MAX Automation SE — Management Reports 2018

Mar 29, 2018

FINANCIAL REPORT NEW HORIZONS

Combined management report for MAX Automation SE for the 2017 financial year

1. Basis of the parent company and the Group

1.1 Business model

MAX Automation SE based in Düsseldorf, Germany, and its subsidiaries operate as an international high-tech mechanical engineering group and leading complete provider of integrated and complex system and component solutions.

Operations are divided into the two operating segments of Industrial Automation and Environmental Technology. In its Industrial Automation segment, the Group's extensive technological expertise enables it to act as an innovation leader in the development and production of integrated and proprietary solutions for manufacturing and assembly in the long-term growth sectors of automotive, medical technology, packaging automation and electronics. In its Environmental Technology segment, MAX Automation develops and installs technologically complex systems for the recycling, energy and raw materials industries.

As an innovation leader in its business areas, MAX Automation ascribes great significance to groundbreaking solutions for networked production. Core competencies in this context relate to the creation of machines and systems, and equally to the development of software and interlinked applications, such as for product management or maintenance.

In the Industrial Automation segment, MAX Automation concentrates on the four business areas of mobility automation, process technologies, life science automation and new automation technologies. These business areas benefit from attractive growth drivers, such as reducing CO2 emissions from vehicles, the rising importance of sustainable and environmentally compatible solutions in mobility, the development of networked applications for the advancing digitalization of industrial production (Industry 4.0) and the general population's growing awareness of health, with the corresponding positive effects on the medical technology sector. In the Environmental Technology segment MAX Automation serves growth drivers such as the growing global awareness of climate and environmental protection as well as increasingly stringent political regulation in this area, combined with solutions for an approach to using natural resources sparingly.

The primary goal of MAX Automation's business model is geared to the sustainable development of the medium-sized Group companies. These companies form the Group's operating business. In acquiring companies, MAX Automation SE pursues the objective of purchasing a controlling interest, if possible 100% of the shares. Smaller interests are also possible, however, if appropriate with an option to increase participating interests later.

As the management company, MAX Automation SE is responsible for the strategic and financial management of the Group. In addition, it determines and monitors appropriate strategic and operational measures that allow the defined targets of the Group companies and of the Group to be met.

Above and beyond this, MAX Automation analyzes and defines significant synergy potential between the Group companies, thereby raising efficiency within the Group, in accordance with its medium-term "Strategy 2021". These include combining activities in the areas of purchasing and financing, an increasingly important joint utilization of foreign sites as part of internationalization, know-how and technology transfer, best practice approaches and methodologies, and targeted partnerships in developing new solutions in specific projects. MAX Automation has set itself the target of boosting value creation within the Group through concerted enhancement of relationships for the delivery of goods and rendering of services between the Group companies. In some situations, possibilities also exist for exploiting sales synergies through project-based collaboration within the MAX Group.

In accordance with a decision passed by the Shareholders' General Meeting held on June 30, 2017, and the entry into the commercial register on February 8, 2018, MAX Automation AG was transformed into MAX Automation SE. Up until its transformation, the company was managed by the Management Board in accordance with the statutory provisions under German stock corporation law. The Supervisory Board supervised the Management Board and advised it in its managerial duties. Since its transformation, MAX Automation SE has had a monistic management structure that is characterized by the fact that the management of the SE is incumbent on a single management body, namely the Administrative Board.

The Administrative Board is provided with the information necessary for managing the company and decision making by the Executive Directors who receive monthly financial reports from the subsidiaries and meet regularly with the managing directors of operating subsidiaries and make visits to domestic and foreign locations.

MAX Automation SE is listed on the Frankfurt Stock Exchange. The MAX Automation share has been listed in the Prime Standard segment of Deutsche Börse AG since April 2015.

The business trends of the Group companies in the segments, and their corresponding profit transfers have a significant impact on net assets, financial position and performance of MAX Automation SE as the Group's parent company. All of the Group's operating companies are allocated to one of the two segments of either Industrial Automation or Environmental Technology.

The Industrial Automation segment comprised the following companies with their group companies in the fiscal year 2017:

• NSM Magnettechnik Group
• ELWEMA Automotive GmbH
• IWM Automation Group
• bdtronic Group
• MA micro automation GmbH
• Rohwedder Macro Assembly GmbH
• iNDAT Robotics GmbH
• Mess- und Regeltechnik Jücker GmbH
• AIM Micro Systems GmbH
• MAX Automation North America Inc.

GROUP MANAGEMENT REPORT

In addition, MAX Automation reported the signing of an investment agreement for the majority acquisition of the operations of Shanghai Cisens Automation Co., Ltd., a Chinese mechanical engineering company, in August 2017. The transaction is due to be completed in March 2018. Furthermore, at the start of 2018, subsidiary bdtronic GmbH purchased 100% of all the shares in Italian mechanical engineering company R.C.M. Reatina Costruzioni Mecchaniche S.r.l. (RCM), headquartered in Rieti, Lazio region, which has extended its product range, above all in the field of electric and hybrid drives.

The Environmental Technology segment comprised the following company with its significant subsidiary in the year under review:

• Vecoplan Group
• Vecoplan LLC (USA)

The Group companies of MAX Automation SE operate as technology leaders in their respective markets. They develop complex automation and process solutions tailored individually to their customers' requirements. The companies provide a broad range of products and services that encompass individual technical components and process, turnkey automation systems and complete specialty mechanical engineering plants. As systems integrators, they also operate on behalf of their customers and render services for their customers such as consulting (including analyses, tests and feasibility studies), production assistance, maintenance/repair, and software development. Consequently, the individual Group companies are able to provide integrated automation solutions with a high degree of technical complexity and extensive services such as for maintenance of machinery and systems as well as staff training on a one-stop-shop basis.

The MAX Automation Group operates primarily in target markets in Europe, North and South America as well as Asia. The Group companies develop and produce their high-tech automation solutions mainly in Germany, as well as at selected sales and service sites in the USA and Poland. In addition, they have international sales and service branch operations to enable them to serve their global customers on site.

The most important customer groups of the Industrial Automation segment include the automotive industry and their suppliers of various degrees, the medical technology and the electronic industry. The customer base of the Environmental Technology segment includes primarily private and public sector companies from the waste and recycling sector, the pulp and paper industry, the energy sector, as well as the cement and plastics industry (for more information on the Group operating segments, please see section 2.10 of the segment report).

1.2 Key management indicators and strategic positioning

1.2.1 Key financial management indicators

MAX Automation SE uses financial management indicators to manage and assess its operations. These are aimed at securing and enhancing long-term profitability.

The financial performance indicators include:

• New order intake and order book position
• Profitability indicators
• Capital and liquidity indicators
• Personnel data (especially headcounts)
• Covenants for the syndicated loan agreement

The covenants for the syndicated loan agreement include the MAX Group's equity ratio, leverage, and interest coverage ratio. The Group is managed through setting and reviewing target ranges.

1.2.2 Strategic positioning

MAX Automation SE pursues a long-term oriented business model. The model is derived from the specific strengths of the Group companies in the segments of Industrial Automation and Environmental Technology as well as from the strategic strategic instructions of MAX Automation SE as the management company such as in the form of the medium-term "2021 Strategy". The Group's strategic positioning is characterized essentially by the following aspects:

• Offering of value added: The Group companies in the segments of Industrial Automation and Environmental Technology possess long-standing experience and extensive expertise. The Group companies are therefore in a position to combine automation components and broad-based system, process and software know-how into individual and technologically complex solutions, including supplementary services. Acting as close partners to their customers in the respective industries, the Group companies pursue the goal of optimizing their product processes on an ongoing basis based on the specific requirements and specifications. The Group and its subsidiaries therefore create important added value for their customers and deliver competitive advantages through their unique selling propositions. This added value positioning is of key significance for the MAX Automation Group's long-term business success and profitability.
• Expertise for sophisticated major projects: MAX Automation's subsidiaries have the ability to integrate various services into one uniform project management. This applies above all to the use of high-tech solutions, combined with special process know-how and end-to-end services. This kind of holistic project management is a key starting point not only for development, production and the maintenance of individual components but also for acquiring and realizing sophisticated major projects in the international markets.
• A corporate culture that lives and breathes innovation: The industrial automation and environmental technology areas in which MAX Automation operates together with its subsidiaries are characterized by fierce competition and consistent, ongoing technological progress. This applies increasingly to the digitalization of industrial production, the associated networking of machines and systems, as well as to high-growth industrial areas such as micro-automation and robotics. In this context, the development of software solutions, such as for the management or maintenance of plant, is of growing significance. Innovative products and services that create sustainable optimizations and consequently measurable added value for customers are therefore critical to the Group's long-term success. MAX Automation therefore attributes great importance to the continuous development of technologies and the development of innovative solutions in securing and further expanding the individual Group companies' market positions.

GROUP MANAGEMENT REPORT

• Long-term growth drivers: The MAX Automation Group benefits from specific growth drivers in its Industrial Automation and Environmental Technology segments. This includes, for example, CO2 reduction in the automotive area, trends toward electromobility and autonomous driving, technological progress in digitalization and robotics, along with demographic trends and related greater health awareness in the population. The leading indicators of these trends as well as the corresponding strategic direction, for instance in the context of "Strategy 2021", are of key importance for the long-term success of the Group. MAX Automation pursues the objective of not only participating in the relevant technological developments but also of shaping them through developing innovative solutions, for example in the areas of electromobility, augmented automation and collaborative robotics.
• Targeted international expansion: The Group companies of MAX Automation are steadily expanding their international businesses. In view of the dynamic growth of markets in the emerging economies of Asia and South America, customer demand for comprehensive support at their international locations, as well as huge investment requirements in environmental technologies, particularly in North America and Asia, this international expansion is a prerequisite for the Group's further growth. An international network of sales and service branches that are partly jointly used by Group companies, as well as selected production sites abroad provide a base from which the MAX Automation Group can serve local customer requirements, generate synergies and progress and step up its acquisition efforts. The Group's objective is to substantially reinforce its international presence, particularly in North America and China.
• Strategic partnerships: MAX Automation SE is planning to expand its Environmental Technology segment. According to a comprehensive and in-depth market analysis, the specialist for high-tech engineering perceives good opportunities for creating added value for customers, employees and shareholders. Up until now, environmental technology has consisted only of the wholly-owned subsidiary of Vecoplan AG. The expansion is to take place on an organic basis as well as in cooperation with strategic partners. MAX Automation intends to actively exploit consolidation opportunities in the heterogeneous environmental technology sector and to reap further benefit from the drivers of global growth and the increasingly stringent political regulations placed on environmental protection.

1.3 Research and development

The MAX Automation Group serves renowned international companies in the segments of industrial automation and environmental technology through its solutions. In their respective sectors, these companies rank among the leading providers and require customized automation solutions that harness state-of-the-art technologies and processes for their business success. The market environment in which MAX Automation operates is characterized by swift technological change, new developments and trends, fierce competition and growing political regulation in the environmental technology segment in particular.

Against this backdrop, MAX Automation attributes particular importance to its own development for its future success in the individual markets. Development is organized on a decentralized basis: As the Group's strategic management company, MAX Automation SE does not have any development activities of its own. All of the subsidiaries maintain their own capacities, including in the form of specialized departments and technology centers. They structure their research activities in the context of specific customer projects, aligning them depending on their customers' market situations and needs. They also offer to prepare individual feasibility studies in advance.

The subsidiaries consistently expand their expertise in order to secure their technological leadership and tap into new and promising markets. As a result, the individual companies have comparatively young product portfolios that are hallmarked by ongoing innovation.

In fiscal 2017, key innovations pertain to the following Group companies, among others:

• · ELWEMA Automotive: The development of a steam cleaning system for engine and gear unit manufacturing, a process that began in fiscal 2016, offers substantial benefits compared with conventional methods. Among other features, this includes saving around 95% of water consumption, significantly reduced space requirements, and a purchase price that is considerably below the cost of conventional technologies. The newly developed cleaning system is used for combustion engines as well as in e-mobility.
• · IWM Automation Group: Development of a system for the punching, conveying and joining of housing connector parts in automotive production. The system offers much greater flexibility compared with conventional solutions as it is programmable and can therefore produce various connector structures. Another innovation consists of using a high-frequency needle system for the punching process. The system harbors huge potential, particularly for the production of electric vehicles in view of the large volume of connectors in this area.
• · Vecoplan AG: Development of a standardized machine for opening waste material packed in plastic bags and/or sack-in-sack packaging (e.g. DSD –> yellow sack) without shredding their content in order to obtain easily sortable material in downstream processes. The cutters on this machine (VSA 250 T) consist of hammers which are welded to the two rotors and which operate inside the open, solid cutting frame. Thanks to the open design of the cutting frame, the cutters are unaffected by impurities such as stones or hand-sized metal items. As the cutting frame and rotors can be changed, maintenance work such as hard facing welding can be carried out outside the machine. This significantly reduces system downtime.

Of the development costs totaling EUR 2.3 million (previous year: EUR 4.4 million) recorded in fiscal 2017, an amount of EUR 1.7 million was capitalized. In the recognition of development costs, the fact that many developments are incorporated into specific customer projects and cannot be calculated and therefore disclosed separately should be taken into account. The development costs incurred are estimated to be considerably higher. Further information about development spending is presented in section 6.2 of the notes to the financial statements.

2. Group economic and business report

2.1 Macroeconomic and sector-related conditions

2.1.1. Macroeconomic environment

In 2017, the global economy was characterized by an upswing. The International Monetary Fund (IMF) reports major growth impetus emanating again from the established economies for the first time several years, including Germany, Japan and the USA. The emerging economies in Eastern Europe, in South America and China, however, also reported positive trends. According to the IMF, a special factor of influence was the outcome of the elections in France, the Netherlands and Austria, and the defeat of the right-wing populist parties in this context.

In the reporting year, the IMF anticipates growth of 3.7% for the global economy on the back of the aforementioned developments, following on from 3.2% in the previous year, which was lowest growth since the financial crisis in 2007. The Chinese economy expanded by 6.8%. In the USA, economic growth was also upbeat, increasing by 2.3%.

According to the IMF, the economy in the Eurozone expanded by 2.4%, which was stronger than originally anticipated at the start of the year. Export activities in Germany as well as in other European countries picked up the pace. Expectations for the UK's economy are, however, modest in the opinion of the IMF. This is attributable to the effects of the referendum on a possible exit of the country from the European Union.

Germany's economy experienced a distinct economic upswing in 2017. According to the German Federal Statistical Office, the gross domestic product (GDP) was up by 2.2 %, which is almost one percentage point above the average figure posted in the last decade. Above all, private consumption formed the mainstay of this upbeat development on the back of the good situation in the labor market and a positive trend in almost all areas of the economy, including the services sector, the manufacturing industry and the construction sector.

2.1.2 Trends in relevant sectors

The German Engineering Federation (VDMA) reports a successful year in 2017 for its member companies. The Federation anticipated full-year growth of 2.3% to EUR 224 billion in the industry's revenues. This brings the earnings of the companies over the EUR 220 billion threshold for the first time ever. According to the VDMA, this positive development was supported by exports, with the USA and China accounting for the majority of these exports. By contrast, exports to the UK declined due to the uncertainty surrounding Brexit.

The robotics and automation business developed extremely well. The VDMA Specialist Robotics and Automation Technology Association expected an increase of 11.0% in the industry's revenues to a record figure of EUR 14.2 billion in 2017. Revenue generated in the robotics business is predicted to grow by 15.0% to EUR 4.1 billion. Revenue in the Integrated Assembly Solutions segment that comprises intelligent assembly and production solutions expanded by 6.0% to EUR 7.5 billion.

Sources:

^• International Monetary Fund (IWF), World Economic Outlook, October 2017 and January 2018

^• Federal Government of Germany, press release, January 11, 2018

According to the German Automotive Industry Association (VDA), new vehicle registrations on the global automotive markets climbed by 2.0% to EUR 84.6 million in total in the year under review. The VDA reported growth of 2.0% 24.1 million new vehicles in the Chinese market and of 3.0% to 15.6 million new vehicles in the European market. The US market contracted by 2.0% to 17.2 million new vehicles, however. The Association reported that of the large markets in Europe only the British market entered into decline due to the impact of Brexit.

The German medical technology sector also developed well in 2017. The sector association Spectaris puts the increase in companies' revenue at 4.8% to EUR 30.6 billion, thereby exceeding the threshold of EUR 30 billion for the first time. The Association cites digitalization as the main factor of influence behind this development. Medical technology companies are set to evolve from pure manufacturers of devices to providers of digital healthcare solutions.

The VDMA Specialist Waste and Recycling Technology Association reported that its member companies' business developed well in the year under review, and anticipated growth of 3.0% to EUR 2.7 billion in the industry's revenues. According to the Association, one of the main reasons for the increase was a surge in demand, both in Germany and from the member states of the European Union.

2.2 Group business trends

In 2017, the MAX Automation Group reported business developments generally progressing in line with expectations. The Group even achieved a new record in its order book position. The two Group segments of Industrial Automation and Environmental Technology both contributed to this development. Industrial Automation continued to benefit from the numerous growth drivers in the automotive industry in particular and, to an increasing extent, also in the medical technology sector. In accordance with the "Strategy 2021", the segment's business performance was also determined by the ongoing internationalization of business activities, above all in the USA and China, as well as from the growing exploitation of synergies. The measures implemented to improve the cost structure in Environmental Technology and a successful development drive resulted in notable effects.

In their original forecast for the reporting year, the Executive Directors of Max Automation SE planned to leverage synergies between the Group companies and to accelerate internationalization in the Industrial Automation segment. In the Environmental Technology segment, the Executive Directors assumed that the segment would generate appropriate results based on the measures launched in 2016 to adjust capacity to market conditions, starting from a lower revenue basis. In view of these assumptions, the Executive Directors anticipated consolidated revenue of EUR 370 at minimum and consolidated EBIT before purchase price allocation (PPA) amortization within a range of EUR 22 million and EUR 25 million in the 2017 fiscal year.

Sources:

• German Engineering Federation (VDMA), Specialist Robotics and Automation Technology Association, press release, September 27, 2017

^• German Engineering Federation (VDMA), press release, December 12, 2017

^• German Engineering Federation (VDMA), Specialist Waste and Recycling Technology Association, press release, November 24, 2017

^• German Automotive Industry Association (VDA), press release, December 6, 2017

^• Spectaris, Specialist Medical Technology Association, press release, November 9, 2017

GROUP MANAGEMENT REPORT

The MAX Automation Group closed the fiscal year with consolidated revenue of EUR 376.2 million, which was recorded at 11.6 % above the year-earlier figure of EUR 337.1 million. Earnings before interest and tax (EBIT) for the Group as well as from PPA amortization grew by an above average 28.0 % to EUR 22.2 million (previous year: EUR 17.4 million). For the purpose of managing and controlling the Group companies, PPA amortization of EUR 2.0 million was added to this figure (previous year: EUR 5.0 million). In addition, EBIT also includes expenses from currency effects of EUR 0.7 million (previous year: gains from currency effects of EUR 0.4 million). The EBIT margin (net of PPA) – in relation to total operating revenue – improved from 5.1 % to 6.0 %.

The consolidated order intake of the MAX Automation Group amounted to EUR 383.6 million in the year under review and therefore remained at a high level (previous year: EUR 395.7 million; –3.1%). The consolidated order book position rose by 2.5% to EUR 198.6 million as of December 31, 2017, which represents a new record level. The book-to-bill ratio came in at 1.02.

The net interest result rose by 11.0% to EUR –3.2 million due to the increase in working capital above all in the second and third quarter in the context of pre-financing and the processing of the higher order book volume.

Consolidated equity had risen by 24.9% to EUR 139.0 million by the end of 2017 owing to the high net profit and the successfully placed cash capital increase in the reporting year. The equity ratio stood at 43.0%, well above the long-term targeted 30% minimum, as before.

Net debt as of December 31, 2017 was scaled back significantly in line with planning and stood at EUR 47.1 million, down 32.6% compared with the 2016 reporting date.

The Administrative Board of MAX Automation SE intends to enable shareholders to participate appropriately in the successful performance in the reporting year, following on from the reliable dividend policy in recent years. It plans to put a proposal to the Shareholders' General Meeting on May 18, 2018 to keep the 15 euro cents dividend per share for the fiscal year now ended (previous year: 15 euro cents). Because of the capital increase the total payout would therefore amount to EUR 4.4 million (previous year: EUR 4.0 million).

2.3 Particular events during the financial year

2.3.1 Presence expanded in North America

On January 3, 2017, MAX Automation AG reported that it had opened a location with MAX Automation North America Inc. in Atlanta, the capital of the US state of Georgia. The company operates as a platform (business hub) for several MAX Automation Group companies in the segment of Industrial Automation. From the Atlanta base, the Group companies serve customers above all in the Midwest in the automotive and medical technology sectors. MAX Automation is expanding its network with the new location to encompass the North American continent with presences in South Carolina, Oklahoma and Mexico.

2.3.2 Participating interest in ESSERT GmbH

In January 2017, MAX Automation AG completed its investment in ESSERT GmbH, a company based in Ubstadt-Weiher near Karlsruhe in Baden-Württemberg. With a stake of 44.5%, increased to a majority position in

subsequent years on the basis of fixed options, MAX Automation is considerably enlarging its expertise in software development for Industry 4.0 applications as well as in collaborative robotics.

2.3.3 MA micro automation is expanding its presence in Asia

MAX Automation's Group company MA micro automation GmbH continued its expansion in May 2017 and established a new location in Singapore. The aim is to provide customers in the region of Asia with more direct and flexible service. The location will initially function as a service and sales office from where projects can also be managed in the Asian region. In future, the spare parts business for Asian customers is to be run from this location. Furthermore, there are plans to expand the location in order to be able to handle projects in their entirety on site.

2.3.4 Shareholders' General Meeting approves SE transformation

On June 30, 2017, the Shareholders' General Meeting of MAX Automation SE approved the plan on the transformation of MAX Automation SE into the established legal form of a European public company (Societas Europaea, SE) by a large majority. Through the transformation envisaged, the company is taking account of the growing significance of its international business activities. The legally effective implementation took place on February 8, 2018 (see Events after the reporting date). The articles of incorporation of MAX Automation SE included in the transformation plan provides for adjusting the dualistic management structure of the company comprising the Management Board and the Supervisory Board to accommodate the monistic management system consisting of an Administrative Board. The former Management Board members Daniel Fink and Fabian Spilker as well as the former Supervisory Board members Gerhard Lerch, Dr. Jens Kruse and Oliver Jaster were appointed as members of the first Administrative Board of MAX Automation SE. Moreover, according to the articles of incorporation, Messrs Fink and Spilker were elected Executive Directors responsible for heading up the company's operations in this capacity.

2.3.5 Group financing expanded

MAX Automation announced on July 31, 2017 that it had expanded its Group financing and, at the same time, renewed it until 2024. Accordingly, an agreement was reached to increase the syndicated loan concluded in 2015 by EUR 40 million to an overall volume of EUR 190 million. MAX Automation used the sustained favorable financing environment to increase the syndicated loan. The agreement with five partner banks, lead-managed by Commerzbank, includes improved terms and conditions and comfortable covenants. The syndicated loan primarily serves the financing of further internal and external growth in important future markets and therefore the implementation of "Strategy 2021".

2.3.6 Strategic acquisition in China

On August 2, 2017, MAX Automation announced that the Management Board had signed an investment agreement on the same day for the majority acquisition of the operations of the Chinese mechanical engineering company Shanghai Cisens Automation Co., Ltd. In a first step, a participating investment of 51 % was planned, with the option of purchasing the remaining shares in the coming years. For the purpose of implementation, Shanghai Cisens Automation's operations are to be integrated into a new company in the context of an asset deal. Roger Lee, the CEO and founder of the company, is to retain 49 % of the shares. The transaction volume for the acquisition will be in the lower double-digit range in millions of euros. The acquisition of 51 % of the shares is to have been completed by March 2018. Shanghai Cisens Automation

GROUP MANAGEMENT REPORT

is a company specializing in industrial automation. The automotive industry is its largest customer group by far.

2.3.7 Cash capital increase successfully concluded

In mid-August 2017, MAX Automation successfully completed a cash capital increase under exclusion of subscription rights pursuant to Section 186 (3) Clause 4 of the German Corporation Act. The very keen demand of institutional investors exceeded the available volume of shares many times over. The issue price of the new common shares totaling 2,665,000 stood at EUR 7.00. Based on the cash capital increase, the share capital of MAX Automation rose by EUR 2,665,000, equivalent to 10%, to EUR 29,459,415. Overall, the company received gross funds, in other words, before deduction of transaction-related expenses, of EUR 18.7 million.

2.3.8 Strategic partnerships envisaged in Environmental Technology

At the end of September 2017, MAX Automation announced that it intended to expand the Environmental Technology segment in accordance with its medium-term "Strategy 2021". This strategic decision was predicated on an extensive analysis of the long-term market potential in the segment. The business is to be expanded both organically as well as in cooperation with strategic partners. MAX Automation intends to actively seize consolidation opportunities in the heterogeneous environmental technology sector with a view to continuing to benefit from the global growth drivers.

2.3.9 MAX Automation is extending its range of products and services in e-mobility

On December 19, 2017, MAX Automation announced that the Group company bdtronic was to take over 100% of the shares in Italian mechanical engineering company R.C.M. Reatina Costruzioni Mecchaniche SRL (RCM) based in Rieti, Lazio region, from the owner families. The investment volume lay in the lower single-digit million euro range. RCM is a supplier specialized in solutions for mechanical manufacturing, assembly and engineering. The company commands special expertise in the production of impregnating systems for electric and hybrid power trains and has already worked together with bdtronic as a supplier for several years. RCM will operate as bdtronic Italia S.r.l. in the future. The location in Rieti is to be built up into a competence center for impregnating systems, and the supply chain sustainably simplified at the same time.

2.4 Group financial accounting and scope of consolidation

MAX Automation AG prepared its consolidated financial statements for the 2017 financial year according to International Financial Reporting Standards (IFRS). As a result, the company has been released from the obligation to prepare consolidated financial statements according to the requirements of the German Commercial Code (HGB). Previous year figures were also calculated according to IFRS.

Further information about the consolidation scope is presented in section 3.2 of the notes to the consolidated financial statements.

2.5 Order book position

The consolidated new order intake of the MAX Automation Group amounted to EUR 383.6 million in the year under review, thus remaining at a very high level. This corresponds to a marginal decline of EUR –12.1 million, or –3.1%, compared with the record figure of 2016 (previous year: EUR 395.7 million).

The Industrial Automation segment reported order intake of EUR 290.7 million, following on from the high previous year's figure of EUR 300.7 million (-3%). The segment once again reaped the benefit of the key drivers of growth in the automotive industry, including electromobility, the trend toward driver assistance systems, the multitude of varieties in automobile manufacturing, and the more stringent standards imposed on vehicle manufacturers in terms of CO2 emissions. Business in medical technology that is benefiting from the demographic developments and from a general heightening of the population's awareness of health also developed well. For instance, the subsidiary MA micro automation acquired, among other things, a major order from a customer in this segment with a volume of around EUR 20 million.

By contrast, new orders of EUR 92.9 million in the Environmental Technology segment declined by 2.2% compared with the previous year's figure (2016: EUR 95.0 million).

As of December 31 2017, the Group's consolidated order book position had increased by EUR 4.9 million, up 2.5%, to EUR 198.6 million, thereby setting a new record level. The book-to-bill ratio, the ratio between new order intake and revenue, stood at 1.02 (previous year: 1.17).

In Industrial Automation, the order position increased by a further 3% to EUR 168.8 million as of December 31, 2017 (December 31, 2016: EUR 164.1 million). In Environmental Technology, the order book position stood at EUR 29.7 million, unchanged from the previous year's reporting date.

2.6 Revenue and results of operations

The consolidated revenue of MAX Automation advanced considerably, by EUR 39.0 million, or 11.6%, to EUR 376.2 million in 2017 (previous year: EUR 337.1 million). This growth resulted from an increase in the revenue of Industrial Automation. The export share of Group revenue declined slightly to 68.0% compared with 69.7% in the previous year. Business in Germany in the Environmental Technology segment grew in comparison with the previous year, albeit with a slight slowdown in business in other European countries. Overall, North America was the Group's most important foreign market in the reporting year.

The total operating revenue of the MAX Automation Group increased by EUR 37.5 million, or 10.9%, to EUR 380.3 million (previous year: EUR 342.8 million). This figure included changes in inventory of EUR 1.7 million (previous year: EUR 2.6 million) and other work performed by the company and capitalized of EUR 2.4 million (previous year: EUR 3.1 million).

Other operating income dropped to EUR 7.2 million compared with EUR 9.8 million in the previous year. Among other factors, the decrease was attributable to lower income from currency differences. This declined to EUR 1.3 million compared with EUR 2.4 million in the previous year (see explanations on other operating expenses below). In addition, a book gain of EUR 1.7 million from the disposal of the investment property in Dettenhausen was also included in the previous year.

Due to the lower level of total operating revenue, the cost of materials declined from EUR 175.6 million to EUR 196.3 million (11.8%). The cost of materials ratio – in relation to total operating revenue – stood at 51.6%, only marginally higher than the year-earlier level of 51.2%.

GROUP MANAGEMENT REPORT

Personnel expenses rose by 5.4% to EUR 112.3 million, up from EUR 106.6 million, due to hiring new staff in the high-growth segments and general increases in wages and salaries. In relation to total operating revenue, however, the personnel expenses ratio improved by 1.6 percentage points, from 31.1% to 29.5%.

Depreciation and amortization amounted to EUR 8.7 million, which is significantly below the previous year's level of EUR 12.0 million. This figure includes PPA amortization of EUR 2.0 million (previous year: EUR 5.0 million).

Other operating expenses increased from EUR 46.0 million to EUR 49.8 million (8.3%). Expenses from currency differences of EUR 2.0 million remained at the year-earlier level (previous year: EUR 2.0 million). The net balance of currency effects consequently amounted to EUR –0.7 million, compared with EUR +0.4 million in the previous year. In relation to total operating revenue, this reflects a slightly lower expense ratio of 13.1% (previous year: 13.4%).

Consolidated earnings before interest, tax, depreciation and amortization (EBITDA) increased strongly by EUR 4.4 million, or 18.2%, to EUR 28.9 million (previous year: EUR 24.4 million).

Consolidated earnings before interest and tax (EBIT) increased by more than two thirds to EUR 20.2 million (previous year: EUR 12.4 million; 63.0%). For the purpose of managing the Group companies, PPA amortization was added back to EBIT.

In fiscal 2017, PPA amortization declined significantly, from EUR 5.0 million in 2016 to EUR 2.0 million in line with planning. PPA amortization arises mainly from the acquisition of ELWEMA Automotive GmbH at the end of 2013 and of iNDAT Robotics GmbH in February 2015.

For the 2017 fiscal year, the MAX Automation Group reports consolidated operating earnings before interest and tax (EBIT), as well as before amortization relating to purchase price allocations (PPA amortization), of EUR 22.2 million, which is therefore around one third higher than the year-earlier figure (previous year: EUR 17.4 million; 28.0%). The cost of materials ratio – in relation to total operating revenue – improved slightly from 5.1% to 6.0% year on year. EBIT per share before PPA amortization increased sharply to EUR 0.80 compared with EUR 0.62 in 2016 (including the effect from the capital increase).

The net interest result increased from EUR –2.8 million to EUR –3.2 million (11.0%) due to the higher level of working capital, particularly in the second and third quarter, in the context of pre-financing and the processing of the high order book level.

Consolidated earnings before tax (EBIT) amounted to EUR 17.0 million in the reporting year, compared with EUR 9.5 million in the previous year (78.5%).

The expense from income taxes climbed from EUR 1.2 million to EUR 2.9 million.

The Group reported a substantial increase of EUR 14.1 million in consolidated net income in 2017 (previous year: EUR 8.3 million; 69.4%). This is equivalent to EUR 0.50 of earnings per share, after EUR 0.30 in the previous year.

2.7 Assets position

The MAX Automation Group reported total assets of EUR 323.3 million as of the December 31, 2017 balance sheet date, which is EUR 17.0 million, or 5.6%, above the level on the previous year's reporting date (December 31, 2016: EUR 306.3 million).

Non-current assets rose by 0.8% to EUR 111.1 million (December 31, 2016: EUR 110.2 million). Countervailing effects arose. As of December 31, 2017, intangible assets had fallen by EUR 1.7 million, from EUR 15.4 million to EUR 13.7 million, above all due to PPA amortization. Similarly, deferred tax assets declined by EUR 1.3 million to EUR 4.7 million due to the use of loss carryforwards (December 31, 2016: EUR 6.0 million). By contrast, the purchase of the shares in ESSERT GmbH resulted in an addition to equity shares (December 31, 2017: EUR 3.5 million).

Current assets grew by 8.2% overall to EUR 212.3 million (December 31, 2016: EUR 196.2 million). Inventories climbed by 2.1% to EUR 42.1 million (December 31, 2016: EUR 41.2 million). Trade receivables rose substantially by 14.1% to EUR 138.3 million (December 31, 2016: EUR 121.2 million). This increase was primarily attributable to the lower level of prepayments received for long-term construction contracts (December 31, 2017: EUR 95.8 million compared with EUR 116.8 million in the previous year).

Other current assets declined by EUR 5.0 million to EUR 5.6 million (December 31, 2016: EUR 10.6 million). In the previous year, the purchase price receivable of EUR 4.3 million from the sale of the property in Dettenhausen, settled in the previous year, was also included.

Liquid assets of EUR 26.2 million were 13.6% above the level on the previous year's reporting date (December 31, 2016: EUR 23.0 million).

Working capital increased to EUR 107.8 million due to growth and the pre-financing of operations (December 31, 2016: EUR 100.7 million).

2.8 Financial position

The equity of the MAX Automation Group stood at EUR 139.0 million as of December 31, 2017 (December 31, 2016: EUR 111.3 million; 24.9%). The equity ratio of 43.0% remained well above the targeted 30% minimum (December 31, 2016: 36.3%. The capital reserves rose to EUR 18.9 million due to the premium from the cash capital increase that took place in August 2017 (December 31, 2016: EUR 3.1 million). The revenue reserve climbed by 19.2% to EUR 31.2 million.

Non-current liabilities totaled EUR 77.3 million (December 31, 2016: EUR 81.8 million; -5.4%). Non-current bank borrowings stood at EUR 64.8 million (December 31, 2016: EUR 64.1 million; 1.2%). The other non-current financial liabilities declined from EUR 2.2 million to EUR 1.8 million, above all through the reduction of leasing liabilities. As a result of releasing goodwill, deferred tax liabilities declined significantly to EUR 8.2 million compared with EUR 13.2 million as of December 31, 2016.

Current liabilities dropped overall by 5.6% to EUR 107.0 million (December 31, 2016: EUR 113.3 million). Trade payables rose from EUR 61.8 million to EUR 72.6 million (+17.5%), which reflects a higher level of prelimi-

GROUP MANAGEMENT REPORT

nary work performed by suppliers for long-term construction contracts that have been started. Current bank borrowings declined by -70.8% to EUR 8.4 million due to the repayment of drawdowns on the syndicated loan and the reclassification of a long-term portion (December 31, 2016: EUR 28.8 million). Other current financial liabilities increased marginally by 5.1% to EUR 12.9 million (December 31, 2016: EUR 12.3 million). Income tax provisions and liabilities climbed to EUR 4.7 million (December 31, 2016: EUR 2.0 million), which was also attributable to the formation of a provision for the new BMF circular on Section 8c German Corporation Tax Act (KStG) issued at the end of December.

Gross debt (current non-current bank borrowings) amounted to EUR 73.3 million as of December 31, 2017, which is considerably below the level of EUR 92.9 million posted on December 31, 2016 (–21.1%).

Net debt was reduced by around a third to EUR 47.1 million in line with planning (December 31, 2016; EUR 69.9 million; –32.6%).

2.9 Liquidity trends

In 2017, the MAX Automation Group reports a cash outflow from operating activities of EUR 18.7 million, compared with a cash inflow of EUR 15.9 million in the previous year.

Investing activities generated a EUR 6.5 million cash outflow (previous year: EUR 9.0 million). Of this amount, EUR 7.8 million is attributable to investments in non-current assets. This was offset by EUR 0.9 million in cash inflows from disposals, mainly of property, plant and equipment.

The cash outflow from financing activities stood at EUR 8.4 million (cash inflow in the previous year: EUR 26.4 million), mainly due to the repayment of a drawdown on the syndicated loan.

The total cash flows generated cash and cash equivalents of EUR 26.2 million as of the end of the 2017 reporting period, compared with EUR 23.0 million at the start of the reporting period.

2.10 Segment reporting

MAX Automation SE and its specialist Group companies offer their customers technologically complex and innovative components and systems solutions with a view to accommodating the increasingly sophisticated demands made on efficiency and flexibility in automation and the advancing networking in industrial production. The companies concentrate on solutions for specific industries and leverage numerous synergy effects within the Group.

In the Industrial Automation segment, MAX Automation companies develop machines and systems, along with the associated software, to deliver precision to the highest degree in their customers' production processes. Key sectors include the automotive industry, medical technology and the electronics industry. The Group companies are positioned as reliable and expert partners for their customers and enable them to constantly adapt their products to changing market requirements and to optimize their processes. The products and services of the subsidiaries encompass the development and production of holistic assembly systems, among other things, including integrating robotics solutions as well as creating control and maintenance software.

In the Environmental Technology segment, the Group company Vecoplan with its subsidiaries deploys its special expertise to develop machines and systems that contribute to the sustainable utilization of finite raw materials. The service range entails the efficient reprocessing of raw and residual materials to be returned to the materials cycle, or as replacement fuels for energy utilization. The Vecoplan Group also develops and produces services and products to comply with globally more stringent emission protection requirements.

2.10.1 Industrial Automation segment key figures

In 2017, the Industrial Automation segment followed on from the successful development in the previous year and increased its key indicators, in some cases considerably. By the end of the reporting year, the segment had achieved a new record for its order book position. The gratifying development of business, particularly from collaboration with the automotive industry, but also in the field of medical technology, boosted demand that rose sharply for high quality automation solutions and the associated services. The Group companies succeeded in this context in expanding business relationships with existing customers and acquiring new customers.

The Group company iNDAT Robotics ramped up its capacities in May 2017 with the aim of improving production processes and with a view to implementing its growth plans. The company relocated to a new site at headquarters in Ginsheim-Gustavsburg, in the Federal State of Hesse. iNDAT now has access to considerably larger production and warehouse facilities as well as premises with a modern fit-out for its administration.

Moreover, as a result of restructuring within the Group, iNDAT Robotics was taken out of the NSM Magnettechnik Group and integrated into MAX Management GmbH with retrospective effect as of January 1, 2017.

More information concerning the Group companies can be found in the section on Particular events during the financial year.

All in all, the segment continued to benefit from the main growth drivers in its respective markets. This includes electromobility in the automotive industry, the reduction of CO2 emissions of vehicles and the increasing demand for driver assistance systems, as well as the population's generally heightened awareness of health, alongside demographic trends.

Along with operations, the Group companies continued to focus on optimizing their corporate structures and internal processes. Key areas in this context concerned the joint utilization of service locations and collaboration on specific projects in terms of know-how transfer.

Industrial Automation segment – key figures

The Industrial Automation segment generated a consolidated order intake of EUR 290.7 million in the 2017 fiscal year (previous year: EUR 300.7 million; –3.3%).

The order book position stood at EUR 168.9 million as of December 31, 2017, marking a new record (December 31, 2016: EUR 164.1 million; 2.9%). The book-to-bill ratio stood at 1.01 on December 31, 2017 (December 31, 2016: 1.25).

GROUP MANAGEMENT REPORT

The segment's revenue developed dynamically in 2017, rising by EUR 46.6 million, or 19.4%, to EUR 286.4 million (previous year: EUR 239.8 million). Of the segment revenue, 64.3% was attributable to exports, compared with 62.3% in the previous year (2 percentage points).

EBITDA rose markedly to EUR 24.7 million compared with EUR 21.5 million in the previous year.

Segment operating earnings before interest and tax (EBIT), as well as before PPA amortization, posted above-average growth to EUR 19.8 million in relation to revenue (previous year EUR 16.8 million; 17.5 %). The EBIT margin – in relation to total operating revenue – amounted to 6.9 % (previous year: 6.8 %).

The segment result net of PPA amortization came in at EUR 18.1 million, which reflects an increase of 41.5% in a year-on-year comparison (previous year: EUR 12.8 million).

The number of employees in the Industrial Automation segment stood at 1,194 individuals on a year-average basis in 2017 (excluding trainees). The segment employed an average of 1,131 staff in the previous year (5.5%).

Industrial Automation segment key figures

	2017 EUR mill.	2016 EUR mill.	Change in%
New order intake	290.7	300.7	–3.3
Order book position1	168.9	164.1	2.9
Segment revenue	286.4	239.8	19.4
– of which from abroad	184.1	149.4	23.2
EBITDA	24.7	21.5	15.0
Segment EBIT before PPA amortization	19.8	16.8	17.5
Segment EBIT after PPA amortization	18.1	12.8	41.5
Employees (numbers)2	1,194	1,131	5.5

As of December 31

Annual average excluding trainees

2.10.2 Environmental Technology

In the Environmental Technology segment that is represented by the Vecoplan Group within the MAX Automation Group, the measures aimed at improving the cost structure and initiated in the previous year continued in 2017. The segment succeeded in raising profitability substantially against the backdrop of an unchanged business volume and in responding rapidly to the typical volatility in the environmental technology markets. The segment reported a pleasing recycling business in important markets, including the USA. Performance was supported by a revitalized and streamlined product portfolio in the context of successful development activity. Furthermore, the service business was also extended.

MAX Automation extensively analyzed the market opportunities in the field of environmental technology in the year under review. As a result, the segment enjoys good opportunities for creating added value for customers, employees and shareholders. In order to actively seize consolidation opportunities in the heterogeneous environmental technology sector while continuing to benefit from the global growth drivers, such as the general public's heightened awareness of the environment and the increasingly stringent political regulations placed on environmental protection, MAX Automation is planning to expand the segment. The market position of Environmental Technology is to be enhanced through a strategic partnership. The expansion envisaged reflects the medium-term "Strategy 2021" approved for the MAX Automation Group.

Environmental Technology segment key figures

The Environmental Technology segment recorded a consolidated order intake of EUR 92.9 million in the 2017 financial year, which is slightly less than in the previous year (previous year: EUR 95.0 million; –2.2%). The order book position amounted to EUR 29.7 million as of December 31, 2017, and therefore also remained at the year-earlier level (December 31, 2016: EUR 29.7 million). The book-to-bill ratio stood at 1.04 on December 31, 2017 (December 31, 2016: 0.98).

The segment's revenue dropped to EUR 89.4 million (previous year: EUR 97.4 million; –8.1%). The export share stood at 80.0% compared with 87.8% in 2016.

EBITDA doubled, from EUR 4.1 million to EUR 8.2 million in the reporting year (97.6%).

The segment's earnings before interest and tax (EBIT) net of PPA amortization rose almost fourfold, from EUR 1.8 million to EUR 6.5 million, thanks to improvements to the cost structure in response to market conditions. Following a successful development initiative, the revitalized product portfolio and the extended service business contributed to raising gross profit. The EBIT margin – in relation to total operating revenue – amounted to 7.1% (previous year: 1.9%; +5.2 percentage points).

Segment EBIT after PPA amortization amounted to EUR 6.5 million (previous year: EUR 1.3 million).

In its Environmental Technology segment, the MAX Automation Group employed an average of 374 staff in 2017 (excluding trainees), 38 individuals fewer than in the previous year (412 persons). The difference resulted from the aforementioned measures aimed at improving the Vecoplan Group's cost structure.

Environmental Technology segment key figures

	2017 EUR mill.	2016 EUR mill.	Change in%
New order intake	92.9	95.0	–2.2
Order book position1	29.7	29.7	0.1
Segment revenue	89.4	97.4	–8.1
– of which from abroad	71.6	85.5	–16.2
EBITDA	8.2	4.1	97.6
Segment EBIT before PPA amortization	6.5	1.8	268.6
Segment EBIT after PPA amortization	6.5	1.3	417.1
Employees (numbers)²	374	412	–9.2

As of December 31

Annual average excluding trainees

2.11 Change in financial performance indicators

In 2017, the MAX Group reported the following changes to key indicators that are applied as financial performance indicators.

	2016 EUR mill.	2015 EUR mill.	Change in%
New order intake	383.6	395.7	–3.1
Order book position1	198.6	193.8	2.5
Working capital	107.8	100.7	7.1
Revenue	376.2	337.1	11.6
EBITDA	28.9	24.4	18.2
EBIT before PPA amortization	22.2	17.4	28.0
EBIT after PPA amortization	20.2	12.4	63.0
Return on sales (as% of total operating revenue, before PPA amortization)	5.9%	5.1%	+0.8 (% points)
Equity ratio (in%)	43.0%	36,3%	+6.7 (% points)
Workforce headcount	1,796	1,751	2.5
– of whom trainees	147	139	5.8
Workforce headcount (weighted average)	1,700	1,677	1,4
– of whom trainees	125	128	–3

As of 31. December

Non-financial performance indicators are not utilized for internal Group steering. For the forecast horizon, primary recourse is made to relevant indicators from the statement of comprehensive income.

3. Investments

The MAX Group invested EUR 7.7 million in non-current assets in the 2017 fiscal year compared with EUR 8.8 million in 2016. The investments in the reporting year pertained above all to IT and the development of technologies and products, the extension and conversion of buildings used for business purposes as well as to technical systems and machinery.

The segment report in this annual report provides more detailed information about investments in the operating segments.

4. Personnel report

As in previous years, in 2017 the MAX Automation Group with its Group companies followed the principle of appropriately adapting its personnel base to business growth and development only after other options have been exhausted.

The Group employed a total of 1,796 staff, including trainees, as of the December 31, 2017 reporting date (December 31, 2016: 1,751 employees; +2.5 %). The average number of employees, including trainees, increased by 26 individuals, or 1.7%, from 1,549 to 1,575.

Employees of the Group companies and of the holding company represent a key resource for the success and profitability of the company's business. MAX Automation consequently pursues the objective of creating attractive possibilities for further professional development for expert and committed staff. For instance, an intensive training course for managers was launched Groupwide at the end of 2017. More than 50 members of managerial staff took part or will take part in this training. The Groupwide personnel policy comprises high training standards, as well as the promotion and long-term retention of committed employees. In addition, MAX Automation also factored in the greater need for qualified engineers and software development.

5. MAX Automation SE

The separate annual financial statements of MAX Automation SE were prepared according to the regulations of the German Commercial Code (HGB). The regulations of the German Stock Corporation Act (AktG) were also complied with. The separate annual financial statements were prepared in accordance with regulations for large corporations.

5.1 Results of operations and application of earnings

The results of operations of MAX Automation SE depend to a high degree on the development in its subsidiaries' earnings. Control and profit transfer agreements were concluded in 2008 with four Industrial Automation subsidiaries. The control and profit transfer agreement with Mess- und Regeltechnik Jücker GmbH was cancelled effective as of December 31, 2016 as were the remaining control and profit transfer agreements effective as of December 31, 2017. New control and profit transfer agreements are due to be concluded in 2018. Dividend payments from other subsidiaries to the parent company are realized depending on their results, and take the subsidiaries' future investment requirements into account.

Section 2.10 Segment reporting describes the development in the subsidiaries' results of operations. The following figures are based on the earnings of MAX Automation SE according to the principles of the German Commercial Code.

MAX Automation SE recorded income from participating interests of EUR 14.6 million in the 2017 financial year (previous year: EUR 16.0 million) which resulted from the profit transfers and dividend payments of the subsidiaries.

Revenues generated with affiliated companies, which mainly include costs transferred within the Group as well as the allocation of costs for the centralized purchasing of goods and services, totaled EUR 1.9 million (previous year: EUR 0.6 million).

Other operating income included a EUR 2.2 million gain on the disposal of part of the company property in Dettenhausen in the previous year (at Group level in line with IFRS: EUR 1.7 million).

Other operating expenses in the previous year included the EUR 4.3 million loss incurred on the merger of altmayerBTD GmbH & Co. KG.

GROUP MANAGEMENT REPORT

The balanced net interest result in the previous year improved substantially from EUR –0.03 million to EUR +0.4 million. This mainly includes expenses for the syndicated loan as well as interest income generated with affiliated companies.

The company reports earnings before tax of EUR 10.7 million, compared with EUR 10.9 million in the previous year. The tax expense amounts to EUR 3.4 million (previous year: EUR 2.8 million).

Net income for the year stands at EUR 8.2 million (previous year: EUR 8.1 million). An amount of EUR 4.0 million was paid out in dividends from the previous year's unappropriated retained earnings.

The Executive Directors and Administrative Board propose distributing a dividend of EUR 0.15 cents per share for the 2017 financial year from the unappropriated retained earnings.

5.2 Net assets and financial position

The total assets of MAX Automation SE amounted to EUR 207.0 million on the December 31, 2017 balance sheet date. This corresponds to an increase of EUR 33.2 million compared with the previous year's reporting date (EUR 173.8 million), arising from the increase in intercompany financing.

Receivables and other assets rose from EUR 81.4 million to EUR 106.7 million. This includes EUR 86.2 million from receivables due from subsidiaries deriving from the syndicated loan (previous year: EUR 57.8 million). In order to optimize interest rates, liquid assets were reduced to almost EUR 0 million (after EUR 2.9 million in the previous year). At the same time, credit drawdowns from the syndicated loan were reduced.

MAX Automation SE reports EUR 114.3 million in equity as of December 31, 2017 (previous year: EUR 91.5 million). The equity ratio stood at 55.2% (December 31, 2016: 52.7%).

Bank borrowings reduced to EUR 62.3 million, compared with EUR 74.5 million as of December 31, 2016. Liabilities due to subsidiaries from assets at MAX Automation SE totaled EUR 22.5 million as of December 31, 2017, following EUR 4.3 million in the previous year.

The financial position and performance of MAX Automation SE are in an orderly condition.

6. Non-financial Group declaration in accordance with Section 315b of the German Commercial Code (HGB)

Practicing responsibility

As a high-tech supplier to the mechanical engineering sector, the MAX Group holds responsibility in Germany, Europe and throughout the world. MAX Automation firmly believes that responsibility and long-term success go hand in hand. In the interests of its stakeholders, MAX Automation SE views profitable and long-term growth as its way of acting and operating responsibly for future generations.

The MAX Automation Group's commitment to sustainability primarily covers three areas: Environment, personnel and compliance.

MAX Automation takes environmental responsibility

Sustainability as a growth driver

The protection of the environment and climate is one of the major challenges of the present day. Due to the fact that natural resources are becoming increasingly scarce, while the global population and consumption are growing, the demands made on the use of natural resources are constantly rising. Sustainability has developed into a growth driver which is playing an increasingly important role in purchasing decisions. The MAX Group positioned itself at an early stage in the future markets which are dominated by sustainable environmental trends. These include reducing CO2 emissions, boosting resource efficiency and offering products which combine environmental progress with economic success.

Innovative environmental technology for effective residual waste recycling and treatment

In the Environmental Technology segment, the MAX Group develops components and systems to effectively recycle and process waste materials. This includes, for instance, systems for opening the yellow sack recycling bag. This is no trivial process as the bags have to first be opened without damaging the contents. Our design and construction allows the careful shredding of the bags as well as other bags contained within them. This makes the material easily sortable for downstream processes. This system harnesses a so-called HiTorc motor with direct power transmission instead of using a clutch or transmission. As a result, its energy requirements are a third of those previously required for this process.

Effective shredding and cleaning of plastic waste

The MAX Group's innovative environmental technology includes shredders for all plastic materials. With the help of the latest shredding technology, a wide variety of inputted plastic becomes high-quality, homogeneous output. The shredders can be easily integrated into existing systems and stand out thanks to their particularly low energy consumption and high level of efficiency.

Moreover, the MAX Group offers a system which completely dispenses with the use of chemicals for the process of cleaning plastic waste. The VecoDyn technology consumes substantially less energy than the conventional process and also automatically treats the waste water created within a closed system.

Efficient impregnation process for electromobility

The MAX Group has developed a good-value process of efficiently impregnating stators. The stator is a component within the electric motor which is responsible for generating electricity and therefore of vital importance for electromobility. Every stator has to be protected against outside influences like moisture through impregnation. As part of this process, polyester resin is drizzled onto the pre-warmed, rotating stator. Conventional methods dip the stator into an impregnating bath. The process developed by the MAX Group is quicker and cheaper than any other as it prevents material losses during the draining-off phase. No post-processing of any kind is required either. As a result, MAX Group customers can produce stators rapidly and efficiently and therefore push forward the development of e-mobility.

Water-saving steam cleaning

Another prime example of the development and production of sustainable products is steam cleaning for engine and transmission production. This process technology, which can be integrated into automated production lines in vehicle construction, fulfills the highest cleaning and environmental standards in the automotive industry. It is also a significant step forward compared to conventional processes from an environmental point of view. Steam cleaning allows water consumption savings of 95%, it also requires substantially less space and is some 50% less costly than conventional technologies.

MAX Automation is committed to responsible business practices

Operating with integrity

MAX Automation is synonymous with responsible and legally compliant actions in every respect. All MAX employees are obligated to adhere to the legal framework and internal guidelines, and conform to the rules governing the business environment. For the MAX Group, this means basing all actions at all times on the applicable legal standards for the location in question. Legal infringements are not tolerated. This compliance strengthens the trust of our customers, shareholders and employees as well as that of the public in our products and services, in our independence and in our integrity.

Compliance as the basis for our code of conduct

Compliance encompasses much more than adhering to legislation and internal regulations. It forms the basis for our decision-making and corporate activities. Compliance is embedded within the business processes of MAX Automation. Among other things, this includes informing our customers around the globe about our principles. Our aim is to anchor responsible behavior permanently within the mindset and actions of the entire workforce in the form of a code of conduct. Key provisions are compiled in a compliance guideline applicable Groupwide, which is mandatory for all MAX Group employees. Questionable actions or infringements can be reported either anonymously via the whistleblowing reporting feature on the MAX website or directly communicated to the responsible compliance officer.

Fair competition

We are convinced that compliance can directly and sustainably contribute to the development of companies and countries. Preventing corruption is an important cornerstone of this, for instance. In this context, the MAX Group is committed to practicing fair competition in a full and unqualified way. We only compete based on value for money and the quality of our products and services. Adherence to all laws and regulations for avoiding unfair competition is an integral component of our business policy.

Ban on child labor and forced labor

The MAX Group complies with the ban on child labor in line with the standards of the International Labour Organization (ILO).

Nobody may be employed against their will or forced to work. The MAX Group does not make use of forced or compulsory labor.

MAX Automation takes responsibility for its employees

Sustainable and forward-looking HR approach

Motivated, qualified and committed employees are the key to our success. It is our responsibility to ensure

that they do a good job with us, and that they enjoy working at our company, ideally in the long term. Attracting, developing and retaining top-notch employees is therefore top priority for us. We aim to be perceived as an attractive employer. We provide a pleasant working environment in which our employees are treated fairly. Equality and equal opportunities are fundamental principles of the way we work together. We pay attention to striking the right work-life balance and offer flexible working hours.

The rapid pace of change in our markets demands the continuous improvement of our processes and products, a challenge we tackle with tailored qualification and training offers for our staff. In this way we specifically prepare our employees for the new market developments and changes ahead.

Unwavering support for young talent

We view the training of young people as part of our social responsibility. Many of the MAX companies are important training companies within their respective region. This enables us to fill vacant positions with qualified personnel from within our own ranks. Students can write their bachelor's and master's thesis with us or do internships in order to familiarize themselves with the various careers and tasks on offer. In addition, at several sites, we offer the option of a dual study program with us, including in the fields of mechanical engineering, electrical engineering and business administration.

The safety of employees is paramount

High occupational and plant safety and therefore the protection of our employees is the absolute highest priority at the MAX Group. An attractive and healthy working environment is a vital prerequisite for committed employees. We adhere to occupational safety regulations and encourage safety-concious behavior among our workforce. Regular training courses on occupational safety are conducted at our companies. As part of various TÜV/ISO certifications awarded to our subsidiaries, measures were determined which safeguard the safety of our workforce in the workplace. Following their implementation, these measures are regularly checked and amended if required.

Principles of working together

The MAX Group sets great store by good teamwork, mutual politeness and fairness in dealing with each other. Respect for the private space and dignity of others is essential for a good working environment.

A good working climate is, in turn, essential for the success of the MAX Group. Loyalty, mutual support, respect, appreciation, openness and fairness are key pillars of our ethics in the workplace.

Diversity and appreciation

The individuality of employees in the MAX Group significantly contributes to the corporate culture as well as to maintaining a good climate at work. The corporate culture is built on appreciation. Different religious beliefs, sexual orientations or ideological views are treated with respect.

Discrimination is fundamentally at odds with the fundamental values of the MAX Group. Every form of discrimination, whether relating to employees or third parties, is therefore prohibited. Discrimination means any distinction, exclusion or preference that limits equal treatment or access to work and employment, and that can possibly be based on skin color, gender, religion, political views, age, national, social or ethnic background, family responsibilities or similar considerations. The MAX Group is also committed to providing workplaces which are free of any type of harassment and bullying.

7. Events after the reporting date

7.1 Andreas Krause succeeds Fabian Spilker as Chief Financial Officer

On February 2, 2018, MAX Automation announced that Andreas Krause (49) has been named as an Executive Director of the company effective as of March 1, 2018. He is taking over the function of the Chief Financial Officer Fabian Spilker (44), who is stepping down from his position as CFO on March 31, 2018 and will step down from his position as an Executive Director after the Shareholders' General Meeting on May 18, 2018. He will support his successor in the handover of tasks. Andreas Krause has over 20 years' experience in mechanical engineering, energy and automation technology. Since 1998, he has held various finance management roles within the ABB Group, most recently as CFO of ABB South Africa.

7.2 MAX Automation completes its transformation into a European company

On February 9, 2018, MAX Automation announced that the company's transformation into the established legal form of a European public company (Societas Europaea – SE) had been completed with the entry into the commercial register. The high-tech mechanical engineering specialist has therefore now implemented the Shareholders' General Meeting's resolution from June 30, 2017. The change in legal form reflects the growing importance of the Group's global business activities in Europe, China and the USA. MAX Automation SE's articles of incorporation stipulate a change from the company's former two-tier management structure of a Management Board and a Supervisory Board to the globally standard one-tier management system with an Administrative Board. The Executive Directors are responsible for operating business (see section 2.3, Particular events during the financial year).

You will also find more information in the Events after the reporting period section of the notes to the consolidated financial statements.

8. Disclosures pursuant to Section 315a (1) and Section 289a (1) of the German Commercial Code (HGB) (also: Explanatory Report of the Administrative Board pursuant to Section 22 (6) of the Statute for a European Company ["SE Regulation", SEAG] in connection with Section 176 (1) Clause 1 of the German Stock Corporation Act [AktG])

Pursuant to Section 315a (1) of the German Commercial Code (HGB), parent companies that are stock exchangelisted are obligated to disclose in the Group management report information of relevance to corporate takeovers, such as the composition of capital, shareholder rights and shareholder right limitations, shareholder relationships, and corporate governing bodies.

Companies whose voting-right-entitled shares are listed on an organized market within the meaning of Section 2 (7) of the German Securities Acquisition and Takeover Act (WpÜG) must make such disclosures irrespective of whether a takeover offer has been submitted, or is expected. These disclosures are designed to allow potential bidders to gain an extensive view of the company, and alert them to any potential obstacles to takeover.

Pursuant to Section 22 (6) of the Statute for a European Company (SEAG) in connection with Section 176 (1) Clause 1 of the German Stock Corporation Act (AktG), the Administrative Board is also obligated to present an explanatory report relating to the disclosures to the Shareholders' General Meeting. The disclosures pursuant to Section 315a (1) and Section 289a (1) of the German Commercial Code (HGB) are summarized below together with the related explanations pursuant to Section 22 (6) of the Statute for a European Company (SEAG) in connection with Section 176 (1) Clause 1 of the German Stock Corporation Act (AktG).

a) Composition of subscribed share capital

The subscribed capital (share capital) of MAX Automation SE of EUR 29,459,415 is composed of 29,459,415 no par value ordinary shares, each of which grants the same rights and, in particular, the same voting rights. To this extent, each share grants one voting right. The shares are registered shares. No differing share classes exist. One ordinary share has a notional share in the issued share capital of EUR 1.00. The company currently holds no treasury shares. MAX Automation SE is listed on the stock market. As of April 1, 2015, the share of MAX Automation SE switched from the General Standard segment to the Prime Standard segment of Deutsche Börse AG. The bearer shares were converted into registered shares as of November 28, 2016. With a resolution of August 15, 2017, the Management Board completely made use of its authorization to increase the share capital by up to 10% or EUR 2,665,000 against cash capital contributions excluding subscription rights (Approved Capital II). The capital increase was entered into the commercial register on September 7, 2017.

b) Voting right and transfer restrictions

The Administrative Board is aware of no restrictions relating to voting rights or the transfer of shares.

c) Shareholdings exceeding 10% of the voting rights

According to the knowledge of the Administrative Board, and on the basis of disclosures submitted to the company in accordance with securities trading law and securities takeover law, one investment in the share capital of MAX Automation SE exists that exceeds 10% of the voting rights. Orpheus Capital II GmbH & Co. KG, Hamburg, holds 34.92% of the voting rights in MAX Automation SE. The voting rights are to be attributed to Mr. Oliver Jaster via Günther SE, Bamberg, Günther Holding SE, Hamburg, and Orpheus Capital II Management GmbH, Hamburg.

Further details relating to this matter can be found in the overview contained in the notes to the financial statements under the item "Shareholdings requiring mandatory reporting pursuant to Section 160 (1) No. 8 of the German Stock Corporation Act (AktG)".

d) Shares with special rights granting authorizations of control

No shares exist with special rights granting authorizations of control.

e) Voting right controls in the case of employee participation

The Administrative Board is not aware of employees who participate in the company's equity who do not directly exercise their rights of control.

f) Appointing and recalling Executive Directors and changing the articles of incorporation

MAX Automation SE has one or more Executive Directors; this applies irrespective of the amount of share

GROUP MANAGEMENT REPORT

capital. The number of Executive Directors is set by the Administrative Board in accordance with the articles of incorporation. The appointment and recall of Executive Directors takes place in accordance with the legal provisions of Section 40 (1) Clause 1 and (5) Clause 1 of the Statute for a European Company (SEAG) in connection with Section 11 (2) and (4) of the articles of incorporation. With the exception of the court nomination of replacements, the Administrative Board has sole responsibility for the nomination and recall of Executive Directors.

The Administrative Board appoints Executive Directors for five years at the most. A repeated appointment for a maximum of five years is also permitted. The Administrative Board can appoint an Executive Director as Chairperson and an Executive Director as Deputy Chairperson of the Executive Directors.

In keeping with the suggestion of the German Corporate Governance Code, the maximum possible period of appointment of five years is not the rule in the case of first-time appointments. Pursuant to Section 11 (4) of the articles of incorporation, the appointment may only be revoked for good cause within the meaning of Section 84 (3) of the German Stock Corporation Act (AktG) or in the event of termination of the employment contract, for which a resolution of the Administrative Board is required by a simple majority of the votes cast.

In accordance with Art. 59 of the SE Regulation (SE-VO), Section 51 of the Statute for a European Company (SEAG) in connection with Section 17 (1) of the articles of incorporation, amendments to the articles of incorporation of MAX Automation SE require a majority of two thirds of the votes cast or a simple majority of the votes cast if at least half of the share capital is represented. In addition, pursuant to Section 179 (2) of the German Stock Corporation Act (AktG) in connection with Section 17 (1) Clause 3 of the articles of incorporation, a simple majority of the capital represented is required, unless a larger capital majority is required by law. If the entire share capital is not represented at the Shareholders' General Meeting, it is conceivable that a shareholder with a voting rights interest below 50% could implement amendments to the articles of incorporation with its own votes. Pursuant to Section 17 (2) of the articles of incorporation, the Administrative Board is authorized to make amendments to the articles of incorporation that relate solely to wording. In all other matters, the statutory provisions of Arts. 57 and 59 of the SE Regulation (SE-VO), and Section 51 of the Statute for a European Company (SEAG) apply.

g) Powers of the Administrative Board to issue and buy back shares

Pursuant to Section 5 (7) of the articles of incorporation, the Administrative Board is authorized to increase the company's share capital once or on several occasions during the period until June 29, 2020, by up to a total of EUR 4,019,000.00 against cash capital contributions by issuing new ordinary registered shares (with voting rights) (Approved Capital I). The new shares are to be offered to shareholders for subscription, whereby indirect subscription rights in the meaning of Section 186 (5) Clause 1 of the German Stock Corporation Act (AktG) are satisfactory. The Administrative Board is nevertheless authorized to exclude fractional amounts from shareholders' subscription rights. The Administrative Board is also authorized to determine a commencement of dividend-entitlement that differs from the law, as well as further specifics of the implementation of capital increases from Approved Capital I. The Administrative Board is authorized to adapt the wording of the articles of incorporation after the full or partial implementation of the increase of share capital from Approved Capital I, or after the expiry the authorization period, in accordance with the scope of the capital increase from Approved Capital I. The company has not made any use of the authorization in accordance with Section 5 (7) of the articles of incorporation (Approved Capital I) to date.

h) Material agreement of the company in the case of a change of control

MAX Automation SE is a borrower of a syndicated loan facility. In the case of a change of control, the lender is entitled to demand a premature repayment of all drawdowns plus interest, commissions and all other amounts owed within 15 days. A change of control presupposes that an individual or group of individuals (with the exception of Mr. Oliver Jaster or companies in which he holds a majority stake) acting jointly directly or indirectly acquires 50% or more of the shares and/or voting rights in MAX Automation SE; please refer to the information in section 4.2 (17) of the notes to the consolidated financial statements concerning the utilization of this loan. The company has entered into no other significant agreements that are subject to a change of control condition arising from a takeover offer.

i) Compensation agreements for a change of control

The company has entered into no agreements with either the Executive Directors or employees entailing the payment of compensation in the event of a takeover offer.

9. Corporate governance statement in accordance with Section 289f and Section 315d of the German Commercial Code (HGB)

In February 2018, the Administrative Board issued the corporate governance statement required pursuant to Section 289f and Section 315d of the German Commercial Code (HGB) and made it available on the Internet at www.maxautomation.com/en/investor-relations/corporate-governance/. The company has also published a corporate governance report in connection with the corporate governance statement. The corporate governance report is included within the 2017 Annual Report.

Dependency report

Declaration on the report of the Executive Directors on relationships with affiliated companies pursuant to Section 312 of the German Stock Corporation Act (AktG)

MAX Automation SE was a company dependent on Günther Holding SE, Hamburg, Germany, in the financial year 2017 within the meaning of Section 17 of the German Stock Corporation Act (AktG). As a result, the Executive Directors of MAX Automation SE prepared a report from the Executive Directors on relationships with associated companies in line with Section 312 (1) of the German Stock Corporation Act (AktG), and it contains the following concluding statement:

"We declare that in the transactions and measures stated in the report on relationships with affiliated companies from January 1 to December 31, 2017, the company received appropriate consideration for each transaction in accordance with the circumstances known to us at the time the transactions were carried out or measures were taken or omitted. To the extent that the company was disadvantaged by this, it was granted a legal claim to a sufficient advantage as compensation before the end of the 2017 financial year. The company has not been disadvantaged by taking or not taking measures."

10. Report on board members' compensation

10.1 Compensation of the Administrative Board

Along with reimbursement of their outlays, the Administrative Board Chairman receives EUR 120,000, the Deputy Administrative Board Chairman receives EUR 60,000, and the remaining Administrative Board members, with the exception of the Executive Directors, receive EUR 40,000 after the end of the financial year.

This resulted in the following compensation for the 2017 financial year for the individual Administrative Board members:

TEUR	Basic compensation			Consultancy services		Total
	2016	2017	2016	2017	2016	2017
Gerhard Lerch	144	144	0	0	144	144
Dr. Jens Kruse	60	60	0	0	60	60
Oliver Jaster	40	40	0	0	40	40

The table above also includes TEUR 24 of compensation for Mr. Lerch for his Supervisory Board mandate at Vecoplan AG.

The Administrative Board members did not receive any loans or advances in the 2017 financial year.

10.2 Compensation report

The compensation system described in the following relates to the 2017 financial year and therefore to MAX Automation AG. However, even after the transformation into an SE became effective after it was entered into the commercial register entry of the company on February 8, 2018, it still applies for the Executive Directors.

The compensation scheme at MAX Automation SE is based on appropriateness and sustainability principles. The overall compensation level takes particular account of the tasks of the Management Board members, their personal contribution and performance, the company's financial and business position, the company's performance and future prospects taking into account the market environment as well as wage and salary structures within the company, and compensation at other companies of a comparable size and sector.

The Executive Directors' total compensation comprises fixed and performance-related components. The targets the Administrative Board sets as part of performance-based compensation components are to establish sustainable and long-term performance incentives to enhance the profitability and the value of the entire MAX Group and thereby generate added value for all stakeholders.

The compensation structure is based overall on sustainable corporate development. A significant proportion of overall compensation is attributable to fixed (basic) remuneration. Performance-based compensation components also include elements that are measured on the basis of performance over several years. Their proportion is becoming increasingly important due to the length of the measurement period with annual granting. The Executive Directors' employment contracts contain regulations whereby an appropriate reduction of compensation is permissible if the company's position deteriorates to the extent that continued granting of compensation would be inappropriate. The compensation regulations also include a cap both for the performance-based elements as well as for overall compensation.

The compensation elements that are not performance-based consist of basic compensation in the form of a fixed annual salary, which is paid out monthly pro rata, and ancillary benefits (including private company car use and insurance contributions). The performance-based compensation consists of one-year variable compensation (Short Term Incentive Plan "STIP") and multi-year variable compensation (Long Term Incentive Plan "LTIP"). STIP is granted annually and LTIP after the expiry of the respective term of four years.

Payment of the STIP is tied to achieving financial performance targets relating to the respective financial year. The Administrative Board has set the target amount (amount paid out given 100% target attainment) of the STIP as a percentage of the fixed annual salary. When determining the target amount, the Administrative Board took into consideration the Executive Directors' tasks and performance, and these factors' effects on the value chain, among other aspects. The performance targets relate to EBIT after PPA amortization (in other words, after applying amortization deriving from the purchase price allocation) as well as RoCE (Return on Capital Employed), and both on a consolidated basis. The Administrative Board sets the targets at the start of the financial year, including minimum levels under which no payment is made, and maximum values where the amount paid out is capped at 150% of the target if they are reached or exceeded. To this extent, the payout ranges between 0% and 150% of target.

A payout from the LTIP is tied to the attainment of financial performance targets that are measured over a four-year period, starting with the financial year when the respective tranche is granted. The Administrative Board has set the target amount (amount paid out given 100% target attainment) of the LTIP as a percentage of the fixed annual salary, as is the case with the STIP. When determining the target amount, including for the LTIP, the Administrative Board took into consideration the Executive Directors' tasks and performance, and these factors' effects on the value chain, among other aspects. The performance targets relate to sales revenue growth as well as a so-called "MAX Added Value", which takes into account the RoCE (Return on Capital Employed), WACC (Weighted Average Cost of Capital) and level of capital employed, and in each case on a consolidated basis. The Supervisory Board sets the targets at the start of the first financial year of the four-year period, including minimum levels under which no payment is made, and maximum values where the amount paid out is capped at 150% of the target if they are reached or exceeded, as with the STIP. With the LTIP, too, the payout consequently ranges between 0% and 150% of the target. The term and measurement period for the LTIP tranche granted for the 2017 financial year comprise the 2016 to 2019 financial years as well as the financial years 2017 to 2020. As the payment amount is not determined until the end of the respective tranche, it is granted in the last year of the respective tranche.

None of the Executive Directors or staff have been granted stock options or similar securities-based incentive schemes.

In the case of early termination of a contract, the Executive Directors receive a severance payment to settle their salaries equivalent to the pro rata annual fixed salary for three months, albeit to a maximum of the pro rata value of their compensation claims for the residual term of their employment contracts. Entitlements to such severance payments do not exist if the company is entitled to terminate a contract with good justification, or if the Executive Directors stepped down from office without a good justification for which

GROUP MANAGEMENT REPORT

the company is responsible. The service contracts do not include any commitments especially for the case of early termination of Executive Director employment due to a change of control.

The company has not issued any pension commitments to the current Executive Directors. Neither do any pension commitments exist in relation to the former Management Board members of the AG company. Accordingly, the company has not needed to form any provisions for these.

The following amounts were granted to the Executive Directors of MAX Automation SE in the 2017 financial year:

TEUR	Daniel Fink Executive Director (CEO)
	2016	2017	2017 (min)	2017 (max)
Fixed compensation	240	320	320	320
Ancillary benefits*	24	33	33	33
Total	264	353	353	353
One-year variable compensation	0	31	0	315
Multi-year variable compensation	./.	./.	0	233
– of which 2016 to 2019 program1)	./.	./.	./.	./.
– of which 2017 to 2020 program2)	./.	./.	0	233
Total	264	384	353	901
Pension expense	0	0	0	0
Total compensation	264	384	353	901

*Ancillary benefits notably included private company car use, insurance contributions and residential rental subsidies.

1) Final calculation, granting and payout in 2021 2) Final calculation, granting and payout in 2021

	Fabian Spilker
TEUR		Executive Director (CFO)
			2017	2017
	2016	2017	(min)	(max)
Fixed compensation	220	220	220	220
Ancillary benefits*	21	22	22	22
Total	241	242	242	242
One-year variable compensation3)	0	20	0	210
Multi-year variable compensation3)	./.	./.	0	150
– of which 2016 to 2019 program	./.	./.	./.	./.
– of which 2017 to 2020 program	./.	./.	0	150
Total	241	262	242	602
Pension expense	0	0	0	0
Total compensation	241	262	242	602

* Ancillary benefits notably included private company car use and insurance contributions.

3) Offsetting with other compensation components on leaving the company in 2018

The following amounts and figures were granted to the individual Executive Directors of MAX Automation SE in the 2017 financial year:

		Daniel Fink Executive		Fabian Spilker Executive
TEUR		Director (CEO)		Director (CFO)
	2016	2017	2016	2017
Fixed compensation	240	320	220	220
Ancillary benefits*	24	33	21	22
Total	264	353	241	242
One-year variable compensation	0	0	159	0
Multi-year variable compensation	0	0	0	0
Total	264	353	400	242
Pension expense	0	0	0	0
Total compensation	264	353	400	242

* Ancillary benefits notably included private company car use, insurance contributions and residential rental subsidies.

The Executive Directors did not receive any loans or advances in the 2017 financial year.

Former Management Board members of the AG company or their dependents did not receive any payments in the 2017 financial year.

11. Risk report

11.1 Risk management and internal controlling system

Application area

The Management Board in 2000 introduced a risk management system (RMS) Groupwide that complies with the German Act concerning Corporate Control and Transparency (KonTraG). This allows potential risks to be identified promptly, and countermeasures to be introduced at MAX Automation SE as the parent company as well as at its operating units. The risk management system underwent a deep overhaul in 2009 and has since been adapted continuously to meet new requirements. In the reporting year 2017, although the underlying structure remained unchanged, it was updated to ensure that new developments were taken into account.

Targets and principles

Risk management (RMS) at the MAX Automation Group aims to handle risks in a controlled manner. The RMS is based on a systematic process of risk identification, evaluation, and management that spans the entire Group. The risk management system is based on the principle of securing medium and long-term corporate objectives, particularly the preservation and expansion of the company's market position within the sectors addressed. The primary goal is to identify risk drivers through comprehensive and appropriate management of risks, and to handle them appropriately.

The following risk policy principles are derived from this:

• Risk management is integrated into all significant operative business and decision-making processes. The management of risks mainly takes place through the organizational units that are operational locally.
• The risk management process serves as a set of tools to systematically record, analyze, manage and monitor going concern risks.
• Active and open communication about risks forms an essential factor for the success of the RMS. All MAX Automation Group staff are required to participate actively in risk management within their areas of responsibility.
• Risk measurement occurs conservatively, as a matter of principle. In other words, the maximum anticipated loss is calculated (worst case scenario).
• MAX Automation performs the central monitoring.

Methods and processes

The risk management system consists of various IT-supported matrices built up in steps. The aim is to manage risk on the basis of risk identification and risk evaluation. Risks are identified, their significance for the company is determined, a quantitative risk factor is calculated, and a schedule of fixed measures to control the risk is formulated. The system is completed by a list of risk examples, as well as a set of guidelines for using the electronic file.

The reporting interval is based on the quarter. A risk inventory conducted by the operating units forms an important element of this standard risk cycle. This entails calculating, measuring and condensing specific risks, allocating them to one of seven specific risk areas.

Measuring individual risks is the task of the risk management at the Group companies and at MAX Automation. The risk management handbook serves as a set of guidelines. The measurement process consists of three steps: Firstly, the loss potential is calculated, where possible. This refers to the maximum effect that a risk can have on EBIT over the next 24 months. The probability of an individual risk materializing (event risk) is then calculated. In the third step, the effectiveness of potential countermeasures is examined and appraised as to whether they reduce the risk. Finally, this leaves the potential net risk, in other words, the net EBIT risk remaining after taking into account the event risk and the effectiveness of any measures.

The net risks of the seven risk areas are calculated from the total of all allocated individual risks. Depending on the level of event risk, each risk area is attributed to one of the following categories:

• Low event risk < 10%
• Medium event risk 10–50%
• High event risk > 50%

The risk areas' net risks add up to form the Group's total potential risk. Portfolio and correlation effects are not taken into consideration here.

After taking the risk inventory, the operating units prepare their respective risk reports. On this basis, the risk management function of MAX Automation prepares the Group risk report, which provides information about significant specific risks and the overall risk, and is subsequently discussed by the Executive Directors and Administrative Board.

The Executive Directors and Administrative Board are informed immediately about acute risks. The risk managers are responsible for the identification, measurement, management and monitoring of risk, as well as for reporting on them. These are mainly the heads of the controlling departments of MAX Automation and the Group companies.

Significant characteristics of the risk management system for the financial accounting process

The reporting system represents a key component of the internal controlling system (ICS), which MAX Automation constantly further develops as part of value-oriented reporting.

The accounting handbook of MAX Automation has been made accessible to all companies in order to ensure that accounting-relating topics are treated and measured on a uniform basis. The accounting handbook is updated regularly. It comprises all regulations, measures and procedures to sufficiently ensure the reliability of financial reporting for the Group and the Group companies in accordance with IFRS.

Overall responsibility for the RMS/ICS lies with the Executive Directors. They have established a predefined management and reporting organization for the RMS/ICS covering all organizational and legal units. The financial accounting and controlling function of MAX Automation performs supervision on a random sampling basis.

The most important instruments, and controlling and security routines for the financial accounting process include:

• The MAX Automation Group is distinguished by clear organizational, corporate, and controlling and supervisory structures.
• Groupwide coordinated planning, reporting, controlling, as well as early warning systems and processes exist in order to analyze and manage earnings-relevant risk factors and going concern risks on a uniform basis.
• Functions in all accounting process areas (e.g. financial accounting bookkeeping and controlling) are clearly allocated.
• An adequate set of internal guidelines has been established (including a set of Groupwide risk management guidelines and an accounting handbook), which are adapted as required.
• The IT systems deployed for accounting purposes are protected against unauthorized access. Recourse is primarily made to standard software in the financial systems utilized.
• MAX Automation has worked on a standard basis with LucaNet consolidation software since mid-2008, which is also utilized to prepare the medium-term planning across the Group.

Only selected staff are entitled to access the consolidation system. Only a small group of staff from the Group accounting and controlling function has access to all data. For other users, access is limited to the data relevant to their work.

The process is as follows:

• The subsidiaries report monthly to the parent company on business progress for the last relevant month and current financial year. This process is supplemented at least every quarter by an updated forecast.
• All reports undergo a critical target/actual analysis. An additional management report comments on divergences from budget, provides information about measures designed to meet the budget, progress during the current reporting month, and other significant key topics such as market and competitive conditions, investments, financing, and legal matters. The report is supplemented by verbal explanations.
• Moreover, the Executive Directors conduct regular conversations with the subsidiaries' board members and managing directors in order to compare business progress with budgets, and, if required, to introduce measures aimed at fulfilling budgets.
• The operating corporate planning represents a key component of the RMS. As part of this, the managing directors of the subsidiaries present the current progress of business at the end of each financial year, and explain ongoing corporate strategy. The corporate strategy, and the three-year plans for business trends, investments and liquidity trends that are based on it, form the basis of the discussions. The corporate planning helps to identify and appraise potential opportunities and risks long before significant business decisions.
• Key accounting-related processes are subject to regular analytical audits. The existing Groupwide RMS is constantly adapted to current developments and checked with respect to functionality. The system was examined by the auditor Ebner Stolz GmbH & Co. KG, Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Hannover, as part of the audit of the consolidated annual financial statements.
• The Administrative Board conducts frequent consultations on matters relating to the RMS.

Regular training for all staff also forms part of the RMS/ICS. These include workshops to apply accounting standards (such as currently IFRS 15 and IFRS 16), financial accounting regulations and software tools. In the case of corporate acquisitions, financial accounting processes are adapted quickly and new staff are acquainted with all relevant processes, contents and systems.

By way of conclusion, it should be noted that neither the RMS nor the ICS can provide absolute security: even when utilized with the requisite care, the installation of appropriate systems can be generally prone to error.

Overall risk position

The Group's overall risk potential amounted to around EUR 6.1 million at the end of 2017 (previous year: EUR 7.7 million). This includes the net risk potentials of 55 (previous year: 52) quantifiable individual risks. In addition, there were also 189 (previous year: 184) non-quantifiable individual risks. The overall risk potential is regarded as appropriate and easily manageable in light of the business volume and macroeconomic situation. No risks are currently identifiable that either separately or in interaction with other risks could jeopardize the Group as a going concern.

Almost half of the overall risk potential is attributable to the risk area of "risks from operating activities/project risks", although these are weighted with an event risk of less than 50%.

Corporate risks	Event risk	Potential financial effect	2017 risk position compared with previous year
Strategic risks	low	minor	unchanged
Market risks and economic risks	possible	significant	unchanged
Risks from operating activities, project risks	possible	significant	better
Financial risks, tax risks	possible	minor	unchanged
Legal risks	low	minor	unchanged
Risks from interests held in companies	low	significant	unchanged
Other risks (e.g. IT, personnel, environment)	high	moderate	unchanged

Influence of the possible financial impact on the consolidated net income or consolidated EBIT low (less than TEUR 400), moderate (from TEUR 400 to EUR 1.3 million), major (more than EUR 1.3 million)

11.2 Risk reporting

Risk areas and significant individual risks

• Market risks and economic risks: The risk exists at all MAX Automation Group companies of so-called market risk, in other words, the risk that key customers are lost from the client base, that technology is no longer required by the market or competitors adopt an aggressive approach to the market with corresponding consequences for achievable prices. The risk also exists that customers refuse to accept products, or that competitors challenge existing patents or industrial property rights. These risks may have negative effects on the future success of the Group companies. The Group minimizes market risks through intensive observation of the market, comprehensive project controlling, and close communication with customers. On top of that, there are risks relating to deadlines and technical risks on the purchasing market. MAX Automation counters such risks with end-to-end quality controlling of services procured from third parties, as well as through utilizing synergies within the Group association.

The operating units' business trends are generally strongly coupled with the trend in the macroeconomic environment. MAX Automation is divided into two operating segments, and is in part strongly exposed to the automotive manufacturing business cycle as a result of its Industrial Automation operating segment. Both sector risk as well as general economic risk are mitigated through a high degree of specialization and strong positions in attractive market niches. The company also endeavors to reduce risk through diversification in other sectors such as medical technology. Economic risk cannot be excluded, as a matter of principle, however.

As of December 31, 2017, the MAX Automation Group has a high order book position of EUR 198.6 million (previous year: EUR 193.7) which provides a temporary buffer to implement countermeasures in the case of market and economy-related risks.

• Risks from business activities, project risks: Due to the size of individual projects, MAX Automation has identified possible risk in project planning and project management. Technical miscalculations or delays can occur in larger projects.

GROUP MANAGEMENT REPORT

MAX Automation counters the risk of incorrect estimates as early as the project initiation phase by carefully examining the technical concept with the help of internal and external experts as well as in cooperation with the customer. During the course of the project, regular project manager meetings take place and interim calculations are made, giving the project managers an overview of whether the project is still within the planned cost/time frame. Every material deviation in cost and/or delay of the delivery date are immediately reported to the management. A final cost calculation is made after the project is completed. The entire process has proven successful over the course of years and this helps in preparing estimates for new projects.

• Financial risks: As a result of the new syndicated loan agreement, the Group financing was converted in 2015 from the individual Group companies' bilateral banking arrangements to a unified Group financing arrangement, and once again adjusted in MAX Automation's favor in 2017. The covenants agreed with the Group's lending banks directly affect the interest margin, entitling the banks to a special termination right given a breach. Regular communication occurs with the lending banks and deposit insurers. In 2017, MAX Automation complied with all the covenants to which it has agreed. These covenants refer to key balance sheet and earnings figures derived from the IFRS consolidated financial statements. Counterparty default risk is limited by the fact that banking transactions are concluded exclusively with renowned banks.

In contrast, in project business a trend is currently identifiable that some projects have to be pre-financed long in advance, which negatively impacts working capital and liquidity. The MAX Automation Group endeavors to counter this by, among other things, attempting to implement correspondingly high prepayments when concluding projects, or agreeing correspondingly long payment targets with sub-suppliers and remaining active in sending reminders.

• Other risks – personnel: MAX Automation and Group companies require qualified technical and managerial staff in order to realize their strategic and operating objectives. Qualified industrial education and further training are intended to secure employees' specialist expertise. Variable remuneration components that are measured against our profitability are intended to promote entrepreneurial thinking and activity on the part of our staff.

The recruitment of qualified personnel has been hampered by the very low unemployment rate in Germany. For this reason, the MAX Automation Group focuses particularly on training and developing its own staff, and on exchanging know-how within the Group.

• Other risks – loss and liability risks: By concluding insurance cover, the company endeavors to particularly exclude going concern effects for the MAX Automation Group. In the case of complex and expensive projects, the subsidiaries are contractually obligated to limit risks arising from guarantees, product liability, and supplier delays. Security standards in the MAX Automation Group's payment transactions were intensified due to a general increase in fraud cases. A security system comprising state-of-the-art technology ensures the central IT landscape's security and availability.

As part of auditing the 2017 annual financial statements, the auditor examined the risk management system of the SE company and the Group. It arrived at the conclusion that the system is appropriate to comply with statutory risk management requirements.

Explanatory report concerning disclosures pursuant to Section 315 (4) and Section 289 (4) of the German Commercial Code (HGB)

Object of the report

According to the explanatory memorandum for the German Accounting Law Modernization Act (BilMoG) that came into force on May 29, 2009, the internal controlling system comprises the principles, procedures and measures to safeguard financial accounting efficacy, proper financial accounting, and compliance with relevant legal regulations. This also includes the internal audit system to the extent that it relates to accounting.

As part of the internal controlling system, the risk management system with respect to the financial accounting process, as above, relates to accounting controlling and supervisory processes, particularly in the case of balance sheet items reporting the company's risk cover.

Key characteristics of the internal controlling system and risk management system with respect to the financial accounting process

The key characteristics of the internal controlling system and risk management system at MAX Automation SE with respect to the (Group) financial accounting process are described in detail in section 11.1.

Explanatory report relating to key characteristics of the internal controlling system and risk management system with respect to the financial accounting process

The internal controlling and risk management system relating to the financial accounting process, whose key characteristics have been described above, ensures that corporate matters are reported, prepared and appraised correctly in accounting terms, and are transferred on such a basis to the external accounting function.

The clear organizational, corporate, and controlling and supervisory structures, as well as the qualified personnel and material structure of the accounting system, create the basis for efficient accounting work in the areas involved. Clear legal and internal regulations and guidelines ensure that the financial accounting process is standardized and proper. The clearly defined monitoring mechanisms within the areas engaged in accounting, and early risk identification by the risk management function, ensure coherent accounting.

The internal controlling and risk management system of MAX Automation SE ensures that accounting at MAX Automation SE and at all companies included in the consolidated financial statements is standardized, and complies with legal and statutory regulations, as well as internal guidelines. In particular, the Group-standard risk management system, which complies entirely with statutory requirements, has the task of identifying risks at an early juncture, of measuring them, and of communicating them appropriately. This allows appropriate, relevant and reliable information to be provided promptly to the relevant addressees.

12. Opportunities

The MAX Automation Group is active in various sectors with its Group companies and is increasingly active on international markets. Its customers primarily stem from the automotive, medical technology, electronics, recycling, energy and raw materials industries.

These sectors feature multiple growth drivers which are influenced by dynamic technological development as well as changes on political and societal levels or result from these. The MAX Automation Group's strategic positioning opens up numerous opportunities in 2018 and subsequent years that can affect business progress positively.

In this context, the implementation of "Strategy 2021" is vitally important given the aim of realizing substantial growth in the Group in the medium term. MAX Automation has already made numerous steps forward as part of implementing the strategy, with positive impacts on the business development to date. This strategy mainly encompasses focusing the Group on several identified growth areas, extending its presence and local value creation on attractive international markets with the possibility of appropriate acquisitions, developing further specific offerings of products and services in connected production (Industry 4.0), reducing the volatility of its new order intake, operative excellence in project processing and expanding the service business, as well as the great exploitation of existing synergy potentials and enhancing value creation within the Group.

Opportunities management

MAX Automation regards opportunities as the possibility to achieve a positive difference in relation to its targets due to events or developments. Opportunities management comprises all measures entailed in the systematic and transparent handling of business and entrepreneurial potentials. As part of this, the Executive Directors of MAX Automation SE enter into strategic dialog with the management of the subsidiaries: This combines a structured and Groupwide standardized process where at least three times a year all Group companies systematically prepare and discuss strategies with the Executive Directors, including opportunities and risks emanating from relevant market and technology trends.

Following the strategic dialog, all companies record opportunities in their operative planning and monthly reporting to better estimate and appraise their current earnings and liquidity positions.

All decision-makers are included in opportunities management – from the Executive Directors of MAX Automation SE to the Group companies' management teams and divisional and project heads. The central Corporate Development department supports this process.

Through the integral combination with strategy, planning and reporting processes, opportunities management forms an essential element of strategic and fair value-oriented corporate management.

Market and competitive opportunities

MAX Automation is active in four strategic business areas within the Industrial Automation segment: mobility automation, life science automation, process technologies and new automation technologies. Significant opportunities, in connection with overarching growth drivers, are anticipated in these business areas. These are:

• Mobility automation: The industrial production in the automotive industry is dominated by ever increasing automation, rising demands on efficiency and, in connection with this, stronger interconnectedness. This development is influenced and intensified by a range of trends. One such trend relates to the desire of consumers for improvements in relation to driving performance, comfort and safety. As a result, there is a growing demand for driving aid systems. Sustainability is another determining element in vehicle engineering: Given more stringent legislation and consumers' growing environmental awareness, the automotive industry is also endeavoring to sustainably reduce modern engines' fuel consumption and CO2 emissions. As part of this, it has to react to a continuous rise in interest in alternative drive solutions, including hybrid and electric motors. As a result, the industry is specifically building up resources in order to prepare for the anticipated global demand for alternative drive solutions.

With its Group companies, MAX Automation is a specialist in the continuing optimization of stability, precision and efficiency in industrial manufacturing processes. It operates as a reliable partner to its customers in the manufacturing of components and system solutions for all core automotive areas, including engines, transmissions and steering systems, as well as the areas of electronics, sensor technology and mechatronics. The subsidiaries hold comprehensive expertise in electromobility and have boosted their market position by introducing innovations and further extending their capacities in this area. They boost flexibility in vehicle manufacturing through efficient handling and conveying systems as well as robotics solutions, and enable modularized production. The Group companies are consequently ideally positioned to benefit from trends in mobility automation and help shape these in their respective sub-areas.

• Process technologies: High-performance electronics systems are a major factor when it comes to realizing the aforementioned trends in the automotive industry and continuing development with regard to performance, safety and user comfort. As part of this, particular importance is attached to the highly precise and reliable assembly of these systems in production.

MAX Automation Group companies are specialists in proprietary engineering processes and act as technology leaders in individual areas. Areas of activity include dosing and metering technology, heat staking, plasma treatment and impregnation technology. For example, the companies offer solutions to adhere and seal adaptive cruise controls in vehicles, or produce tiny optics for cameras that monitor events outside and inside a vehicle. This allows them to identify dangers, assist the driver, safeguard the vehicle against theft or replace the car key using driver recognition, and in doing so form an important foundation for boosting driving safety as well as autonomizing the vehicle.

Thanks to the constant evolution of their solutions, the Group companies enjoy significant opportunity to participate in and benefit from automotive industry trends.

• Life science automation: The medical technology sector is experiencing growing demand worldwide on the back of several long-term trends in the industrialized nations and increasingly in the emerging economies. These include medical progress with new and optimized applications, technological development relating to digitalization (so-called e-health solutions), demographic development as well as a growing health consciousness within society, the individualization of treatment forms, the growing demand for effective and smart products as well as the desire of patients for more scope in therapy, e.g. in the form of self-medica-

GROUP MANAGEMENT REPORT

tion. At the same time, the medical technology market is dominated by high entry barriers: Providers have to fulfill specific quality-related, technological and regulatory requirements in order to be allowed to operate in the market. In addition, medical technology customers set great store by collaboration based on the utmost trust, reliability and long-term relationships.

The MAX Automation Group has successfully positioned itself in the medical technology market with its specialist expertise and has expanded the customer base. In addition, it also holds the necessary technical validation to fulfill regulatory requirements. This is a good starting point for the Group companies to be successful on the market in the long term, participate in its forecast growth and establish new customer relationships.

• New automation technologies: Industrial production is exhibiting an increasingly high degree of digital networking and this development is being dynamically sustained. Solutions grouped under the term Industry 4.0 offer a sustained increase in efficiency in production processes as well as in connected processes such as the servicing of machines and systems or in the training of employees. Another trend in industrial production relates to the rapidly increasing use of complex robotics solutions. This area is also dominated by continuous evolution, such as in the form of lightweight robots and collaborative robots.

MAX Automation and its Group companies possesses extensive knowledge and technologies to successfully participate in and shape future developments in Industry 4.0 and robotics. It should be noted that the Group companies have a growing installed base with progressing sales of machinery and systems. As a result, the chances are increasing that service business – e.g. via so-called augmented reality solutions or from service branches on the ground – will continuously expand. This is reflected in their competencies in the servicing and remote maintenance business through utilizing tablets or data goggles and related software solutions, and through the establishment of additional sites.

MAX Automation and its Group companies are recording greater demand for manufacturing close to markets and for a local presence for service and sales in its international business. That is why it is pushing forward the expansion of its network of locations in Europe, North America and Asia in line with "Strategy 2021". As part of this, MAX Automation North America Inc. and a branch office of MA micro automations GmbH in Singapore were recently founded and the majority acquisition of the activities of Shanghai Cisens Automation Co., Ltd. agreed. With the increased international representation, MAX Automation is ensuring comprehensive support for its customers and tapping additional opportunities, such as in the acquisition of orders.

Following a comprehensive strategy and market analysis by MAX Automation, good opportunities in operating business were identified in the Environmental Technology segment. The company is therefore planning to expand this segment, something which should take place both organically as well as in cooperation with strategic partners. As a result, it is aiming to actively use the consolidation opportunities in the heterogeneous environmental technology industry and further benefit from global growth drivers. These primarily concern the following areas:

• Climate and environmental protection: Worldwide, the importance of climate protection, the conservation of natural resources and recycling of residual waste back into the material cycle or for energy recovery is rising. The development is long term and results from economic and societal changes as well as a general

heightened awareness of environmental issues among the general public. Major aspects of this process are the permanently growing consumption in emerging economies, for instance, as well as the related increasingly large volume of waste in cities, primarily in these countries. This results in growing demand for effective and innovative solutions for recycling waste materials as efficiently as possible.

The MAX Automation Group owns Vecoplan, a Group company that has been operating in the market for decades and commands comprehensive expertise in the development, production and maintenance of individual components and system solutions. The Group therefore has the opportunity to benefit from the growing importance of climate and environmental protection, and operate as a driver of innovation through a constantly updated portfolio.

• Stricter environmental regulations: Politicians and public authorities are reacting to the increasing requirements for environmental protection and the processing of waste and recyclable materials at regional, national and international level. This became clear at the third United Nations Environment Assembly (UNEA) in December 2017, where more than 100 nations took a stand against environmental pollution. Several obligatory provisions nevertheless exist already, such as those for reducing carbon dioxide emissions in the European Union (EU) and ultimately reducing the so-called greenhouse effect. Environmental initiatives also exist in North America, including in the form of so-called zero waste programs for local authorities. And at the start of 2018 in China, a freeze on imports was implemented for several different waste products which will lead to increased demand for recycling solutions in the medium term, with corresponding need for action in the exporting countries.

Due to the numerous political regulations in this area, the MAX Automation Group anticipates rising demand for efficient recycling solutions. Here, it is pursuing the objective of further developing existing solutions in materials recycling and adapting them to address ever more complex challenges in individual national markets.

Opportunities arising from effects within the corporate Group

In step with "Strategy 2021", the MAX Automation Group is pushing forward the identification and utilization of synergy effects between the Group companies. This yields a range of opportunities, including bundling activities in the areas of purchasing (bundling procurement volumes and benchmarking to leverage purchasing benefits) and financing, an increasingly important joint utilization of foreign sites as part of internationalization, know-how and technology transfer, and best practice approaches and methodologies in joint projects and the development of new applications.

One of MAX Automation's aims is to boost the value creation within the Group through targeted enhancement of relationships for the delivery of goods and rendering of services between the Group companies. To a specific extent, possibilities also exist to exploit sales synergies through project-based collaboration within the Group.

Synergy and Group association effects are to be expanded successively on a targeted basis and encouraged through the expansion of the international network of sites.

13. Outlook

13.1 Macroeconomic environment

According to estimates from the International Monetary Fund (IMF), the global economy will sustain the positive development of the previous year in 2018 and gain momentum in the process. The Fund primarily expects stronger development than initially anticipated in regions such as the Eurozone, Japan and Canada. It also views the tax reform in the USA concluded at the end of 2017 in a positive light and believes it can stimulate growth in the United States and among its trading partners. In contrast, the IMF continues to assess the economic development in the UK with uncertainty on the back of Brexit and the ongoing exit negotiations with the EU. In addition, it has named several medium-term risks from the trend toward more nationally-oriented politics in several countries.

The IMF forecasts that the global economy will expand by 3.9% in 2018 (2017: 3.6%). In China, a smaller gain than the previous year of 6.6% is anticipated (2017: 6.8%). According to expectations, the economy in the USA will grow by 2.7% (2017: 2.2%).

IMF estimates suggest that the Eurozone economy will grow by 2.2% (2017: 2.1%). Kiel Institute for the World Economy (IfW) is also optimistic and anticipates growth of 2.3%. The Institute cited the high industrial production and upbeat order intake in the manufacturing industry, favorable financing conditions from the expansive policies of the European Central Bank and declining uncertainty in the financial sector.

Gross domestic product (GDP) in Germany is forecast to expand by 2.5% in 2018, according to the IfW. Main influencing factors are the strong export business as well as high private consumption due to the positive employment and income prospects. Nevertheless, the IfW sees a risk in the high capacity utilization of business enterprises, as it is growing increasingly difficult to recruit qualified employees, which in turn impacts production. The IMF is forecasting 2.3% growth for the German economy in 2018.

13.2 Trends in relevant sectors

German mechanical and plant engineering is viewing 2018 with confidence. The German Engineering Federation (VDMA) is anticipating production growth of 3.0% year on year for its member companies in the current year and an increase in industry revenues to more than EUR 230.0 billion (2017: EUR 224.0 billion). However, the Federation attached several conditions to its forecast, including the further expansion of the infrastructure in Germany for rapid data connections and the introduction of tax incentives for research.

The Federation of Robotics (IFR) is forecasting high global demand for robotics solutions in the medium term. The Federation is anticipating a significant growth in the global stock of industrial robots from 1.8 million units in 2017 up to 3.1 million units in 2020. In line with this, in the years 2018 to 2020, it is expecting an average annual growth rate of 14.0%. As part of this trend, an ever greater importance will be attached to the

Sources:

^• International Monetary Fund (IMF), World Economic Outlook, October 2017

^• Kiel Institute for the World Economy (IfW), "Weltkonjunktur im Winter 2017", December 13, 2017

^• Kiel Institute for the World Economy (IfW), "Konjunkturprognose", press release, December 14, 2017

so-called smart, or digitally-networked, factory: Companies are increasingly integrating industrial robots into production with plant-wide machine and system networks.

The German Automotive Industry Association (VDA) is expecting a 1.0% increase in new registrations for the global automotive markets in 2018 to 85.7 million new vehicles (previous year: 84.6 million new vehicles). Although the European market is expected to keep pace with the 2017 level of 15.6 million units, the Western European market will contract by 1.0% to 14.2 million new vehicles due to negative development in the UK. The Federation also anticipates that the US market will record a drop of 2.0% to 16.8 million new vehicles, while the Chinese market will grow by 2.0% to 24.6 million new vehicles.

The industry association Spectaris is forecasting good prospects for German medical technology companies. According to their forecast, industry revenues will grow by 5.0% year on year in 2018 to EUR 32.0 billion (2017: EUR 30.6 billion). On the global market for medical technology, annual growth of 5.0% to USD 530 billion is anticipated up to 2022. As part of this, German medical technology companies will benefit at least proportionally from this positive development.

The German Engineering Federation's Specialist Waste and Recycling Technology Association is also optimistic. According to a survey by the Association, more than 80% of its member companies are anticipating positive development in 2018. A large proportion of the companies are expecting 3.0% growth in industry revenues year on year (2017: EUR 2.7 billion). Various legal issues such as the obligation to separately collect organic waste and the Industrial Waste Ordinance are viewed as growth drivers in domestic business.

13.3 Prospective trends in the 2018 financial year

The Executive Directors of MAX Automation SE are generally optimistic for the Group's development and growth in the 2018 financial year and beyond. Based on the available forecasts for overall economic and industry-specific conditions as well as the long-term growth drivers for the Industrial Automation and Environmental Technology sectors, they are anticipating sustained growth in the demand for high-tech automation solutions from the MAX Automation Group.

The medium-term "Strategy 2021" is of particular importance for the further economic development of MAX Automation. This will see the Group increasingly focus on attractive growth markets and adjust the organizational structure on the back of the progressing international alignment of the Group companies. Furthermore, existing synergy potential is to be exploited and the Group's value creation is to be increased.

In addition, the planned expansion of the Environmental Technology segment will be of particular relevance for the future business development of the MAX Automation Group.

Sources:

^• German Engineering Federation (VDMA), press releases, December 12, 2017

^• German Engineering Federation (VDMA), Specialist Waste and Recycling Technology Association, press release, November 24, 2017

^• International Federation of Robotics, press release, September 27, 2017

^• German Automotive Industry Association (VDA), press release, December 6, 2017

^• Spectaris, Specialist Medical Technology Association, press release, November 9, 2017

13.3.1 Industrial Automation

In 2018 and in following years, the Industrial Automation segment will remain unchanged in concentrating on four strategic business areas. These are:

• Mobility automation: Modernization and automation in vehicle construction, driver assistance systems and autonomous driving, flexibilization in vehicle construction through increasing variant diversity in models and equipment, cutting CO2 emissions in engines and powertrains, and the trend to sustainable vehicles, especially hybrid and electromobility.
• Process technologies: Increasing demand for proprietary engineering for individual processes in electronics, including dosing and metering technology, heat staking, plasma treatment and impregnation technology.
• Life science automation: Medical technology trend to both self-medication for patients and digitalization in the health sector (e-health).
• New automation technologies: Advancing digitalization in industrial manufacturing, optimization of plant machinery through connectivity as well as efficiency enhancements from deploying lightweight design robots and collaborating robots.

As part of this, the Group companies will continue to focus on high-quality and technologically complex solutions for automation in industrial production. This primarily relates to the development and production of machines and systems as well as the creation of software applications for management, networking and analysis as well as complementary services.

The Executive Directors are planning to further expand business within the segment. In order to accomplish this, the existing commitment will continue with regards to the efficiency gains in the organization of the Group companies, the leveraging of synergies within the segment, a targeted expansion of competencies in areas such as electronics, sensors and e-mobility as well as the increased internationalization. In order to strategically complement and expand the portfolio in Industrial Automation, the Executive Directors are also considering the acquisition of suitable companies – such as the takeover of R.C.M. Reatina Costruzioni Mecchaniche S.r.l. (RCM) at the end of 2017 or the planned acquisition of the majority of the activities of the Chinese Shanghai Cisens Automation Co., Ltd. To this end, they are continuously monitoring the markets of relevance for MAX Automation. Not least, based on the continued substantial order book position, the Executive Directors are expecting the continuous development of the segment at a high level.

13.3.2 Environmental Technology

The Environmental Technology segment, which comprises the Vecoplan Group with its subsidiaries, will continue to focus on developing and producing high-quality individual components as well as system solutions, among other things, for the recycling and processing industry. As part of this, specific customer requirements should be individually served and existing recycling processes optimized. The business on the North American continent is of particular importance in this respect.

MAX Automation is planning to expand the segment both organically as well as in cooperation with strategic partners. The aim is therefore to actively utilize the consolidation opportunities in the heterogeneous environmental technology industry and further benefit from global growth drivers. The measures taken in 2016 and 2017 to improve the cost structure have lead to the Vecoplan Group operating profitably with unchanged business volumes and being able to react rapidly to the typical volatility in their markets. This is a good starting point for the planned expansion.

Environmental Technology also holds further upside potential which is to be utilized by way of an action plan.

13.4 Financial forecast

The Executive Directors believe that MAX Automation is ideally positioned strategically thanks to the progress achieved in "Strategy 2021" and the focus on important growth drivers in Industrial Automation and Environmental Technology. They view the sustained high demand, particularly the high level of the order book position, as a good foundation for successful development in 2018. MAX Automation will continue to focus on innovative and promising developments in the high-tech mechanical engineering sector, push forward the expansion and internationalization of the segments, and tap additional potential synergies between the individual Group companies.

Based on the current portfolio and the expectations for macroeconomic conditions presented above, the Executive Directors assume the following for the 2018 financial year:

• Consolidated sales revenue of at least EUR 400 million (previous year forecast: at least EUR 370 million), and
• Consolidated EBIT before PPA amortization of at least EUR 26 million (previous year forecast: EUR 22 million to EUR 25 million).

In the medium term, the Executive Directors are aiming for a substantial increase in consolidated sales revenue through organic growth as well as possible acquisitions in line with the "Strategy 2021" approach. To this end, they are continuously monitoring the markets of relevance for MAX Automation.

13.5 Prospective business trends for the SE company

The results of operations of MAX Automation SE depend to a high degree on the Group earnings trend. Based on the expected trends for the operating companies, the Executive Directors anticipate a rising level of income from its participating interests in the 2018 financial year, with the cost structure remaining unchanged.

GROUP MANAGEMENT REPORT

Forward-looking statements

This report includes forward-looking statements that are based on the present assumptions and forecasts of the management of MAX Automation SE. Such statements are subject to risks and uncertainties. These and other factors can mean that actual results, the financial position, developments or the company's performance differ significantly from the estimates provided here. The company assumes no liability whatsoever to update these forward-looking statements or to amend them in response to future events or developments.

Düsseldorf, February 2018

The Executive Directors

Daniel Fink Fabian Spilker

CONSOLIDATED FINANCIAL STATEMENTS 2017

CONSOLIDATED BALANCE SHEET

of MAX Automation SE, Düsseldorf, as of December 31, 2017

	31.12.2017	31.12.2016
ASSETS Notes	TEUR	TEUR
Non-current assets
Intangible assets (1)	13,667	15,396
Goodwill (2)	53,091	53,139
Property, plant and equipment (3)	31,481	31,625
Investment property (4)	1,379	1,404
Equity accounted investments (5)	3,542	0
Other investments (6)	2,593	2,270
Deferred tax (7)	4,724	5,993
Other non-current assets (8)	601	335
Non-current assets, total	111,078	110,162
Current assets
Inventories (9)	42,095	41,214
Trade receivables (10)	138,326	121,227
Receivables due from related companies (11)	40	90
Prepayments and accrued income, and other current assets (12)	5,639	10,615
Cash and cash equivalents (13)	26,154	23,023
Current assets, total	212,254	196,169
Total assets	323,332	306,331

		31.12.2017	31.12.2016
EQUITY AND LIABILITIES	Notes	TEUR	TEUR
Equity
Subscribed share capital	(14)	29,459	26,794
Capital reserves	(15)	18,907	3,055
Revenue reserve	(15)	31,168	26,144
Equity difference resulting from currency translation		66	966
Non-controlling interests	(15)	576	426
Unappropriated retained earnings	(16)	58,821	53,875
Total equity		138,997	111,260
Non-current liabilities
Non-current loans less current portion	(17)	64,847	64,063
Pension provisions	(18)	963	1,033
Other provisions	(23)	1,489	1,229
Deferred tax	(7)	8,245	13,227
Other non-current liabilities	(17)	1,794	2,222
Non-current liabilities, total		77,338	81,774
Current liabilities
Trade payables	(19)	72,614	61,788
Current loans and current portion of non-current loans	(20)	8,416	28,840
Liabilities to related companies	(21)	148	0
Other current financial liabilities	(22)	12,899	12,271
Income tax provisions and liabilities	(23)	4,962	2,614
Other provisions	(24)	5,113	5,718
Other current liabilities	(25)	2,845	2,066
Current liabilities, total		106,997	113,297
Equity and liabilities, total		323,332	306,331

The attached notes form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

of MAX Automation SE, Düsseldorf, for the period from January 1 to December 31, 2017

		2017	2016
	Notes	TEUR	TEUR
Revenue	(26)	376,180	337,138
Change in finished goods and work-in-progress		1,694	2,641
Work performed by the company and capitalized		2,423	3,055
Total operating revenue		380,297	342,834
Other operating revenue	(27)	7,199	9,778
Income from equity accounted investments		–197	0
Cost of materials	(28)	–196,276	–175,605
Personnel expenses	(29)	–112,332	–106,553
Depreciation, amortization and impairment losses	(30)	–8,676	–12,040
Other operating expenses	(31)	–49,826	–46,026
Operating profit		20,189	12,388
Net interest result	(32)	–3,159	–2,846
Earnings before tax		17,030	9,543
Income taxes	(33)	–2,903	–1,201
Net income		14,127	8,342
– of which attributable to non-controlling interests	(15)	162	22
– of which attributable to shareholders of MAX Automation SE		13,965	8,320
Items not recycled to the income statement
Actuarial gains and losses on employee benefits	(18)	33	22
Income taxes on actuarial gains and losses		–10	–7
Items that may possibly be subsequently recycled to the income statement		23	15
Change arising from currency translation		–900	277
Total comprehensive income		13,250	8,634
– of which attributable to non-controlling interests	(15)	162	22
– of which attributable to shareholders of MAX Automation SE		13,088	8,612
Earnings per share (diluted and basic) in EUR	(34)	0.50	0.30

The attached notes form an integral part of the consolidated financial statements.

Adjustments to the previous year's figures are explained in the notes to the consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

of MAX Automation SE, Düsseldorf, for the period from January 1 to December 31, 2017

	Subscribed share capital TEUR	Capital reserves TEUR	Actuarial gains and losses TEUR	Other revenue reserves TEUR	Difference from currency transla tion TEUR	Reconcil ing item for non-con trolling interests TEUR	Unappro priated profit TEUR	Total TEUR
As of 01.01.2016	26,794	3,055	–244	21,373	689	617	54,574	106,859
Dividend payments	0	0	0	0	0	0	–4,019	–4,019
Payments to non-con trolling interests	0	0	0	0	0	–214	0	–214
Transfer to retained earnings	0	0	0	5,000	0	0	–5,000	0
Total comprehensive income	0	0	15	0	277	22	8,320	8,634
As of 31.12.2016	26,794	3,055	–229	26,373	966	426	53,875	111,260
As of 01.01.2017	26,794	3,055	–229	26,373	966	426	53,875	111,260
Dividend payments	0	0	0	0	0	0	–4,019	–4,019
Payments to non-con trolling interests	0	0	0	0	0	–12	0	–12
Capital increase	2,665	15,852	0	0	0	0	0	18,517
Transfer to retained earnings	0	0	0	5,000	0	0	–5,000	0
Total comprehensive income	0	0	24	0	–900	162	13,965	13,250
As of 31.12.2017	29,459	18,907	–205	31,373	66	576	58,821	138,997

The attached notes form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

of MAX Automation SE, Düsseldorf, for the period from January 1 to December 31, 2017

		Notes	01.01.– 31.12.2017 TEUR	01.01.– 31.12.2016 TEUR
1.	Cash flow from operating activities
	Net income		14,127	8,342
	Adjustments relating to the reconciliation of consolidated net income for the year to cash flow from operating activities:
	Income taxes	(32)	2,903	1,201
	Net interest result	(31)	3,159	2,845
	Amortization	(29)	4,529	7,039
	Depreciation	(29)	3,899	4,538
	Depreciation of investment properties	(29)	25	463
	Gain (–)/loss (+) on disposal of property, plant and equipment and intangible assets	(3)	17	37
	Gain (–)/loss (+) on disposal of investment property	(4)	0	–1,689
	Other non-cash expenses and income		–1,389	–348
	Changes in assets and liabilities
	Increase (–)/decrease (+) in other non-current assets	(8)	–352	37
	Increase (–)/decrease (+) in inventories	(9)	–2,325	–4,157
	Increase (–)/decrease (+) in trade receivables	(10)	–16,453	–21,956
	Increase (–)/decrease (+) in receivables due from related companies	(11)	50	–4
	Increase (–)/decrease (+) in prepayments, accrued income and other assets	(12)	726	–1,923
	Increase (+)/decrease (–) in other non-current financial liabilities		269	–964
	Increase (+)/decrease (–) in pension provisions	(18)	–70	–49
	Increase (+)/decrease (–) in other provisions and liabilities		–521	–8,479
	Increase (+)/decrease (–) in trade payables	(19)	10,826	7,420
	Increase (+)/decrease (–) in liabilities to related companies		1,220	0
	Income tax paid	(32)	–2,607	–9,630
	Income tax reimbursed	(32)	654	1,399
=	Cash flow from operating activities		18,687	–15,878
2.	Cash flow from investing activities
	Outgoing payments for investments in intangible assets	(1)	–3,313	–3,743
	Outgoing payments for investments in property, plant and equipment	(2)	–4,441	–5,022
	Outgoing payments for investments in financial assets	(5) (6)	–3,895	–278
	Payments received from disposals of intangible assets	(1)	507	197
	Payments received from disposals of property, plant and equipment	(2)	343	1,388
	Payments received from disposals of investment property	(4)	4,250	0
	Outgoing payments for acquisition of subsidiaries, less cash		0	–1,500
=	Cash flow from investing activities		–6,549	–8,958

			01.01.– 31.12.2017	01.01.– 31.12.2016
		Notes	TEUR	TEUR
3.	Cash flow from financing activities
	Outgoing payments for dividends	(16)	–4,019	–4,019
	Payment received from cash capital increase		18,655	0
	Payments made for cash capital increase		–161	0
	Drawdown of non-current borrowings	(17)	109,500	55,991
	Repayment of non-current borrowings	(17)	–126,443	–40,672
	Change in current borrowings	(20)	–3,424	17,027
	Interest paid	(31)	–2,786	–1,812
	Interest received	(31)	246	64
	Increase (–)/decrease (+) in restricted cash and cash equivalents	(8)	0	20
	Payments arising from settlement claims for third parties	(15)	0	–214
=	Cash flow from financing activities		–8,432	26,385
4.	Cash and cash equivalents
	Increase/decrease in cash and cash equivalents		3,706	1,549
	Effect of changes in exchange rates		–575	116
	Cash and cash equivalents at start of financial year		23,023	21,358
	Cash and cash equivalents at end of financial year		26,154	23,023
5.	Composition of cash and cash equivalents
=	Cash and cash equivalents	(13)	26,154	23,023

The attached notes form an integral part of the consolidated financial statements.

Adjustments to the previous year's figures are explained in the notes to the consolidated financial statements.

SEGMENT REPORTING

of MAX Automation SE, Düsseldorf as of December 31, 2017

Segment		Industrial Automation	Environmental Technology
Reporting period	2017	2016	2017	2016
	TEUR	TEUR	TEUR	TEUR
New order intake	290,714	300,668	92,916	95,042
Order book position	168,840	164,119	29,744	29,708
Segment revenue	286,418	239,784	89,442	97,363
With external customers	286,370	239,734	89,442	97,363
– of which Germany	102,252	90,305	17,863	11,907
– of which other EU countries	68,543	69,987	27,074	35,719
– of which North America	56,722	24,553	36,303	45,140
– of which China	34,932	32,043	0	0
– of which Rest of the World	23,921	22,846	8,202	4,597
Inter-segment revenue	48	50	0	0
EBITDA	24,669	21,460	8,151	4,125
Segment operating profit
(EBIT before PPA amortization)	19,793	16,847	6,545	1,776
Including:
– Depreciation/amortization	–4,876	–4,613	–1,606	–2,349
– Additions to other provisions and pension provisions	–2,137	–1,652	–1,857	–1,771
– Incoming payments from sale of
investment properties	0	0	0	0
– Income from equity accounted investments	0	0	56	0
Segment operating profit after PPA amortization	18,097	12,790	6,521	1,261
Including:
– PPA amortization	–1,697	–4,057	–24	–515
Segment result from ordinary activities
(EBT)	15,057	10,662	6,043	578
Including:
– Interest and similar income	37	30	28	47
– Interest and similar expenses	–3,076	–2,157	–507	–731
Income taxes	42	1,237	–2,601	–886
Net income	15,099	11,899	3,442	–308
Non-current segment assets (excluding deferred tax)	47,269	47,517	12,876	14,046
– of which Germany	46,871	47,103	10,393	11,061
– of which other EU countries	39	68	41	50
– of which North America	225	187	2,442	2,935
– of which Rest of the World	134	158	0	0
Investments in non-current segment assets	6,731	7,552	909	682
Working capital	93,450	79,374	14,877	22,100
Average number of personnel excluding trainees	1,194	1,131	374	412

The segment reporting is a component of the notes to the consolidated financial statements.

Industrial Automation Environmental Technology	Reconciliation			Total
Reporting period 2017 2016 2017 2016 TEUR TEUR TEUR TEUR	2017 TEUR	2016 TEUR	2017 TEUR	2016 TEUR
New order intake 290,714 300,668 92,916 95,042	0	0	383,630	395,711
Order book position 168,840 164,119 29,744 29,708	0	0	198,584	193,826
Segment revenue 286,418 239,784 89,442 97,363	320	–9	376,180	337,138
With external customers 286,370 239,734 89,442 97,363	368	41	376,180	337,138
– of which Germany 102,252 90,305 17,863 11,907	368	41	120,483	102,253
– of which other EU countries 68,543 69,987 27,074 35,719	0	0	95,617	105,706
– of which North America 56,722 24,553 36,303 45,140	0	0	93,025	69,693
34,932 32,043 0 0	0	0	34,932	32,043
– of which Rest of the World 23,921 22,846 8,202 4,597	0	0	32,123	27,443
48 50 0 0	–48	–50	0	0
24,669 21,460 8,151 4,125 –3,956		–1,157	28,864	24,428
19,793 16,847 6,545 1,776 –4,110		–1,260	22,228	17,362
–4,876 –4,613 –1,606 –2,349	–154	–103	–6,636	–7,066
– Additions to other provisions and pension provisions –2,137 –1,652 –1,857 –1,771	–206	–717	–4,200	–4,140
0 0 0 0	0	1,689	0	1,689
– Income from equity accounted investments 0 0 56 0	–253	0	–197	0
Segment operating profit after PPA amortization 18,097 12,790 6,521 1,261 –4,429		–1,663	20,189	12,388
–1,697 –4,057 –24 –515	–319	–402	–2,040	–4,974
15,057 10,662 6,043 578 –4,070		–1,697	17,030	9,543
37 30 28 47	318	8	383	85
– Interest and similar expenses –3,076 –2,157 –507 –731	41	–43	–3,542	–2,931
42 1,237 –2,601 –886	–344	–1,552	–2,903	–1,201
15,099 11,899 3,442 –308 –4,414		–3,250	14,127	8,342
Non-current segment assets (excluding deferred tax) 47,269 47,517 12,876 14,046 46,208	42,606		106,353	104,168
46,871 47,103 10,393 11,061 46,208		42,606	103,472	100,770
39 68 41 50	0	0	80	118
225 187 2,442 2,935	0	0	2,667	3,122
134 158 0 0	0	0	134	158
Investments in non-current segment assets 6,731 7,552 909 682	113	531	7,753	8,765
93,450 79,374 14,877 22,100	–520	–821	107,807	100,653
Average number of personnel excluding trainees 1,194 1,131 374 412	8	6	1,576	1,549

MAX

NOTES 2017

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

	1.General information	63
	2.Accounting policies	63
2.1	Assets	67
2.2	Equity and liabilities	72
2.3	Statement of comprehensive income	73
2.4	Earnings per share	73
2.5	Currency translation	73
2.6	Leases	74
2.7	Derivative financial instruments and hedges	74
2.8	Income taxes	75
2.9	Current tax	75
	2.10 Deferred tax	75
	3. Consolidation	76
3.1	Consolidation principles	76
3.2	Scope of consolidation	76
3.3	Changes to the scope of consolidation	76
	4.Notes to the consolidated balance sheet	77
4.1	Assets	77
4.2	Equity and liabilities	87
4.3	Capital measure	87
	5.Notes to the statement of comprehensive income	93
	6.Other disclosures relating to the consolidated financial statements	97
6.1	Consolidated statement of cash flows	97
6.2	Research and development	97
6.3	Risk management	98
6.4	Earnings per share	103
6.5	Segment reporting	103
6.6	Events after the reporting period	104
6.7	Other financial obligations	105
6.8	Related party transactions	106
6.9	Auditor	107
	6.10 The corporate bodies of MAX Automation SE	107
	7. Reportable interests pursuant to Section 160 (1) No. 8 of the German Stock Corporation Act (AktG)	110
	8. Statement pursuant to Section 161 of the German Stock Corporation Act (AktG)	111
	relating to the German Corporate Governance Code
	9. Exemption from disclosure for subsidiaries	112

1. General information

The company

MAX Automation SE (hereinafter referred to as "the company" or "the MAX Group") is a public stock corporation domiciled in Germany. Düsseldorf is the location of the company's registered office and Group headquarters.

The company's main activities lie in the activities of a management holding company: in other words, the aggregation of companies under joint management, the advising of such companies, and the assumption of other business management tasks. The Group companies operate as internationally active high-tech engineering companies, and as leading full-range suppliers of integrated and complex system and component solutions. The operative business is divided into the two operating segments of Industrial Automation and Environmental Technology.

Consolidated financial statements

The company has prepared its consolidated financial statements applying Section 315a (1) of the German Commercial Code (HGB) in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU, and according to the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly referred to as the Standing Interpretations Committee (SIC). All mandatory applicable IFRS for the financial year elapsed were taken into account.

The financial year of MAX Automation SE and all its subsidiaries is identical with the calendar year. The equity accounted joint venture with ThyssenKrupp Industrial Solutions AG, Vecoplan Fueltrack GmbH, which is in the process of being liquidated, forms the only exception in this context.

The consolidated financial statements have been prepared in euros (EUR). Unless stated otherwise, all amounts are presented in thousands of euros (TEUR).

The statement of comprehensive income is structured according to the nature of expense method.

The consolidated financial statements for the financial year ending December 31, 2016, which have been audited and awarded an unqualified audit certificate, were approved by the Supervisory Board on March 30, 2017. The Supervisory Board will prospectively approve the audited consolidated financial statements for the financial year ending December 31, 2017, on March 23, 2018.

2. Accounting policies

The financial statements of the German and foreign subsidiaries included in the consolidated financial statements have been prepared uniformly in accordance with IFRS accounting policies.

In certain cases, the application of IFRS requires the making of estimates and assumptions with corresponding effect on the company's financial position and performance. During the same reporting period, different assumptions and estimates could have been made for equally comprehensible reasons. The assumptions and estimates made are subject to routine adjustments. The company notes that actual future results may differ from the estimates and assumptions made.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have approved a number of amendments to existing International Financial Reporting Standards (IFRS) and some new IFRS and interpretations that the MAX Group must apply from the 2017 financial year:

Promul		Mandatory applica tion for the MAX Group		Potential effects on the presenta tion of the MAX Group's financial
gation	Title Standards and interpretations adopted by the EU:	from	Amendments	position and performance
Amend ments to IAS 7	Disclosure Initiative	01.01.2017	The amendments require companies to provide information enabling the addressees of financial statements to assess changes in liabilities from financing activities.	Implementation by the MAX Group was realized in section 6.1 Consolidated statement of cash flows.
Amend ments to IAS 12	Recognition of Deferred Assets for Unrealised Losses	01.01.2017	The amendments to IAS 12 especially aim to clarify the accounting treatment of deferred tax assets for unrealized losses in the case of assets measured at fair value. These are currently treated differently in practice.	No effects.
Diverse	Annual Im provements to IFRSs 2014–2016 Cycle	01.01.2018	The Annual Improvements Cycle 2014 to 2016 comprises improvements to IFRS 1, IFRS 12 and IAS 28.	No significant effects.
IFRS 9	Financial Instruments	01.01.2018	This standard comprehensively regulates the accounting treatment of financial instruments. The new classification regulations for financial assets, which are revised in the latest version of IFRS 9, deserve particular highlighting compared with the predecessor standard IAS 39. These are based on characteristics of the business model as well as contractual cash flows from financial assets. Regulations relating to the recognition of impairment losses, which are now based on a model of anticipated losses, are also funda mentally new. The presentation of accounting hedges is also newly regulated under IFRS 9, and is intended to better reflect operational risk management.	No significant effects.
IFRS 15	Revenue from Con tracts with Customers (including amendments to IFRS 15: Effective date of IFRS 15)	01.01.2018	IFRS 15 regulates the recognition of revenue from contracts with customers across different sectors, and is comprehensively new. Detailed instructions are given in a five-step model in cluding concerning the identification of separate performance obligations, the level of expected consideration taking variable price components into consideration, and concerning the distribu tion of the expected consideration among the identified performance obligations. In addition, deciding whether a performance obligation is to be rendered in relation to a date or a period is now to occur according to standard criteria. This new standard replaces the following regu lations: IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC–31.	Based on the results of the project started in the 2015 financial year to introduce IFRS 15 across the Group, and further analyses conducted in 2017, the following effects were determined or confirmed as the result of this introduction: Warranty obligations whose periods extend beyond the standard sector or statutory period, commitments relating to certain long-term maintenance ratios, assembly work, training, installation and warehousing might need to be treated in the future as the company's own service obligations.

				Moreover, in the case of some construction contracts, which to date have been recognized according to the percentage of completion method pursuant to IAS 11, a post ponement of revenue recognition will occur as the conditions for periodic revenue recognition according to IFRS 15 are not met. As a result of the transition according to the modified retrospective meth od, revenue reserves in the opening balance sheet will decrease by around EUR 4-5 million to approxi mately EUR 26-28 million and trade receivables will diminish by around EUR 33-38 million to approximately EUR 100-105 million, while work in progress will increase by around EUR 29-34 million to around EUR 41-46
IFRS 16	Leases	01.01.2019	The main change, especially for lessees, lies in abandoning the "all or nothing" principle of IAS 17 in favor of the "right of use" model of IFRS 16. The classification of leases as either finance leases or operating leases is discontinued for lessees accordingly. Rent and lease agreements for land and property are also subsumed under leases in the meaning of IFRS 16. For all leases, lessees in the future recognize on their balance sheet a lease liability for the obligation to ren der future payments to the respective lessors. At the same time, lessees capitalize a right of use to the underlying asset, which corresponds to the present value of the payments to the les sor, plus directly attributable costs, as a matter of principle. The lease liability is subsequently measured applying finance-mathematical regulations similar to those for finance leases under currently valid IAS 17, while the right of use is amortized over the lease duration. The regulations for lessor accounting correspond essentially to the regulations currently valid in IAS 17. The lease classification criteria for lessor accounting have been adopted from IAS 17. IFRS 16 also includes a number of other new regulations relating to the definition of a lease, reporting, and disclosures to be made in the notes to the financial statements, as well as concerning sale-and-lease-back transactions.	The effects of IFRS 16 on the MAX Group's financial position and per formance in a worst-case scenario would lead to an increase in lease liabilities, and to the capitalization of a corresponding right-of-use asset in an amount of approximately EUR 21 million. This figure is derived from the note to these financial statements relating to other financial obligations, and accordingly does not include any discounting effects, and none of the exception regulations in IFRS 16 (e.g. short-term leases and low-value assets) of which the MAX Group will make use. The significant proportion is attributable to leased/rented land and buildings. In the statement of comprehensive income, EBITDA and EBIT will rise ac cordingly due to the introduction of IFRS 16, as the previous lease expenses will be distributed among depreciation and interest expenses in the future. It is not yet possible to precisely quantify the ef fects in the statement of comprehensive income. The introduction of IFRS 16 will not affect the company's covenants, as these are based on the IAS/IFRS valid in the EU when the syndicated loan was arranged.
Amend ments to IFRS 4	Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts	01.01.2018	The amendments aim to reduce the effects of the different first-time application date of IFRS 9 with the successor standard IFRS 4, especially for companies with extensive insurance activ ities. Two optional approaches are introduced that can be used when meeting certain condi tions of insured parties, the overlay approach and the deferred approach.	No effects.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The setters of the standards approved further standards and interpretations, as well as amendments to existing standards, that do not yet require mandatory application in the EU. These relate to the following amendments, as well as standards and interpretations:

		Mandatory
Promul gation	Title	applica tion for the MAX Group from	Amendments	Potential effects on the presentation of the MAX Group's financial position and performance
	Standards and interpretations not yet adopted by the EU:
IFRS 17	Insurance Contracts	01.01.2021	IFRS 17 regulates the accounting treatment of insurance contracts. The insurance sector is the main addressee.	No effects.
IFRIC 22	Foreign Currency Transactions and Advance Conside ration	01.01.2018	This interpretation aims to clarify the accounting treatment of business transactions comprising the receipt or payment of consideration in a foreign currency.	No significant effects.
IFRIC 23	Uncertainty over Income Tax Treat ments	01.01.2019	The IASB issued the IFRIC 23 interpretation of the IFRS Interpretations Committee to clarify the accounting treatment of uncertainty relating to income taxes.	No effects.
Amend ments to IFRS 2	Classification and Measurement of Share-based Pay ments Transactions	01.01.2018	The amendments concern individual questions connected with the recognition of cash-settled share-based payments. The main amendment or addition consists in the fact that IFRS 2 now contains regulations relating to the measure ment of the fair value of obligations deriving from share-based payments.	No effects.
Amend ments to IFRS 9	Prepayment Featu res with Negative Compensation	01.01.2019	Minor amendments to IFRS 9 Financial Instruments for financial assets with so-called symmetric prepayment options to enable them to be valued at amortized cost or at fair value recognized directly in equity. A clarification is also made relating to modifications to financial liabilities not leading to derecognition.	No effects.
Amend ments to IAS 28	Long-term Interests in Associates and Joint Ventures	01.01.2018	The amendments clarify that a company is obli gated to apply IFRS 9 Financial Instruments and its impairment regulations to long-term interests in associates and joint ventures that mainly comprise a part of the net investment in the associate or joint venture and are not equity ac counted. The application of IFRS 9 consequently takes precedence over the application of IAS 28.	No effects.
Amend ments to IAS 40	Transfers of Invest ment Property	01.01.2018	The amendments serve to clarify regulations relating to transfers to or from a portfolio of investment property. In particular, the amendments concern whether properties under development that were previously classified as inventories can be reclassified to the investment property category if an evident change of use has occurred.	No effects.
Diverse	Annual Impro vements to IFRSs 2015–2017 Cycle	01.01.2019	The Annual Improvements Cycle 2015 to 2017 comprises improvements to IFRS 13, IFRS 11, IAS 12 and IAS 23.	No significant effects.

2.1 Assets

Purchased intangible assets

Purchased intangible assets (patents rights and licenses, as well as IT software, know-how, technology and brand rights, industrial property rights, websites, order book positions and customer relationships, as well as development projects) are recognized at cost less amortization. Amortization is applied straight-line over economic useful lives of between 1 and 15 years.

Internally generated intangible assets

Internally generated intangible assets (development costs) are also recognized. The useful economic life amounts to between 4 and 5 years. Development costs for newly developed products for which technical feasibility and marketability surveys are available are capitalized at their directly or indirectly attributable production costs to the extent that expenses can be clearly allocated, and insofar as the technical feasibility and marketability of the newly developed products are ensured. Development activity must result with sufficient probability in future cash inflows; borrowing costs are not capitalized. Amortization is applied in line with products' planned economic useful lives. Development costs that are capitalized on the reporting date for development projects that have not yet been fully completed are impairment-tested applying the license analogy method.

Goodwill

Where the acquisition costs for a business combination exceed the sum of the fully remeasured assets and liabilities, including contingent liabilities, such positive differences are capitalized as goodwill. Following reassessment, a negative difference is expensed.

Goodwill is allocated to its respective cash-generating unit, recognized as an asset, and impairment-tested on each reporting date pursuant to IAS 36. In this context, only the operating subsidiaries are allocated to the cash-generating units within the MAX Group. In cases where close supply and service connections exist between Group companies, they are aggregated into operating units, with goodwill being tested for impairment on this basis. Impairment losses are expensed immediately in the statement of comprehensive income, and are not reversed in subsequent periods.

Goodwill deriving from corporate acquisitions preceding the IFRS transition date on January 1, 2004, was transferred from the previous financial statements that were prepared according to the German Commercial Code (HGB), and impairment-tested on that date. Goodwill write-downs applied in previous periods were not reversed.

Goodwill is generally impairment-tested at the level of cash-generating unit. The impairment test is based on measuring the recoverable amount. This is derived from the higher of fair value less costs to sell, and value-in-use. Within the MAX Group, impairment tests are conducted by comparing value-in-use and carrying amount.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

If the carrying amount of the cash generating unit to which the goodwill was allocated exceeds its recoverable amount, the goodwill allocated to this cash generating unit is written down in the amount of the difference.

If the value impairment of the cash generating unit exceeds the carrying amount of the goodwill allocated to it, the surplus impairment is distributed proportionally among the assets allocated to the cash generating unit (IAS 36.104 et seq.). The individual assets' fair value and value-in-use (where determinable) are taken into account as a minimum value in this context.

The carrying amount of the cash-generating unit comprises the net assets, and is derived from operating assets, less disclosed hidden reserves (especially goodwill), and less operating liabilities.

Primarily market price-based methods are applied to measure fair value less costs of disposal. Recourse is made to discounted cash flow (DCF) methods to measure value-in-use.

The weighted average cost of capital (WACC) approach is applied in this context (Institute of Public Auditors in Germany [IDW], Standard IDW RS HFA 16 [30]) The level of market risk premium is selected in compliance with the promulgations of the Institute of Public Auditors in Germany (IDW). The risk-free rate is measured applying a calculation recommended by the IDW (Svensson method). The beta factor, the cost of capital interest rate and the gearing are calculated by making recourse to capital market data for comparable companies from the same sector (peer group).

The following requirements are to be taken into consideration in this context:

• Pursuant to IAS 36.50, cash flows from financing activities as well as for income taxes are not be included in the calculation of value-in-use.
• The costs of equity are calculated based on the capital asset pricing model, and amount to 7.22% (previous year: 6.69%). The cost of capital is calculated taking into account a risk-free rate of 1.30% (previous year: 0.90%), a risk premium of 6.5% (previous year: 6.5%), and a beta of 0.91 (previous year: 0.89). The peer group's borrowing rate amounts to 2.05% (previous year: 1.78%). Taking the 5.26% (previous year: 11.11%) gearing into account, the weighted average cost of capital amounts to 9.89% (previous year: 8.77%).
• The cost of capital is a pre-tax interest rate that reflects current market estimates of the time value of money and the specific risks of the measurement object. As the returns of risky equity instruments that are observable on the capital market frequently include tax effects, the calculated weighted cost of capital has been adjusted to reflect such tax effects.

Value-in-use is calculated by applying the present value of cash flows for two growth phases. The first phase is based on three-year planning prepared by the management of the respective cash-generating unit and approved by the Supervisory Board. Any new information that arises subsequently is taken into account. The second phase is based on a perpetual return on the sustainably recoverable amount based on the final year of the detailed forecast phase, and taking a 1 % growth rate into account. Based on the order book position and the time taken to process it, the selected planning horizon primarily reflects the following assumptions for short-term and medium-term market trends: sales revenue trend, market shares and growth rates, raw materials costs, cost to acquire and retain customers, personnel trends and investments. The MAX Group plans slight increases to sales revenue and EBIT for the 2018 to 2019 periods. These assumptions are mainly calculated in-house, and predominantly reflect past experience, or are compared with external market values.

As part of a sensitivity analysis for the groups of cash generating units to which significant goodwill is allocated, a one percentage point increase in the discounting rate and a simultaneous 10% reduction in cash flows was assumed. On this basis, the company arrives at the conclusion that no impairment losses are required for any of the groups of cash generating units.

Equity accounted investments

Companies over which MAX Automation SE has significant influence, but not control, are recognized applying the equity method. Such companies are recognized at cost when first included in the financial statements. Such interests are carried forward in subsequent periods. Proportionate annual profits or annual losses increase or reduce the value of the interest, although such an interest cannot be written down to lower than EUR 0. Dividends received from the company are deducted from its value.

Property, plant and equipment

Property, plant and equipment are recognized at cost less depreciation, and any requisite impairment losses. In this context, costs of production include not only directly attributable specific costs but also an appropriate portion of production overheads.

Property, plant and equipment are depreciated straight-line over the following useful lives:

Useful lives
Buildings	5 to 50 years
Exterior facilities	5 to 33 years
Technical plant and machinery	1 to 14 years
Other plant and machinery	1 to 17 years

Economic useful lives are determined taking into account prospective physical wear and tear, technical obsolescence, and legal and contractual restrictions.

Assets under construction are recognized at cost. Borrowing costs for qualifying assets are capitalized. Depreciation for such assets commences when they have been completed, or when they are ready for operation.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Given indications of impairment, the recoverable amount of the asset is determined based on its value-in-use in order to establish the level of impairment loss. The impairment loss is expensed.

If the reason for past impairment no longer applies, the impairment loss is reversed accordingly.

The impairment loss reversal in this context is restricted to the level that would have arisen if no impairment losses had been applied in previous years. Reversals of impairment losses are also recognized in profit or loss.

Investment property

Investment property comprises real estate that is held to generate rental income and/or for value appreciation purposes. An investment property is measured initially at its cost, including transaction costs. Investment properties are subsequently measured at amortized cost based on the cost model. Depreciation is applied straight-line over a period of 18 to 40 years.

An investment property is derecognized on disposal, or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal is calculated as the difference between the net disposal proceeds and the asset's carrying amount, and is recognized in the statement of comprehensive income in the period when the disposal occurs.

Non-current financial liabilities

Financial assets are measured at cost on the acquisition date.

Interests in subsidiaries and participating interests that are not consolidated are measured at cost, as their fair value cannot be measured reliably.

Loans extended are measured at amortized cost.

Investments that are not recognized at fair value are tested regularly for impairment. Investments that are impaired are written down to their recoverable amount, with related impairment losses being expensed. If the reason for an impairment loss applied in previous periods no longer exists, the impairment loss is reversed through profit or loss.

Inventories

Inventories are recognized at the lower of cost or net realizable value. Besides production materials and production wages, production costs also include materials and production overheads that require capitalization. Discounts are applied to inventories that lack marketability. Costs are allocated to different types of inventory by means of specific allocation, the average method, or the FIFO (first-in, first-out) method.

Impairment losses are applied where specific assets' net realizable values fall below their carrying amounts.

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with a construction contract are recognized by reference to the stage of completion of the contract activity at the end of the reporting period. The degree of completion is calculated based on the contract costs that have been incurred for the work rendered in ratio to the expected contract costs (cost-to-cost method). Changes to the contractual work, claims and performance premiums are included to the extent that their level can be determined reliably, and receipt of them is regarded as probable.

If the result of a construction contract cannot be measured reliably, contract revenue is recognized only to the level of the incurred contract costs that can probably be collected. Contract costs are expensed in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

Amounts received before the rendering of contract services are deducted from receivables on the consolidated balance sheet. Invoiced amounts for services already rendered that customers have not yet paid are included under trade receivables on the consolidated balance sheet.

Current financial liabilities

Pursuant to IAS 32, financial assets include i.a. trade receivables, receivables due from banks, cash on hand, derivative financial instruments, and marketable other miscellaneous financial assets.

Categorization is applied based on IAS 39:

• a) Besides derivative financial assets, financial assets that are measured at fair value through profit or loss include held-for-trading financial assets. Such assets are purchased with the intention of short-term resale (e.g. equities, fixed income securities). Measurement is at fair value; valuation adjustments are recognized in profit or loss.
• b) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not listed on an active market. These include mainly trade receivables. Following initial recognition, receivables are measured at cost less valuation allowances to cover identifiable risks. General valuation allowances to reflect past default rates are recognized only if they can also be evidenced quantitatively. Gains and losses, as well as interest effects arising from applying the effective interest method, are recognized in profit or loss.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The company assumes that the recognized values of its financial instruments generally correspond to their fair values.

Cash and cash equivalents

Cash and cash equivalents comprise cash and cash equivalents that are measured at cost. They include cash positions, call deposits at banks, and other short-term, highly liquid financial assets with a maximum threemonth term as of the acquisition date. The cash and cash equivalents on which the cash flow statement is based corresponds to the cash and cash equivalents as defined here.

2.2 Equity and liabilities

Equity issue costs

Equity issue costs are deducted from the capital reserves after taking into account tax incurred on them.

Non-controlling interests

This offsetting item is carried forward based on pro rata annual results.

Pension obligations

The provisions for pensions and similar obligations are measured applying the projected unit credit method for retirement benefit commitments. The calculation is based on the "2005 G" mortality tables published by K. Heubeck. Not only pensions and entitlements to future pensions that are known on the reporting date are taken into account, but also future expected changes to salaries and pensions. The service cost is included under personnel expenses in the statement of comprehensive income. On origination, actuarial gains and losses, as well as gains and losses from the revaluation of plan assets, are reported in other comprehensive income, deducted from the revenue reserve. The interest cost is reported in the net interest result.

Tax provisions and other provisions

Tax provisions and other provisions are formed to an appropriate level for all identifiable risks and contingent liabilities. The precondition for recognition is that utilization is probable, and that the level of the obligation can be measured reliably. Non-current provisions are discounted.

Liabilities

Liabilities are measured at cost on initial recognition, and at amortized cost in subsequent years. Discounts and transaction costs are taken into account applying the effective interest method. Non-current, non-interest-bearing liabilities are recognized at present value.

2.3 Statement of comprehensive income

Revenue is recognized if the significant risks and opportunities connected with ownership of the sold merchandise and products have transferred to the customer. This typically occurs when the goods are transferred to the customer, with the customer accepting the goods at the same time (acceptance protocols).

Customer-specific construction contracts are measured applying the percentage of completion (PoC) method. Here, the costs incurred during the financial year, and the revenues attributable to the financial year, are recognized in profit or loss according to the percentage of completion. The percentage of completion is measured according to the costs incurred (cost-to-cost method).

Expenditures connected with the development of new products and processes, including significant improvements and refinements to already existing products, are expensed as incurred, to the extent that the criteria for capitalization as development costs are not met.

Other operating income is recognized when a service is rendered, or when a claim is originated. Interest income and interest expenses are recognized in the period in which they are received or incurred.

2.4 Earnings per share

Undiluted (basic) earnings per share are calculated by dividing the share of the net profit that is attributable to the parent company shareholders by the weighted average number of shares in issue during the financial year under review. Diluted earnings per share are calculated by assuming that all potentially dilutive securities are converted or exercised.

2.5 Currency translation

Transactions denominated in foreign currencies are translated into the respective company's functional currency applying the mid spot exchange rate on the transaction date. At the end of the reporting period, the company translates monetary assets and liabilities denominated in foreign currencies into the functional currency applying the mid spot exchange rate valid on that date. Gains and losses from currency translation are recognized in profit or loss in other operating income or other operating expenses in the income statement.

The separate annual financial statements of the foreign subsidiaries included in the consolidated financial statements whose functional currency is not the euro are translated into the Group's currency, the euro, based on their functional currency, which corresponds in each case to the national currency.

Applying the reporting date method, their balance sheets are translated from their functional currency into the reporting currency applying the mid spot exchange rate on the reporting date.

Their income statements are translated applying the average rate for the reporting period.

Equity is translated at historical exchange rates.

of MAX Automation SE

			Balance sheet: reporting date rate		Income statement: average rate
	EUR 1 =	31.12.2017	31.12.2016	31.12.2017	31.12.2016
China	CNY	7.80440	7.32020	7.62644	7.34956
UK	GBP	0.88720	0.85620	0.87612	0.81890
Hong Kong	HKD	9.37200	8.17510	9.24793	8.18020
Poland	PLN	4.17700	4.41030	4.25630	4.36364
USA	USD	1.19930	1.05410	1.12929	1.10661
		Balance sheet: reporting date rate			Income statement: average rate
	HKD =	31.12.2017	31.12.2016	31.12.2017	31.12.2016
China	CNY	0.83270	0.89543	0.84425	0.89223

Gains and losses from currency translation are carried directly to equity.

2.6 Leases

Leases are classified as finance leases if the lease agreement essentially transfers all opportunities and risks connected with ownership to the lessee. All other leases are classified as operating leases.

Assets held as part of a finance lease are recognized by the lessee at the start of the lease as an asset measured at fair value or, if it is lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is reported based on its term among other financial liabilities on the consolidated balance sheet.

The lease payments are divided into financing costs and the capital repayment of the lease liability, so that constant periodic interest is applied to the remaining liability. The financing costs are recognized as interest expenses directly in the statement of comprehensive income. If a finance lease results in a depreciable asset, a depreciation or amortization charge is incurred in each period. Depreciation and amortization charges are calculated applying the regulations of IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets that are relevant for the asset.

Lease payments arising from operating leases are expensed straight-line by the lessee over the lease duration, unless another systematic basis corresponds better to the temporal progression of utilization for the MAX Group. Contingent lease payments as part of an operating lease are expensed in the period in which they are incurred.

2.7 Derivative financial instruments and hedges

Derivative financial instruments are deployed exclusively to hedge against currency or interest rate risks. The company does not enter into pure trading transactions without corresponding underlying transactions. In order to limit default risk, derivative financial instruments are concluded exclusively with banks with first-class credit ratings.

Derivative financial instruments are measured at fair value both on first-time recognition and on subsequent measurement. The fair value of a financial instrument is the price for which an independent third party would assume rights or obligations arising from the financial instrument from another independent party. As far as possible, fair values are recognized with the values that are actually to be realized on the market. In the case of listed derivatives, these correspond to the positive or negative market value.

Where a stock market value does not exist for a derivative financial instrument, fair value is derived as a theoretical value applying recognized finance-mathematical methods. Initial recognition occurs on the trade date. Value changes to derivative financial instruments are recognized immediately in profit or loss. IAS 39 hedge accounting is not applied. The section on risk management includes more details.

2.8 Income taxes

The income tax expense represents the sum of current tax expense and deferred tax.

Current and deferred taxes are recognized in the consolidated income statement unless they are connected with items that are recognized either in other comprehensive income or directly in equity. In this case, current and deferred taxes are also recognized in other comprehensive income or directly in equity. If current or deferred taxes arise from the first-time recognition of a business combination, the tax effects are included in the recognition of the business combination.

2.9 Current tax

The current tax expense is calculated based on taxable earnings for the current financial year. Taxable income differs from the net profit reported in the consolidated income statement due to expenses and income that are taxable in subsequent years, never taxable, or tax-deductible. The Group's obligation for current taxes is calculated based on prevailing tax rates.

2.10 Deferred tax

Deferred taxes are recognized for differences between the carrying amounts of assets and liabilities in the consolidated financial statements, and the corresponding tax valuations as part of calculating taxable income. Deferred tax liabilities are generally recognized for all taxable temporary differences; deferred tax assets are generally reported only to the extent that it is probable that taxable earnings will be available for which the temporary deductible can be utilized. Deferred tax assets and deferred tax liabilities are not recognized if the temporary differences arise from goodwill, or from the first-time recognition of other assets and liabilities (except in the case of business combinations), which arise from events that affect neither taxable income nor net profit for the year.

Deferred tax liabilities are formed for taxable temporary differences that arise from interests in subsidiaries, unless the Group can control the reversal of the temporary differences, and it is probable that the temporary difference will also not reverse within the foreseeable future.

Deferred tax assets that arise from temporary differences connected with interests in subsidiaries are recognized only to the extent that it is probable that sufficient taxable income will be available with which the assets from the temporary differences can be utilized. It must also be assumed that these temporary differences will reverse within the foreseeable future.

The carrying amount of deferred tax assets is reviewed every year on the reporting date, with an impairment loss being applied if it is no longer probable that sufficient taxable income will be available to fully or partly realize the asset.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Deferred tax liabilities and tax assets are measured based on the expected tax rates and tax laws that will be valid prospectively on the day when the liability is satisfied, or the asset is realized. The measurement of deferred tax assets and tax liabilities reflects the tax consequence that arises from the manner in which the Group anticipates on the reporting date that it will satisfy the liability or realize the asset.

3. Consolidation

3.1 Consolidation principles

In the consolidation (elimination) of the investment account, the costs of acquiring the subsidiaries are offset with the fair values of proportionate equity as of the acquisition date (revaluation model). Remaining differences are recognized as goodwill, and tested annually for impairment (DCF method with WACC approach).

As part of consolidating liabilities and income, receivables and liabilities between Group companies, as well as expenses and income incurred or accrued within the Group, are consolidated. Intragroup profits and losses are eliminated.

3.2 Scope of consolidation

All of the Group's active Group companies are included in its scope of consolidation. These comprise majority interests.

Besides MAX Automation SE, the scope of consolidation comprises a total of 26 subsidiaries and second-tier subsidiaries, ESSERT GmbH and the joint venture company Vecoplan FuelTrack GmbH i.L., which is equity accounted, as well as the interest in MAX Automation (Asia Pacific) Co. Ltd.

In line with the clear strategic orientation, existing companies are classified into the segments of Industrial Automation and Environmental Technology. The scope of consolidation is composed as follows:

Number of companies included	2017	2016
Industrial Automation	19	17
Environmental Technology	7	7
Group	26	24

3.3 Changes to the scope of consolidation

On January 3, 2017, MAX Automation AG reported that with MAX Automation North America Inc. it had opened a location in Atlanta, the capital of the US state of Georgia. The company serves as the operative platform (business hub) for several MAX Automation Group companies in the Industrial Automation segment. From the Atlanta base, the Group companies particularly serve customers in the Midwest in the automotive and medical technology sectors. With presences in South Carolina, Oklahoma and Mexico, MAX Automation is expanding its network on the American continent.

MA micro automation GmbH, St. Leon-Rot, founded a branch operation in Singapore on April 28, 2017, given the further expansion of MA micro automation GmbH toward Asia and the related necessity to establish a local representative office. Customers in the Asian region can now be served faster and better from this location. This site initially comprises a service and sales branch operation from which projects in the Asian region can also be managed. Equally, the replacement parts business for Asian customers will operate from there in the future. The further expansion of the branch operation in order to process complete projects will follow in the future.

4. Notes to the consolidated balance sheet

4.1 Assets

(1) Intangible assets

The following tables show the changes and composition of intangible assets:

TEUR	Concessions, industrial prop erty rights, and similar rights and assets, as well as licenses to such rights and assets	Internally gener ated intangible assets	Prepayments rendered	Total
Cost
01.01.2017	32,816	10,333	955	44,104
Change in consolidation scope	0	0	0	0
Currency differences	–128	0	3	–125
Additions	847	1,773	693	3,313
Disposals	–264	0	–507	–771
Reclassifications	0	0	0	0
31.12.2017	33,271	12,106	1,144	46,521
Cumulative depreciation/amortization/ impairment losses
01.01.2017	24,900	3,678	130	28,708
Change in consolidation scope	0	0	0	0
Currency differences	–122	0	3	–119
Additions	2,953	1,576	0	4,529
Disposals	–264	0	0	–264
Reclassifications	–10	10	0	0
31.12.2017	27,457	5,264	133	32,854
Carrying amount
31.12.2017	5,814	6,842	1,011	13,667

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

TEUR	Concessions, industrial prop erty rights, and similar rights and assets, as well as licenses to such rights and assets	Internally gener ated intangible assets	Prepayments rendered	Total
Cost
01.01.2016	32,097	7,431	1,057	40,585
Change in consolidation scope	0	0	0	0
Currency differences	–55	0	–2	–56
Additions	748	2,902	93	3,742
Disposals	–98	0	–111	–209
Reclassifications	124	0	–82	42
31.12.2016	32,816	10,333	955	44,104
Cumulative depreciation/amortization/ impairment losses
01.01.2016	19,352	2,339	47	21,738
Change in consolidation scope	0	0	0	0
Currency differences	–55	0	–2	–57
Additions	5,615	1,339	85	7,039
Disposals	–12	0	0	–12
Reclassifications	0	0	0	0
31.12.2016	24,900	3,678	130	28,708
Carrying amount
31.12.2016	7,916	6,655	825	15,396

Intangible assets comprise licenses, IT software, technologies, development projects, websites, brands and customer relationships.

The internally generated intangible assets relate to the Group companies' capitalized development costs. Development costs of TEUR 1,773 (previous year: TEUR 2,902) were capitalized.

(2) Goodwill

The reported goodwill from capital consolidation (elimination of the investment account) is comprised as follows in detail:

TEUR	Goodwill	Total
Cost
01.01.2017	63,115	63,115
Change in consolidation scope	0	0
Currency differences	–58	–58
Additions	0	0
Disposals	0	0
Reclassifications	0	0
31.12.2017	63,057	63,057
Cumulative depreciation/amortization/impairment losses
01.01.2017	9,976	9,976
Change in consolidation scope	0	0
Currency differences	–10	–10
Additions	0	0
Disposals	0	0
Reclassifications	0	0
31.12.2017	9,966	9,966
Carrying amount
31.12.2017	53,091	53,091
TEUR	Goodwill	Total
Cost
01.01.2016	63,104	63,104
Change in consolidation scope	0	0
Currency differences	11	11
Additions	0	0
Disposals	0	0
Reclassifications	0	0
31.12.2016	63,115	63,115
Cumulative depreciation/amortization/impairment losses
01.01.2016	9,978	9,978
Change in consolidation scope	0	0
Currency differences	–2	–2
Additions	0	0
Disposals	0	0
Reclassifications	0	0
31.12.2016	9,976	9,976
Carrying amount
31.12.2016	53,139	53,139

Goodwill decreased minimally to TEUR 53,091 in the financial year under review (previous year: TEUR 53,139). This reduction arises from currency translation effects in the Environmental Technology subgroup.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

TEUR	31.12.2017	31.12.2016
Goodwill	53,091	53,139
Industrial Automation	46,715	46,715
– of which NSM Magnettechnik Group	12,124	19,788
– of which MA micro automation GmbH	11,661	11,661
– of which iNDAT Robotics GmbH	7,663	0
– of which ELWEMA Automotive GmbH	4,165	4,165
– of which bdtronic Group	6,163	6,163
– of which IWM Automation Group	2,676	2,676
– of which Mess- und Regeltechnik Jücker GmbH	1,403	1,403
– of which AIM Micro Systems GmbH	860	860
Environmental Technology	6,375	6,424
– of which the Vecoplan Group	6,375	6,424

The decrease in goodwill at the NSM Magnettechnik Group from TEUR 19,788 to TEUR 12,124 derives from the organizational reassignment of iNDAT Robotics GmbH. MAX Management GmbH has held the shares in iNDAT Robotics GmbH since January 1, 2017.

(3) Property, plant and equipment

The increase in land and buildings arises mainly from the reclassification of TEUR 1,839 from prepayments rendered, which reduced accordingly. This relates to the restructuring and expansion of a production hall of ELWEMA Automotive GmbH.

TEUR	Land and buildings	Technical plant and machin ery	Other plant, operating and office equip ment	Plant under construc tion	Prepay ments rendered	Total
Cost
01.01.2017	40,211	15,052	19,134	711	46	75,154
Change in consolidation scope	0	0	0	0	0	0
Currency differences	–310	–78	–288	0	0	–676
Additions	206	839	2,128	1,263	5	4,441
Disposals	0	–753	–489	–9	0	–1,251
Reclassifications	1,839	51	0	–1,839	–51	0
31.12.2017	41,946	15,111	20,485	126	0	77,668
Cumulative depreciation/ amortization/impairment losses
01.01.2017	17,516	11,380	14,634	0	0	43,530
Change in consolidation scope	0	0	0	0	0	0
Currency differences	–81	–64	–206	0	0	–351
Additions	1,221	1,191	1,487	0	0	3,899
Disposals	0	–414	–477	0	0	–891
Reclassifications	0	0	0	0	0	0
31.12.2017	18,656	12,093	15,438	0	0	46,187
Carrying amount
31.12.2017	23,290	3,018	5,047	126	0	31,481

TEUR	Land and buildings	Technical plant and machin ery	Other plant, operating and office equip ment	Plant under construc tion	Prepay ments rendered	Total
Cost
01.01.2016	36,525	15,041	17,632	668	2,510	72,376
Change in consolidation scope	0	0	0	0	0	0
Currency differences	81	8	53	0	0	141
Additions	654	929	1,781	1,095	563	5,022
Disposals	–158	–927	–342	–918	0	–2,344
Reclassifications	3,109	0	10	–134	–3,027	–42
31.12.2016	40,211	15,052	19,134	711	46	75,154
Cumulative depreciation/amortization/ impairment losses
01.01.2016	16,419	10,019	13,404	0	0	39,842
Change in consolidation scope	0	0	0	0	0	0
Currency differences	22	12	32	0	0	66
Additions	1,232	1,830	1,476	0	0	4,538
Disposals	–157	–482	–279	0	0	–918
Reclassifications	0	0	0	0	0	0
31.12.2016	17,516	11,380	14,633	0	0	43,528
Carrying amount
31.12.2016	22,695	3,672	4,501	711	46	31,625

(4) Investment property

Investment property includes land and buildings of the unsold partial land plot/buildings of the former BTD division, whose fair value corresponds to the carrying amount on the reporting date.

The amount of TEUR 37 was expensed for the maintenance of the utilized investment property (previous year: TEUR 17). The changes in investment properties are as follows:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

TEUR	Land	Buildings	Total
Cost
01.01.2017	296	5,085	5,381
Change in consolidation scope	0	0	0
Currency differences	0	0	0
Additions	0	0	0
Disposals	0	0	0
Reclassifications	0	0	0
31.12.2017	296	5,085	5,381
Cumulative depreciation/amortization/impairment losses
01.01.2017	0	3,977	3,977
Change in consolidation scope	0	0	0
Currency differences	0	0	0
Additions	0	25	25
Disposals	0	0	0
Reclassifications	0	0	0
31.12.2017	0	4,002	4,002
Carrying amount
31.12.2017	296	1,083	1,379
TEUR	Land	Buildings	Total
Cost
01.01.2016	479	19,594	20,073
Change in consolidation scope	0	0	0
Currency differences	0	0	0
Additions	0	0	0
Disposals	–183	–14,509	–14,692
Reclassifications	0	0	0
31.12.2016	296	5,085	5,381
Cumulative depreciation/amortization/impairment losses
01.01.2016	0	16,107	16,107
Change in consolidation scope	0	0	0
Currency differences	0	0	0
Additions	0	463	463
Disposals	0	–12,593	–12,593
Reclassifications	0	0	0
31.12.2016	0	3,977	3,977
Carrying amount

(5) Equity accounted investments

The Vecoplan FuelTrack GmbH i.L. joint venture, which was founded on April 7, 2011 and which is 49% held by Vecoplan AG, was recognized at its acquisition cost of TEUR 25, and fully written off in 2011 due to start-up losses. The winding down of the company was approved by way of shareholder resolution on March 4, 2014.

Furthermore, since January 20, 2017, MAX Automation SE has held a 44.5% interest in ESSERT GmbH as an associate, which is also equity accounted.

The aggregate net result of the equity accounted associates amounts to TEUR –770 for the 2017 financial year.

(6) Other investments

Other investments of TEUR 2,593 (previous year: TEUR 2,270) include, among other items, a vendor loan of TEUR 969 (previous year: TEUR 1,087) and a dormant equity investment of TEUR 800 (previous year: TEUR 800). Both the vendor loan and the dormant equity investment were originated in 2016 in connection with the management buyout at altmayerBTD GmbH & Co. KG.

In an amount of TEUR 353, the shares in MAX Automation (Asia Pacific) Co. Ltd. in Hong Kong, in which MAX Automation SE holds a 25% interest, were added to other financial assets this year.

In the previous year, other investments also included TEUR 30 of interests in affiliated companies. These relate to an interest in a general partnership limited liability company. This investment is of minor significance for the consolidated financial statements and was merged with its parent entity in the current financial year.

Other non-current financial assets exist in an amount of TEUR 471 (previous year: TEUR 353), and mainly include a tenant loan of TEUR 357 (previous year: TEUR 271).

(7) Deferred tax

Deferred taxes are to be allocated to the following balance sheet items in line with their origination:

TEUR		31.12.2017		31.12.2016
	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Non-current balance sheet items
A. Non-current assets	5,430	3,938	5,592	8,669
I. Intangible assets	323	3,303	323	7,930
II. Property, plant and equipment	224	577	207	640
III. Non-current financial liabilities	14	58	14	99
IV. Deferred tax assets for tax loss carryforwards	4,869	0	5,048	0
B. Non-current borrowings	125	60	141	49
Current balance sheet items
C. Current assets	1,548	4,159	1,687	4,330
I. Inventories and trade receivables	1,548	3,957	1,687	4,330
II. Current financial liabilities	0	202	0	0
D. Current borrowings	219	88	486	179
Sub-total	7,322	8,245	7,906	13,227
Valuation adjustments applied to loss carryforwards	–625	0	–199	0
Offsetting	–1,973	0	–1,715	0
Total	4,724	8,245	5,992	13,227

Deferred tax assets and deferred tax liabilities arising from long-term construction contracts were offset, as were deferred tax assets and deferred tax liabilities within the Group's fiscal units for corporation tax purposes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Deferred tax on goodwill in an amount of TEUR 4,251 (previous year: TEUR 2,395) was released through profit or loss, thereby increasing the results, and taking into account a low-tax interest. Retroactive taxation deadlines were applicable to goodwill pursuant to the German Transformation Taxation Act (UmwStG), which have now expired.

In the previous year, domestic trade tax loss carryforwards of TEUR 758 existed at the parent company, which were utilized in full in 2017.

In addition, domestic trade tax loss carryforwards exist in an amount of TEUR 13,901 (previous year: TEUR 14,925), and corporation tax loss carryforwards in an amount of TEUR 14,393 (previous year: TEUR 14,657), with deferred tax assets totaling TEUR 4,069 (previous year: TEUR 4,157), which were value-adjusted in an amount of TEUR 11 (previous year: TEUR 0). The domestic loss carryforwards amount to TEUR 3,196 (previous year: TEUR 3,175), with the related deferred tax assets of TEUR 800 (previous year: TEUR 787) being value-adjusted in an amount of TEUR 614 (previous year: TEUR 199).

When measuring the value retention of the loss carryforwards, minimum taxation has had to be taken into account in Germany. Loss carryforwards can be offset against subsequent years' profits up to TEUR 1,000 on an unlimited basis, and beyond by up to 60%.

The value retention of the deferred tax assets relating to loss carryforwards was reviewed. The realization of these loss carryforwards is sufficiently ensured.

Of the deferred tax assets relating to loss carryforwards after valuation adjustments, an amount of TEUR 4,057 (previous year: TEUR 4,261) is covered through deferred tax liabilities. Deferred tax assets of TEUR 187 (previous year: TEUR 588) comprise loss carryforwards that are not covered by deferred tax liabilities, and where losses occurred in previous periods. Measures to utilize the losses in the near term are, and were, being implemented.

The following amounts are reported in the consolidated balance sheet:

TEUR	31.12.2017	31.12.2016
Deferred tax assets:
– from deductible differences	2,453	2,858
– from tax loss carryforwards	4,244	4,849
– offsetting with deferred tax liabilities	–1,973	–1,714
Total deferred tax assets	4,724	5,993
Deferred tax liabilities:
– from taxable temporary differences	8,245	13,227

(8) Other non-current assets

The other non-current assets of TEUR 601 (previous year: TEUR 335) comprise mainly non-current trade receivables in an amount of TEUR 598 (previous year: TEUR 333).

(9) Inventories

TEUR	31.12.2017	31.12.2016
Raw materials and supplies	15,691	16,270
Unfinished goods and work-in-progress	12,375	16,472
Finished goods and services	10,363	5,154
Prepayments rendered	3,666	3,318
Inventories	42,095	41,214

A year-on-year inventory change of TEUR 1,694 (previous year: TEUR 2,641) occurred in the case of finished goods and services, which is reported in the statement of comprehensive income. Differences to the corresponding balance sheet items arise from value changes to foreign Group companies' inventories reflecting changes in foreign currency exchange rates.

Impairment losses of TEUR 4,358 are included in inventories (previous year: TEUR 3,573). Information about collateral assignments is included in section 4.2 (17).

(10) Trade receivables

Trade receivables include receivables arising from applying the PoC method to construction contracts:

TEUR	31.12.2017	31.12.2016
Receivables from construction contracts	178,574	192,694
Proportionately recognized cost	–157,572	–172,199
Reported unappropriated retained earnings	21,002	20,495
Prepayments received for construction contracts	–95,786	–116,843
Current receivables from construction contracts	82,788	75,851

Revenues of TEUR 210,645 were recognized from construction contracts during the period under review (previous year: TEUR 177,303).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The following table provides an overview of the trade receivables' term structure:

TEUR	31.12.2017	31.12.2016
Trade receivables:
Neither overdue nor individually value-adjusted receivables	37,612	31,284
Individual value allowances	–1,295	–1,215
Collective value allowances	–345	–313
Overdue receivables that are not individually value-adjusted
< 30 days	7,216	6,632
> 30 days	2,323	2,173
> 60 days	2,764	2,132
> 90 days	5,955	3,461
Overdue receivables, total	18,258	14,398
Individually value-adjusted receivables	1,308	1,223
Carrying amount	55,538	45,377
Receivables from construction contracts	178,574	192,694
Prepayments received from construction contracts	–95,786	–116,843
Trade receivables	138,326	121,227

The increase in the portfolio of receivables derives mainly from a year-on-year lower volume of prepayments rendered for construction contracts.

(11) Receivables due from related companies

The TEUR 40 item relates mainly to trade receivables due from ESSERT GmbH. In the previous year, this item related to trade receivables due from Vecoplan FuelTrack GmbH i.L. in an amount of TEUR 90.

(12) Prepayments and accrued income, and other current assets

TEUR	31.12.2017	31.12.2016
Claims made against tax authorities	1,945	3,534
Prepayments and accrued income	1,276	1,402
Receivables arising from compensation claims	624	575
Derivatives	325	0
Receivables due from employees	220	220
Supplier accounts in debit	75	171
Receivables from purchase price payments	0	4,250
Other receivables	1,174	463
Total	5,639	10,615

In the previous year, the receivable deriving from a purchase price payment related to the partial disposal of an investment property, which was settled in the reporting year.

(13) Cash and cash equivalents

Cash and cash equivalents of TEUR 26,154 (previous year: TEUR 23,023) comprise cash positions, checks and bank deposits.

4.2 Equity and liabilities

Equity

Changes to equity during the financial year are presented separately in the consolidated statement of changes in equity.

4.3 Capital measure

With a resolution dated August 15, 2017, the Executive Directors of MAX Automation SE, full utilized the authorization to increase the share capital by up to 10%, or EUR 2,665,000, against cash capital contributions under exclusion of subscription rights (Approved Capital II). The capital increase was entered in the commercial register on September 7, 2017.

(14) Subscribed share capital

The company's fully paid in share capital amounts to EUR 29,459,415.00.

It is divided into 29,459,415 no par value ordinary registered shares. As a consequence, one ordinary share corresponds to the notional investment value of EUR 1.00.

The Administrative Board determines the form of the share documents, and of the dividend coupons and renewal sheets. The same applies for bonds.

The company can aggregate individual shares within share documents that securitize multiple shares (multiple share certificate). Shareholders' entitlement to any securitization of their interests above and beyond this is excluded.

The Administrative Board is authorized to increase the company's share capital once or on several occasions during the period until June 29, 2020, by up to a total of EUR 4,019,000.00 against cash capital contributions through issuing new ordinary registered shares (with voting rights) (Approved Capital I). The new shares are to be offered to shareholders for subscription, whereby indirect subscription rights in the meaning of Section 186 (5) Clause 1 of the German Stock Corporation Act (AktG) are satisfactory. The Administrative Board is nevertheless authorized to exclude fractional amounts from shareholders' subscription rights. The Administrative Board is also authorized to determine a commencement of dividend-entitlement that differs from the law, as well as further specifics of the implementation of capital increases from Approved Capital I. The Administrative Board is authorized to adapt the wording of the articles of incorporation after the full or partial implementation of the increase of share capital from Approved Capital I, or after the expiry the authorization period, in accordance with the scope of the capital increase from Approved Capital I.

The company has not utilized this authorization to date.

(15) Capital reserves and revenue reserve

The consolidated statement of changes in equity presents the composition and changes in the capital reserves and the revenue reserve.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The capital reserves include the TEUR 15,990 premium from the capital increase from Approved Capital II approved on August 15, 2017. Costs for the capital increase, less the incurred tax effect of TEUR 138, are to be deducted from this.

Along with income tax, the revenue reserve also includes actuarial gains and losses on pension provisions. These amounted to TEUR -205 in 2017 (previous year: TEUR -229).

(16) Unappropriated retained earnings

Due to the provisions of the German Stock Corporation Act (AktG), the amount that is available for distributions of dividends to the shareholders is based on the unappropriated retained earnings and other revenue reserves as reported in the separate annual financial statements of MAX Automation SE, which are prepared in accordance with the provisions of the German Commercial Code (HGB). The separate financial statements of MAX Automation SE for 2017 report unappropriated retained earnings of TEUR 12,309 based on accounting pursuant to the German Commercial Code (HGB).

The Administrative Board proposes the distribution of a dividend of 0.15 euro cents per share from the unappropriated retained earnings. This corresponds to a total dividend payout amount of TEUR 4,419. The dividend payout results generally in a deduction of 25% capital gains tax and 5.5% Solidarity Surcharge on the capital gains tax (the total deduction consequently amounts to 26.375%), as well as any church tax.

Capital management

The overall framework for optimal capital management is set by the strategic orientation of the MAX Group. The focus is on long-term value growth in the interests of investors, employees and customers. This is to be taken into account through continuous earnings improvement generated by growth and efficiency enhancement.

Management of the capital structure aims to always ensure maximum flexibility and scope for capital market activity. This enables optimal pricing when raising equity and debt financing.

Non-current liabilities

(17) Non-current financial liabilities

TEUR	31.12.2017	31.12.2016
Non-current loans less current portion	64,847	64,063
Remaining term 1-5 years	63,830	62,448
Remaining term > 5 years	1,017	1,615
Other non-current liabilities	1,794	2,222
Remaining term 1-5 years	1,273	1,369
Remaining term > 5 years	521	853
Total	66,641	66,285

The non-current loans relate to bank borrowings and include the parent company syndicated loan in an amount of TEUR 61,158 (previous year: TEUR 59,342).

Other non-current liabilities mainly comprise lease liabilities (see following section on finance leases).

Non-current loans less current portion

On July 31, 2017, MAX Automation AG expanded the syndicated loan it had agreed in 2015 and also extended it until 2024. As a consequence, a EUR 40 million increase in the syndicated loan to a total volume of EUR 190 million was agreed (including bill guarantee lines for prepayments, warranties and contract fulfillment). MAX Automation exploited the continued favorable financing environment to enlarge the syndicated loan. The agreement comprises improved terms as well as comfortable covenants based on the IFRS consolidated financial statements. These relate to both balance sheet and earnings figures. In 2017, the MAX Group complied with all covenants agreed with its lending banks.

The companies included in the syndicated loan are jointly and severally liable for the obligations arising from this agreement. Utilization is deemed unlikely as the debtors' creditworthiness is secured through their membership of the MAX Group. The level of the interest rate on the syndicated loan depends in part on key balance sheet figures in the consolidated financial statements. Interest is based on Euribor plus a margin derived from the key figures.

Land charges for liabilities of TEUR 5,210 (previous year: TEUR 8,301) and collateral assignment of non-current assets in an amount of TEUR 0 (previous year: TEUR 791) mainly serve as collateral for the non-current liabilities apart from the syndicated loan, as well as for the current liabilities reported in section 4.2 (20).

The Group's loans carry interest at both fixed and variable rates. Depending on the term of the agreements, interest rates (including finance leases) ranged between 1.40% and 5.70% in 2017.

Finance leases

A finance lease for a property exists within the MAX Group. The basic rental period for the property amounts to 15 years.

The leases in the previous year for technical plant as well as operating and office equipment were repaid early in the financial year under review. The related assets were acquired by the respective Group companies.

After the end of the basic rental period, the property carries both an option for a further rental period, as well as a purchase option. Both the lessee and the lessor can unilaterally exercise the purchase option.

The lease contract does not include any types of restrictions on business activities relating to dividends, additional liabilities or further leases.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The historical acquisition costs for the lease assets amounted to TEUR 3,527 (previous year: TEUR 4,661). The net carrying amount stands at TEUR 2,658 on the reporting date (previous year: TEUR 3,550). Depreciation of TEUR 197 was applied in the year under review (previous year: TEUR 377).

TEUR	up to 1 year	1 to 5 years	longer than 5 years	Total
Minimum lease payments	349	1,403	545	2,297
Future borrowing costs	103	257	24	384
Present values	246	1,146	521	1,913

(18) Pension provisions

The pension provisions recognized on the balance sheet arise from commitments made by a subsidiary to its employees. The defined benefit obligations within the MAX Group are not financed through funds.

The following key assumptions were included in the actuarial calculations:

TEUR	31.12.2017	31.12.2016
Interest rate	1.90%	1.58%
Salary trend	1.5%	1.5%
Pension trend	2.0%	2.0%
Notional staff turnover rate	None	None
Notional pensionable age	65 years	65 years

Cost trends in the medical care area have not been taken into consideration in the actuarial assumptions.

The projected pension benefit obligations report the following changes:

TEUR	31.12.2017	31.12.2016
Balance as of January 1	1,033	1,082
Service cost	0	0
Interest cost	16	25
Actuarial gains and losses	–34	–22
Pensions paid	–52	–52
Offsetting with reinsurance	0	0
Pension provision	963	1,033

Actuarial gains and losses were recognized directly in equity.

The pension obligations report the following changes over the last five years:

TEUR	2017	2016	2015	2014	2013
Pension obligation as recognized on the balance sheet	963	1,033	1,082	814	715
Plan assets offset	0	0	0	156	140

No significant adjustments to the pension obligations are expected based on experience.

Besides pension payments (TEUR 53), pension costs (interest and current service costs) of prospectively TEUR 18 will be incurred in 2018.

Due to the minor significance for the financial position and performance of the MAX Group, the company has refrained from conducting a sensitivity analysis of the pension obligations.

(19) Trade payables

TEUR	2017	2016
Trade payables	32,241	31,949
Prepayments received unrelated to construction contracts	19,192	18,808
Obligations from construction contracts	14,469	6,959
Liabilities from unbilled deliveries and outstanding assembly work	6,281	3,809
Liabilities to subcontractors	431	263
Trade payables	72,614	61,788

(20) Current loans and current portion of non-current loans

Short-term bank borrowings of TEUR 8,416 (previous year: TEUR 28,840) were drawn down, for which interest is charged on standard market terms. This includes TUSD 6,840 utilized by the US Group companies from an allocation line of the syndicated loan from Commerzbank in New York.

The level and composition of collateral is presented in section 4.2 (17).

(21) Liabilities to related companies

The liabilities to related companies derive from trade payables due to ESSERT GmbH in an amount of TEUR 148.

(22) Other current financial liabilities

TEUR	31.12.2017	31.12.2016
Wages and salaries	6,145	4,114
Vacation wages/salaries and overtime	3,335	3,104
Debtor accounts in credit	938	1,133
Social security liabilities	606	567
Lease liabilities	246	562
Negative market values of derivative financial instruments	0	2
Acquisition price obligation for iNDAT Robotics GmbH	0	994
Miscellaneous current liabilities	1,629	1,796
Total	12,899	12,271

Wages and salaries include TEUR 5,790 of bonuses (previous year: TEUR 3,525).

(23) Income tax provisions and liabilities

Taxes and levies which have arisen economically as of the balance sheet date but whose level has not yet been determined are covered by tax provisions. In Germany, the MAX Group is generally subject to two types of taxes on its income: trade tax and corporation tax.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

As far as corporation tax is concerned, the standard tax rate of 15% applies, to which a 5.5% Solidarity Surcharge is added. Trade tax amounts to an average of around 14%. The average tax rate in Germany amounts to 29.83% as a consequence. The MAX Group abroad mainly generates taxable earnings in the USA. The average tax rate in the USA amounts to 35.64%.

Tax provisions report the following changes:

TEUR	31.12.2016	Consump tion	Reversals	Additions	31.12.2017
Corporation tax with
Solidarity Surcharge	366	–1	–11	2,058	2,412
Trade tax	1,303	–501	–173	1,276	1,905
Other taxes	356	–7	0	83	432
Total provisions	2,025	–509	–184	3,417	4,749
Tax liabilities	589	–376	0	0	213
Income tax provisions and
liabilities	2,614	–885	–184	3,417	4,962

The changes arising from currency translation are not reported separately due to their being immaterial, and are included among additions to provisions.

(24) Other provisions

Other provisions comprise the following main items:

TEUR	31.12.2016	Consump tion	Reversals	Reclassifi cation	Additions	31.12.2017
Non-current warranty provisions	1,156	–149	–7	238	178	1,416
Non-current personnel cost provisions	64	0	0	0	0	64
Non-current miscellaneous other provisions	10	0	0	0	0	10
Other non-current provisions, total	1,229	–149	–7	238	178	1,489
Warranty provisions	2,775	–239	–1,783	–238	2,190	2,705
Personnel cost provisions	425	–107	–34	0	0	284
Miscellaneous other provisions	2,518	–1,910	–289	0	1,805	2,124
Other current provisions, total	5,718	–2,256	–2,106	–238	3,995	5,113

Miscellaneous other provisions include all of the Group's obligations and risks for which an outflow of funds is probable, and which can be estimated reliably. Among other items, these include obligations for subsequent invoices of TEUR 672 (previous year: TEUR 509), for auditing and advisory costs of TEUR 550 (previous year: TEUR 778), for litigation costs/loss compensation of TEUR 93 (previous year: TEUR 60), for commissions of TEUR 2 (previous year: TEUR 84) and for other of TEUR 807 (previous year: TEUR 1,086).

The changes arising from currency translation are not reported separately due to their being immaterial, and are included among additions to provisions.

(25) Other current liabilities

This item of TEUR 2,845 (previous year: TEUR 2,066) mainly comprises wage and church taxes of TEUR 1,325 (previous year: TEUR 1,247) and VAT of TEUR 1,520 (previous year: TEUR 818).

5. Notes to the statement of comprehensive income

The presentation of the statement of comprehensive income was adjusted in the 2017 financial year so that EBIT is no longer reported separately before PPA. The same applies to amortization relating to purchase price allocations.

EBIT before PPA continues to be reported as an important key indicator for the MAX Group.

(26) Revenue

TEUR	2017	2016
Germany	120,483	102,253
European Union	95,617	105,706
North America	93,025	69,693
China	34,932	32,043
Rest of the World	32,123	27,443
Total	376,180	337,138

The MAX Group generally generates revenue from the sale of goods and services. The effects of accounting for construction contracts are presented in section 4.1 (10).

(27) Other operating revenue

TEUR	2017	2016
Income from release of provisions	2,113	1,940
Income from currency effects	1,309	2,425
Income from the consumption of personnel-related liabilities in accordance with regulations	1,109	802
Income from elimination of valuation adjustments	426	438
Income from written-off receivables	218	61
Income from loss compensation	53	225
Gain on disposal of investment property	0	1,689
Other	1,971	2,199
Total	7,199	9,778

The Other item mainly comprises non-cash benefits of TEUR 651 (previous year: TEUR 624), and bonuses of TEUR 521 that have not yet been disbursed (previous year: TEUR 583).

			(28) Cost of materials
--	--	--	------------------------

TEUR	2017	2016
Expenses for purchased goods	144,900	134,316
Expenses for purchased services	51,377	41,289
Total	196,276	175,605

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

(29) Personnel expenses

TEUR	2017	2016
Wages and salaries	94,825	89,714
Social security contributions	17,507	16,839
– of which expenses for pensions and benefits	595	688
Total	112,332	106,553
Average number of employees excluding trainees	2017	2016
Wage earners	510	493
Salary earners	1,066	1,056
Total	1,576	1,549

(30) Depreciation, amortization and impairment losses

TEUR	2017	2016
For intangible assets	4,529	7,039
For buildings, leasehold improvements and external facilities	1,221	1,232
For other property, plant and equipment	2,678	3,306
For investment property	25	463
For equity accounted investments	223	0
– PPA amortization included in the items above	2,040	4,974
Total	8,676	12,040

PPA amortization includes TEUR 0 of impairment losses in the financial year under review (previous year: TEUR 1,537).

The amortization of equity accounted financial investments relates to PPA-related amortization that the company does not report in the result from equity accounted companies.

(31) Other operating expenses

TEUR	2017	2016
Travel expenses	5,934	5,751
Rent/lease expenses	4,043	3,630
Expense for outgoing freight	4,040	3,314
Vehicle expenses	3,471	3,696
Legal and advisory costs	3,388	3,551
Expense for postage, telephone and IT	2,875	2,578
Warranty expenses	2,537	1,657
Maintenance costs	2,311	2,521
Sales commissions	2,301	1,937
Personnel expenses (including training and further development)	1,999	1,765
Expenses from currency effects	1,982	1,992
Advertising costs	1,859	1,257
Expense for electricity, gas and water	1,678	1,775
Expense for insurance	1,316	1,349
Trade fair costs	846	1,333
Tools	678	593
Addition to individual and collective value allowances	611	667
Miscellaneous other operating expenses	7,956	6,660
Total	49,826	46,026

Travel expenses of TEUR 5,934 (previous year: TEUR 5,751) were incurred mainly for employees engaged in assembly, as well as for sales staff.

Personnel expenses of TEUR 1,999 (previous year: TEUR 1,765) include chiefly expenses for training and further development of staff, as well as expenses for staff recruitment, and for voluntary social benefits.

(32) Net interest result

TEUR	2017	2016
Interest income	383	85
Interest expenses	–3,542	–2,931
Net interest result	–3,159	–2,846

Interest expenses mainly comprise interest expenses incurred for the syndicated loan.

The net interest result includes expenses of TEUR 39 (previous year: TEUR 129) arising from reversing discounts applied to non-current provisions, and TEUR 9 (previous year: TEUR 0) of income arising from the discounting of non-current provisions.

The net interest result presented above arises exclusively from financial assets and financial liabilities that were not measured at fair value through profit or loss.

The following table presents the net gains or net losses on financial instruments as recognized in the statement of comprehensive income, which are not reported in the net interest result:

TEUR	2017	2016
Financial assets and financial liabilities measured at fair value through profit or loss	296	110
Loans and receivables	–1,501	–157

Along with results from market changes, the net gains and losses on financial assets and financial liabilities measured at fair value through profit or loss also include current expenses and income for these financial instruments.

Along with current income/expenses, the net gains and net losses deriving from loans and receivables include both reversals to impairment losses and impairment losses deriving from trade receivables and trade payables.

of MAX Automation SE

(33) Income taxes

Earnings before income taxes amount to TEUR 17,030 (previous year: TEUR 9,543).

TEUR	2017	2016
Current taxes on income	–5,699	–4,805
Taxes on income relating to other periods	–960	62
Deferred tax	3,756	3,542
– of which loss carryforwards	595	599
Total	–2,903	–1,201

Current and deferred taxes are measured applying the respective country-specific income tax rates.

The main accounting entries for deferred taxes are explained in section 4.1 (7).

A provision of TEUR 1,194 was formed for risks arising from the German Federal Ministry of Finance (BMF) circular relating to Section 8c of the German Corporation Tax Act (KStG), which was issued at the end of 2017. This is included in taxes relating to other accounting periods.

The expected notional income tax expense is derived by multiplying the earnings for the year before income taxes by the Group income tax rate. This is derived from the tax rates of the companies that are included in the financial statements. The 2017 tax rate reduced considerably due to this special effect, as in the previous year.

Please see section 4.1 (7) for an explanation of the adjustment of previous years' deferred tax.

The reconciliation between the notional income tax expense and the income tax reported in the statement of comprehensive income is presented in the following table:

TEUR	2017	2016
Earnings for the year before income taxes	17,030	9,543
Group income tax rate	30.39%	32.79%
Notional income tax expense in the financial year under review	5,176	3,129
Differences deriving from tax rate	282	70
Differing tax burdens (country-specific particularities)	–70	0
Correction relating to a value adjustment to deferred tax assets relating to loss carryforwards	427	354
Non-tax-deductible expenses	277	165
Income taxes relating to other periods/adjustment to previous years' deferred taxes	–3,428	–2,240
Taxes borne by minority shareholders	0	–8
Current-year tax calculation differences	4	5
Other	234	–274
Taxes on income	2,903	1,201
Effective tax rate	17.04%	12.59%

(34) Earnings per share (EPS)

Earnings per share amount to EUR 0.50. Further information on earnings per share, please see section 6.4 below.

6. Other disclosures relating to the consolidated financial statements

6.1 Consolidated statement of cash flows

The consolidated statement of cash flows is presented applying the indirect method.

The change in deferred tax is included in other non-cash expenses and income.

TEUR	31.12.2016	Outgoing pay ments	Incom ing pay ments	Other changes	Corp orate acquisi tions	New lease con tracts	Fair value chang es	Cur rency effects	31.12.2017
Non-current finan cial liabilities
	64,063	–125,716	109,500	17,000	0	0	0	0	64,847
Current
financial liabilities	28,840	–3,424	0	–17,000	0	0	0	0	8,416
Lease liabilities	2,640	–727	0	0	0	0	0	0	1,913
Other non-current
liabilities	142	–40	0	26	0	0	0	0	128
Total	95,685	–129,907	109,500	26	0	0	0	0	75,304

The following table shows the changes in liabilities from financing activities.

The other changes relate mainly in an amount of TEUR 17,000 to the prolongation of a line from the syndicated loan, leading to a change in recognition from current financial liabilities to non-current financial liabilities.

6.2 Research and development

Section 1.3 in the notes to the consolidated financial statements includes information about MAX Group research and development activities.

Development costs totaling TEUR 2,328 were incurred in 2017 (previous year: TEUR 4,408). Of this, an amount of TEUR 1,773 was capitalized pursuant to IAS 38 Intangible Assets (previous year: TEUR 2,902). This corresponds to a 76% capitalization rate (previous year: 66%). Amortization and impairment losses of TEUR 1,577 were applied to development costs (previous year: TEUR 1,339).

All of the capitalized development costs are attributable to the Industrial Automation segment.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

6.3 Risk management General information about financial risks

Various risks from financial instruments can arise for the MAX Automation Group. These are:

• Credit risks
• Liquidity risks
• Market price risks

Credit risks arise mainly from trade receivables. Special significance is ascribed in this context to the estimating of risks from the project business, such as from the pre-financing of contracts.

Liquidity risks may arise from an inability to satisfy payment obligations in due time. As a rule, such risks are normally associated with negative developments in the operating business.

Market price risks derive from changes to currency exchange rates and interest rates. Currency risks exist on the sales side chiefly in the case of invoicing on a US dollar basis.

In general, the risks that are presented can negatively affect the Group's financial position and performance.

The Group monitors the deployment of financial instruments as part of its risk management. Important functions are separated in this context: firstly, in relation to the operating processing of business by the Group companies and, secondly, in relation to financial controlling by the parent company. The Group's guidelines are oriented to identify potential risks at an early stage, thereby allowing countermeasures to be launched. These guidelines are constantly adapted to market requirements accordingly.

The focus of risk management is steered via the operating business and financing activities. Moreover, derivative financial instruments are deployed only to reduce or avoid risks arising from the operating business. Section 5.3.3. on market price risks provides additional information about the derivative financial instruments.

Risk categories

6.3.1 Credit risks

Credit risk describes the risk of financial loss if a counterparty fails to fulfill its contractual obligations or payment obligations. Such risk mainly comprises default risk, and the risk of a deterioration in credit standing.

Trade receivables arise from the worldwide sales activities of the individual companies' operating businesses. A total of 11.2% of the Group's trade receivables position exist in relation to one customer. This customer has a very good credit rating, however. The Group manages credit risk on the basis of internal financial controlling. Deriving from the differing credit ratings of the customers, the following credit insurance is taken out, as a rule:

• Export insurance
• Letters of credit
• Prepayments
• Guarantees and letters of comfort
• Internal credit lines
• Collateral assignments

The Group's default risks are limited to normal business risk that is reflected potentially through the formation of valuation adjustments. Counterparty risk on derivative financial instruments is countered by concluding derivative transactions exclusively with renowned banks.

The maximum default risk (credit risk) comprises the complete default of the positive carrying amounts of the financial instruments. From today's perspective, the default risk on the financial instruments whose values have not been adjusted is generally appraised as minor, as default probability is kept low as a result of tight risk management.

6.3.2 Liquidity risk

Operative liquidity management entails aggregating the companies' short-term and medium-term cash flows at Group level. Along with the maturities of financial assets and liabilities, these cash flows also comprise the expectations for the Group companies' operating cash flows.

The following cash flows from interest and redemption payments arise for the Group's liabilities as of December 31, 2017:

	Carrying amount	Cash flow up to one	Cash flow	Cash flow longer than
TEUR	31.12.2017	year	1 to 5 years	5 years
Non-derivative financial liabilities
Financing liabilities	73,263	8,663	66,828	1,048
Trade payables (excluding prepayments received)	72,614	72,614	0	0
Other interest-bearing and non-interest-bearing liabilities	17,537	15,846	1,531	545
Cash outflows from derivative financial instruments
– Currency derivatives	325	12,805	658	0
– Interest rate derivatives	0	0	0	0
Cash inflows from derivative financial instruments
– Currency derivatives	325	13,147	641	0
– Interest rate derivatives	0	0	0	0

The overview includes the following contents:

• Undiscounted outgoing repayment and interest rate obligations deriving from financing liabilities
• Undiscounted outgoing payments deriving from trade payables
• Undiscounted outgoing payments for other interest-bearing and non-interest-bearing financial liabilities
• Undiscounted cash outflows and cash inflows (not offset for the respective year) for derivative financial instruments

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

The following assumptions are imputed for the undiscounted outgoing payments:

• If payment is possible on different dates, the earliest date is imputed as the due date.
• Derivative financial instruments include derivatives with both negative and positive fair values.
• The interest payments from financial instruments with variable interest rate are projected based on estimated interest rates. These estimates are based on interest rates prevailing on the date when the financial statements are prepared.

Future cash outflows are generally covered by the cash inflows from the operating business. Demand financing peaks in terms of timing and amount are sufficiently covered by the liquidity that the company holds available, as well as by the interplay of short-term and long-term credit lines.

6.3.3 Market price risk

Due to its international orientation, the Group is exposed to market price risks in the form of currency exchange rate risks and interest rate risks. Such risks can negatively affect the Group's financial position and performance. To assess and estimate risks, economic conditions are monitored constantly, and recourse is made to relevant market information.

The Group has established a centrally oriented risk management system for systematic risk recording and measurement. Continuous reporting is made to the Executive Directors in this context.

Currency risks

Due to its international orientation, the MAX Automation Group is exposed to currency fluctuation risks in its operating business as well as in relation to the aforementioned financial and cash flows. The Group's exchange rate risk is sales-driven, and consists mainly of the exchange rate between the US dollar and the euro. Transaction risk is of particular significance in this context, as revenues are generated in foreign currencies and the related costs are incurred in euros. To this extent, the formation risks can generate considerable reductions in the Group's results and liquidity.

Exchange rate fluctuations are partly hedged through deploying corresponding currency exchange rate hedging instruments.

Forward currency transactions and currency option transactions are entered into to hedge currency transactions. The company does not enter into pure trading transactions without corresponding underlying transactions.

Forward currency sales can generate market price risks in the form of potential obligations to sell currencies at a rate below the standard cash market rate on the settlement date. The market price risk in the case of options is limited to the option premium.

The terms and level of currency hedges correspond to the hedged underlying transactions. The Group holds the following hedging instruments as of the reporting date:

Financial instruments for currency hedging

	Nominal volume in TUSD		Fair value TEUR
	31.12.2017	31.12.2016	31.12.2017	31.12.2016
Forward currency transactions (sale)	1,500	0	16	0
Currency options (USD calls)	2,000	0	65	0

A forward currency transaction (embedded derivative) was arranged due to the payment agreements deriving from the acquisition of Shanghai Cisens Automation Co., Ltd. The derivative with a nominal volume of TCNY 87,600 hedges an amount of TUSD 13,035. The fair value amounts to TEUR 244 as of the reporting date.

Pursuant to IFRS 7, the company prepares sensitivity analyses relating to market price risks, which allow the effects on earnings and equity of hypothetical changes to relevant risk variables to be calculated.

The periodic effects are measured by relating the hypothetical changes in the risk variables to the financial instruments position as of the reporting date. This entails imputing that the position on the reporting date is representative for the full year.

The currency sensitivity analyses are based on the following assumptions:

• Non-derivative financial instruments denominated in a foreign currency are subject to currency risk, and are consequently included in the sensitivity analysis.
• Currency exchange-rate-related changes to the market values of currency derivatives that are neither included in a hedge pursuant to IAS 39 nor included in a natural hedge affect the currency result and are consequently included in the sensitivity analysis.

If the euro were to have appreciated by 10% against the US dollar on the balance sheet date, consolidated equity would have been TEUR 358 lower due to direct changes (previous year: TEUR 387 higher). If the euro were to have depreciated by 10% against the US dollar on the balance sheet date, consolidated equity would have been TEUR 438 higher due to direct changes (previous year: TEUR 473 lower).

If the euro were to have appreciated by 10% against the US dollar on the balance sheet date, the consolidated net result would have been TEUR 406 lower (previous year: TEUR 9 lower). If the euro were to have depreciated by 10% against the US dollar on the balance sheet date, the consolidated net result would have been TEUR 496 higher (previous year: TEUR 11 higher).

The risks deriving from the GBP, CNY and PLN have been subjected to a sensitivity analysis. These generate no significant effects, however.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Interest rate risks

Assets and liabilities that are sensitive to interest rates are held to a normal extent within the Group.

The operating business is financed on a matched term basis as a result of the syndicated loan. Variable interest refinancing possibilities are nevertheless utilized to a minor extent, however, in order to maintain flexibility on the market. Derivative financial instruments such as interest rate swaps and caps are deployed to limit the resultant risks.

An interest rate cap transaction exists where the variable interest rate to be paid is limited to 4.35%. The term of the transaction is June 7, 2024.

TEUR		Nominal volume	Fair value
	31.12.2017	31.12.2016	31.12.2017	31.12.2016
Interest rate cap	244	240	0	0
Interest rate swap	0	470	0	–2

Pursuant to IFRS 7, interest rate risks are presented by way of sensitivity analyses. These show the effects of changes to market interest rates on interest income and interest expenses, other earnings components, as well as equity, where relevant. The interest rate sensitivity analyses are based on the following assumptions:

• Market interest rate changes to non-derivative fixed interest financial instruments only affect earnings if they are measured at fair value. Accordingly, all fixed interest financial instruments measured at amortized cost are subject to no interest rate risks in the meaning of IFRS 7.
• Market interest rate changes affect the result from non-derivative variable interest financial instruments whose interest payments are not designated as underlying transactions as part of cash flow hedges against interest rate changes, and are consequently taken into account in the sensitivity calculations.
• Market interest rate changes to interest rate derivatives that are not included in the hedge pursuant to IAS 39 affect the net interest result, and are consequently included in the sensitivity calculations.

If the market interest rate level had been 100 basis points higher in the year under review, the consolidated net result would have been TEUR 987 lower (previous year: TEUR 852 lower).

If the market interest rate level had been 100 basis points lower in the year under review, the consolidated net result would have been TEUR 100 higher (previous year: TEUR 184 higher).

If the market interest rate level had been 100 basis points higher in the year under review, consolidated equity would have been TEUR 987 lower (previous year: TEUR 852 lower).

If the market interest rate level had been 100 basis points lower in the year under review, consolidated equity would have been TEUR 100 higher (previous year: TEUR 184 higher).

Other price risks

As part of presenting market risks, IFRS 7 also requires information about how hypothetical changes to other price risk variables affect the prices of financial instruments. Risk variables particularly include stock market prices and indices in this context.

The company had no holdings of such financial instruments either in the year under review, or in the previous year.

6.4 Earnings per share

Undiluted (basic) earnings per share were calculated from the net profit for the year attributable to the parent company shareholders, divided by the weighted average number of shares in issue during the financial year.

As dilutive instruments have been issued, undiluted and diluted earnings per share are identical.

In August of the financial year elapsed, MAX Automation completed a cash capital increase. The issue price for the new registered shares amounted to EUR 7.00 per share. The bonus element included in the issue price (the difference between the issue price and the price on the previous day) were taken into consideration accordingly in calculating the weighted average number of shares in the financial year.

The following table includes the information relating to the earnings and the shares taken as the basis in calculating diluted and undiluted earnings per share:

TEUR			2017		2016
Net income attributable to the shareholders of MAX SE (in TEUR)			13,965		8,320
Weighted average number of shares			27,912		26,794
Undiluted (basic)/diluted earnings per share			0.50		0.30
in EUR	2017	2016	2015	2014	2013
Undiluted (basic)/diluted earnings per share (EUR)	0.50	0.30	0.38	0.37	0.38

6.5 Segment reporting

Segment reporting is included as an annex to these notes.

Segment classification into the areas of Industrial Automation and Environmental Technology corresponds to the current internal reporting status. Allocation to the respective segments is based on each case on the products and services that are offered.

The Industrial Automation segment of the MAX Group comprises the following companies: the NSM Magnettechnik Group, ELWEMA Automotive GmbH, the IWM Automation Group, the bdtronic Group, MA micro automation GmbH, Rohwedder Macro Assembly GmbH, iNDAT Robotics GmbH, Mess- und Regeltechnik Jücker GmbH and AIM Micro Systems GmbH.

In the Environmental Technology segment, the MAX Group is active with the companies of the Vecoplan Group.

Section 2.10 the Group management report provides further information about the individual companies' operating activities.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Key segment data are published pursuant to IFRS 8. These are also reported regularly to the Executive Directors and the Administrative Board, and are of central importance for the management of the company. A particular focus is placed in this context on revenue and EBIT as key performance indicators. Working capital is also regularly subjected to more precise analysis. Internal reporting is in line with external financial accounting applying IFRS.

This segment report presents the main income and expense items, as well as relevant earnings metrics. Segment assets are also analyzed, with the location of the company's headquarters being the determinant factor.

Average headcount, investment, new order intake and order book positions also form part of the segment report as further steering metrics.

Intragroup transactions are generally conducted on terms that are standard among third parties.

Revenue is segmented by sales markets. By way of divergence from the provisions of IFRS 8.33 (a), the company does not show revenues in the North American market separately by countries, as this market is monitored as a unity in terms of its economic trends.

Of the sales revenues, TEUR 295,079 (previous year: TEUR 257,286) were attributable to projects, while TEUR 81,201 (previous year: TEUR 79,852) were attributable to business with service and spare parts.

No customer generated more than 10% of consolidated revenue in 2017.

6.6 Events after the reporting period

The disposal of NSM Packtec GmbH, Ahaus, was notarized on January 3, 2017. The closing of the agreement will prospectively occur in March 2018. The disposal price lies in the single-digit range in millions of euros. A book gain from the company's deconsolidation is expected for the 2018 financial year.

In early January 2018, the takeover of Italian engineering company R.C.M. Reatina Costruzioni Mecchaniche S.r.l. (RCM) based in Rieti, in the Lazio region, from its owner families was completed by bdtronic GmbH. The investment volume lies in the lower single-digit range in millions of euros. Its notarization already occurred in December 2017, as reported.

RCM is a specialized provider of solutions in mechanical manufacturing, assembly and engineering. The company possesses special expertise in the production of waterproofing systems for electric and hybrid engines, and has already been working for several years together with bdtronic as a supplier. Besides bdtronic, its customers include companies from the medical technology, hygiene products and energy supply industries. RCM was founded in 1979 and currently has 46 employees. The company is largely debt-free.

MAX Group company bdtronic will rename RCM as bdtronic Italia S.r.l. It plans to establish the location in Rieti as soon as possible into a competence center for waterproofing systems, and also aims to simplify the supply chain for the long term. The site is also to be utilized for further technologies.

On February 2018, MAX Automation announced that Andreas Krause (49) will be appointed Executive Director of the company with effect as of March 1, 2018. In the CFO function he succeeds Fabian Spilker (44), who will stand down from the CFO role as of March 31, 2018, and will step down as Executive Director as of the end of the Shareholders' General Meeting on May 18, 2018. Mr. Spilker will assist his successor in the handing over of responsibilities. Andreas Krause has more than 20 years' experience in engineering, energy technology and automation technology. Since 1998, he has held various finance management roles within the ABB Group, most recently as CFO of ABB South Africa.

On February 9, 2018, MAX Automation announced that, with the related entry in the company's commercial register, the company had transformed its legal form into that of a European public company (Societas Europaea – SE). The high-tech engineering specialist thereby implemented the corresponding resolution of the Ordinary Shareholders' General Meeting on June 30, 2017. This change of legal form reflects the growing significance of the Group's worldwide business activities in Europe as well as China and the USA. Instead of the previous dualistic management structure for the company comprising a Management Board and the Supervisory Board, the articles of incorporation of MAX Automation SE consists of the internationally widely disseminated monistic management system with an Administrative Board. Executive Directors are responsible for the operative business (see section 2.3, Particular events during the financial year).

MAX Automation also announced in August 2017 that it had signed an investment agreement to acquire a majority interest in the activities of Chinese engineering company Shanghai Cisens Automation Co., Ltd. The transaction was completed in March 2018. MAX Automation SE now holds a 51% interest in MAX Automation (Asia Pacific) Co. Ltd., Hong Kong, in which it held a 25% interest until the December 31, 2017 reporting date. The transaction volume lies in the lower double-digit range in millions of euros.

6.7 Other financial obligations

Other financial obligations amount to a total of TEUR 33,651 as of the reporting date (previous year: TEUR 24,045).

This relates to TEUR 10,829 of obligations arising from rental and lease contracts (previous year: TEUR 9,495), and from leases in an amount of TEUR 9,672 (previous year: TEUR 9,304).

A total of TEUR 12,653 of obligations from other contracts relate to obligations for future investments in financial assets, which were realized mainly in the first quarter 2018, and were largely serviced in US dollars.

Operating leases

Operating leases in the MAX Group mainly comprise real estate, cars, IT systems, machinery, and office fittings and furniture. The lease durations amount to between 2 and 28 years. No extension and/or purchase options exist.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

A tenant loan is also granted along with the lease payments. Interest is applied to the tenant loan so that as the tenant loan increases, the lease installments fall. The tenant loan is secured through land charges on the corresponding real estate, and through guarantees provided by external parties.

TEUR	up to 1 year	1 to 5 years	longer than 5 years	Total (previous year)
	2,699	5,081	3,049	10,829
Obligations from rental and lease agreements	(2,036)	(4,528)	(2,931)	(9,495)
	2,511	5,016	2,145	9,672
Lease obligations	(2,509)	(4,047)	(2,748)	(9,304)
	12,469	870	295	13,634
Obligations from other agreements	(4,752)	(431)	(63)	(5,246)

The financial obligations arising from these agreements amount to:

6.8 Related party transactions

Individuals and companies (including affiliated companies) which can be influenced by the company, or which can influence the company, are regarded as related parties in the meaning of IAS 24. The MAX Group companies render and purchase various services for, or from, related companies as part of their operating activities.

Such supply and service relationships are conducted on standard market terms. Services are rendered on the basis of existing contracts.

Related companies

Revenues of TEUR 227 were generated with, and services of TEUR 145 were purchased from, related (associated) companies in the financial year under review.

A non-pecuniary consulting agreement with Günther Holding SE was concluded with effect as of September 1, 2014, to which an addendum was added on January 16, 2017.

In connection with the acquisition of ESSERT GmbH, 3.5% interest was sold on to Günther Holding SE. The purchase price was standard for the market and amounted to TEUR 288. Pro rata incidental acquisition costs of TEUR 5 were charged on to Günther Holding SE.

Related individuals

Business transactions with related natural persons amount to a total of TEUR 10 (previous year: TEUR 10).

These relate to travel expenses incurred by Supervisory Board members. Section 6.10 explains relationships with the Management and Supervisory boards.

6.9 Auditor

Auditors' fees of TEUR 345 were incurred in the year under review (previous year: TEUR 360).

TEUR	2017	2016
1. Auditing services for financial statements	297	312
a) Services for the current year	289	288
b) Services for the previous year	8	24
2. Other certification services	0	0
3. Tax advisory services	30	24
4. Other services	18	24
Total	345	360

No other certification services were rendered in the financial year under review, and none were rendered in the previous year.

Services for the auditing of the financial statements include TEUR 18 for services connected with the enforcement proceeding.

Services in connection with the auditor's review of the half-year financial report pursuant to Section 37w (5) of the German Securities Trading Act (WpHG) are recognized under audit services.

Other services relate mainly to audit-related advice as well as services connected with the review of quarterly reports not requiring certification.

6.10 The corporate bodies of MAX Automation SE

Until the becoming effective of the company's transformation into the SE with the entry in the company's commercial register on February 2018, the Management Board managed MAX Automation AG. The Supervisory Board consulted with, and supervised, the Management Board in its management of the company. Since the corporate transformation, MAX Automation SE has a monistic management structure distinguished by the fact that the management of the SE is the responsibility of a single management body, the Administrative Board. The Executive Directors of MAX Automation SE manage the company's business based on joint responsibility with the aim of sustainable value creation. They implement the guidelines and instructions that the Administrative Board prepares.

Executive Directors

Daniel Fink, Düsseldorf CEO

Not a member of other controlling bodies

Fabian Spilker, Düsseldorf CFO

Member of the following controlling bodies: • Deputy Supervisory Board Chairman of Vecoplan AG, Bad Marienberg

of MAX Automation SE

Executive Directors' total compensation

The following amounts were granted to the Executive Directors of MAX Automation SE in the 2017 financial year:

TEUR	Daniel Fink Executive Director (CFO)
	2016	2017	2017 (min)	2017 (max)
Fixed compensation	240	320	320	320
Ancillary benefits*	24	33	33	33
Total	264	353	353	353
One-year variable compensation	0	31	0	315
Multi-year variable compensation	./.	./.	0	233
– of which 2016 to 2019 program1)	./.	./.	./.	./.
– of which 2017 to 2020 program2)	./.	./.	0	233
Total	264	384	353	901
Pension expense	0	0	0	0
Total compensation	264	384	353	901

*Ancillary benefits notably included private company car use, insurance contributions and residential rental subsidies. 1) Final calculation, granting and payout in 2021

2) Final calculation, granting and payout in 2021

TEUR		Fabian Spilker Executive Director (CEO)
	2016	2017	2017 (min)	2017 (max)
Fixed compensation	220	220	220	220
Ancillary benefits*	21	22	22	22
Total	241	242	242	242
One-year variable compensation3)	0	20	0	210
Multi-year variable compensation3)	./.	./.	0	150
– of which 2016 to 2019 program	./.	./.	./.	./.
– of which 2017 to 2020 program	./.	./.	0	150
Total	241	262	242	602
Pension expense	0	0	0	0
Total compensation	241	262	242	602

* Ancillary benefits notably included private company car use and insurance contributions. 3) Offsetting with other compensation components on leaving the company in 2018

The following amounts were granted to the Executive Directors of MAX Automation SE in the 2017 financial year:

TEUR		Daniel Fink Executive Director (CEO)		Fabian Spilker Executive Director (CFO)
	2016	2017	2016	2017
Fixed compensation	240	320	220	220
Ancillary benefits	24	33	21	22
Total	264	353	241	242
One-year variable compensation	0	0	159	0
Multi-year variable compensation	0	0	0	0
Total	264	353	400	242
Pension expense	0	0	0	0
Total compensation	264	353	400	242

Other compensation for the Executive Directors of MAX Automation SE includes incidental benefits in the form of benefits in kind, primarily company car use as well as the provision of a company apartment. Benefits in kind are taxable as a compensation component for the individual Executive Director. Compensation arising from D&O insurance for the Executive Directors of MAX Automation SE was not measurable as this related to group insurance comprising a number of staff members.

Section 10.2 (compensation report) provides further related information.

Members of the Administrative Board

Gerhard Lerch, Hannover Dipl.-Betriebswirt, Consultant Administrative Board Chairman

Member of the following controlling bodies: • Supervisory Board Chairman of Vecoplan AG, Bad Marienberg

Dr. Jens Kruse, Hamburg General Manager of M.M. Warburg & CO (AG & Co.), Hamburg Deputy Administrative Board Chairman

Member of the following controlling bodies:

• Supervisory Board member of Biesterfeld AG, Hamburg
• Member of the Supervisory Board of PNE Wind AG, Cuxhaven (since June 2017)

Oliver Jaster, Hamburg

Member of the Administrative Board of Günther SE, Hamburg Administrative Board member

Member of the following controlling bodies:

• Member of the Supervisory Board of ZEAL Network SE, London
• Advisory Board Chairman of Langenscheidt GmbH & Co. KG, Munich
• Advisory Board Chairman of Langenscheidt Digital GmbH & Co. KG, Munich (since April 2017)
• Advisory Board Chairman of Langenscheidt Management GmbH, Munich
• Advisory Board Chairman of all4cloud GmbH & Co. KG, Viernheim (since February 2017)
• Advisory Board Chairman of all4cloud Management GmbH, Hamburg (since February 2017)
• Advisory Board Chairman of Günther Direct Services, Bamberg
• Advisory Board Chairman of G Connect GmbH, Munich (since November 2017)
• Administrative Board Chairman of Günther SE, Bamberg

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

Daniel Fink, Düsseldorf Executive Director of MAX Automation SE Member of the Administrative Board

Fabian Spilker, Düsseldorf Executive Director of MAX Automation SE Member of the Administrative Board

Total compensation of the Administrative Board Administrative Board compensation for 2017 amounted to TEUR 244 (TEUR 244).

TEUR		Basic compensation		Consultancy services		Total
	2016	2017	2016	2017	2016	2017
Gerhard Lerch	144	144	0	0	144	144
Dr. Jens Kruse	60	60	0	0	60	60
Oliver Jaster	40	40	0	0	40	40

The list above includes fixed compensation for the Supervisory Board mandates of Vecoplan AG for Mr. Lerch in an amount of TEUR 24.

Section 10.1 (compensation report) of the Group management report provides further related information.

7. Reportable interests pursuant to Section 160 (1) No. 8 of the German Stock Corporation Act (AktG)

On November 17, 2015, Mr. Oliver Jaster, Germany, informed us pursuant to Section 21 (1) WpHG that his percentage of voting rights in our company exceeded the threshold of 30% on November 17, 2015, and now amounts to 30.0001%. This corresponds to 8,038,356 voting rights. Of these voting rights, 30.0001% (corresponding to 8,038,356 voting rights) are to be attributed to Mr. Jaster through Orpheus Capital II GmbH & Co. KG, Hamburg in Germany, Orpheus Capital II Management GmbH, Hamburg in Germany, Günther Holding GmbH, Hamburg in Germany, and Günther GmbH, Bamberg in Germany pursuant to Section 22 (1) Clause 1 No. 1 of the German Securities Trading Act (WpHG).

On July 21, 2016, Baden-Württembergische Versorgungsanstalt für Ärzte, Zahnärzte und Tierärzte, Tübingen, Germany, informed us pursuant to Section 41 (4f) WpHG that its interest in the voting rights of MAX Automation AG, Düsseldorf, Germany, amounted to 8.94% on July 2, 2016. This technical notification of the shareholding occurred due to a further amendment to the German Securities Trading Act (WpHG) as a consequence of the Amending Act to the Financial Transparency Directive to harmonize the transparency of shareholdings in Europe.

On November 3, 2016, Stüber & Co. KG, Balzers, Liechtenstein, informed us pursuant to Section 21 (1) of the German Securities Trading Act (WpHG) that its percentage of the voting rights in MAX Automation AG, Düsseldorf, Germany, had exceeded the threshold of 5% on October 21, 2016, and amounts to 6.08% as per this date (corresponds to 1,630,000 voting rights).

On January 4, 2017, Universal-Investment-Gesellschaft mbH, Frankfurt am Main, Germany, informed us that its percentage of voting rights pursuant to Section 21 (1) WpHG had exceeded the threshold of 5% on December 30, 2016, and amounts to 5.004% as per this date (corresponds to 1,340,692 voting rights). Of these voting rights, 5.004% (corresponds to 1,340,692 voting rights) are to be attributed to this company pursuant to Section 22 (1) Clause 1 No. 6 WpHG.

On September 11, 2017, we communicated pursuant to Section 26a (1) WpHG that the total number voting rights had changed to 29,459,415 on September 7, 2017 due to the issuing of subscription shares.

On September 18, 2017, Universal-Investment-Gesellschaft mbH, Frankfurt am Main, Germany, notified us that its interest in the voting rights had changed from 5.004% to 4.96% on September 7, 2017 due to the change in the total number of voting rights. Of these voting rights, 4.96% (corresponds to 1,460,344 voting rights) are to be attributed to this company pursuant to Section 22 (1) Clause 1 No. 6 WpHG.

On September 20, 2017, Axxion S.A., Grevenmacher, Luxembourg, informed us pursuant to Section 21 (1) of the German Securities Trading Act (WpHG) that its percentage of the voting rights in MAX Automation AG, Düsseldorf, Germany, had exceeded the threshold of 5% on September 18, 2017, and amounts to 5.07% as per this date (corresponds to 1,492,488 voting rights). Of these voting rights, 5.07% (corresponds to 1,492,488 voting rights) are to be attributed to this company pursuant to Section 22 (1) Clause 1 No. 6 WpHG.

8. Statement pursuant to Section 161 of the German Stock Corporation Act (AktG) relating to the German Corporate Governance Code

As a company listed on the stock market in Germany, MAX Automation AG, Düsseldorf, issued the statement required by Section 161 of the German Stock Corporation Act (AktG) on March 28, 2017, making it permanently available to shareholders by publishing it on the company's website at www.maxautomation.com.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

of MAX Automation SE

9. Exemption from disclosure for subsidiaries

The following subsidiaries utilize the provisions pursuant to Section 264 (3) of the German Commercial Code (HGB) relating to the exemption from publishing separate annual financial statements and preparation of management reports and notes to the financial statements for the 2017 financial year:

• MAX Management GmbH, Düsseldorf
• ELWEMA Automotive GmbH, Ellwangen
• MA micro automation GmbH, St. Leon-Rot
• Rohwedder Macro Assembly GmbH, Bermatingen,
• AIM Micro Systems GmbH, Triptis
• iNDAT Robotics GmbH, Ginsheim-Gustavsburg
• bdtronic GmbH, Weikersheim
• IWM Automation GmbH, Porta Westfalica
• NSM Magnettechnik GmbH, Olfen-Vinnum
• Mess- und Regeltechnik Jücker GmbH, Dillingen
• Vecoplan AG, Bad Marienberg

In the case of these companies, MAX Automation SE publishes by way of exemption its consolidated annual financial statements and Group management report in the German Federal Gazette (Bundesanzeiger).

Düsseldorf, February 28, 2018

The Executive Directors

Daniel Fink Fabian Spilker

MAX Automation SE, Düsseldorf, List of shareholdings as of December 31, 2017

a) Companies included in the consolidated financial statements

Name and headquarters of company	Interest in capital (%)
Subsidiaries of MAX Automation SE:
MAX Management GmbH	Düsseldorf	100
bdtronic GmbH	Weikersheim	100
IWM Automation GmbH	Porta Westfalica	100
Mess- und Regeltechnik Jücker GmbH	Dillingen	100
NSM Magnettechnik GmbH	Olfen-Vinnum	100
MAX Automation North America Inc.	Wilmington, Delaware, USA	100
Vecoplan AG	Bad Marienberg	100
Second-tier subsidiaries and subsidiaries of MAX Management GmbH:
AIM Micro Systems GmbH	Triptis	100
ELWEMA Automotive GmbH	Ellwangen	100
iNDAT Robotics GmbH	Ginsheim-Gustavsburg	100
Rohwedder Macro Assembly GmbH	Bermatingen	100
MA micro automation GmbH	St. Leon-Rot	100
MA micro automation PTE.Ltd.	Singapore	100
(subsidiary of MA micro automation GmbH)
Subsidiaries of bdtronic GmbH:
bdtronic BVBA	Diepenbeek, Belgium	100
BARTEC Dispensing Technology Inc.	Tulsa, Oklahoma, USA	100
bdtronic Ltd.	Ashton under Lyne, UK	100
bdtronic S.r.l.	Monza, Italy	100
bdtronic Suzhou Co. Ltd.	Suzhou, China	100
Subsidiaries of NSM Magnettechnik GmbH:
IWM Automation Polska Sp. z o.o.	Chorzow, Poland	100
Subsidiaries of NSM Magnettechnik GmbH:
NSM Packtec GmbH	Ahaus	100
Second-tier subsidiaries and subsidiaries of Vecoplan AG:
Vecoplan Holding Corporation	Wilmington, Delaware, USA	100
Vecoplan LLC	Archdale, North Carolina,USA	100
(subsidiary of Vecoplan Holding Corporation)
Vecoplan Midwest LLC	Floyds Knobs, Indiana, USA	61
(subsidiary of Vecoplan LLC)
Vecoplan Limited	Birmingham, UK	100
Vecoplan Austria GmbH	Vienna, Austria	100
Vecoplan Iberica S.L.	Bilbao, Spain	100

b) Companies included in the consolidated financial statements applying the equity method

Name and headquarters of company		Interest in capital (%)
Participating interests of MAX Automation AG:
ESSERT GmbH	Ubstadt-Weiher	44.5
MAX Automation (Asia Pacific) Co. Ltd.	Hong Kong	25
Participating interests of Vecoplan AG:
Vecoplan FuelTrack GmbH i.L.	Bad Marienberg	49

KONZERNANHANG GROUP AUDIT CERTIFICATE

der MAX Automation SE and responsibility statement

Audit certificate of the independent auditor of the financial statements

To MAX Automation SE, Düsseldorf

Note concerning the audit of the consolidated financial statements and combined management report

Audit opinions

We have audited the consolidated financial statements of MAX Automation SE, Düsseldorf, and its subsidiaries (the Group) – consisting of the consolidated balance sheet as of December 31, 2017, 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 January 1 to December 31, 2017 as well as the notes to the consolidated financial statements, including a summary of significant financial accounting methods.

We have also audited the Group management report combined with the separate management report (hereinafter referred to as the "combined management report") of MAX Automation SE, Düsseldorf, for the financial year from January 1 to December 31, 2017. In accordance with German statutory regulations, we have not audited the content of the Group non-financial statement included in the section 6 of the combined management report. In accordance with German statutory regulations, we have not audited the content of the corporate governance statement, to which reference is made in the combined management report.

Based on the findings gained from our audit, in our opinion

• the attached consolidated financial statements correspond in all significant matters to IFRS, as applicable in the EU, and the German statutory regulations to be additionally applied pursuant to Section 315e (1) of the German Commercial Code (HGB), and in compliance with such regulations convey a true and fair view of the Group's net assets and financial position as of December 31, 2017, as well as its results of operations for the financial year from January 1 to December 31, 2017 and
• the attached combined management report conveys overall a true and fair view of the Group's position. In all significant matters, this combined management report is consistent with the consolidated financial statements, complies with German statutory regulations, and appropriately presents the opportunities and risks pertaining to future development. Our audit opinion relating to the combined management report does not include all of the contents of the Group non-financial statement contained in section 6 of the combined management report and the content of the corporate governance statement published on the company's website.

Pursuant to Section 322 (3) Clause 1 HGB, we declare that our audit has not led to any objections against the proper nature of the consolidated financial statements and combined management report.

Basis for the audit opinions

We conducted our audit of the consolidated financial statements and combined management report in accordance with Section 317 of the German Commercial Code (HGB) and Regulation (EU) 537/2014 relating to the statutory auditing of public-interest entities, in compliance with German proper accounting principles as determined by the Institute of Public Auditors in Germany (IDW). Our responsibility according to these regulations and principles is described in more detail in the is section "Auditor's responsibility for the audit of the consolidated financial statements and combined management report" of our audit certificate. In compliance with European statutory as well as German commercial law and professional regulations, we are independent of the Group companies, and fulfilled our other German professional obligations in accordance with such requirements. Moreover, pursuant to Article 10 (2) lit. f) Regulation (EU) 537/2014, we declare that we have not rendered any prohibited non-auditing services pursuant to Article 5 (1) Regulation (EU) 537/2014. We are of the opinion that the audit evidence we have obtained is sufficient and appropriate to serve as the basis for our audit opinions on the consolidated financial statements and combined management report.

Particularly important audit matters in the audit of the consolidated financial statements

Particularly important audit matters are such matters which, in our professional judgment, proved most important in our audit of the consolidated financial statements for the financial year from January 1 to December 31, 2017. These matters were taken into account in connection with our audit of the consolidated financial statements as a whole and in the formation of our audit opinion; we do not issue a separate audit opinion relating to such matters.

Below we present the audit matters that proved particularly important from our perspective:

• 1) Goodwill impairment test
• 2) Application of the percentage of completion method for revenue recognition to long-term contract manufacturing

Relating to 1) Goodwill impairment test

a) The risk for the financial statements

As of the balance sheet date, the consolidated balance sheet reports nine goodwill items with a total carrying amount of EUR 53.1 million. This corresponds to approximately 16% of consolidated total assets.

The company's disclosures relating to goodwill are contained in sections 2.1 and 4.1 (2) of the notes to the consolidated financial statements.

Pursuant to IAS 36.90, cash-generating units to which goodwill has been allocated are to be tested annually for impairment.

This test applies complex valuation models based on expectations about the future trend of the respective operating business as well as the resultant cash flows. For this reason, the result of the impairment test is significantly subject to the influence of estimated figures. Given this, we were of the view that such matters were of particular importance for our audit.

KONZERNANHANG GROUP AUDIT CERTIFICATE

der MAX Automation SE and responsibility statement

b) Audit approach and conclusions

Our audit included a plausibility check on the three-year plans approved by the legal representatives and the Administrative Board, which form the basis for the impairment tests of all significant goodwill items. This also involved examining them for any potential bias in the exercising of discretion.

Along with checking the plausibility of the underlying plans, we appraised the accuracy of the planning through comparing the previous year's planning with the actual outcomes.

We focused on significant goodwill items where the recoverable amount of the cash-generating unit was close to its carrying amount.

We also examined the calculation procedures that were applied as to their methodically correct application, the derivation of discount rates, as well as arithmetic correctness by way of random sampling. It should be noted in this context that small changes in the parameters, especially in the discount rate, can exert considerable effects on the recognized value of the participating interest.

We validated the client's calculation results based on supplementary analyses, including sensitivity analyses.

The valuation parameters and assumptions applied by the legal representatives concur overall with our expectations, and from our perspective are generally appropriate for an objective measurement of goodwill, taking the available information into consideration.

Relating to 2) Application of the percentage of completion method for revenue recognition as part of longterm contract manufacturing

a) The risk for the financial statements

The company applies the percentage of completion method (PoC method) pursuant to IAS 11 to large-scale contracts exceeding a given order volume as stipulated in the Group financial accounting guidelines.

Application of the PoC method generates a positive equity effect of EUR 21 million as of the reporting date.

The company's disclosures relating to the application of the percentage of completion method are contained in sections 2.1 and 4.1 (9) of the notes to the consolidated financial statements.

The degree of completion is calculated by applying the cost-to-cost method. Especially the calculation of the respective degrees of completion requires estimates and judgments to a significant extent, some of which are based on constantly updated planning. For this reason, the application of the percentage of completion method is considerably subject to the influence of estimated figures. For potentially loss-making projects, anticipated cost overruns are to be estimated and recognized as pending losses. Given this, we were of the view that these matters were of particular importance for our audit.

b) Audit approach and conclusions

In the first step, we assessed the accumulation of manufacturing costs as part of a process appraisal based on the internal control system, including functional tests.

The assessment of the reliability of the calculation of budgeted manufacturing costs and the related degree of completion was performed by auditing the processing of PoC contracts as of December 31, 2016 based on random sampling in the new 2017 financial year. This approach focused especially on the realization of the margins estimated on December 31, 2016 based on the cost-to-cost method. The reliability of the intrayear PoC valuation was also assessed through time series analyses. The contract sums to be additionally included in the PoC methodology were tested with the underlying customer contracts by way of random sampling.

The estimates and judgments underlying the PoC valuation are balanced overall. This enabled an objective recognition of revenue and of changes in inventories.

Other information

The legal representatives are responsible for the other information. The other information comprises:

• the Group's non-financial statement included in section 6 of the combined management report,
• the corporate governance statement published on the company's website,
• the remaining sections of the annual report, apart from the audited consolidated financial statements and combined management report, as well as our audit certificate,
• the corporate governance report pursuant to section 3.10 of the German Corporate Governance Code, and
• the assurance pursuant to Section 297 (2) Clause 4 HGB relating to the consolidated financial statements and the assurance pursuant to Section 315 (1) Clause 5 HGB relating to the the combined management report.

Our audit opinions relating to the consolidated financial statements and the combined management report did not include the other information, and accordingly we issue neither an audit opinion nor any other type of audit conclusion in this relation.

In connection with our audit of the consolidated financial statements, we are responsible for reading the other information and appraising in this context whether the other information

• exhibits significant inconsistencies in relation to the consolidated financial statements, the combined management report or the information we gained as part of our audit, or
• appears to be presented significantly erroneously in another manner.

KONZERNANHANG GROUP AUDIT CERTIFICATE

der MAX Automation SE and responsibility statement

Responsibility of the legal representatives and Administrative Board for the consolidated financial statements and combined management report

The legal representatives are responsible for the preparation of the consolidated financial statements, corresponding in all important matters to IFRS, as applicable in the EU, and the supplementary German statutory regulations to be additionally applied pursuant to Section 315e (1) HGB, and for ensuring that the consolidated financial statements convey a true and fair view of the Group's financial position and performance in compliance with such regulations. Moreover, the legal representatives are responsible for the internal controls they deem necessary to enable the preparation of consolidated financial statements free of significant – intended or unintended – erroneous presentations.

In preparing the consolidated financial statements, the legal representatives are responsible for assessing the Group as a going concern. Furthermore, they are responsible for disclosing matters connected with the Group as a going concern, where relevant. In addition, they are responsible for preparing accounts based on the financial accounting going concern principle, unless the Group intends to liquidate, or to discontinue its business operations, or no realistic alternative exists in such a case.

Moreover, the legal representatives are responsible for the preparation of the combined management report, which overall conveys a true and fair view of the Group position and is consistent in all important aspects with the consolidated financial statements, complies with German statutory regulations, and appropriately presents the opportunities and risks entailed in future development. Furthermore, the legal representatives are responsible for the precautions and measures (systems) they deem necessary to enable the preparation of a combined management report in compliance with applicable German statutory regulations, and to provide sufficient appropriate evidence for the statements made in the combined management report.

The Administrative Board is responsible for the supervision of the Group's financial accounting process relating to the preparation of the consolidated financial statements and combined management report.

Auditor's responsibility for the audit of the consolidated financial statements and combined management report

Our aim is to achieve sufficient certainty as to whether the consolidated financial statements, as a whole, are free of significant – intended or unintended – erroneous presentations, and whether the combined management report conveys overall a true and fair view of the Group's position, and is consistent in all important aspects with the consolidated financial statements as well as the knowledge gained as part of our audit, complies with German statutory regulations, and appropriately present the opportunities and risks pertaining to the future development, as well as to issue an audit certificate that includes our audit opinions relating to the consolidated financial statements and combined management report.

Sufficient certainty refers to a high degree of certainty but is not a guarantee that an audit conducted in compliance with Section 317 of the German Commercial Code (HGB) and Regulation (EU) 537/2014, in compliance with German proper auditing principles as promulgated by the Institute of Public Auditors in Germany (IDW), will always uncover a significantly erroneous presentation. Erroneous presentations can derive from offenses or errors, and are regarded as significant if it could have been reasonably expected that, individually or together, they affect the economic decisions of addressees based on these consolidated financial statements and this combined management report.

During the audit, we exercise discretion and maintain a basically critical stance. Above and beyond this,

• we identify and assess the risks of significant intended or unintended erroneous presentations in the consolidated financial statements and in the combined management report, plan and execute audit actions as a response to such risks, and obtain audit evidence that is sufficient and appropriate to serve as the basis for our audit opinions. The risk that significant erroneous presentations are not uncovered is greater in the case of offenses than in the case of errors, as offenses can comprise fraudulent collaboration, forgeries, intended incompleteness, misleading presentations and the disabling of internal controls;
• we gain an understanding of the internal control system relevant to the audit of the consolidated financial statements and the precautions and measures relevant for the audit of the combined management report, in order to plan related audit actions that are appropriate in the given circumstances, although not with the aim of issuing an audit opinion on the efficacy of such systems;
• we assess the appropriateness of the financial accounting methods applied by the legal representatives as well as the feasibility of the estimated figures and related disclosures presented by the legal representatives;
• we draw conclusions about the appropriateness of the financial accounting going concern principle applied by the legal representatives, and, based on the audit evidence obtained, whether a significant uncertainty exists in connection with events or circumstances that can lead to considerable doubts about the Group as a going concern. If we arrive at the conclusion that a considerable uncertainty exists, we are obligated to draw attention in the audit certificate to the related disclosures in the notes to the consolidated financial statements and in the combined management report, or if such disclosures are unsuitable, to modify our respective audit opinion. We draw our conclusions based on the audit evidence obtained until the date of our audit opinion. Future events or circumstances can nevertheless lead the Group to no longer comprise a going concern;
• we assess the overall presentation, the structure and content of the consolidated financial statements, including the disclosures, as well as whether the consolidated financial statements present the underlying business transactions and events so that the consolidated financial statements convey a true and fair view of the Group's financial position and performance in compliance with IFRS, as applicable in the EU, and the German statutory regulations to be additionally applied pursuant to Section 315e (1) HGB;
• we obtain sufficient appropriate audit evidence for the financial accounting information of the companies or operating activities within the Group, in order to issue audit opinions relating to the consolidated financial statements and combined management report. We are responsible for the direction, supervision and implementation of the audit of the consolidated financial statements. We bear sole responsibility for our audit opinions;
• we evaluate the consistency of the combined management report with the consolidated financial statements, its legal conformity, and the view it conveys of the Group's position; and

KONZERNANHANG GROUP AUDIT CERTIFICATE

der MAX Automation SE and responsibility statement

• we conduct audit actions in relation to the forward-looking disclosures in the combined management report presented by the legal representatives. Based on sufficient appropriate audit evidence, we especially investigate the significant assumptions taken as the basis for the forward-looking disclosures by the legal representatives, and appraise the objective derivation of the forward-looking disclosures from such assumptions. We do not issue a separate audit opinion relating to the forward-looking disclosures and the underlying assumptions. A considerable unavoidable risk exists that future events may differ significantly from the forward-looking disclosures.

Topics we discuss with those individuals responsible for supervision include the planned scope and time planning of the audit as well as significant audit findings, including any defects in the internal control system we identify during our audit.

We issue a statement to those individuals responsible for supervision that we have obtained the relevant impartiality requirements, and discuss with them all relationships and other matters where it can be reasonably assumed that they affect our impartiality, and the related protective measures.

From the matters we discuss with the individuals responsible for supervision we determine those matters that proved most significant for the current reporting period in the audit of the consolidated financial statements, and consequently that comprise particularly important audit matters. We describe such matters in the audit opinion, unless laws or other legal regulations prohibit public disclosure of the related matter.

Other statutory and legal requirements

Miscellaneous disclosures pursuant to Article 10 Regulation (EU) 537/2014

We were elected as the auditor of the consolidated financial statements by the Shareholders' General Meeting on June 30, 2017. The Supervisory Board issued its mandate to us on July 21, 2017. We have been the auditor of the consolidated financial statements of MAX Automation SE, Düsseldorf, without interruption since the 2004 financial year.

We declare that the audit opinions contained in this audit certificate are consistent with the additional report to the Administrative Board pursuant to Article 11 Regulation (EU) 537/2014.

Certified Public Auditor

Mr. Steffen Fleitmann is the Certified Public Auditor responsible for the audit.

Hannover, March 15, 2018 Ebner Stolz GmbH & Co. KG

Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Hans-Peter Möller	Steffen Fleitmann
Certified Public Auditor	Certified Public Auditor

In the case of publications or the circulation of the consolidated financial statements and/or the combined Group management report in a form differing from the version we confirm (including its translation into other languages), our renewed opinion is first required, to the extent that our audit certificate is cited or reference is made to our audit; please refer to Section 328 of the German Commercial Code (HGB).

Assurance of the legal representatives

To the best of our knowledge, we assure that, pursuant to applicable accounting principles, the consolidated financial statements convey a true and fair view of the Group's financial position and performance, that the course of business, including the business results and the Group's position, are presented in the Group management report that is combined with the management report for MAX Automation SE so as to convey a true and fair view, and that the significant opportunities and risks pertaining to the Group's prospective development are described.

Düsseldorf, February 28, 2018

MAX Automation SE The Executive Directors

Daniel Fink Fabian Spilker