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Single entity financial statements and combined management report ofDrägerwerk AG & Co. KGaA

as of December 31, 2019

1CONTENTS

Combined management report of Drägerwerk AG & Co. KGaA 3

Single entity financial statements of Drägerwerk AG & Co. KGaA 5Income statement of Drägerwerk AG & Co. KGaA January 1 to December 31, 2019 5Balance sheet of Drägerwerk AG & Co. KGaA as of December 31, 2019 6

Notes to the single entity financial statements of Drägerwerk AG & Co. KGaA 8Major direct and indirect shareholdings of Drägerwerk AG & Co. KGaA 36The Company’s Boards 40Management compliance statement 44

Possible rounding differences in this financial report may lead to slight discrepancies.

3NOTESANNUAL FINANCIAL STATEMENTS MANAGEMENT REPORT

Combined management report of Drägerwerk AG & Co. KGaA

The management report of Drägerwerk AG & Co. KGaA and the management report of the Dräger Group have been combined and published in the Group Annual Report since fiscal year 2014 pursuant to Sec. 315 (5) of the Ger-man Commercial Code (Handelsgesetzbuch—HGB). The management report of Drägerwerk AG & Co. KGaA, which is combined with the Group management report, and the single entity financial statements for fiscal year 2019 are submitted and published in an electronic version by the German Federal Gazette.

5NOTESMANAGEMENT REPORT ANNUAL FINANCIAL STATEMENTS

INCOME STATEMENT OF DRÄGERWERK AG & CO. KGAA—JANUARY 1 TO DECEMBER 31, 2019

in € thousand Note 2019 2018

Net sales 5 1,059,653 1,064,771

Increase in work in progress and finished products 3,277 2,996

Other own work capitalized 2,732 2,577

Other operating income 6 44,024 65,218

Cost of materials 7 –591,990 –579,882

Personnel expenses 8 –299,831 –282,345

Depreciation / amortization 9 –30,992 –33,502

Other operating expenses 10 –283,013 –289,277

Income from investments 11 3,162 1,403

Income from profit and loss transfer agreements 12 101,952 52,934

Income from other securities and loans of financial assets 4,180 995

Write-downs on financial assets –12,618 –7,175

Expenses from loss transfer due to profit and loss transfer agreements 12 –769 –408

Interest result 13 1,240 –12,386

Income tax refunds 14 6,942 15,399

Earnings after taxes 7,949 1,318

Other taxes –405 –329

Profit before distribution for participation capital 7,544 989

Distribution for participation capital Series D –1,077 –1,077

Net profit/ loss for the period 6,467 –88

Profit brought forward from prior year 533,465 536,318

Net earnings 39 539,932 536,230

Single entity financial statements of Drägerwerk AG & Co. KGaA

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BALANCE SHEET OF DRÄGERWERK AG & CO. KGAA AS OF DECEMBER 31

in € thousand Note December 31, 2019 December 31, 2018

Assets

Intangible assets 16 10,595 11,307

Property, plant, and equipment 17 206,503 210,573

Financial assets 18 814,122 640,882

Non-current assets 1,031,220 862,761

Inventories 19 151,330 140,949

Trade receivables 20 33,096 43,257

Other receivables and other assets 20 372,251 524,075

Bank balances 35,804 31,683

Current assets 592,481 739,963

Prepaid expenses 21 6,733 8,313

Deferred tax assets 22 72,782 60,271

Total assets 1,703,217 1,671,309

BALANCE SHEET

7NOTESMANAGEMENT REPORT ANNUAL FINANCIAL STATEMENTS

in € thousand Note December 31, 2019 December 31, 2018

Equity and liabilities

Capital stock 23 45,466 45,466

Capital reserves 24 237,217 237,217

Retained earnings 25 199,191 199,191

Other retained earnings 199,191 199,191

Net earnings 26 539,932 536,230

Participation capital—par value: EUR 14,488 thousand (Series D) 28 28,511 28,511

Equity 1,050,317 1,046,615

Provisions for pensions and similar obligations 139,566 133,546

Other provisions 119,834 102,244

Provisions 29 259,400 235,790

Participation capital—par value: EUR 6,777 thousand (Series A+K) 15,588 15,588

Liabilities to banks 103,382 139,059

Trade payables 91,100 92,784

Other liabilities 182,868 140,922

Liabilities 30 392,938 388,352

Deferred income 563 551

Total equity and liabilities 1,703,217 1,671,309

8 NOTES TO DRÄGERWERK AG & CO. KGAA SINGLE ENTITY FINANCIAL STATEMENTS 2019

Notes to Drägerwerk AG & Co. KGaA single entity financial statements 2019

GENERAL

Drägerwerk Verwaltungs AG, Lübeck, is the sole general partner of Drägerwerk AG & Co. KGaA. Drägerwerk Verwaltungs AG, Lübeck, does not hold any shares. The capital stock of the general partner amounts to EUR 1.0 million.

Drägerwerk AG & Co. KGaA, Lübeck, Germany, is registered at the Register Court of Lübeck under HRB 7903 HL.

The single entity financial statements of Drägerwerk AG & Co. KGaA have been pre-pared in accordance with the provisions of the Commercial Code (Handelsgesetzbuch— HGB). For the income statement, the expense method of presentation has been used.

With the goal of enhancing the transparency of the presentation, certain items of the balance sheet and income statement have been summarized, but are detailed separately in the notes. The financial statements were prepared in euros. Unless otherwise stated, all figures are disclosed in thousands of euros (EUR thousand); rounding differences may arise as a result.

CORPORATE GOVERNANCE

Drägerwerk AG & Co. KGaA’s declaration of conformity under the terms of Sec. 161 AktG (Aktiengesetz—German Stock Corporation Act) has been issued and made available to the shareholders (see the Annual Report of the Dräger Group or www.draeger.com, Investor Relations/Corporate Governance).

CURRENCY TRANSLATION

Foreign currency assets and liabilities are stated at the historical exchange rate on the day of transaction.

Foreign currency assets and liabilities with a remaining term of up to one year are rec-ognized at the mean spot exchange rate as of the balance sheet date. Exchange gains and losses from this conversion are recognized in income. Only losses resulting from different currency exchange rates are recognized for assets and liabilities with a remaining term of more than one year. Income and expenses from currency translation are recognized in the notes under other operating income and expenses.

ACCOUNTING POLICIES

Purchased intangible assets are carried at cost less straight-line amortization over an estimated useful life of no more than four years. Internally developed intangible assets that are part of non-current assets are not recognized.

Property, plant, and equipment are carried at cost less straight-line depreciation over the assets’ estimated useful life. Pursuant to Sec. 255 (1) HGB, cost also includes inciden-tal purchase costs and post-acquisition expenses, allowing for acquisition cost deductions. Costs include direct materials and labor costs, special production costs, and materials and production overheads to an appropriate extent, as well as the impairment of non-current assets insofar as it is caused by production. Research and sales costs are not taken into

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account. Factory and office buildings are depreciated over a maximum period of 50 years, building fixtures and fittings over 10 years, production plant and machinery over 8 years, and other plant, factory, and office equipment up to 15 years, but generally between 2 and 5 years. Movable items of property, plant, and equipment recognized up to December 31, 2009, are depreciated according to the declining balance method, applying the maxi-mum rates permitted by tax regulations. For assets received after that date, the declining balance method is only applied if it corresponds with the actual depreciation of non-cur-rent assets. Low-value assets with a value up to EUR 250 are recognized immediately as expenses. Low-value assets with a value between EUR 251 and EUR 800 are recognized, fully expensed, and written off in the fiscal year of acquisition.

Within financial assets, the shares in Group companies and investments are stated at the lower of cost or, where long-term impairment appears probable, at realizable value.

Non- and/or low-interest bearing loans are disclosed at their present value, while loans carried at the customary market interest rate are disclosed at nominal value. Discounting and compounding are shown as write-downs or write-ups respectively in the asset history sheet. Non-current assets whose carrying amounts, when determined according to the above-mentioned principles, exceed the values to be attributed to them on the balance sheet date are written down accordingly where long-term impairment appears probable.

Exchange rate gains and losses from foreign currency denominated financial assets are recognized under other operating income or expenses.

In the case of inventories, raw materials, consumables, and supplies, as well as mer-chandise and prepayments, are recognized at the lower of average cost or reference values. Work in progress and finished products, as well as services not yet billed, are recognized at cost; average costs are comprised of direct costs of materials and labor, material costs, and production overheads, as well as the decline in the value of fixed assets. Sufficient impair-ments are recorded for inventory risks arising from storage time and reduced value. Costs do not include interest on debt.

Prepayments received on account of orders or partial payment on services that have already been rendered but not yet invoiced are recognized at nominal value and directly offset against inventories.

Receivables and other assets are stated at nominal value, less any necessary allow-ances for bad debts. Adequate general allowances provide for the normal collection risk. Non- and/or low-interest receivables with a remaining term of more than one year are discounted.

Derivative financial instruments are measured at fair value. Provisions for contingent losses are recognized for those derivatives that have negative fair values where they are not part of a valuation unit. If the market value cannot be reliably determined, the fair value is derived from the market value of similar derivatives or calculated with the help of established measurement methods such as the discounted cash flow method (present value approach) and the Black Scholes model (in the case of options). The applied yield curves and exchange rates that are in line with the market are the primary factors for these models.

Bank balances are stated at the nominal value.Deferred taxes are calculated for temporary differences between the values of non-cur-

rent and current assets, as well as prepaid expenses, provisions, and liabilities under com-mercial law and tax law, that in all probability will be reversed in the future. Drägerwerk AG & Co. KGaA, in its role as parent company, includes the differences from its own bal-

10 NOTES TO DRÄGERWERK AG & CO. KGAA SINGLE ENTITY FINANCIAL STATEMENTS 2019

ance sheet items as well as those from the consolidated tax group. Tax loss carryforwards and interest carryforwards are recognized in addition to these temporary differences. Deferred taxes are determined on the basis of the income tax rate applicable to Drägerw-erk AG & Co. KGaA’s fiscal unit. The deferred taxes are measured at the amount expected to be paid or recovered in subsequent fiscal years. Deferred tax assets from loss and interest carryforwards are only recognized if it is sufficiently probable that they will be realized within the next five years.

For accounting purposes, series D participation capital is reported as equity due to the terms and conditions upon which the participation certificates are based. Therefore, it is shown on a separate line in addition to the statutory classification format, under equity and Drägerwerk AG & Co. KGaA’s net earnings. The par value of this participation capital is disclosed in the previous column. Although participation capital is treated as accounting equity, the underlying participation rights maintain their obligatory nature under law. Therefore, the premium yielded over and above the par value can be neither transferred to the capital reserve nor allocated otherwise. Hence it follows that this premi-um continues to be an integral part of the balance sheet item “Participation capital”. The contribution on series D participation certificates reduces the net profit or increases the net loss for the period. The underlying dividend distribution is shown on a separate line of the income statement immediately preceding net profit/loss.

Series A and K participation capital is classified as non-current debt because the terms and conditions of these participation certificates include a minimum dividend and no loss transfer, among other terms. Civil law considerations require that any profit dis-tributed in favor of participation capital must be offset against net profit. The dividends for series A and K participation certificates are recognized in the interest result.

The actuarial calculations for determining pension obligations are based on biomet-ric probability (2018 G Heubeck mortality table) and use the projected unit credit method. The calculation also takes into account future expected wages/salary and pension increas-es. The underlying interest rate for compounding and discounting of pension obligations is based on the average market rate of the past 10 fiscal years for an anticipated remaining term of 15 years determined and published by Deutsche Bundesbank.

The company pension plan for the German Group companies introduced on January 1, 2005, is composed of three levels: the employer-funded basic level, employee-funded top-up level, and employer-funded supplementary level. The pension cost for the employ-er-funded basic level is based on the respective employee’s income. The employee-funded top-up level allows employees to increase their pension entitlement through deferred com-pensation. The contribution made at the employer-funded supplementary level depends on the employee contribution through deferred compensation and on the Dräger Group’s business performance (EBIT).

The employees’ pension accounts have a minimum guaranteed return of 2.75 percent until December 31, 2018. The company pension plan was amended effective as of Janu-ary 1, 2019. The amendments concern the minimum guaranteed return on the pension capital, which has been lowered to 0.9 percent, and the redefinition of the annuitization factor used to convert pension capital into pension benefits in the light of changes in demographic trends. Pension capital accrued up to 2018 and future interest due on these amounts continue to apply under the previous terms to the extent of the respective pen-sion entitlement. The funds resulting from pension commitments as of 2005 (including


the changes as of 2019) are invested in a restricted fund set up especially for Dräger that is subject to special restraints on disposal. The measurement is carried out at fair value, which is offset against the respective underlying obligations. If the result is a backlog of obligations, this amount is recognized in pension provisions. If the value of the plan assets exceeds the obligations, it is recognized in “Excess of plan assets over pension liability.”

Provisions adequately allow for all identifiable risks in accordance with prudent business judgment and contingent liabilities. The amount recognized reflects the sum required to fulfill the obligations according to prudent business judgment. Future price and cost increases are taken into consideration if there is sufficient evidence to substan-tiate their actual occurrence. Non-current provisions are discounted at the market rate relating to their remaining terms published by the Bundesbank.

Expenses incurred from the compounding of provisions are recognized separately in “Interest and similar expenses”.

Liabilities are stated at the amount repayable.Contingent liabilities are valued at the best estimate of the possible liabilities as of the

balance sheet date. For contingent liabilities from guarantees, suretyships, and warranty/ indemnity contracts, the loan sums actually drawn as of the balance sheet date are dis-closed in addition to the guaranteed ceilings.

The other financial obligations based on continuing obligations are measured at their nominal value and disclosed in the notes.

12 NOTES TO THE INCOME STATEMENT

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Notes to the income statement

NET SALES

For the breakdown of net sales by business segment and geographical segment, please see the table below.

NET SALES

in € thousand 2019 2018

Breakdown by segment 1,059,653 1,064,771Equipment 800,970 815,092

Services 258,683 249,679

Breakdown by region (markets) 1,059,653 1,064,771Germany 249,479 228,126

Rest of Europe 281,383 272,514

Americas 205,872 226,299

Asia 273,015 280,361

Other (such as Africa, Australia) 49,904 57,471

Business with subsidiaries accounts for a large share of Drägerwerk AG & Co. KGaA’s net sales.

OTHER OPERATING INCOME

In fiscal year 2019, other operating income mainly comprised income generated from derivative financial instruments in the amount of EUR 14.1 million (2018: EUR 21.4 mil-lion), income from currency translation in the amount of EUR 13.6 million (2018: EUR 14.4 million), and income from the reversal of allowances and provisions.

In fiscal year 2019, other operating income included income from other periods of EUR 3.8 million (2018: EUR 4.5 million) that was primarily attributable to the reversal of provisions.

COST OF MATERIALS

COST OF MATERIALS


Cost of raw materials, consumables, and supplies, and purchased goods –524,337 –502,545

Cost of services –67,653 –77,337

Cost of materials –591,990 –579,882


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PERSONNEL EXPENSES/HEADCOUNT

PERSONNEL EXPENSES/ HEADCOUNT


Salaries –239,842 –223,354Social security, pension expenses, and related employee benefits –59,989 –58,990

thereof pension expenses (–21,688) (–22,775)

Personnel expenses –299,831 –282,345

Headcount (average) 2,924 2,862Production 733 746

Other 2,191 2,116

Headcount as of the balance sheet date 2,927 2,897Production 726 742

Other 2,201 2,155

“Production” covers manufacturing, service, and exterior fitting.

The increase in personnel expenses was mainly due to the rise in the headcount and the wage and salary increases resulting from the raises in accordance with wage agreements in the metal and electrical industries in Germany.

Effects from the change in interest rates in the calculation of pension provisions are shown in the personnel expenses.

Pension plans were offered to the members of the Executive Board of Drägerwerk Ver-waltungs AG by Drägerwerk AG & Co. KGaA, with the related expenses and liabilities being recognized as personnel expenses at Drägerwerk AG & Co. KGaA.

DEPRECIATION/AMORTIZATION

DEPRECIATION/AMORTIZATION


Amortization on intangible assets and depreciation of property, plant, and equipment –30,992 –33,502

Depreciation/amortization –30,992 –33,502

The decrease in depreciation/amortization was mainly due to the comparatively low investment volume in the areas of software, buildings, and factory and office equipment.


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OTHER OPERATING EXPENSES

The other operating expenses primarily include administrative expenses, such as rent and lease expenses, insurance premiums, contributions, fees and public levies, travel expens-es, additions to provisions, services performed on behalf of Group companies, and losses from the disposal of non-current assets.

This item also includes expenses from currency translation of EUR 11.4 million (2018: EUR 18.3 million), as well as expenses from derivative financial instruments of EUR 27.4 million in fiscal year 2019 (2018: EUR 25.6 million).

Dräger Grundstücksverwaltungs GmbH, Lübeck, was merged into Drägerwerk AG & Co. KGaA as per the merger agreement dated July 31, 2019, with retroactive effect as of January 1, 2019. Following the merger, Drägerwerk AG & Co. KGaA remained the sole shareholder of OPTIO Grundstücks-Verwaltungs GmbH & Co. KG. As a result, OPTIO Grundstücks-Verwaltungs GmbH & Co. KG ceased to exist upon the absorption of its assets by Drägerwerk AG & Co. KGaA.

The assets and liabilities of both companies were transferred at their carrying amounts. The transactions were entered into the commercial register on September 3 and 10, 2019. The corresponding loss from the integration of OPTIO Grundstücks-Verwaltungs GmbH & Co. KG in the amount of EUR 609 thousand was recorded in other operating expens-es. The merger of Dräger Grundstücksverwaltungs GmbH resulted in a merger profit of EUR 12 thousand that will be reported in other operating income.

INCOME FROM OTHER INVESTMENTS

INCOME FROM OTHER INVESTMENTS


Income from investments 3,162 1,403

thereof from Group companies (2,834) (1,158)

INCOME/EXPENSES DUE TO PROFIT AND LOSS TRANSFER AGREEMENTS

Income from profit and loss transfer agreements consists mainly of the profits of Dräger Safety AG & Co. KGaA (EUR 74.9 million; 2018: EUR 23.2 million), Dräger Medical Inter-national GmbH (EUR 21.4 million; 2018: EUR 20.8 million), and Dräger ANSY GmbH (EUR 5.5 million; 2018: EUR 5.9 million).

The expenses from profit and loss transfer agreements result from the loss transfer due to Dräger Gebäude und Service GmbH and Dräger Medical Deutschland GmbH.


INTEREST RESULT

INTEREST RESULT


Other interest and similar income 4,780 5,183

thereof from Group companies (3,881) (4,040)

Interest and similar expenses –6,615 –7,359

thereof to Group companies (–2,255) (–1,520)

thereof from compounding of non-current provisions (–305) (–410)

thereof from distribution for series A and K participation certificates (–504) (–504)

Interest expense from pension provisions –6,416 –6,540

Income/expense from plan assets 9,491 –3,670

Net amount 3,075 –10,210

Interest result 1,240 –12,386

Interest expense from pension obligations is offset against the original income from plan assets in accordance with Sec. 246 (2) Sentence 2 HGB. In fiscal year 2019, interest income from plan assets amounted to EUR 9,491 thousand (2018: interest loss of EUR 3,670 thousand), and interest expense from pension obligations amounted to EUR 6,416 thousand (2018: EUR 6,540 thousand), resulting in a net amount of EUR 3,075 thousand in 2019 (net amount in 2018: EUR 10,210 thousand).

Interest income from Group companies amounted to EUR 3,881 thousand (2018: EUR 4,040 thousand).

The year-on-year increase in interest result was primarily the result of the interest income from plan assets.

INCOME TAX REFUNDS

INCOME TAXES


Current taxes –5,569 3,798

Deferred tax expense / income from temporary differences 12,511 11,601

Deferred tax income 12,511 11,601

Income taxes 6,942 15,399

Income taxes comprise corporate income tax, the corresponding solidarity surcharge, trade tax, and foreign withholding tax, as well as the change in deferred taxes for the fiscal unit of Drägerwerk AG & Co. KGaA.

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In fiscal year 2019, Drägerwerk AG & Co. KGaA, in its role as parent company, recognized deferred tax income of EUR 12,511 thousand from temporary differences (2018: deferred tax income of EUR 11,601 thousand). Deferred taxes are determined on the basis of a 31.5 percent income tax rate (2018: 31.5 percent). The income tax rate includes corporate income tax and the corresponding solidarity surcharge, as well as trade tax.

DERIVATIVE FINANCIAL INSTRUMENTS

To hedge against currency and interest rate risks, derivatives are used, predominantly currency forwards and interest rate swaps. Such contracts are only transacted with com-mercial banks with high credit ratings and limited to financing transactions. The volume of currency forwards mainly includes exchange rate hedges for operations-related under-lying transactions and intercompany loans.

Fair values are determined on the basis of a mark to market calculation as of the report-ing date. Currency forwards are entered into for various currencies, such as USD, GBP, CNY, and CHF.


in € thousand Nominal amount Term in years Fair value Carrying value

Currency forwards (receivables and liabilities / operating) 445,638 up to 1 –6,740 –3,810Currency forwards (receivables and liabilities / operating) 89,252 1 to 5 –557 38

Currency forwards (foreign currency loans / cash pooling) 218,287 up to 1 –985 –2,774Currency forwards (foreign currency loans / cash pooling) 27,088 1 to 5 177 –167

Provisions for contingent losses were recognized for unrealized losses from currency for-wards (EUR 6,712 thousand).

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Unrealized losses and gains from the calculation break down as follows:

UNREALIZED GAINS AND LOSSES FROM THE VALUATION


Losses from the hedging ofForeign currency loans / cash pooling 2,941 1,656

Receivables and liabilities / operating 3,772 6,262

6,712 7,918

Gains from the hedging ofForeign currency loans / cash pooling 2,132 1,434

Receivables and liabilities / operating 1,836 7,594

3,968 9,028

Interest rate hedges An interest rate hedge in the form of a swap was concluded to hedge the interest portion of the lease payment for a office and development building (hedged item); this hedge suitably offsets the interest portion. As a result, a micro-valuation unit exists.

The prospective test as of December 31, 2019, indicates that the key parameters of the hedged item and the hedge that are relevant to the valuation—term, benchmark interest rate, calculation of interest rates, repayment, and nominal amount—tally. Consequently, the valuation unit is classified as highly effective over the entire hedging period.

As of the balance sheet date, the valuation units included currency futures with the following nominal values (carrying values):


in € thousand Nominal amount Term in years Fair value Carrying value

Interest rate swap1 12,191 1 to 5 1,662 1,662

1 Liabilities in the form of a variable interest component from the lease payment for construction financing

It is expected that the changes in the value of the hedging item and the hedging instru-ment will therefore be fully offset over the next four years. The net hedge presentation method is used to present the offsetting change in value resulting from the valuation unit.

The risk for the interest rate swap hedged by the micro-valuation units amounts to EUR 1,662 thousand; this is the amount of the negative changes in value and cash flows that had been avoided as of the balance sheet date.

NOTES TO THE BALANCE SHEET18

Notes to the balance sheet

INTANGIBLE ASSETS

INTANGIBLE ASSETS

In € thousand

Purchased concessions, industrial property rights, and similar rights and

assets, as well as licenses thereto

Prepayments made

Total

CostJanuary 1, 2019 109,204 1,344 110,548

Additions 835 3,552 4,387

Disposals 1,341 1,341

Reclassifications 962 –962 0

December 31, 2019 109,660 3,934 113,594

Accumulated depreciation January 1, 2019 99,241 – 99,241

Additions 5,099 – 5,099

Disposals 1,341 – 1,341

Reclassifications – – –

December 31, 2019 102,999 0 102,999

Net carrying value December 31, 2019 6,661 3,934 10,595Net carrying value December 31, 2018 9,963 1,344 11,307

The additions to intangible assets in the current fiscal year largely comprise the acqui-sition of software in the amount of EUR 0.8 million (2018: EUR 2.0 million) and pre-payments made on software that is still in production of EUR 3.6 million (2018: EUR 1.2 million).

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PROPERTY, PLANT, AND EQUIPMENT

PROPERTY, PLANT, AND EQUIPMENT

in € thousand

Land, equivalent titles,

and buildings, incl. on leased land

Production plant and machinery

Other plant, factory, and

office equipment

Prepayments made and assets

under construction

Total

CostJanuary 1, 2019 264,386 7,704 164,674 17,420 454,184

Additions 1,452 108 5,292 12,806 19,658

Disposals 2,203 47 8,053 0 10,303

Reclassifications 2,686 180 8,190 –11,056 0

Transfers from subsidiaries 8,271 – – – 8,271

December 31, 2019 274,592 7,945 170,103 19,170 471,810

Accumulated depreciation January 1, 2019 120,244 5,695 117,672 – 243,611

Additions 8,524 599 16,770 – 25,893

Disposals 1,274 47 7,353 – 8,674

Transfers from subsidiaries 4,477 – – – 4,477

December 31, 2019 131,971 6,247 127,088 0 265,307

Net carrying value December 31, 2019 142,620 1,698 43,015 19,170 206,503Net carrying value December 31, 2018 144,142 2,009 47,002 17,420 210,573

Investments in property, plant, and equipment amounted to EUR 19.7 million in the fiscal year (2018: EUR 24.0 million). Of this amount, EUR 1.5 million (2018: EUR 5.6 million) related to the construction and redevelopment of buildings, and EUR 5.3 million (2018: EUR 8.8 million) to the replacement of tools and factory equipment. The additions to pre-payments and assets under construction of EUR 12.8 million (2018: EUR 9.3 million) are primarily associated with redevelopment, the manufacturing of production systems, and the production of various tools.

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FINANCIAL ASSETS

FINANCIAL ASSETS

in € thousand

Shares in Group

companies

Loans to Group companies

Shareholdings Other loans

Total

CostJanuary 1, 2019 591,205 65,066 370 1,233 657,874

Additions 6,055 197,288 326 – 203,669

Disposals 51 16,634 – 1,126 17,811

December 31, 2019 597,209 245,720 696 107 843,732

Accumulated depreciation January 1, 2019 7,141 9,825 26 0 16,992

Additions 12,514 32 72 – 12,618Disposals – – – –

December 31, 2019 19,655 9,857 98 0 29,610

Net carrying value December 31, 2019 577,554 235,863 598 107 814,122Net carrying value December 31, 2018 584,064 55,241 344 1,233 640,882

In fiscal year 2019, Drägerwerk AG & Co. KGaA recognized impairments on the shares in Dräger Industria e Comercio Ltda., Dräger Chile Ltda., and Draeger Arabia Co. Ltd. Fur-thermore, OPTIO Grundstücks-Verwaltungs-GmbH & Co. KG and Dräger Grundstücksver-waltungs GmbH were merged with Drägerwerk AG & Co. KGaA as of January 1, 2019 (see Note 10). The additions to loans to Group companies are mainly the result of reclassifica-tions of short-term loans and long-term tenant loans to two rental companies, MOLVINA KG, Düsseldorf, and DRENITA KG, Düsseldorf, in connection with real estate leases rela-ting to an office and development building and to a production building.

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INVENTORIES

Inventories are composed as follows:

INVENTORIES


Raw materials, consumables, and supplies 74,933 71,215

Work in progress 10,745 8,970

Finished goods and merchandise 66,100 61,171

Prepayments received –448 –407

Inventories 151,330 140,949

RECEIVABLES AND OTHER ASSETS

RECEIVABLES AND OTHER ASSETS


Trade receivables 33,096 43,257thereof due in more than one year (–) (691)

Other receivables and other assetsReceivables from Group companies 358,853 501,141

thereof trade payables (264,563) (260,517)

Other assets 13,399 22,934

thereof due in more than one year (1,188) (1,130)

372,251 524,075

Receivables and other assets 405,347 567,332

Receivables from Group companies mainly comprise cash management.Other assets include claims arising from reinsurance funds, credit balances with sup-

pliers, receivables from income tax and VAT, receivables from employees, as well as mis-cellaneous non-trade receivables.

PREPAID EXPENSES

Prepaid expences exclusively comprise transitory items.

DEFERRED TAX ASSETS

Drägerwerk AG & Co. KGaA in its role as parent company, expects future tax relief to total EUR 72,782 thousand (2018: EUR 60,271 thousand) from temporary differences as of December 31, 2019. Deferred taxes are determined on the basis of a 31.5 percent income tax rate (2018: 31.5 percent). The income tax rate includes corporate income tax and the corresponding solidarity surcharge, as well as trade tax. The increase in deferred tax

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assets was primarily due to the change in temporary differences from the recognition and measurement of pension provisions.

DEFERRED TAX ASSETS/ LIABILITIES

Deferred tax assets Deferred tax liabilities

in € thousand 2019 2018 2019 2018

Non-current assets 2,696 2,919 2,868 2,883

Current assets 12,209 11,852 51 41

Prepaid expenses 375 128 – –

Provisions 60,349 47,677 – –

Liabilities 79 697 8 78

Gross amount 75,709 63,273 2,927 3,002

Netting –2,927 –3,002 –2,927 –3,002

Carrying amount 72,782 60,271 0 0

In accordance with Sec. 274 (1) Sentence 2 HGB, the Company made use of the option to recognize deferred tax assets for the surplus.

CAPITAL STOCK

The subscribed capital stock of Drägerwerk AG & Co. KGaA amounts to EUR 45,466 thou-sand (2018: EUR 45,466 thousand).

As in the prior year, this capital stock is divided into 10,160,000 limited no-par bearer common shares and 7,600,000 limited no-par preferred shares.

The nominal value of both share types is EUR 2.56. Drägerwerk Verwaltungs AG, the general partner, holds no shares in capital.

The capital stock has been fully paid in. As before, the preferred and common shares are traded on the capital market.

Other than voting rights, the preferred shares have the same rights as those attached to the common shares. As compensation for the lack of voting rights, an advance dividend of EUR 0.13 per preferred share is distributed from net earnings.

If sufficient profits are available, a dividend of EUR 0.13 per common share is then paid. Any profit in excess of this amount, if distributed, is allocated so that preferred shares receive EUR 0.06 more than common shares.

If the profit is not sufficient to distribute the advance dividend for preferred shares in one or more years, the amounts are paid from the profit of subsequent fiscal years before a dividend is paid on common shares.

If amounts in arrears are not paid in the next year along with the full preferred divi-dend for that year, the preferred shareholders have voting rights until the arrears have been paid.

In the event of liquidation, the preferred shareholders receive 25 percent of net liqui-dation proceeds in advance. The remaining liquidation proceeds are distributed evenly among all shares.

23


By resolution of the annual shareholders’ meeting on April 27, 2016, the general partner was authorized to increase the capital stock of the Company, with the approval of the Supervisory Board, until April 26, 2021, by issuing new bearer common shares and/or pre-ferred shares (no-par value shares) in return for cash and/or contributions in kind by up to EUR 11,366,400.00 (authorized share capital) in one or several tranches. The authori-zation includes the entitlement to optionally issue new common shares and/or non-voting preferred shares up to the statutory maximum as stipulated in Sec. 139 (2) AktG, which carry the same status as the previously issued non-voting preferred shares with regard to the distribution of profits and/or Company assets.

In the case of common and preferred shares being issued at the same time while main-taining the ratio of both share types at the time of issuance, the general partner is autho-rized, subject to approval by the Supervisory Board, to exclude the right of the holders of common or preferred shares to subscribe to the other type of shares (“crossed exclusion of subscription rights”). Also in this case, the general partner is entitled to exclude further subscription rights under the terms of the regulations stated below.

The general partner is further authorized, subject to the approval of the Supervisory Board, to exclude the subscription rights of the shareholders:

(i) in order to compensate for any fractional amounts; (ii) if the shares are issued in exchange for contributions in kind, especially in the

context of company mergers or the acquisition of companies, business units, or equity interests in companies or of other assets or of claims to the acquisition of other assets, including receivables from the Company or from companies con-trolled by it within the meaning of Sec. 17 AktG;

(iii) if the shares of the Company are issued in exchange for cash and the issue price per share does not significantly fall below the stock market price of an essentially similarly structured, already listed share of the same class at the time the shares are issued. However, the exclusion of the subscription right can, in this event, be conducted only if the number of the shares issued in this way, together with the number of other shares that are issued or sold during the term of this authori-zation subject to an exclusion of the subscription right in direct application or application mutatis mutandis of Sec. 186 (3) sentence 4 AktG and the number of shares that may be created as the result of the exercise or fulfillment of option and/or conversion rights or obligations arising from warrant and/or convertible bonds and/or participation rights that are issued during the term of this autho-rization subject to an exclusion of the subscription right in application mutatis mutandis of Sec. 186 (3) sentence 4 AktG, does not exceed 10 percent of the share capital either at the time that this authorization comes into effect or at the time the new shares are issued;

(iv) if this is necessary in order to grant holders or creditors of warrant and/or con-vertible bonds with option and/or conversion rights and obligations that are issued by the Company or one of the companies in which it holds a majority interest a right to subscribe to new shares in the extent to which they would be entitled after exercising the option or conversion rights or after fulfilling option or conversion obligations.


The proportion of the share capital attributed in total to new shares for which the sub-scription right is excluded on the basis of this authorization may, together with the propor-tion of the share capital that is attributed to treasury shares or to new shares from other authorized capital or that relates to the option or conversion rights or obligations arising from options, warrant and/or convertible bonds, and/or participation rights that have been sold or issued during the term of this authorization subject to the exclusion of sub-scription rights, not exceed 20 percent of the share capital. Shares issued under a crossed exclusion of subscription rights are excluded from the limitation to 20 percent of capital stock. The key factor for calculating the 20 percent limit is the existing share capital at the time that this authorization comes into effect or is exercised, on whichever of these dates the share capital is at its lowest.

The general partner is authorized, subject to the approval of the Supervisory Board, to determine the details of the share rights and of the capital increase, as well as the terms and conditions of the share issue, in particular the issue price. The Supervisory Board is entitled to adjust the wording of the articles of association in line with the utilization of the authorized capital or after the authorization period expires.

Reports regarding voting rightsSec. 160 (1) No. 8 AktG requires disclosure of the existence of investments that have been notified to the Company in accordance with Sec. 21 (1) or (1a) WpHG.

The following table shows the reportable investments disclosed during the Drägerwerk AG & Co. KGaA’s fiscal year. Please note that the disclosures may have changed following the preparation of this report.

DISCLOSED REPORTABLE INVESTMENTS

ReporterDate that

thresholds were exceeded

or undercut

Reporting threshold * Allocation pursuant to WpHG

Invest-ment

Investment in voting rights

Brandes Investment Partners, L.P., San Diego, USA

February 12, 2019 5% exceeded Sec. 34 5.01% 508,527

Brandes Investment Partners, L.P., San Diego, USA

June 18, 2019 5% undercut Sec. 34 4.99% 507,816

* Reported due to a change in directly and indirectly held voting rights


CAPITAL RESERVE

CAPITAL RESERVE

Drägerwerk AG & Co. KGaA’s capital reserve originated from the share premiums from Amount in € thousand

The Company’s establishment (transformation) 2,556

The increases in capital stock of

March 1979 5,726

June 1981 7,016

July 1991 23,569

38,867

Dividend waiver by Stefan Dräger in 2009 582Increase of capital reserves in 2010 by issuing 3,810,000 new common shares 95,277

Replacement of variable option component with equity instrument 26,540

Exercise of 4 options of 50,000 shares each in 2013 12,190



Capital reserve as of December 31, 2019 237,217

The capital reserve is unchanged year on year.

RETAINED EARNINGS

Retained earnings remained unchanged in fiscal year 2019. The retained earnings of EUR 199,191 thousand reported as of December 31, 2019, (2018: EUR 199,191 thousand) relate to transfers from prior years.

DEVELOPMENT OF NET EARNINGS

DEVELOPMENT OF NET EARNINGS

Amount in € thousand

Net earnings as of December 31, 2018 536,230

EUR 0.13 cash dividend for 10,160,000 common shares 1,321

EUR 0.19 cash dividend for 7,600,000 preferred shares 1,444

Profits brought forward 2019 from prior year 533,465

Net profit for the year 2019 6,467

Net earnings as of December 31, 2019 539,932

24

25

26

26 NOTES TO THE BALANCE SHEET

DISCLOSURES ON AMOUNTS RESTRICTED FROM DISTRIBUTION

As of December 31, 2019, the amount restricted from distribution amounted to EUR 119,619 thousand (2018: EUR 99,619 thousand). The calculation of the amount is based on Sec. 268 (8) HGB and Sec. 253 (6) HGB.

DISCLOSURES ON AMOUNTS RESTRICTED FROM DISTRIBUTION

Restricted amount

in € thousand 2019 Deferred taxes 2019 2018

Fair value of plan assets exceeding acquisition cost 16,191 –5,100 11,091 4,692

Difference pursuant to Sec. 253 (6) HGB 30,646 –9,653 20,993 22,263

Balance of remaining deferred taxes 87,535 87,535 72,666

Total amount restricted from distribution 46,837 72,782 119,619 99,619

Equity interests available to cover amounts 739,704 736,002

Freely available equity 620,085 636,383

The measurement of the special fund assets of the new pension plan is carried out in accordance with Sec. 253 (1) Sentence 4 HGB at fair value. This amounted to EUR 86,777 thousand as of December 31, 2019, (2018: EUR 71,876 thousand) and is therefore EUR 16,191 thousand higher than the acquisition costs of EUR 70,586 thousand (2018: EUR 65,026 thousand). The EUR 30,646 thousand calculated pursuant to Sec. 253 (6) HGB (2018: EUR 32,497 thousand) is the difference between the measurement of the pension provision obligation, the prescribed ten-year average interest rate, and the seven-year average interest rate. The amount in excess of the acquisition costs was offset by freely available retained earnings of EUR 199,191 thousand (2018: EUR 199,191 thousand), free capital reserves of EUR 582 thousand (2018: EUR 582 thousand), and net earnings of EUR 539,932 thousand (2018: EUR 536,230 thousand).

PARTICIPATION CAPITAL

PARTICIPATION CAPITAL CONDITIONS

Termination rightof Drägerwerk

AG & Co. KGaA

Terminationright of participation

certificate holder

Lossshare

Minimumyield

Contribution on participation certificates

€

Series A yes no no 1.30 Dividend on preferred share × 10

Series K yes yes no 1.30 Dividend on preferred share × 10

Series D yes yes yes – Dividend on preferred share × 10

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28


Participation capital from the participation certificates issued and floated up to June 30, 1991, forms part of securities series A and is recognized as debt. Participation capital cre-ated after June 30, 1991, covering securities series K is also reported as debt.

The terms and conditions underlying the series K participation certificates differ from those for the (series A) certificates outstanding up to June 30, 1991, in that their holders may give five years’ notice of termination, but not prior to December 31, 2021; the period of termination thereafter is five years.

Since the 1997 annual shareholders’ meeting, series D participation certificates have been floated; their terms and conditions have been amended primarily in terms of their minimum yield, loss-sharing concept for participation certificates, and adequate cumu-lative, compensatory terms. The cases in which the minimum return is not paid are the same as those in which the preferred dividend is not paid. As with the subsequent payment of preferred dividends, the contribution on participation certificates is paid in arrears. Series D participation certificate holders may exercise their calling right every five years with five years’ notice as of calendar year-end, but not prior to December 31, 2026. Series D participation certificates are stated in equity.

Since December 1, 1999, the par value of participation certificates has amounted to EUR 25.56. Drägerwerk AG & Co. KGaA does not intend to terminate the participation certificates. If the participation certificate holder exercises the calling right, the amount repayable shall equal the average mean rate of the last three months at the Hamburg Exchange or a maximum of the weighted average issue price of this tranche. The contri-bution on participation certificates is ten times the preferred share dividend, as the par value of the securities was originally identical, but the arithmetic par value of the pre-ferred share has since been reduced to one-tenth of the original par value.

For details, please refer to the terms and conditions of series A, K, and D participation certificates.

PARTICIPATION CAPITAL

Number Par value Premium Participation capital

€ € €

Disclosed in debtSeries A 195,245 4,990,462.20 7,642,509.00 12,632,971.20

Series K 69,887 1,786,311.72 1,168,305.27 2,954,616.99

265,132 6,776,773.92 8,810,814.27 15,587,588.19

Disclosed in equitySeries D 566,819 14,487,893.64 14,023,388.96 28,511,282.60

As of December 31, 2019 (Series A, K, and D) 831,951 21,264,667.56 22,834,203.23 44,098,870.79


In fiscal year 2019, as well as in the prior year, no participation certificates were issued or bought back.

PROVISIONS

The pension obligations for fiscal year 2019 were calculated using the generally recog-nized projected unit credit method. In addition, the calculation also takes into account future expected wage/salary and pension increases. The underlying interest rate for the compounding and discounting of pension obligations is based on the average market rate of the past 10 fiscal years for an anticipated remaining term of 15 years determined and published by Deutsche Bundesbank.

In this fiscal year, the increase in pension obligations was attributable to a number of factors, including the interest rate.

Direct pension provisions are calculated based on the following assumptions:

ACTUARIAL ASSUMPTIONS

in € thousand

2019

2018

Discount rate 2.71%* 3.21%*

Future wage and salary increases 3.00% 3.00%

Future pension increases 1.00–1.75% 1.00–1.75%

Average employee turnover 3.00% 3.00%

* Forecasted interest rate on the basis of the interest rate published by Deutsche Bundesbank on October 31, 2019 (interest rate published by Deutsche Bundesbank on December 31, 2019: 2.71 percent)

Offsetting plan assetsPlan assets were offset against the underlying obligations from the new pension plan in accordance with Sec. 246 (2) Sentence 2 HGB.

The fair value of plan assets stated in the table below was derived from the stock exchange price of the plan assets at the balance sheet date, if these pertained to fund shares.

OFFSETTING PLAN ASSETS


Fair value of plan assets 86,777 71,876

Pension obligations under the pension plan –104,109 –85,905

Shortfall of pension liability –17,332 –14,029

Acquisition cost of plan assets 70,586 65,026

The plan assets are shares in a restricted fund set up exclusively for Dräger (WKN—secu-rities identification number—A0HG1B) and a settlement account. They are managed by AllianzGI-Fonds as a trustee for Drägerwerk AG & Co. KGaA, and their access is restricted for other creditors.

29


The fund and the settlement account serve to safeguard pension obligations made under the new pension plan and are subject to special restraints on disposal.

Other provisions

OTHER PROVISIONS


Tax provisions 21,857 19,674

Sundry provisions 97,977 82,570

Other provisions 119,834 102,244

Sundry provisions provide for, in particular, warranty obligations (EUR 22,241 thousand), supplier invoices not yet received (EUR 14,657 thousand), services still to be rendered (EUR 44 thousand), lawsuit costs/risks (EUR 1,921 thousand), and contingent liabilities mainly resulting from project-related obligations (EUR 4,563 thousand), as well as various other risks.

Provisions for personnel-related risks amount to EUR 41,426 thousand, mainly from the profit share to employees, accrued vacation pay, phased retirement, and long-service awards. Phased retirement employment contracts are concluded in line with works agree-ments.

Provisions in the amount of EUR 6,712 thousand were set up for expected losses from the settlement of currency forwards (derivative financial instruments) in fiscal year 2019.

LIABILITIES

LIABILITIES

2019 2018

Total Residual term Total Residual term

in € thousand

up to 1 year

more than 1 year

thereof more than 5 years

up to 1 year

more than 1 year

thereof more than 5 years

Participation capital series A+K 15,588 – 15,588 15,588 15,588 – 15,588 15,588Liabilities to banks 103,382 10,547 92,836 2,694 139,059 37,732 101,327 8,359Trade payables 91,100 91,100 – – 92,784 92,784 – –Liabilities to Group companies 174,655 49,776 124,880 – 130,721 113,142 17,580 –

thereof trade payables (50,291) (50,291) – – (19,773) (19,773) – –

Liabilities to companies in which participating interests are held – – – – – – – –

Other liabilities 8,212 7,930 282 227 10,201 9,897 304 225

thereof for taxes (3,829) (3,829) – – (3,790) (3,790) – –

thereof for social security – – – – – – – –

Liabilities 392,938 159,352 233,586 18,508 388,352 253,555 134,799 24,172

There were no liabilities secured by pledges or similar rights.

30


Liabilities to banks Total liabilities of EUR 60 million (2018: EUR 60 million) were recorded from a note loan as of December 31, 2019. The note loan has a due date in 2021.

In fiscal year 2013, Drägerwerk AG & Co. KGaA utilized a redeemable KfW loan totaling EUR 15.9 million; the loan is due on June 30, 2023. Dräger repaid EUR 2.0 million of this loan in 2019 (2018: EUR 2.0 million). This loan was valued at EUR 7.0 million on Decem-ber 31, 2019 (2018: EUR 9.0 million).

The first repayment of the redeemable KfW loans that were taken out in fiscal year 2014 was made in 2016. EUR 1.1 million was repaid in fiscal year 2019 (2018: EUR 1.1 mil-lion). These loans were valued at EUR 4.7 million on December 31, 2019 (2018: EUR 5.8 million).

Three additional redeemable KfW loans were taken out in fiscal year 2015 to finance the construction of new buildings associated with the “factory of the future”; these loans are due in June 2025. EUR 5.4 million was repaid in fiscal year 2019 (2018: EUR 5.4 mil-lion). The loans were valued at EUR 29.6 million on December 31, 2019 (2018: EUR 35.0 million).

Liabilities to Group companies Liabilities to Group companies mainly result from cash management of EUR 124.4 mil-lion (2018: EUR 93.4 million).

Other liabilitiesOther liabilities mainly result from tax liabilities in the amount of EUR 3.8 million (2018: EUR 3.8 million), liabilities from the distribution for participation certificates of EUR 1.6 million (2018: EUR 1.6 million), and liabilities from finance leases of EUR 0.1 million (2018: EUR 0.2 million).

32 OTHER DISCLOSURES

32

31

Other disclosures

CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS

CONTINGENT LIABILITIES


Contingent liabilities under warranty / indemnity contracts 207,242 190,696

Loan amounts actually drawn 33,086 34,715

Warranties of EUR 192,632 thousand (2018: EUR 176,086 thousand) were issued for Group companies. The Company also issued comfort letters for subsidiaries.

The financial situation of the Group companies ensures that they will meet their obli-gations. Consequently, there is no risk of these guarantees being called upon.

OTHER FINANCIAL OBLIGATIONS

Consignment warehousing agreementsAs of the balance sheet date, Drägerwerk AG & Co. KGaA states activities related to con-signment warehousing agreements on the balance sheet. These are reported both under inventories and trade payables in the amount of EUR 13.9 million (2018: EUR 11.5 mil-lion). The consignment stock refers to the goods stored at Drägerwerk AG & Co. KGaA; until such time as the stock is reported as having been withdrawn in the legal sense, this stock remains the property of the supplier. This provides a number of benefits: On the one hand, this offers the highest level of security and, on the other hand, reduces capital com-mitments, as suppliers will only invoice the Company once the stock has been withdrawn from the warehouse.

Specific contractual arrangements with these suppliers imply that both the economic benefits and the economic risks lie with Drägerwerk AG & Co. KGaA. These items are therefore reported with the identical value, both in inventories and liabilities.

Rental and lease agreements As of the balance sheet date, other financial obligations from long-term rental and lease agreements come to approximately EUR 60.3 million, of which approximately EUR 10.1 million are to Group companies. The annual charge comes to approximately EUR 6.7 million, of which EUR 2.3 million are to Group companies.

Other financial obligations mainly relate to the real estate lease agreement with MOLVINA Vermietungsgesellschaft mbH & Co. Objekt Finkenstraße KG concerning the new office and development building and to the real estate lease agreement with DREN-ITA Grundstücksvermietungsgesellschaft mbH & Co. Objekt Fertigung Dräger Medizin-technik KG concerning the new production building on Revalstraße, Lübeck.


33

34

Purchase obligations In line with the usual requirements, Drägerwerk AG & Co. KGaA has also entered into purchase obligations with other service providers in order to guarantee the availability of IT services.

Other As a result of outstanding orders, the Group has obligations to purchase intangible assets of EUR 206 thousand (2018: EUR 322 thousand) and to purchase property, plant, and equipment of EUR 15.4 million as of December 31, 2019 (2018: EUR 14.2 million). The order obligations for property, plant, and equipment are mainly due to building conver-sions and the replacement and purchase of machinery and tools.

As of December 31, 2019, Drägerwerk AG & Co. KGaA was obliged to make capital pay-ments on outstanding capital distributions in the amount of EUR 2,458 thousand (2018: EUR 2,781 thousand).

At present, no significant opportunities and risks arise from the investments in the follow-ing special purpose entities:

– MOLVINA Vermietungsgesellschaft mbH & Co. Objekt Finkenstraße KG– Fimmus Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Lübeck KG– DRENITA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Fertigung Dräger-

Medizintechnik KG

LEGAL RISKS

Drägerwerk AG & Co. KGaA is involved in certain legal disputes and claims for damages arising in the ordinary course of business. The Executive Board believes that the outcome of such litigations and claims will not have any material adverse effect on the Company’s net assets, financial position, or results of operations.

Remuneration report

EXECUTIVE BOARD REMUNERATION

Total remuneration for active Executive Board members amounted to EUR 6,187,673 in fiscal year 2019 (2018: EUR 4,540,713). This amount is made up of non-performance-relat-ed payments of EUR 2,414,215 (2018: EUR 2,310,309) and performance-related payments of EUR 3,770,563 (2018: EUR 2,230,405), of which EUR 3,145,739 were short-term (2018: EUR 1,180,134) and EUR 624,824 long-term (2018: EUR 1,048,400), as well as share-based remuneration with long-term incentives in the amount of EUR 2,895 (2018: EUR 1,871).

The employee share program, offered for the first time in Germany in 2013, was once again offered by Dräger in fiscal year 2019. Executive Board members Stefan Dräger, Gert-Hartwig Lescow, and Dr. Reiner Piske took part in the employee share program. All three Executive Board members purchased 20 sets of three shares each at a price of EUR 52.85 per share using their own funds. For every three preferred shares, participants received one preferred share worth EUR 56.20 on the date of entry free of charge booked to their individual portfolio from Dräger. The holding period for these preferred shares—includ-ing those that participants acquired themselves—runs until December 31, 2021.

34 OTHER DISCLOSURES

35

If Executive Board remuneration is paid by Drägerwerk Verwaltungs AG, it is entitled to claim reimbursement from Drägerwerk AG & Co. KGaA monthly pursuant to Sec. 11 (1) and (3) of the articles of association of Drägerwerk AG & Co. KGaA. Pursuant to Sec. 11 (4) of the Company’s articles of association, the general partner receives a fee, independent of profit and loss, of 6 percent of the equity disclosed in its financial statements, payable one week after the general partner prepares its financial statements, for the management of the Company and the assumption of personal liability. For fiscal year 2019, this remu-neration amounted to EUR 114,219 (2018: EUR 96,362) plus potentially incurred VAT.

Obligations to Executive Board members under pension plans are stated in the finan-cial statements for 2019 at EUR 6,950,173 (2018: EUR 5,736,472).

In fiscal year 2019, the Company made pension provision contributions of EUR 1,213,701 for members of the Executive Board (2018: EUR 1,366,937).

PENSION OBLIGATIONS FOR ACTIVE EXECUTIVE BOARD MEMBERS

Allocation Obligation Allocation Obligation

in € thousand 2019 Dec. 31, 2019 2018 Dec. 31, 2018

Dräger, Stefan 687,269 4,333,405 708,606 3,646,136

Lescow, Gert-Hartwig 353,246 1,673,506 382,980 1,320,260

Klug, Rainer 42,857 199,951 107,234 157,094

Piske, Dr. Reiner 44,022 176,367 84,246 132,345

Schrofner, Anton 86,307 566,944 83,871 480,637

Executive Board members in total 1,213,701 6,950,173 1,366,937 5,736,472

EUR 3,272,086 (2018: EUR 3,152,869) was paid to former members of the Executive Board and their surviving dependents. Pension commitments to former members of the Executive Board and their surviving dependents amounted to EUR 37,719,331 (2018: EUR 37,351,916).

If an Executive Board member dies during his or her active service on the Board, the surviving spouse is entitled to Dräger widow’s pension, and any remaining children have claim to Dräger orphan’s pension. The annual Dräger widow’s and widower’s pension amounts to 55 percent of the Dräger pension received by, or which would have been received by, the deceased executive if said executive would have been unable to work when they died (notional invalidity pension). The amount of the Dräger orphan’s pension is 10 percent of the notional reduction in earning capacity pension or the current Dräger pen-sion of the deceased Executive Board member.

SUPERVISORY BOARD REMUNERATION

The annual shareholders’ meeting of Drägerwerk AG & Co. KGaA has defined Supervisory Board remuneration in the articles of association since fiscal year 2011. Supervisory Board remuneration for fiscal year 2019 amounted EUR 350,000 (2018: EUR 357,500).

In fiscal year 2019, the total remuneration of the six members of the Supervisory Board of the general partner, Drägerwerk Verwaltungs AG, amounted to EUR 135,000 (2018: EUR 135,000) plus additional reimbursements for out-of-pocket expenses totaling EUR 60,000


36

37

(2018: EUR 55,000). No remuneration was paid to Supervisory Board members of Group companies.

Further information on the itemized remuneration of the Executive Board and the Supervisory Board can be found in the combined management report of the Annual Report 2019.

RELATED PARTY AND COMPANY TRANSACTIONS

Services were rendered for Stefan Dräger and companies and persons related to Stefan Dräger, the Dräger-Stiftung, and the Dräger-Familienstiftung (Dräger Foundation and Dräger Family Foundation) totaling EUR 30 thousand (2018: EUR 36 thousand) in fiscal year 2019. The Company had no receivables in this respect on December 31, 2019.

Drägerwerk AG & Co. KGaA rendered rental services and other services totaling EUR 108 thousand (2018: EUR 103 thousand) for associate MAPRA Assekuranzkontor GmbH in fiscal year 2019. This resulted in receivables in the amount of EUR 4 thousand as of December 31, 2019 (2018: EUR 1 thousand).

The remuneration of the employee representatives on the Supervisory Board for work performed in addition to the Supervisory Board activities was also concluded at arm’s length terms and conditions. Overall, remuneration is of immaterial importance for the Dräger Group.

Dräger Verwaltungs AG is the general partner of Drägerwerk AG & Co. KGaA and holds 0 percent of the capital. There are only a few transactions conducted with the general partner, as it solely exercises administrative functions. The general partner is entitled to compensation for all expenses incurred in relation with the management of Drägerwerk AG & Co. KGaA, including the contractually agreed remuneration for its executive bodies. These expenses comprise the remuneration of the Executive Board, the remuneration of its Supervisory Board, liability remuneration, and other expenses.

Liabilities to Drägerwerk Verwaltungs AG amounted to EUR 5.1 million as of December 31, 2019 (2018: EUR 4.6 million); there were no receivables (2018: EUR 1 thousand).

In fiscal year 2018, Drägerwerk Verwaltungs AG granted an Executive Board member a fixed-rate loan of EUR 600 thousand with a term until May 2, 2023, and an interest rate of 2 percent.

All transactions with related parties were conducted at arm’s length terms and condi-tions.

AUDITOR’S FEE

The total fee charged by the Company’s auditor in fiscal year 2019 is broken down and disclosed by services for the audit of the financial statements, other audit services, tax consultancy services, and other services in the corresponding item in the Group financial statements of Drägerwerk AG & Co. KGaA.

The services for the audit of the financial statements mainly consist of fees for the audit of the consolidated financial statements as well as the legally mandated audits of Drägerwerk AG & Co. KGaA and its subsidiaries included in the consolidated financial statements. The fees for other audit services primarily consist of legally mandated audit services, including EMIR. The fees for tax consultancy services include, in particular, fees for tax advice related to charges, tax consultancy related to current and planned transac-tions, and reorganization within the Group. The fees for other services mainly comprise project-related consultancy services.

36 MAJOR DIRECT AND INDIRECT SHAREHOLDINGS

MAJOR DIRECT AND INDIRECT SHAREHOLDINGS

OF DRÄGERWERK AG & CO. KGAA

SHARES OWNED BY DRÄGERWERK AG & CO. KGAA AS OF DECEMBER 31, 2019

Shareholding in % in € thousand in € thousand

Name and registered office direct indirect Equity Earnings

GermanyDräger Safety AG & Co. KGaA, Lübeck 100 151,872 0 1

Dräger Medical Deutschland GmbH, Lübeck 100 26,044 0 1

Dräger Electronics GmbH, Lübeck 100 –9,232 –113

Dräger Digital GmbH, Lübeck 100 –291 –1,128

Dräger Safety Verwaltungs AG, Lübeck 100 1,120 0 1

Dräger TGM GmbH, Lübeck 100 1,134 233 1, 4

Dräger MSI GmbH, Hagen 100 1,747 0 1

Dräger Medical ANSY GmbH, Lübeck 100 2,826 0 1

Dräger Interservices GmbH, Lübeck 30 70 846 0 1

Dräger Gebäude und Service GmbH, Lübeck 100 432 0 1

Dräger Medical International GmbH, Lübeck 89.452 10.548 231,945 0 1

MAPRA Assekuranzkontor GmbH, Lübeck 49 1,026 721 2, 3

Fachklinik für Anästhesie und Intensivmedizin Vahrenwald GmbH, Lübeck 100 –7,673 0 1

Dräger Energie GmbH, Lübeck 100 25 0 1

FIMMUS Grundstücks-Vermietungs GmbH, Lübeck 100 30 0 1

Dräger Finance Services GmbH & Co. KG, Bad Homburg v. d. Höhe 95 552 10FIMMUS Grundstücks-Vermietungs Gesellschaft mbH & Co. Objekt Lübeck KG, Lübeck 100 85 3MOLVINA Vermietungsgesellschaft mbH & Co. Objekt Finkenstraße KG, Düsseldorf 100 131 2DRENITA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Fertigung Dräger Medizintechnik KG, Düsseldorf 100 –4 5

Dräger Holding International GmbH, Lübeck 100 59,471 0 1

bentekk GmbH, Hamburg 100 –675 406

EuropeBelgium Dräger Medical Belgium NV, Wemmel 100 5,790 770

Dräger Safety Belgium NV, Wemmel 100 3,948 675

Bulgaria Draeger Medical Bulgaria EOOD, Sofia 100 479 73

Draeger Safety Bulgaria EOOD, Sofia 100 429 177

Denmark Dräger Danmark A/S, Herlev 100 1,944 377

Finland Dräger Suomi Oy, Helsinki 100 999 191

France Dräger France SAS, Antony 100 31,494 4,070

AEC SAS, Antony 100 1,945 453

Greece Draeger Hellas A.E. for Products of Medical and Safety Technology, Athens 100 2,431 355

UK Draeger Safety UK Ltd., Blyth 100 40,300 6,972

Draeger Medical UK Ltd., Hemel Hempstead 52.627 47.373 11,549 2,112

Ireland Dräger Ireland Ltd., Dublin 100 578 239

Italy Draeger Italia S.p.A., Corsico-Milan 100 12,735 1,094

Croatia Dräger Medical Croatia d.o.o., Zagreb 100 2,614 322

Dräger Safety d.o.o., Zagreb 100 413 56

1 Profit and loss transfer agreement2 Associate as defined under Sec. 311, 312 HGB3 Prior year4 Recognized value corresponds to the amount restricted from distribution

38





EuropeNetherlands Dräger Nederland B.V., Zoetermeer 100 17,016 2,936

Norway Dräger Norge AS, Oslo 100 1,561 642

GasSecure AS, Oslo 100 7,766 537

Austria Dräger Austria GmbH, Vienna 100 34,487 13,150

Poland Dräger Polska sp. zo.o., Warsaw 100 –21 982

Portugal Dräger Portugal, LDA, Lisbon 0.01 99.99 2,160 276

Romania Dräger Medical Romania SRL, Bucharest 100 1,906 158

Dräger Safety Romania SRL, Bucharest 100 1,180 233

Russia Draeger OOO, Moscow 100 4,922 –347

Sweden Dräger Sverige AB, Kista 100 3,266 729

ACE Protection AB, Svenljunga 100 1,435 203

Switzerland Dräger Schweiz AG, Liebefeld-Bern 100 6,133 789

Serbia Draeger Tehnika d.o.o., Belgrade 100 2,145 284

Slovakia Dräger Slovensko s.r.o., Piestany 100 807 142

Slovenia Dräger Slovenija d.o.o., Ljubljana-Crnuce 100 915 33

Spain Dräger Medical Hispania SA, Madrid 100 6,966 1,708

Dräger Safety Hispania SA, Madrid 100 5,044 834

Czech Republic Dräger Medical s.r.o., Prague 100 2,609 385

Dräger Safety s.r.o., Prague 100 1,422 179

Dräger Manufacturing Czech s.r.o., Klášterec nad Ohří 100 5,717 441

Turkey Draeger Medikal Ticaret ve Servis Anonim Sirketi, Istanbul 100 3,735 548

Draeger Safety Korunma Teknolojileri Anonim Sirketi, Ankara 100 5,182 623

Hungary Dräger Safety Hungaria Kft., Budapest 100 539 259

Dräger Medical Hungary Kft., Budapest 100 785 225

AfricaMorocco Draeger Maroc SARLAU, Casablanca 100 700 –103

South Africa Dräger South Africa (Pty.) Ltd., Johannesburg 69 5,603 1,078

Dräger Safety Zenith (Pty.) Ltd., East London 100 1,684 162

AmericasArgentina Dräger Argentina SA, Buenos Aires 10 90 6,028 494

Brazil Dräger do Brasil Ltda., São Paulo 99 1 1,238 –92

Dräger Industria e Comércio Ltda., São Paulo 99.999929 0.000071 1,234 –1,669

Dräger Safety do Brasil Equipamentos de Segurança Ltda., São Paulo 100 3,153 –650

Chile Dräger Chile Ltda., Santiago 99.99 0.01 6,511 250

Dräger-Simsa S.A., Santiago 51 1,792 374

Canada Draeger Safety Canada Ltd., Mississauga /Ontario 100 6,538 344

Draeger Medical Canada Inc., Richmond Hill /Ontario 100 1,624 915

Focus Field Solutions Inc., St. John’s, NL 30 1,041 –527 2

Colombia Draeger Colombia SA, Bogota D.C. 1.5 98.5 5,046 207

Mexico Draeger Safety S.A. de C.V., Querétaro 100 976 0

Dräger Medical Mexico S.A. de C.V., Mexico D.F.D. 0.002 99.998 8,213 787

1 Profit and loss transfer agreement2 Associate as defined under Sec. 311, 312 HGB3 Prior year4 Recognized value corresponds to the amount restricted from distribution

38 MAJOR DIRECT AND INDIRECT SHAREHOLDINGS




AmericasPanama Draeger Panama S. de R.L., Panama 0.000560 99.99944 1,834 444

Draeger Panama Comercial, S. de R.L., Panama 0.005 99.995 898 136

Peru Draeger Peru S.A.C., Piso Miraflores-Lima 0.0001 99.9999 2,847 –77

United States Draeger, Inc., Telford 100 67,077 13,784

Draeger Medical Systems, Inc., Telford 100 140,721 –5,517

Asia/AustraliaP.R. China Shanghai Dräger Medical Instrument Co., Ltd., Shanghai 100 10,634 2,512

Draeger Safety Equipment (China) Co., Ltd., Beijing 100 14,143 1,015

Dräger Medical Equipment (Shanghai) Co., Ltd., Shanghai 100 20,703 9,435

Draeger Hong Kong Limited, Wan Chai 100 1,793 334

Draeger Medical Systems (Shanghai) Co., Ltd., Shanghai 100 10,042 –27

India Draeger India Private Limited, Mumbai 100 7,868 901

Draeger Safety India Pvt. Ltd., Mumbai 100 1,832 174

Indonesia PT Draegerindo Jaya, Jakarta 100 1,137 –153

PT Draeger Medical Indonesia, Jakarta 5 95 3,761 –346

Japan Draeger Japan Ltd., Tokyo 100 9,800 1,782

Malaysia Draeger Malaysia Sdn. Bhd., Kuala Lumpur 100 3,768 430

Myanmar Draeger Myanmar Limited, Rangoon 100 46 –2

Philippines Draeger Philippines Corporation, Pasig City 100 1,342 659

Saudi Arabia Draeger Arabia Co. Ltd., Riyadh 25.5 25.5 32,197 –264

Singapore Draeger Singapore Pte Ltd., Singapore 100 4,779 –1,286

South Korea Draeger Korea Co., Ltd., Seoul 100 4,478 276

Taiwan Draeger Safety Taiwan Co., Ltd., Hsinchu City 100 2,949 380

Draeger Medical Taiwan Ltd., Taipei 100 1,756 145

Thailand Draeger Medical (Thailand) Ltd., Bangkok 100 7,228 469

Draeger Safety (Thailand) Ltd., Bangkok 100 1,765 144

Vietnam Draeger Vietnam Co., Ltd., Ho Chi Minh City 100 1,114 226

Australia Draeger Safety Pacific Pty. Ltd., Notting Hill 100 0 0

Draeger Australia Pty. Ltd., Notting Hill 100 13,039 1,794

New Zealand Draeger New Zealand Limited, Auckland 100 1,185 318


SUBSEQUENT EVENTS

Subsequent events Significant business events subject to reporting requirements have not occurred since the end of the fiscal year.

Proposed distribution of net earnings Net earnings for fiscal year 2019 amount to EUR 539,931,704.46. This includes profits brought forward of EUR 533,464,838.33. Drägerwerk Verwaltungs AG as general partner of Drägerwerk AG & Co. KGaA, together with the Supervisory Board of Drägerwerk AG & Co. KGaA, Lübeck, intends to propose to the annual shareholders’ meeting that these net earnings should be distributed as follows:

PROPOSED DISTRIBUTION OF NET EARNINGS

in €

EUR 0.13 cash dividend for 10,160,000 common shares 1,320,800

EUR 0.19 cash dividend for 7,600,000 preferred shares 1,444,000

It is further proposed that the remaining net earnings for fiscal year 2019 of EUR 537,166,904.46 will be carried forward to new account.

39

40 THE COMPANY’S BOARDS

Daniel Friedrich1st Delegate of the metalworkers’ union IG Metall, Lübeck-Wismar

administrative office, Lübeck (until October 31, 2019

Regional director of the metalworkers’ union IG Metall, costal region,

Hamburg (since December 1, 2019)

Supervisory Board membership:

– Dräger Safety AG & Co. KGaA, Lübeck

Prof. Dr. Thorsten GrenzManaging Partner of KIMBRIA Gesellschaft für Beteiligung und

Beratung mbH, Berlin

Professor of Economics and Social Sciences

at Christian-Albrechts University, Kiel

Supervisory Board memberships:

– Gpredictive GmbH, Hamburg

– Schaltbau Holding AG, Munich

– Drägerwerk Verwaltungs AG, Lübeck


– Dräger Safety Verwaltungs AG, Lübeck

– Credion AG, Hamburg (since May 14, 2019)

Astrid HamkerAdvisory Board member and partner of Piepenbrock Unternehmens-

gruppe GmbH & Co. KG, Berlin

Advising family-run businesses through KOMPASS-Beratung as a

freelance consultant, Georgsmarienhütte


– dorma+kaba Holding GmbH & Co. KGaA, Ennepetal

(until September 17, 2019)

– Schmitz Cargobull AG, Horstmar (since September 24, 2019)

– NORD/LB Norddeutsche Landesbank Girozentrale, Hanover



Memberships on comparable boards of German or

foreign companies:

– Piepenbrock Unternehmensgruppe GmbH & Co. KG, Berlin

(Member of the Advisory Board)

– Felix Schoeller Gruppe GmbH & Co. KG, Osnabrück

(since September 8, 2019)

– Wieland Holding GmbH, Bamberg (since October 7, 2019)

40

The Company’s Boards

SUPERVISORY BOARD OF DRÄGERWERK AG & CO. KGAA

Chairman

Stefan LauerFormer Executive Board member of Deutsche Lufthansa AG,

Frankfurt


– People at Work Systems AG, Munich



Vice-Chairman

Siegfrid KasangGroup Works Council Chairman of Dräger, Lübeck

Dräger Lübeck Works Council Chairman, Lübeck

Bettina van AlmsickChairperson of Works Council Dräger Sales and Service

Germany, Essen

Member of Works Council Dräger Sales and Service Germany,

Lübeck

Member of the Group Works Council of Dräger, Lübeck


– Dräger Medical Deutschland GmbH, Lübeck

(Vice-Chairperson)

Nike BentenMember of Dräger Lübeck Works Council, Lübeck

Member of the Group Works Council of Dräger, Lübeck



(Vice-Chairperson)

Maria DietzMember of the Administrative Board and shareholder of GFT

Technologies SE, Stuttgart


– GFT Technologies SE, Stuttgart (Member of the Administrative

Board)




Stephan KruseOfficer, Drägerwerk AG & Co. KGaA, Lübeck Uwe LüdersFormer Chairman of the Executive Board of L. Possehl & Co. mbH,

Lübeck


– Lübecker Hafen-Gesellschaft mbH (LHG), Lübeck (Chairman)



– Dräger Safety Verwaltungs AG, Lübeck

Thomas RickersOfficer for Drägerwerk AG & Co. KGaA

Secretary of the metalworkers’ union IG Metall costal region,

Hamburg

Dr. Reinhard ZinkannManaging Partner of Miele & Cie. KG, Gütersloh


– Falke KGaA, Schmallenberg (Chairman)



Memberships on comparable boards of German or foreign compa-

nies:

– Hipp & Co., Pfaffenhofen (President of the Administrative Board)

– Nobilia-Werke J. Stickling GmbH & Co. KG, Verl (Advisory Board)

Members of the Audit Committee:Thorsten Grenz (Chairman)

Siegfrid Kasang

Stefan Lauer

Uwe Lüders

Daniel Friedrich

Members of the Nomination Committee:Stefan Lauer (Chairman)

Uwe Lüders

Dr. Reinhard Zinkann

Members of the Joint Committee:Representatives of Drägerwerk Verwaltungs AG:

Maria Dietz

Astrid Hamker

Uwe Lüders

Dr. Reinhard Zinkann

Representatives of Drägerwerk AG & Co. KGaA:

Stefan Lauer (Chairman)

Prof. Dr. Thorsten Grenz

Siegfrid Kasang

Thomas Rickers

42 THE COMPANY’S BOARDS

MEMBERS OF THE EXECUTIVE BOARD OF DRÄGERWERK

VERWALTUNGS AG, ACTING ON BEHALF OF DRÄGERWERK AG

& CO. KGAA

Stefan DrägerChairman of the Executive Board

Chairman of the Executive Board of Drägerwerk Verwaltungs AG,

Lübeck

(general partner of Drägerwerk AG & Co. KGaA)

Chairman of the Executive Board of Dräger Safety Verwaltungs AG,

Lübeck

(general partner of Dräger Safety AG & Co. KGaA)


– Sparkasse zu Lübeck AG, Lübeck

Gert-Hartwig LescowChief Financial Officer and Executive Board member for IT

Vice-Chairman of the Executive Board

Member of the Executive Board of Drägerwerk Verwaltungs AG,

Lübeck


Member of the Executive Board of Dräger Safety Verwaltungs AG,

Lübeck



– AXA Corporate Solutions S. A., Paris (until February 7, 2019)

Rainer KlugExecutive Board member for Production, Logistics, Purchasing

Regional responsibility for the Americas (until December 31, 2019)

Executive Board member for Safety Division

(since January 1, 2020)


Lübeck



Lübeck


Dr. Reiner PiskeExecutive Board member for Human Resources,

regional responsibility for Europe, Africa, Asia, and Australia

(until December 31, 2019)

Executive Board member for Sales and Human Resources



Lübeck



Lübeck



– Dräger Medical Deutschland GmbH (Chairman), Lübeck

Anton SchrofnerExecutive Board member for Innovation (until December 31, 2019)

Executive Board member for Medical Division



Lübeck



Lübeck



Lübeck, Germany, February 19, 2020

Drägerwerk AG & Co. KGaAThe general partnerDrägerwerk Verwaltungs AGrepresented by its Executive Board

Stefan DrägerGert-Hartwig LescowRainer KlugDr. Reiner PiskeAnton Schrofner

44 MANAGEMENT COMPLIANCE STATEMENT

Management compliance statement

We confirm to the best of our knowledge that, in accordance with the applicable financial reporting framework, the single entity financial statements give a true and fair view of the net assets, financial position, and results of operations of the Company, that the com-bined management report of the annual report presents business performance including business results and the situation of the Company so as to give a true and fair view, and that the significant opportunities and risks relating to the Company’s development have been described.

Lübeck, Germany, February 19, 2020

Drägerwerk AG & Co. KGaAThe general partnerDrägerwerk Verwaltungs AGrepresented by its Executive Board

Stefan DrägerGert-Hartwig LescowRainer KlugDr. Reiner PiskeAnton Schrofner

46 AUDITOR’S REPORT

“Independent Auditor’s Report To Drägerwerk AG & Co. KGaA, Lübeck

Report on the audit of the annual financial statements and of the management report

AUDIT OPINIONS

We have audited the annual financial statements of Drägerwerk AG & Co. KGaA, Lübeck, which comprise the balance sheet as of December 31, 2018, and the statement of profit and loss for the fiscal year from January 1 to December 31, 2018, as well as the notes to the financial statements, including the recognition and measurement policies presented therein. In addition, we have audited the management report of Drägerwerk AG & Co. KGaA, which is combined with the Group management report, for the fiscal year from Jan-uary 1 to December 31, 2018. We have not audited the content of those parts of the group management report listed in the “Other Information” section of our auditor’s report in accordance with the German legal requirements.

In our opinion, on the basis of the knowledge obtained in the audit,

– the accompanying annual financial statements comply, in all material respects, with the requirements of German commercial law and give a true and fair view of the assets, liabilities, and financial position of the Company as of December 31, 2018, and of its financial performance for the fiscal year from January 1 to December 31, 2018, in com-pliance with German Legally Required Accounting Principles; and

– the accompanying management report provides, as a whole, an appropriate view of the Company’s position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. Our audit opinion regarding the management report does not include the content of the elements in the section “Other information” of the management report.

Pursuant to § (article) 322 Abs. (paragraph) 3 Satz (sentence) 1 HGB (“Handelsgesetz-buch”: German Commercial Code), we declare that our audit has not led to any reser-vations relating to the legal compliance of the annual financial statements and of the management report.

BASIS FOR THE AUDIT OPINIONS

We conducted our audit of the annual financial statements and of the management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer—IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibil-ities for the audit of the annual financial statements and of the management report”


section of our auditor’s report. We are independent of the Company in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) (f) EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the annual financial statements and on the management report.

KEY AUDIT MATTERS IN THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS

Key audit matters are those matters that, in our professional judgment, were of most sig-nificance in our audit of the annual financial statements for the fiscal year from January 1 to December 31, 2018. These matters were addressed in the context of our audit of the annual financial statements as a whole and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.

In our view, the matters of most significance in our audit were as follows:

1 Measurement of shares in affiliated companies2 Recognition of deferred taxes

Our presentation of these key audit matters has been structured in each case as follows:

1 Matter and issue 2 Audit approach and findings3 Reference to further information

Hereinafter, we present the key audit matters:

1 MEASUREMENT OF SHARES IN AFFILIATED COMPANIES AND INVESTMENTS

1 The Company’s annual financial statements report shares in affiliated companies amounting to EUR 584.4 million (35 percent of total assets) under the balance sheet item “Financial assets.”

The valuation of shares in affiliated companies and investments under commercial

law is oriented toward cost and the lower fair value. The fair values are determined as the present values of the expected future cash flows using discounted cash flow models on the basis of the budget projections prepared by management. The expecta-tions regarding future market development and assumptions about the development of macroeconomic factors are thereby also taken into account. Discounting uses the individually determined cost of capital of the respective financial asset. On the basis of the determined values and further documentation, a write-down of EUR 7.1 million was required for a share in an affiliated company in fiscal year 2018. There were also no write-ups required for shares in affiliated companies and investments. The result of this measurement depends to a large extent on the executives directors’ estimates


of future cash flows, as well as the respective discount rates and growth rates applied. The measurement is therefore subject to material uncertainties. Against this back-ground, and due to the highly complex nature of the measurement and the materi-ality for the net assets and results of operations of the Company, this matter was of particular importance during our audit.

2 As part of our audit, we evaluated, among other things, the measurement methods used. In particular, we evaluated whether the fair value was appropriately determined using discounted cash-flow models, taking into account relevant valuation standards. We based our assessment on a comparison with general and sector-specific market expectations, among other things, as well as the executives directors’ detailed explana-tions regarding key planning value drivers underlying the expected cash inflows. With the knowledge that even relatively small changes in the discount rate applied can have material effects on the goodwill calculated in this way, we focused in particular on the parameters used to determine the discount rate applied and evaluated the measure-ment model.

Taking into consideration the information available, we believe that overall the mea-

surement parameters and assumptions used by the executive directors are appropri-ate to measure shares in affiliated companies and investments.

3 Information about financial assets provided by the Company is included in note 18 in the notes to the financial statements.

2 MEASUREMENT OF DEFERRED TAXES

1 Deferred tax assets of EUR 60.3 million after netting in accordance with § 274 Abs. 1 Satz 3 HGB are presented in the annual financial statements of the Company. Before netting with deferred tax liabilities, deferred tax assets of EUR 63.3 million are car-ried. The resulting surplus of deferred tax assets of EUR 60.3 million is recognized exercising the option to capitalize under § 274 Abs. 1 Satz 2 HGB. Deferred taxes are capitalized taking into account the principle of prudence to the degree that it is like-ly, according to the estimate of the executive directors, that taxable results will be accrued in the foreseeable future with which the temporary differences liable for deductions can be realized. If tax liabilities from taxable temporary differences are insufficient for this purpose, the anticipated future tax results based on corporate planning are forecast.

In our view, the accounting of deferred taxes was of particular importance in our audit, as it is highly dependent on estimates and assumptions of the executive direc-tors and is thus subject to material uncertainties.

2 As part of our audit, we assessed, among other things, the internal processes and con-

trols implemented for the recording of tax matters and the methodological procedures to determine, recognize, and measure deferred taxes. Furthermore, we assessed the recoverability of the deferred tax assets relating to deductible temporary differences on the basis of Company-internal forecasts of the Company’s future income situation


and evaluated the appropriateness of the estimates and assumptions used.

Based on our audit activities, we were able to satisfy ourselves that the estimates applied and the assumptions made by the executive directors were sufficiently docu-mented and supported.

3 The Company’s statements on deferred taxes are included in note 22 in the notes to the financial statements.

OTHER INFORMATION

The executive directors are responsible for the other information. The other information comprises the following non-audited parts of the management report:

– the statement on corporate governance pursuant to § 289f HGB and § 315d HGB includ-ed in section “Declaration/Group declaration of corporate governance” of the manage-ment report;

– the Corporate Governance report in accordance with No. 3.10 of the German Corporate Governance Code (with the exception of the remuneration report);

– the separate non-financial report pursuant to § 289b Abs. 3 HGB and § 315b Abs. 3 HGB.

Our audit opinions on the annual financial statements and on the management report do not cover the other information; consequently, we do not express an audit opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information– is materially inconsistent with the annual financial statements, with the management

report, or our knowledge obtained in the audit, or– otherwise appears to be materially misstated.

RESPONSIBILITY OF THE EXECUTIVE DIRECTORS AND THE SUPERVISORY BOARD FOR THE

ANNUAL FINANCIAL STATEMENTS AND THE MANAGEMENT REPORT

The executive directors are responsible for the preparation of annual financial statements that comply, in all material respects, with the requirements of German commercial law, and for ensuring that the annual financial statements give a true and fair view of the assets, liabilities, financial position, and financial performance of the Company in com-pliance with German Legally Required Accounting Principles. In addition, the legal rep-resentatives are responsible for such internal control as they, in accordance with German Legally Required Accounting Principles, have determined necessary to enable the prepa-ration of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, the executive directors are responsible for assessing the Company’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to the going concern assump-tion. In addition, they are responsible for financial reporting based on the going concern basis of accounting, provided no actual or legal circumstances conflict therewith.

Furthermore, the executive directors are responsible for the preparation of a manage-ment report that, as a whole, provides an appropriate view of the Company’s position and


is, in all material respects, consistent with the annual financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrange-ments and measures (systems) that they consider necessary to enable the preparation of a management report that is in accordance with the applicable German legal require-ments, and to be able to provide sufficient appropriate evidence for the assertions in the management report.

The Supervisory Board is responsible for monitoring the Company’s financial report-ing processes for the preparation of the annual financial statements and the management report.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS AND

OF THE MANAGEMENT REPORT

Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the management report as a whole provides an appropriate view of the Company’s position and, in all material respects, is consistent with the annual finan-cial statements and the knowledge obtained in the audit, complies with the German legal requirements, and appropriately presents the opportunities and risks of future develop-ment, as well as to issue an auditor’s report that includes our audit opinions on the annual financial statements and on the management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and EU Audit Regulation in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstate-ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these annual financial statements and this management report.

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

– Identify and assess the risks of material misstatement in the annual financial statements and in the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not detecting a mate-rial misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of the internal control system relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management report in order to design audit procedures that are appro-priate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems of the Company.

– Evaluate the appropriateness of the accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclo-sures.


– Draw conclusions on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, as to whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to be able to continue as a going concern.

– Evaluate the overall presentation, structure, and content of the annual financial state-ments, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial state-ments give a true and fair view of the assets, liabilities, financial position, and financial performance of the Company in compliance with German Legally Required Accounting Principles.

– Evaluate the consistency of the management report with the annual financial state-ments, its conformity with German law, and the view of the Company’s position it pro-vides.

– Perform audit procedures on the forward-looking statements presented by the execu-tive directors in the management report. On the basis of sufficient appropriate audit evidence, we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the forward-looking statements and evaluate the proper deriva-tion of the forward-looking statements from these assumptions. We do not express a sep-arate audit opinion on the forward-looking statements and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the forward-looking statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have com-plied with the relevant independence requirements and communicate with them all rela-tionships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the annual financial state-ments of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter.

OTHER LEGAL AND REGULATORY REQUIREMENTS

Further information pursuant to Article 10 EU Audit RegulationWe were elected as auditor by the annual general meeting on May 4, 2018. We were engaged by the supervisory board on June 19, 2018. We have been the auditor of the Drägerwerk AG & Co. KGaA, Lübeck, without interruption since the financial year 2009.


We declare that the audit opinions expressed in this auditor’s report are consistent with the additional report to the Audit Committee pursuant to Article 11 EU Audit Regulation (long-form audit report).

RESPONSIBLE AUDITOR

The German Public Auditor responsible for the engagement is Marko Schipper.«

Hamburg, February 20, 2019

PricewaterhouseCoopers GmbHWirtschaftsprüfungsgesellschaft

Dr. Andreas Focke Marko Schipper(German Public Auditor) (German Public Auditor)

Drägerwerk AG & Co. KGaAMoislinger Allee 53 – 5523558 Lübeck, Germanywww.draeger.com

CommunicationsTel. + 49 451 882 - 3202Fax + 49 451 882 - 3944

Investor RelationsTel. + 49 451 882 - 2685Fax + 49 451 882 - 3296 90

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