Elmos Semiconductor SE

Interim / Quarterly Report • Aug 3, 2018

Innovation Matters

Interim Report H1 2018

January 1 to June 30, 2018

Positive sales and earnings performance in the first half of the year

"The second quarter of 2018 saw positive development. Our products meet the sweet spot in the market. We continue to push forward with the expansion of test capacity. This and the dynamic ramp-ups require considerable efforts. Thus we lay the ground for our growth," says Dr. Anton Mindl, CEO of Elmos Semiconductor AG.

Interim group management report January 1 to June 30

in million Euro unless otherwise indicated	Q2 2018	Q2 2017	Change	H1 2018	H1 2017	Change
Sales	69.1	59.5	16.2%	132.6	120.3	10.3%
Goss profit	29.9	25.0	19.4%	55.6	49.7	11.8%
in % of sales	43.3%	42.1%		41.9%	41.4%
Research and development expenses	8.6	8.8	–2.9%	16.4	18.5	–11.7%
in % of sales	12.4%	14.9%		12.3%	15.4%
Operating income	11.1	6.6	66.7%	18.7	11.3	65.9%
in % of sales	16.0%	11.2%		14.1%	9.4%
EBIT	12.2	6.2	97.7%	20.1	10.9	84.9%
in % of sales	17.7%	10.4%		15.1%	9.0%
Consolidated net income after non
controlling interests	8.0	4.3	86.3%	13.4	7.2	86.3%
in % of sales	11.6%	7.2%		10.1%	6.0%
Earnings per share (basic) in Euro	0.40	0.22	86.0%	0.68	0.36	87.0%
		6/30/2018 3/31/2018			Change 6/30/2018 12/31/2017	Change
Total assets	329.1	339.8	–3.1%	329.1	336.9	–2.3%
Shareholders' equity	245.0	244.2	0.3%	245.0	240.1
in % of total assets	74.4%	71.9%		74.4%	71.3%
Financial liabilities	40.6	51.2	–20.7%	40.6	51.2	–20.6%
Liquid assets and securities	57.2	75.7	–24.4%	57.2	84.4	–32.2%
Net cash	16.6	24.5	–32.2%	16.6	33.2	–50.1%
	Q2 2018	Q2 2017	Change	H1 2018	H1 2017	Change
Cash flow from operating activities	13.4	5.1	>100.0%	18.0	13.6	31.6%
Capital expenditures	11.4	6.3	80.0%	20.4	13.5	51.6%
in % of sales	16.4%	10.6%		15.4%	11.2%
Adjusted free cash flow	–1.1	–3.0	–64.5%	–8.2	–1.7	>100.0%

Definition of selected financial indicators

• Adjusted free cash flow: cash flow from operating activities less capital expenditures for/plus disposal of intangible assets and property, plant and equipment

• Capital expenditures: capital expenditures for intangible assets and property, plant and equipment, less capitalized development expenses - For more details on the key figures used, please refer to the Annual Report 2017 of Elmos Semiconductor AG at www.elmos.com

Key figures Profit, financial position as well as assets and liabilities

• -> Pleasant sales growth of 10.3% in the first half of 2018.
• -> The Semiconductor segment's ratio of orders received to sales, known as the book-to-bill ratio, was above one at the end of the reporting period.
• -> The capitalization of development expenses has an opposite effect compared to the continued increase in research and development resources.
• -> EBIT nearly doubled at 20.1 million Euro (EBIT margin: 15.1%).
• -> Net cash decreased in particular due to capital expenditures and the dividend distribution.
• -> Some capital expenditures for expanding the test area were brought forward to the first half of 2018, which had a material impact on adjusted free cash flow in the reporting period.

Economic environment

• -> International new car registrations developed positively in the reporting period, according to the German Association of the Automotive Industry (VDA). The number of new car registrations rose in Western Europe (+2.0%), the United States (+2.0%) and China (+5.5%). Japan proved to be an exception, seeing a year-on-year decline of 2.3%.
• -> The global economy and the automotive industry in particular are exposed to various risks whose possible effects cannot currently be predicted.

Sales by region Segment reporting

in thousand Euro		Semiconductor		Micromechanics	Consolidation		Group
				H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017
Third-party sales		121,697 110,362	10,922	9,905	0		0 132,619 120,267
Inter-segment sales	263	227	373	1,133	–636	–1,360	0	0
Total sales		121,960 110,589	11,295	11,038	–636		–1,360 132,619 120,267
Segment earnings (EBIT)	18,571	9,602	1,503	1,253	0	0	20,074	10,855
Share in net income of associates							–787	–182
Finance income							515	612
Finance costs							–876	–1,775
Earnings before taxes							18,926	9,510
Income tax	–5,478	–2,301	–78	–164	0	0	–5,556	–2,465
Consolidated net income							13,370	7,045

-> Both segments contributed to the positive development in the first half of 2018.

-> The development of the Micromechanics segment is subject to greater volatility compared to the Semiconductor segment due to the smaller absolute size of the business.

• -> Asia continues to show disproportionate growth.
• -> The other changes in the split of regional sales were due primarily to changes in delivery addresses.

Fiscal year 2018	As of 2/15/2018
Sales growth in 2018 (vs. 2017)	8% to 12%
EBIT margin	13% to 17%
Capital expenditures (in % of sales)1	<15%
Adjusted free cash flow2	Negative
Assumed exchange rate	1.20 USD/EUR

1 Capital expenditures for intangible assets and property, plant and equipment less capitalized development expenses 2 Cash flow from operating activities less capital expenditures for/plus disposal of intangible assets and property, plant and equipment

Outlook Financial calendar

Fiscal year 2018
Quarterly results Q2/20181	August 2, 2018
Quarterly results Q3/20181	November 7, 2018
Equity Forum in Frankfurt	November 26 -27, 2018

¹ The German Securities Trading Act ("Wertpapierhandelsgesetz") and the Market Abuse Regulation (EU) oblige issuers to announce immediately any information which may have a substantial price impact, irrespective of the communicated schedules. Therefore, we cannot rule out having to announce key figures of quarterly and fiscal year results ahead of the dates mentioned above. As we can never rule out changes of dates, we recommend checking them in advance on the website (www.elmos.com).

-> The guidance issued in February 2018 is confirmed. Continued good economic condition are the prerequisite for this guidance.

Opportunities and risks

The individual company risks and opportunities are described in our Annual Report 2017. In the first six months of 2018, there was no significant change to the company's risk and opportunities as described in the Annual Report. As explained in the Annual Report, individual risks may cause substantial damage to the company in extreme cases. Such cases can neither be predicted nor ruled out. Irrespective of this, it should be noted that the occurrence of an individual risk, even if it does not develop into an extreme case, can have a strong negative impact on the profit, financial positions as well as assets and liabilities of the company.

Significant events

At the Annual General Meeting on May 16, 2018, the shareholders agreed to the proposed dividend increase to 0.40 Euro per share (prior year: 0.35 Euro). The other items on the agenda were also approved by a large majority.

Elmos released an ad hoc announcement on July 18, 2018, since EBIT in the second quarter of 2018 far surpassed the consensus of analyst estimates compiled by Elmos.

Visit www.elmos.com for more events, new products and notifications on voting rights from the first half of 2018.

Condensed interim consolidated financial statements according to IFRS January 1 to June 30

Condensed consolidated statement of financial position

Assets in thousand Euro	6/30/2018	12/31/2017
Intangible assets	27,739	23,366
Property, plant and equipment	110,318	100,142
Investments in associates	0	787
Securities	23,521	40,122
Investments	20	20
Other financial assets	6,700	6,354
Deferred tax assets	1,834	2,111
Non-current assets	170,133	172,902
Inventories	65,568	65,052
Trade receivables	45,715	44,391
Securities	19,060	11,868
Other financial assets	1,466	2,019
Other receivables	10,787	7,881
Income tax assets	1,800	450
Cash and cash equivalents	14,618	32,367
Current assets	159,014	164,028
Total assets	329,146	336,930

Equity and liabilities in thousand Euro	6/30/2018	12/31/2017
Share capital	20,104	20,104
Treasury shares	–325	–414
Additional paid-in capital	85,295	85,093
Surplus reserve	102	102
Other equity components	–437	–1,529
Retained earnings	139,782	136,177
Equity attributable to owners of the parent	244,521	239,532
Non-controlling interests	507	588
Shareholders' equity	245,028	240,120
Provisions for pensions	0	412
Financial liabilities	40,546	40,765
Deferred tax liabilities	4,615	3,246
Non-current liabilities	45,161	44,424
Provisions	14,434	12,875
Income tax liabilities	5,495	4,088
Financial liabilities	75	10,398
Trade payables	15,509	22,803
Other liabilities	3,444	2,223
Current liabilities	38,958	52,386
Liabilities	84,118	96,810
Total assets	329,146	336,930

in thousand Euro	Q2 2018	Q2 2017	H1 2018	H1 2017
Sales	69,116	59,484	132,619	120,267
Cost of sales	–39,221	–34,449	–77,012	–70,521
Gross profit	29,894	25,035	55,608	49,745
Research and development expenses	–8,581	–8,839	–16,373	–18,549
Distribution expenses	–4,942	–4,934	–10,190	–10,287
Administrative expenses	–5,297	–4,619	–10,317	–9,623
Other operating income before other operating expenses (–)/income	11,074	6,643	18,727	11,286
Foreign exchange gains/losses (–)	674	–781	252	–1,026
Other operating income	1,131	605	1,979	1,098
Other operating expenses	–666	–289	–885	–503
Earnings before interest and taxes (EBIT)	12,213	6,177	20,074	10,855
Share in net income of associates	–655	–73	–787	–182
Finance income	281	298	515	612
Finance costs	–581	–926	–876	–1,775
Earnings before taxes	11,258	5,476	18,926	9,510
Income tax	–3,326	–1,408	–5,556	–2,465
thereof current income tax	–2,457	–1,045	–4,121	–2,312
thereof deferred tax	–869	–363	–1,435	–153
Consolidated net income	7,933	4,068	13,370	7,045
thereof attributable to owners of the parent	8,002	4,296	13,438	7,214
thereof attributable to non-controlling interests	–69	–228	–68	–169
Earnings per share	Euro	Euro	Euro	Euro
Basic earnings per share	0.40	0.22	0.68	0.36
Fully diluted earnings per share	0.40	0.22	0.68	0.36

Condensed consolidated income statement Condensed consolidated statement of comprehensive income

in thousand Euro	Q2 2018	Q2 2017	H1 2018	H1 2017
Consolidated net income	7,933	4,068	13,370	7,045
Items to be reclassified to the income statement in later periods
including respective tax effects
Foreign currency adjustments without deferred tax effect	622	–541	429	–579
Foreign currency adjustments with deferred tax effect	548	–704	328	–851
corresponding deferred tax	–140	174	–88	209
Value differences in hedges	0	156	0	311
corresponding deferred tax	0	–51	0	–102
Changes in market value of financial assets measured at market value	–186	19	–310	15
corresponding deferred tax	61	–6	101	–5
Items not to be reclassified to the income statement in later periods
including respective tax effects
Actuarial gains from pension plans	884	6	890	12
corresponding deferred tax	–256	–2	–258	–4
Other comprehensive income after taxes	1,533	–950	1,092	–994
Total comprehensive income after taxes	9,466	3,118	14,462	6,051
thereof attributable to owners of the parent	9,537	3,551	14,530	6,226
thereof attributable to non-controlling interests	–70	–234	–68	–175

in thousand Euro	Q2 2018	Q2 2017	H1 2018	H1 2017
Consolidated net income	7,933	4,068	13,370	7,045
Depreciation and amortization	6,796	5,915	12,752	11,956
Gains (–)/losses from disposal of assets	0	–6	7	–134
Financial result	952	519	1,146	1,163
Other non-cash expenses	196	363	762	153
Current income tax	2,457	1,044	4,121	2,312
Expenses for stock awards/share matching	25	55	92	111
Changes in pension provisions	35	–24	0	–48
Changes in net working capital
Trade receivables	–5,185	–1,497	–1,324	3,736
Inventories	502	–1,725	–516	–1,421
Other assets	3,287	2,135	–2,401	–730
Trade payables	1,356	–989	–8,324	–6,129
Other provisions and other liabilities	–3,024	–1,661	2,768	1,320
Income tax payments	–1,349	–2,783	–4,064	–5,203
Interest paid	–754	–649	–876	–1,099
Interest received	214	298	447	612
Cash flow from operating activities	13,441	5,063	17,960	13,644
Capital expenditures for intangible assets	–4,488	–2,071	–7,747	–2,644
Capital expenditures for property, plant and equipment	–10,156	–6,074	–18,560	–12,890
Payments from disposals of non-current assets held for sale	0	23	0	23
Disposal of non-current assets	122	41	151	212
Disposal of/Payments for (–) securities	7,065	–1,427	9,057	–4,599
Payments from/Payments for (–) other non-current
financial assets	–111	380	–222	258
Cash flow from investing activities	–7,568	–9,128	–17,321	–19,640

in thousand Euro	Q2 2018	Q2 2017	H1 2018	H1 2017
Repayment (–)/Borrowing of non-current liabilities	–111	39,890	–219	39,781
Repayment (–)/Borrowing of current liabilities to/from banks	–10,000	22	–10,000	22
Share-based payment/Issue of treasury shares	–159	588	–1,144	1,675
Purchase of treasury shares	0	–4,856	0	–9,672
Dividend distribution	–7,906	–6,912	–7,906	–6,912
Other changes	282	–8	278	–22
Cash flow from financing activities	–17,894	28,724 –18,991
Decrease (–)/Increase in cash and cash equivalents	–12,021	24,659	–18,352	18,876
Effects of exchange rate changes on cash and cash equivalents	824	–893	602	–990
Cash and cash equivalents at beginning of reporting period	25,815	37,230	32,367	43,110
Cash and cash equivalents at end of reporting period	14,618	60,997	14,618	60,997

Condensed consolidated statement of changes in equity

	Equity attributable to owners of the parent						Non controlling interests	Group
in thousand Euro	Shares	Share	Treasury	Additional	Surplus		Other equity components			Retained	Total	Total	Total
	thousand	capital	shares	paid-in capital	reserve					earnings
						Provision for financial assets measured at market value outside profit or loss	Hedges	Foreign currency translation	Unrealized actuarial gains/losses
January 1, 2017	20,104	20,104	–193	92,444	102	–142	–367	1,578	–866	118,142	230,803	778	231,581
Consolidated net income										7,214	7,214	–169	7,045
Other comprehensive income for the period						10	209	–1,216	9		–988	–6	–993
Total comprehensive income						10	209	–1,216	9	7,214	6,226	–175	6,051
Share-based payment/Issue of treasury shares			195	1,480							1,675		1,675
Repurchase of treasury shares			–450	–9,222							–9,672		–9,672
Dividend distribution										–6,912	–6,912		–6,912
Other changes				86							86		86
June 30, 2017	20,104	20,104	–448	84,789	102	–132	–158	363	–857	118,444	222,207	603	222,810
January 1, 2018	20,104	20,104	–414	85,093	102	–273	0	–394	–862	136,177	239,532	588	240,120
Consolidated net income										13,438	13,438	–68	13,370
Other comprehensive income for the period						–209	0	669	632		1,092	0	1,092
Total comprehensive income						–209	0	669	632	13,438	14,530	–68	14,462
Share-based payment/Issue of treasury shares			89	215						–1,448	–1,143		–1,143
Dividend distribution										–7,906	–7,906		–7,906
Other changes				–13						–479	–492	–13	–505
June 30, 2018	20,104	20,104	–325	85,295	102	–482	0	276	–230	139,782	244,521	507	245,028

The condensed interim consolidated financial statements for the first half of 2018 were released for publication pursuant to Management Board resolution in August 2018.

1 – GENERAL INFORMATION

The address of the Company's registered office is Heinrich-Hertz-Straße 1, 44227 Dortmund, Germany.

Basic principles of the preparation of financial statements

The condensed interim consolidated financial statements for the period January 1 to June 30, 2018 have been prepared in accordance with IAS 34 "Interim Financial Reporting". These financial statements therefore do not contain all the information and disclosures required for consolidated financial statements and should therefore be consulted together with the consolidated financial statements for the fiscal year ended December 31, 2017.

Essential accounting policies and measurement methods

For the preparation of the condensed interim consolidated financial statements, the same accounting policies and measurement methods have been adopted as were applied for the preparation of the consolidated financial statements for the fiscal year ended December 31, 2017, with the exception of the new or amended IFRS standards and interpretations explained below.

IFRS 9 – Financial Instruments: This standard supersedes all previous versions of IAS 39 for the classification and measurement of financial assets and liabilities, as well as for the accounting of hedging instruments. It contains revised guidelines for classifying and measuring financial instruments, including a new expected credit default model for calculating the impairment of financial assets as well as the new general accounting principles for hedges. IFRS 9 must be adopted for the first time in fiscal years beginning on or after January 1, 2018. With the exception of accounting for hedges, the standard must be applied retroactively; however, providing comparative information is not required. With a few exceptions, the hedge accounting principles are generally to be applied prospectively.

Overall, the changes have the following impact on Elmos with regard to the classification and measurement of financial assets and liabilities:

		IAS 39			IFRS 9
in thousand Euro		Cat. Measurement	Book value 12/31/2017	Business model	Category	Book value 01/01/2018
Financial assets
Investments		AfS Amortized cost		20 Hold and sell	At market value outside profit or loss (no recycling)	20
Securities		LaR Amortized cost	5,000 Hold		Amortized cost	5,000
Securities		AfS At market value outside profit or loss		46,990 Hold and sell	At market value outside profit or loss (with recycling)	46,990
Trade receivables		LaR Amortized cost	44,391 Hold		Amortized cost	44,391
Cash and cash equivalents		LaR Amortized cost	32,367 Hold		Amortized cost	32,367
Other receivables and assets		LaR Amortized cost	2,011 Hold		Amortized cost	2,011
Other loans receivable		LaR Amortized cost	6,354 Hold		Amortized cost	6,354
Call options		HfT At market value through profit or loss		8 Trading	At market value through profit or loss	8
Financial liabilities
Trade payables	OL AC	Amortized cost		22,803 Financial liabilities at amortized cost	Amortized cost	22,803
Liabilities to banks	OL AC	Amortized cost		51,163 Financial liabilities at amortized cost	Amortized cost	51,163
Miscellaneous financial liabilities	OL AC	Amortized cost		380 Financial liabilities at amortized cost	Amortized cost	380
Forward exchange/ Currency option transactions and embedded derivatives		HfT At market value through profit or loss		100 Financial liabilities measured at fair value through profit or loss	At market value through profit or loss	100

Additional risk provisioning due to the first-time adoption of the expected credit loss method was not necessary based on the credit risk assessment. It was also not necessary to observe the new hedge accounting rules due to the lack of hedge reporting at the Group.

IFRS 15 – Revenue from Contracts with Customers: The new standard supersedes all existing guidelines on recognizing revenue, including IAS 18 – Revenue, IAS 11 – Construction Contracts and IFRIC 13 – Customer Loyalty Programmes. The standard provides for a uniform, principle-based five-step model for calculating and recognizing revenue, which is to be used for all contracts with customers. Elmos is using the simplified first-time adoption option and limiting the retroactive application of IFRS 15 to contracts that had not been fully performed upon first-time adoption. This means that contracts not performed in full as of January 1, 2018 are accounted for as if IFRS 15 had been applied to them from the beginning. The cumulative effect from the transition is recognized directly in equity. The new standard resulted in no significant impact at Elmos with respect to the development and production of application-specific standard products (ASSPs) or to the development and production of applicationspecific integrated circuits (ASICs).

The following standards and interpretations to be applied for the first time from January 1, 2018 on had no effect on the interim consolidated financial statements as of June 30, 2018:

• -> Amendment to IAS 28 Investments in Associates and Joint Ventures: Clarifications
• -> Amendments to IAS 40 Investment Property: Transfer of investment property
• -> Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards: Deletion of exemptions
• -> Amendments to IFRS 2 – Share-based Payment: Classification and measurement of transactions involving share-based payment
• -> Amendments to IFRS 4 Insurance Contracts: Adoption of IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
• -> IFRIC 22 Foreign Currency Transactions and Advance Consideration

Accounting standards released by IASB but not yet adopted that are relevant to Elmos AG: IFRS 16 – Leases: There are no significant changes in the first half of 2018 to the explanations in the Elmos consolidated financial statements for the fiscal year ended December 31, 2017 with regard to the estimated effects of the IFRS 16 standard not yet adopted.

Estimates and assumptions

The Company recognizes provisions for pension obligations pursuant to IAS 19. For 2018, an actuarial interest rate of 1.65% has been applied, unchanged from December 31, 2017.

Changes in estimates and assumptions

None

Exceptional business transactions

There were no exceptional business transactions in the first six months of 2018.

Basis of consolidation/Investments in associates

In the second quarter of 2018, Micro Systems on Silicon (MOS) Limited, Pretoria (South Africa) was deconsolidated due to a lack of materiality.

Seasonal and economic effects on business operations

The global economy is projected to grow by 3.9% in 2018 according to the International Monetary Fund (IMF). As a result, the forecast from July 2018 remains unchanged compared with the forecast from April 2018. Expectations regarding the United States and China also remain the same. However, the IMF is more skeptical in terms of the eurozone countries, as well as the United Kingdom, Japan and India. A possible tariff war represents the primary risk to global production. If new tariffs are imposed, they could squeeze global economic output by around half a percentage point by 2020. The business of Elmos Semiconductor AG shows rather insignificant seasonal fluctuation.

2 – INFORMATION ON FINANCIAL INSTRUMENTS

The following table lists the book values and fair values of the Group's financial instruments. The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability between market participants in a regular business transaction as of the measurement date. In view of varying factors of influence, the presented fair values can only be regarded as indicators of the amounts actually recoverable on the market. Detailed information on the methods and assumptions underlying the determination of the value of financial instruments can be found under note 29 to the 2017 consolidated financial statements as well as under note 1 of these interim consolidated financial statements.

	June 30, 2018		December 31, 2017
in thousand Euro	Book value	Fair value	Book value	Fair value
Financial assets
Investments	20	20	20	20
Securities (long-term)	23,521	23,521	40,122	40,122
Securities (short-term)	19,060	19,060	11,868	11,868
Trade receivables	45,715	45,715	44,391	44,391
Cash and cash equivalents	14,618	14,618	32,367	32,367
Other financial assets	8,166	8,166	8,373	8,373
Financial liabilities
Trade payables	15,509	15,509	22,803	22,803
Liabilities to banks	40,621	40,916	51,163	51,490
Other financial liabilities	150	150	480	480

Book values and fair values of financial assets and liabilities

At the end of each reporting period, a review is conducted to find out whether reclassifications between valuation hierarchies must be made. The following presentation shows which valuation hierarchy levels (according to IFRS 13) financial assets and liabilities measured at fair value are classified to.

Hierarchy of fair values

Level 1: quoted (unadjusted) prices on active markets for similar assets or liabilities

in thousand Euro			01/01 Addition Disposal		Reclassification	Market valuation	6/30
Long-term securities1	2018	35,122	0	–6,088	–10,527	14	18,521
	2017	37,856	8,277	0	–2,077	–298	43,758
Short-term securities1	2018	11,868	0	–3,011	10,527	–325	19,060
	2017	5,678	522	–4,546	2,077	313	4,044

1At market value outside profit or loss (with recycling)

Level 2: methods where all input parameters with a material effect on the determined fair value are observable either directly or indirectly

in thousand Euro		01/01	Addition	Disposal	Market valuation	6/30
Hedged derivatives	2018	0	0	0	0	0
	2017	–547	0	0	311	–236
Forward exchange contracts/ Currency option transactions	2018	–62	223	30	98	290
	2017	0	–318	0	0	–318
Embedded derivatives	2018	–38	0	0	14	–24
	2017	–10	0	0	–27	–37

Level 3: methods using input parameters that have a material effect on the determined fair value and are not based on observable market data

in thousand Euro		01/01	Addition	Derecognition	6/30
Call	2018	8	2	0	10
options	2017	8	3	0	11

3 – RELATED PARTY DISCLOSURES

As reported in the consolidated financial statements for the fiscal year ended December 31, 2017, the Elmos Group maintains business relationships with related companies and individuals in the context of the ordinary course of business. These supply and performance relationships continue to be transacted at market prices. Notifications of managers' transactions for the period from January 1 to June 30, 2018 are available at www.elmos.com.

4 – SIGNIFICANT EVENTS AFTER THE END OF THE FIRST SIX MONTHS OF 2018

Elmos released an ad hoc announcement on July 18, 2018, since EBIT in the second quarter of 2018 far surpassed the consensus of analyst estimates compiled by Elmos. Beyond this, there are no further significant events that occurred after the end of the first six months of 2018 to report.

5 – CHANGES TO THE MANAGEMENT BOARD

In February 2018, the Elmos Supervisory Board appointed Dr. Jan Dienstuhl to be the new Management Board member for Sales and Development effective January 1, 2019. The current Chief Sales Officer, Dr. Peter Geiselhart, will be leaving when his contract ends on December 31, 2018, as per the longstanding agreement with him. The current composition of the Management Board may be viewed at http://www.elmos.com/english/about-us/management.html.

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the accounting principles applicable to interim fi nancial reporting, the interim consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the interim group management report 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 in the remaining fi nancial year.

Dortmund, Germany, August 2, 2018

Dr. Anton Mindl Dr. Arne Schneider Guido Meyer Dr. Peter Geiselhart

REVIEW REPORT To Elmos Semiconductor AG

We have reviewed the condensed interim consolidated fi nancial statements – comprising condensed statement of fi nancial position, condensed statement of comprehensive income, condensed statement of cash fl ows, condensed statement of changes in equity, and selected explanatory notes – and the interim group management report of Elmos Semiconductor AG, Dortmund, Germany, for the period from January 1 to June 30, 2018 that are components of a half-year fi nancial report pursuant to Section 115 WpHG (Securities Trading Act). The preparation of the condensed interim consolidated fi nancial statements in accordance with the IFRS applicable to interim fi nancial reporting as adopted by the European Union and of the interim group management report in accordance with the regulations of the WpHG applicable to interim group management reports is the responsibility of the Company's management. It is our responsibility to issue a report on the condensed interim consolidated fi nancial statements and the interim group management report based on our review.

We have performed our review of the condensed interim consolidated fi nancial statements and the interim group management report in accordance with the German generally accepted standards for the review of fi nancial statements as promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require the review to be planned and conducted in a way that allows us to rule out the possibility with reasonable assurance that the condensed interim consolidated fi nancial statements have not been prepared in material respects in accordance with the IFRS applicable to interim fi nancial reporting as adopted by the European Union and that the interim group management report has not been prepared in material respects in accordance with the regulations of the WpHG applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the degree of assurance attainable in a fi nancial statement audit. As we have not performed a fi nancial statement audit in accordance with our engagement, we cannot issue an audit opinion.

No matters have come to our attention on the basis of our review that lead us to presume that the condensed interim consolidated fi nancial statements of Elmos Semiconductor AG, Dortmund, Germany, for the period from January 1, 2018 to June 30, 2018, have not been prepared in all material respects in accordance with the IFRS applicable to interim fi nancial reporting as adopted by the European Union or that the interim group management report has not been prepared in all material respects in accordance with the regulations of the WpHG applicable to interim group management reports.

Düsseldorf, Germany, August 2, 2018

Warth & Klein Grant Thornton AG Wirtschaftsprüfungsgesellschaft

Prof. Dr. Thomas Senger Ulrich Diersch Germany Public Auditor German Public Auditor

Contact

Thalea Willms | Investor Relations

Phone: + 49 (0) 231-75 49-273 Fax: + 49 (0) 231-75 49-111 invest@elmos.com

Elmos Semiconductor AG

Heinrich-Hertz-Straße 1 44227 Dortmund | Germany Phone: + 49 (0) 231-75 49-0 Fax: + 49 (0) 231-75 49-149 info@elmos.com | www.elmos.com

Note

The half-year financial report of Elmos Semiconductor AG fulfills the requirements of the applicable provisions under the Securities Trading Act (Wertpapierhandelsgesetz, WpHG) and comprises, according to Section 37w WpHG, condensed consolidated half-year financial statements, a group management report, and a responsibility statement. The consolidated half-year financial statements have been prepared in accordance with the IFRS applicable to interim financial reporting as released by the IASB and adopted by the European Union. The half-year financial report should be consulted together with our Annual Report for financial year 2017. The Annual Report includes a comprehensive presentation of our business activities and notes to the financial indicators applied.

Due to rounding it is possible that individual numbers indicated in this interim report do not add up precisely to respective totals indicated and that percentages indicated do not correspond precisely to respective absolute values.

Forward-looking statements

This report contains statements directed to the future that are based on assumptions and estimates made by the management of Elmos. Even though we assume the underlying expectations of our forward-looking statements to be realistic, we cannot guarantee these expectations will prove right. The assumptions may carry risks and uncertainties, and as a result actual events may differ materially from the current statements made with respect to the future. Among the factors that could cause material differences are changes in general economic and business conditions, changes in exchange and interest rates, the introduction of competing products, lack of acceptance of new products, and changes in business strategy. Elmos neither intends nor assumes any obligation to update its statements with respect to future events.

This English translation is for convenience purposes only.