These disclosures should be regarded as a supplement, rather than a substitute for the IFRS disclosures.

Apparent discrepancies may arise throughout this annual report on account of mathematical rounding up or down in the course of addition.

In this annual report, words in the masculine include words in the feminine; in parts of the report, the masculine form has solely been used to make the document easier to read.

This annual report is available in both German and English. Both versions can be downloaded from the company's website at www.stratec.com. In the event of any discrepancies between the two, the German report is the definitive version.

STRATEC SE

Gewerbestr. 37 75217 Birkenfeld Germany Phone: +49 7082 7916-0 [email protected] www.stratec.com

AI Terminal

STRATEC SE

416_10-k_2022-03-30_8dacf128-fb97-4c0c-96fd-af6ec14bf3de.pdf

A PERFECT MATCH IN DIAGNOSTICS

MISSION STATEMENT

CONTENTS

STRATEC GROUP AT A GLANCE

GROUP KEY FIGURES

Sales, earnings, and dividend

Balance sheet

QUARTERLY OVERVIEW 2021

Sales and earnings

LETTER FROM THE BOARD OF MANAGEMENT

DEAR SHAREHOLDERS, DEAR PARTNERS AND FRIENDS OF STRATEC,

REPORT OF THE SUPERVISORY BOARD

DEAR SHAREHOLDERS,

SUPERVISORY BOARD MEETINGS, FORMATION OF COMMITTEES, MEETING ATTENDANCE, AND KEY FOCUSES OF DISCUSSION

ACTIVITIES OF THE SUPERVISORY BOARD AUDIT COMMITTEE

REVIEW OF POTENTIAL CONFLICTS OF INTEREST AND INDEPENDENCE OF SUPERVISORY BOARD MEMBERS

CHANGES IN THE SUPERVISORY BOARD

AUDIT OF ANNUAL AND CONSOLIDATED FINANCIAL STATEMENTS; AUDIT OF NON-FINANCIAL GROUP DECLARATION

THANKS

TOUCHDOWN IN CTE DIAGNOSTICS

NEW OPPORTUNITIES FOR EARLY DIAGNOSIS AND TREATMENT

BIOMARKERS AND THEIR ROLE IN THE NFL

DIFFICULT TO ACCESS: BRAIN AND CENTRAL NERVOUS SYSTEM

NEUROFILAMENTS CAN SERVE AS INDICATORS OF EARLY STAGE BRAIN DAMAGE

CONCUSSION – A FILM CREATES AWARENESS

SHOCKING! INJURIES IN AMERICAN FOOTBALL

CONCUSSION IN SPORT – WHAT IS BEHIND IT?

THE VALUE OF HEALTH

A STRONG OFFENSIVE IN CTE DIAGNOSTICS

EACH BOUT OF CONCUSSION DAMAGES MORE NERVES AND MORE NEUROFILAMENTS LEAK INTO LIQUOR

FROM LIQUOR TO BLOOD PLASMA: FIND THE NEUROFILAMENT USING IMMUNOASSAYS!

MONITORING AS KEY TO PREVENTION

DIGITAL PCR USING MICROFLUIDICS

IMMUNOASSAYS USING SMART CONSUMABLES

SHARP MOVE: IMPLEMENTING SMART CONSUMABLES

HIGH-PRECISION, MICRO-STRUCTURED CHIPS OPEN UP UNIMAGINED POSSIBILITIES

TECHNOLOGIES ADVANCE BEYOND ESTABLISHED ANTIBODY DETECTION

SUCCESSFUL PASS TO PERSONALIZED MEDICINE

NOVEL OPPORTUNITIES TO DIAGNOSE AND TREAT NEUROLOGICAL DISEASES

RESEARCH AND PREVENTION TO THE BENEFIT OF ALL PATIENTS

ANNUAL REPORT OF STRATEC SE

CONTENTS

STRATEC'S SHARE

Review of 2021 on the stock markets

STRATEC's share price performance in 2021 (€)

STRATEC's share – annual highs and lows in 2021 (€)

Listing, stock market turnover, and index membership

Trading data for STRATEC's share (status: December 31)

Virtual Annual General Meeting approves further dividend increase

Eighteenth consecutive dividend increase proposed

Shareholder structure remains stable

Key figures for STRATEC's share (status: December 31)

Further information about STRATEC's share

Investor Relations

Financial calendar

GROUP MANAGEMENT REPORT FOR THE 2021 FINANCIAL YEAR OF STRATEC SE

CONTENTS

A. THE STRATEC GROUP

Business model and strategy

Basic features of business model

Core of corporate strategy

1. Focusing on high-growth market segments

2. Continually expanding the technology and product portfolio

3. Expanding and securing long-term customer relationships

4. Raising the share of recurring sales

5. Increasing diversification

Production and locations

Supply Chain

Quality management

Group structure

STRATEC Instrumentation

Partnering Business

Platform development

Diatron

STRATEC Smart Consumables

Management of the STRATEC Group

Market